# 1 800 Flowers Com Inc: Form 10-Q for the period ended Sep 29, 2024

- Company: [1 800 Flowers Com Inc](/companies/flws.md) (CIK 1084869)
- Form: 10-Q
- Filed: 2024-11-01
- Accepted by EDGAR: Nov 1, 2024, 13:27 ET
- Period: 2024-09-29
- Accession: 0001437749-24-032937
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1084869/000143774924032937/flws20240930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1084869/000143774924032937/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-29.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-29 | $242.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-29 | $149.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-29 | $92.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-07-01 to 2024-09-29 | −$47.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-29 | −$14.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-29 | −$34.2m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-29 | −$0.53 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2024-07-01 to 2024-09-29 | −$177.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-07-01 to 2024-09-29 | $12.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-07-01 to 2024-09-29 | $1.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-29 | $8.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-29 | $385.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-29 | $1.03bn | us-gaap:Assets |
| Current liabilities | at 2024-09-29 | $267.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-29 | $601.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-29 | $172.3m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-29 | $57.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-29 | $433.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,484 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 fiscal year ended June 30, 2024. 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 fiscal year ended June 30, 2024 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 our 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®, Scharffen Berger®, and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge on eligible products across our portfolio of brands, the Company 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 its members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; Alice’s Table®, a lifestyle business offering fully digital on demand floral, culinary and other experiences to guests across the country; and Card Isle®, an e-commerce greeting card service.

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 fiscal year ended June 30, 2024.*

### Macro-economic Conditions

Overall, broader macro-economic conditions continue to impact our consumers as they continue to moderate their discretionary spending. Consumers remain pressured by persistent inflation and higher interest rates. Our fiscal first quarter contains no major holiday occasions, which means that our e-commerce sales for the quarter are primarily comprised of everyday or just-because gift giving. Based on this, we expected our sales to be the most challenged during the first quarter of Fiscal 2025. In line with our expectations, total consolidated revenues in the first quarter of Fiscal 2025 decreased 10.0% to $242.1 million, compared with total consolidated revenues of $269.1 million in the same prior year period. As we look ahead to the holiday period in the current environment, we expect our sales trends to improve as our gifting business has historically proven to be more resilient during holiday periods as consumers tend to view holiday gifting periods as being somewhat less discretionary.

### Acquisition of Scharffen Berger

On July 1, 2024, the Company completed its acquisition of certain assets of Scharffen Berger, a chocolate manufacturing company, expanding the Company's product offerings in the Gourmet Foods & Gift Baskets Segment. The Company used cash on its balance sheet to fund the approximately $3.3 million purchase – See Note 3 – Acquisitions, in Item 1.

### Acquisition of Card Isle

On April 3, 2024, the Company completed its acquisition of certain assets of Card Isle, an e-commerce greeting card company, expanding the Company’s presence in the greeting card category across all brands. The Company used cash on its balance sheet to fund the $3.6 million purchase – See Note 3 – Acquisitions, in Item 1.

### Company Guidance

For Fiscal 2025, the Company continues to expect its revenue trend to improve as the fiscal year progresses. The Adjusted EBITDA range reflects the acknowledgement that the consumer environment remains uncertain.

As a result, for Fiscal 2025 the Company continues to expect:

- Total revenues on a percentage basis to be in a range of flat to a decrease in the low single digits, as compared with the prior year;
- Adjusted EBITDA to be in a range of $85 million to $95 million; and
- Free Cash Flow to be in a range of $45 million to $55 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, and reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are referred to as “non-GAAP”, “adjusted” or "on a comparable basis" below, as these terms are used interchangeably. Reconciliations for forward-looking figures 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, Non-Qualified Deferred Compensation Plan (“NQDC Plan”) Investment appreciation/depreciation, and certain items affecting period-to-period comparability.

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 and Adjusted EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.

The following table presents the EBITDA and Adjusted EBITDA for the three months ended September 29, 2024 and October 1, 2023, respectively.

*(in thousands)*

| Reconciliation of net loss to Adjusted EBITDA (non-GAAP): | Three Months Ended September 29, 2024 | October 1, 2023 |
| --- | ---: | ---: |
| Net loss | $(34,190) | $(31,242) |
| Add: Interest expense and other, net | 1,593 | 3,956 |
| Add: Depreciation and amortization | 13,038 | 13,194 |
| Add: Income tax benefit | (14,384) | (10,291) |
| EBITDA | (33,943) | (24,383) |
| Add: Stock-based compensation | 2,479 | 2,364 |
| Add: Compensation charge related to NQDC Plan investment appreciation (depreciation) | 1,738 | (504) |
| Add: System implementation costs | 1,780 | - |
| Adjusted EBITDA | $(27,946) | $(22,523) |

### Adjusted net loss and adjusted or comparable net 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. 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.

