LOVESAC CO Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended
January 30, 2022. As discussed in the section titled "Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in the Forward-Looking Statements section herein and set forth below and those discussed in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent report on Form 10-K filed with the Securities and Exchange Commission. We operate on a 52- or 53-week fiscal year that ends on the Sunday closest to February 1. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period.
We are a technology driven company that designs, manufactures and sells unique, high quality furniture derived through our proprietary "Designed for Life" approach which results in products that are built to last a lifetime and designed to evolve as our customers' lives do. Our current product offering is comprised of modular couches called Sactionals, premium foam beanbag chairs called Sacs, and their associated home decor accessories. Innovation is at the center of our design philosophy with all of our core products protected by a robust portfolio of utility patents. We market and sell our products through an omni-channel platform that includes direct-to-consumer touch-feel points in the form of our own showrooms, which include our newly created mobile concierge and kiosks, online directly at www.lovesac.com, and through shop-in-shops and online pop-up-shops with third party retailers. We believe that our ecommerce centric approach, coupled with our ability to deliver our large, upholstered products through express couriers, is unique to the furniture industry.
Impact of COVID-19
Although there has been a general improvement in conditions related to the COVID-19 pandemic, there continues to be significant uncertainties around the scope and severity of the pandemic, its impact on the global economy, including supply chains, and other business disruptions that may impact our operating results and financial condition. We continue to follow the guidance issued by federal, state and local governments and health organizations and have taken measures to protect the safety of our associates and customers. While the COVID-19 pandemic has led to shifts in the way in which we operate, we continue to serve our customers through our omni-channel platform as our products can be easily configured in our touchpoints, shopped online and delivered quickly in a touchless way, coupled with consumers' demand for home related products and solutions. We continue to experience growth as our net sales increased
$46.5 million, or 56.0% to $129.4 millionfor the thirteen weeks ended May 1, 2022, compared to $82.9 millionfor the thirteen weeks ended May 2, 2021. Retail sales drove an increase of $32.3 million, or 65.9%, to $81.3 millionfor the thirteen weeks ended May 1, 2022, compared to $49.0 millionfor the thirteen weeks ended May 2, 2021. Our internet sales (sales made directly to customers through our ecommerce channel) also increased $6.1 millionor 24.1% to $31.3 millionfor the thirteen weeks ended May 1, 2022, compared to $25.2 millionfor the thirteen weeks ended May 2, 2021. New customers increased by 8.2% for the thirteen weeks ended May 1, 2022as compared to 3.9% for the thirteen weeks ended May 2, 2021.
Our products serve as a set of building blocks that can be rearranged, restyled and re-upholstered with any new setting, mitigating constant changes in fashion and style. They are built to last and evolve throughout a customer's life. •Sactionals. Our Sactional product line currently represents a majority of our net sales. We believe our Sactionals platform is unlike competing products in its adaptability yet is comparable aesthetically to similarly priced premium couches and sectionals. Our Sactional products include a number of patented features relating to their geometry and modularity, coupling mechanisms and other features. Utilizing only two, standardized pieces, "seats" and "sides," and approximately 200 high quality, tight-fitting covers that are removable, washable, and changeable, customers can create numerous permutations of a sectional couch with minimal effort. Customization 15
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is further enhanced with our specialty-shaped modular offerings, such as our wedge seat and roll arm side. Our custom features and accessories can be added easily and quickly to a Sactional to meet endless design, style, storage and utility preferences, reflecting our Designed for Life philosophy. Sactionals are built to meet the highest durability and structural standards applicable to fixed couches. Sactionals are comprised of standardized units and we guarantee their compatibility over time, which we believe is a major pillar of their value proposition to the consumer. Our Sactionals represented 88.9% and 89.3% of our sales for the thirteen weeks ended
May 1, 2022and May 2, 2021, respectively. During October 2021, we introduced the new Sactionals StealthTech Sound + Charge product line. This unique innovation features immersive surround sound by Harman Kardonand convenient wireless charging, all seamlessly embedded and hidden inside the adaptable Sactionals platform. The System includes two Sound + Charge Sides each with embedded front- and rear-firing Harman Kardonspeakers, a Subwoofer that easily integrates into a Sactionals Seat Frame and a Center Channel, all working in unison to deliver captivating surround sound that is completely hidden from view. •Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sac product line offers 6 different sizes ranging from 22 pounds to 95 pounds with capacity to seat 3+ people on the larger model Sacs. Filled with Durafoam, a blend of shredded foam, Sacs provide serene comfort and guaranteed durability. Their removable covers are machine washable and may be easily replaced with a wide selection of cover offerings. •Accessories. Our accessories complement our Sacs and Sactionals by increasing their adaptability to meet evolving consumer demands and preferences. Our current product line offers Sactional-specific drink holders, Footsac blankets, decorative pillows, fitted seat tables and ottomans in varying styles and finishes and our unique Sactionals Power Hub, providing our customers with the flexibility to customize their furnishings with decorative and practical add-ons to meet evolving style preferences.
