Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. As I mentioned in our last call, we view fiscal 2026 as a year of stabilization for the company focused on building a foundation for long term sustainable growth. We began to make major changes in our customer acquisition and marketing strategy during the first quarter. In Q1, we made a fundamental shift to focus on marketing contribution margin, which allows us to better allocate resources and optimize spending, ensuring that our marketing dollars drive measurable returns.
In the short term, we could see additional pressure on the top line as we recalibrate our approach toward a positive marketing contribution margin on paid traffic. As we pivot toward a greater focus on contribution margin, we are placing a stronger emphasis on optimizing our marketing spend to drive profitable growth, not just higher sales. Efficiency ensures we are maximizing our marketing dollars, reducing waste, and aligning spend with our highest return channels. Together, these improvements directly impact our top and bottom lines by increasing awareness, accelerating customer acquisition, and improving retention.
At the end of the day, this strategy positions us for stronger and more sustainable growth and profitability. This approach is intended to improve productivity and maximize return on investment by increasing conversion and average order value as customers attach other categories merchandise on our primary platforms. I am thrilled to welcome Melanie Babcock to our company as Chief Marketing and Growth Officer. Her proven ability to scale brands, build high-performing businesses, and create customer-centric growth strategies make her the perfect partner for this new chapter of our journey.
| Metric | Period | Current guidance |
|---|---|---|
| Top line | near term | could see additional pressure as the approach recalibrates toward positive marketing contribution margin on paid traffic |
| Cost savings (run-rate) | FY2026-FY2027 | incremental $50 million over the next two years on a run-rate basis, roughly half in FY2026 and half in FY2027, excluding one-time consultant and severance costs |
| Revolver borrowings | fiscal Q2 FY2026 | expected to be fully repaid during fiscal second quarter |
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | -11.1% | Strategic shift emphasizing positive marketing contribution margin and, to a lesser extent, wholesale order timing shifting from Q1 prior year into Q2 of this fiscal year. |
| Consumer Floral & Gifts segment revenue | -14.6% | Strategic shift toward marketing contribution margin. |
| Gourmet Foods & Gift Baskets segment revenue | -8.6% | Marketing contribution margin shift and wholesale order timing shift into Q2. |
| BloomNet segment revenue | essentially flat | Relatively unaffected by the marketing shift. |
| Gross margin | -240 bps to 35.7% | Deleveraging on the sales decline combined with the impact of higher tariffs. |
| Operating expenses (adjusted) | -$10.9M to $124.9M | Lower marketing and labor costs. |
| Adjusted EBITDA | loss of $32.9M vs loss of $27.9M | Sales deleveraging and gross margin pressure, partially mitigated by marketing efficiency and cost actions; trend was slightly positive after adjusting for timing items. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Marketing strategy | Shift from gross margin to variable/contribution margin focus announced | Fundamental shift to marketing contribution margin implemented in Q1 with immediate profitability benefit; building toward a full-funnel approach under new CMO | — |
| Cost savings | $40 million plan with $17 million already implemented | Incremental $50 million run-rate target identified over two years (half FY2026, half FY2027), excluding consultant and severance costs | — |
| New channels | Plan to expand beyond e-commerce sites | Now selling on Amazon and Walmart.com with early positive traction; testing paid traffic consolidation by redirecting visitors from lower-traffic sites to main platforms | — |
| Organizational efficiency | Engaged external consultant to identify efficiencies | Implemented targeted changes including centralizing the marketing team and improving customer service/website development coordination | — |
| Physical retail | Celebration strategy to broaden reach | Opened holiday pop-up shops (nine locations) to test a scalable physical retail concept for potential nationwide rollout | — |