Luvu Brands (OTCQB: LUVU) posts Q3 FY26 growth, margin gains and positive net income

Rhea-AI Filing Summary

Luvu Brands reported stronger third quarter fiscal 2026 results, showing both growth and improved profitability. Net sales for the quarter ended March 31, 2026 rose 12.0% to $6.55 million, compared with $5.85 million a year earlier, helped by demand across key product categories and channels.

Gross profit increased to $1.84 million with gross margin expanding to 28.0% from 27.4%, reflecting better product mix and cost controls. Operating expenses fell to 25% of net sales from 27%, lifting operating income to $227,000 versus breakeven.

Net income turned positive at $174,000, compared with an $(88,000) loss in the prior-year quarter. Adjusted EBITDA rose to $317,000 from $116,000. For the nine months, net sales reached $19.27 million and Adjusted EBITDA increased to $688,000, although net loss widened to $(724,000) mainly due to a $764,000 deferred tax provision tied to new lease accounting. Cash and cash equivalents were $1.23 million as of March 31, 2026, and operating cash flow for the nine months was $690,000, more than tripling year over year.

Positive

• Double-digit revenue growth and margin expansion: Q3 FY26 net sales rose 12.0% to $6.55 million with gross margin improving to 28.0%, demonstrating stronger demand and better cost control.
• Return to quarterly profitability and stronger cash flow: Net income turned positive at $174,000 from an $(88,000) loss, while nine‑month operating cash flow increased to $690,000 and cash reached $1.23 million.

Negative

• None.

Insights

Equity analyst

Q3 shows double-digit growth, margin gains, and stronger cash generation.

Luvu Brands delivered 12.0% revenue growth to $6.55M in Q3 FY26, with gross margin improving to 28.0%. Operating expenses dropped to 25% of sales, supporting operating income of $227k versus breakeven a year earlier.

Net income swung to a $174k profit from an $(88)k loss, and quarterly Adjusted EBITDA nearly tripled to $317k. For the nine months, Adjusted EBITDA increased to $688k, though net loss of $(724)k reflects a $764k deferred tax provision tied to a new operating-lease treatment.

Liquidity improved, with cash reaching $1.23M as of March 31, 2026 and operating cash flow for the nine months at $690k. Management highlights ongoing cost optimization, reinvestment in higher-margin products, and manufacturing automation as key drivers for future scalability and margin performance.

Key Figures

Q3 FY26 Net Sales: $6.55M Q3 FY26 Gross Margin: 28.0% Q3 FY26 Net Income: $174k +5 more

8 metrics

Q3 FY26 Net Sales $6.55M Three months ended March 31, 2026; up 12.0% YoY from $5.85M

Q3 FY26 Gross Margin 28.0% Quarter ended March 31, 2026; up from 27.4% prior-year quarter

Q3 FY26 Net Income $174k Quarter ended March 31, 2026; versus $(88)k prior-year loss

Q3 FY26 Adjusted EBITDA $317k Quarter ended March 31, 2026; up from $116k prior-year quarter

Nine-month Net Sales $19.27M Nine months ended March 31, 2026; up from $18.79M

Nine-month Net Loss $(724)k Nine months ended March 31, 2026; impacted by $764k deferred tax provision

Cash and Equivalents $1.23M As of March 31, 2026; 67.3% higher than prior-year period

Nine-month Operating Cash Flow $690k Nine months ended March 31, 2026; more than tripled year over year

Key Terms

Adjusted EBITDA, deferred tax provision, operating lease liability, right-of-use asset, +2 more

6 terms

Adjusted EBITDA financial

"Adjusted EBITDA for the three months ended March 31, 2026 increased to $317,000"

Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.

deferred tax provision financial

"driven primarily by a $764,000 deferred tax provision related to the new operating-lease accounting"

operating lease liability financial

"Operating lease liability 544 ... Long-term operating lease liability 2,937"

Operating lease liability is the current estimated cost of a company’s remaining rent-like payments for assets it uses but does not own, recorded on the balance sheet as a debt-like obligation. Investors care because it reveals hidden commitments that affect a company’s leverage and ability to pay debts and fund growth—think of it like the remaining months on a long-term rental contract that still must be paid and can change how risky or valuable the business looks.

right-of-use asset financial

"new operating-lease accounting treatment of the $813,000 right-of-use asset"

A right-of-use asset is the value a company records on its balance sheet for the practical use of something it leases — like the benefit of living in a rented office or using leased equipment for a set period. Investors care because it turns many leases into on-balance-sheet assets and matching liabilities, which can change reported leverage, asset base and performance metrics much like taking on a loan would.

vertically integrated other

"demonstrating the strength of its vertically integrated operating model"

