# 1 800 Flowers Com Inc: Form 10-Q for the period ended Apr 2, 2023

- Company: [1 800 Flowers Com Inc](/companies/flws.md) (CIK 1084869)
- Form: 10-Q
- Filed: 2023-05-12
- Accepted by EDGAR: May 12, 2023, 11:52 ET
- Period: 2023-04-02
- Accession: 0001437749-23-014083
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1084869/000143774923014083/flws20230402_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1084869/000143774923014083/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-04-02.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-02 to 2023-04-02 | $417.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-07-04 to 2023-04-02 | $1.62bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-02 to 2023-04-02 | $277.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-07-04 to 2023-04-02 | $1.01bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-01-02 to 2023-04-02 | $140.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-07-04 to 2023-04-02 | $609.7m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-01-02 to 2023-04-02 | −$84.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-07-04 to 2023-04-02 | −$10.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-01-02 to 2023-04-02 | −$16.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-07-04 to 2023-04-02 | $126.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-02 to 2023-04-02 | −$71.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-07-04 to 2023-04-02 | −$22.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-02 to 2023-04-02 | −$1.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-07-04 to 2023-04-02 | −$0.34 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-02 to 2023-04-02 | −$1.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-07-04 to 2023-04-02 | −$0.34 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-02 to 2023-04-02 | 64,767,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-07-04 to 2023-04-02 | 64,660,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-07-04 to 2023-04-02 | $73.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-07-04 to 2023-04-02 | $31.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2022-07-04 to 2023-04-02 | $1.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-04-02 | $51.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-04-02 | $319.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-04-02 | $998.8m | us-gaap:Assets |
| Current liabilities | at 2023-04-02 | $205.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-04-02 | $506.8m | us-gaap:Liabilities |
| Long-term debt | at 2023-04-02 | $128.1m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-04-02 | $20.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-04-02 | $492.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 62,322 characters.

*This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ("MD&A") is intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity and results of operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-Q and in the Company’s Annual Report on Form 10-K, for the year ended July 3, 2022. The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed or referred to in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption “Forward-Looking Information and Factors That May Affect Future Results,” under Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended July 3, 2022 under the heading “Risk Factors” and Part II-Other Information, Item 1A in this Form 10-Q.*

### Business Overview

1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”) is a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features an all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Stock Yards® and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift industry service provider offering a broad-range of products and services designed to help members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; and Alice’s Table®, a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country.

For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our Annual Report on Form 10-K for the year ended July 3, 2022.

### Acquisition of Vital Choice

On October 27, 2021, the Company completed its acquisition of Vital Choice Seafood LLC (“Vital Choice”), a provider of wild-caught seafood and sustainably farmed shellfish, pastured proteins, organic foods, and marine-sourced nutritional supplements. The Company utilized its existing credit facility to fund the $20.0 million purchase (subject to certain working capital and other adjustments), which included tradenames, customer lists, websites and operations. Vital Choice revenues were approximately $27.8 million during its most recent year ended December 31, 2020 - see Note 4 –Acquisitions in Item 1.

**Acquisition of Alice’s Table**

On December 31, 2021, the Company completed its acquisition of Alice’s Table LLC (“Alice’s Table”), a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. The Company utilized existing cash of $0.8 million, converted the existing accounts receivable from Alice’s Table of $0.3 million and its previous $0.3 million cost method investment in Alice’s Table, in order to acquire 100% ownership in Alice’s Table, which included tradenames, customer lists, websites and operations. Alice’s Table revenues were approximately $3.8 million during the twelve-month period ended September 30, 2021 - see Note 4 –Acquisitions in Item 1.

### Acquisition of Things Remembered

On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider of personalized gifts, whose operations will be integrated within the PersonalizationMall.com brand, in the Consumer Floral & Gifts segment. The Company used cash on hand to fund the $5.0 million purchase, which included the intellectual property, customer list, certain inventory, and equipment. The acquisition did not include Things Remembered retail stores. Things Remembered’s annual revenues from its ecommerce operations, based on its most recently available unaudited financial information was $30.4 million for the twelve months ended November 30, 2022 - see Note 4 –Acquisitions in Item 1.

### Amended Credit Agreement

On August 29, 2022, the Company entered into a Third Amendment to the Company's 2019 Credit Agreement. The Third Amendment amends the 2019 Credit Agreement to, among other modifications, (A) alter the financial maintenance covenants set forth therein by (1) increasing the required maximum consolidated leverage ratio, for the reference period ending October 2, 2022, from 3.25 to 1.00 to 4.25 to 1.00 and (2) decreasing the required minimum consolidated fixed charge coverage ratio, for the reference periods ending October 2, 2022, January 1, 2023, and April 2, 2023, from 1.50 to 1.00 to 1.00 to 1.00 and (B) increase the amount of certain capital expenditures that may be disregarded for purposes of calculating the consolidated fixed charge coverage ratio from $25.0 million to $35.0 million (See Note 8 - Debt, in Item 1, for details).

### Macro-Economic Factors

Overall, consumer behavior continues to reflect the significant geo-political, inflationary forces, interest rate hikes, and fears of a recession, that are affecting both their discretionary and nondiscretionary spending. Throughout the current fiscal year discretionary spending remained pressured and consumers continue to moderate their purchases for “Everyday” gifting occasions, and to a lesser extent, “Holiday” gifting occasions.

We expect consumers to remain cautious in the face of macroeconomic pressures, including high inflation, rising interest rates, and fear of recession. For the balance of the fiscal year, we expect that customers will continue to moderate their spending on everyday gifting occasions, and while we also expect that our customers will continue to shop for the important people in their lives during the major upcoming holidays, including Mother’s Day, the fourth quarter of our fiscal year is more heavily weighted towards everyday gifting occasions.

The challenging macro-economic conditions that have affected our customers have also impacted our operating costs. During the second quarter of fiscal 2022, in-bound and out-bound shipping, commodity, labor and fuel costs began to surge, and escalated throughout the balance of the year into our first quarter of fiscal 2023. During our second quarter and third quarter of the current fiscal year, while certain commodity prices remain near historical highs, we began to see a more stable labor market, and significant year-over-year reductions in ocean freight costs.