The following table presents the adjusted net loss and adjusted net loss per common share for the three months ended September 29, 2024 and October 1, 2023, respectively.

*(in thousands, except for share data)*

| Reconciliation of net loss to adjusted net loss (non-GAAP): | Three Months Ended September 29, 2024 | October 1, 2023 |
| --- | ---: | ---: |
| Net loss | $(34,190) | $(31,242) |
| Adjustments to reconcile net loss to adjusted net loss (non-GAAP) |  |  |
| Add: System implementation costs | 1,780 | - |
| Deduct: Income tax effect on adjustments | (527) | - |
| **Adjusted net loss (non-GAAP)** | $(32,937) | $(31,242) |
| Basic and diluted net loss per common share | $(0.53) | $(0.48) |
| Basic and diluted adjusted net loss per common share (non-GAAP) | $(0.51) | $(0.48) |
| Weighted average shares used in the calculation of basic and diluted net loss and adjusted net loss per common share | 64,198 | 64,785 |

### 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. 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 this limitation when using this measure by looking at other GAAP measures, such as operating income and net income.

The following table presents the net revenues, gross profit, segment contribution margin, and adjusted segment contribution margin from each of the Company’s business segments, for the three months ended September 29, 2024 and October 1, 2023, respectively.

*(dollars in thousands)*

| Net revenues: | Three Months Ended September 29, 2024 | System Implementation Costs | As Adjusted (non-GAAP)% September 29, 2024 | October 1, 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Consumer Floral & Gifts | $135,180 | $- | $135,180 | $142,194 | -4.9% |
| BloomNet | 23,075 | - | 23,075 | 28,870 | -20.1% |
| Gourmet Foods & Gift Baskets | 84,003 | - | 84,003 | 98,109 | -14.4% |
| Corporate | 89 | - | 89 | 270 | -67.0% |
| Intercompany eliminations | (257) | - | (257) | (393) | 34.6% |
| **Total net revenues** | $242,090 | $- | $242,090 | $269,050 | -10.0% |
| **Gross profit:** |  |  |  |  |  |
| Consumer Floral & Gifts | $53,929 | $- | $53,929 | $56,322 | -4.2% |
|  | 39.9% |  | 39.9% | 39.6% |  |
| BloomNet | 11,528 | - | 11,528 | 14,498 | -20.5% |
|  | 50.0% |  | 50.0% | 50.2% |  |
| Gourmet Foods & Gift Baskets | 26,844 | - | 26,844 | 30,907 | -13.1% |
|  | 32.0% |  | 32.0% | 31.5% |  |
| Corporate | 18 | - | 18 | 201 | -91.0% |
|  | 20.2% |  | 20.2% | 74.4% |  |
| **Total gross profit** | $92,319 | $- | $92,319 | $101,928 | -9.4% |
|  | 38.1% | - | 38.1% | 37.9% |  |
| **EBITDA (non-GAAP):** |  |  |  |  |  |
| **Segment Contribution Margin (non-GAAP) (a):** |  |  |  |  |  |
| Consumer Floral & Gifts | $4,944 | $- | $4,944 | $8,826 | -44.0% |
| BloomNet | 6,841 | - | 6,841 | 9,387 | -27.1% |
| Gourmet Foods & Gift Baskets | (12,253) | 913 | (11,340) | (11,028) | -2.8% |
| Segment Contribution Margin Subtotal | (468) | 913 | 445 | 7,185 | -93.8% |
| Corporate (b) | (33,475) | 867 | (32,608) | (31,568) | -3.3% |
| **EBITDA (non-GAAP)** | (33,943) | 1,780 | (32,163) | (24,383) | -31.9% |
| Add: Stock-based compensation | 2,479 | - | 2,479 | 2,364 | 4.9% |
| Add: Compensation charge related to NQDC Plan Investment Appreciation (Depreciation) | 1,738 | - | 1,738 | (504) | 444.8% |
| **Adjusted EBITDA (non-GAAP) (c)** | $(29,726) | $1,780 | $(27,946) | $(22,523) | -24.1% |

20

(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, stock-based compensation, as well as changes in the fair value of the Company's NQDC Plan. 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.

(c) See reconciliation of the Company's net loss to Adjusted EBITDA (non-GAAP) above.

