BUILD-A-BEAR WORKSHOP INC

Previous wording

We were formed in 1997 as a mall-based, experiential specialty retailer. Build-A-Bear has evolved to become a beloved multi-generational brand focused on its mission to “add a little more heart to life” where guests of all ages make their own “furry friends” in celebration and commemoration of life moments. Guests create their own stuffed animals by participating in the stuffing, dressing, accessorizing, and naming of their own teddy bears and other plush toys based on the Company’s own intellectual property and in conjunction with a variety of best-in-class licenses. The hands-on and interactive nature of our more than 600 company-owned, partner-operated and franchise experience locations around the world, combined with Build-A-Bear’s pop-culture appeal, often fosters a lasting and emotional brand connection with consumers, and has enabled the Company to expand beyond its retail stores to include e-commerce sales on www.buildabear.com and non-plush branded consumer categories via out-bound licensing agreements with leading manufacturers, as well as the creation of engaging content via Build-A-Bear Entertainment (a subsidiary of Build-A-Bear Workshop, Inc.). Over the last 28 years, Build-A-Bear has become a brand with high consumer awareness, positive affinity, and strong retail influence by leveraging our brand strength to grow our brick-and-mortar retail footprint beyond traditional malls through a range of store sizes, formats and locations including tourist destinations. We are also growing through our websites, which focus on gift-giving, collectible merchandise, and licensed products. In addition to growing our corporately-managed store and e-commerce footprint, we are also growing through third-party operated and franchised stores, particularly for our international expansion. Our ongoing digital transformation, which touches our e-commerce business, consumer loyalty program and digital marketing and content, has led to omni-channel growth over the past several years. Build-A-Bear's pop-culture appeal has played a key role in growing our total addressable market beyond children by adding teens and adults with entertainment and sports licensing, collectible and gifting offerings, as well as by introducing new products and adding categories beyond plush.

Current wording

We were formed in 1997 as a mall-based, experiential specialty retailer. Build-A-Bear has since evolved to become a beloved multi-generational brand focused on its mission to “add a little more heart to life” where guests of all ages make their own “furry friends” in celebration and commemoration of life moments. Guests create their own stuffed animals by participating in the stuffing, dressing, accessorizing, and naming of their own teddy bears and other plush toys based on the Company’s own intellectual property and in conjunction with a variety of best-in-class licenses. The hands-on and interactive nature of our more than 600 company-owned, partner-operated and franchise experience locations around the world, combined with Build-A-Bear’s pop-culture appeal, often fosters a lasting and emotional brand connection with consumers, and has enabled the Company to expand beyond its retail stores to include e-commerce sales on www.buildabear.com and non-plush branded consumer categories via out-bound licensing agreements with leading manufacturers, as well as the creation of engaging content via Build-A-Bear Entertainment (a subsidiary of Build-A-Bear Workshop, Inc.). Over the last 28 years, Build-A-Bear has become a brand with high consumer awareness, positive affinity, and strong retail influence by leveraging our brand strength to grow our brick-and-mortar retail footprint beyond traditional malls through a range of store sizes, formats and locations including tourist destinations. We are also growing through our websites, which focus on gift-giving, collectible merchandise, and licensed products. In addition to growing our corporately-managed store and e-commerce footprint, we are also growing through partner operated and franchised locations, particularly for our international expansion. Our ongoing digital transformation, which touches our e-commerce business, consumer loyalty program and digital marketing and content, has led to omni-channel growth over the past several years. Build-A-Bear's pop-culture appeal has played a key role in growing our total addressable market beyond children by adding teens and adults with entertainment and sports licensing, collectible and gifting offerings, as well as by introducing new products and adding categories beyond plush.

Previous wording

We primarily operate through a vertical retail channel with corporately-managed, partner-operated, and franchise locations that feature a unique combination of experience and product in which guests can “make their own stuffed animals.” We also operate buildabear.com, which both serves as an information and communications tool to plan a store visit as well as an e-commerce site that focuses on gift-giving, collectible merchandise, and licensed products that appeal to consumers that have an affinity for characters from a range of entertainment, sports, art, and gaming properties. Our retail stores also act as mini distribution centers that provide efficient omnichannel support for our growing digital demand. The primary consumer target for our brick-and-mortar locations is families with children, while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens, and adults. Additionally, we offer products in nonplush consumer categories via outbound licensing agreements with leading manufacturers.

