JJill Inc

1. Description of Business

J.Jill, Inc., “J.Jill” or the “Company”, is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease. The brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter. J.Jill offers a high touch customer experience through over 200 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim condensed consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”) associated with reporting of interim period financial information. We consistently applied the accounting policies described in our Annual Report on Form 10-K (the “2023 Annual Report”) for the fiscal year ended February 3, 2024 (“Fiscal Year 2023”) in preparing these unaudited interim condensed consolidated financial statements. J.Jill operates on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal year ending February 1, 2025 (“Fiscal Year 2024”) is comprised of 52 weeks and Fiscal Year 2023 was comprised of 53 weeks.

In the opinion of management, these interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February 3, 2024 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and thirty-nine weeks ended November 2, 2024 are not necessarily indicative of future results or results to be expected for Fiscal Year 2024. You should read these statements in conjunction with our audited consolidated financial statements and related notes in our 2023 Annual Report.

Financial Statement Presentation

Certain reclassifications have been made to prior periods to conform with the current period presentation.

On the condensed consolidated statements of operations and comprehensive income, the Company reclassified amounts for interest income for the thirteen and thirty-nine weeks ended October 28, 2023 from Interest expense, net to a separate financial statement line item to conform with the current presentation for the thirteen and thirty-nine weeks ended November 2, 2024.

On the condensed consolidated statement of cash flows, the Company reclassified approximately $1.0 million of prepaid software project costs from Prepaid expenses and other current assets to Other assets forthe thirty-nine weeks ended October 28, 2023. For further details refer “Cloud-Based Software Arrangements” below under Note 2. Summary of Significant Accounting Policies.

Correction of Immaterial Error

Prior to Fiscal Year 2024, the Company had recorded processing fee income related to customer sales returns as a contra expense within Selling, general and administrative expenses rather than as a component of Net sales in the condensed consolidated statements of operations and comprehensive income. Beginning in Fiscal Year 2024, the Company recorded this revenue as a component of Net sales within the Direct channel. The Company reclassified this income, which increased previously reported Net sales and Selling, general and administrative expenses by approximately $0.7 million forthe thirteen weeks ended October 28, 2023, and by $2.5 million forthe thirty-nine weeks ended October 28, 2023. The Company has concluded that the reclassification of this income was immaterial to the prior period financial statements.

Cost of Goods Sold

Cost of goods sold (“COGS”) includes the direct costs of sold merchandise, which include customs, taxes, duties, commissions and inbound shipping costs, inventory shrinkage, adjustments and reserves for excess, aged and obsolete inventory. COGS does not include distribution center costs and allocations of indirect costs, such as occupancy, depreciation, amortization, or labor and benefits.

Selling, general and administrative expenses consist primarily of payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and operations at the headquarters, including utilities, depreciation and amortization. These expenses also consist of marketing expense, including catalog production and mailing costs, warehousing, distribution and outbound shipping costs, customer service operations, consulting and software services, natural disasters, professional services and other administrative costs.

For the thirteen and thirty-nine weeks ended November 2, 2024, the Company recorded a loss due to hurricane of $0.3 million related to the write-off of property and equipment and inventory at one store location. This amount is included in Selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

Cloud-Based Software Arrangements

The costs incurred to implement cloud computing arrangements hosted by third party vendors are capitalized when incurred during the application development phase, and recognized as Prepaid expenses and other current assets for the current portion or Other assets for the long-term portion. Implementation costs are subsequently amortized on a straight-line basis over the expected term of the related cloud service, beginning on the date the related software or module is ready for its intended use. The amortization of cloud-based software implementation costs is recorded as a component of Selling, general, and administrative expenses, the same line item as the expense for the associated hosting arrangement. The carrying value of cloud computing implementation costs are tested for impairment when an event or circumstance indicates that the asset might be impaired. Cloud computing arrangement implementation costs are classified within operating activities in the condensed consolidated statements of cash flows.

