Bob's Discount Furniture, Inc.

Previous wording

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

Current wording

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

Bob’s Discount Furniture is a rapidly growing, nationally proven omnichannel retailer of value home furnishings with 214 showrooms as of March 29, 2026 across 26 U.S. states. We offer quality, stylish products at everyday low prices below our value-oriented furniture competitors’ lowest promoted prices. Our value proposition is made possible by our curated merchandising strategy, with SKU counts approximately one-third narrower than value-oriented furniture competitors, longstanding sourcing relationships and efficient supply chains.

Current wording

Bob’s Discount Furniture is a rapidly growing, nationally proven omnichannel retailer of value home furnishings with 218 showrooms as of June 28, 2026 across 27 U.S. states. We offer quality, stylish products at everyday low prices below our value-oriented furniture competitors’ lowest promoted prices. Our value proposition is made possible by our curated merchandising strategy, with SKU counts approximately one-third narrower than value-oriented furniture competitors, longstanding sourcing relationships and efficient supply chains.

Previous wording

We have a proven, profitable and portable store model that has produced consistent financial returns across vintages, geographic regions and population densities. Nearly all of our stores were profitable on a four-wall basis in fiscal year 2025 and our new stores have achieved average unit volumes (“AUVs”) of $9 million, cash-on-cash returns exceeding 80% by their fifth year of operation, with returns exceeding 60% by year two and a payback period of approximately two years. We believe our business model and new store unit economics, plus the expansive and fragmented home furnishings industry, provides us with an opportunity to expand our store base in both existing and new geographies to over 500 stores by 2035. Our ability to open profitable new stores depends on multiple factors, including our ability to identify suitable markets and sites, negotiate leases with acceptable terms, support new locations with qualified managers and achieve brand awareness in new markets. For further information see “Item 1A. Risk Factors—Risks Related to Our Business”in our 2025 Annual Report.

Current wording

We have a proven, profitable and portable store model that has produced consistent financial returns across vintages, geographic regions and population densities. Nearly all of our stores were profitable on a four-wall basis in fiscal year 2025 and we expect new stores to achieve average unit volumes (“AUVs”) of $9.0 million, cash-on-cash returns exceeding 80% by their fifth year of operation, with returns exceeding 60% by year two and a payback period of approximately two years. We believe our business model and new store unit economics, plus the expansive and fragmented home furnishings industry, provides us with an opportunity to expand our store base in both existing and new geographies to over 500 stores by 2035. Our ability to open profitable new stores depends on multiple factors, including our ability to identify suitable markets and sites, negotiate leases with acceptable terms, support new locations with qualified managers and achieve brand awareness in new markets. For further information see “Item 1A. Risk Factors—Risks Related to Our Business”in our 2025 Annual Report.

Previous wording

During the first quarter of fiscal year 2026, we continued to make progress to support our key long-term growth strategies. Accomplishments within the quarter include the following:

Current wording

During the second quarter of fiscal year 2026, we continued to make progress to support our key long-term growth strategies. Accomplishments within the quarter include the following:

Previous wording

•delivering comparable sales growth of 1.2% through increases in conversion and average order value (“AOV”) in both our retail and eCommerce channels.

Current wording

•delivering comparable sales growth of 2.3% through increases in average order value (“AOV”) and conversion.

