Torrid Holdings Inc.

Previous wording

(B)Comparable sales in fiscal year 2023 compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023. In fiscal years 2022 and 2021, comparable sales include results from stores that were temporarily closed due to COVID-19.

Current wording

(B)The computation of fiscal year 2024 comparable sales compares sales in fiscal year 2024 to sales in the 52-week period ended February 3, 2024. The computation of fiscal year 2023 comparable sales compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023.

Previous wording

(C)Please refer to "Results of Operations" for a reconciliation of net income (loss) to Adjusted EBITDA.

Current wording

(C)Please refer to "Results of Operations" for a reconciliation of net income to Adjusted EBITDA.

Previous wording

Comparable Sales. We define comparable sales for any given period as the sales of our e-Commerce operations and stores that we have included in our comparable sales base during that period. We include a store in our comparable sales base after it has been open for 15 full fiscal months. If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. The computation of fiscal year 2023 comparable sales compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023. In fiscal years 2022 and 2021, comparable sales include results from stores that were temporarily closed due to COVID-19. Partial fiscal months are excluded from the computation of comparable sales. We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of non-comparable sales and new store openings.

Current wording

Comparable Sales. We define comparable sales for any given period as the sales of our e-Commerce operations and stores that we have included in our comparable sales base during that period. We include a new store in our comparable sales base after it has been open for 15 full fiscal months. If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. We also determine when certain store remodels and relocations are reintegrated into our comparable sales base. The computation of fiscal year 2024 comparable sales compares sales in fiscal year 2024 to sales in the 52-week period ended February 3, 2024. The computation of fiscal year 2023 comparable sales compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023. Partial fiscal months are excluded from the computation of comparable sales. We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of non-comparable sales and new store openings.

Previous wording

Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with GAAP and our calculation thereof may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents GAAP net income (loss) plus interest expense less interest income, net of other expense (income), plus provision for less (benefit from) income taxes, depreciation and amortization ("EBITDA"), and share-based compensation, noncash deductions and charges and other expenses. We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to ongoing operating performance. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting the overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and, as such, use it internally to report and analyze our results and as a benchmark to determine certain non-equity incentive payments made to executives.

Current wording

Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with GAAP and our calculation thereof may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents GAAP net income plus interest expense less interest income, net of other (income) expense, plus provision for less (benefit from) income taxes, depreciation and amortization ("EBITDA"), and share-based compensation, noncash deductions and charges and other expenses. We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to ongoing operating performance. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting the overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and, as such, use it internally to report and analyze our results and as a benchmark to determine certain non-equity incentive payments made to executives.

Previous wording

Adjusted EBITDA has limitations as an analytical tool. This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to or substitutes for net income (loss), income (loss) from operations or any other performance measures determined in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Among other limitations, Adjusted EBITDA does not reflect:

Current wording

Adjusted EBITDA has limitations as an analytical tool. This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to or substitute for net income, income from operations or any other performance measures determined in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Among other limitations, Adjusted EBITDA does not reflect:

Previous wording

•interest income, net of other expense (income);

Current wording

•interest income, net of other (income) expense;

Previous wording

Demographic Changes. The growth of our business is impacted, in part, by the size of the plus-size population. Slower or negative growth in this demographic, specific to certain geographic markets, income levels or overall, could adversely affect our results of operations.

Current wording

Demographic Changes. The growth of our business is impacted, in part, by the size of the plus- and mid-size population. Slower or negative growth in this demographic, specific to certain geographic markets, income levels or overall, could adversely affect our results of operations.

Previous wording

Inventory Management. Our strategy is built around a base of core products that provide our customer with year-round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers. We employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews. We engage in ongoing dialogue with customers through social media and customer surveys. Shifts in inventory levels may result in fluctuations in the amount of regular price sales, markdowns, and merchandise mix, as well as gross margin.

Current wording

Inventory Management. Our strategy is built around a base of core products that provide our customer with year-round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers. We employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews. We engage in ongoing dialogue with customers through social media and customer surveys. Although we intend to continue to tightly manage our inventory levels, shifts in these levels may result in fluctuations in the amount of regular price sales, markdowns, and merchandise mix, as well as gross margin.