For the thirteen and thirty-nine weeks ended November 2, 2024, the Company amortized $0.2 million and $0.6 million, respectively, of cloud-based software implementation costs. Forthe thirteen and thirty-nine weeks ended October 28, 2023, the Company amortized $0.3 million and $0.4 million, respectively, of cloud-based software implementation costs.

As of November 2, 2024, the Company had $7.2 million of gross capitalized cloud-based software implementation costs and $0.6 million of related accumulated amortization, for a net balance of $6.6 million, made up of $1.2 million recorded within Prepaid expenses and other current assets and $5.4 million recorded within Other assets on the Company’s condensed consolidated balance sheets.

As of February 3, 2024, the Company had $2.5 million of gross capitalized cloud-based software implementation costs and $0.6 million of related accumulated amortization, for a net balance of $1.9 million, made up of $0.9 million recorded within Prepaid expenses and other current assets and $1.0 million recorded within Other assets on the Company’s condensed consolidated balance sheets.

Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative”. This ASU amends the FASB ASC in response to the SEC’s disclosure update and simplification initiative. This guidance will be applied prospectively with the effective date for each amendment to be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027, the SEC has not removed the related disclosures from Regulation S-X or Regulation S-K, the pending amendments will not become effective for any entity. The Company is assessing what impact this guidance will have on its disclosures in the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting, Improvements to Reportable Segment Disclosures”. This ASU enhances the disclosures required about a public entity’s reportable segments in its annual and interim condensed consolidated financial statements. The amendments in this update require additional detailed and enhanced information about reportable segments’ expense, including significant segment expenses and other segment items that bridge segment revenue, significant expenses to segment profit or loss. The ASU also requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”) on an annual basis as well as an explanation of how the CODM uses the reported measures and other disclosures. The amendments in this update do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for the

Company for annual reporting periods beginning with the fiscal year ending February 1, 2025 and for interim reporting periods beginning in fiscal year 2026. Early adoption is permitted. The Company is assessing what impact this guidance will have on its disclosures in the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”. This ASU requires enhanced income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregated information related to income taxes paid. The other amendments in this update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit), and (2) removing disclosures that are no longer considered cost beneficial or relevant. The amendments in ASU 2023-09 are effective for the fiscal year ending January 31, 2026. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its disclosures in the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses”. This ASU requires public entities to disclose specified information about certain costs and expenses in the notes to their financial statements for both annual and interim reporting periods. Specifically, this ASU requires the disclosure of amounts related to (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization for oil and gas-producing activities. Additionally, entities must also provide a qualitative description of any amounts in relevant expense captions that are not quantitatively disaggregated, as well as total selling expenses and a definition of selling expenses for annual periods. The amendments in ASU 2024-03 must be applied prospectively and are effective for annual reporting periods beginning with the fiscal year ending January 29, 2028 and for interim periods beginning in fiscal year 2028. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements.

3. Revenues

Disaggregation of Revenue

Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our retail stores (“Retail”) and through our website and catalog orders (“Direct”). Net sales also include shipping and handling fees collected from customers, royalty revenues and marketing reimbursements related to our private label credit card agreement. Retail revenue is recognized at the time of sale and Direct revenue is recognized upon shipment of merchandise to the customer. The following table presents disaggregated revenues by source (in thousands):

Performance Obligations

The Company has a remaining performance obligation of$0.5 million related to an upfront payment to support the marketing and promotion of the Company’s private label credit card program. This upfront payment will be amortized to revenue evenly through January 2031.

Contract Liabilities

The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):

(1)

The short-term portion of the upfront payment is included in Accrued expenses and other current liabilities and the long-term portion of the upfront payment is included in Other long-term liabilities on the Company’s condensed consolidated balance sheets.

(2)

Revenue recognized for the thirty-nine weeks ended November 2, 2024 related to the contract liability balance as of February 3, 2024 was$3,470.