We offer our products through an omni-channel platform that provides a seamless and meaningful experience to our customers online and in-store. Our distribution strategy allows us to reach customers through four distinct, brand-enhancing channels. •Showrooms. We market and sell our products through 162 retail locations at top tier malls, lifestyle centers, mobile concierge, kiosk, and street locations in 40 states in the
U.S.We carefully select the best small-footprint retail locations in high-end malls and lifestyle centers for our showrooms. Compared to traditional retailers, our showrooms require significantly less square footage because of our need to have only a few in-store sample configurations for display and our ability to stack our inventory for immediate sale. The architecture and layout of these showrooms is designed to communicate our brand personality and key product features. Our goal is to educate first-time customers, creating an environment where people can touch, feel, read, and understand the technology behind our products. We are updating and remodeling many of our showrooms to reflect our new showroom concept, which emphasizes our unique product platform, and is the standard for new showrooms. Our new showroom concept utilizes technology in more experiential ways to increase traffic and sales. Net sales completed through this channel accounted for 62.8% of total net sales for the thirteen May 1, 2022, up from 59.1% of total net sales for the thirteen weeks ended May 2, 2021. •Ecommerce. Through our ecommerce channel, we believe we are able to significantly enhance the consumer shopping experience for home furnishings, driving deeper brand engagement and loyalty, while also realizing more favorable margins than our showroom locations. We believe our robust technological capabilities position us well to benefit from the growing consumer preference to transact at home and via mobile devices. With furniture especially suited to ecommerce applications, our net sales completed through this channel accounted for 24.2% of total net sales for the thirteen weeks ended May 1, 2022, down from 30.4% of total net sales for the thirteen weeks ended May 2, 2021, respectively. •Other touchpoints. We augment our showrooms with other touchpoint strategies including online pop-up-shops, shop-in-shops, and barter inventory transactions. We utilize in store pop-up-shops to increase the number of locations where customers can experience and purchase our products, a low-cost alternative to drive brand awareness, in store sales, and ecommerce sales. These in-store pop-up-shops are staffed similarly to our showrooms with associates trained to demonstrate and sell our products and promote our brand. Unlike the in-store pop-up-shops which are typically 10-day shows, and pop-up locations, shop-in-shops are designed to be in 16
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permanent locations carrying the same digital technology of our showrooms and are also staffed with associates trained to demonstrate and sell our products. Shop-in-shops require less capital expenditure to open a productive space to drive brand awareness and touchpoint opportunities for demonstrating and selling our products. We did not host any in-store pop-up-shops in the thirteen weeks ended
May 1, 2022. and May 2, 2021. We operated 2 online pop-up-shops on Costco.com for the thirteen weeks ended May 1, 2022, and 1 for the thirteen weeks ended May 2, 2021. We operated 22 Best Buy shop-in-shops for the thirteen weeks ended May 1, 2022, up from 4 for the thirteen weeks ended May 2, 2021. Other sales which includes pop-up-shop sales, shop-in-shop sales, and barter inventory transactions accounted for 13.0% of our total sales for the thirteen weeks ended May 1, 2022, up from 10.6% of our total sales for the thirteen weeks ended May 2, 2021. SELECTED CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following tables present our summary condensed consolidated financial and other data as of and for the periods indicated. The condensed consolidated statement of operations data for the thirteen ended May 1, 2022and May 2, 2021, the condensed consolidated statement of cash flow data for the thirteen weeks ended May 1, 2022and May 2, 2021and the summary condensed consolidated balance sheet data as of May 1, 2022, are derived from our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report filed on Form 10-Q and have been prepared on the same basis as the audited condensed consolidated financial statements. 17
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The summarized financial information presented below is derived from and should be read in conjunction with our audited condensed consolidated financial statements including the notes to those financial statements and our unaudited condensed consolidated financial statements including the notes to those financial statements both of which are included elsewhere in is Quarterly Report filed on Form 10-Q along with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results.