Previous wording

Investments. We have invested significantly to strengthen our business, including augmenting leadership across our organization and enhancing our infrastructure and technology in order to realize growth. We anticipate that our operating expenses will grow as we continue to increase our spending on advertising and marketing and hire additional personnel primarily in marketing, product design and development, merchandising, technology, operations, customer service and general and administrative functions. We will also continue to selectively expand our store footprint and make investments to improve the customer experience both in-store and online. We believe that such investments will increase the number and loyalty of our customers and, as a result, yield positive financial performance in the long term.

Current wording

Investments. We have invested significantly to strengthen our business, including augmenting leadership across our organization and enhancing our infrastructure and technology in order to realize growth. We anticipate that our operating expenses will grow as we continue to increase our spending on advertising and marketing and hire additional personnel primarily in marketing, product design and development, merchandising, technology, operations, customer service and general and administrative functions. We are strategically working to expand and rebalance our store footprint, aiming for an optimal split between malls and outdoor centers. We will also continue to make investments to improve the customer experience both in-store and online. We believe that such investments will increase the number and loyalty of our customers and, as a result, yield positive financial performance in the long term.

Previous wording

In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) we receive pursuant to the Credit Card Agreement (as defined in “Note 2–Summary of Significant Accounting Policies”). Historically, we recorded PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Under the new policy, we record PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) in net sales in the consolidated statements of operations and comprehensive income (loss). This reclassification does not have any impact on income from operations, income before provision for income taxes, net income (loss) or earnings (loss) per share and there was no cumulative effect to stockholders’ deficit or net assets. The recognition of PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) in net sales is preferable because it will enhance the comparability of our financial statements with those of many of our industry peers and provide greater transparency into performance metrics relevant to our industry by showing the gross impact of the funds received as net sales instead of as a reduction to selling, general and administrative expenses.

Current wording

In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) we receive pursuant to the Credit Card Agreement (as defined in “Note 2–Summary of Significant Accounting Policies”). Historically, we recorded PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income. Under the new policy, we record PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) in net sales in the consolidated statements of operations and comprehensive income. This reclassification does not have any impact on income from operations, income before provision for income taxes, net income or earnings per share and there was no cumulative effect to stockholders’ deficit or net assets. The recognition of PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) in net sales is preferable because it will enhance the comparability of our financial statements with those of many of our industry peers and provide greater transparency into performance metrics relevant to our industry by showing the gross impact of the funds received as net sales instead of as a reduction to selling, general and administrative expenses.

Previous wording

Net Sales. Net sales reflects our revenues from the sale of our merchandise, shipping and handling revenue received from e-Commerce sales, PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) and gift card breakage income, less returns, discounts and loyalty points/awards. Revenue from our stores is recognized at the time of sale and revenue from our e-Commerce channel is recognized upon shipment of the merchandise to the home of the customer; except in cases where the merchandise is shipped to a store and revenue is recognized when the customer retrieves the merchandise from the store. Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers (i.e., customers shopping only in-store or online) to omni-channel customers (i.e., customers shopping both in-store and online), who on average spend significantly more than single-channel customers in a given year.

Current wording

Net Sales. Net sales reflects our revenues from the sale of our merchandise, shipping and handling revenue received from e-Commerce sales, PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) and gift card breakage income, less returns, discounts and loyalty points/awards. Revenue from our stores is recognized at the time of sale and revenue from our e-Commerce channel is recognized upon shipment of the merchandise to the customer; except in cases where the merchandise is shipped to a store and revenue is recognized when the customer retrieves the merchandise from the store. Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers (i.e., customers shopping only in-store or online) to omni-channel customers (i.e., customers shopping both in-store and online), who on average spend significantly more than single-channel customers in a given year.

Previous wording

Interest Expense. Interest expense consists primarily of interest expense and other fees associated with our Existing ABL Facility, as amended, and New Term Loan Credit Agreement, as amended.

Current wording

Interest Expense. Interest expense consists primarily of interest expense and other fees associated with our ABL Facility and Amended Term Loan Credit Agreement.

Previous wording

The following table provides a reconciliation of net income to Adjusted EBITDA for the periods presented (dollars in thousands):

Current wording

The following table provides a reconciliation of net income to Adjusted EBITDA for the periods presented (in thousands):

Previous wording

(B)Share-based compensation in fiscal year 2023 includes $1.2 million for awards that will be settled in cash as they are accounted for as share-based compensation in accordance with ASC 718, Compensation—Stock Compensation, similar to awards settled in shares.

Current wording

(B)Share-based compensation in fiscal year 2024 includes $3.0 million for awards that will be settled in cash as they are accounted for as share-based compensation in accordance with ASC 718, Compensation—Stock Compensation, similar to awards settled in shares.