The Company recognized revenue related to gift card redemptions and breakage for the thirteen and thirty-nine weeks ended November 2, 2024 of approximately$1.8 million and$7.2 million, respectively, and for the thirteen and thirty-nine weeks ended October 28, 2023 of approximately$2.0 million and$7.5 million, respectively. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued and redeemed during the period.

Practical Expedients and Policy Elections

The Company excludes from its revenue all amounts collected from customers for sales taxes that are remitted to taxing authorities.

Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.

The Company does not disclose remaining performance obligations that have an expected duration of one year or less.

4. Asset Impairments

Long-lived Asset Impairments

For the thirteen and thirty-nine weeks ended November 2, 2024, the Company recorded noncash impairment charges of $0.1 million and $0.4 million, respectively, related to leasehold improvements at certain store locations driven by the actual performance at these locations. The Company reduced the net carrying value of certain long-lived assets to their estimated fair value, which was determined using a discounted cash flows method.

For the thirteen and thirty-nine weeks ended October 28, 2023, the Company recorded an immaterial amount of impairment charges.

Goodwill and Other Intangible Assets

The balance of goodwill was$59.7 million at November 2, 2024 and February 3, 2024. The accumulated goodwill impairment losses as of November 2, 2024 were$137.3 million.

A summary of other intangible assets as of November 2, 2024 and February 3, 2024 is as follows (in thousands):

Total amortization expense for these amortizable intangible assets was $1.2 million and $1.7 million for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and $4.0 million and $5.2 million for the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively.

The estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):

(1)

Represents amortization expense for the remainder of Fiscal Year 2024.

Impairment Tests

Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Definite-lived intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable. Judgments regarding indicators of potential impairment are based on market conditions and operational performance of the business.

During the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023, the Company did not identify any events or circumstances that indicated the fair value of a reporting unit was less than its carrying value.

5. Debt

The components of the Company’s outstanding long-term debt as of November 2, 2024 and February 3, 2024 were as follows (in thousands):

Term Loan Credit Agreement

The Company is party to a secured $175.0 million term loan credit agreement (the “Term Loan Credit Agreement” and, such facility, the “Term Loan Facility”), dated April 5, 2023, by and among the lenders party thereto and Jefferies Finance LLC, as administrative and collateral agent, with a maturity date of May 8, 2028.

On May 10, 2024, the Company made a voluntary principal prepayment of $58.2 million on the Term Loan Credit Agreement, in lieu of the previously expected excess cash flow payment of $26.6 million. The expected excess cash flow payment was rejected by the lenders as permitted under the provisions of the Term Loan Credit Agreement. On June 21, 2024, the Company made an additional voluntary principal prepayment of $27.2 million (See Note 8. Shareholders’ Equity, Common Stock Issuance, for additional information). Together with the required quarterly payments, the Company has repaid $92.0 million in principal under the Term Loan Credit Agreement in Fiscal Year 2024. In connection with the voluntary principal prepayments, the Company paid a $2.6 million premium, amounting to 3% on the aggregate principal amount being prepaid, and $1.6 million towards interest, in accordance with the provisions of the Term Loan Credit Agreement.

In connection with the voluntary principal prepayments discussed above, for the thirty-nine weeks ended November 2, 2024, the Company recognized a loss on extinguishment of debt of approximately $8.6 million, consisting of $6.0 million of accelerated amortization of the discount and fees and $2.6 million of prepayment premium, in its condensed consolidated statements of operations and comprehensive income. As of November 2, 2024, the remaining Term Loan Facility principal balance was $76.5 million, which is to be repaid in one quarterly principal payment of $2.2 million prior to January 31, 2025, with the remaining balance of $74.3 million to be paid upon maturity on May 8, 2028. The remaining unamortized discount and fees of $5.2 million will continue to be amortized over the remaining term through maturity.

As of November 2, 2024, the Company was in compliance with all covenants contained in its outstanding debt arrangements.

Priming and Subordinated Term Loans

The Company was party to a priming and a subordinated credit agreement, dated as of September 30, 2020, by and among J.Jill, Inc., Jill Acquisition LLC, as the borrower, the lenders party thereto from time to time and Wilmington Trust, National Association, as administrative agent and collateral agent (as amended, the “Subordinated Credit Agreement” and, such facility, the Subordinated Facility), until it was repaid in full on April 5, 2023.