As a result of these trends, combined with our strategic pricing initiatives, and automation efforts, we expect to continue to see margin improvement during the fourth quarter of our fiscal year, as we cycle against the sharp inflationary period of a year ago. Further, as a management team, we are focusing our efforts on the areas that are within our control, mitigating topline challenges through gross margin improvement and expense management efforts.

### Company Guidance

Based on its third quarter performance and outlook for the balance of the year, the Company is updating its fiscal 2023 guidance. This outlook includes a continuation of the challenging consumer environment, which is expected to be mitigated by the Company’s expense management efforts.

The Company expects:

- Total revenues to decline approximately 8% as compared with the prior year;
- Adjusted EBITDA to be in a range of $85.0 million to $90.0 million; and
- Free Cash Flow to exceed $75.0 million.

Refer to "Definitions of non-GAAP Financial Measures" for reconciliation of non-GAAP results to applicable GAAP results.

### Definitions of non-GAAP Financial Measures:

We sometimes use financial measures derived from consolidated financial information, but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission rules. See below for definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Segment Information and Results of Operations sections below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. We do not provide a reconciliation of adjusted EBITDA guidance to net income guidance or a reconciliation of free cash flow guidance to net cash provided by operating activities because doing so would require unreasonable efforts at this time, because of the uncertainty and variability of the nature and amount of certain components of various necessary GAAP components, including for example those related to compensation, tax items, amortization or others that may arise during the year, and the Company's management believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.

### EBITDA and adjusted EBITDA

We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation, NQDC Plan investment appreciation/depreciation, and for certain items affecting period-to-period comparability. See Segment Information for details on how EBITDA and adjusted EBITDA were calculated for each period presented.

The Company presents EBITDA and adjusted EBITDA because it considers such information meaningful supplemental measures of its performance and believes such information is frequently used by the investment community in the evaluation of similarly situated companies. The Company uses EBITDA and adjusted EBITDA as factors to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company's credit agreement uses EBITDA and adjusted EBITDA to determine its interest rate and to measure compliance with certain covenants. EBITDA and adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates.

EBITDA and adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations are: (a) EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA and adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.

### Segment contribution margin and adjusted segment contribution margin

We define segment contribution margin as earnings before interest, taxes, depreciation and amortization, before the allocation of corporate overhead expenses. Adjusted segment contribution margin is defined as contribution margin adjusted for certain items affecting period-to-period comparability. See Segment Information for details on how segment contribution margin was calculated for each period presented.

When viewed together with our GAAP results, we believe segment contribution margin and adjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.

Segment contribution margin and adjusted segment contribution margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of segment contribution margin and adjusted segment contribution margin is that they are an incomplete measure of profitability as they do not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as operating income and net income.

### Adjusted net income (loss) and adjusted or comparable net income (loss) per common share

We define adjusted net income (loss) and adjusted or comparable net income (loss) per common share as net income (loss) and net income (loss) per common share adjusted for certain items affecting period-to-period comparability. See Segment Information below for details on how adjusted net income (loss) and adjusted or comparable net income (loss) per common share were calculated for each period presented.

We believe that adjusted net income (loss) and adjusted or comparable net income (loss) per common share are meaningful measures because they increase the comparability of period-to-period results.

Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP net income (loss) and net income (loss) per common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.

### Free Cash Flow

We define free cash flow as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in the Company’s business, make strategic acquisitions, strengthen the balance sheet, and repurchase stock or retire debt. Free cash flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated companies.

Since free cash flow is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company's cash balance for the period.

### Segment Information

The following table presents the net revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, and adjusted EBITDA.

| Net revenues: | Three Months Ended April 2, 2023 | Goodwill and Intangible Impairment | Things Remembered Transaction Costs | As Adjusted (non-GAAP) April 2, 2023 | March 27, 2022 | Vital Choice and Alice's Table Transaction Costs | Litigation Settlement | As Adjusted (non-GAAP) March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Consumer Floral & Gifts | $233,019 | $- | $- | $233,019 | $264,243 | $- | $- | $264,243 | -11.8% |
| BloomNet | 36,968 |  |  | 36,968 | 38,448 |  |  | 38,448 | -3.8% |
| Gourmet Foods & Gift Baskets | 147,863 |  |  | 147,863 | 167,402 |  |  | 167,402 | -11.7% |
| Corporate | 36 |  |  | 36 | 43 |  |  | 43 | -16.3% |
| Intercompany eliminations | (320) |  |  | (320) | (560) |  |  | (560) | 42.9% |
| **Total net revenues** | $417,566 | $- | $- | $417,566 | $469,576 | $- | $- | $469,576 | -11.1% |
| **Gross profit:** |  |  |  |  |  |  |  |  |  |
| Consumer Floral & Gifts | $88,317 |  |  | $88,317 | $96,875 |  |  | $96,875 | -8.8% |
|  | 37.9% |  |  | 37.9% | 36.7% |  |  | 36.7% |  |
| BloomNet | 15,720 |  |  | 15,720 | 14,895 |  |  | 14,895 | 5.5% |
|  | 42.5% |  |  | 42.5% | 38.7% |  |  | 38.7% |  |
| Gourmet Foods & Gift Baskets | 36,371 |  |  | 36,371 | 42,343 |  |  | 42,343 | -14.1% |
|  | 24.6% |  |  | 24.6% | 25.3% |  |  | 25.3% |  |
| Corporate | 32 |  |  | 32 | (22) |  |  | (22) | 245.5% |
|  | 88.9% |  |  | 88.9% | -51.2% |  |  | -51.2% |  |
| **Total gross profit** | $140,440 | $- | $- | $140,440 | $154,091 | $- | $- | $154,091 | -8.9% |
|  | 33.6% | - | - | 33.6% | 32.8% | - | - | 32.8% |  |
| **EBITDA (non-GAAP):** |  |  |  |  |  |  |  |  |  |
| **Segment Contribution Margin (non-GAAP) (a):** |  |  |  |  |  |  |  |  |  |
| Consumer Floral & Gifts | $26,136 | $- |  | $26,136 | $20,523 | $- | $- | $20,523 | 27.3% |
| BloomNet | 10,982 |  |  | 10,982 | 9,783 |  |  | 9,783 | 12.3% |
| Gourmet Foods & Gift Baskets | (78,480) | 64,586 |  | (13,894) | (17,134) |  | 2,900 | (14,234) | 2.4% |
| Segment Contribution Margin Subtotal | (41,362) | 64,586 | - | 23,224 | 13,172 | - | 2,900 | 16,072 | 44.5% |
| Corporate (b) | (30,015) |  | 201 | (29,814) | (26,735) | 25 |  | (26,710) | -11.6% |
| **EBITDA (non-GAAP)** | (71,377) | 64,586 | 201 | (6,590) | (13,563) | 25 | 2,900 | (10,638) | 38.1% |
| Add: Stock-based compensation | 2,487 |  |  | 2,487 | 1,507 |  |  | 1,507 | 65.0% |
| Add: Compensation charge related to NQDC Plan Investment (Depreciation) Appreciation | (1,446) |  |  | (1,446) | (2,881) |  |  | (2,881) | 49.8% |
| **Adjusted EBITDA (non-GAAP)** | $(70,336) | $64,586 | $201 | $(5,549) | $(14,937) | $25 | $2,900 | $(12,012) | 53.8% |

