Good afternoon, and welcome to Lulu's Fashion Lounge Second Quarter 2025 Earnings Call. Today's call is being recorded, and we have allocated 1 hour for the prepared remarks and Q&A. At this time, I'd like to turn the conference over to Lulu's General Counsel and Corporate Secretary, Naomi Beckman-Straus. Thank you. Please go ahead.

Good afternoon, everyone, and thank you for joining us to discuss Lulu's Second Quarter Fiscal 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 historical fact should be considered forward-looking statements, including, but not limited to, statements regarding management's expectations, plans, strategies, goals and objectives and their implementation, opportunities for growth, 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, including our financial outlook for the third quarter and fiscal year 2025, our ability to realize the intended impact of cost reduction measures and the negotiation of a new asset-based revolving credit facility. 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-K for the fiscal year ended December 29, 2024, and our quarterly reports on Form 10-Q for the fiscal quarters ended March 30, 2025, and June 29, 2025, the latter of which was filed with the SEC this afternoon and all of which can be found on our website at investors.lulus.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 at some point in the future, we undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, net debt and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. Our non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliation of GAAP to non-GAAP measures as well as the description limitations and rationale for using each measure can be found in this afternoon's press release and in our SEC filings. We also use certain key operating metrics, including gross margin, average order value and total orders placed. The description of these metrics can also be found in this afternoon's press release and in our SEC filings. Joining me on the call today are our CEO and Interim CFO, Crystal Landsem; and our President and CIO, Mark Vos. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Crystal.

Thank you, Naomi, and good afternoon, everyone. We appreciate you joining us today. In the second quarter, we built on our positive momentum from the start of the year with encouraging trends continuing across key areas of the business. Notably, we saw a meaningful sequential improvement in our quarterly year-over-year net revenue comparisons and generated positive adjusted EBITDA for the second quarter, in line with our expectations. Special occasion and bridesmaid categories were key growth drivers during the quarter, reflecting sustained consumer interest and underscoring the resonance of our offering. This performance was offset by continued softness in our casual wear and footwear businesses, and we are taking action to better align these categories with our strength in events-focused apparel. To that end, our more curated collections in casual and separates launched during the second quarter with early positive reads in key styles. We will continue to test and iterate to fine-tune our reorder pipeline. In the second quarter, we continued to make progress strengthening our financial position with positive adjusted EBITDA performance and a reduction in our total debt position. With a more efficient cost structure and a condition of our balance sheet, we believe we are well positioned to continue investing in our brand, deepen key wholesale partnerships and drive product margin gains in the second half of the year. As it relates to our refinancing efforts, on August 11, we entered into an amendment to our forbearance agreement and fifth amendment to our credit agreement with Bank of America, which extended the expiration of the forbearance period under the forbearance agreement and maturity date under the credit agreement from August 15 to August 22. Importantly, we are actively negotiating a new asset-based revolving credit facility. We will share updates as appropriate in the future. From an operational standpoint, we remain committed to executing against our strategic priorities, which should drive greater cost efficiency, optimize our business for long-term growth and expand our reach to new customers. Mark will walk you through our progress on these initiatives and how they've continued to take shape in Q2. Before I turn it over to Mark, I'll take a few minutes to talk through our key highlights during the second quarter. We delivered our strongest Q2 performance ever in special occasion with formal and bridesmaid categories seeing robust year-over-year and net sales growth. Our consistent outperformance in event dressing reinforces our conviction in our assortment strategy and as a style destination for life standout moments. First-time reorders of new products continue to see momentum with another quarter of sequential and year-over-year growth. We are making ongoing refinements to our reorder funnel and merchandising strategy and making product investments in areas of our new assortment where we're seeing demand. Product margins improved for the third consecutive quarter and increased by roughly 170 basis points compared to the prior year period, reflecting a consumer preference shift to higher-margin product categories and continued traction with pricing and margin enhancement initiatives. Gross margin was nearly flat on a year-over-year basis and expanded on a sequential basis, consistent with typical Q2 trends, reaching 45.3% in the second quarter, up from 40.3% in Q1 2025. Return rates improved 114 basis points during the quarter, marking our fourth consecutive quarter of improvement. Our continued success managing return rates reflects the ongoing positive impacts we're seeing from our improvements in fit and quality and thoughtful adjustments to our return policy. On the brand front, our campaigns and activations in the second quarter continued to drive meaningful gains in engagement and awareness through high-impact influencer collaborations, seasonal content and cultural moments that drove visibility and discovery. Our brand equity score had another record-breaking quarter, which we believe illustrates that our brand investments are working. Our wholesale business has continued to see significant traction with the addition of three new major partners and growth among boutique retailers, underscoring the growing demand for the Lulu's brand across channels. We remain extremely optimistic about our growth potential in wholesale and continue to expect strong growth in this business throughout 2025 and beyond. Finally, and importantly, we returned to positive adjusted EBITDA in the second quarter as expected. This improvement was driven by our leaner cost structure and improved product margins resulting from the discipline and focus around streamlining operations and strengthening our bottom line. Now turning to our challenges during the quarter. Shoes and separates continued to weigh on top line results, again, accounting for the majority of the year-over-year decline in net sales. We are actively addressing these challenges with our refined merchandising strategy and early signs of improvement are visible, most notably in our casual and separates categories where we are seeing traction with our more elevated styles launched during Q2. Furthermore, we believe actions to narrow assortment and reduce SKU complexity as we align our offerings with our core brand identity and occasion wear will continue to support profitability and brand alignment. In shoes, we are closely evaluating and adapting our sourcing and merchandising strategies to address the continued soft sales in this category, which should position us well for improvement in 2026. Shifting to our cost reduction initiatives. In the back half of 2024 through Q1 2025, we implemented targeted cost savings initiatives alongside our broader strategic priorities to drive improved profitability and set the foundation for long-term growth. With the implementation of these initiatives, we're seeing meaningful benefits reflected in our operating expenses. In the second quarter, OpEx declined 15% year-over-year. And within that, fixed costs were down 19%, supporting our inflection to positive adjusted EBITDA for the quarter. We expect to continue to benefit from our leaner cost structure and the additional actions we're taking to drive operational efficiency, optimize performance and sustain profitability. On our last earnings call, we announced additional steps we are taking to streamline our cost structure following the heightened macro uncertainty stemming from trade policy actions initiated earlier this year, namely driving cash generation and reinforcing our balance sheet, which includes SKU rationalization and the acceleration of our direct sourcing strategy, among other supply chain initiatives. As a reminder, our SKU rationalization focuses on leveraging data to shift our buying strategy towards deeper investments in a narrower, more curated assortment, aiming to drive improved efficiencies, margin expansion, reduction of excess inventory and additional cost savings. On the direct sourcing side, we are making excellent progress shifting to a direct-from-factory approach for select product category segments. We continue to expect to double our direct sourcing sales mix by year-end, which was previously less than 5%, further supporting margin expansion. Furthermore, we have been closely evaluating our sourcing geographies to reduce dependence on any single region where possible, including China, and we are pursuing proactive mitigation in partnership with our vendors as well as through price strategy and assortment optimization. Regardless of final tariff policy outcomes, we maintain conviction in our supply chain diversification and direct sourcing strategies, which better position our business for the long term. Even in light of the dynamic macro backdrop, 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. We believe we're well-equipped to manage today's challenges while remaining focused on our long-term growth plans. Before I turn it over to Mark, I want to briefly address our CFO transition. As you may know, in addition to my responsibilities as CEO, I'm currently serving as interim CFO while we conduct a search for our next finance leader. Identifying the right candidate for this role is a top priority, and I'm working closely with our Board to ensure we bring a strong leader to the business. In the meantime, I have the utmost confidence in the current finance team in place today and having served as Lulu's CFO for a number of years, I believe we are well-equipped to continue to execute against our plans until we find a successor. With that, I'd like to turn the call over to Mark Vos, our President and Chief Information Officer. Mark will provide updates around progress we're seeing against our strategic priorities.

