[PART I—FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for October 28, 2023, show decreased assets and debt, with Q3 net income rising to $11.6 million and YTD net income declining to $31.4 million due to a debt refinancing loss [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of October 28, 2023, total assets decreased to $438.0 million, primarily due to lower cash, while total liabilities significantly decreased to $406.4 million, leading to positive shareholders' equity of $31.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | October 28, 2023 | January 28, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $64,115 | $87,053 | | Inventories, net | $56,652 | $50,585 | | Total current assets | $143,606 | $160,820 | | Total assets | $438,048 | $466,417 | | **Liabilities & Equity** | | | | Total current liabilities | $136,004 | $126,987 | | Long-term debt, net | $148,731 | $205,236 | | Total liabilities | $406,390 | $466,636 | | Total shareholders' equity (deficit) | $31,658 | $(219) | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For Q3 2023, net sales were flat at $150.1 million, but net income rose to $11.6 million; for the thirty-nine weeks, net sales decreased 2.7% to $455.2 million, and net income fell to $31.4 million due to a $12.7 million debt refinancing loss Q3 Performance Comparison (in thousands, except per share data) | Metric | Thirteen Weeks Ended Oct 28, 2023 | Thirteen Weeks Ended Oct 29, 2022 | | :--- | :--- | :--- | | Net sales | $150,125 | $150,204 | | Gross profit | $107,842 | $105,023 | | Operating income | $22,127 | $18,850 | | Net income | $11,616 | $8,919 | | Diluted EPS | $0.80 | $0.62 | YTD Performance Comparison (in thousands, except per share data) | Metric | Thirty-Nine Weeks Ended Oct 28, 2023 | Thirty-Nine Weeks Ended Oct 29, 2022 | | :--- | :--- | :--- | | Net sales | $455,214 | $467,616 | | Loss on debt refinancing | $12,702 | $0 | | Net income | $31,434 | $41,139 | | Diluted EPS | $2.19 | $2.89 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the thirty-nine weeks ended October 28, 2023, net cash from operations decreased to $56.7 million, while net cash used in investing and financing activities significantly increased, resulting in a net cash decrease of $22.9 million due to debt refinancing Cash Flow Summary (in thousands) | Cash Flow Activity | Thirty-Nine Weeks Ended Oct 28, 2023 | Thirty-Nine Weeks Ended Oct 29, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,682 | $66,720 | | Net cash used in investing activities | $(10,760) | $(5,173) | | Net cash used in financing activities | $(68,860) | $(7,424) | | **Net change in cash and cash equivalents** | **$(22,938)** | **$54,123** | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, revenue disaggregation, debt structure, and equity compensation, highlighting the April 2023 debt refinancing that resulted in a $12.7 million loss and the granting of new Performance Stock Units - Net sales are primarily generated from Retail stores (**55.0% YTD**) and Direct channels (**45.0% YTD**), with Direct channel sales decreasing to **$204.8 million YTD in 2023** from **$214.5 million in 2022**[25](index=25&type=chunk)[106](index=106&type=chunk) - On April 5, 2023, the company entered into a new **$175.0 million Term Loan Credit Agreement** maturing in 2028, with proceeds used to repay existing Priming and Subordinated Term Loans[34](index=34&type=chunk)[38](index=38&type=chunk) - The debt refinancing resulted in a recorded loss of **$12.7 million** during the thirty-nine weeks ended October 28, 2023[39](index=39&type=chunk) - During the thirty-nine weeks ended October 28, 2023, the company granted Performance Stock Units (PSUs) with performance goals based on Adjusted EBITDA and total shareholder return (TSR)[59](index=59&type=chunk)[62](index=62&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports Q3 2023 net sales were flat with improved gross margin and 30.2% net income growth, while year-to-date net income declined 23.6% due to a $12.7 million debt refinancing loss, with liquidity expected to be sufficient after the April 2023 debt refinancing [Results of Operations](index=19&type=section&id=Results%20of%20Operations) For Q3 2023, net sales were flat at $150.1 million, with gross margin expanding to 71.8% and operating income increasing 17.4%; for the thirty-nine weeks, net sales decreased 2.7% to $455.2 million, and income before taxes fell 20.8% due to a $12.7 million debt refinancing loss Q3 2023 vs Q3 2022 Performance (in thousands) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $150,125 | $150,204 | (0.1)% | | Gross profit | $107,842 | $105,023 | 2.7% | | Gross Margin | 71.8% | 69.9% | +190 bps | | Operating income | $22,127 | $18,850 | 17.4% | | Net income | $11,616 | $8,919 | 30.2% | YTD 2023 vs YTD 2022 Performance (in thousands) | Metric | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $455,214 | $467,616 | (2.7)% | | Gross profit | $326,791 | $326,960 | (0.1)% | | Gross Margin | 71.8% | 69.9% | +190 bps | | Operating income | $75,564 | $70,928 | 6.5% | | Net income | $31,434 | $41,139 | (23.6)% | [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) As of October 28, 2023, the company held $64.1 million in cash and $34.2 million ABL availability, with a significant debt refinancing in April 2023 extending the term loan and ABL facility maturities to 2028, ensuring sufficient liquidity - As of October 28, 2023, the company had **$64.1 million** in cash and **$34.2 million** of availability under its ABL Facility[113](index=113&type=chunk) - In April 2023, the company entered into a new **$175.0 million Term Loan Credit Agreement** maturing in May 2028, using the proceeds to fully repay previous credit agreements[114](index=114&type=chunk) - The maturity date of the ABL Credit Agreement was extended from May 2024 to May 2028[117](index=117&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in its market risk exposure during Q3 Fiscal Year 2023, referring to the 2022 Annual Report on Form 10-K for detailed discussion - There have been no material changes in the company's exposure to market risk during the third quarter of Fiscal Year 2023[135](index=135&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of October 28, 