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Greetings, and Welcome to the La-

Thank you, Genie. Good morning, everyone, and thanks for joining us to discuss our fiscal 2024 second quarter. With us today are Melinda Whittington, La-

Thanks, Mark, and good morning, everyone. Yesterday, following the close of market, we reported results for our October ended second quarter. We delivered sales in line with the high-end of our guidance and non-GAAP operating margins exceeded guidance ranges issued last quarter, despite an increasingly challenging macro environment and continued soft home furnishings industry. These results were achieved via strong execution in both our retail stores and across our manufacturing supply chain, which has led to continued market share gains. Highlights for the quarter included: consolidated delivered sales of $511 million, up 14% versus our most recent pre-pandemic second quarter, but down 16% versus the prior year as expected, which benefited from delivering the above normal pandemic backlog. Total La-

Thank you, Melinda, and good morning, everyone. As a reminder, we present our results on both a GAAP and non-GAAP basis. We believe non-GAAP presentation better reflects underlying operating trends and performance of the business. Non-GAAP results exclude items which are detailed in our press release and in the tables in the appendix section of our conference call slides. On a consolidated basis, fiscal '24 second quarter sales decreased 16% to $511 million versus the prior year quarter, primarily reflecting lower delivered unit volume versus last year's backlog shipments. This quarter sales results, represent a 14% increase versus the most recent non-pandemic second quarter. As a reminder, we previously called out that last fiscal year benefited by an approximately $300 million increase in delivered sales, due to the delivery of backlog of COVID-related furniture orders, which will not repeat this year. While we did not call out backlog explicitly across the quarters, the first half saw a more pronounced impact against backlog sales. As such, we expect year-over-year delivered sales comparisons to improve over the back half of the fiscal year. Consolidated GAAP operating income decreased to $34 million and non-GAAP operating income was $41 million, a decrease of 34% versus last year's second quarter. Consolidated GAAP operating margin was 6.6% and non-GAAP operating margin was 7.9%, reflecting a 210 basis point decline versus last year due to fixed cost deleverage on lower delivered sales. GAAP diluted EPS was $0.63 for the second quarter versus $1.07 in the prior year quarter. Non-GAAP diluted EPS was $0.74 in the current year quarter versus $1.05 last year. As I move to the segment discussion, my comments from here will focus on our non-GAAP reporting unless specifically stated otherwise. Starting with the Retail segment, for the quarter, delivered sales were $214 million, a 15% decrease over the prior year's second quarter, which benefited from higher deliveries of backlog. Importantly, sales were 44% higher than our fiscal 2020 second quarter, a 10% compound annual growth rate improvement over the four years. Retail non-GAAP operating margin decreased to 13% versus 16.5% in the prior year quarter. Gross margin improvements from prior period pricing actions were more than offset by higher SG&A as a percentage of sales, with fixed cost deleverage on the lower delivered sales volume. This non-GAAP operating margin result was 720 basis higher than fiscal 2020 second quarter pre-pandemic result, reflecting significant sustainable improvement in store execution and fixed cost leverage, due to the overall growth of the Retail business. For our Wholesale segment, delivered sales for the quarter declined to $365 million, an 18% decrease versus the prior year period, which benefited from pandemic backlog production and deliveries. Non-GAAP operating margin for the Wholesale segment was 7.7% versus 8.6% in last year's second quarter, reflecting strong gross margin improvement, more than offset by SG&A deleverage on lower sales. Gross margin improved with benefits from lower raw material pricing and duty expense. This was more than offset by fixed cost deleverage and increased marketing investments to support the launch of our Long Live the Lazy brand campaign. Joybird reported in corporate and other recorded delivered sales of $32 million, a 15% decrease versus the prior year quarter. The decline was driven by lower unit volume from more cautious consumer demand compared to earlier in the prior year. Additionally, we recently opened our 12th Joybird store in Portland, Oregon in November. We remain committed to growing the brand over the longer term and will continue to maintain our discipline approach as we work to balance growth and profitability. Pulling all this together for the quarter, consolidated non-GAAP gross margin improved across all businesses and for the entire company, improved by 340 basis points versus the prior year second quarter, primarily due to lower raw material and duty costs, partially offset by selective pricing and promotional actions. While SG&A non-GAAP expense dollars decreased year over year, non-GAAP SG&A as a percentage of sales for the second quarter increased by 550 basis points compared with the same period last year, primarily due to sales de-leverage against last year's backlog driven top line results. Our effective tax rate on a GAAP basis for the second quarter was 26.5% compared to the 25.8% for the prior year period. Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes. We expect our effective tax rate to be in the range of 26% to 27% for fiscal ‘24. Turning to cash for the quarter, we generated $31 million in cash from operating activities. Solid cash generation on the quarter was primarily driven by profit performance. Through the first two quarters, cash flow from operations was $57 million, 84% higher than last year's comparable period. We ended the quarter with $333 million in cash and no externally funded debt. We spent $13 million in capital expenditures during the quarter, primarily related to retail store openings and remodels, as well as upgrades at our manufacturing and distribution facilities. We also spent $2 million on the acquisition of one independent La-

Thanks, Bob. We delivered on our objectives in the quarter with many wins, including a new brand campaign launch, positive written same-store sales, sequential improvement in our delivered sales results, and growth in our company-owned retail store base, which is now just over 50% of our total network. We are engaging with an even brighter consumer than we have in the past. And although the macroeconomic environment remains challenging, we will continue to focus on driving our business, focusing on the consumer and continuously improving our execution. We have every intention of growing from our post-COVID base gaining share and believe the best is yet to come as we deliver long-term profitable growth and returns to all stakeholders. I want to thank the entire La-

Thank you, Melinda. We will begin the question-and-answer period now. Jenny, please review the instructions for getting in the queue to ask questions.