Thirteen weeks ended
May 1, May 2, (amounts in thousands, except per share data and share amounts) 2022 2021 Condensed Consolidated Statement of Operations Data: Net sales Showrooms
$ 81,254 $ 48,986Internet 31,255 25,175 Other 16,871 8,754 Total net sales 129,380 82,915 Cost of merchandise sold 63,272 36,839 Gross profit 66,108 46,076 Operating expenses Selling, general and administrative expenses 44,901 30,718 Advertising and marketing 15,901 10,680 Depreciation and amortization 2,661 2,420 Total operating expenses 63,463 43,818 Operating income 2,645 2,258 Interest expense, net (35) (44) Net income before taxes 2,610 2,214 Provision for income taxes (715) (153) Net income $ 1,895 $ 2,061Net Income Attributable to Common Stockholders $ 1,895 $ 2,061Net income per common share: Basic (1) $ 0.13 $ 0.14Diluted (1) $ 0.12 $ 0.13Weighted average number of common shares outstanding: Basic 15,155,378 15,034,954 Diluted 16,173,339 16,073,021 18
Table of Contents Thirteen weeks ended May 1, May 2, (dollars in thousands) 2022 2021 EBITDA (2)(3)
$ 5,306 $ 4,678Adjusted EBITDA (2)(3) $ 6,373 $ 5,332As of May 1, January 30, (amounts in thousands) 2022 2022 Balance Sheet Data: Cash and cash equivalents $ 64,380 $ 65,740Working capital 106,326 75,702 Total assets 366,576 264,603 Total liabilities 207,339 153,921 Total stockholders' equity 159,237 110,682 Thirteen weeks ended (amounts in thousands) May 1, 2022 May 2, 2021
Condensed Consolidated Statement of Cash flow Data:
$ (21,786) $ (9,604)Net Cash Used in Investing Activities (6,018)
Net Cash(Used in) Provided by Financing Activities (208)
Net change in cash and cash equivalents (28,012)
Cash and cash equivalents at the end of the period 64,380
(1)For the calculation of basic and diluted net income per share, see Note 5 and
Note 8 to our condensed consolidated financial statements.