Vertically integrated describes a company that owns and controls multiple steps in making and selling its products or services — for example sourcing raw materials, manufacturing, and distribution. Like a bakery that grows its own wheat, mills the flour, bakes the bread and runs the shops, this setup can lower costs, improve quality and speed to market and protect profit margins, but it also requires more capital and can reduce flexibility.

working capital management financial

"Operating cash flow for the nine‑month period exceeded $690,000, driven by improved profitability and working capital management"

Working capital management is the ongoing process of balancing a company’s short-term assets and obligations—like cash, customer payments, inventory and supplier bills—to keep day-to-day operations running smoothly and ensure it can meet near-term expenses. Investors care because efficient management is like a household keeping enough cash on hand while avoiding wasted stock: it supports steady cash flow, reduces risk of short-term crises, and can improve profitability and growth potential.

Earnings Snapshot

Revenue: $6.55M

Q3 FY26

Revenue $6.55M +12.0% YoY

Net income $174k vs $(88)k prior-year quarter

Adjusted EBITDA $317k vs $116k prior-year quarter

Gross margin 28.0% up from 27.4% prior-year quarter

Understanding 8-K Material Events →

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

Luvu Brands Reports Strong Q3 FY26 Results with 12% Revenue Growth, Margin Expansion, and Improved Profitability Driven by Disciplined Cost Management

ATLANTA, GA – May 15, 2026 – Luvu Brands, Inc. (OTCQB: LUVU), a U.S.-based manufacturer of lifestyle, wellness, and comfort products, today announced financial results for its third fiscal quarter ended March 31, 2026. The Company delivered meaningful improvements in revenue, profitability, and cash generation, reflecting continued execution of its cost optimization strategy and operational discipline.

Third Quarter Fiscal 2026 Financial and Operational Overview

During the third quarter of fiscal 2026, Luvu Brands generated double‑digit revenue growth, expanded gross margins, and delivered positive net income—demonstrating the strength of its vertically integrated operating model and the effectiveness of its cost control initiatives. Louis Friedman, the Company CEO and Founder, stated “Our Q3 performance demonstrates the strength of our operating model and the effectiveness of our cost optimization strategy. We delivered on our plans, all while maintaining our commitment to product quality and customer experience.”

Strong Revenue Performance

Net sales for the three months ended March 31, 2026, increased 12.0% to $6.55 million, compared to $5.85 million in the prior‑year period. Key product categories and channels drove improved demand results and expanded our customer base. For the nine‑month period, net sales rose 2.6% to $19.27 million from $18.79 million in fiscal 2025, reflecting resilient performance despite a challenging consumer environment.

Gross Profit and Margin Expansion

Gross profit for the third quarter increased to $1.84 million, compared to $1.60 million in the prior‑year period. Gross margin expanded to 28.0%, up from 27.4% last year, driven by improved product mix, manufacturing efficiencies, and supply chain cost controls. Year‑to‑date gross profit totaled $5.29 million, compared to $5.10 million in the prior‑year period.

Operating Expense Discipline

Operating expenses decreased as a percentage of revenue, falling to 25% of net sales, compared to 27% in the prior‑year quarter. The improvement reflects the Company’s ongoing cost optimization program, including supplier consolidation, automation of manual processes, zero‑based budgeting, contract renegotiations, and streamlined organizational structure.

As a result, operating income improved to $227,000, compared to breakeven in the prior‑year period. Christopher Knauf, the Company CFO, stated “We continue to operate with financial rigor. The improvement in Adjusted EBITDA and cash generation demonstrates the strength of our model and positions us well for continued progress.”

1

Net Income and Adjusted EBITDA

Net income turned positive at $174,000 for the three months ended March 31, 2026, compared with a net loss of $(88,000) from the same period in the prior year. That is a $262,000 year-over-year improvement. Adjusted EBITDA for the three months ended March 31, 2026 increased to $317,000 from $116,000 in the prior-year quarter, reflecting stronger operating leverage and continued cost discipline.

For the nine months ending March 31, 2026, Adjusted EBITDA increased to $688,000 from $512,000, reflecting continued operating leverage and cost discipline. Net loss was $(724,000) versus $(104,000) in the prior year, driven primarily by a $764,000 deferred tax provision related to the new operating-lease accounting treatment of the $813,000 right-of-use asset, which will be amortized over the remaining lease term.

Liquidity and Cash Flow

As of March 31, 2026, cash and cash equivalents totaled $1.23 million, an increase of 67.3% from the prior‑year period. Operating cash flow for the nine‑month period exceeded $690,000, driven by improved profitability and working capital management. The Company continues to prioritize liquidity, operational efficiency, and disciplined capital allocation.

