BUILD-A-BEAR WORKSHOP INC

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 with tweens, teens and adults.

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, expanding into international markets primarily via our partner-operated and franchise store models, and growing 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 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.

Current wording

As of November 1, 2025, we had 375 corporately-managed stores globally, 168 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 108 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 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.

Current wording

Selected financial data attributable to each segment for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 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

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.

Current wording

Through our partner-operated model, there were 168 stores in operation at the end of the third 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 $26.1 million or 11.5%, primarily driven by a $22.9 million or 10.8% increase in Net Retail sales and a $3.0 million or 22% 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.

Current wording

*Total revenues.*Consolidated revenues increased$3.2 million or 2.7%, primarily driven by a $2.8 million or 2.5% increase in Net Retail sales and a $0.4 million or 4%increase in Commercial revenue when compared to the third fiscal quarter of 2024. Theincrease 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 45 partner-operated locations since the third quarter of 2024.

Previous 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):

Current wording

Net retail sales for the thirteen weeks ended November 1, 2025 were $112.3 million, compared to $109.5 million for the thirteen weeks ended November 2, 2024. The components of the improved performance are as follows (dollars in thousands):

Previous 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.

Current wording

Commercial revenue was $8.9 million for the thirteen weeks ended November 1, 2025 compared to $8.6 million for the thirteen weeks ended November 2, 2024. The $0.4 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated retail model.

Previous wording

International franchising revenue was $1.0 million for the thirteen weeks ended August 2, 2025 compared to $1.0 million for the thirteen weeks ended August 3, 2024.

Current wording

International franchising revenue was $1.5 million for the thirteen weeks ended November 1, 2025 compared to $1.3 million for the thirteen weeks ended November 2, 2024. The $0.2 million increase is primarily due to timing of product shipments.

Previous 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.

Current wording

*Retail gross margin.*Retail gross margin dollars increased $1.1 million to $60.5 million from $59.4 million for the thirteen weeks ended November 2, 2024. The retail gross margin rate decreased 30 basis points compared to the prior year driven primarily by improved merchandise margin compared to the third quarter of fiscal 2024.

Previous 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.

Current wording

*Selling, general and administrative.*SG&A expenses were $55.3 million, or 45.1% of consolidated revenue, for the thirteen weeks ended November 1, 2025, compared to $51.7 million, or 43.3% of consolidated revenue, for the thirteen weeks ended November 2, 2024. The increasewas 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 August 2, 2025, compared to interest income of $0.2 million for the thirteen weeks ended August 3, 2024.

Current wording

*Interest income, net.*Interest income was $0.2 million for the thirteen weeks ended November 1, 2025, compared to interest income of $0.1 million for the thirteen weeks ended November 2, 2024.

Previous wording

Provision for income taxes. Income tax expense was $3.0 million with a tax rate of 19.3% for the thirteen weeks ended August 2, 2025, as compared to $2.8 million with a tax rate of 24.0% for the thirteen weeks ended August 3, 2024. The second quarter of 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 second quarter of fiscal 2024 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense. In addition, in the second 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 $2.6 million with a tax rate of 24.3% for the thirteen weeks ended November 1, 2025, as compared to $3.2 million with a tax rate of 24.5% for the thirteen weeks ended November 2, 2024. The third quarter of 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 and the foreign-derived intangible income deduction. The third quarter of fiscal 2024 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense. In addition, in the third quarter of fiscal 2025 and 2024, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Previous 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.

Current wording

*Total revenues.*Consolidated revenues increased $29.4 million or 8.5%, primarily driven by a $25.7 million or 8.0% increase in Net Retail sales and a $3.3 million or 15% increase in Commercial revenue when compared to the third 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 45 partner-operated locations since the third quarter of 2024.