Previous wording

In early 2025, the U.S. Government began imposing significant new or increased tariffs on goods imported into the U.S. from numerous countries from which the Company sources merchandise. The global trade environment remains fluid and highly uncertain in 2026. The U.S. Government imposed a 25% tariff on imports of certain upholstered wooden furniture, which is scheduled to increase to 30% on January 1, 2027. In February 2026, the U.S. Supreme Court ruled that many of the tariffs recently imposed by the U.S. Government exceeded its statutory authority, thereby invalidating many, but not all, of such tariffs. The U.S. presidential administration has indicated that it will seek to reinstate all or a portion of these tariffs under alternative legal authorities or mechanisms. These rulings have also introduced uncertainty regarding the timing and ultimate realization of potential refunds of tariffs previously paid, although U.S. Customs and Border Protection has established a process to administer such refund claims. As of March 29, 2026, the Company has not recognized an asset related to any potential refund. The Company will recognize any recovery as a reduction to cost of sales or inventory as applicable in the period in which recovery becomes realized or realizable. In April 2026, the President issued a proclamation that reduced the tariff rate on steel and aluminum derivative products from 50% to 25%, while modifying the duty application from applying only the metal content in metal-containing products to applying the duty to the full customs value of the imported product. The proclamation excluded certain products, including the Company's covered products from the Section 232 steel and aluminum duties; as a result, the Company's affected products are now subject to the temporary 10% surcharge imposed under Section 122. We will continue to monitor developments related to trade policy and tariffs and evaluate their impact on the Company, including the potential recovery of previously paid tariffs, and make appropriate sourcing, pricing and other operational decisions as appropriate to manage the potential impact on our financial condition and results of operations.

Current wording

In early 2025, the U.S. Government began imposing significant new or increased tariffs on goods imported into the U.S. from numerous countries from which the Company sources merchandise. The global trade environment remains fluid and highly uncertain in 2026. The U.S. Government imposes a 25% tariff on imports of certain upholstered wooden furniture, which is scheduled to increase to 30% on January 1, 2027.

Previous wording

Since late February 2026, the conflict in Iran has resulted in heightened volatility in fuel prices and geopolitical uncertainty. Geopolitical events, increased fuel prices and geopolitical uncertainty, including changes in U.S. tariff policy, has in the past resulted in supply chain disruptions, increased costs and impacts on consumer spending. Such events could materially increase the cost and reduce or delay the supply of our products and impacted discretionary consumer spending, which may adversely affect our business, financial condition, results of operations, liquidity and stock price. See “Item 1A. Risk Factors” in our 2025 Annual Report, including the risk factors titled “Our business, results of operations and financial condition may be adversely affected by global economic conditions and the effect of economic pressures, including inflation, and other business factors on discretionary consumer spending and consumer preferences”and “Our business, results of operations and financial condition may be adversely affected by global economic conditions and the effect of economic pressures, including inflation, and other business factors on discretionary consumer spending and consumer preferences.” We will continue to monitor developments in, and the impacts of, such conflicts and geopolitical events and uncertainties and evaluate their impact on the Company, and make appropriate sourcing and pricing decisions in an effort to minimize any impacts on our financial condition and results of operations.

Current wording

Since late February 2026, the conflict in Iran has resulted in heightened volatility in fuel prices and geopolitical uncertainty. Geopolitical events, increased fuel prices and geopolitical uncertainty, including changes in U.S. tariff policy, has in the past resulted in supply chain disruptions, increased costs and impacts on consumer spending. Such events could materially increase the cost and reduce or delay the supply of our products and impacted discretionary consumer spending, which may adversely affect our business, financial condition, results of operations, liquidity and stock price. See “Item 1A. Risk Factors” in our 2025 Annual Report, including the risk factor titled“Our business, results of operations and financial condition may be adversely affected by global economic conditions and the effect of economic pressures, including inflation, and other business factors on discretionary consumer spending and consumer preferences.” We will continue to monitor developments in, and the impacts of, such conflicts and geopolitical events and uncertainties and evaluate their impact on the Company, and make appropriate sourcing and pricing decisions in an effort to minimize any impacts on our financial condition and results of operations.

Previous wording

We consider a variety of performance and financial measures in assessing the performance of our business. In addition to our results determined in accordance with U.S. GAAP, we regularly review key performance indicators (“KPIs”) and certain non-GAAP financial measures, including Adjusted net income and Adjusted earnings before interest, tax expense/(benefit), depreciation and amortization (“Adjusted EBITDA”), to evaluate our business, measure our performance, identify trends in our business, prepare projections and make strategic decisions. We believe that these non-GAAP financial measures and KPIs are useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of non-recurring items. The non-GAAP financial measures and KPIs presented herein are specific to us and may not be comparable to similar measures disclosed by other companies because of differing methods used by other companies in calculating them. The key measures we use to determine how our business is performing are: net revenues, gross profit and gross margin, SG&A, operating income, net income, comparable sales growth, number of new stores, number of stores, Adjusted net income and Adjusted EBITDA.

