SPORTSMAN'S WAREHOUSE HOLDINGS, INC.

Previous wording

Our business continues to face widespread macroeconomic uncertainties, including the impact of changes to international trade policies and increased tariff rates, inflation, elevated interest rates, elevated fuel prices, recession risks and rising global political tensions. We continue to monitor the potential impact of these broader consumer spending pressures on our business. While we cannot predict the ultimate impact of such uncertainties on our financial results for fiscal year 2026 and beyond, we believe these factors could affect our sales in fiscal year 2026. We remain measured in our outlook for the year.

Current wording

Our business continues to face widespread macroeconomic uncertainties, including the impact of changes to international trade policies and increased tariff rates, inflation, elevated interest rates, elevated fuel prices, recession risks and rising global political tensions. We continue to monitor the potential impact of these broader consumer spending pressures on our business. While we cannot predict the ultimate impact of such uncertainties on our financial results for fiscal year 2026 and beyond, we believe these factors have affected and may continue to affect our sales in fiscal year 2026. We remain measured in our outlook for the year.

Previous wording

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net loss plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, management transition costs and executive retention costs.

Current wording

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales, same store sales, gross profit, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net loss plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, management transition costs and executive retention costs.

Previous wording

macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, elevated interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict and rising global political tensions;

Current wording

macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, elevated interest rates, tightening of credit markets, and potential disruptions from ongoing international conflicts and rising global political tensions;

Previous wording

We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly fishing, improving our seasonal inventory efficiency, strategic buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Successful inventory management ensures we have sufficient high margin products in stock to meet customer demand, while overstocking of items can lead to aggressive markdowns in order to help a product sell. We ended our fiscal first quarter of 2026 with $25.1 million less inventory than at the end of the fiscal first quarter of 2025, a 6.1% decrease.

Current wording

We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly fishing, improving our seasonal inventory efficiency, strategic buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Successful inventory management ensures we have sufficient high margin products in stock to meet customer demand, while overstocking of items can lead to aggressive markdowns in order to help a product sell. We ended our second fiscal quarter of 2026 with $44.5 million less inventory than at the end of the second fiscal quarter of 2025, a 10.0% decrease. We believe this reflects our disciplined inventory management and positions us well to support growth in our key categories while continuing to improve productivity and inventory turns.

Previous wording

Net Sales and Same Store Sales. Net sales increased by $7.0 million, or 2.8%, to $256.1 million during the 13 weeks ended May 2, 2026 compared to $249.1 million in the corresponding period of fiscal year 2025. Our net sales increased primarily due to sales growth in our Hunting and Shooting Sports and Fishing departments. Hunting and Shooting Sports increases were led by firearms, ammunition, and less-lethal personal protection, partially aided by external event-driven demand. Fishing increases were driven by seasonal demands as customers prepared for the spring fishing season. These increases were partially offset by decreases in net sales across other departments, reflecting continued pressure on the U.S. consumer and a strategic pull down of inventory to align our complementary categories with our core pursuits. E-commerce driven sales comprised approximately 23% of total sales for the 13 weeks ended May 2, 2026. Same store sales increased by 2.1% during the 13 weeks ended May 2, 2026 compared to the corresponding 13 weeks ended May 3, 2025, primarily as a result of the factors discussed above that impacted net sales.

Current wording

Net Sales and Same Store Sales. Net sales increased by $1.7 million, or 0.6%, to $295.6 million during the 13 weeks ended August 1, 2026 compared to $293.9 million in the corresponding period of fiscal year 2025. Our net sales increased primarily due to sales growth in our Hunting and Shooting Sports department. Hunting and Shooting Sports increases were led by firearms, ammunition, and less-lethal personal protection, partially aided by external event-driven demand. These increases were partially offset by decreases in net sales across other departments, reflecting continued pressure on the consumer and drought conditions in the western United States. E-commerce driven sales comprised approximately 19% of total sales for the 13 weeks ended August 1, 2026. Same store sales remained flat during the 13 weeks ended August 1, 2026 compared to the corresponding period of fiscal year 2025.