Previous wording

Net retail sales for the twenty-six weeks ended August 2, 2025 were $234.2 million, compared to $211.3 million for the twenty-six weeks ended August 3, 2024. The components of the improved performance are as follows (dollars in thousands):

Current wording

Net retail sales for the thirty-nine weeks ended November 1, 2025 were $346.5 million, compared to $320.8 million for the thirty-nine weeks ended November 2, 2024. The components of the improved performance are as follows (dollars in thousands):

Previous wording

Commercial revenue was $16.3 million for the twenty-six weeks ended August 2, 2025 compared to $13.3 million for the twenty-six weeks ended August 3, 2024. The $3.0 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated retail model.

Current wording

Commercial revenue was $25.2 million for the thirty-nine weeks ended November 1, 2025 compared to $21.9 million for the thirty-nine weeks ended November 2, 2024. The $3.3 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated retail model.

Previous 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.

Current wording

International franchising revenue was $3.6 million for the thirty-nine weeks ended November 1, 2025 compared to $3.3 million for the thirty-nine weeks ended November 2, 2024. The change is primarily the result of the timing of product shipments and the opening of 19 franchise stores since the third quarter 2024.

Previous wording

*Retail gross margin.*Retail gross margin dollars increased $19.8 million to $134.1 million from $114.3 million for the twenty-six weeks ended August 3, 2024. The retail gross margin rate increased 320 basis points compared to the prior year driven primarily by improved merchandise margin compared to the first half of fiscal 2024.

Current wording

*Retail gross margin.*Retail gross margin dollars increased $20.9 million to $194.6 million from $173.7 million for the thirty-nine weeks ended November 2, 2024. The retail gross margin rate increased 210 basis points compared to the prior year driven primarily by improved merchandise margin compared tothe first three quarters of fiscal 2024.

Previous wording

*Selling, general and administrative.*SG&A expenses were $110.0 million, or 43.5% of consolidated revenue, for the twenty-six weeks ended August 2, 2025, compared to $96.8 million, or 42.7% of consolidated revenue, for the twenty-six 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.

Current wording

*Selling, general and administrative.*SG&A expenses were $165.3 million, or 44.0% of consolidated revenue, for the thirty-nine weeks ended November 1, 2025, compared to $148.4 million, or 42.9% of consolidated revenue, for the thirty-nine weeks ended November 2, 2024. Theincreasewas 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 $0.4 million for the twenty-six weeks ended August 2, 2025 compared to interest income of $0.6 million for the twenty-six weeks ended August 3, 2024.

Current wording

*Interest income, net.*Interest income was $0.6 million for the thirty-nine weeks ended November 1, 2025 compared to interest income of $0.7 million for the thirty-nine weeks ended November 2, 2024.

Previous 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.

Current wording

Provision for income taxes. Income tax expense was $9.9 million with a tax rate of 21.6% for the thirty-nine weeks ended November 1, 2025 as compared to $9.5 million with a tax rate of 24.1% for the thirty-nine weeks ended November 2, 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 third 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 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.

Current wording

EBITDA for the thirteen weeks ended November 1, 2025 decreased$2.5 million, or 14.7% to $14.2 million from $16.7 million for the thirteen weeks ended November 2, 2024. The decreasewas driven by gross profit resulting from increased retail and commercial margins partially offset by higher SG&A expenses.

Previous wording

EBITDA for the twenty-six weeks ended August 2, 2025 increased $8.7 million, or 26.0% to $41.9 million from $33.3 million for the twenty-six 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.

Current wording

EBITDA for the thirty-nine weeks ended November 1, 2025 increased $6.2 million, or 12.4% to $56.1 million from $49.9 million for the thirty-nine weeks ended November 2, 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 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.

Current wording

As of November 1, 2025, we had a consolidated cash balance of $27.7 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 $0.6 million during the thirty-nine weeks ended November 1, 2025.

Previous 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.

Current wording

Operating Activities. Cash provided by operating activities increased $12.7 million for the thirty-nine weeks ended November 1, 2025, as compared to the thirty-nine weeks ended November 2, 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 $0.6 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.