### 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.

The following table reconciles net cash used in operating activities, a GAAP Measure, to free cash flow, a non-GAAP Measure for the three months ended September 29, 2024 and October 1, 2023, respectively.

*(in thousands)*

|  | Three Months Ended September 29, 2024 | October 1, 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(177,241) | $(143,884) |
| Capital expenditures | (12,075) | (6,974) |
| Free cash flow | $(189,316) | $(150,858) |

21

### Results of Operations

### Net revenues

*(dollars in thousands)*

| Net revenues: | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| E-Commerce | $193,174 | $209,911 | -8.0% |
| Other | 48,916 | 59,139 | -17.3% |
| Total net revenues | $242,090 | $269,050 | -10.0% |

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

Net revenues decreased 10.0% during the three months ended September 29, 2024, compared to the same period of the prior year, due to lower order volume across the Company's three segments, reflecting a continuation of the trends that the Company had experienced throughout the prior fiscal year, as consumer discretionary income remains pressured, and consumers continue to moderate their spending.

The Company acquired Scharffen Berger and Card Isle on July 1, 2024 and April 3, 2024, respectively. Revenues related to these acquisitions were not significant during the three months ended September 29, 2024.

*(dollars in thousands)*

| Net revenues | Three Months Ended Consumer Floral & Gifts September 29, 2024 | October 1, 2023 | % Change | BloomNet September 29, 2024 | October 1, 2023 | % Change | Gourmet Foods & Gift Baskets September 29, 2024 | October 1, 2023 | % Change | Corporate and Eliminations September 29, 2024 | October 1, 2023 | Consolidated September 29, 2024 | October 1, 2023 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| E-commerce | $133,544 | $140,335 | -4.8% | $- | $- | -% | $59,630 | $69,576 | -14.3% | $- | $- | $193,174 | $209,911 | -8.0% |
| Other | 1,636 | 1,859 | -12.0% | 23,075 | 28,870 | -20.1% | 24,373 | 28,533 | -14.6% | (168) | (123) | 48,916 | 59,139 | -17.3% |
| **Total net revenues** | $135,180 | $142,194 | -4.9% | $23,075 | $28,870 | -20.1% | $84,003 | $98,109 | -14.4% | $(168) | $(123) | $242,090 | $269,050 | -10.0% |
| **Other revenues detail** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Retail and other | $1,636 | $1,859 | -12.0% | $- | $- | - | $1,784 | $1,934 | -7.8% | $- | $- | $3,420 | $3,793 | -9.8% |
| Wholesale | - | - | - | 10,112 | 11,797 | -14.3% | 22,589 | 26,599 | -15.1% | - | - | 32,701 | 38,396 | -14.8% |
| BloomNet services | - | - | - | 12,963 | 17,073 | -24.1% | - | - | - | - | - | 12,963 | 17,073 | -24.1% |
| Corporate | - | - | - | - | - | - | - | - | - | 89 | 270 | 89 | 270 | -67.0% |
| Eliminations | - | - | - | - | - | - | - | - | - | (257) | (393) | (257) | (393) | 34.6% |
| **Total other revenues** | $1,636 | $1,859 | -12.0% | $23,075 | $28,870 | -20.1% | $24,373 | $28,533 | -14.6% | $(168) | $(123) | $48,916 | $59,139 | -17.3% |

23

### Revenue by sales channel:

**E-commerce revenues (combined online and telephonic)** decreased 8.0% during the three months ended September 29, 2024, compared to the same period of the prior year, primarily due to the decline in demand across our three segments, as a result of the macro-economic conditions noted above. These external influences have negatively impacted consumer discretionary spending.

During the three months ended September 29, 2024, the Company fulfilled approximately 2.5 million orders through its e-commerce sales channel (online and telephonic sales), a decrease of 6.5%, compared to a year-over-year decrease of 16.1% for the same period in the prior year. During the three months ended September 29, 2024, average order value decreased 1.5% to $78.25 compared to the same period in the prior year. The average order value decreased as a result of product mix a s the Company has introduced a wider selection of more modestly priced items to target a broader consumer base.

**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 September 29, 2024, decreased 17.3%, compared to the same period of the prior year, due to slightly lower wholesale volumes within the Gourmet Foods & Gift Baskets segment largely due to timing of shipments from the first quarter to the second quarter, as well as lower BloomNet revenues due to lower shop-to-shop volumes, as well as wholesale volumes.

### Revenue by segment:

**Consumer Floral & Gifts –** this segment, which includes the operations of the 1-800-Flowers.com, PersonalizationMall, the Things Remembered and Alice’s Table brands, 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 4.9% during the three months ended September 29, 2024, compared to the same period of the prior year, due to continued macro-economic pressure.