Previous wording

Our Hunting and Shooting Sports and Fishing departments saw net sales increases of $11.7 million and $1.8 million, respectively, during the 13 weeks ended May 2, 2026 compared to the corresponding period of fiscal year 2025 primarily driven by increases in firearms, ammunition, and less-lethal personal protection, with some additional event-driven demand. Our Camping, Footwear, Apparel and Optics, Electronics, Accessories and Other departments saw net sales decreases of $2.9 million, $1.6 million, $1.3 million and $0.8 million, respectively, during the 13 weeks ended May 2, 2026 compared to the corresponding period of fiscal year 2025. These decreases reflect continued pressure on the U.S. consumer and a strategic pull down of inventory to align our complementary categories with our core pursuits. Within our Hunting and Shooting Sports department, sales from our ammunition and firearm categories increased by $5.4 million and $3.9 million, or 12.8% and 5.4%, respectively, for the first quarter of fiscal year 2026 compared to the corresponding fiscal period of 2025. The increase in these categories was primarily due to our change to every day low pricing in key product groups within the ammunition category, our bulk unit ammunition strategy, and improved in-stocks on core products.

Current wording

Our Hunting and Shooting Sports and Optics, Electronics, Accessories and Other departments saw net sales increases of $11.1 million and $0.1 million, respectively, during the 13 weeks ended August 1, 2026 compared to the corresponding period of fiscal year 2025 primarily driven by increases in firearms, ammunition, and less-lethal personal protection, with some additional event-driven demand. Our Camping, Footwear, Apparel and Fishing departments saw net sales decreases of $4.4 million, $2.4 million, $1.6 million and $1.0 million, respectively, during the 13 weeks ended August 1, 2026 compared to the corresponding period of fiscal year 2025. These decreases reflect continued pressure on the consumer and drought conditions in the western United States. Within our Hunting and Shooting Sports department, sales from our firearm and ammunition categories increased by $5.2 million and $3.9 million, or 8.7% and 9.9%, respectively, for the second quarter of fiscal year 2026 compared to the corresponding fiscal period of 2025. The increase in these categories was primarily due to our every day low pricing in key product groups within the ammunition category, our bulk unit ammunition strategy, improved in-stocks on core products and event-driven demand.

Previous wording

With respect to same store sales, during the 13 weeks ended May 2, 2026, our Hunting and Shooting Sports and Fishing departments saw increases of 6.3% and 5.7%, respectively, compared to the corresponding period of fiscal year 2025. Our Camping, Footwear, Apparel and Optics, Electronics, Accessories and Other departments saw same store sales decreases of 14.0%, 12.3%, 9.3% and 1.8%, respectively, during the 13 weeks ended May 2, 2026 compared to the corresponding period of fiscal year 2025. These changes were primarily driven by the items noted above for net sales. As of May 2, 2026, 146 stores were included in our same store sales calculation.

Current wording

With respect to same store sales, during the 13 weeks ended August 1, 2026, our Hunting and Shooting Sports and Optics, Electronics, Accessories and Other departments saw increases of 6.7% and 1.0%, respectively, compared to the corresponding period of fiscal year 2025. Our Footwear, Camping, Apparel and Fishing departments saw same store sales decreases of 13.8%, 10.7%, 8.9% and 2.0%, respectively, during the 13 weeks ended August 1, 2026 compared to the corresponding period of fiscal year 2025. These changes were primarily driven by the items noted above for net sales. As of August 1, 2026, 146 stores were included in our same store sales calculation.

Previous wording

Interest Expense. Interest expense decreased by $0.3 million, or 11.7 %, to $2.6 million during the 13 weeks ended May 2, 2026, compared to $3.0 million for the corresponding period of fiscal year 2025. The decrease in interest expense was primarily driven by reduced debt during the first quarter of fiscal year 2026 compared to the corresponding period of fiscal year 2025.

Current wording

Interest Expense. Interest expense decreased by $0.5 million, or 12.3%, to $3.3 million during the 13 weeks ended August 1, 2026, compared to $3.8 million for the corresponding period of fiscal year 2025. The decrease in interest expense was primarily driven by reduced debt during the second quarter of fiscal year 2026 compared to the corresponding period of fiscal year 2025.