(2)EBITDA and Adjusted EBITDA are "Non-GAAP Measures" that are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We believe that EBITDA and Adjusted EBITDA are useful measures of operating performance, as they eliminate expenses that are not reflective of the underlying business performance, facilitate a comparison of our operating performance on a consistent basis from period-to-period and provide for a more complete understanding of factors and trends affecting our business. Additionally, EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use EBITDA and Adjusted EBITDA, alongside GAAP measures such as gross profit, operating income (loss) and net income (loss), to measure and evaluate our operating performance and we believe these measures are useful to investors in evaluating our operating performance. These Non-GAAP Measures should not be considered as alternatives to net income (loss) or net income (loss) per share as a measure of financial performance, cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. They should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, our Non-GAAP Measures are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as tax payments and debt service requirements and certain other cash costs that recur in the future. Our Non-GAAP Measures contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In addition, our Non-GAAP Measures exclude certain non-recurring and other charges. 19
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In the future, we may incur expenses that are the same as or similar to some of the adjustments in our Non-GAAP Measures. Our presentation of our Non-GAAP Measures should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying primarily on our GAAP results and by using our Non-GAAP Measures as supplemental information. Our Non-GAAP Measures are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation. (3)We define "EBITDA" as earnings before interest, taxes, depreciation and amortization. We define "Adjusted EBITDA" as EBITDA adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include management fees, equity-based compensation expense, write-offs of property and equipment, deferred rent, financing expenses and certain other charges and gains that we do not believe reflect our underlying business performance.
Reconciliation of Non-GAAP Financial Measures
The following provides a reconciliation of Net income to EBITDA and Adjusted
EBITDA for the periods presented:
Thirteen weeks Thirteen weeks (amounts in thousands) ended May 1, 2022 ended May 2, 2021 Net income
$ 1,895 $ 2,061Interest expense, net 35 44 Taxes 715 153 Depreciation and amortization 2,661 2,420 EBITDA 5,306 4,678 Equity-based compensation (a) 1,172 654 Other non-recurring expenses (b) (105) - Adjusted EBITDA $ 6,373 $ 5,332(a)Represents expenses, such as compensation expense and employer taxes related to RSU equity vesting and exercises associated with stock options and restricted stock units granted to our associates and board of directors.
(b)Other non-recurring expenses in the thirteen weeks ended
non-recurring expenses in the thirteen weeks ended
How We Assess the Performance of Our Business
We consider a variety of financial and operating measures, including the
following, to evaluate our business, measure our performance, identify trends
affecting our business, formulate business plans, and make strategic decisions.
Net sales reflect our sale of merchandise plus shipping and handling revenue less returns and discounts. Sales made at Company operated showrooms, including shop-in-shops and pop-up shops, and via the web are recognized in accordance with the guidance set forth in ASC 606, which is typically at the point of transference of title when the goods are shipped.
Gross profit is equal to our net sales less cost of merchandise sold. Gross profit as a percentage of our net sales is referred to as gross margin. In
September 2018, the Office of the U.S. Trade Representativebegan imposing a 10 percent ad valorem duty on a subset of products imported from China, inclusive of various furniture product categories. In September 2019, the Office of U.S. Trade Representativeimposed an additional 15 percent ad valorem duty on products imported from China. 20
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Selling, General and Administrative Expenses
Selling, general and administrative expenses include all operating costs, other than advertising and marketing expense, not included in cost of merchandise sold. These expenses include all payroll and payroll-related expenses; showroom expenses, including occupancy costs related to showroom operations, such as rent and common area maintenance; occupancy and expenses related to many of our operations at our headquarters, including utilities, equity-based compensation, financing related expense; public company expenses; and credit card transaction fees. Selling, general and administrative expenses as a percentage of net sales is usually higher in lower volume quarters and lower in higher volume quarters because a significant portion of the costs are relatively fixed. Our recent revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant components of these increases are payroll and rent costs. We expect these expenses, as well as rent expense associated with the opening of new showrooms, to increase as we grow our business. We expect to leverage total selling, general and administrative expenses as a percentage of sales as sales volumes continue to grow. We expect to continue to invest in infrastructure to support the Company's growth. These investments will lessen the impact of expense leveraging during the period of investment with the greater impact of expense leveraging happening after the period of investment. However, total selling, general and administrative expenses generally will leverage during the periods of investments with the most deleverage occurring in the first three quarters of the fiscal year, and the greatest leverage occurring in the fourth quarter.