Asset-Based Revolving Credit Agreement

The Company is party toa secured $40.0 million asset-based revolving credit facility agreement(the “ABL Credit Agreement” and, such facility, the“ABL Facility”), as amended, with a maturity date of May 10, 2028 (or 180 days prior to the maturity date of the Company’s Term Loan Credit Agreement if the maturity date of such Term Loan Facility has not been extended to a date that is at least 180 days after the maturity date of the ABL Credit Agreement).

The Company hadno short-term borrowings under the Company’s ABL Facility as of November 2, 2024 and February 3, 2024. The Company’s available borrowing capacity under the ABL Facility as of November 2, 2024 and February 3, 2024 was$35.7 million and$34.2 million, respectively.

As of November 2, 2024 and February 3, 2024, there were outstanding letters of credit of$4.3 million and$5.8 million, respectively, which reduced the availability under the ABL Facility. As of November 2, 2024, the maximum commitment for letters of credit was $10.0 million.

As of November 2, 2024, the Company was in compliance with all covenants.

6. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1 - Quoted prices in active markets for identical assets or liabilities.

•

Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, including interest rates and yield curves, and market corroborated inputs.

•

Level 3 - Unobservable inputs for the assets or liabilities that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These are valued based on management’s estimates and assumptions that market participants would use in pricing the asset or liabilities.

The following table presents the carrying value and fair value hierarchy for debt as of November 2, 2024 and February 3, 2024, respectively (in thousands):

The Company’s debt instruments include the Term Loan Credit Agreement. The debt instruments are recorded at cost, net of debt issuance costs and any related discount. The fair value of the debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.

The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, accounts payable and any amounts drawn on its revolving credit facilities, consisting primarily of instruments without extended maturities, based on management’s estimates, approximates their fair value due to the short-term maturities of these instruments.

Assets and Liabilities with Recurring Fair Value Measurements - Certain assets and liabilities may be measured at fair value on an ongoing basis. We did not elect to apply the fair value option for recording financial assets and financial liabilities. Other than total debt, we do not have any assets or liabilities which we measure at fair value on a recurring basis.

Assets and Liabilities with Nonrecurring Fair Value Measurements - Certain assets and liabilities are not measured at fair value on an ongoing basis. These assets and liabilities, which include long-lived assets, goodwill, intangible assets, and debt are subject to fair value adjustment in certain circumstances. From time to time, the fair value is determined on these assets and liabilities as part of related impairment tests or for disclosure purposes. See Note 4. Asset Impairments, for additional information.

7. Income Taxes

The Company recorded an income tax provision of$4.5 million and$4.7 million during the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively. The Company recorded an income tax provision of$13.8 million and$13.3 million during the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively.

The effective tax rate was 26.8% and 28.9% for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and 27.1% and 29.8% for the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively.

The effective tax rate for the thirteen and thirty-nine weeks ended November 2, 2024 differs from the federal statutory rate of 21% primarily due to the impact of state and local income taxes and executive compensation limitations. The effective tax rate forthe thirteen and thirty-nine weeks ended October 28, 2023 differs from the federal statutory rate of 21% primarily due to the impact of state and local income taxes, executive compensation limitations and non-deductible expenses.

8. Shareholders’ Equity

Common Stock Issuance

On June 12, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, William Blair & Company, L.L.C., and TD Securities (USA) LLC (collectively, the “Underwriters”), as well as TowerBrook Capital Partners, LP (“TowerBrook”), an affiliate and the Company’s largest stockholder (the“Selling Stockholder”). Pursuant to the Underwriting Agreement, (i) the Company offered, issued, and sold 1,000,000 shares of its common stock and, (ii) the Selling Stockholder offered and sold 1,300,000 shares of the Company’s common stock, which included 300,000 shares sold as a result of the Underwriters’ full exercise of their option to purchase additional shares (collectively, the “Equity Offering”). The shares were offered at an offering price of $31.00 per share, less underwriting discounts and commissions. The Equity Offering was completed on June 14, 2024.