24

| Net revenues: | Nine Months Ended April 2, 2023 | Goodwill and Intangible Impairment | Things Remembered Transaction Costs | As Adjusted (non-GAAP) April 2, 2023 | March 27, 2022 | Vital Choice and Alice's Table Transaction Costs | Litigation Settlement | As Adjusted (non-GAAP) March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Consumer Floral & Gifts | $672,248 | $- | $- | $672,248 | $760,555 | $- | $- | $760,555 | -11.6% |
| BloomNet | 103,187 |  |  | 103,187 | 107,212 |  |  | 107,212 | -3.8% |
| Gourmet Foods & Gift Baskets | 844,522 |  |  | 844,522 | 855,830 |  |  | 855,830 | -1.3% |
| Corporate | 152 |  |  | 152 | 157 |  |  | 157 | -3.2% |
| Intercompany eliminations | (1,062) |  |  | (1,062) | (1,761) |  |  | (1,761) | 39.7% |
| **Total net revenues** | $1,619,047 | $- | $- | $1,619,047 | $1,721,993 | $- | $- | $1,721,993 | -6.0% |
| **Gross profit:** |  |  |  |  |  |  |  |  |  |
| Consumer Floral & Gifts | $262,510 | $- | $- | $262,510 | $302,903 | $- | $- | $302,903 | -13.3% |
|  | 39.0% |  |  | 39.0% | 39.8% |  |  | 39.8% |  |
| BloomNet | 44,086 |  |  | 44,086 | 46,325 |  |  | 46,325 | -4.8% |
|  | 42.7% |  |  | 42.7% | 43.2% |  |  | 43.2% |  |
| Gourmet Foods & Gift Baskets | 302,902 |  |  | 302,902 | 308,745 |  |  | 308,745 | -1.9% |
|  | 35.9% |  |  | 35.9% | 36.1% |  |  | 36.1% |  |
| Corporate | 166 |  |  | 166 | 82 |  |  | 82 | 102.4% |
|  | 109.2% |  |  | 109.2% | 52.2% |  |  | 52.2% |  |
| **Total gross profit** | $609,664 | $- | $- | $609,664 | $658,055 | $- | $- | $658,055 | -7.4% |
|  | 37.7% | - | - | 37.7% | 38.2% | - | - | 38.2% |  |
| **EBITDA (non-GAAP):** |  |  |  |  |  |  |  |  |  |
| **Segment Contribution Margin (non-GAAP) (a):** |  |  |  |  |  |  |  |  |  |
| Consumer Floral & Gifts | $64,832 | $- | $- | $64,832 | $77,869 | $- | $- | $77,869 | -16.7% |
| BloomNet | 29,847 |  |  | 29,847 | 32,530 |  |  | 32,530 | -8.2% |
| Gourmet Foods & Gift Baskets | 26,313 | 64,586 |  | 90,899 | 85,695 |  | 2,900 | 88,595 | 2.6% |
| Segment Contribution Margin Subtotal | 120,992 | 64,586 | - | 185,578 | 196,094 | - | 2,900 | 198,994 | -6.7% |
| Corporate (b) | (91,595) |  | 444 | (91,151) | (90,694) | 540 |  | (90,154) | -1.1% |
| **EBITDA (non-GAAP)** | 29,397 | 64,586 | 444 | 94,427 | 105,400 | 540 | 2,900 | 108,840 | -13.2% |
| Add: Stock-based compensation | 5,941 |  |  | 5,941 | 6,803 |  |  | 6,803 | -12.7% |
| Add: Compensation charge related to NQDC Plan Investment (Depreciation) Appreciation | (2,548) |  |  | (2,548) | 111 |  |  | 111 | -2,395.5% |
| **Adjusted EBITDA (non-GAAP)** | $32,790 | $64,586 | $444 | $97,820 | $112,314 | $540 | $2,900 | $115,754 | -15.5% |