Strategic and Operational Highlights

	·	Cost Optimization as a Growth Engine: Operating expenses declined as a percentage of revenue for the third consecutive quarter, driven by supplier consolidation, process automation, and tighter spend controls across the organization.
	·	Cash Generation Strength: Operating cash flow more than tripled year‑over‑year for the nine‑month period, supported by improved profitability, better inventory management, and disciplined working capital execution.
	·	Manufacturing Investment: The Company extended its manufacturing facility lease under improved terms, supporting capacity planning and continued investment in its vertically integrated, “Made in USA” production strategy.
	·	Balanced Growth Priorities: Savings from cost initiatives are being reinvested into high‑margin product lines, direct‑to‑consumer platform enhancements (including marketing and conversion improvements), and manufacturing automation to support scalability and margin expansion.

Luvu Brands intended to maintain its disciplined cost structure while investing in initiatives that support margin expansion and scalable growth. Management remains focused on strengthening the balance sheet, optimizing working capital, and driving operational efficiencies across the business.

2

Additional Information

More information, including financial statements and SEC filings, is available at www.luvubrands.com.

For investor inquiries, please contact:

Christopher Knauf

Chief Financial Officer

770‑246‑6426

chris.knauf@luvubrands.com

Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements.  Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's success in product development; the Company's ability to execute its business model and strategic plans; the Company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the Company's Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q.  Examples of forward-looking statements in this release include statements related to new products, anticipated revenue, and profitability.  The Company assumes no obligation to update the cautionary information in this release.

*Use of Non-GAAP Measures – Adjusted EBITDA

Luvu Brands management evaluates and makes operating decisions using various financial metrics. In addition to the Company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. While Adjusted EBITDA is not a measure of performance in accordance with GAAP, management believes that this non-GAAP measure provides useful information about the Company's operating results.  The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. As used herein, Adjusted EBITDA income represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense.

3

Financial Statements

Consolidated Statements of Operations (Unaudited)

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2026				2025				2026				2025
		(in thousands, except share data)								(in thousands, except share data)
Net Sales		$	6,549			$	5,846			$	19,272			$	18,787
Cost of goods sold (excluding depreciation expense presented below)			4,713				4,243				13,982				13,687
Gross profit			1,836				1,603				5,290				5,100
Operating expenses:
Advertising and promotion			193				240				698				718
Other selling and marketing			447				430				1,326				1,281
General and administrative			888				827				2,606				2,610
Depreciation			81				107				265				324
Total operating expenses			1,609				1,604				4,895				4,933
Operating income/(loss)			227				(1	)			395				167
Other income (expense):
Interest expense and financing costs			(102	)			(87	)			(355	)			(272	)
Total other income (expense)			(102	)			(87	)			(355	)			(272	)
Income (loss) from operations before income taxes			125				(88	)			40				(105	)
Provision for income taxes			49				0				(764	)			0
Net income (loss)		$	174			$	(88	)		$	(724	)		$	(105	)
Net income (loss) per share:
Basic		$	0.01			$	0.00			$	(0.01	)		$	(0.00	)
Diluted		$	0.01			$	0.00			$	(0.01	)		$	(0.00	)
Shares used in calculation of net income  per share:
Basic			76,834,057				76,834,057				76,834,057				76,834,057
Diluted			76,834,057				76,834,057				76,834,057				76,834,057

4

Consolidated Balance Sheets

		March 31,				June 30,
		2026				2025
		(unaudited)
Assets:		(in thousands, except share data)
Current assets:
Cash and cash equivalents		$	1,230			$	735
Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $18 on March 31, 2026 and $35 on June 30, 2025			1,612				1,600
Inventories, net of allowance for inventory reserve of $232 on March 31, 2026 and $232 on June 30, 2025			3,339				3,585
Other current assets			93				108
Total current assets			6,274				6,028
Equipment, property and leasehold improvements, net			1,323				1,476
Finance lease assets, net			101				104
Operating lease assets			3,398				1,057
Other assets			80				96
Total assets		$	11,176			$	8,761
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable		$	1,736			$	1,858
Current debt			1,817				1,949
Other accrued liabilities			784				553
Operating lease liability			544				646
Total current liabilities			4,881				5,006
Noncurrent liabilities:
Deferred Tax Liability			887				119
Long-term debt			750				704
Long-term operating lease liability			2,937				513
Total noncurrent liabilities			4,574				1,336
Total liabilities			9,455				6,342
Commitments and contingencies (See Note 12)			—				—
Stockholders’ equity:
Preferred stock, 5,700,000 shares authorized, $0.0001 par value none issued and outstanding			—				—
Series A Convertible Preferred stock, 4,300,000 shares authorized $0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $1,000 as of March 31, 2026 and June 30, 2025			—				—
Common stock, $0.01 par value, 175,000,000 shares authorized, 76,834,057 and 76,834,057 shares issued and outstanding as of March 31, 2026 and June 30, 2025, respectively			766				766
Additional paid-in capital			6,315				6,289
Accumulated deficit			(5,360	)			(4,636	)
Total stockholders’ equity			1,721				2,419
Total liabilities and stockholders’ equity		$	11,176			$	8,761