2023, with no material changes to internal control over financial reporting during Q3 - Management concluded that as of October 28, 2023, the company's disclosure controls and procedures are effective[136](index=136&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the third quarter of Fiscal Year 2023[137](index=137&type=chunk) [PART II. OTHER INFORMATION](index=24&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various ordinary course legal proceedings, none of which are expected to have a material adverse effect on its business or financial condition - The company is subject to various legal proceedings arising in the ordinary course of business[72](index=72&type=chunk) - Management does not believe that the resolution of any current legal proceedings would have a material adverse effect on the company[72](index=72&type=chunk)[139](index=139&type=chunk) [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K have occurred - As of the date of this report, there have been no material changes to the risk factors previously disclosed in the 2022 Annual Report[140](index=140&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[141](index=141&type=chunk) [Exhibits](index=24&type=section&id=Item%206.%20Exhibits) The report includes various exhibits, notably CEO and CFO certifications required by the Sarbanes-Oxley Act and an amendment to an executive employment agreement - Exhibits filed with the report include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act[147](index=147&type=chunk)

J.Jill, Inc. (NYSE:JILL) Q3 2023 Earnings Conference Call December 5, 2023 8:00 AM ET Company Participants Claire Spofford - President and Chief Executive Officer Mark Webb - Executive Vice President, Chief Financial Officer and Chief Operating Officer Conference Call Participants Jeff Lick - B. Riley Financial Ryan Meyers - Lake Street Capital Markets Dana Telsey - Telsey Group Operator Good morning. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome eve ...

Financial Data and Key Metrics Changes - Total company sales for Q2 2023 were $156 million, down 2.9% compared to Q2 2022 [11] - Q2 gross profit was $111 million, a decrease of $1.1 million from Q2 2022, with a gross margin of 71.6%, up 140 basis points year-over-year [12] - Adjusted EBITDA for Q2 was $34.5 million, compared to $35.6 million in Q2 2022 [29] - Cash generated from operations in Q2 was $28 million, ending with $49 million in cash and no borrowings [13] Business Line Data and Key Metrics Changes - Store sales for Q2 were down about 1% versus Q2 2022, with about 1% fewer stores [11] - Direct sales as a percentage of total sales were 45% in the quarter, down 5% compared to Q2 2022 [47] - Unit sales were more markdown-oriented compared to last year, with higher online returns negatively impacting net sales [28] Market Data and Key Metrics Changes - The company saw customer growth in both channels, particularly in new-to-brand customers in the direct channel [6] - The inventory at the end of Q2 was down 16% compared to the end of Q2 2022, largely due to improved conditions [49] Company Strategy and Development Direction - The company is focusing on strengthening omnichannel capabilities through strategic investments in infrastructure and systems [7] - A new POS system rollout is expected to be completed by the end of Q3, with the next phase involving an upgrade of the order management system [7][50] - The company plans to introduce a Wearever Works Capsule to highlight versatile pieces for customers [23] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about trends in consumer sentiment and responsiveness, which have improved since late Q2 [26] - The company expects sales to be down in the low-single-digits for Q3 2023 compared to Q3 2022, with adjusted EBITDA projected between $23 million and $25 million [31] - Management emphasized the importance of maintaining a disciplined approach to inventory management while investing in profitable growth [43] Other Important Information - Capital expenditures in Q2 were about $4 million, with full-year capital expected to be around $18 million [30][32] - The company is updating its guidance to reflect better-than-expected Q2 performance, expecting adjusted EBITDA to be down in the low-single-digits as a percentage compared to last year [51] Q&A Session Summary Question: Did you see improvement in both digital and stores? - Management confirmed a nice improvement over the quarter, particularly in full-price sales, with July being the strongest month [53] Question: Any updates on cash flow and outlook for the year? - Management highlighted strong cash flow generation and mentioned that they are investing in technology while managing cash prudently [56] Question: How do you view the balance in your business model? - Management noted the balance between direct and store sales, with direct sales now being a more full-price channel than before [60] Question: What are the strengths of your customer profile? - Management emphasized customer loyalty and the strength of the product assortments as key factors driving the brand's performance [62]

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents J.Jill, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) **Condensed Consolidated Balance Sheet Highlights (in thousands):** | Metric | July 29, 2023 | January 28, 2023 | Change (YoY) | | :-------------------------------- | :------------ | :--------------- | :----------- | | Cash and cash equivalents | $48,903 | $87,053 | $(38,150) | | Inventories, net | $45,689 | $50,585 | $(4,896) | | Total current assets | $116,172 | $160,820 | $(44,648) | | Total assets | $416,760 | $466,417 | $(49,657) | | Total current liabilities | $118,129 | $126,987 | $(8,858) | | Long-term debt, net of discount and current portion | $150,296 | $195,517 | $(45,221) | | Total liabilities | $397,647 | $466,636 | $(68,989) | | Total shareholders' equity (deficit) | $19,113 | $(219) | $19,332 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Unaudited)) **Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data):** | Metric | 13 Weeks Ended July 29, 2023 | 13 Weeks Ended July 30, 2022 | Change (YoY) | 26 Weeks Ended July 29, 2023 | 26 Weeks Ended July 30, 2022 | Change (YoY) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net sales | $155,669 | $160,343 | (2.9%) | $305,089 | $317,412 | (3.9%) | | Gross profit | $111,409 | $112,474 | (0.9%) | $218,949 | $221,937 | (1.3%) | | Operating income | $28,044 | $28,193 | (0.5%) | $53,438 | $52,078 | 2.6% | | Loss on debt refinancing | — | — | N/A | $12,702 | — | N/A | | Interest expense, net | $6,157 | $3,547 | 73.6% | $11,214 | $7,205 | 55.6% | | Net income | $15,222 | $17,805 | (14.5%) | $19,818 | $32,220 | (38.5%) | | Diluted EPS | $1.06 | $1.25 | (15.2%) | $1.38 | $2.27 | (39.2%) | [Condensed Consolidated Statements of Shareholders' Equity (Deficit) (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Deficit)%20(Unaudited)) **Condensed Consolidated Statements of Shareholders' Equity (Deficit) Highlights (in thousands):** | Metric | January 28, 2023 | April 29, 2023 | July 29, 2023 | | :-------------------------------- | :--------------- | :------------- | :------------ | | Total Shareholders' Equity (Deficit) | $(219) | $3,325 | $19,113 | | Net income (for period) | N/A | $4,596 | $15,222 | | Equity-based compensation (for period) | N/A | $878 | $937 | **Key Changes:** * Shareholders' equity significantly improved from a deficit of **$(219)k** at January 28, 2023, to a positive **$19,113k** at July 29, 2023 * Net income contributed **$15,222k** to equity during the quarter ended July 29, 2023 [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) **Condensed Consolidated Statements of Cash Flows Highlights (in thousands):** | Metric | 26 Weeks Ended July 29, 2023 | 26 Weeks Ended July 30, 2022 | Change (YoY) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Net cash provided by operating activities | $35,615 | $35,457 | $158 | | Net cash used in investing activities | $(7,105) | $(2,161) | $(4,944) | | Net cash used in financing activities | $(66,660) | $(7,397) | $(59,263) | | Net change in cash and cash equivalents | $(38,150) | $25,899 | $(64,049) | | Cash and cash equivalents, End of Period | $48,903 | $61,856 | $(12,953) | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) [Note 1. Description of Business](index=7&type=section&id=Note%201.%20Description%20of%20Business) - J.Jill, Inc. is a national lifestyle brand offering apparel, footwear, and accessories for women, operating through **over 200 stores** nationwide and a robust e-commerce platform[20](index=20&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=7&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - The interim condensed consolidated financial statements are unaudited and prepared in accordance with GAAP, consistently applying policies from the 2022 Annual Report[21](index=21&type=chunk) - The fiscal year ending February 3, 2024, is comprised of **53 weeks**[22](index=22&type=chunk) - Cost of goods sold includes direct merchandise costs, inventory shrinkage, and adjustments, but excludes distribution center and indirect costs[24](index=24&type=chunk) - Selling, general and administrative expenses cover payroll, occupancy, information systems, marketing, warehousing, distribution, customer service, and professional services[25](index=25&type=chunk) [Note 3. Revenues](index=8&type=section&id=Note%203.%20Revenues) **Disaggregated Net Sales (in thousands):** | Channel | 13 Weeks Ended July 29, 2023 | 13 Weeks Ended July 30, 2022 | 26 Weeks Ended July 29, 2023 | 26 Weeks Ended July 30, 2022 | | :------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Retail | $86,110 | $87,081 | $168,314 | $171,293 | | Direct | $69,559 | $73,262 | $136,775 | $146,119 | | Net sales | $155,669 | $160,343 | $305,089 | $317,412 | **Key Insights:** * Net sales **decreased by 2.9%** for the thirteen weeks and **3.9%** for the twenty-six weeks ended July 29, 2023, compared to the prior year[26](index=26&type=chunk) * Contract liabilities (signing bonus and unredeemed gift cards) decreased from **$7,213k** at January 28, 2023, to **$5,520k** at July 29, 2023[27](index=27&type=chunk) - Revenue recognized from gift card redemptions and breakage was approximately **$2.6 million** for the thirteen weeks and **$5.5 million** for the twenty-six weeks ended July 29, 2023[28](index=28&type=chunk) [Note 4. Goodwill and Other Intangible Assets](index=9&type=section&id=Note%204.%20Goodwill%20and%20Other%20Intangible%20Assets) **Goodwill and Other Intangible Assets (in thousands):** | Asset Type | July 29, 2023 Carrying Amount | January 28, 2023 Carrying Amount | | :-------------------- | :------------------------------ | :------------------------------- | | Goodwill | $59,697 | $59,697 | | Trade name | $34,000 | $34,000 | | Customer relationships | $35,717 | $39,188 | | Total intangible assets | $69,717 | $73,188 | **Key Insights:** * Goodwill balance remained stable at **$59.7 million**, with accumulated impairment losses of **$137.3 million**[31](index=31&type=chunk) * Total amortization expense for amortizable intangible assets was **$3.5 million** for the twenty-six weeks ended July 29, 2023, a decrease from **$3.8 million** in the prior year[33](index=33&type=chunk) * No impairment events were identified during the twenty-six weeks ended July 29, 2023 [Note 5. Debt](index=10&type=section&id=Note%205.%20Debt) - On April 5, 2023, the Company entered into a new Term Loan Credit Agreement for **$175.0 million**, maturing May 8, 2028, which was used to repay the outstanding **$225.4 million** under the Priming Term Loan and Subordinated Term Loan Credit Agreements[35](index=35&type=chunk)[39](index=39&type=chunk) - A loss on debt refinancing of **$12.7 million** was recorded for the twenty-six weeks ended July 29, 2023, primarily related to the repayment of the Subordinated Credit Agreement[40](index=40&type=chunk) - The ABL Credit Agreement maturity date was extended from May 8, 2024, to May 10, 2028, and the Company was in compliance with all debt covenants as of July 29, 2023[38](index=38&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) **Outstanding Long-Term Debt (in thousands):** | Debt Type | July 29, 2023 Balance Sheet | January 28, 2023 Balance Sheet | | :------------------------------------ | :-------------------------- | :--------------------------- | | Term Loan due 2028 (net) | $150,296 | — | | Priming Term Loan due 2024 (net) | — | $198,941 | | Subordinated Term Loan due 2024 (net) | — | $9,719 | | Net long-term debt | $150,296 | $205,236 | [Note 6. Fair Value Measurements](index=12&type=section&id=Note%206.