[Operator Instructions]. Our first question is coming from Brad Thomas of KeyBanc Capital Markets. Brad, your line is live.

Hi, good morning and congratulations on a good quarter here. Melinda, first I just want to kick off with the strong performance, particularly relative to the industry and what you're seeing on the written front, and maybe this is kind of two parts. I mean, first I was hoping you could just talk a little bit more about your own network and what you think is best driving results. And then maybe if you could also speak to some of the wins that you have had within third-parties? And how much of this is just your own execution versus perhaps some of the bankruptcies that have been reported in the industry and the disappearance of competitors?

Yes, a couple of thoughts there. First of all, within our Furniture Galleries, and particularly our company-owned furniture galleries, we have been on a really strong execution march for quite a few quarters now where with the traffic that is coming in the door, what we are doing in the way of design sales, in the way of conversion rates of average tickets, the blocking and tackling, we just continue to get better there in very database, but blocking and tackling ways, and that trajectory continues. The second thing is, the power of the brand. And we do believe, the Long Live the Lazy campaign, has begun to affect that and will continue to get stronger over time, obviously long purchase cycles. And so, that's a long process. But we believe that the consumer coming in is excited about the La-

And then, Melinda, just to follow-up on the cadence of the business, you did touch on this, I think in the remarks, but we sort of widely heard that October was a soft month. You referenced things improving in November. Any more commentary you could share about how November's been trending for you and your optimism for this holiday season?

Yeah, I mean, we've certainly seen even if you look through what would be our Q2, August, September, October, as we mentioned prepared remarks. Labor Day looked like there was some decent strengthening. And then October, I think across the, in industry was challenging. Early reads, it's still very early on the holiday season, which for all industries kind of spreads over a couple of weeks, if not months now. So, we were pleased with what we saw in the early days of the holiday season. And I think we're just going to continue to see kind of a bumpy consumer experience here for a while. So, we're focused on executing against those consumers that are still willing to buy. And it does help that we're a little more upper middle-income consumer, so they are always going to be a little less affected by some of these economic challenges.

Your next question is coming from Anthony Lebiedzinski with Sidoti & Company.

First just to follow-up on Brad's question about as far as design, sales and average ticket, is there any way you guys can share any quantifiable metrics on that? As far as how much of your revenue comes from in home design nowadays and maybe any, any sort of comments on the average ticket?

Yeah, Anthony, right now, we've been increasing this and has continued to a slow march, if you will. But it's a march -- continued march up, we're now around 30%, design sales and that's continuing to increase, we continue to see year over year improvements in that metric as the stores execute extremely well with the consumers who are coming in to shop there. And then from an average ticket perspective, we're also seeing slight increases there particularly with the higher design sales. We are seeing folks buying more product, and those are two of the reasons that Melinda also added to the other ones relative to what we are doing in the store as well as what we are doing from a brand perspective that are enabling our retail stores to outperform, what we believe is outperforming the industry in general.

Thanks, Bob. And then, in terms of the guidance for Q3, is this mostly volume driven as far as the sales decline from last year. How should we think about pricing? I know it was a bit of a factor during Q2, but just overall, just wanted to get a better understanding as to how you are thinking about the volume versus pricing dynamics?

The pricing is pretty much in -- we have pretty much lapped all the price increases that we've taken. There's been some promotional opening price point sharpening and things like that, that we have done. We have seen some improvements in mix, and a combination of those things is how we are kind of thinking about the kind of year-over-year from a unit perspective, things are, I would say, flattish with some benefit from the mix of the business we have from a Retail versus Wholesale, as well as the mix of some of the products that we're selling in the Retail segment.

And then, as you called out, part of Century Vision strategy is to get to double-digit operating margins, you made some changes to your supply chain here as of this last quarter, staying agile as you like to say. So I mean, can you guys -- do you think you can get back to a double-digit operating margins even if revenue will be below peak levels that you had in fiscal '22?