Current wording

We consider a variety of performance and financial measures in assessing the performance of our business. In addition to our results determined in accordance with U.S. GAAP, we regularly review key performance indicators (“KPIs”) and certain non-GAAP financial measures, including adjusted gross profit, adjusted net income and adjusted earnings before interest, tax expense/(benefit), depreciation and amortization (“adjusted EBITDA”), to evaluate our business, measure our performance, identify trends in our business, prepare projections and make strategic decisions. We believe that these non-GAAP financial measures and KPIs are useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of non-recurring items. The non-GAAP financial measures and KPIs presented herein are specific to us and may not be comparable to similar measures disclosed by other companies because of differing methods used by other companies in calculating them. The key measures we use to determine how our business is performing are: net revenues, gross profit and gross margin, SG&A, operating income, net income, comparable sales growth, number of new stores, number of stores, adjusted gross profit, adjusted net income and adjusted EBITDA.

Previous wording

Operating income is gross profit less SG&A expenses, pre-opening expenses, loss on disposal of fixed assets, impairment of long-lived assets, restructuring charges and insurance recoveries. Operating income excludes interest income or expense, and income tax expense. We use operating income as an indicator of the productivity of our business and our ability to manage expenses.

Current wording

Operating income is gross profit less SG&A expenses, pre-opening expenses, loss (gain) on disposal of fixed assets, impairment of long-lived assets, restructuring charges and insurance recoveries. Operating income excludes interest income or expense, and income tax expense. We use operating income as an indicator of the productivity of our business and our ability to manage expenses.

Previous wording

Comparable sales growth measures performance during the current reporting period against the performance of the comparable store sales and eCommerce sales in the corresponding period of the previous fiscal year. Comparable store sales consist of net revenues from our stores beginning on the first day of the 14th full fiscal month following the store’s opening, which is when we believe comparability is achieved. eCommerce sales consist of net revenues from online purchases during the current reporting period. Any change in the square footage of an existing comparable store, including for remodels and relocations within the same primary trade area of the existing store being relocated, does not eliminate that store from inclusion in the calculation of comparable store sales.

Current wording

Comparable sales growth measures performance during the current reporting period against the performance of the comparable store sales and of the eCommerce sales in the corresponding period of the previous fiscal year. Comparable store sales consist of revenues from our stores beginning on the first day of the 14th full fiscal month following the store’s opening, which is when we believe comparability is achieved. eCommerce sales consist of revenues from online purchases during the current reporting period. Any change in the square footage of an existing comparable store, including for remodels and relocations within the same primary trade area of the existing store being relocated, does not eliminate that store from inclusion in the calculation of comparable store sales.

Previous wording

Adjusted net income is defined as net income less items that are not indicative of the operating performance of the business, including, but not limited to, restructuring charges, insurance recoveries, gains on hedge accounting de-designation of interest rate cap, gains on sale of Connecticut income tax credits, gains and losses on disposal of fixed assets, impairment of long-lived assets, senior executive termination benefits, management fee and other expenses and income not indicative of ongoing business operations and performance.

Current wording

Adjusted net income is defined as net income less items that are not indicative of the operating performance of the business, including, but not limited to, IEEPA tariff refunds and related interest income, restructuring charges, insurance recoveries, gains on hedge accounting de-designation of interest rate cap, gains on sale of Connecticut income tax credits, gains and losses on disposal of fixed assets, impairment of long-lived assets, senior executive termination benefits, management fee and other expenses and income not indicative of ongoing business operations and performance.