Previous wording

(D)Other expenses include severance costs for certain key management positions, certain litigation fees, and the reimbursement of certain management expenses, primarily for travel, incurred by Sycamore on our behalf, which are not considered to be part of our core business.

Current wording

(D)Other expenses include severance costs for certain key management positions, certain transaction and litigation fees (including certain settlement costs), and the reimbursement of certain management expenses, primarily for travel, incurred by Sycamore on our behalf, which are not considered to be part of our core business.

Previous wording

Net sales for fiscal year 2023 decreased by $136.2 million, or 10.6%, to $1,151.9 million, from $1,288.1 million for fiscal year 2022. This decrease was primarily driven by a decrease in sales transactions, partially offset by improved pricing strategies and additional sales of $21.7 million attributable to the 53 rd week in fiscal year 2023. Active customers decreased by $0.1 million, or 3.6%, to 3.8 million at the end of fiscal year 2023, from 3.9 million at the end of fiscal year 2022. Net sales per active customer decreased by $24 from $330 in fiscal year 2022 to $306 in fiscal year 2023. Comparable sales decreased 12.0%. The total number of stores we operate increased by 16 stores, or 2.5%, to 655 stores at the end of fiscal year 2023, from 639 stores at the end of fiscal year 2022.

Current wording

Net sales for fiscal year 2024 decreased by $48.2 million, or 4.2%, to $1,103.7 million, from $1,151.9 million for fiscal year 2023. This decrease was primarily driven by a decrease in sales transaction values, a decrease in PLCC Funds and sales of $21.7 million attributable to the 53 rd week in fiscal year 2023, partially offset by improved pricing strategies. Comparable sales decreased 5.0%. The total number of stores we operate decreased by 21 stores, or 3.2%, to 634 stores at the end of fiscal year 2024, from 655 stores at the end of fiscal year 2023.

Previous wording

Gross profit for fiscal year 2023 decreased by $53.6 million, or 11.7%, to $406.0 million, from $459.5 million for fiscal year 2022. This decrease was primarily due to a decrease in sales transactions, increases in store occupancy costs and merchandising payroll costs, and additional costs of $12.9 million attributable to the 53 rd week in fiscal year 2023 partially offset by a decrease in e-Commerce shipping costs as a result of fewer packages shipped. Gross profit as a percentage of net sales decreased by 0.5% to 35.2% in fiscal year 2023 from 35.7% in fiscal year 2022. This decrease was primarily driven by increases in store occupancy costs, store depreciation expense and merchandising payroll costs, partially offset by improved pricing strategies and a decrease in e-Commerce shipping costs as a result of fewer packages shipped.

Current wording

Gross profit for fiscal year 2024 increased by $7.5 million, or 1.8%, to $413.5 million, from $406.0 million for fiscal year 2023. This increase was primarily due to reduced product costs, an increase in sales of regular-priced products and a decrease in store occupancy costs, partially offset by decreased net sales. Gross profit as a percentage of net sales increased by 2.3% to 37.5% in fiscal year 2024 from 35.2% in fiscal year 2023. This increase was primarily driven by reduced product costs and an increase in sales of regular-priced products, partially offset by decreased net sales, an increase in store depreciation expense and deleverage of store occupancy costs and merchandising payroll costs as a result of lower net sales.

Previous wording

Selling, general and administrative expenses for fiscal year 2023 decreased by $4.6 million, or 1.6%, to $293.3 million, from $298.0 million for fiscal year 2022. The decrease was primarily due to a $5.3 million decrease in store and e-Commerce payroll costs, a $1.9 million decrease in share-based compensation expense, a $1.4 million decrease in losses on property and equipment disposals and a $1.2 million decrease in other store operating costs, partially offset by a $4.3 million increase in headquarters general and administrative expenses. Selling, general and administrative expenses as a percentage of net sales increased by 2.4% to 25.5% in fiscal year 2023 from 23.1% in fiscal year 2022. This increase was primarily driven by increased headquarter general and administrative expenses and deleverage of store and e-Commerce payroll costs and other store operating costs as a result of lower net sales.