5

Consolidated Statement of Cash Flows (Unaudited)

		Nine Months Ended
		March 31,
		2026				2025
		(in thousands)
OPERATING ACTIVITIES:
Net loss		$	(724	)		$	(105	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			265				324
Deferred tax expense			768				0
Stock-based compensation expense			25				27
Loss on sale of fixed asset			0				7
Change in operating assets and liabilities:
Accounts receivable			(12	)			(359	)
Inventory			246				(170	)
Operating lease liability			(1,457	)			(388	)
Amortization of operating lease asset			(1,439	)			365
Prepaid expenses and other current assets			15				4
Other Assets			16				0
Accounts payable			(122	)			312
Other current liabilities			231				186
Net cash provided by operating activities		$	690			$	203
INVESTING ACTIVITIES:
Investment in equipment, software and leasehold improvements		$	(109	)		$	(34	)
Net cash used in investing activities		$	(109	)		$	(34	)
FINANCING ACTIVITIES:
Borrowing under revolving line of credit		$	183			$	(82	)
Repayment of unsecured line of credit			(5	)			54
Proceeds from secured notes payable			250				-
Repayment of secured notes payable			(364	)			-
Repayment of unsecured notes payable			-				(9	)
Proceeds from equipment notes			71				250
Payments on equipment notes			(233	)			(282	)
Proceeds for finance leases			29				0
Principal payments on finance leases			(17	)			(17	)
Net cash used in financing activities		$	(86	)		$	(87	)
Net increase in cash and cash equivalents			495				82
Cash and cash equivalents at beginning of period		$	735			$	1,028
Cash and cash equivalents at end of period		$	1,230			$	1,110
Supplemental Disclosure of Cash Flow Information:
Non cash item:
New operating lease liability and right of use asset		$	3,780			$	-
Cash paid during the year for:
Interest		$	308			$	218
Income taxes			-				-

6

Non-GAAP Financial Measures

Reconciliation of Net Loss to Adjusted EBITDA

		Three Months Ended
		March 31
		2026				2025
		(in thousands)
Net income (loss)		$	174			$	(88	)
Plus interest expense, financing costs and income tax			103				88
Plus depreciation and amortization expense			81				107
Plus stock-based compensation expense			8				9
Plus income tax provision			(49	)			0
Adjusted EBITDA		$	317			$	116

		Nine Months Ended
		March 31
		2026				2025
		(in thousands)
Net loss		$	(724	)		$	(105	)
Plus interest expense, financing costs and income tax			358				269
Plus depreciation and amortization expense			265				322
Plus stock-based compensation expense			25				26
Plus income tax provision			764				0
Adjusted EBITDA		$	688			$	512

7

FAQ

How did Luvu Brands (LUVU) perform in Q3 fiscal 2026?

Luvu Brands posted stronger Q3 FY26 results, with net sales up 12.0% to $6.55 million. Gross margin improved to 28.0%, operating income reached $227,000, and net income turned positive at $174,000 compared with a loss a year earlier.

What happened to Luvu Brands’ profitability and Adjusted EBITDA in Q3 FY26?

Profitability improved meaningfully, as net income was $174,000 versus an $(88,000) loss last year. Q3 Adjusted EBITDA increased to $317,000 from $116,000, reflecting stronger operating leverage and ongoing cost optimization efforts across advertising, marketing, and administrative spending.

How did Luvu Brands’ nine‑month fiscal 2026 results compare to the prior year?

For the nine months ended March 31, 2026, net sales rose to $19.27 million from $18.79 million. Adjusted EBITDA increased to $688,000 from $512,000. Net loss widened to $(724,000), largely due to a $764,000 deferred tax provision from new lease accounting.

What is Luvu Brands’ cash and liquidity position as of March 31, 2026?

As of March 31, 2026, Luvu Brands held $1.23 million in cash and cash equivalents, a 67.3% increase from the prior year. Nine‑month operating cash flow reached $690,000, supported by improved profitability, inventory management, and working capital execution.

How is Luvu Brands managing costs and margins in fiscal 2026?

The company reduced operating expenses to 25% of net sales in Q3 FY26, down from 27%. Management credits supplier consolidation, process automation, and tighter spend controls, which helped expand gross margin to 28.0% and improved operating income and Adjusted EBITDA.

Why did Luvu Brands report a nine‑month net loss despite better operations?

The nine‑month net loss of $(724,000) was driven primarily by a $764,000 deferred tax provision. This relates to new operating‑lease accounting for an $813,000 right‑of‑use asset, which will be amortized over the remaining lease term.

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