25

| Reconciliation of net income (loss) to adjusted net income (loss) (non-GAAP): | Three Months Ended April 2, 2023 | March 27, 2022 | Nine Months Ended April 2, 2023 | March 27, 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $(70,993) | $(23,409) | $(22,155) | $51,860 |
| Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP) |  |  |  |  |
| Add: Transaction costs | 201 | 25 | 444 | 540 |
| Add: Litigation settlement | - | 2,900 | - | 2,900 |
| Add: Goodwill and Intangibles Impairment | 64,586 | - | 64,586 | - |
| Deduct: Income tax effect on adjustments | (11,546) | (533) | (11,609) | (641) |
| **Adjusted net income (loss) (non-GAAP)** | $(17,752) | $(21,017) | $31,266 | $54,659 |
| **Basic and diluted net income (loss) per common share** |  |  |  |  |
| Basic | $(1.10) | $(0.36) | $(0.34) | $0.80 |
| Diluted | $(1.10) | $(0.36) | $(0.34) | $0.79 |
| **Basic and diluted adjusted net income (loss) per common share (non-GAAP)** |  |  |  |  |
| Basic | $(0.27) | $(0.32) | $0.48 | $0.84 |
| Diluted | $(0.27) | $(0.32) | $0.48 | $0.83 |
| **Weighted average shares used in the calculation of basic and diluted net income (loss) and adjusted net income (loss) per common share** |  |  |  |  |
| Basic | 64,767 | 65,028 | 64,660 | 65,086 |
| Diluted | 64,767 | 65,028 | 64,660 | 65,849 |

26

| Reconciliation of net income (loss) to adjusted EBITDA (non-GAAP): | Three Months Ended April 2, 2023 | March 27, 2022 | Nine Months Ended April 2, 2023 | March 27, 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $(70,993) | $(23,409) | $(22,155) | $51,860 |
| Add: Interest expense and other, net | 3,116 | 5,233 | 11,150 | 5,431 |
| Add: Depreciation and amortization | 13,267 | 12,693 | 40,276 | 36,251 |
| Add: Income tax expense (benefit) | (16,767) | (8,080) | 126 | 11,858 |
| EBITDA | (71,377) | (13,563) | 29,397 | 105,400 |
| Add: Stock-based compensation | 2,487 | 1,507 | 5,941 | 6,803 |
| Add: Compensation charge related to NQDC plan investment (depreciation) appreciation | (1,446) | (2,881) | (2,548) | 111 |
| Add: Goodwill and Intangible Impairment | 64,586 | - | 64,586 | - |
| Add: Transaction costs | 201 | 25 | 444 | 540 |
| Add: Litigation settlement | - | 2,900 | - | 2,900 |
| Adjusted EBITDA | $(5,549) | $(12,012) | $97,820 | $115,754 |

(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.

(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.

### Results of Operations

### Net revenues

*(dollars in thousands)*

| Net revenues: | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| E-Commerce | $357,801 | $409,777 | -12.7% | $1,387,133 | $1,500,670 | -7.6% |
| Other | 59,765 | 59,799 | -0.1% | 231,914 | 221,323 | 4.8% |
| Total net revenues | $417,566 | $469,576 | -11.1% | $1,619,047 | $1,721,993 | -6.0% |

Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.

Net revenues decreased 11.1% and 6.0% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, due to lower volume across all segments, reflecting a continuation of the trends that we have experienced throughout this fiscal year, in which discretionary spending remains pressured and consumers continue to moderate their spending on purchases for “Everyday” gifting occasions, and to a lesser extent, “Holiday” gifting occasions, combined with the prudent use of promotional offerings and advertising campaigns that balance the long-term goals of the Company with strategies to improve gross margins and operating spend ratios during this challenging economic environment.

Adjusted for the non-comparative impact of Alice’s Table and Vital Choice, which were acquired on December 31, 2021 and October 27, 2021, respectively, consolidated revenues decreased 6.4% during the nine months ended April 2, 2023, in comparison to the prior year period. The Company acquired Things Remembered on January 10, 2023, and launched the brand on its e-commerce platform in April 2023. As such, Things Remembered revenues were immaterial during the three and nine months ended April 2, 2023.

To provide perspective, our post-pandemic fiscal 2023 (three and nine months ended April 2, 2023) revenues exceeded our pre-pandemic fiscal 2019 (three and nine months ended March 31, 2019) revenues by 68.1% and 63.7%, respectively. This revenue growth includes revenues attributable to Shari’s Berries, which was acquired in August 2019, PersonalizationMall, which was acquired on August 3, 2020, Vital Choice, which was acquired on October 27, 2021, and Alice's Table, which was acquired on December 31, 2021. Excluding revenues from these acquisitions, pro-forma, post-pandemic revenues for the three and nine months ended April 2, 2023, exceeded pre-pandemic (three and nine months ended March 31, 2019) revenues by 41.4% and 37.4%, respectively.

| Net revenues | Three Months Ended Consumer Floral & Gifts April 2, 2023 | March 27, 2022 | % Change | BloomNet April 2, 2023 | March 27, 2022 | % Change | Gourmet Foods & Gift Baskets April 2, 2023 | March 27, 2022 | % Change | Corporate and Eliminations April 2, 2023 | March 27, 2022 | Consolidated April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| E-commerce | $230,403 | $261,707 | -12.0% | $- | $- | -% | $127,398 | $148,070 | -14.0% | $- | $- | $357,801 | $409,777 | -12.7% |
| Other | 2,616 | 2,536 | 3.2% | 36,968 | 38,448 | -3.8% | 20,465 | 19,332 | 5.9% | (284) | (517) | 59,765 | 59,799 | -0.1% |
| **Total net revenues** | $233,019 | $264,243 | -11.8% | $36,968 | $38,448 | -3.8% | $147,863 | $167,402 | -11.7% | $(284) | $(517) | $417,566 | $469,576 | -11.1% |
| **Other revenues detail** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Retail and other | 2,616 | 2,536 | 3.2% | - | - | - | 1,686 | 1,656 | 1.8% | - | - | 4,302 | 4,192 | 2.6% |
| Wholesale | - | - | - | 14,695 | 15,322 | -4.1% | 18,779 | 17,676 | 6.2% | - | - | 33,474 | 32,998 | 1.4% |
| BloomNet services | - | - | - | 22,273 | 23,126 | -3.7% | - | - | - | - | - | 22,273 | 23,126 | -3.7% |
| Corporate | - | - | - | - | - | - | - | - | - | 36 | 43 | 36 | 43 | -16.3% |
| Eliminations | - | - | - | - | - | - | - | - | - | (320) | (560) | (320) | (560) | 42.9% |
| **Total other revenues** | $2,616 | 2,536 | 3.2% | $36,968 | $38,448 | -3.8% | $20,465 | $19,332 | 5.9% | $(284) | $(517) | $59,765 | 59,799 | -0.1% |