Previous wording

We define EBITDA as net income before interest expense, interest income, income tax expense/(benefit), and depreciation and amortization expenses. Adjusted EBITDA represents EBITDA as further adjusted for items that are not indicative of the operating performance of the business, including but not limited to, stock-based compensation expense, restructuring charges, insurance recoveries, gains on hedge accounting de-designation of interest rate cap, gains on sale of Connecticut income tax credits, gains and losses on disposal of fixed assets, impairment of long lived assets, senior executive termination benefits, management fee and other expenses or income not indicative of ongoing business operations and performance.

Current wording

We define EBITDA as net income before interest expense, interest income, income tax expense/(benefit), and depreciation and amortization expenses. Adjusted EBITDA represents EBITDA as further adjusted for items that are not indicative of the operating performance of the business, including but not limited to, stock-based compensation expense, IEEPA tariff refunds, restructuring charges, insurance recoveries, gains on hedge accounting de-designation of interest rate cap, gains on sale of Connecticut income tax credits, gains and losses on disposal of fixed assets, impairment of long lived assets, senior executive termination benefits, management fee and other expenses or income not indicative of ongoing business operations and performance.

Previous wording

(2)Adjusted net income and adjusted EBITDA are non-GAAP financial measures. Refer to "—Reconciliation of Non-GAAP Financial Measures" for reconciliation to the most comparable GAAP financial measures.

Current wording

(2)Adjusted gross profit, adjusted net income and adjusted EBITDA are non-GAAP financial measures. Refer to "—Reconciliation of Non-GAAP Financial Measures" for reconciliation to the most comparable GAAP financial measures.

Previous wording

Net revenues increased $45.3 million or 8.5%, in the three months ended March 29, 2026 compared to the corresponding prior year period. Our retail channel increased $34.2 million, or 7.6%, and our eCommerce channel increased $11.1 million, or 13.5% for the three months ended March 29, 2026 compared to the corresponding prior year period. The increase in total net revenues was primarily due to non-comparable sales of $43.3 million and comparable sales growth.

Current wording

Net revenues increased $50.0 million or 8.8%, in the three months ended June 28, 2026 compared to the corresponding prior year period. Our retail channel increased $29.2 million, or 6.0%, and our eCommerce channel increased $20.8 million, or 24.1% for the three months ended June 28, 2026 compared to the corresponding prior year period. The increase in total net revenues was primarily due to non-comparable sales of $41.0 million and comparable sales growth.

Previous wording

Comparable sales increased 1.2% in the three months ended March 29, 2026, predominately driven by increases in conversion and AOV in both our retail and eCommerce channels. These improvements were partially offset by lower in-store traffic, particularly during periods that were impacted by the effects of exceptional winter weather.

Current wording

Comparable sales increased 2.3% in the three months ended June 28, 2026, predominately driven by increases in AOV and higher conversion, partially offset by lower in-store traffic.

Previous wording

In the three months ended March 29, 2026, we received $0.7 million in insurance recoveries for lost profits associated with an information technology system outage and the related interruption of our business that occurred at the end of September 2024. The Company did not recognize any insurance recoveries in the first quarter of fiscal year 2025.

Current wording

The Company did not recognize any insurance recoveries in the second quarter of fiscal year 2026. In the three months ended June 29, 2025, we received $4.5 million in insurance recoveries for lost profits associated with an information technology system outage and the related interruption of our business that occurred at the end of September 2024.

Previous wording

Interest income in the three months ended March 29, 2026 decreased $0.2 million compared to the corresponding prior year period, primarily related to income earned on lower balances in our money market funds.

Current wording

Interest income in the three months ended June 28, 2026 increased $1.4 million compared to the corresponding prior year period, primarily related to interest earned on duties previously paid under IEEPA.

Previous wording

Gross profit increased $19.9 million or 8.4% in the three months ended March 29, 2026 compared to the corresponding prior year period. This increase was primarily driven by the impact of higher net revenues.

Current wording

Gross profit increased $74.6 million or 14.9% in the six months ended June 28, 2026 compared to the corresponding prior year period, primarily driven by $37.9 million in IEEPA tariff refunds and the impact of higher net revenues partially offset by higher freight costs.