Advertising and Marketing Expense
Advertising and marketing expense include digital, social, and traditional advertising and marketing initiatives that cover all of our business channels. Advertising and marketing expense is expected to continue to increase as a percentage to sales as we continue to invest in advertising and marketing which has accelerated sales growth.
Basis of Presentation and Results of Operations
The following table sets forth, for the periods presented, our condensed consolidated statement of operations data as a percentage of total revenues: Thirteen weeks ended May 1, May 2, 2022 2021 Statement of Operations Data: Net sales 100 % 100 % Cost of merchandise sold 49 % 44 % Gross profit 51 % 56 % Selling, general and administrative expenses 35 % 37 % Advertising and marketing 12 % 13 % Depreciation and amortization 2 % 3 % Operating income 2 % 3 % Interest expense, net 0 % 0 % Net income before taxes 2 % 3 % Provision for income taxes -1 % 0 % Net income 1 % 3 % 21
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Thirteen weeks ended
Net sales Net sales increased
$46.5 million, or 56.0%, to $129.4 millionin the thirteen weeks ended May 1, 2022as compared to $82.9 millionin the thirteen weeks ended May 2, 2021. The increase in overall net sales was driven by growth across all channels. New customers increased by 8.2% in the thirteen weeks ended May 1, 2022as compared to 3.9% in the thirteen weeks ended May 2, 2021. We had 162 and 116 total showrooms as of May 1, 2022and May 2, 2021, respectively. We opened 11 additional showrooms, 5 kiosks and did not remodel or close any showrooms in the thirteen weeks ended May 1, 2022. In comparison, we opened 8 showrooms and did not close or remodel any showrooms in the thirteen weeks ended May 2, 2021. Showroom net sales increased $32.3 million, or 65.9%, to $81.3 millionin the thirteen weeks ended May 1, 2022as compared to $49.0 millionin the thirteen weeks ended May 2, 2021. This increase was due in large part to comparable net sales increase of $22.0 million, or 53.2%, to $63.3 millionin the thirteen weeks ended May 1, 2022, compared to $41.3 millionin the thirteen weeks ended May 2, 2021, related to higher point of sales transactions with lower promotional discounting and the addition of 31 new showrooms, 13 kiosks and 2 mobile concierges. Point of sales transactions represent orders placed through our showrooms which does not always reflect the point at which control transfers to the customer, which occurs upon shipment being confirmed. See Note 12 to the condensed consolidated financial statements. We believe point of sales transactions is a more accurate way to measure showroom performance and how our showroom associates are incentivized. Retail sales per selling square foot increased $113, or 23.3%, to $599in the thirteen weeks ended May 1, 2022as compared to $486in the thirteen weeks ended May 2, 2021. Total number of units sold at point of transaction increased by approximately 17.0% driven by higher comparable sales. The increase in comparable sales, retail sales per selling square foot and total number of units sold over prior years is the result of a very strong Easter campaign and some channel shift from Internet net sales. Internet net sales (sales made directly to customers through our ecommerce channel) increased $6.1 million, or 24.1%, to $31.3 millionin the thirteen weeks ended May 1, 2022as compared to $25.2 millionin the thirteen weeks ended May 2, 2021also driven by a strong Easter campaign. Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions increased $8.1 million, or 92.7%, to $16.9 millionin the thirteen weeks ended May 1, 2022as compared to $8.8 millionin the thirteen weeks ended May 2, 2021. This increase was principally due to higher productivity of our temporary online pop-up-shops on Costco.com and hosting 1 additional online event compared to the prior year period. We also opened 18 additional Best Buy shop-in-shop locations compared to the prior year period.