During the three months ended September 29, 2024, Consumer Floral & Gifts orders through its e-commerce sales channel (online and telephonic sales) decreased 2.8%, compared to the same period of the prior year. In addition, the average order value decreased 2.1%, as a result of product mix trending towards lower price point items.

**BloomNet** - revenues in this segment are derived from membership fees, as well as product and service offerings.

Net revenues decreased 20.1% during the three months ended September 29, 2024, compared to the same period of the prior year. The net revenue decline was due to soft wholesale product revenues, as well as lower services revenues, attributable to a decline in order volume processed through the network.

**Gourmet Foods & Gift Baskets –** this segment includes the operations of Harry & David, Wolferman’s, Cheryl’s Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, Vital Choice, and since July 1, 2024, Scharffen Berger. 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 Cookies brand names, as well as wholesale operations.

Net revenues within this segmentdecreased14.4% during the three months ended September 29, 2024, compared to the same period of the prior year, as a result of lower e-commerce revenues, primarily due to macro-economic weakness and the timing of wholesale shipments.

During the three months ended September 29, 2024 , Gourmet Foods & Gift Baskets orders through its e-commerce sales channel (online and telephonic sales) decreased 13.8%, compared to the same period of the prior year. In addition, the average order value decreased 0.5%, as a result of product mix trending towards lower price point items.

### Gross profit

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| Gross profit | $92,319 | $101,928 | -9.4% |
| Gross profit % | 38.1% | 37.9% |  |

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 9.4% during the three months ended September 29, 2024, compared to the same period of the prior year, due to lower revenues as noted above, partially offset by a favorable gross profit percentage.

Gross profit percentage increased 20 basis points during the three months ended September 29, 2024, compared to the same period of the prior year, driven by improved inventory management, production efficiencies, and lower florist fulfillment costs.

Gross profit by segment follows:

**Consumer Floral & Gifts segment** - Gross profit decreased by 4.2% during the three months ended September 29, 2024, compared to the same period of the prior year, due to the impact of the lower revenues noted above, partially offset by favorable gross profit percentage attributable to production efficiencies and lower florist fulfillment costs.

**BloomNet segment -** Gross profit decreased by 20.5% during the three months ended September 29, 2024, compared to the same period of the prior year, due to the decrease in revenues noted above, as well as a slight decline in gross profit percentage. Gross profit percentage decreased in comparison to the prior year due to higher cost of merchandise, delivery and shipping, and labor costs, partially offset by lower florist rebates.

**Gourmet Foods & Gift Baskets segment –** Gross profit decreased by 13.1% during the three months ended September 29, 2024, compared to the same period of the prior year, due to the decrease in revenue noted above, partially offset by improved gross profit percentage. Gross profit percentage increased 50 basis points during the three months ended September 29, 2024, compared to the same period of the prior year. The increased gross profit percentage was attributable to lower cost of merchandise, which was the result of operational efficiencies and strong inventory management.

### Marketing and sales expense

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| Marketing and sales | $82,097 | $82,518 | -0.5% |
| Percentage of net revenues | 33.9% | 30.7% |  |

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 0.5% during the three months ended September 29, 2024, compared to the same period of the prior year, mainly related to decreased labor costs.

### Technology and development expense

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| Technology and development | $15,639 | $15,304 | 2.2% |
| Percentage of net revenues | 6.5% | 5.7% |  |

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 2.2% during the three months ended September 29, 2024, compared to the same period of the prior year, primarily due to higher maintenance and support costs for the Company's technology platform enhancements, including duplicate costs relating to the implementation of a new customer service platform, partially offset by lower labor and consulting costs.

### General and administrative expense

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| General and administrative | $28,526 | $28,489 | 0.1% |
| Percentage of net revenues | 11.8% | 10.6% |  |

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 were essentially flat during the three months ended September 29, 2024, compared to the same period of the prior year, primarily due to increases in labor costs driven by changes in the value of the Company’s NQDC Plan investments (offset in Other (income) expense below), partially offset by lower bad debt expense and discretionary spending.

### Depreciation and amortization expense

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| Depreciation and amortization | $13,038 | $13,194 | -1.2% |
| Percentage of net revenues | 5.4% | 4.9% |  |

Depreciation and amortization expense was essentially in-line with the prior year, during the three months ended September 29, 2024.

### Interest expense, net

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| Interest expense, net | $3,360 | $3,482 | -3.5% |

Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s credit facility (See Note 7 - Debt, Net in Item 1 for details), net of income earned on the Company’s available cash balances.