Previous wording

SG&A increased $19.5 million or 9.0% in the three months ended March 29, 2026 compared to the corresponding prior year period, primarily due to increases in payroll-related expenses of $6.0 million mostly related to new store growth, higher occupancy costs of approximately $6.0 million related to new stores and increases in rent in existing stores, and growth in marketing spend of $4.8 million. Additionally contributing to higher SG&A was a $2.0 million fee associated with the termination of our advisory agreement with Bain Capital upon consummation of our IPO.

Current wording

SG&A increased $39.5 million or 9.2% in the six months ended June 28, 2026 compared to the corresponding prior year period, primarily due to increases in payroll-related expenses of $11.5 million related to new store growth, higher occupancy costs of approximately $11.4 million related to new stores and increases in rent in existing stores, growth in marketing spend of $10.8 million, and an increase in depreciation expense of $3.6 million. Additionally contributing to higher SG&A was a $2.0 million fee associated with the termination of our advisory agreement with Bain Capital upon consummation of our IPO.

Previous wording

SG&A as a percentage of revenue of 40.7% in the three months ended March 29, 2026 increased slightly compared to 40.5% in the corresponding prior year period. The increase was primarily driven by incremental marketing, occupancy expense associated with new stores and greenfield market expansion and the $2.0 million termination fee associated with the advisory agreement with Bain Capital, substantially offset by efficiencies at existing stores.

Current wording

SG&A as a percentage of revenue increased slightly to 39.3% in the six months ended June 28, 2026 compared to 39.1% in the corresponding prior year period due to incremental marketing and occupancy expense associated with new stores, particularly greenfield market expansion, and the $2.0 million termination fee associated with the advisory agreement with Bain Capital, substantially offset by efficiencies at existing stores.

Previous wording

Pre-opening expenses increased $1.8 million or 58.8% in the three months ended March 29, 2026 compared to the corresponding prior year period due to the timing of new store openings in the current year.

Current wording

Pre-opening expenses increased $1.9 million in the six months ended June 28, 2026 compared to the corresponding prior year period driven by the timing of new store openings in the current year.

Previous wording

In the first quarter of fiscal year 2025, management identified efficiencies to optimize overhead costs, which resulted in workforce reductions. Restructuring costs of $0.3 million were recognized in the three-month fiscal period ended March 30, 2025 for these workforce reductions. The Company did not recognize any costs attributable to these actions in subsequent periods. There were no restructuring charges in the first quarter of fiscal year 2026.

Current wording

In the first quarter of fiscal year 2025, the Company identified efficiencies to optimize overhead costs resulting in workforce reductions at the corporate headquarters. Restructuring costs of $0.3 million were recognized in the six month fiscal period ended June 29, 2025 for these workforce reductions. No significant restructuring actions were initiated during the six-month fiscal period ended June 28, 2026.

Previous wording

Interest expense in the three months ended March 29, 2026 increased $14.4 million compared to the corresponding prior year period primarily due to the acceleration of $10.7 million in debt issuance costs in connection with the pay down of the Term Loan and interest expense associated with the Term Loan and Revolving Credit Facility outstanding in the period. There was no outstanding debt in the first quarter of fiscal year 2025.

Current wording

Interest expense in the six-month fiscal period ended June 28, 2026 increased $15.1 million compared to the corresponding prior year period driven by the acceleration of $10.7 million in debt issuance costs in connection with the pay down of the Term Loan and interest expense associated with higher average outstanding borrowings, partially offset by a lower weighted average interest rate.

Previous wording

Other income, net in the three months ended March 29, 2026 decreased $0.6 million compared to the corresponding prior year period, primarily due to the absence of income earned on our interest rate cap in the current period which matured in the third quarter of fiscal year 2025.

Current wording

Other income, net in the six-month fiscal period ended June 28, 2026 increased $0.7 million compared to the corresponding prior year period, primarily due a bankruptcy settlement associated with a former vendor, partially offset by the absence of income earned on our interest rate cap which matured in the third quarter of fiscal year 2025.