The gross proceeds to the Company from the issuance of the Company’s 1,000,000 shares amounted to $31.0 million and the Company didnot receive any proceeds from the shares sold by the Selling Stockholder. After deducting underwriting discounts and commissions of approximately $1.5 million, the net proceeds to the Company from the Equity Offering were $29.5 million. The issuance of the 1,000,000 new shares soldby the Company increased the total number of outstanding shares and are reflected in the stockholders’equity section of the Company’s condensed consolidated balance sheet as of November 2, 2024. In connection with the Equity Offering, the Company incurred $0.9 million of third- party expenses. The net proceeds, after deducting both underwriting discounts and commissions and third- party expenses have been recorded in Additional paid-in capital and are detailed in the condensed consolidated statements of shareholders’ equity forthe thirteen and thirty-nine weeks ended November 2, 2024.

The Company utilized the net proceeds from its sale of shares in the Equity Offering for repayment of its debt and general corporate purposes.

Dividends

During the thirteen weeks ended November 2, 2024, the Board of Directors (the “Board”) declared a quarterly cash dividend payment of $0.07 per share of common stock (the “Dividend”). The Dividend was payable on October 2, 2024 to stockholders of record of issued and outstanding shares of the Company’s common stock as of September 18, 2024. Duringthe thirteen and thirty-nine weeks ended November 2, 2024, the Company paid$1.0 million and $1.8 million, respectively, in dividends. While dividends are generally recorded as a reduction to Retained earnings, since the Company has an accumulated deficit, dividends are recorded as a reduction to Additional paid-in capital.

The Company intends to pay cash dividends quarterly in the future, subject to market conditions and at the discretion of the Board. Our ability to pay dividends in the future is based on a number of factors, such as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements and the ability of our operating subsidiaries to pay dividends to us as a holding company.

Subsequent Events

On December 4, 2024, the Board declared a cash dividend of $0.07 per share, payable on January 9, 2025 to stockholders of record of issued and outstanding shares of the Company’s common stock as of December 26, 2024.

On December 6, 2024, the Board approved a share repurchase program (the “Share Repurchase Program”), under which the Company is authorized to repurchase up to $25.0 million of the Company’s common stock over the nexttwo years. Under the Share Repurchase Program, shares of the Company’s common stock may be purchased from time to time through open market or private transactions, block trades, or such other manner as the Company may determine, in accordance with applicable insider trading and other securities laws and regulations under the Exchange Act. The timing and the number of shares repurchased are subject to the discretion of the Company and may be affected by market conditions and other factors. The Share Repurchase Program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time.

9. Net Income Per Share

The following table summarizes the computation of basic and diluted net income per common share (“EPS”) (in thousands, except share and per share data):

Equity compensation awards are excluded from the diluted earnings per share calculation when their inclusion would have an antidilutive effect such as when the Company has a net loss for the reporting period, or if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Accordingly,13,916 and 118,663 shares for the thirteen and thirty-nine weeks ended November 2, 2024, respectively, and 35,195 and 72,248 shares for the thirteen and thirty-nine weeks ended October 28, 2023, respectively, were excluded from the diluted earnings per share calculation because their inclusion would be antidilutive.

Duringthe thirteen and thirty-nine weeks ended November 2, 2024, the Company issued 3,572,664 shares of common stock following the exercise of 3,573,707 warrants(the “Warrants”) that were previously issued pursuant to a Warrant Agreement, dated as of October 2, 2020, by and between the Company and American Stock Transfer & Company LLC (the “Warrant Agreement”). The exercise price of the Warrants was net share settled as per the terms of the Warrant Agreement and asdetailed in the condensed consolidated statements of shareholders’ equity for the thirteen and thirty-nine weeks ended November 2, 2024. Given the non-substantive exercise price of the Warrants in relation to the fair value of the common shares issued upon exercise, the exercise of these Warrants had no impact on net income per common share, both basic and diluted. Upon exercise, the net share settled warrants are included in the Weighted average number of common shares outstanding in the table above for the thirteen and thirty-nine weeks ended November 2, 2024.