Current wording

Selling, general and administrative expenses for fiscal year 2024 increased by $8.7 million, or 3.0%, to $302.0 million, from $293.3 million for fiscal year 2023. The increase was primarily due to a $9.1 million increase in headquarter general and administrative expenses and an $8.6 million increase in performance bonuses, partially offset by a $7.0 million decrease in store and e-Commerce payroll costs and a $1.6 million decrease in store pre-opening costs. Selling, general and administrative expenses as a percentage of net sales increased by 1.9% to 27.4% in fiscal year 2024 from 25.5% in fiscal year 2023. This increase was primarily driven by increased headquarter general and administrative expenses and performance bonuses, partially offset by decreased store and e-Commerce payroll costs.

Previous wording

Marketing expenses for fiscal year 2023 decreased by $4.4 million, or 7.4%, to $55.5 million, from $59.9 million for fiscal year 2022. This decrease was primarily due to decreased television marketing, regional marketing events and direct mail program spend, partially offset by an increase in digital marketing. Marketing expenses as a percentage of net sales increased by 0.1% to 4.8% in fiscal year 2023 from 4.7% in fiscal year 2022. This increase was due to deleverage of marketing expenses as a result of lower net sales.

Current wording

Marketing expenses for fiscal year 2024 decreased by $1.3 million, or 2.3%, to $54.2 million, from $55.5 million for fiscal year 2023. This decrease was primarily due to decreased spend on email marketing, comparison shopping engines, retargeting, store and brand marketing, and photographic production, partially offset by expenses associated with our model search campaign and an increase in social media spend. Marketing expenses as a percentage of net sales increased by 0.1% to 4.9% in fiscal year 2024 from 4.8% in fiscal year 2023. This increase was due to deleverage of marketing expenses as a result of lower net sales.

Previous wording

Interest expense was $39.2 million for fiscal year 2023, compared to $29.7 million for fiscal year 2022. The increase was primarily due to an increase in the variable interest rate associated with the 1st Amendment to the New Term Loan Credit Agreement, dated as of May 24, 2023, during fiscal year 2023 compared to fiscal year 2022.

Current wording

Interest expense was $35.6 million for fiscal year 2024, compared to $39.2 million for fiscal year 2023. The decrease was primarily due to a decrease in the variable interest rate associated with the Amended Term Loan Credit Agreement, dated as of May 24, 2023, during fiscal year 2024 compared to fiscal year 2023.

Previous wording

The provision for income taxes for fiscal year 2023 decreased by $15.1 million to $6.4 million, from $21.5 million for fiscal year 2022. Our effective tax rate was 35.6% for fiscal year 2023 as compared to 30.0% for fiscal year 2022. The increase in the effective tax rate for fiscal year 2023 as compared to fiscal year 2022 was primarily due to increases in the amount of non-deductible compensation for covered employees and state income taxes relative to income before provision for income taxes for fiscal year 2023.

Current wording

The provision for income taxes for fiscal year 2024 decreased by $1.1 million to $5.3 million, from $6.4 million for fiscal year 2023. Our effective tax rate was 24.5% for fiscal year 2024 as compared to 35.6% for fiscal year 2023. The decrease in the effective tax rate for fiscal year 2024 as compared to fiscal year 2023 was primarily due to the decrease in the amount of non-deductible stock-based compensation for covered employees and state income taxes relative to income before provision for income taxes for fiscal year 2024.

Previous wording

Our business relies on cash flows from operations as our primary source of liquidity. We do, however, have access to additional liquidity, if needed, through borrowings under our Existing ABL Facility, as amended. Our primary cash needs are for merchandise inventories, payroll, rent for our stores, headquarters and distribution center, capital expenditures associated with opening new stores and updating existing stores, logistics and information technology. We also need cash to fund our interest and principal payments on the New Term Loan Credit Agreement and make discretionary repurchases of our common stock. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable, accrued and other current liabilities and operating lease liabilities. We believe that cash generated from operations and the availability of borrowings under our Existing ABL Facility, as amended, or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our Existing ABL Facility, as amended, or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Current wording

Our business relies on cash flows from operations as our primary source of liquidity. We do, however, have access to additional liquidity, if needed, through borrowings under our ABL Facility. Our primary cash needs are for merchandise inventories, payroll, rent for our stores, headquarters and distribution center, capital expenditures associated with opening new stores and updating existing stores, logistics and information technology. We also need cash to fund our interest and principal payments on the Amended Term Loan Credit Agreement and make discretionary repurchases of our common stock. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable, accrued and other current liabilities and operating lease liabilities. We believe that cash generated from operations and the availability of borrowings under our ABL Facility or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our ABL Facility or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Previous wording

In July 2023, we implemented a strategic reduction of approximately 5% of our workforce employed in our headquarters in City of Industry, California. Costs to implement the workforce reduction comprised primarily of severance payments and continuing health care coverage over the severance period. During fiscal year 2023, we recognized $1.5 million of expense related to the workforce reduction in selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income (loss). None of our employees are represented by a labor union or are party to a collective bargaining agreement.