Yes. Our plan will be to get our sales above those peak levels with all the work that we are doing from a Century Vision strategy perspective. That includes all the work we are doing on the retail side relative to acquisitions, new store openings and just continued execution that store to derive same-store sales. All the channel expansion strategy that we have got right now is delivering. We are getting into new customers and we are delivering incremental volume from that. So with all of those going on, and then eventually, we will see the consumer come back in and start shopping because the economy will get better, the housing market will improve, and people will start kind of -- we will see the industry come back from that perspective. A combination of all of those things will indicate that we are going to be over that, the peak that we hit during COVID. Question of when that's going to happen, is a function of the macroeconomic environment. But we are working on all the things that we can work on to make that happen. And as we are doing that, we are doing a lot of work, particularly on the wholesale side to bring that business back up into the 10% margin area that it was pre-pandemic. We’re getting more efficient in our plants. We just took a decision relative to closing a facility, because of the productivity improvements we have seen in the U.S. plants, we were able to absorb all that volume into those plants. So it is not something that's going to happen next quarter, but over time we are going to be continue to move that are Wholesale business up to that 10%. And we will continue to execute well on the Retail side. And that's the formula if you will for getting to the consistent double-digit margins.

[Operator Instructions]. Our next question is coming from Bobby Griffin of Raymond James.

I guess Bob, I want to circle back on the restructuring and hopefully maybe we can unpack the changes a little bit more and then maybe talk about what do you think that opportunity can do to the wholesale margins? And then I guess as the second part of that question is when you look back versus pre pandemic, so not the prior -- not the pandemic peak, but going back to call it like FY ’19, what are the biggest two or three drivers and the difference between wholesale being 10% and now wholesale being 7% or 8% margins?

I'll start, Bobby. If you look at what we did over the last three years when there was so much supply chain disruption, and then at one point we were at kind of a six-to-nine-month backlog. What we did is prioritize getting our consumers and our customers’ service. And as our production process is an artesian process. It's people with hands putting together fabric and foam and steel and wood. And so we opened up quite a few leased facilities to essentially get the people and the processes in place to service that backlog. As the dust has settled now, that's giving us the opportunity to look at that, get back to the blocking and tackling work that we've had for many years around being super productive, and get our existing plants back on track with less disruption. So with that, enables us to start to, it's never easy to be clear to close locations, right? Those that impacts people. But we're making those tough choices and closing down some of those leased facilities and all, as the rest of our network kind of gets back to the excellent productivity levels that they've had in the past. So I think that that's the biggest single piece is somewhat managing through the disruption now and then designing that footprint of the future that meets our consumer needs and our customer needs for the long term at the sort of strategic level.

And then Bob, I think, you touched on it a little bit in your remarks about improving the efficiency, but just any color on kind of where we are versus historical efficiency on a output per employee or any type of metrics you guys look at that kind of help us think about this sequentially building, because I believe that is probably one of the biggest drivers of getting wholesale margins back to double digits, right?

It is and it is a combination of the productivity as well as like the decision that we just made. We should get at least 50 to 60 basis points of improvement next year versus this year due to that the restructure that we just announced. Again, it's not going to start until next year because it's going to take three months or six months for us to go off and get completed -- it'll be completed by the beginning of fiscal ‘25. It's going to be that couple -- there's no one single, it's not just a worker productivity piece of it. There's work that we're doing relative to how we are scheduling our plants, what products are being made in our plants. We're doing work on our delivery expense and our delivery network and how we do that. So we are tackling every single aspect of our supply chain cost structure via program we call transform. And that program is turning over every rock making improvements in a number of different areas. So, it's hard to quantify just one thing for you to say, okay, our productivity is so many sofas per shift for whatever, and then it's going to be up by 10% and that kind of thing. I don't know if that's what you were looking for or not.

The basis point improvement based on restructuring is helpful too. And I guess the last side of things is, what is the change do from a capacity standpoint? Hopefully, one day, we are going to get back to a point where industry is growing again. I am hopeful that's going to happen sometime. But what does it do from a a capacity standpoint, if we get back into a nice type of recovery?

Our focus is absolutely making sure we can service those incoming order rates. And to your point, eventually, there is going to be a tailwind here, on top of all the good work to drive demand. And so, that's part of our overall equation is to make sure we have got the headroom for when we see order rates pick back up significantly. And importantly, our supply chain will remain agile. So over time, the potential for expansion of our existing Same footprint is something we are always looking at to make sure not just that we have got enough capacity, but that it is in the right locations. Furniture are big pieces to move around, so you want to make sure that, footprint is in the right place relative to where your customer base is too.

And then congrats on getting the agreement to acquire the six Midwest stores. Are the conversations changed any or happening more frequently with some of the independent galleries, given some of the headwinds the industry has been facing or is it still kind of as we have always talked about historically kind of ebb-and-flow basis of timing you can't really predict?

We have talked over the last couple of years about being a little more strategic in those conversations on our end, rather than kind of waiting to see if someone knocks on the door, making sure we are proactively. Partnering with our long-term independent furniture gallery owners so that they know we are here, if they are interested and what that would look like for them financially. So we have been definitely more strategic in those conversations in recent years. I wouldn't say anything given the economy is really changing right now. Simply, for the most part, La-

Thank you very much. We don't appear to have any further questions in the queue. I will now hand back over to the management team for their closing comments.

Thanks, Genie. Melinda, Bob and I will be in our office to take any follow-up questions we didn't get to on the call. Have a great day.