| Net revenues | Nine Months Ended Consumer Floral & Gifts April 2, 2023 | March 27, 2022 | % Change | BloomNet April 2, 2023 | March 27, 2022 | % Change | Gourmet Foods & Gift Baskets April 2, 2023 | March 27, 2022 | % Change | Corporate and Eliminations April 2, 2023 | March 27, 2022 | Consolidated April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| E-commerce | $665,866 | $753,813 | -11.7% | $- | $- | -% | $721,267 | $746,857 | -3.4% | $- | $- | $1,387,133 | $1,500,670 | -7.6% |
| Other | 6,382 | 6,742 | -5.3% | 103,187 | 107,212 | -3.8% | 123,255 | 108,973 | 13.1% | (910) | (1,604) | 231,914 | 221,323 | 4.8% |
| **Total net revenues** | $672,248 | $760,555 | -11.6% | $103,187 | $107,212 | -3.8% | $844,522 | $855,830 | -1.3% | $(910) | $(1,604) | $1,619,047 | $1,721,993 | -6.0% |
| **Other revenues detail** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Retail and other | 6,382 | 6,742 | -5.3% | - | - | - | 7,907 | 8,084 | -2.2% | - | - | 14,289 | 14,826 | -3.6% |
| Wholesale | - | - | - | 40,370 | 39,890 | 1.2% | 115,348 | 100,889 | 14.3% | - | - | 155,718 | 140,779 | 10.6% |
| BloomNet services | - | - | - | 62,817 | 67,322 | -6.7% | - | - | - | - | - | 62,817 | 67,322 | -6.7% |
| Corporate | - | - | - | - | - | - | - | - | - | 152 | 157 | 152 | 157 | -3.2% |
| Eliminations | - | - | - | - | - | - | - | - | - | (1,062) | (1,761) | (1,062) | (1,761) | 39.7% |
| **Total other revenues** | $6,382 | 6,742 | -5.3% | $103,187 | $107,212 | -3.8% | $123,255 | $108,973 | 13.1% | $(910) | $(1,604) | $231,914 | 221,323 | 4.8% |

29

### Revenue by sales channel:

**E-commerce revenues** (combined online and telephonic) decreased 12.7% and 7.6% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, primarily as a result of a decline in demand for “Everyday” gifts within all our segments, attributable to the macro-economic conditions noted above, which have negatively impacted consumer discretionary spending.

During the three and nine months ended April 2, 2023, the Company fulfilled approximately 4.6 million and 16.3 million orders through its e-commerce sales channel (online and telephonic sales), a decrease of 15.8% and 12.7%, respectively, compared to the same periods of the prior year. During the three and nine months ended April 2, 2023, average order value increased 3.8% and 5.9%, to $78.25 and $85.01, respectively, as a result of strategic price increases, and product mix into higher price point items.

Excluding the impact of the acquisitions of Vital Choice and Alice’s Table, pro-forma e-commerce revenues declined 8.1% during the nine months ended April 2, 2023, compared to the same period of the prior year.

**Other revenues** are comprised of the Company’s BloomNet segment, as well as the wholesale and retail channels of its Consumer Floral & Gifts and Gourmet Foods & Gift Baskets segments.

Other revenues during the three months ended April 2, 2023, were consistent with the same period of the prior year, as higher wholesale volumes within the Gourmet Foods & Gift Baskets segment, as a result of increased spring and Easter volume, offset lower revenues within the BloomNet segment due to the overall macro-economic conditions.

Other revenues increased 4.8% during the nine months ended April 2, 2023, compared to the same period of the prior year, due to increased wholesale product demand within the Gourmet Foods & Gift Baskets segment, as consumers returned to in person “brick-and-mortar” shopping, as well as increased spring and Easter demand, partially offset by lower revenues within the BloomNet segment due to the overall macro-economic conditions.

### Revenue by segment:

**Consumer Floral & Gifts –** this segment, which includes the operations of the 1-800-Flowers.com and PersonalizationMall brands, as well as Alice’s Table, subsequent to its acquisition on December 31, 2021, and the Things Remembered brand, subsequent to its acquisition on January 10, 2023, derives revenue from the sale of consumer floral products and gifts through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations.

Net revenues within this segment decreased 11.8% and 11.6% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, due to reduced “Everyday” product demand and weaker than anticipated Valentine’s Day demand, as consumer discretionary spending continues to shrink in the current inflationary environment, combined with planned reductions in advertising spend, as the brands focused their efforts on improving gross margin and operating spend efficiency in the face of softening demand.

Pro-forma segment revenues decreased 11.7% during the nine months ended April 2, 2023, adjusting for the acquisition of Alice’s Table.

**BloomNet** - revenues in this segment are derived from membership fees, as well as product and service offerings. Net revenues decreased 3.8% during both the three and nine months ended April 2, 2023, compared to the same periods of the prior year.

The net revenue decline during the three months ended April 2, 2023 was due to a decline in wholesale product revenues, as well as services revenues, attributable to reduced membership/transaction fee revenues associated with a decline in order volume processed through the network, as well as lower directory services ad revenues.

Net revenues declined during the nine months ended April 2, 2023 due to lower services revenues, attributable to reduced membership/transaction fee revenues associated with a decline in order volume processed through the network, as well as lower directory services ad revenues, partially offset by strong wholesale product demand in the first quarter of the fiscal year, driven by product availability, which had been constrained by supply chain issues in the prior year.

**Gourmet Foods & Gift Baskets –** this segment includes the operations of Harry & David, Wolferman’s, Stock Yards, Cheryl’s Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, and Vital Choice, subsequent to its October 27, 2021 acquisition date. Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and confections, gourmet popcorn, gift baskets, dipped berries, prime steaks, chops, and fish, through the Company’s e-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David and Cheryl’s brand names, as well as wholesale operations.