Current wording

In July 2023, we implemented a strategic reduction of approximately 5% of our workforce employed in our headquarters in City of Industry, California. Costs to implement the workforce reduction were comprised primarily of severance payments and continuing health care coverage over the severance period. During fiscal year 2023, we recognized $1.5 million of expense related to the workforce reduction in selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income. None of our employees are represented by a labor union or are party to a collective bargaining agreement.

Previous wording

A summary of operating, investing and financing activities are shown in the following table (dollars in thousands):

Current wording

A summary of operating, investing and financing activities are shown in the following table (in thousands):

Previous wording

Operating activities consist primarily of net income (loss) adjusted for noncash items, including depreciation and amortization and share-based compensation, the effect of working capital changes and taxes paid.

Current wording

Operating activities consist primarily of net income adjusted for noncash items, including depreciation and amortization and share-based compensation, the effect of working capital changes and taxes paid.

Previous wording

Net cash used in investing activities were $23.4 million and $17.6 million in fiscal years 2022 and 2021, respectively. The increase in cash used in investing activities was primarily as a result of an increase in capital expenditures related to the opening of new stores and store relocations and investments in our West Jefferson, Ohio distribution center during fiscal year 2022, compared to fiscal year 2021.

Current wording

Net cash used in investing activities was $14.4 million and $26.0 million in fiscal years 2024 and 2023, respectively. The decrease in cash used in investing activities was primarily as a result of a decrease in capital expenditures related to the opening of new stores and investment in our West Jefferson, Ohio distribution center during fiscal year 2024, compared to fiscal year 2023.

Previous wording

Financing activities consist primarily of (i) borrowings and repayments related to our Existing ABL Facility, as amended, (ii) borrowings and repayments related to the New Term Loan Credit Agreement and (iii) repurchases and retirement of our common stock.

Current wording

Financing activities consist primarily of (i) borrowings and repayments related to our ABL Facility, (ii) borrowings and repayments related to the Amended Term Loan Credit Agreement, (iii) repurchases and retirement of our common stock, and (iv) proceeds and withholding taxes related to issuances under our shared-based compensation plans.

Previous wording

Net cash used in financing activities were $18.5 million and $45.1 million for fiscal years 2023 and 2022, respectively. The decrease in net cash used in financing activities is primarily as a result of a $31.7 million decrease in share repurchases and a $4.4 million decrease in principal payments on the New Term Loan Credit Agreement due to the timing of payments relative to the end of our fiscal quarter, partially offset by a $9.5 million decrease in net borrowing from the Existing ABL Facility, as amended.

Current wording

Net cash used in financing activities were $18.5 million and $45.1 million for fiscal years 2023 and 2022, respectively. The decrease in net cash used in financing activities is primarily as a result of a $31.7 million decrease in share repurchases and a $4.4 million decrease in principal payments on the Amended Term Loan Credit Agreement due to the timing of payments relative to the end of our fiscal quarter, partially offset by a $9.5 million decrease in net borrowing from the ABL Facility.

Previous wording

On June 14, 2021, we entered into a term loan credit agreement (the "New Term Loan Credit Agreement") among Bank of America, N.A., as agent, and the lenders party thereto. On May 24, 2023, we entered into an amendment to the New Term Loan Credit Agreement (the "1st Amendment to the New Term Loan Credit Agreement"). The 1st Amendment to the New Term Loan Credit Agreement replaced the London Interbank Offered Rate ("LIBOR") interest rate benchmark with the Secured Overnight Financing Rate ("SOFR") benchmark. All other material terms of the New Term Loan Credit Agreement remained substantially the same after giving effect to the 1st Amendment to the New Term Loan Credit Agreement. In March 2020 and January 2021, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Updates ("ASU") 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") and 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"), respectively. ASU 2020-04 and ASU 2021-01 include practical expedients which provide entities the option to account for qualifying amendments as if the modification was not substantial in accordance with Accounting Standards Codification ("ASC") 470, Debt. We elected this option, accordingly, the 1st Amendment to the New Term Loan Credit Agreement did not have a material impact on our consolidated financial statements.