Previous wording

Income Taxes. We recognized income tax expense of $1.0 million during the 13 weeks ended May 2, 2026 compared to an income tax benefit of $1.3 million during the corresponding period of fiscal year 2025. Our effective tax rates during the 13 weeks ended May 2, 2026 and May 3, 2025 were -5.0% and 5.9%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Current wording

Income Taxes. We recognized income tax expense of $0.0 million during the 13 weeks ended August 1, 2026 compared to an income tax expense of $0.1 million during the corresponding period of fiscal year 2025. Our effective tax rates during the 13 weeks ended August 1, 2026 and August 2, 2025 were 0.2% and -1.4%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Previous wording

Gross Profit. Gross profit increased by $0.2 million, or 0.2%, to $75.8 million during the 13 weeks ended May 2, 2026 compared to $75.6 million for the corresponding period of fiscal year 2025. As a percentage of net sales, gross profit decreased to 29.6% during the 13 weeks ended May 2, 2026, compared to 30.4% for the corresponding period of fiscal year 2025 primarily driven by category mix and lower sales in higher margin categories.

Current wording

Gross Profit. Gross profit increased by $2.2 million, or 1.3%, to $171.8 million during the 26 weeks ended August 1, 2026 compared to $169.6 million for the corresponding period of fiscal year 2025. The increase in gross profit was primarily driven by increased sales, lower freight and tariff refunds. As a percentage of net sales, gross profit decreased to 31.1% during the 26 weeks ended August 1, 2026, compared to 31.2% for the corresponding period of fiscal year 2025, primarily driven by unfavorable department level mix and rates, partially offset by lower freight from improved inventory management and tariff refunds.

Previous wording

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased by $1.4 million, or 1.4%, to $93.9 million during the 13 weeks ended May 2, 2026, compared to $95.3 million for the corresponding period of fiscal year 2025. This decrease was primarily the result of a decrease in payroll expense of $1.4 million as we emphasize disciplined cost control and decreased depreciation expense of $1.2 million during the 13 weeks ended May 2, 2026. As a percentage of net sales, selling, general, and administrative expenses decreased to 36.7% of net sales in the first quarter of fiscal year 2026, compared to 38.2% of net sales in the first quarter of fiscal year 2025, as a result of the factors noted above.

Current wording

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased by $1.4 million, or 0.7%, to $191.0 million during the 26 weeks ended August 1, 2026, compared to $192.4 million for the corresponding period of fiscal year 2025. This decrease was primarily the result of decreased depreciation expense of $2.6 million partially offset by increased rent of $0.9 million and increased other operating expenses of $0.7 million during the 26 weeks ended August 1, 2026. As a percentage of net sales, selling, general, and administrative expenses decreased to 34.6% of net sales in the 26 weeks ended August 1, 2026, compared to 35.4% in the corresponding period of fiscal year 2025.

Previous wording

Net sales are typically higher in our third and fourth fiscal quarters than in our first and second fiscal quarters because of the openings of hunting seasons across the country and consumer holiday buying patterns. We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. We anticipate our net sales will continue to reflect this seasonal pattern. On average, over the last three fiscal years, we have generated approximately 27.0% and 28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season. We anticipate our net sales will continue to reflect this seasonal pattern. However, Spring hunting, Father’s Day and the availability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree.

Current wording

Net sales are typically higher in our third and fourth fiscal quarters than in our first and second fiscal quarters because of the openings of hunting seasons across the country and consumer holiday buying patterns. We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. On average, over the last three fiscal years, we have generated approximately 27.0% and 28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season. We anticipate our net sales will continue to reflect this seasonal pattern. However, Spring hunting, Father’s Day and the availability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree.

Previous wording

As of May 2, 2026, we had cash and cash equivalents of $2.1 million and working capital, consisting of current assets less current liabilities, of $61.9 million. We also had $114.6 million available for borrowing under our senior secured revolving credit facility as of May 2, 2026, calculated based upon borrowing base restrictions under our revolving credit facility.

Current wording

As of August 1, 2026, we had cash and cash equivalents of $2.0 million and working capital, consisting of current assets less current liabilities, of $60.9 million. We also had $103.0 million available for borrowing under our senior secured revolving credit facility as of August 1, 2026, calculated based upon borrowing base restrictions under our revolving credit facility.