Net revenues within this segment decreased 11.7% and 1.3% during the three and nine months ended April 2, 2023 compared to the same periods of the prior year, as a result of lower e-commerce sales, primarily due to the macro-economic weakness, which has significantly reduced “Everyday” occasion volumes, combined with planned reductions in advertising spend, as the brands focused their efforts on improving gross margin and operating spend efficiency in the face of softening demand. Wholesale revenues were slightly favorable to prior year due to increased Spring and Easter volumes, and improved demand as consumers return to traditional “brick-and-mortar” shopping.

Pro-forma segment revenues decreased 2.1% during the nine months ended April 2, 2023, adjusting for the acquisition of Vital Choice.

### Gross profit

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $140,440 | $154,091 | -8.9% | $609,664 | $658,055 | -7.4% |
| Gross profit % | 33.6% | 32.8% |  | 37.7% | 38.2% |  |

Gross profit consists of net revenues less cost of revenues, which is comprised primarily of florist fulfillment costs (fees paid directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated costs, including inbound and outbound shipping charges. Additionally, cost of revenues includes labor and facility costs related to direct-to-consumer and wholesale production operations, as well as payments made to sending florists related to order volume referred through the Company’s BloomNet network.

Gross profit decreased 8.9% and 7.4% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, primarily due to lower revenues noted above.

Gross profit percentage increased 80 basis points during the three months ended April 2, 2023, compared to the prior year, driven by improvements within the Consumer Floral & Gifts and BloomNet segments, as a result of strategic pricing initiatives and lower in-bound freight costs.

Gross profit percentage decreased by 50 basis points during the nine months ended April 2, 2023 compared to the prior year, reflecting the annualization of macro-economic headwinds in the first quarter of fiscal 2023, attributable to higher commodity, labor, inbound and outbound shipping costs, including the impact of fuel surcharges, as well as the write-off of dated perishable product, partially offset by the improvements in the second and third quarter, as noted above.

The Company has and will continue to implement strategies designed to mitigate the impact of the various headwinds noted above, including pricing initiatives across our product assortment, advancements in our logistics optimization programs to mitigate rising third-party shipping costs and deploying automation to increase throughput and efficiency and address high cost of labor. Ocean freight costs have come down significantly from their highs of last year, and over time, we expect commodity costs will revert to more historical norms.

Gross profit by segment follows:

**Consumer Floral & Gifts segment** - Gross profit decreased by 8.8% during the three months ended April 2, 2023 due to the impact of the lower revenues noted above, partially offset by favorable gross profit percentage attributable to strategic pricing initiatives and product mix, reflected in the higher average order value, as well as lower inbound ocean freight rates.

Gross profit decreased by 13.3% during the nine months ending April 2, 2023, due to the impact of the lower revenues noted above, as well as a decrease in gross profit percentage, driven by higher ocean freight (carried on earlier inventory buys), as well as higher outbound freight, and labor rates, partially offset by pricing initiatives which are reflected in the higher average order value noted above.

**BloomNet segment -** Gross profit increased by 5.5% during the three months ended April 2, 2023, compared to the same period of the prior year, due to an improved gross profit percentage, partially offset by the decrease in revenues noted above. Gross profit percentage increased in comparison to the prior year primarily due to improvements in wholesale margins, as a result of strategic pricing initiatives and lower ocean freight

Gross profit decreased 4.8% during the nine months ended April 2, 2023, compared to the same period of the prior year, due to the lower revenues noted above, as well as the impact of a lower gross margin percentage, due to sales mix, with a greater proportion of revenues derived from lower margin wholesale product sales, and higher rebates.

**Gourmet Foods & Gift Baskets segment** - Gross profit decreased by 14.1% and 1.9%, respectively, during the three and nine months ended April 2, 2023, compared to the same periods of the prior year, primarily due to the revenue decrease noted above, combined with a decline in gross profit percentage primarily attributable to increased promotions to incentivize customer demand and to work down long inventory positions, combined with continued inflationary pressures on component costs, partially offset by lower ocean freight, automation efficiencies, and pricing initiatives.

### Marketing and sales expense

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Marketing and sales | $106,472 | $130,645 | -18.5% | $390,077 | $432,795 | -9.9% |
| Percentage of net revenues | 25.5% | 27.8% |  | 24.1% | 25.1% |  |

Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search costs, retail store and fulfillment operations (other than costs included in cost of revenues) and customer service center expenses, as well as the operating expenses of the Company’s departments engaged in marketing, selling and merchandising activities.

Marketing and sales expense decreased 18.5% and 9.9% during the three and nine months ended April 2, 2023, respectively, compared to the same period of the prior year, due to variable components associated with lower revenues, combined with reduced, but more efficient advertising spend, and expense optimization efforts.

### Technology and development expense

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2022 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Technology and development | $14,837 | $14,456 | 2.6% | $44,529 | $41,369 | 7.6% |
| Percentage of net revenues | 3.6% | 3.1% |  | 2.8% | 2.4% |  |

Technology and development expense consists primarily of payroll and operating expenses of the Company’s information technology group, costs associated with its websites, including hosting, design, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment, and database systems.

Technology and development expense increased by 2.6% and 7.6% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, primarily due to higher maintenance and support for the Company’s technology platform enhancements, including higher labor and consulting costs, partially offset by lower performance-based compensation in the current year.

### General and administrative expense

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| General and administrative | $25,922 | $22,553 | 14.9% | $81,075 | $78,491 | 3.3% |
| Percentage of net revenues | 6.2% | 4.8% |  | 5.0% | 4.6% |  |

General and administrative expense consists of payroll and other expenses in support of the Company’s executive, finance and accounting, legal, human resources and other administrative functions, as well as professional fees and other general corporate expenses.

General and administrative expenses increased 14.9%, during the three months ended April 2, 2023, compared to the same period of the prior year, due to the impact of increases in health care claim costs, and change in the value of non-qualified deferred compensation plan investments (see equal offset in “other income/expense, net”), partially offset by lower performance-based compensation.