%20Fair%20Value%20Measurements) - The company's debt instruments are classified as Level 2 fair value measurements, with a carrying value of **$159,046k** and a fair value of **$166,968k** as of July 29, 2023, based on observable market prices for similar instruments[49](index=49&type=chunk) - Other financial instruments like cash, accounts receivable, and accounts payable approximate their fair value due to their short-term maturities[50](index=50&type=chunk) [Note 7. Income Taxes](index=13&type=section&id=Note%207.%20Income%20Taxes) **Income Tax Provision and Effective Tax Rates:** | Metric | 13 Weeks Ended July 29, 2023 | 13 Weeks Ended July 30, 2022 | 26 Weeks Ended July 29, 2023 | 26 Weeks Ended July 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income tax provision | $6,665 | $5,912 | $8,630 | $10,922 | | Effective tax rate | 30.5% | 24.9% | 30.3% | 25.3% | **Key Insights:** * The effective tax rates for both periods in 2023 were higher than the federal statutory rate of **21%** primarily due to state and local income taxes, executive compensation limitations, and non-deductible expenses[53](index=53&type=chunk)[54](index=54&type=chunk) * A **$1.4 million** valuation allowance against state deferred tax assets was maintained as of July 29, 2023[55](index=55&type=chunk) [Note 8. Net Income Per Share](index=13&type=section&id=Note%208.%20Net%20Income%20Per%20Share) **Net Income Per Common Share (EPS):** | Metric | 13 Weeks Ended July 29, 2023 | 13 Weeks Ended July 30, 2022 | 26 Weeks Ended July 29, 2023 | 26 Weeks Ended July 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $1.08 | $1.28 | $1.40 | $2.32 | | Diluted EPS | $1.06 | $1.25 | $1.38 | $2.27 | **Key Insights:** * Both basic and diluted EPS decreased for the thirteen and twenty-six weeks ended July 29, 2023, compared to the prior year[56](index=56&type=chunk) * Warrants issued to Subordinated Credit Agreement holders are included in EPS calculations due to their near-certain exercise[57](index=57&type=chunk) [Note 9. Equity-Based Compensation](index=14&type=section&id=Note%209.%20Equity-Based%20Compensation) - The J.Jill, Inc. Omnibus Equity Incentive Plan (A&R Plan) has **2,043,453 shares** reserved, with **1,117,373 shares** remaining for future issuance as of July 29, 2023[59](index=59&type=chunk) - Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) were granted[60](index=60&type=chunk) - RSUs vest in **1-3 annual installments**, while PSUs are based on Adjusted EBITDA and annualized absolute total shareholder return (TSR) goals, with potential payouts ranging from **0% to 200%** of target shares[62](index=62&type=chunk)[63](index=63&type=chunk) **Equity-Based Compensation Expense (in thousands):** | Period | 2023 | 2022 | | :-------------------- | :----- | :----- | | 13 Weeks Ended July | $937 | $976 | | 26 Weeks Ended July | $1,815 | $1,718 | **Key Insights:** * As of July 29, 2023, there was **$5.4 million** of unrecognized compensation expense for RSUs (weighted-average service period of **1.9 years**) and **$1.7 million** for PSUs (weighted-average service period of **2.5 years**)[66](index=66&type=chunk)[67](index=67&type=chunk) [Note 10. Related Party Transactions](index=15&type=section&id=Note%2010.%20Related%20Party%20Transactions) - TowerBrook Capital Partners, LP controls a majority of J.Jill's voting stock, making it a controlled company[68](index=68&type=chunk) - The Subordinated Credit Agreement with related parties was repaid in full on April 5, 2023[69](index=69&type=chunk) **Interest Expense, Net - Related Party (in thousands):** | Period | 2023 | 2022 | | :-------------------- | :----- | :----- | | 13 Weeks Ended July | $0 | $929 | | 26 Weeks Ended July | $1,074 | $1,731 | [Note 11. Commitments and Contingencies](index=15&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) - The Company is subject to various legal proceedings in the ordinary course of business but does not believe their resolution would have a material adverse effect on its financial condition or operations[72](index=72&type=chunk) - Reserves are established for probable and estimable losses [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes J.Jill's financial condition and operating results, covering business overview, performance metrics, Adjusted EBITDA reconciliation, and liquidity analysis [Overview](index=16&type=section&id=Overview) - J.Jill is a national lifestyle brand offering apparel, footwear, and accessories designed for women, operating through over 200 stores nationwide and a robust e-commerce platform, headquartered outside Boston[76](index=76&type=chunk) [Factors Affecting Our Operating Results](index=16&type=section&id=Factors%20Affecting%20Our%20Operating%20Results) - Operating results are influenced by overall economic trends (consumer confidence, inflation), consumer preferences and fashion trends, intense retail competition, the implementation of strategic initiatives (e-commerce, information systems upgrades), pricing strategies, merchandise mix, supply chain issues, and potential changes in tax laws and regulations[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) [How We Assess the Performance of Our Business](index=17&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) - Key performance metrics include net sales (impacted by customer base, product assortment, marketing, and omnichannel migration), total company comparable sales (performance of existing stores and Direct channel), number of stores, gross profit/margin, costs of goods sold (COGS), selling, general and administrative (SG&A) expenses, and non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk)[92](index=92&type=chunk) - COGS variability is driven by raw materials, transportation, freight costs, energy prices, currency fluctuations, and commodity prices[89](index=89&type=chunk) - SG&A expenses generally do not vary proportionately with net sales, leading to higher percentages in lower-volume periods[91](index=91&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin](index=18&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA%20and%20Calculation%20of%20Adjusted%20EBITDA%20Margin) **Adjusted