Previous wording

Lease Obligations. Lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term. As of May 2, 2026, our expected operating and finance lease payments for the remainder of fiscal year fiscal year 2026 are $57.6 million and $0.3 million, respectively. Our total committed operating and finance lease payments are $416.1 million. Other operating lease obligations consist of distribution center equipment. See Note 6, “Leases” to our unaudited condensed consolidated financial statements included in this 10-Q.

Current wording

Lease Obligations. Lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term. As of August 1, 2026, our expected operating and finance lease payments for the remainder of fiscal year fiscal year 2026 are $38.6 million and $0.2 million, respectively. Our total committed operating and finance lease payments are $398.6 million. Other operating lease obligations consist of distribution center equipment. See Note 6, “Leases” to our unaudited condensed consolidated financial statements included in this 10-Q.

Previous wording

Capital Expenditures. During the 13 weeks ended May 2, 2026, we incurred approximately $4.2 million in capital expenditures, net of tenant allowances, primarily related to strategic technological investments and general store maintenance. We expect capital expenditures net of tenant allowances to be between $20 million and $25 million for fiscal year 2026 (inclusive of amounts spent during the 13 weeks ended May 2, 2026) primarily related to strategic technological investments, such as store scheduling tools and loyalty program technology, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, existing cash and cash equivalents and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.

Current wording

Capital Expenditures. During the 26 weeks ended August 1, 2026, we incurred approximately $7.7 million in capital expenditures, net of tenant allowances, primarily related to strategic technological investments and general store maintenance. We expect capital expenditures net of tenant allowances to be between $20 million and $25 million for fiscal year 2026 (inclusive of amounts spent during the 26 weeks ended August 1, 2026) primarily related to strategic technological investments, such as store scheduling tools and loyalty program technology, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, existing cash and cash equivalents and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.

Previous wording

Principal and Interest Payments. We maintain a $350.0 million revolving credit facility and a $45.0 million term loan facility. As of May 2, 2026, $118.9 million was outstanding under the revolving credit facility and $45.0 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility after May 2, 2026, our interest payments would be approximately $8.3 million for the remainder of fiscal year 2026, based on the interest rate as of May 2, 2026. As of May 2, 2026, our weighted average interest rate on the amounts outstanding under our revolving credit facility and term loan facility was 6.74%. See below under “Indebtedness” for additional information regarding our revolving credit facility and term loan facility, including the interest rates applicable to any borrowing under such facilities.

Current wording

Principal and Interest Payments. We maintain a $315.0 million revolving credit facility and a $45.0 million term loan facility. As of August 1, 2026, $138.7 million was outstanding under the revolving credit facility and $45.0 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility after August 1, 2026, our interest payments would be approximately $6.2 million for the remainder of fiscal year 2026, based on the interest rate as of August 1, 2026. As of August 1, 2026, our weighted average interest rate on the amounts outstanding under our revolving credit facility and term loan facility was

Previous wording

Net cash used in operating activities was $55.4 million for the 13 weeks ended May 2, 2026, compared to net cash used in operating activities of $60.2 million for the corresponding period of fiscal year 2025, a decrease of approximately $4.8 million. The decrease in our cash flows used in operating activities was primarily driven by the timing of inventory purchases and the resulting payments related to accounts payable during the 13 weeks ended May 2, 2026 compared to the corresponding period of fiscal year 2025.

Current wording

Net cash used in operating activities was $67.4 million for the 26 weeks ended August 1, 2026, compared to net cash used in operating activities of $86.8 million for the corresponding period of fiscal year 2025, a decrease of approximately $19.4 million. The decrease in our cash flows used in operating activities was primarily driven by reduced inventory during the 26 weeks ended August 1, 2026 compared to the corresponding period of fiscal year 2025.

Previous wording

Net cash used in investing activities was $4.2 million for the 13 weeks ended May 2, 2026, compared to net cash used in investing activities of $3.8 million for the corresponding period of fiscal year 2025, an increase of approximately $0.4 million, which was primarily driven by increased capital expenditures related to the timing of technical investments and fleet maintenance during the 13 weeks ended May 2, 2026 compared to the corresponding period of fiscal year 2025.

