Luvu Brands (OTCQB: LUVU) posts Q2 FY26 loss as sales, margins tighten

Rhea-AI Filing Summary

Luvu Brands reported second quarter fiscal 2026 net revenue of $6.88 million, down 4.2% from $7.19 million a year earlier as consumer spending and retail competition pressured sales. Gross margin slipped to 26.1%, reducing gross profit to $1.80 million from $1.98 million.

The company still generated positive operating income of $184,000, but posted a net loss of $765,000 versus net income of $192,000 last year, mainly due to an $813,000 deferred tax provision tied to future tax benefits. Adjusted EBITDA was $145,000 compared with $399,000 in the prior-year quarter.

For the first six months, revenue declined 1.7% to $12.72 million and net loss widened to $897,000. Despite this, Luvu produced $365,000 of operating cash flow and increased cash to $1.09 million, while total assets rose to $11.14 million, helped by new operating lease assets for its manufacturing facility.

Insights

Equity research analyst

Moderate top-line softness and tax-driven loss, but cash flow remains positive.

Luvu Brands saw Q2 FY26 revenue decline 4.2% to $6.88M, with gross margin compressing to 26.1% due to tariffs and cost pressures. Operating income stayed positive at $184K, indicating cost controls are offsetting some demand and margin headwinds.

The shift from prior-year net income of $192K to a net loss of $765K is largely explained by an $813K deferred tax provision, a non-cash item. Year-to-date, revenue is down 1.7% and Adjusted EBITDA has fallen to $227K, showing weaker profitability but not a collapse in operations.

Liquidity improved, with cash increasing to $1.09M and operating cash flow of $365K for the six months ended December 31, 2025. Management highlights continued focus on efficiency, pricing, and product mix to support margins, while macro consumer weakness and low-priced competition remain key external pressures.

EXHIBIT 99.1

Luvu Brands Reports Q2 FY26 Earnings: Net Revenue of $6.9 million

ATLANTA, GA, February 17, 2026 – Luvu Brands, Inc. (OTCQB: LUVU), a vertically integrated designer, manufacturer, and marketer of consumer lifestyle brands, today reported financial and operational results for the second quarter of fiscal 2026, ended December 31, 2025.

Financial Highlights

Three Months Ended December 31, 2025:

	·	Quarterly revenue decline of 4.2% to $6.88 million versus $7.19 million in Q2 FY2025, reflecting challenging consumer spending environment and retail market headwinds from low priced overseas competitors.
	·	Gross profit margin compression to 26.1% from 27.6% year-over-year, with gross profit declining to $1.80 million from $1.98 million due to decline in revenue and increased costs related to import tariffs impacting cost of goods sold.
	·	Operating income positive at $184,000 despite revenue headwinds, demonstrating operational resilience and cost management discipline.
	·	Net loss of $765,000 compared to net income of $192,000 in prior year quarter, primarily attributable to significant deferred tax provision of $813,000 related to future tax benefits
	·	Adjusted EBITDA* of $145,000 versus $399,000 in Q2 FY2025, reflecting margin pressure but maintaining positive cash generation capabilities.

Six Months Ended December 31, 2025:

	·	Year-to-date revenue decline of 1.7% to $12.72 million compared to $12.94 million in the same period fiscal 2025, reflecting consumer discretionary spending weakness.
	·	Six-month net loss of $897,000 versus net loss of $18,000 in prior year period, primarily driven by deferred tax provision and increased interest expense.
	·	Adjusted EBITDA of $227,000 for the six-month period compared to $395,000 in fiscal 2025, demonstrating continued positive cash generation despite challenging market conditions

Q2 FY26 Operational Performance and Market Conditions

During the second quarter of fiscal 2026, Luvu Brands navigated challenging macroeconomic headwinds including consumer discretionary spending weakness, cost pressures, and tariff impacts. Despite revenue decline and margin compression, the Company demonstrated operational discipline by maintaining positive operating income of $184,000 and generating positive operating cash flow.

Liquidity Position Strengthened. Cash and cash equivalents increased 47.8% to $1.09 million from $735,000 at June 30, 2025, reflecting disciplined working capital management and positive cash generation capabilities during challenging market conditions.

Total assets expanded to $11.14 million from $8.76 million, primarily driven by new operating lease assets for the current manufacturing facility.  Christopher Knauf, the CFO of the Company, said “The extension of our manufacturing facility lease demonstrates our commitment to making products in the USA.  We are confident that current manufacturing capacity will allow us to grow considerably with minimal capital investments.”