EBITDA and Margin (in thousands):** | Metric | 13 Weeks Ended July 29, 2023 | 13 Weeks Ended July 30, 2022 | Change (YoY) | 26 Weeks Ended July 29, 2023 | 26 Weeks Ended July 30, 2022 | Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net income | $15,222 | $17,805 | (14.5%) | $19,818 | $32,220 | (38.5%) | | Adjusted EBITDA | $34,545 | $35,572 | (2.9%) | $66,408 | $66,869 | (0.7%) | | Adjusted EBITDA margin | 22.2% | 22.2% | 0.0 ppt | 21.8% | 21.1% | 0.7 ppt | **Key Insights:** * Adjusted EBITDA for the thirteen weeks decreased slightly by **2.9%**, while the margin remained stable at **22.2%**[95](index=95&type=chunk) * For the twenty-six weeks, Adjusted EBITDA decreased by **0.7%**, but the margin improved by **0.7 percentage points** to **21.8%**[95](index=95&type=chunk) * The 2023 twenty-six-week period includes a **$12.7 million** loss on debt refinancing as a significant adjustment[95](index=95&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) [Thirteen weeks ended July 29, 2023 Compared to Thirteen weeks ended July 30, 2022](index=19&type=section&id=Thirteen%20weeks%20ended%20July%2029,%202023%20Compared%20to%20Thirteen%20weeks%20ended%20July%2030,%202022) **Financial Performance (13 Weeks Ended July):** | Metric | July 29, 2023 | July 30, 2022 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | :--------- | | Net sales | $155,669 | $160,343 | $(4,674) | (2.9%) | | Costs of goods sold | $44,260 | $47,869 | $(3,609) | (7.5%) | | Gross profit | $111,409 | $112,474 | $(1,065) | (0.9%) | | Gross margin | 71.6% | 70.1% | 1.5 ppt | N/A | | SG&A expenses | $83,365 | $84,281 | $(916) | (1.1%) | | Operating income | $28,044 | $28,193 | $(149) | (0.5%) | | Interest expense, net | $6,157 | $3,547 | $2,610 | 73.6% | | Net income | $15,222 | $17,805 | $(2,583) | (14.5%) | **Key Insights:** * The decrease in net sales was primarily driven by a **1.3% decrease** in total company comparable sales[96](index=96&type=chunk) * Gross margin improved due to lower freight costs[97](index=97&type=chunk) * SG&A expenses decreased mainly due to lower depreciation and amortization[99](index=99&type=chunk)[100](index=100&type=chunk) * Net income declined due to increased interest expense and a higher effective tax rate (**30.5% vs 24.9%**)[102](index=102&type=chunk)[103](index=103&type=chunk) [Twenty-six weeks ended July 29, 2023 Compared to Twenty-six weeks ended July 30, 2022](index=20&type=section&id=Twenty-six%20weeks%20ended%20July%2029,%202023%20Compared%20to%20Twenty-six%20weeks%20ended%20July%2030,%202022) **Financial Performance (26 Weeks Ended July):** | Metric | July 29, 2023 | July 30, 2022 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | :--------- | | Net sales | $305,089 | $317,412 | $(12,323) | (3.9%) | | Costs of goods sold | $86,140 | $95,475 | $(9,335) | (9.8%) | | Gross profit | $218,949 | $221,937 | $(2,988) | (1.3%) | | Gross margin | 71.8% | 69.9% | 1.9 ppt | N/A | | SG&A expenses | $165,511 | $169,859 | $(4,348) | (2.6%) | | Operating income | $53,438 | $52,078 | $1,360 | 2.6% | | Loss on debt refinancing | $12,702 | — | $12,702 | N/A | | Interest expense, net | $11,214 | $7,205 | $4,009 | 55.6% | | Net income | $19,818 | $32,220 | $(12,402) | (38.5%) | **Key Insights:** * Net sales **decreased by 3.9%**, driven by a **2.0% decrease** in total company comparable sales[104](index=104&type=chunk)[105](index=105&type=chunk) * Gross margin improved due to lower freight costs[107](index=107&type=chunk) * Operating income increased by **2.6%**, but net income significantly decreased by **38.5%** primarily due to the **$12.7 million** loss on debt refinancing and higher interest expense[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) * SG&A expenses decreased due to lower compensation and depreciation/amortization[108](index=108&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) [General](index=21&type=section&id=General) - Primary liquidity sources are cash from operating activities and availability under the ABL facility[113](index=113&type=chunk) - As of July 29, 2023, the Company had **$48.9 million** in cash and **$34.2 million** of total availability under its ABL Facility[113](index=113&type=chunk) - On April 5, 2023, J.Jill entered into a new **$175.0 million** Term Loan Credit Agreement, maturing May 8, 2028, to fully repay previous Priming and Subordinated Credit Agreements[114](index=114&type=chunk)[117](index=117&type=chunk) - The ABL Credit Agreement maturity was also extended to May 10, 2028[117](index=117&type=chunk) - The Company was in compliance with all covenants under the Term Loan Credit Agreement as of July 29, 2023[116](index=116&type=chunk) [Cash Flow Analysis](index=22&type=section&id=Cash%20Flow%20Analysis) **Cash Flow Summary (26 Weeks Ended July, in thousands):** | Activity | July 29, 2023 | July 30, 2022 | | :-------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $35,615 | $35,457 | | Net cash used in investing activities | $(7,105) | $(2,161) | | Net cash used in financing activities | $(66,660) | $(7,397) | - Net cash provided by operating activities increased slightly by **$0.2 million**, driven by improved operating performance (excluding debt refinancing loss) and a **$1.0 million decrease** in cash used for working capital[120](index=120&type=chunk) - Net cash used in investing activities increased to **$7.1 million** due to higher purchases of property and equipment and capitalized software[123](index=123&type=chunk) - Net cash used in financing activities significantly increased to **$66.7 million**, primarily due to the repayment of the previously existing Priming and Subordinated Credit Agreements, partially offset by proceeds from the new Term Loan[124](index=124&type=chunk) [Dividends](index=22&type=section&id=Dividends) - Future cash dividends are at the discretion of the board of directors, dependent on earnings, capital requirements, legal restrictions, financial condition, and debt agreement restrictions[125](index=125&type=chunk) - As a holding company, J.Jill's ability to pay dividends relies on cash received from its operating subsidiaries[125](index=125&type=chunk) [Credit