10. Equity-Based Compensation

The J.Jill, Inc. Omnibus Equity Incentive Plan, as amended and restated on June 1, 2023 (the “A&R Plan”), reserves a maximum of 2,043,453 shares of common stock for issuance upon exercise of options, or in respect of granted awards. As of November 2, 2024, the A&R Plan had an aggregate of 863,571 shares remaining for future issuance pursuant to awards that may be granted by the Board.

During the thirty-nine weeks ended November 2, 2024 and October 28, 2023, the Board approved and granted Restricted Stock Units (“RSUs”), dividend equivalent RSUs, Performance Stock Units (“PSUs”) and dividend equivalent PSUs under the A&R Plan.

Restricted Stock Units

For the thirty-nine weeks ended November 2, 2024 and October 28, 2023, the Board granted RSUs under the A&R Plan, which vest in one to three equal annual installments, beginning one year from the date of grant. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. In connection with the cash dividend paid on the Company’s common stock and in accordance with the terms of the A&R Plan, participants holding RSUs were credited with dividend equivalent RSUs, which are subject to the same vesting terms as the RSUs. Forthe thirty-nine weeks ended November 2, 2024 and October 28, 2023, the fair market value of RSUs was determined based on the market price of the Company’s shares on the date of the grant.

The following table summarizes the RSU awards activity forthe thirty-nine weeks ended November 2, 2024:

As of November 2, 2024, there was$6.9 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average service period of 2.0 years. The total fair value of RSUs vested during the thirty-nine weeks ended November 2, 2024 and October 28, 2023 was$3.2 million and$3.5 million, respectively.

Performance Stock Units

For the thirty-nine weeks ended November 2, 2024 and October 28, 2023, the Board granted PSUs, a portion of which are based on achieving an adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) goal and the remaining portion is based on achieving an annualized absolute total shareholder return (“TSR”) growth goal.

Each PSU award reflects a target number of shares (“Target Shares”) that may be issued to the award recipient provided the employee continues to provide services to the Company throughout the three-year performance period of the award. For Adjusted EBITDA based PSUs, the number of units earned will be determined based on the achievement of the predetermined Adjusted EBITDA goals at the end of each performance year, and for TSR based PSUs, the number of units earned will be determined based on the achievement of the predetermined TSR growth goal at the end of a three-year performance period. The TSR is based on J.Jill’s 30-trading day average beginning and closing price of thethree-year performance period, assuming the reinvestment of dividends. Depending on the performance results based on Adjusted EBITDA and TSR, the actual number of shares that a grant recipient receives at the end of the vesting period may range from 0% to 200% of the Target Shares granted. PSUs are converted into shares of common stock upon vesting, under the terms of the A&R Plan. In connection with the cash dividend paid on the Company’s common stock and in accordance with the terms of the A&R Plan, participants holding PSUs were credited with dividend equivalent PSUs, a portion of which are based on an Adjusted EBITDA goal and the remaining portion is based on achieving an annualized TSR growth goal, each subject to the same vesting terms as the corresponding PSUs.

The fair value of the PSUs for which the performance is based on an Adjusted EBITDA goal was determined based on the market price of the Company’s shares on the date of the grant. Additionally, for those awards whose performance is based on a TSR growth goal, the fair value was estimated using a Monte Carlo simulation as of the grant date. This valuation was performed prior to any declaration of cash dividends and the issuance of dividend equivalent PSUs. Except for the dividend equivalent PSUs, no additional PSUs were granted following this fair valuation, which is based on the assumptions noted below:

The Company recognizes equity-based compensation expense related to Adjusted EBITDA based PSUs based on the Company’s estimate of the percentage of the award that will be achieved. The Company evaluates the estimate of these awards on a quarterly basis and adjusts equity-based compensation expense related to these awards, as appropriate. For the TSR based PSUs, the equity-based compensation expense is recognized on a straight-line basis over thethree-year performance period based on the grant-date fair value of these PSUs.