Current wording

We primarily operate through a vertical retail channel with corporately-managed, partner-operated, and franchise locations that feature a unique combination of experience and product in which guests can “make their own stuffed animals.” We also operate buildabear.com and buildaber.co.uk, which both serves as an information and communications tool to plan a store visit as well as an e-commerce site that focuses on gift-giving, collectible merchandise, and licensed products that appeal to consumers that have an affinity for characters from a range of entertainment, sports, art, and gaming properties. Our retail stores also act as mini distribution centers that provide efficient omnichannel fulfillment for our digital demand. The primary consumer target for our brick-and-mortar locations is families with children, while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens, and adults. Additionally, we offer products in non-plush consumer categories via outbound licensing agreements with leading manufacturers.

Previous wording

Our strategy includes leveraging our brand strength to continue to evolve our brick-and-mortar retail footprint with a versatile range of formats and locations, including tourist destinations, expand into international markets primarily via our partner-operated and franchise store models, and grow our e-commerce business. By leveraging our brand strength and owned intellectual properties through the creation of engaging short-form and long-form content for kids and adults, we endeavor to develop a circle of continuous engagement to increase purchase occasions and to continue to broaden the consumer base beyond children by adding tweens, teens and adults with entertainment and sports licensing, plus collectible and gifting offerings.

Current wording

Our strategy includes leveraging our brand strength to continue to evolve our brick-and-mortar retail footprint with a versatile range of formats and locations, including tourist destinations, expand into international markets primarily via our partner-operated and franchise store models, and grow our e-commerce business. By leveraging our brand strength and owned intellectual properties through the creation of engaging short-form and long-form content for kids and adults, we endeavor to develop a circle of continuous engagement to increase purchase occasions and to continue to broaden the consumer base beyond children with tweens, teens and adults.

Previous wording

As of May 3, 2025, we had 369 corporately-managed stores globally, 148 partner-operated locations operating through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that execute our retail experience, and 87 international franchised stores, all under the Build-A-Bear Workshop brand. We also operate a limited number of seasonal locations. In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

Current wording

As of August 2, 2025, we had 368 corporately-managed stores globally, 157 partner-operated locations operating through our partner-operated model in which we sell our products on a wholesale basis to other companies that execute our retail experience, and 102 international franchised stores, all under the Build-A-Bear Workshop brand. We also operate a limited number of seasonal locations. In addition to these locations, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

Previous wording

Selected financial data attributable to each segment for the thirteen weeks ended May 3, 2025 and May 4, 2024 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

Selected financial data attributable to each segment for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

As of May 3, 2025, 52% of our corporately-managed stores were in an updated Discovery format. We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.

Current wording

As of August 2, 2025, 53% of our corporately-managed stores were in an updated Discovery format. We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.

Previous wording

Through our third-party retail model, there were 148 stores in operation at the end of the first quarter of 2025 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. The third-party retail model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased from us on a wholesale basis. These locations are heavily weighted to the hospitality industry, which allow us to further advance our focus on experience location expansion in non-traditional and tourist areas, as well as shop-in-shop arrangements within other retailers’ stores.

Current wording

Through our partner-operated model, there were 157 stores in operation at the end of the second quarter of 2025 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. The partner-operated model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased from us on a wholesale basis. These locations are heavily weighted to the hospitality industry, which allow us to further advance our focus on experience location expansion in non-traditional and tourist areas, as well as shop-in-shop arrangements within other retailers’ stores.

Previous wording

*Total revenues.*Consolidated revenues increased $13.7 million or 11.9%, primarily driven by a $11.7 million or 10.9% increase in Net Retail sales and a $1.6 million or 27% increase in Commercial revenue when compared to the first fiscal quarter of 2024. The increase in net retail sales was driven primarily by growth at existing stores. The increased commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from the opening of 51 third-party retail stores since the first quarter of 2024.

Current wording

*Total revenues.*Consolidated revenues increased $12.4 million or 11.1%, primarily driven by a $11.2 million or 10.8% increase in Net Retail sales and a $1.3 million or 18% increase in Commercial revenue when compared to the second fiscal quarter of 2024. The increase in net retail sales was driven primarily by growth at existing stores and sales at new stores. The increased commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from the opening of 50 partner-operated locations since the second quarter of 2024.

Previous wording

Net retail sales for the thirteen weeks ended May 3, 2025 were $119.6 million, compared to $107.9 million for the thirteen weeks ended May 4, 2024. The components of the improved performance are as follows (dollars in thousands):

Current wording

Net retail sales for the thirteen weeks ended August 2, 2025 were $114.6 million, compared to $103.5 million for the thirteen weeks ended August 3, 2024. The components of the improved performance are as follows (dollars in thousands):

Previous wording

The higher retail revenue performance was primarily the result of an increased sales at existing stores and sales atnew stores partially offset by the effect of store closures.

Current wording

The higher retail revenue performance was primarily the result of increased sales at existing stores and sales atnew stores partially offset by the effect of store closures.