Thank you, Crystal. While active customers were lower on a year-over-year basis, we continue to see great traction with our brand engagement efforts to drive visibility and awareness of the brand. Our Love Rewards loyalty program membership saw year-over-year double-digit growth in the second quarter, driving an overall increase in total membership. We also continued with positive year-over-year reactivation rates of lapsed customers. Notably, we saw improved average order values in the second quarter, which drove continued comp improvement through May. With another quarter of positive momentum across key customer engagement metrics, we're optimistic about the impact our strategic initiatives are having on the momentum of the Lulu's brand. Turning now to our second quarter progress against our strategic initiatives. Starting with our product assortment optimization and related margin expansion efforts. The launch of our updated return policy in the first quarter has continued to show positive traction with another quarter of improved return rates as well as a decrease in customer returns related to damaged items. As a reminder, we shifted to a flat fee rather than a per unit return fee early in Q1, which better aligns us with industry standards. We are continuing to monitor these trends, but are pleased with the positive performance we have seen so far in the first half of the year. The success of our ongoing fit enhancement initiatives has continued to support the decline in return rates while also enhancing customer experience. In Q2, we continued to see a positive trend, which we attribute to our attention to the improved fit consistency and flexibility across categories, a clearer fit guidance and a more supportive return policy. Turning to our investments in strengthening brand awareness and customer engagement. Throughout the quarter, we made sure the Lulu's brand stayed front and center from launching our spring campaign to showing up in cultural moments that drove real conversation and visibility from our Childbella campaign to the festival showroom or Derby race to hot concert tour activations. Additionally, the launches of our wedding trend report, Elliott and Garden Girl and RSVP edits were key drivers of media coverage during the quarter, supporting a number of unique placements in top-tier lifestyle, fashion, entertainment and business outlets, broadening our visibility and industry relevance. Influencer and ambassador efforts continued to scale in the second quarter, delivering strong returns with record earned media value and engagement, supported by a strong creator strategy, which is delivering from a reach, potency and cost standpoint. These partnerships allow us to connect with new audiences through content that reflects how our customers shop, share and dress for life's moments. In parallel, we saw strong gains in social engagement with growing followings and clicks across Instagram and TikTok with more customers coming back to shop the products they discovered through our content. Finally, these ongoing brand and engagement efforts resulted in Lulu's brand equity hitting a new all-time high in Q2, following a record-breaking Q1. We believe the sequential improvement underscores the effectiveness of our investments, social and content strategies, and overall momentum of our brand. Our third initiative focuses on driving technology enablement to improve decisioning, efficiencies and create a seamless customer experience across channels. In Q2, we expanded our usage of AI-driven site merchandising for product discovery by trend, core and end use case. Additionally, we enhanced our cross-category merchandising to further optimize impressions of newly introduced and reintroduced products to drive both new product adoption and continuation of best sellers. Lastly, we have also seen great customer response to individual customer personalized AI-curated product selections, and we will continue to build on this success towards truly individual shopping experiences. In summary, we are pleased with our consistent progress against our strategic priorities, which we believe lay the foundation for our business's return to profitable and sustainable growth. And with that, I'll turn it back to Crystal to provide more color on our financial performance.