Previous wording

(1)Represents the acceleration of debt issuance costs in connection with the repayment of the Term Loan in the three-month fiscal period ended March 29, 2026. See “Note 3, Long-Term Debt” for further information on the Term Loan.

Current wording

(2)Represents the acceleration of debt issuance costs in connection with the repayment of the Term Loan in the six-month fiscal period ended June 28, 2026. See “Note 3, Long-Term Debt” for further information on the Term Loan.

Previous wording

(2)Represents management fees paid in accordance with our Advisory Agreement with our controlling stockholder, which terminated in connection with the IPO. Included in the activity for the three-month fiscal period ended March 29, 2026 is a termination fee of $2.0 million. See “Item 13. Certain Relationships, Related Transactions and Director Independence—Advisory Agreement” in the 2025 Annual Report for further information on the Advisory Agreement.

Current wording

(3)Represents management fees paid in accordance with our Advisory Agreement with our controlling stockholder, which terminated in connection with the IPO. Included in the activity for the six-month fiscal period ended June 28, 2026 is a termination fee of $2.0 million. See “Item 13. Certain Relationships, Related Transactions and Director Independence—Advisory Agreement” in the 2025 Annual Report for further information on the Advisory Agreement.

Previous wording

(3)Represents the acceleration of a bonus from our financing partner due to the termination of the agreement.

Current wording

(4)Represents the acceleration of a bonus from our financing partner due to the termination of the agreement.

Previous wording

(4)Other expenses represents costs that are not indicative of ongoing business operations and performance, including, but not limited to, third-party professional fees related to the IPO and senior executive termination benefits.

Current wording

(5)Other (income) expenses, net represents income and costs that are not indicative of ongoing business operations and performance, including, but not limited to, third-party professional fees related to the IPO, litigation matters outside the ordinary course of business, bankruptcy settlements, and senior executive termination benefits.

Previous wording

Our primary sources of liquidity are net cash flows provided by operating activities and available borrowings under our $200.0 million Revolving Credit Facility. Our primary cash needs have historically been for merchandise inventories, payroll, advertising, rent, interest payments, and capital expenditures associated with opening new stores and updating existing stores, as well as the development of our infrastructure and information technology. We expect further investments in inventory to be commensurate with higher sales from new stores and comparable sales growth. We expect that our cash on hand, cash generated from operations and the availability of borrowings under our Revolving Credit Facility will be sufficient to meet our liquidity requirements for at least the next twelve months. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. At March 29, 2026, we had total liquidity of $127.1 million, comprised of cash and cash equivalents of $27.7 million and available borrowing capacity of $99.4 million.

Current wording

Our primary sources of liquidity are net cash flows provided by operating activities and available borrowings under our $200.0 million Revolving Credit Facility. Our primary cash needs have historically been for merchandise inventories, payroll, advertising, rent, interest payments, and capital expenditures associated with opening new stores and updating existing stores, as well as the development of our infrastructure and information technology. We expect further investments in inventory to be commensurate with higher sales from new stores and comparable sales growth. We expect that our cash on hand, cash generated from operations and the availability of borrowings under our Revolving Credit Facility will be sufficient to meet our liquidity requirements for at least the next twelve months. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. At June 28, 2026, we had total liquidity of $176.6 million, comprised of cash and cash equivalents of $32.0 million and available borrowing capacity of $144.6 million. This excludes a receivable of $41.9 million associated with IEEPA tariff refunds, which was received subsequent to fiscal quarter end.

Previous wording

At March 29, 2026, we had $25.0 million outstanding under our Revolving Credit Facility. Subsequent to March 29, 2026, the Company amended its Revolving Credit Facility on April 29, 2026, increasing the maximum availability from $125.0 million to $200.0 million and extending the maturity date to April 2031. Interest payments on our financing arrangements for the fiscal year ending January 3, 2027 (“fiscal year 2026”) will be dependent on our cash flow needs and any short-term borrowing under our Revolving Credit Facility in fiscal year 2026. The interest rate and subsequent payments related to the Revolving Credit Facility are dependent on the Secured Overnight Financing Rate (“SOFR”).