Previous wording

Commercial revenue was $7.6 million for the thirteen weeks ended May 3, 2025 compared to $6.0 million for the thirteen weeks ended May 4, 2024. The $1.6 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated third-party retail model.

Current wording

Commercial revenue was $8.6 million for the thirteen weeks ended August 2, 2025 compared to $7.3 million for the thirteen weeks ended August 3, 2024. The $1.3 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated retail model.

Previous wording

*Retail gross margin.*Retail gross margin dollars increased $9.5 million to $68.0 million from $58.5 million for the thirteen weeks ended May 4, 2024. The retail gross margin rate increased 270 basis points compared to the prior year driven primarily by improved merchandise margin compared to the first quarter of fiscal 2024.

Current wording

*Retail gross margin.*Retail gross margin dollars increased $10.3 million to $66.1 million from $55.8 million for the thirteen weeks ended August 3, 2024. The retail gross margin rate increased 370 basis points compared to the prior year driven primarily by improved merchandise margin compared to the second quarter of fiscal 2024.

Previous wording

*Selling, general and administrative.*SG&A expenses were $53.6 million, or 41.7% of consolidated revenue, for the thirteen weeks ended May 3, 2025, compared to $47.6 million, or 41.5% of consolidated revenue, for the thirteen weeks ended May 4, 2024. The increase was driven by higher wage rates, increased healthcare costs and general inflationary pressures.

Current wording

*Selling, general and administrative.*SG&A expenses were $56.4 million, or 45.4% of consolidated revenue, for the thirteen weeks ended August 2, 2025, compared to $49.2 million, or 44.0% of consolidated revenue, for the thirteen weeks ended August 3, 2024. The increase was driven by higher store-level compensation, corporate costs and general inflationary pressures. These increases were partially offset by favorable marketing expense timing.

Previous wording

*Interest income, net.*Interest income was $0.2 million for the thirteen weeks ended May 3, 2025 compared to interest income of $0.4 million for the thirteen weeks ended May 4, 2024.

Current wording

*Interest income, net.*Interest income was $0.2 million for the thirteen weeks ended August 2, 2025, compared to interest income of $0.2 million for the thirteen weeks ended August 3, 2024.

Previous wording

International franchising revenue was $1.2 million for the thirteen weeks ended May 3, 2025 compared to $0.9 million for the thirteen weeks ended May 4, 2024. The change is primarily the result of the timing of product shipments and the opening of 10 franchise stores since the first quarter 2024.

Current wording

International franchising revenue was $2.2 million for the twenty-six weeks ended August 2, 2025 compared to $1.9 million for the twenty-six weeks ended August 3, 2024. The change is primarily the result of the timing of product shipments and the opening of 13 franchise stores since the second quarter 2024.

Previous wording

Provision for income taxes. Income tax expense was $4.3 million with a tax rate of 22.0% for the thirteen weeks ended May 3, 2025 as compared to $3.6 million with a tax rate of 23.8% for the thirteen weeks ended May 4, 2024. In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived intangible income deduction. In the first quarter of fiscal 2024, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting. In addition, in the first quarter of fiscal 2025 and 2024, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Current wording

Provision for income taxes. Income tax expense was $7.3 million with a tax rate of 20.8% for the twenty-six weeks ended August 2, 2025 as compared to $6.3 million with a tax rate of 23.8% for the twenty-six weeks ended August 3, 2024. The fiscal 2025 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting, the foreign-derived intangible income deduction and discrete benefits related to settlement of a prior period tax position. The fiscal 2024 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting. In addition, in the second quarter of fiscal 2025 and 2024, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Previous wording

EBITDA for the thirteen weeks ended May 3, 2025 increased $4.9 million, or 26.7% to $23.1 million from $18.3 million for the thirteen weeks ended May 4, 2024. The increase was driven by gross profit driven by increased retail and commercial margins partially offset by higher SG&A expenses.

Current wording

EBITDA for the thirteen weeks ended August 2, 2025 increased $3.8 million, or 25.3% to $18.8 million from $15.0 million for the thirteen weeks ended August 3, 2024. The increase was driven by gross profit resulting from increased retail and commercial margins partially offset by higher SG&A expenses.

Previous wording

As of May 3, 2025, we had a consolidated cash balance of $44.3 million, 79% of which was domiciled within the U.S. Historically, our cash requirements have been primarily for the relocation and remodeling of existing stores in our new design, opening of new stores, investments in information technology infrastructure and working capital. Over the past several years, we have met these requirements through capital generated from cash flow provided by operations. Additionally, during 2025 we have used cash on-hand to invest in short-term, highly liquid investments with original maturities of three months or less resulting in interest income of $0.2 million during the thirteen weeks ended May 3, 2025.