Facilities](index=22&type=section&id=Credit%20Facilities) - As of July 29, 2023, there were no short-term borrowings outstanding under the ABL Facility[126](index=126&type=chunk) - The Company had **$34.2 million** in additional borrowing capacity and **$5.8 million** in outstanding letters of credit, which reduced availability[126](index=126&type=chunk) [Contractual Obligations](index=23&type=section&id=Contractual%20Obligations) - The Company's contractual obligations primarily consist of debt obligations, interest payments, operating leases, and purchase orders for merchandise inventory, which impact its short-term and long-term liquidity and capital resource needs[127](index=127&type=chunk) [Contingencies](index=23&type=section&id=Contingencies) - J.Jill is subject to various legal proceedings in the ordinary course of business, but management does not believe their resolution would have a material adverse effect[128](index=128&type=chunk) - Reserves are established for probable and estimable losses [Off-Balance Sheet Arrangements](index=23&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company is not a party to any off-balance sheet arrangements[129](index=129&type=chunk) [Critical Accounting Policies and Significant Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) - Significant accounting estimates involve revenue recognition (gift card breakage, merchandise returns), inventory valuation, and impairment assessments for goodwill, other indefinite-lived intangible assets, and long-lived assets[130](index=130&type=chunk) - No significant changes to these policies or estimates have occurred since the 2022 Annual Report[131](index=131&type=chunk) [Special Note Regarding Forward-Looking Statements](index=23&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) - This Quarterly Report contains forward-looking statements that involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[132](index=132&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which reflect views only as of the report date, and the Company undertakes no obligation to update them[133](index=133&type=chunk)[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states no material changes in market risk exposure during Q2 FY2023, referring to the 2022 Annual Report for details - No material changes in the Company's exposure to market risk occurred during the second quarter of Fiscal Year 2023[135](index=135&type=chunk) - Further details are available in the 2022 Annual Report[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of July 29, 2023, with no material changes in internal control over financial reporting during Q2 FY2023 - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of July 29, 2023[136](index=136&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the second quarter of Fiscal Year 2023[137](index=137&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 11 for legal proceedings, expecting no material adverse effects from current cases - Information regarding legal proceedings is provided in Note 11 to the condensed consolidated financial statements[139](index=139&type=chunk) - Management does not believe current legal proceedings will have a material adverse effect[139](index=139&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section reports no material changes to previously disclosed risk factors, acknowledging potential for new or currently immaterial risks - No material changes to the risk factors previously disclosed in the 2022 Annual Report have occurred[140](index=140&type=chunk) - However, additional risk factors not presently known or deemed immaterial may impair the business[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[141](index=141&type=chunk) [Item 3. Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[142](index=142&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[143](index=143&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) The company reported no other information to disclose under this item - None[144](index=144&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished as part of this Quarterly Report, including corporate governance documents, certifications by executive officers, and Inline XBRL data files - Exhibits include the Certificate of Incorporation, Bylaws, and certifications from the Principal Executive Officer and Principal Financial Officer as required by the Securities Exchange Act of 1934 and Sarbanes-Oxley Act of 2002[147](index=147&type=chunk) - The report also includes Inline XBRL documents for the instance, taxonomy extension schema, calculation, definition, label, and presentation linkbase documents, along with the Cover Page Interactive Data File[150](index=150&type=chunk) [SIGNATURES](index=27&type=section&id=SIGNATURES) - The report was duly signed on August 31, 2023, by Claire Spofford, Chief Executive Officer, President and Director, and Mark Webb, Executive Vice President, Chief Financial and Operating Officer, on behalf of J.Jill, Inc[152](index=152&type=chunk)[154](index=154&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Commission File Number: 001-38026 J.Jill, Inc. (Exact Name of Registrant as Specified in its Charter) | Delaware | 45-1459825 | | --- | --- | | (State or oth ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) J.Jill is a national omnichannel lifestyle brand offering apparel, footwear, and accessories for affluent women aged 45 and older - J.Jill is a national lifestyle brand providing apparel, footwear, and accessories, targeting women aged 45 and older with a median annual household income of approximately **$150,000**[20](index=20&type=chunk)[22](index=22&type=chunk) Fiscal Year 2022 Channel Sales Mix | Channel | Percentage of Net Sales | | :--- | :--- | | Retail | 53% | | Direct (Ecommerce/Catalog) | 47% | Store Fleet Optimization (Fiscal Years 2019-2022) | Fiscal Year | Stores Opened | Stores Closed | Total Stores at Year-End | | :--- | :--- | :--- | :--- | | 2019 | 11 | (6) | 287 | | 2020 | — | (20) | 267 | | 2021 | — | (14) | 253 | | 2022 | 1 | (11) | 243 | - The company's growth strategy focuses on growing the value of its customer base, increasing direct sales, strengthening omnichannel capabilities, and enhancing its product assortment, including inclusive