Current wording

At June 28, 2026, we had no amounts outstanding under our Revolving Credit Facility. The Company amended its Revolving Credit Facility on April 29, 2026, increasing the maximum availability from $125.0 million to $200.0 million and extending the maturity date to April 2031. Interest payments on our financing arrangements for the fiscal year ending January 3, 2027 (“fiscal year 2026”) will be dependent on our cash flow needs and any short-term borrowing under our Revolving Credit Facility in fiscal year 2026. The interest rate and subsequent payments related to the Revolving Credit Facility are dependent on the Secured Overnight Financing Rate (“SOFR”).

Previous wording

Future rental payments for operating and financing leases total $1.1 billion and $70.4 million, respectively, as of March 29, 2026.

Current wording

Future rental payments for operating and financing leases total $1.4 billion and $102.2 million, respectively, as of June 28, 2026.

Previous wording

Historically, we have invested significant capital in opening new stores and distribution centers and we anticipate additional capital expenditures as we open more stores and distribution centers. Our capital expenditures are related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received. Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us. New stores may require different levels of capital investment on our part in the future. Total capital expenditures, net of tenant allowances, were $23.3 million for the three-month fiscal period ended March 29, 2026. Total estimated capital expenditures, net of tenant allowances for fiscal year 2026 is expected to be in the range of approximately $110.0 million to $115.0 million, the largest portion of which is expected to relate to new and remodeled stores and a new distribution center.

Current wording

Historically, we have invested significant capital in opening new stores and distribution centers and we anticipate additional capital expenditures as we open more stores and distribution centers. Our capital expenditures are related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received. Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us. New stores may require different levels of capital investment on our part in the future. Total capital expenditures, net of tenant allowances, were $47.3 million for the six-month fiscal period ended June 28, 2026. Total estimated capital expenditures, net of tenant allowances for fiscal year 2026 are expected to be in the range of approximately $110.0 million to $115.0 million, the largest portion of which is expected to relate to new and remodeled stores and a new distribution center.

Previous wording

The Company maintains certain cash balances that are restricted as to withdrawal or use. Restricted cash is comprised primarily of cash used as collateral with the Company’s insurance carrier related to a portion of our workers’ compensation and automobile insurance obligations. At March 29, 2026 and December 28, 2025, we had $10.2 million and $9.4 million in restricted cash.

Current wording

The Company maintains certain cash balances that are restricted as to withdrawal or use. Restricted cash is comprised primarily of cash used as collateral with the Company’s insurance carrier related to a portion of our workers’ compensation and automobile insurance obligations. At June 28, 2026 and December 28, 2025, we had $10.2 million and $9.4 million in restricted cash, respectively.

Previous wording

Net cash provided by operating activities in the three months ended March 29, 2026 was $28.9 million, primarily resulting from our net income of $2.5 million and non-cash charges of $53.4 million, both partially offset by changes in operating assets and liabilities resulting in a net use of cash of $27.1 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $19.9 million decrease in accrued expenses, a $15.5 million increase in operating leases, a $7.7 million decrease in accounts payable, a $5.5 million increase in accounts receivable, and a $3.9 million increase in other assets, all partially offset by a $13.4 million decrease in inventories and a $11.7 million increase in customer deposits.

Current wording

Net cash provided by operating activities in the six months ended June 28, 2026 was $93.1 million, primarily resulting from our net income of $60.3 million and non-cash charges of $91.7 million, both partially offset by changes in operating assets and liabilities resulting in a net use of cash of $58.9 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $41.9 million increase in tariff refunds receivable, a $28.1 million increase in operating leases, a $10.9 million decrease in accrued expenses, a $10.8 million increase in accounts receivable, a $7.1 million increase in prepaid and other current assets, and a $4.4 million increase in other assets, all partially offset by a $21.8 million increase in accounts payable, a $9.6 million increase in customer deposits, an $8.4 million increase in other long-term liabilities and a $4.4 million decrease in inventories.