Gross profit increased
$20.0 million, or 43.5%, to $66.1 millionin the thirteen weeks ended May 1, 2022from $46.1 millionin the thirteen weeks ended May 2, 2021. Gross margin decreased to 51.1% of net sales in the thirteen weeks ended May 1, 2022from 55.6% of net sales in the thirteen weeks ended May 2, 2021. The decrease in gross margin percentage of 450 basis points was primarily driven by an increase of approximately 640 basis points in total distribution and related tariff expenses partially offset by an improvement of 190 basis points in product margin. The increase in total distribution and related tariff expenses over prior year is principally related to the negative impact of 630 basis points increase in inbound transportation costs. The product margin rate improvement is due to lower promotional discounting and continuing vendor negotiations to assist with the mitigation of tariffs.
Selling, general and administrative expenses
Selling, general and administrative expenses increased
$14.2 million, or 46.2%, to $44.9 millionin the thirteen weeks ended May 1, 2022as compared to $30.7 millionin the prior year period. The increase in selling, general and administrative expenses was primarily related to an increase in employment costs, rent, overhead expenses, and selling related expenses. Employment costs increased by $8.3 milliondriven by an increase in new hires and variable compensation. Rent increased by $2.2 millionrelated to $1.4 millionrent expense from our net addition of 46 showrooms and $0.8 millionin higher percentage rent from the increase in Showroom sales. Overhead expenses increased $2.2 millionconsisting of an increase of $1.2 millionin infrastructure investments, an increase of $0.5 millionin travel expenses, an increase of $0.3 millionin equity-based compensation and an increase of $0.2 millionin insurance expense related to the growth of the Company. Selling related expenses increased $1.5 millionprincipally due to credit card fees related to the increase in sales. 22
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Selling, general and administrative expenses were 34.7% of net sales in the thirteen weeks ended
May 1, 2022as compared to 37.0% of net sales in the thirteen weeks ended May 2, 2021. The decrease in selling, general and administrative expenses of 230 basis points was primarily due to higher leverage within infrastructure investments, rent, equity-based compensation, selling related expenses, and insurance, partially offset by deleverage in employment costs and travel. The deleverage in certain expenses relate to the continuous investments we are making into the business to support our ongoing growth.
Advertising and Marketing
Advertising and marketing expenses increased
$5.2 million, or 48.9%, to $15.9 millionfor the thirteen weeks ended May 1, 2022as compared to $10.7 millionin the thirteen weeks ended May 2, 2021. The majority of the increase in advertising and marketing dollars relates to the ongoing investments in marketing spends to support our sales growth. The investment by quarter may vary greatly. Advertising and marketing expenses were 12.3% of net sales in the thirteen weeks ended May 1, 2022as compared to 12.9% of net sales in the thirteen weeks ended May 2, 2021. The majority of the decrease in advertising and marketing as a percent of net sales is primarily due to improved performance in our media activities which has driven an increase in net sales.
Depreciation and amortization expenses
Depreciation and amortization expenses increased
in the thirteen weeks ended
amortization expense principally relates to capital investments for new and
Interest expense, net
Interest expense, net which is less than
$0.1 millionfor the thirteen weeks ended May 1, 2022and May 2, 2021, principally relates to the interest expense related to unused line fees and amortization of deferred financing fees on the asset-based loan with a slight offset of interest earned on the Company's cash and cash equivalents balances.
Provision for income taxes
Income tax provision was
$0.7 millionand $0.2 million, less than 0.55% and 0.18% of sales, for the thirteen weeks ended May 1, 2022and May 2, 2021, respectively. The increase in income taxes is primarily driven by the utilization of deferred tax assets of $0.5 millionduring the first quarter of fiscal 2023 based on the expected generation of taxable income for the fiscal year 2023.
Liquidity and Capital Resources
Our business primarily relies on cash flows from operations, supplemented as needed by our revolving line of credit (see "Revolving Line of Credit" below), as our primary sources of liquidity. Our primary cash needs are for advertising and marketing, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. The most significant components of our working capital are cash and cash equivalents, inventory, accounts receivable, accounts payable and other current liabilities and customer deposits. Borrowings generally increase in our third fiscal quarter as we prepare for the holiday selling season, which is in our fourth fiscal quarter. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. 23
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