Interest expense was relatively in-line with the prior year, during the three months ended September 29, 2024.

### Other (income) expense, net

*(dollars in thousands)*

|  | Three Months Ended September 29, 2024 | October 1,% 2023 | Change |
| --- | ---: | ---: | ---: |
| Other (income) expense, net | $(1,767) | $474 | 472.8% |

Other (income) expense consists primarily of investment losses (gains) on the Company’s NQDC Plan investments (for which the offsetting expense was recorded in the general and administration expense line item).

### Income Taxes

The Company recorded an income tax benefit of $14.4 million and $10.3 million, during the three months ended September 29, 2024 and October 1, 2023, respectively. The Company’s effective tax rate for the three months ended September 29, 2024 was 29.6%, compared to 24.8% in the same period of the prior year. The Company’s effective tax rate for the three months ended September 29, 2024 and October 1, 2023 differed from the U.S. federal statutory rate of 21.0% primarily due to state income taxes and non-deductible executive compensation including tax deficiencies (shortfalls) from stock-based compensation, partially offset by tax credits.

### 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 7 - Debt, Net in Item 1 for details). At September 29, 2024, the Company had working capital of $118.7 million, including cash and cash equivalents of $8.4 million, compared to working capital of $157.9 million, including cash and cash equivalents of $159.4 million, at June 30, 2024.

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 Mother’s Day, Valentine’s Day, Easter, and Administrative Professionals Week, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.

As of September 29, 2024, the Company had $45.0 million outstanding under its revolving credit agreement in order to fund pre-holiday manufacturing and inventory procurement requirements. Working capital borrowings typically peak in November after which time cash generated from operations during the Christmas holiday shopping season is expected to enable the Company to repay such borrowings.

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.

#### Cash Flows

Net cash used in operating activities of $177.2 million, for the three months ended September 29, 2024, was primarily attributable to the Company’s net loss during the period, adjusted by non-cash charges for depreciation and amortization and stock-based compensation, combined with seasonal changes in net working capital, including increases in inventory, trade receivables, and prepaid and other current assets.

Net cash used in investing activities of $15.1 million, for the three months ended September 29, 2024, was attributable to capital expenditures primarily related to the Company's technology and automation initiatives, and the acquisition of Scharffen Berger as noted above.

Net cash provided by financing activities of $41.3 million, for the three months ended September 29, 2024, related primarily to net proceeds from bank borrowings under the Company’s working capital line of credit.

#### Free Cash Flow

Free cash flow was negative $189.3 million for the three months ended September 29, 2024, compared with free cash flow of negative $150.8 million for three months ended October 1, 2023, a decrease of $38.5 million primarily driven by a decrease in cash flows from operations to fund the build in inventory for the holiday season. Refer to "Definitions of non-GAAP Financial Measures" for reconciliation of non-GAAP results to applicable GAAP results.

### Stock Repurchase Program

See Item 2 in Part II below for details.

### Contractual Obligations

At September 29, 2024, the Company’s contractual obligations consist of:

- Long-term debt obligations - payments due under the Company's credit agreement (see Note 7 - Debt, Net in Item 1 for details and payments due by period).
- Operating lease obligations – payments due under the Company’s operating leases (see Note 12 - 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 2025 | Fiscal 2026 | Fiscal 2027 | Fiscal 2028 | Fiscal 2029 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Purchase commitments | $93,077 | $11,223 | $5,093 | $3,447 | $3,447 | $- | $116,287 |

### Critical Accounting Estimates

As disclosed in the Company’s *Annual Report on Form 10-K for the fiscal year ended June 30, 2024*, 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 June 30, 2024.

### 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,” “expects,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “forecast,” “likely,” “will,” "should," “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;
- to address the effects of changes in accounting policies, practices, or assumptions, including changes that could potentially require future impairment charges;
- to achieve its guidance for the full Fiscal year;
- to successfully execute its strategic initiatives; and
- to reduce promotional activities and achieve more efficient marketing programs.
- 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 June 30, 2024* 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, 763 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 million during the three months ended September 29, 2024.

## Controls and procedures

As filed, 1,415 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 September 29, 2024. 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 effective as of September 29, 2024.

#### Changes in Internal Control over Financial Reporting

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 September 29, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

#### Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

## Risk factors

As filed, 192 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 fiscal year ended June 30, 2024.*

Filed Nov 1, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-032937. Last ingested by Listed: Nov 6, 2026, 12:19 ET. No prices; not investment advice.