Luvu Brands continues to navigate challenging macroeconomic conditions including consumer discretionary spending weakness, retail market headwinds, and persistent inflationary cost pressures across raw materials and logistics. The Atlanta-based consumer lifestyle brands company has maintained focus on operational efficiency, cost management discipline, and strategic initiatives to drive sustainable long-term growth and market share expansion.

Management remains committed to optimizing product mix, expanding omnichannel distribution networks, and improving gross profit margins through strategic pricing and operational efficiency initiatives. Louis Friedman, CEO and founder, commented "While we navigated challenging macroeconomic headwinds, we are committed to improving efficiencies, diversifying our product portfolio, and bringing new innovations to the market. We're executing decisive cost management and revenue diversification strategies to strengthen our competitive position in the evolving consumer products marketplace."

1

Strategic Growth Initiatives and Market Positioning

Looking ahead to the remainder of fiscal 2026 and beyond, Luvu Brands will continue prioritizing strategic investments focused on operational efficiency, developing high-margin products, omnichannel distribution growth, and strengthen customer loyalty. These strategic efforts are designed to improve gross profit margins, enhance EBITDA performance, and position the Company for sustainable long-term growth as macroeconomic conditions stabilize and consumer discretionary spending recovers.

Additional Information

Visit www.luvubrands.com for updates on events, press releases, and product launches. For investor inquiries, please contact Christopher Knauf at chris.knauf@luvubrands.com.

Company Contact:

Luvu Brands, Inc.

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.

2

Financial Statements

Consolidated Statements of Operations (Unaudited)

		Three Months Ended December 31,								Six Months Ended December 31,
		2025				2024				2025				2024
(in thousands, except share data)
Net Sales		$	6,882			$	7,186			$	12,723			$	12,941
Cost of goods sold			5,084				5,204				9,269				9,444
Gross profit			1,798				1,982				3,454				3,497
Operating expenses:
Advertising and promotion			255				247				505				478
Other selling and marketing			457				437				878				851
General and administrative			805				899				1,719				1,783
Depreciation			97				108				184				217
Total operating expenses			1,614				1,691				3,286				3,329
Operating income			184				291				168				168
Other income (expense):
Interest expense and financing costs			(136	)			(98	)			(252	)			(185	)
Total other expense			(136	)			(98	)			(252	)			(185	)
(Loss) Income before taxes			48				192				(84	)			(18	)
Provision for income taxes			(813	)			0				(813	)			0
Net (loss) income		$	(765	)		$	192			$	(897	)		$	(18	)
Net (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:
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

3

Consolidated Balance Sheets

		December 31, 2025				June 30, 2025
		(unaudited)
(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents		$	1,086			$	735
Accounts receivable, net			1,483				1,600
Inventories, net			3,352				3,585
Other current assets			106				108
Total current assets			6,027				6,028
Equipment, property and leasehold improvements, net			1,368				1,476
Finance lease assets, net			77				104
Operating lease assets			3,584				1,057
Other assets			85				96
Total assets		$	11,141			$	8,761
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	1,696			$	1,858
Current debt			1,923				1,949
Other accrued liabilities			657				553
Operating lease liability			595				646
Total current liabilities			4,871				5,006
Noncurrent liabilities:
Deferred Tax Liability			932				119
Long-term debt			766				704
Long-term operating lease liability			3,033				514
Total noncurrent liabilities			4,731				1,337
Total liabilities			9,602				6,343
Stockholders' equity:
Common stock ($0.01 par value)			766				766
Additional paid-in capital			6,307				6,289
Accumulated deficit			(5,534	)			(4,637	)
Total stockholders' equity			1,539				2,418
Total liabilities and stockholders' equity		$	11,141			$	8,761

4

Consolidated Statement of Cash Flows (Unaudited)