Current wording

As of August 2, 2025, we had a consolidated cash balance of $39.1 million, 82% of which was domiciled within the U.S. Historically, our cash requirements have been primarily for the relocation and remodeling of existing stores in our new design, opening of new stores, investments in information technology infrastructure and working capital. Over the past several years, we have met these requirements through capital generated from cash flow provided by operations. Additionally, during 2025 we have used cash on-hand to invest in short-term, highly liquid investments with original maturities of three months or less resulting in interest income of $0.4 million during the twenty-six weeks ended August 2, 2025.

Previous wording

Operating Activities. Cash provided by operating activities increased $17.4 million for the thirteen weeks ended May 3, 2025, as compared to the thirteen weeks ended May 4, 2024. This increase in cash from operating activities was primarily the result of a decrease in accounts receivable resulting from lower receivables from commercial accounts and an increase in accounts payable and accrued expenses. These increases were partially offset by higher cash spent on inventory purchases due to accelerated purchases in anticipation of the uncertainty in cost due to potential tariffs.

Current wording

Operating Activities. Cash provided by operating activities increased $19.6 million for the twenty-six weeks ended August 2, 2025, as compared to the twenty-six weeks ended August 3, 2024. This increase in cash from operating activities was primarily the result of increased net income, decreased accounts receivable driven by lower receivables from commercial accounts and an increase in accounts payable and accrued expenses. These increases were partially offset by higher cash used for inventory purchases as a result of additional tariff costs and accelerated purchases of core products as part of the Company's tariff-mitigation plans.

Previous wording

Investing Activities. Cash used in investing activities increased $0.5 million for the thirteen weeks ended May 3, 2025, as compared to the thirteen weeks ended May 4, 2024. The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.

Current wording

Investing Activities. Cash used in investing activities increased $0.6 million for the twenty-six weeks ended August 2, 2025, as compared to the twenty-six weeks ended August 3, 2024. The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.

Previous wording

Financing Activities. Cash used in financing activities decreased $5.6 million for the thirteen weeks ended May 3, 2025, as compared to the thirteen weeks ended May 4, 2024. This decrease in cash used in financing activities was driven by a decrease in the amount utilized to repurchase shares during the first quarter when compared to the prior year.

Current wording

Financing Activities. Cash used in financing activities decreased $11.4 million for the twenty-six weeks ended August 2, 2025, as compared to the twenty-six weeks ended August 3, 2024. This decrease in cash used in financing activities during the first twenty-six weeks of fiscal 2025 was driven by a decrease in the amount utilized to repurchase shares compared to the prior year.

Previous wording

Capital spending through thethirteen weeks ended May 3, 2025 totaled$2.9 million for information technology projects and new store openings, and we expect to spend approximately $20 to $25 million on capital expenditures in fiscal 2025.

Current wording

Capital spending through thetwenty-six weeks ended August 2, 2025 totaled$6.3 million for information technology projects and new store openings, and we expect to spend approximately $20 to $25 million on capital expenditures in fiscal 2025.

Previous wording

Total inventory at quarter end was $72.3 million, an increase of $8.3 million or 13% from the end of the fiscal 2024 first quarter. Beginning in the second half of fiscal 2024 and continuing into the first quarter of fiscal 2025, we accelerated the acquisition of our core products in anticipation of the uncertainty in cost due to potential tariffs. We are comfortable with the level and composition of our inventory.

Current wording

Total inventory at quarter end was $81.8 million, an increase of $14.8 million or 22% from the end of the fiscal 2024 second quarter. The increase in inventory was the result of additional tariff costs and accelerated purchases of core products that began in the second half of fiscal 2024 and continued into the first quarter of fiscal 2025 as part of the Company's tariff-mitigation plans. We are comfortable with the level and composition of our inventory.

Previous wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of May 3, 2025, we had purchase obligations totaling approximately $100.7 million, of which $26.7 million are due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

Current wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of August 2, 2025, we had purchase obligations totaling approximately $108.8 million, of which $27.1 million are due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

Previous wording

Weutilized $4.2 million in cash to repurchase 108,502 shares during the thirteen weeks ended May 3, 2025, compared to using $9.2 million in cash to repurchase 343,406 shares during the thirteen weeks ended May 4, 2024.

Current wording

Weutilized $7.3 million in cash to repurchase 167,585 shares during the twenty-six weeks ended August 2, 2025 under our current September 2024 Stock Repurchase Program, compared to using $18.2 million in cash to repurchase 685,027 shares during the twenty-six weeks ended August 3, 2024 under our prior August 2022 Stock Repurchase Program.