General and administrative expenses increased 3.3% during the nine months ended April 2, 2023, compared to the same period of the prior year, due to an increase in bad debt expense, legal fees, and health care costs, partially offset by lower labor costs resulting from a change in the value of non-qualified deferred compensation plan investments (see equal offset in “other income/expense, net”), and lower performance-based compensation.

### Depreciation and amortization expense

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Depreciation and amortization | $13,267 | $12,693 | 4.5% | $40,276 | $36,251 | 11.1% |
| Percentage of net revenues | 3.2% | 2.7% |  | 2.5% | 2.1% |  |

Depreciation and amortization expense increased 4.5% and 11.1% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, due to distribution facility automation projects and IT related ecommerce/platform enhancements, as well as incremental amortization associated with recent acquisitions.

### Goodwill and intangible impairment

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Goodwill and intangible impairment | $64,586 | $- | -% | $64,586 | $- | -% |

Based upon the continuing pressures on consumer discretionary spending, ongoing geopolitical events, the current inflationary macro-economic conditions, related cost input headwinds that have negatively impacted the Company’s gross margins, and resulting downward revisions to its forecast, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit during the quarter ended April 2, 2023. As such, the Company performed an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired the related goodwill, and partially impaired certain tradenames within the reporting unit. See Note 6 – Goodwill and Intangibles, net, in Item I for details.

### Interest expense, net

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest expense, net | $1,712 | $1,226 | 39.6% | $8,676 | $4,477 | 93.8% |

Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s credit facility (See Note 8 - Debt, in Item 1. for details), net of income earned on the Company’s available cash balances.

Interest expense, net increased 39.6% and 93.8% during the three and nine months ended April 2, 2023, respectively, compared to the same periods of the prior year, primarily due to higher interest rates, and higher working capital borrowings during the nine month period, partially offset by favorable interest earned on available cash balances.

### Other expense (income), net

*(dollars in thousands)*

|  | Three Months Ended April 2, 2023 | March 27, 2022 | % Change | Nine Months Ended April 2, 2023 | March 27, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Other expense (income), net | $1,404 | $4,007 | -65.0% | $2,474 | $954 | 159.3% |

Other expense (income) consists primarily of investment losses/(gains) on the Company’s NQDC Plan assets.

### Income Taxes

The Company recorded income tax benefit of $16.8 million and income tax expense of $0.1 million, during the three and nine months ended April 2, 2023 respectively, compared to an income tax benefit of $8.1 million and income tax expense of $11.9 million, during the three and nine months ended March 27, 2022, respectively. The Company’s effective tax rate for the three and nine months ended April 2, 2023 was 19.1% and -0.6% respectively, compared to 25.7% and 18.6% in the same periods of the prior year. The Company’s effective tax rate for the three and nine months ended April 2, 2023 differed from the U.S. federal statutory rate of 21.0% primarily as a result of the non-deductible portions of the goodwill impairment charge as well as state income taxes, non-deductible executive compensation, and tax shortfalls related to stock-based compensation, partially offset by various tax credits. The effective tax rate for the three months ended March 27, 2022 differed from the U.S. federal statutory rate of 21% primarily due to state income taxes and nondeductible expenses for executive compensation, partially offset by various tax credits, whereas, the effective tax rate for the nine months ended March 27, 2022 differed from the U.S. federal statutory rate of 21.0% primarily due to excess tax benefits from stock based compensation, partially offset by state income taxes.

### Liquidity and Capital Resources

#### Liquidity and borrowings

The Company's principal sources of liquidity are cash on hand, cash flows generated from operations and borrowings available under the Company’s Credit Agreement (see Note 8 - Debt in Item 1 for details). At April 2, 2023, the Company had working capital of $114.4 million, including cash and cash equivalents of $51.6 million, compared to working capital of $82.5 million, including cash and cash equivalents of $31.5 million, at July 3, 2022.

Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, is expected to generate over 40% of the Company’s annual revenues, and all of its earnings. Due to the number of major floral gifting occasions, including Valentine’s Day, Easter, Administrative Professionals Week, and Mother’s Day, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.

During the first two quarters of fiscal 2023, the Company borrowed under its revolving credit agreement in order to fund pre-holiday manufacturing and inventory procurement requirements, with borrowings peaking at $195.9 million in November 2022. Cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the borrowings under the Revolver in December 2022. Based on current projected cash flows, the Company believes that available cash balances will be sufficient to provide for the Company’s operating needs through the remainder of fiscal 2023, at which time the Company would again expect to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases. The Company had no amounts outstanding under its Revolver as of April 2, 2023.

While we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the next twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, and will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to require additional financing. The Company is in the process of refinancing its Credit Agreement, which matures in May 2024.

#### Cash Flows

Net cash provided by operating activities of $73.1 million, for the nine months ended April 2, 2023, was primarily attributable to the Company’s net loss during the period, adjusted by non-cash charges for goodwill and intangible asset impairment, depreciation and amortization, bad debt expense and stock-based compensation, partially offset by uses of cash for working capital purposes, comprised of decreases in accounts payable and increases in trade receivables, offset by decreases in inventory.

Net cash used in investing activities of $36.4 million, for the nine months ended April 2, 2023, was attributable to capital expenditures primarily related to the Company's technology and automation initiatives and the acquisition of Things Remembered.

Net cash used in financing activities of $16.6 million, for the nine months ended April 2, 2023, related primarily to repayments of bank borrowings under the Company’s term loan, and acquisition of treasury stock.

### Stock Repurchase Program

See Item 2 in Part II below for details.

### Contractual Obligations

At April 2, 2023, the Company’s contractual obligations consist of:

- Long-term debt obligations - payments due under the Company's Credit Agreement (see Note 8 - Debt in Item 1 for details and payments due by period).
- Operating lease obligations – payments due under the Company’s operating leases (see Note 13 - Leases in Item 1 for details and payments due by period for the long-term operating leases).
- Purchase commitments - consisting primarily of inventory and IT related equipment purchase orders and license agreements made in the ordinary course of business – see below for the contractual payments due by period.