Current wording

On June 14, 2021, we entered into a term loan credit agreement (the "Term Loan Credit Agreement") among Bank of America, N.A., as agent, and the lenders party thereto. On May 24, 2023, we entered into an amendment to the Term Loan Credit Agreement (the "Amended Term Loan Credit Agreement"). The Amended Term Loan Credit Agreement replaced the London Interbank Offered Rate ("LIBOR") interest rate benchmark with the Secured Overnight Financing Rate ("SOFR") benchmark. All other material terms of the Term Loan Credit Agreement remained substantially the same after giving effect to the Amended Term Loan Credit Agreement. In March 2020 and January 2021, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Updates ("ASU") 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") and 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"), respectively. ASU 2020-04 and ASU 2021-01 include practical expedients which provide entities the option to account for qualifying amendments as if the modification was not substantial in accordance with Accounting Standards Codification ("ASC") 470, Debt. We elected this option, accordingly, the Amended Term Loan Credit Agreement did not have a material impact on our consolidated financial statements.

Previous wording

The New Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million ("Principal"), which is recorded net of OID of $3.5 million and has a maturity date of June 14, 2028. In connection with the New Term Loan Credit Agreement, we paid financing costs of approximately $6.0 million.

Current wording

The Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million ("Principal"), which is recorded net of OID of $3.5 million and has a maturity date of June 14, 2028. In connection with the Term Loan Credit Agreement, we paid financing costs of approximately $6.0 million.

Previous wording

The $346.5 million proceeds of the New Term Loan Credit Agreement, net of OID, were used to (i) repay and terminate the Amended Term Loan Credit Agreement (as defined below); (ii) make a $131.7 million distribution to the direct and indirect holders of our equity interests; and (iii) pay for financing costs associated with the New Term Loan Credit Agreement.

Current wording

The $346.5 million proceeds of the Term Loan Credit Agreement, net of OID, were used to (i) repay and terminate the original term loan credit agreement; (ii) make a $131.7 million distribution to the direct and indirect holders of our equity interests; and (iii) pay for financing costs associated with the Term Loan Credit Agreement.

Previous wording

Loans made pursuant to the New Term Loan Credit Agreement bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a SOFR rate for an interest period of one month, plus 1.00% (in each case, subject to a floor of 1.75%); or (b) at a SOFR rate for the interest period relevant to such borrowing (subject to a floor of 0.75%), in each case plus an applicable margin of 5.50% for SOFR borrowings and 4.50% for base rate borrowings.

Current wording

Loans made pursuant to the Amended Term Loan Credit Agreement bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a SOFR rate for an interest period of one month, plus 1.00% (in each case, subject to a floor of 1.75%); or (b) at a SOFR rate for the interest period relevant to such borrowing (subject to a floor of 0.75%), in each case plus an applicable margin of 5.50% for SOFR borrowings and 4.50% for base rate borrowings.

Previous wording

If we elect the SOFR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates. If we elect the Base rate, interest is due and payable the last day of each calendar quarter. The elected interest rate at the end of fiscal year 2023 was approximately 11%.

Current wording

If we elect the SOFR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates. If we elect the Base rate, interest is due and payable the last day of each calendar quarter. The elected interest rate at the end of fiscal year 2024 was approximately 10%.

Previous wording

In addition to paying interest on the outstanding Principal under the New Term Loan Credit Agreement, we are required to make fixed mandatory repayments of the Principal on the last business day of each fiscal quarter until maturity commencing with the second full fiscal quarter following the closing date ("Repayment"). For each of the fiscal quarters until the maturity date and starting with the fourth fiscal quarter of 2021, Repayments represent 1.25% of the Principal, reduced as a result of the application of prior Prepayments (as defined below).

Current wording

In addition to paying interest on the outstanding Principal under the Amended Term Loan Credit Agreement, we are required to make fixed mandatory repayments of the Principal on the last business day of each fiscal quarter until maturity commencing with the second full fiscal quarter following the closing date ("Repayment"). For each of the fiscal quarters until the maturity date and starting with the fourth fiscal quarter of 2021, Repayments represent 1.25% of the Principal, reduced as a result of the application of prior Prepayments (as defined below).