Current wording

Net cash used in investing activities was $7.7 million for the 26 weeks ended August 1, 2026, compared to net cash used in investing activities of $11.2 million for the corresponding period of fiscal year 2025, a decrease of approximately $3.5 million, which was primarily driven by decreased capital expenditures and no new store openings during the 26 weeks ended August 1, 2026 compared to the corresponding period of fiscal year 2025.

Previous wording

Net cash provided by financing activities was $60.0 million for the 13 weeks ended May 2, 2026, compared to net cash provided by financing activities of $64.8 million for the corresponding period of fiscal year 2025, a decrease of approximately $4.8 million. The decrease in cash provided by financing activities was primarily the result of lower borrowings on our revolving credit facility.

Current wording

Net cash provided by financing activities was $75.5 million for the 26 weeks ended August 1, 2026, compared to net cash provided by financing activities of $96.9 million for the corresponding period of fiscal year 2025, a decrease of approximately $21.5 million. The decrease in cash provided by financing activities was primarily the result of lower borrowings on our revolving credit facility.

Previous wording

We maintain a $350.0 million revolving credit facility, with $118.9 million outstanding as of May 2, 2026. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National Association (“Wells Fargo”). Our term loan facility is governed by an ABL term loan credit agreement with PLC Agent, LLC, as administrative and collateral agent for various lenders affiliated with Pathlight Capital. Available borrowings under our revolving credit facility are subject to a borrowing base calculation. As of May 2, 2026, we had an aggregate amount of $114.6 million available for borrowing under our revolving credit facility, calculated based upon certain borrowing base restrictions, and $3.0 million in stand-by commercial letters of credit. We have no remaining amounts available for borrowing under our term loan facility.

Current wording

We maintain a $315.0 million revolving credit facility, with $138.7 million outstanding as of August 1, 2026. Our revolving credit facility (the “Revolving Line of Credit”) is governed by an amended and restated credit agreement (as amended, the “Amended Credit Agreement”) with Sportsman’s Warehouse, Inc. (“SWI”), a wholly owned subsidiary of Holdings, as lead borrower, Holdings, and other subsidiaries of Holdings, each as borrowers, and Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, collateral agent, swing line lender, letter of credit issuer and lender, with a consortium of banks led by Wells Fargo. Our $45.0 million term loan facility (the “Term Loan Facility”) is governed by an ABL term loan credit agreement (as amended, the “A&R Term Loan Agreement”) with SWI, as lead borrower, Holdings, as guarantor, and other subsidiaries of Holdings, each as borrowers, and PLC Agent LLC, as administrative and collateral agent for various lenders. As of August 1, 2026, we had an aggregate amount of $103.0 million available for borrowing under our revolving credit facility, calculated based upon certain borrowing base restrictions, and $5.4 million in stand-by commercial letters of credit. We have $45.0 million of term loans outstanding and no remaining amounts available for borrowing under our term loan facility.

Previous wording

Borrowings under the revolving credit facility bear interest based on either the base rate or Term SOFR (as defined by the credit agreement governing the revolving credit facility), at our option, in each case plus an applicable margin. The base rate is the greatest of (1) the floor rate (as defined in the credit agreement as a rate of interest equal to 0.0%) (2) Wells Fargo’s prime rate, (3) the federal funds rate (as defined in the applicable credit agreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the applicable credit agreement) plus 1.00%. The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.25% to 0.50% per year for base rate loans and from 1.35% to 1.60% per year for Term SOFR loans. We are required to pay a commitment fee for the unused portion of the revolving credit facility, which will range from 0.20% to 0.225% per annum, depending on the average daily availability under the revolving credit facility.

Current wording

The Revolving Line of Credit has a maturity of June 18, 2031. Borrowings under the Revolving Line of Credit bear interest based on either the base rate or Term SOFR (as defined in the Amended Credit Agreement), at our option, in each case plus an applicable margin. The base rate is the greatest of (1) the floor rate (as defined in the Amended Credit Agreement as a rate of interest equal to 0.0%) (2) Wells Fargo’s prime rate, (3) the federal funds rate (as defined in the Amended Credit Agreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the Amended Credit Agreement) plus 1.00%. The applicable margin for loans under the Revolving Line of Credit, which varies based on the average daily availability, ranges from 0.75% to 1.00% per year for base rate loans and from 1.75% to 2.00% per year for Term SOFR loans. We are required to pay a commitment fee for the unused portion of the Revolving Line of Credit, which will range from 0.25% to 0.30% per annum, depending on the average daily availability under the Revolving Line of Credit. The weighted average interest rate on the amounts outstanding under the Revolving Line of Credit as of August 1, 2026 and January 31, 2026 was 5.56% and 5.09%, respectively.

