Grocery Outlet Holding Corp.

Sources of Liquidity

Based on our current operations and new store growth plans, we expect to satisfy our short-term and long-term cash requirements through a combination of our existing cash and cash equivalents position, funds generated from operating activities, and the borrowing capacity available in the revolving credit facility under our credit agreement, dated February 21, 2023, with Bank of America, N.A. (the "2023 Credit Agreement"). If cash generated from our operations and borrowings under the revolving credit facility are not sufficient or available to meet our liquidity requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, the terms will be satisfactory to us and not dilutive to our then-current stockholders. Additionally, we may seek to take advantage of market opportunities to refinance our existing debt instruments with new debt instruments at interest rates, maturities and terms we deem attractive.

As of October 3, 2026, we had cash and cash equivalents of $59.8 million, which consisted primarily of cash held in checking and money market accounts with financial institutions. In addition, we have a revolving credit facility with $400.0 million in borrowing capacity under the 2023 Credit Agreement. As of October 3, 2026, we had $240.0 million of borrowings outstanding under the revolving credit facility and $6.2 million of outstanding standby letters of credit, resulting in $153.8 million of remaining borrowing capacity available under this revolving credit facility.

The senior secured credit facilities of the 2023 Credit Agreement permit us to add incremental term loan facilities, increase any existing term loan facility, increase revolving commitments, and/or add incremental replacement revolving credit facility tranches. The aggregate principal amount of such incremental facilities is limited to (a) an amount not in excess of the sum of the greater of $200.0 million and 100% of Consolidated EBITDA (as defined in the 2023 Credit Agreement), subject to certain limitations, plus (b) voluntary prepayments of any term loan facility, voluntary permanent reductions of the commitments for the revolving credit facility and voluntary prepayments of indebtedness secured by liens on the collateral securing the credit facilities, subject to certain exceptions, plus (c) an amount such that (assuming that the full amount of any such incremental revolving increase and/or incremental replacement revolving credit facility was drawn, and after giving effect to any appropriate pro forma adjustment events) we would be in compliance, on a pro forma basis (but excluding the cash proceeds of such incurrence), with a Total Net Leverage Ratio (as defined in the 2023 Credit Agreement) of 3.00 to 1.00.

We may also, from time to time, at our sole discretion, prepay or retire all or a portion of our outstanding debt.

Material Cash Requirements

There has been no material change in our material cash requirements since the end of fiscal 2025, other than those which occur in the ordinary course of business. See our 2025 Form 10-K for additional information.

Capital Expenditures

Capital expenditures include purchases of capital assets such as property and equipment as well as intangible assets and licenses. Capital expenditures for the first three quarters of fiscal 2026, before tenant improvement allowances, were $128.6 million, and, net of tenant improvement allowances, were $118.3 million. We currently expect total capital expenditures, net of tenant improvement allowances, to be approximately $170.0 million for fiscal 2026, which includes new store openings, ongoing store maintenance and improvements, supply chain investments and systems and infrastructure investments.

Debt Obligations

The 2023 Credit Agreement requires us to make scheduled quarterly amortization payments of the senior term loan. Such payments total $18.8 million over the remaining term of the senior term loan, with $3.8 million payable over the remainder of fiscal 2026. The remaining senior term loan principal balance and any outstanding revolving credit facility balance will become due in February 2028 at maturity. See Note 4 to the condensed consolidated financial statements for additional information.

Debt Covenants

The 2023 Credit Agreement contains certain customary representations and warranties, subject to limitations and exceptions, and affirmative and customary covenants. The 2023 Credit Agreement contains certain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments; incur additional debt or issue certain disqualified stock and preferred stock; incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets; enter into transactions with affiliates; and allow to exist certain restrictions on the ability of our subsidiaries to pay dividends or make other payments to the borrower. The 2023 Credit Agreement also contains financial performance covenants requiring us to satisfy a maximum total net leverage ratio test and a minimum interest coverage ratio test as of the last day of each fiscal quarter. The maximum total net leverage ratio test requires us to be in compliance with a Total Net Leverage Ratio no greater than 3.25 to 1.00 as of the last day of each test period ending after December 31, 2025, subject to certain adjustments set forth in the 2023 Credit Agreement. The minimum interest coverage ratio test requires us to be in compliance with a Consolidated Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of no less than 1.75 to 1.00 as of the last day of each test period.

As of October 3, 2026, we were in compliance with all applicable financial covenant requirements for the 2023 Credit Agreement.

Cash Flows

The following table summarizes our cash flows for the periods presented (amounts in thousands):

Cash Provided by Operating Activities

The decrease in net cash provided by operating activities of $36.0 million for the first three quarters of fiscal 2026 compared to the same period in fiscal 2025 was primarily driven by changes in working capital, including accounts receivable and accrued and other liabilities, and a decrease in operating lease liabilities, partially offset by a lower net loss for the first three quarters of fiscal 2026, after adjusting for non-cash charges. The change in accrued and other liabilities was impacted primarily by timing differences of accruals and payments for goods and services and interest payments of the senior term loan, and the decrease in operating lease liabilities was primarily due to the net write-offs of right-of-use assets and lease liabilities associated with the Lease Exits during the first three quarters of fiscal 2026 associated with the Optimization Plan (see Note 12 to the condensed consolidated financial statements for additional information).

Cash Used in Investing Activities

The decrease in net cash used in investing activities of $50.4 million for the first three quarters of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to lower purchases of property and equipment for the first three quarters of fiscal 2026 due to a decrease in current and future new store openings in fiscal 2026 compared to fiscal 2025 and investments in new warehouses in fiscal 2025.

Cash Provided By Financing Activities

The decrease in net cash provided by financing activities of $13.6 million for the first three quarters of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to decreased borrowings on the revolving credit facility and the increase in scheduled principal payments on the senior term loan, partially offset by decreased principal payments on the revolving credit facility.