Previous wording

Net cash provided by operating activities in the three months ended March 30, 2025 was $3.7 million, primarily resulting from our net income of $13.1 million and non-cash charges of $36.6 million, both partially offset by changes in operating assets and liabilities resulting in a net use of cash of $46.0 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $15.7 million increase in inventories, a $15.4 million decrease in accounts payable, a $12.1 million increase in operating leases, a $10.0 million decrease in accrued expenses, and a $2.3 million increase in accounts receivable, all partly offset by a $6.3 million increase in customer deposits and a $3.3 million decrease in prepaid and other current assets.

Current wording

Net cash provided by operating activities in the six months ended June 29, 2025 was $36.2 million, primarily resulting from our net income of $48.4 million and non-cash charges of $74.2 million, both partially offset by changes in operating assets and liabilities resulting in a net use of cash of $86.4 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $41.8 million decrease in accounts payable, a $24.3 million increase in operating leases, a $14.8 million increase in inventories, a $7.2 million decrease in accrued expenses, a $3.3 million increase in prepaid and other current assets, and a $2.2 million increase in accounts receivable, all partly offset by a $7.3 million increase in customer deposits.

Previous wording

Net cash used in investing activities in the three months ended March 29, 2026 was $31.6 million, which consisted primarily of purchases of property and equipment associated with new store openings in the three months ended March 29, 2026 together with investments in a new distribution center and business information systems.

Current wording

Net cash used in investing activities in the six months ended June 28, 2026 was $59.9 million, which consisted primarily of purchases of property and equipment associated with new store openings in the six months ended June 28, 2026 together with investments in a new distribution center, trailers, and business information systems.

Previous wording

Net cash used in investing activities in the three months ended March 30, 2025 was $15.9 million, which consisted primarily of purchases of property and equipment associated with new store openings together with investments in business information systems.

Current wording

Net cash used in investing activities in the six months ended June 29, 2025 was $38.0 million, which consisted primarily of purchases of property and equipment associated with new store openings together with investments in business information systems.

Previous wording

Net cash used in financing activities in the three months ended March 29, 2026 was $22.0 million, consisting of the repayment of our $350.0 million Term Loan, $5.2 million in payments of IPO costs, and $3.5 million in principal payments on financing lease obligations, all partially offset by $310.9 million in proceeds from our IPO, net of underwriting discounts, net borrowings under the Revolving Credit Facility of $25.0 million and $1.0 million in net proceeds related to the exercise of employee stock options.

Current wording

Net cash used in financing activities in the six months ended June 28, 2026 was $53.7 million, primarily consisting of the repayment of our $350.0 million Term Loan, $10.6 million in principal payments on financing lease obligations, and $5.2 million in payments of IPO costs, all partially offset by $310.9 million in proceeds from our IPO, net of underwriting discounts, and $1.3 million in net proceeds related to the exercise of employee stock options.

Previous wording

Net cash used in financing activities in the three months ended March 30, 2025 was $3.1 million, primarily consisting of $2.6 million in principal payments on financing lease obligations and $0.5 million in payments related to the exercise of employee stock options.

Current wording

Net cash used in financing activities in the six months ended June 29, 2025 was $4.8 million, primarily consisting of $5.5 million in principal payments on financing lease obligations and $0.7 million in payments for the acquisition of treasury stock, both offset by $1.4 million in proceeds related to the exercise of employee stock options.

Previous wording

There have been no material changes outside the ordinary course of business in our contractual obligations or off-balance sheet arrangements during the first three months of fiscal year 2026. See our 2025 Annual Report for a discussion of our contractual obligations and off-balance sheet arrangements.

Current wording

There have been no material changes outside the ordinary course of business in our contractual obligations or off-balance sheet arrangements during the first six months of fiscal year 2026. See our 2025 Annual Report for a discussion of our contractual obligations and off-balance sheet arrangements.