Current wording

Investing Activities. Cash used in investing activities increased $3.3 million for the thirty-nine weeks ended November 1, 2025, as compared to the thirty-nine weeks ended November 2, 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 $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.

Current wording

Financing Activities. Cash used in financing activities decreased$5.9 million for the thirty-nine weeks ended November 1, 2025, as compared to the thirty-nine weeks ended November 2, 2024. This decrease in cash used in financing activities during the first thirty-nine weeksof fiscal 2025 was driven by adecrease in the amount utilized to repurchase shares compared to the prior year.

Previous 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.

Current wording

Capital spending through thethirty-nine weeks ended November 1, 2025 totaled$12.9 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.

Previous 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.

Current wording

Total inventory at quarter end was $83.3 million, an increase of $12.5 million or 18% from the end of the fiscal 2024 third quarter. Theincrease in inventorywas 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 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.

Current wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of November 1, 2025, we had purchase obligations totaling approximately $119.7 million, of which $27.4 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 $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.

Current wording

Weutilized $17.4 million in cash to repurchase 336,041 shares during the thirty-nine weeks ended November 1, 2025under our current September 2024 Stock Repurchase Program, compared to using $23.0 million in cash to repurchase 832,944 shares during the thirty-nine weeks ended November 2, 2024 under our September 2024 Stock Repurchase plan and completed August 2022 program.

Previous wording

The impact of inflation on the Company's business operations was seen throughout fiscal 2024, predominately through rising store labor costs. However, we continue to take mitigating actions, such as select strategic price increases on highly sought-after products and leveraging distribution costs. We expect the inflationary pressures experienced in fiscal 2024 to continue into fiscal 2025, specifically through wage increases and tariffs on inventory purchases. We continue to monitor the impact of inflation on our business operations on an ongoing basis and may need to adjust our prices further to mitigate the impacts of changes to the rate of inflation during 2025 or in future years. Future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect our financial results. Inflationary pressures may be exacerbated by higher transportation costs due to war and other geopolitical conflicts, such as the current Russia/Ukraine conflict, tension between China and Taiwan, and the Israel-Hamas conflict. We cannot provide an estimate or range of impact that such inflation may have on our future results of operations. However, if we are unable to recover the impact of these costs through price increases to our guests, or if consumer spending decreases as a result of inflation, our business, results of operations, financial condition and cash flows may be adversely affected. In addition, ongoing inflation in product costs may result in lower gross margin rates if we elect to maintain higher inventory reserves to mitigate anticipated higher costs.

Current wording

Inflation continued to impact the Company’s operations during fiscal years 2024 and 2025, most notably through higher store labor costs and increased input prices. We implemented certain mitigating actions such as further cost reductions and process efficiencies, in addition to selective strategic price adjustments. We anticipate inflationary pressures to persist throughout fiscal 2025 and beyond, driven by wage growth, tariff and tariff-related costs that extend beyond inventory purchases to broader supply chain and other operational areas. In August 2025, the U.S. Court of Appeals for the Federal Circuit ruled that several tariffs imposed under the Trump Administration exceeded presidential authority and were therefore invalid, although the decision remains stayed pending U.S. Supreme Court review. This ruling introduces uncertainty regarding the scope and durability of current and future tariff measures. Even if certain tariffs affecting our Company are ultimately invalidated, we may not be able to fully recover increased costs associated with product delivery and related services from international vendors. We continue to monitor the impact of inflation on our business operations and may need to adjust pricing strategies as needed to offset cost increases during fiscal 2025 and beyond. Fluctuations in general price inflation could negatively affect our financial results by adversely impacting material availability, shipping and warehousing expenses, and other operational overhead. Inflationary pressures may be compounded by elevated transportation costs linked to geopolitical conflicts, including the Russia-Ukraine war, tensions between China and Taiwan, and the Israel-Hamas conflict. We cannot provide an estimate or range of impact that such inflation may have on our future results of operations. However, failure to recover increased costs through pricing adjustments or a decline in consumer spending could negatively affect our business, results of operations, financial condition, and cash flows.