Previous wording

Under the New Term Loan Credit Agreement, we are also required to make variable mandatory prepayments of the Principal, under certain conditions as described below, approximately 102 days after the end of each fiscal year (each, a "Prepayment"). Prepayments, if applicable, commence at the end of fiscal year 2022 and represent between 0% and 50% (depending on our first lien net leverage ratio) of Excess Cash Flow (as defined in the New Term Loan Credit Agreement) in excess of $10.0 million, minus prepayments of Principal, the Existing ABL Facility, as amended (to the extent accompanied by a permanent reduction in the commitments thereunder) and certain other specified indebtedness and amounts in connection with certain other enumerated items. As of February 3, 2024, we did not meet the Excess Cash Flow threshold to require a Prepayment.

Current wording

Under the Amended Term Loan Credit Agreement, we are also required to make variable mandatory prepayments of the Principal, under certain conditions as described below, approximately 102 days after the end of each fiscal year (each, a "Prepayment"). Prepayments, if applicable, commence at the end of fiscal year 2022 and represent between 0% and 50% (depending on our first lien net leverage ratio) of Excess Cash Flow (as defined in the Amended Term Loan Credit Agreement) in excess of $10.0 million, minus prepayments of Principal, the ABL Facility (to the extent accompanied by a permanent reduction in the commitments thereunder) and certain other specified indebtedness and amounts in connection with certain other enumerated items. As of February 1, 2025, we did not meet the Excess Cash Flow threshold to require a Prepayment.

Previous wording

All of Torrid LLC’s existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guarantee all obligations under the New Term Loan Credit Agreement. Substantially all of the assets of Torrid LLC, Torrid LLC’s existing subsidiaries and Torrid Intermediate LLC will secure all such obligations and the guarantees of those obligations, subject to certain exceptions.

Current wording

All of Torrid LLC’s existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guarantee all obligations under the Amended Term Loan Credit Agreement. Substantially all of the assets of Torrid LLC, Torrid LLC’s existing subsidiaries and Torrid Intermediate LLC will secure all such obligations and the guarantees of those obligations, subject to certain exceptions.

Previous wording

The New Term Loan Credit Agreement also contains a number of covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: create, incur or assume liens on our assets or property; incur additional indebtedness; issue preferred or disqualified stock; consolidate or merge; sell assets; pay dividends or make distributions, make investments, or engage in transactions with our affiliates.

Current wording

The Amended Term Loan Credit Agreement also contains a number of covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: create, incur or assume liens on our assets or property; incur additional indebtedness; issue preferred or disqualified stock; consolidate or merge; sell assets; pay dividends or make distributions, make investments, or engage in transactions with our affiliates.

Previous wording

At the end of fiscal year 2023, we were compliant with our financial covenants under the New Term Loan Credit Agreement.

Current wording

At the end of fiscal year 2024, we were compliant with our financial covenants under the Amended Term Loan Credit Agreement.

Previous wording

At the end of fiscal year 2023, the fair value of the New Term Loan Credit Agreement was approximately $259.4 million. The fair value of the New Term Loan Credit Agreement is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement (as defined in "Note 20—Fair Value Measurements").

Current wording

At the end of fiscal year 2024, the fair value of the Amended Term Loan Credit Agreement was approximately $274.1 million. The fair value of the Amended Term Loan Credit Agreement is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement (as defined in "Note 19—Fair Value Measurements").

Previous wording

At the end of fiscal year 2023, total borrowings, net of OID and financing costs, of $304.7 million remain outstanding under the New Term Loan Credit Agreement. During fiscal year 2023, we recognized $36.1 million of interest expense and $1.4 million OID and financing costs related to the New Term Loan Credit Agreement. The OID and financing costs are amortized over the New Term Loan Credit Agreement’s seven-year term and are reflected as a direct deduction of the face amount of the term loan in our consolidated balance sheets. We recognize interest payments, together with amortization of the OID and financing costs, in interest expense in our consolidated statements of operations and comprehensive income (loss).

Current wording

At the end of fiscal year 2024, total borrowings, net of OID and financing costs, of $288.6 million remain outstanding under the Amended Term Loan Credit Agreement. During fiscal year 2024, we recognized $33.2 million of interest expense and $1.4 million OID and financing costs related to the Amended Term Loan Credit Agreement. The OID and financing costs are amortized over the Amended Term Loan Credit Agreement’s seven-year term and are reflected as a direct deduction of the face amount of the term loan in our consolidated balance sheets. We recognize interest payments, together with amortization of the OID and financing costs, in interest expense in our consolidated statements of operations and comprehensive income.