		Six Months Ended
		December 31,
		2025				2024
		(in thousands)
OPERATING ACTIVITIES:
Net loss		$	(897	)		$	(17	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			184				217
Deferred tax expense			813				0
Stock-based compensation expense			18				18
Loss on sale of fixed asset			0				7
Change in operating assets and liabilities:
Accounts receivable			117				(550	)
Inventory			233				45
Operating lease liability			(1,310	)			(260	)
Amortization of operating lease asset			1,253				248
Prepaid expenses and other current assets			2				2
Other Assets			11				-
Accounts payable			(162	)			541
Other current liabilities			104				112
Net cash provided by operating activities		$	365			$	363
INVESTING ACTIVITIES:
Investment in equipment, software and leasehold improvements		$	(49	)		$	(3	)
Net cash used in investing activities		$	(49	)		$	(3	)
FINANCING ACTIVITIES:
Borrowing under revolving line of credit		$	141			$	160
Repayment of unsecured line of credit			(3	)			(1	)
Proceeds from secured notes payable			250				-
Repayment of secured notes payable			(221	)			-
Proceeds from equipment notes			49				-
Payments on equipment notes			(168	)			(187	)
Principal payments on capital leases			(12	)			(11	)
Net cash used in financing activities		$	35			$	(39	)
Net increase in cash and cash equivalents			352				321
Cash and cash equivalents at beginning of period		$	735			$	1,028
Cash and cash equivalents at end of period		$	1,086			$	1,349
Supplemental Disclosure of Cash Flow Information:
Non cash item:
New operating lease liability		$	3,780			$	-
Cash paid during the year for:
Interest		$	210			$	176
Income taxes			-				-

5

Non-GAAP Financial Measures

Reconciliation of Net Loss to Adjusted EBITDA

		Three Months Ended December 31,								Six Months Ended December 31,
		2025				2024				2025				2024
(in thousands)
Net income (loss)		$	(765	)		$	192			$	(897	)		$	(18	)
Plus, interest expense and financing costs			136				98				252				185
Plus, income tax provision			813				-				813				-
Plus, depreciation and amortization expense			97				108				184				217
Plus, stock-based compensation expense			9				9				18				18
Less income tax provision			(813	)			-				(813	)			-
Adjusted EBITDA		$	145			$	399			$	227			$	395

6

FAQ

How did Luvu Brands (LUVU) perform in Q2 fiscal 2026?

Luvu Brands reported Q2 FY26 net revenue of $6.88 million, down 4.2% year-over-year. Gross margin declined to 26.1%, and the company posted a net loss of $765,000, driven mainly by an $813,000 deferred tax provision despite positive operating income.

What were Luvu Brands (LUVU) revenues and margins for the first half of FY26?

For the six months ended December 31, 2025, Luvu Brands generated revenue of $12.72 million, a 1.7% decline year-over-year. Gross profit was $3.45 million, and Adjusted EBITDA was $227,000, indicating reduced but still positive operating cash generation in a challenging environment.

Why did Luvu Brands (LUVU) report a net loss in Q2 FY26?

Luvu Brands reported a Q2 FY26 net loss of $765,000 primarily due to an $813,000 deferred tax provision related to future tax benefits. This non-cash charge offset positive operating income of $184,000 and contributed to the shift from net income in the prior-year quarter.

What is Luvu Brands’ (LUVU) cash and liquidity position after Q2 FY26?

At December 31, 2025, Luvu Brands held $1.09 million in cash and cash equivalents, up from $735,000 at June 30, 2025. The improvement was supported by $365,000 of net cash provided by operating activities over the first six months of fiscal 2026.

How did Luvu Brands’ (LUVU) Adjusted EBITDA change in Q2 FY26?

Adjusted EBITDA for Q2 FY26 was $145,000, down from $399,000 in the prior-year quarter. For the six-month period, Adjusted EBITDA totaled $227,000 versus $395,000 a year earlier, reflecting margin pressure while still indicating positive underlying earnings before interest, taxes, depreciation, and amortization.

What key challenges did Luvu Brands (LUVU) face during Q2 FY26?

Luvu Brands faced consumer discretionary spending weakness, retail headwinds from low-priced overseas competitors, and cost inflation including tariffs. These factors contributed to a 4.2% revenue decline, gross margin compression to 26.1%, and lower Adjusted EBITDA compared with the prior-year period.

Filing Exhibits & Attachments

6 documents

Press Releases

• EX-99.1 PRESS RELEASE 200.3 KB

Other Documents

• EX-101 XBRL TAXONOMY EXTENSION SCHEMA 4.9 KB
• EX-101 XBRL TAXONOMY EXTENSION LABEL LINKBASE 12.3 KB
• EX-101 XBRL TAXONOMY EXTENSION CALCULATION LINKBASE 910 B
• EX-101 XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE 7.7 KB
• EX-101 XBRL TAXONOMY EXTENSION DEFINITION LINKBASE 2.1 KB