Thanks, Mark. In the second quarter, net revenue was approximately $81.5 million, a decrease of 11% year-over-year, driven by a 16% decrease in total orders placed, partially offset by a 1% increase in average order value and the favorable impact of lower return rates, marking our fourth consecutive quarter of year-over-year improvement in return rates. Gross margin for the quarter was 45.3%, down 20 basis points versus the prior year with notable improvement in product-related margins, offset by outbound and returns logistics cost pressures from rate increases and higher fuel surcharges passed through from shipping carriers. On the expense side, Q2 selling and marketing expenses totaled $22 million, down about $2.9 million year-over-year, primarily due to lower marketing and merchant processing fees on lower revenues. General and administrative expenses decreased $3.9 million to $17.5 million in Q2, an 18% decline year-over-year, primarily due to a decrease in fixed labor costs driven by reduced headcount, lower variable labor costs on lower sales volumes as well as lower equity-based compensation expense and lower travel, supplies and insurance costs. Our net loss for Q2 improved to $3 million from $10.8 million in the same period last year, driven primarily by a $1.8 million reduction in our operating loss, a $0.3 million increase in net interest expense and other income and a $6 million reduction in our income tax provision. Last year's income tax provision was unusually high due to the initial establishment of the valuation allowance on our deferred tax assets. Q2's adjusted EBITDA was approximately $0.5 million compared to a $0.2 million loss in Q2 2024. Adjusted EBITDA margin was 0.6% versus negative 0.2% in the prior year period. Interest expense in Q2 totaled $856,000 versus $270,000 in Q2 2024, inclusive of one-time fees paid related to amendments to our credit agreement. Diluted loss per share for the quarter was $1.08 compared to a diluted loss per share of $3.92 in Q2 of 2024. In the second quarter, net cash used in operating activities was $1.4 million, a $5 million decline from $3.7 million of cash provided in the same period last year, primarily due to a larger decrease in accounts payable related to the timing of payments in Q2 '25 compared to Q2 '24. Free cash flow during Q2 was negative $1.9 million, reflecting a $4.9 million decrease year-over-year. Net debt was $4.2 million at the end of Q2, a $4.4 million reduction from our net debt position of $8.6 million at the end of the fourth quarter 2024. Our inventory balance at quarter-end was $37.3 million, a $0.3 million or an approximately 1% decrease year-over-year. Moving on to guidance. For the third quarter, we once again expect to generate positive adjusted EBITDA and are confident in the work we are doing to strengthen our liquidity position while focusing on driving the success of our business. This confidence is reinforced by the active negotiation of a new asset-based revolving credit facility. Additionally, we now expect capital expenditures for the full year to be approximately $2.5 million, which represents the low end of our previously estimated range of between $2.5 million and $3 million. We continue to evaluate options to help mitigate the potential impacts of tariffs through a combination of vendor collaboration, sourcing diversification, strategic pricing and assortment optimization. Potential tariff costs are being closely managed and partly offset with the ramp of our direct sourcing strategy, which we expect to more materially benefit the business in the second half of the year. We are very pleased with the work the team has done to progress our growth strategy and return to profitability. This quarter has shown the positive outcome of our cost management and overall business strategy, even amid a dynamic macroeconomic environment. We remain focused on executing and driving cost efficiencies as well as the continued strengthening of our liquidity position. Thank you to our team, the entire Lulu's community for their engagement with our brand and their enthusiasm and to our shareholders for their continued support. With that, I'll turn it over to questions.

At this stage, there are no questions. Thank you for your attendance. You may now disconnect your lines.