Previous wording

Borrowings under the term loan facility bear interest at a rate equal to (i) a specified term secured overnight financing rate (SOFR), plus (ii) 0.10% as a SOFR adjustment, plus (iii) the applicable margin as specified in the term loan. The applicable margin means either 3.50% or 6.50% depending on the type of term loan. Under the term loan, loans may be required to be converted to base rate loans and in such case, the applicable margin rate will increase by 1.0%.

Current wording

The A&R Term Loan Agreement has a stated maturity date of June 18, 2031. Borrowings under the A&R Term Loan Agreement bear interest at a rate equal to (i) a specified term secured overnight financing rate (“SOFR”), plus (ii) 0.10% as a SOFR adjustment, plus (iii) the applicable margin as specified in the A&R Term Loan Agreement. The applicable margin means either 4.00% or 7.00% depending on the type of term loan. Under the A&R Term Loan Agreement, loans may be required to be converted to base rate loans and in such case, the applicable margin rate will increase by 1.0%.

Previous wording

Each of the subsidiaries of Holdings is a borrower under the revolving credit facility and the term loan facility, and all obligations under the revolving credit facility and the term loan facility are guaranteed by Holdings. All of the obligations under the revolving credit facility and the term loan facility are secured by a lien on substantially all of Holdings’ assets and assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of Holdings’ subsidiaries. The lien securing the obligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. The lien securing the obligations under the term loan facility is a first priority lien as to equipment, fixtures, intellectual property and equity interests.

Current wording

Each of the subsidiaries of Holdings is a borrower under the Revolving Line of Credit and the Term Loan Facility, and all obligations under the Revolving Line of Credit and the Term Loan Facility are guaranteed by Holdings. All of the obligations under the Revolving Line of Credit and the Term Loan Facility are secured by a lien on substantially all of Holdings’ tangible and intangible working capital assets and the tangible and intangible working capital assets of all of Holdings’ subsidiaries. The lien securing the obligations under the Revolving Line of Credit is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. The lien securing the obligations under the Term Loan Facility is a first priority lien as to equipment, fixtures, intellectual property and equity interests.

Previous wording

We may be required to make mandatory prepayments under the revolving credit facility and the term loan facility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.

Current wording

SWI and the other borrowers may be required to make mandatory prepayments under the Revolving Line of Credit and the Term Loan Facility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.

Previous wording

Our revolving credit facility and term loan facility each require us to maintain a minimum availability at all times of not less than the greater of $30.0 million and 10% of the gross borrowing base. In addition, the credit agreements governing each of our revolving credit facility and our term loan facility contain customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations. The revolving credit facility and term loan facility also contain customary events of default, including defaults triggered by defaults under the other facility. As of May 2, 2026, we were in compliance with all covenants under the credit agreements governing each of our revolving credit facility and our term loan facility.

Current wording

The Amended Credit Agreement and A&R Term Loan Agreement each require us to maintain a minimum availability at all times of not less than the greater of $30.0 million and 10% of the gross borrowing base. In addition, the Amended Credit Agreement and A&R Term Loan Agreement contain customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations. The Amended Credit Agreement and A&R Term Loan Agreement also contain customary events of default, including defaults triggered by defaults under the other facility. As of August 1, 2026, we were in compliance with all covenants under the credit agreements governing each of our revolving credit facility and our term loan facility.

Previous wording

In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net loss plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, management transition costs and executive retention costs. Net income (loss) is the most comparable GAAP financial measure to Adjusted EBITDA. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.

Current wording

In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net loss plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, management transition costs, executive retention costs and legal accrual. Net income (loss) is the most comparable GAAP financial measure to Adjusted EBITDA. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.