The following table summarizes the PSU awards activity forthe thirty-nine weeks ended November 2, 2024:

As of November 2, 2024, there was$4.6 million of total unrecognized compensation expense related to unvested PSUs, which is expected to be recognized over a weighted-average service period of 2.0 years.

Equity-based compensation expense for RSUs and PSUs was recorded in the Selling, general and administrative expenses in the condensed consolidated statement of operations and comprehensive income. The Company recorded$1.7 million and$4.7 million for the thirteen and thirty-nine weeks ended November 2, 2024, respectively, and$1.0 million and$2.8 million forthe thirteen and thirty-nine weeks ended October 28, 2023, respectively. As per the terms of the A&R Plan, as the dividend equivalent awards are subject to the same vesting conditions as their underlying awards, the Company didnot record any additional equity-based compensation expense associated with these awards.

11. Related Party Transactions

On June 14, 2024, the Company, and TowerBrook, as the Selling Stockholder, completed the Equity Offering, which resulted in the dilution of TowerBrook’s ownership and voting power in the Company. As a result, TowerBrook no longer controls a majority of the voting power of the Company’s outstanding voting stock and, therefore, the Company no longer qualifies as a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards. Despite this change, TowerBrook remains an affiliated entity of the Company.

The Company was party to the Subordinated Credit Agreement, with a group of lenders that includes certain affiliates of TowerBrook and the Chairman of our Board, until it was repaid in full on April 5, 2023. For the thirteen and thirty-nine weeks ended October 28, 2023, the Company incurred $1.1 million of Interest expense - related party associated with the Subordinated Credit Agreement in the condensed consolidated statements of operations and comprehensive income.

For the thirty-nine weeks ended November 2, 2024, the Company incurred $0.1 million in third-party expenses, primarily related to the payment of legal and professional fees associated with TowerBrook’s sale of the Company’s common stock in connection with the Equity Offering. For the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023, the Company incurred an immaterial amount of other expenses in connection with related party transactions.

Subsequent to November 2, 2024, on December 9, 2024, the Company and Elm ST Advisors, LLC (“Elm Street”) entered into a consulting services agreement (the “Consulting Agreement”). Elm Street is owned by Jim Scully, who served as a director on the Company’s Board until June 2024.

Pursuant to the terms of the Consulting Agreement, Elm Street will assist the Company in developing enhanced operational strategies with a focus on growth opportunities. In consideration for these services, the Company has agreed to pay Elm Street an upfront fee of $0.2 million and monthly installment payments of $0.3 millionfor the term of the Consulting Agreement, which terminateson June 9, 2025. Elm Street has also been granted the option to purchase 0.1 million shares of Company’s common stock subject to vesting during the term of the Consulting Agreement at the discretion of the Company upon achievement of certain milestones. The grant price of the options will be the closing price of Company shares on December 13, 2024.

12. Commitments and Contingencies

Legal Proceedings

The Company is subject to various legal proceedings that arise in the ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that the Company is presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on the Company’s financial statements. The Company establishes reserves for specific legal matters, including legal costs, when the Company determines that the likelihood of an unfavorable outcome is probable, and the loss is reasonably estimable.

13. Subsequent Events

On December 6, 2024, Claire Spofford, the Company’s President and Chief Executive Officer and director on the Board, notified the Board of her intent to retire effective April 15, 2025. Ms. Spofford will continue to serve in her current roles with the Company and on the Board through April 15, 2025 to facilitate a smooth transition.

Ms. Spofford’s retirement is not a result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

Refer Note 8. Shareholders’ Equity for information on the declaration of dividend and the Share Repurchase Program.

Refer Note 11. Related Party Transactions for information on the Consulting Agreement with Elm Street.