*(in thousands)*

|  | Payments due by period Remaining Fiscal 2023 | Fiscal 2024 | Fiscal 2025 | Fiscal 2026 | Fiscal 2027 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Purchase commitments | $60,888 | $34,967 | $10,279 | $2,124 | $168 | $- | $108,426 |

### Critical Accounting Estimates

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended July 3, 2022, the discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, and management evaluates its estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company’s most critical accounting policies relate to goodwill, other intangible assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies since July 3, 2022, except as noted below:

### Goodwill & Intangible Assets Assessment and Impairment

#### Interim Impairment Evaluation

During the quarter ended April 2, 2023, the Company evaluated whether events or circumstances had changed such that it would indicate it was more likely than not that its goodwill, intangible and other long-lived assets of the Gourmet Foods & Gift Baskets reporting units fair values were less than their carrying amounts. After considering the continuing pressures on consumer discretionary spending, ongoing geopolitical events, the current inflationary macro-economic conditions, related cost input headwinds that have negatively impacted the Company’s gross margins, and resulting downward revisions to its forecast, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit. As such, the Company performed an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023.

*Impairment Assessments – Goodwill and Intangibles*

The Company performed its goodwill impairment test by comparing the fair value of its Gourmet Foods & Gift Baskets reporting unit to its respective carrying value. The Company estimated the fair value of the Gourmet Foods & Gift Baskets reporting unit using an equal weighting of the income and market approaches, and a discount rate of 13%. The Company used industry accepted valuation models and set criteria that were reviewed and approved by various levels of management. Under the income approach, the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company used the guideline public company method. Under this method the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciled the aggregate fair values of its reporting units to its current market capitalization.

The Company’s impairment test for indefinite-lived intangible assets encompassed calculating a fair value of the indefinite-lived intangible asset and comparing that result to its carrying value. To determine fair value of indefinite-lived intangible assets, the Company used an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.

The Company’s impairment test for definite-lived intangibles was performed through a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of the asset or asset group to its carrying value.

Based on the impairment assessment performed for the period ending April 2, 2023, the Company recorded a goodwill and intangible impairment charge against its Gourmet Foods & Gift Baskets reporting unit of $64.6 million, comprised of $62.3 million which was attributable to goodwill and $2.3 million which was attributable to certain tradenames within the same reporting unit. The Company concluded that the definite-lived and other long-lived assets of the reporting unit were not impaired.

### Recently Issued Accounting Pronouncements

See Note 1 - Accounting Policies in Item 1 for details regarding the impact of accounting standards that were recently issued on our consolidated financial statements.

### Forward Looking Information and Factors that May Affect Future Results

Our disclosure and analysis in this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as “estimate,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “goal,” “target” or similar words or phrases. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including:

- the Company’s ability:
- to achieve revenue and profitability;
- to leverage its operating platform and reduce operating expenses;
- to manage the seasonality of its business;
- to cost effectively acquire and retain customers;
- to successfully integrate acquired businesses and assets;
- to reduce working capital requirements and capital expenditures;
- to mitigate the impact of supply chain cost and capacity constraints;
- to compete against existing and new competitors;
- to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; and
- to address the effects of changes in accounting policies, practices, or assumptions, including changes that could potentially require future impairment charges;
- the outcome of contingencies, including legal proceedings in the normal course of business; and
- general consumer sentiment and economic conditions that may affect among other things, the levels of discretionary customer purchases of the Company’s products and the costs of shipping and labor.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated, or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Annual Report on Form 10-K for the fiscal year ended July 3, 2022 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995”. We incorporate that section of that Form 10-K in this filing and investors should refer to it. In addition, please refer to any additional risk factors in Part II, Item 1A in this Form 10-Q.

## Market risk

As filed, 776 characters.

The Company is exposed to market risk from the effect of interest rate changes.

#### Interest Rate Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment of available cash balances and its long-term debt. The Company generally invests its cash and cash equivalents in investment grade corporate and U.S. government securities. Borrowings under the Company’s credit facility bear interest at a variable rate, plus an applicable margin, and therefore expose the Company to market risk for changes in interest rates. The effect of a 50 basis point increase in current interest rates on the Company’s interest expense would be approximately $0.2 and $0.9 million during the three and nine months ended April 2, 2023.

## Controls and procedures

As filed, 2,926 characters.

#### Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of April 2, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and procedures were not effective as of April 2, 2023, due to a material weakness in internal control over financial reporting related to logical access and segregation of duties, at the application control level, in certain information technology environments. The material weakness was first identified and reported in Management's Report on Internal Control over Financial Reporting in our Annual Report on Form 10-K for the period ending July 3, 2022.

Management has taken steps to remediate these deficiencies, including redesigning the logical access and placing enhanced segregation of duties, enhancing its internal documentation and monitoring approach to ensure that all procedures designed to restrict access to applications and data are operating in an optimal manner in order to provide management with comfort that access is properly limited to the appropriate internal personnel. Management began to implement these remedial steps during the first quarter of fiscal 2023. In accordance with our internal control compliance program, a material weakness is not considered remediated until the remediation processes have been operational for a sufficient period of time and successfully tested. In light of this material weakness, management performed additional procedures over our IT environment and personnel affected to determine if any unauthorized action had been taken and found no such instances.

Notwithstanding the material weakness described in Management's Report on logical access and segregation of duties in certain technology environments, our management has concluded that our consolidated financial statements for the periods covered by this form 10-Q are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein.

#### Changes in Internal Control over Financial Reporting

Except for the remedial actions described above, there were no changes in our internal control over financial reporting identified in connection with the Company’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended April 2, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 182 characters.

There were no material changes to the Company’s risk factors as discussed in Part 1, Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for the year ended July 3, 2022.

Filed May 12, 2023.
Source: SEC EDGAR, the filing index for accession 0001437749-23-014083. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.