sizing[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - In Fiscal Year 2022, approximately **80%** of products were sourced through agents and **20%** directly from suppliers, with merchandise sourced globally from **11 countries** No single supplier accounts for more than **20%** of merchandise purchased by volume[54](index=54&type=chunk)[56](index=56&type=chunk) - As of January 28, 2023, the company employed **1,115 full-time** and **1,869 part-time** associates[63](index=63&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including macroeconomic sensitivity, intense competition, operational complexities, substantial debt, and information security threats - **Business & Industry Risks:** The business is sensitive to economic downturns, consumer discretionary spending, and the COVID-19 pandemic It faces intense competition and must continually respond to changing fashion trends and maintain its brand image[75](index=75&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk)[83](index=83&type=chunk) - **Indebtedness Risks:** The company has a substantial amount of debt under its Credit Facilities, which contain restrictive covenants that limit operational and financial flexibility The Priming Facility and ABL Facility mature in **May 2024**, and the Subordinated Term Loan Facility matures in **November 2024**, creating refinancing risk[115](index=115&type=chunk)[117](index=117&type=chunk)[122](index=122&type=chunk) - **Operational & Sourcing Risks:** The company relies on independent third-party suppliers, primarily outside the U.S., exposing it to risks of production and shipment disruptions It also depends on a single distribution center in Tilton, New Hampshire, making it vulnerable to operational interruptions[102](index=102&type=chunk)[104](index=104&type=chunk)[113](index=113&type=chunk) - **Corporate & Governance Risks:** As a **'controlled company'** by TowerBrook Capital Partners LP, J.Jill is exempt from certain NYSE corporate governance requirements, such as having a majority of independent directors TowerBrook's interests may conflict with those of other stockholders[130](index=130&type=chunk)[131](index=131&type=chunk) - **Information Security Risks:** The business depends on information systems for all aspects of its operations and is exposed to risks from security breaches, data loss, and evolving data privacy regulations[154](index=154&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) [Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[176](index=176&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) J.Jill leases all its properties, including its corporate headquarters, a 520,000 square foot distribution center, and 243 retail stores across 42 states - The company leases its principal executive offices in Quincy, MA, and its **520,000 square foot** distribution and customer contact center in Tilton, New Hampshire[177](index=177&type=chunk) - As of January 28, 2023, the company operated **243 retail stores** in **42 states**, all of which are leased The average store size is approximately **3,700 square feet**[178](index=178&type=chunk) Store Lease Expiration Schedule | Fiscal Years Lease Terms Expire | Number of Stores | | :--- | :--- | | 2023 – 2025 | 138 | | 2026 – 2028 | 86 | | 2029 – 2031 | 17 | | 2032 and later | 2 | [Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently party to any legal proceedings that it believes would have a material adverse effect on its business or financial condition - The company is not presently party to any material legal proceedings[181](index=181&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[182](index=182&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under 'JILL', underwent a 1-for-5 reverse stock split, and has paid one special cash dividend, with future dividends restricted by debt agreements - The company's common stock began trading on the NYSE under the symbol "JILL" on **March 9, 2017**[184](index=184&type=chunk) - A **1-for-5 reverse stock split** was effective on **November 9, 2020** All share and per-share amounts have been retroactively adjusted[186](index=186&type=chunk) - The company paid one special cash dividend of approximately **$50.2 million** on **April 1, 2019** Future dividends are restricted by the company's credit agreements[187](index=187&type=chunk)[188](index=188&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For Fiscal Year 2022, J.Jill reported increased net sales and gross margin, a significant turnaround to net income, and solid liquidity, with debt maturities approaching [Results of Operations](index=38&type=section&id=Results%20of%20Operations) For Fiscal Year 2022, net sales increased by **5.1%** to **$615.3 million**, gross profit rose **7.0%**, and the company achieved a net income of **$42.2 million** Consolidated Results of Operations (FY 2022 vs. FY 2021) | (in thousands) | FY 2022 | FY 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $615,268 | $585,206 | $30,062 | 5.1% | | Gross profit | $422,050 | $394,436 | $27,614 | 7.0% | | Operating income | $78,734 | $58,720 | $20,014 | 34.1% | | Net income (loss) | $42,175 | $(28,143) | $70,318 | 249.9% | - The **5.1%** increase in net sales was driven by a total company comparable sales increase of **6.5%**, benefiting from higher full-price sales[215](index=215&type=chunk) - Gross margin improved to **68.6%** from **67.4%**, largely due to favorable promotional rates and strong full-price sales in the Retail channel[217](index=217&type=chunk) - Selling, general and administrative (SG&A) expenses increased by **1.8%** to **$341.9 million**, driven by higher costs in marketing, compensation, and shipping[218](index=218&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by cash from operations and its ABL facility, with **$87.1 million** in cash and **$30.0 million** ABL availability, and plans to refinance its Priming Credit Agreement maturing in May 2024 - As of January 28, 2023, the company had **$87.1 million** in cash and cash equivalents and **$30.0 million** of total availability under its **$40.0 million** ABL Facility[223](index=223&type=chunk) Cash Flow Summary (in thousands) | | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $74,425 | $74,999 | | Net cash used in investing activities | $(15,067) | $(5,474) | | Net cash used in financing activities | $(8,262) | $(37,975) | Long-Term Debt as of January 28, 2023 (Carrying Value, in thousands) | Facility | Carrying Value | | :--- | :--- | | Priming Facility | $198,941 | | Subordinated Term Loan Facility | $9,719 | | **Net long-term debt** | **$205,236** | - The Priming Credit Agreement matures on **May 8, 2024**, and the company intends to refinance this debt[238](index=238&type=chunk) [Critical Accounting Policies and Significant Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) Critical accounting policies involve significant estimates for revenue recognition, inventory valuation, and impairment assessments for goodwill, trade name, and other long-lived assets - Key critical accounting policies involve significant estimates for revenue recognition (sales returns, gift card breakage), inventory valuation (obsolescence reserves), and asset impairment assessments[247](index=247&type=chunk) - Goodwill and the company's trade name are tested for impairment annually or more frequently if indicators exist The company uses qualitative and quantitative (discounted cash flow) approaches for these tests[255](index=255&type=chunk)[257](index=257&type=chunk)[261](index=261&type=chunk) - Long-lived assets, such as property, equipment, and operating lease assets, are assessed for impairment whenever events indicate their carrying value may not be recoverable[264](index=264&type=chunk)[265](index=265&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on variable-rate borrowings, with a **10%** rate change impacting net income by approximately **$1.6 million** - The company is subject to interest rate risk from its variable-rate borrowings under the Priming Facility and Subordinated Term Loan Facility[271](index=271&type=chunk) - Based on outstanding borrowings as of January 28, 2023, a **10%** change in the interest rate would have affected net income by **$1.6 million** during Fiscal Year 2022[271](index=271&type=chunk) [Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years ended January 28, 2023, and January 29, 2022, including balance sheets, income statements, equity, and cash flows Consolidated Balance Sheet Data (in thousands) | | Jan 28, 2023 | Jan 29, 2022 | | :--- | :--- | :--- | | Total Current Assets | $160,820 | $123,248 | | Total Assets | $466,417 | $451,849 | | Total Current Liabilities | $126,987 | $138,745 | | Total Liabilities | $466,636 | $496,503 | | Total Shareholders' Deficit | $(219) | $(44,654) | Net Income (Loss) Per Share | | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Basic | $3.03 | $(2.26) | $(15.22) | | Diluted | $2.95 | $(2.26) | $(15.22) | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=45&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[273](index=273&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of January 28, 2023, affirmed by an unqualified audit opinion - Management concluded that the company's disclosure controls and procedures were effective as of **January 28, 2023**[275](index=275&type=chunk) - Management assessed the company's internal control over financial reporting as effective as of **January 28, 2023**, based on the COSO framework[278](index=278&type=chunk) - The independent registered public accounting firm, Grant Thornton LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[279](index=279&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=47&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement[285](index=285&type=chunk) [Executive Compensation](index=47&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement[287](index=287&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=47&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement[288](index=288&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=47&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement[289](index=289&type=chunk) [Principal Accounting Fees and Services](index=47&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement[290](index=290&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section provides an index of all financial statements, schedules, and exhibits filed with or incorporated by reference into the Form 10-K - This section provides an index of all financial statements, schedules, and exhibits filed with or incorporated by reference into the Form 10-K[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) [Form 10-K Summary](index=51&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a Form 10-K summary - None[297](index=297&type=chunk)

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2022 was $27.5 million, up from $27 million in Q3 2021, with a margin of 18.3% compared to 17.8% in the prior year [5][19] - Total company sales for Q3 2022 were $150 million, down 1% year-over-year, with comparable sales also down 1.2% [16] - Gross profit was $105 million, an increase of $500,000 compared to Q3 2021, with a gross margin of 69.9%, up 100 basis points from the previous year [17] Business Line Data and Key Metrics Changes - Store sales decreased by approximately 2.2% compared to Q3 2021, attributed to 5% fewer stores, although higher average unit retails partially offset lower traffic [16] - Direct sales accounted for 46% of total sales, with a slight increase of 0.4% compared to the same quarter last year [16] Market Data and Key Metrics Changes - The company noted a hesitancy from customers due to inflation and macroeconomic concerns, but unique and special items continued to see strong demand [6][30] - The "Wearever" sub-brand performed well, as customers sought versatile pieces for various occasions [7] Company Strategy and Development Direction - The "Welcome Everybody" and inclusive sizing initiative launched in August 2022 aimed to modernize the brand and engage both existing and new customers [8][9] - A pilot collection called "Pure Jill Elements" was tested, focusing on unique, artisanal pieces, which received positive feedback from the target demographic [10] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the remainder of the year due to macroeconomic headwinds but remained optimistic about customer engagement during the holiday season [13] - The company plans to take promotional pricing actions as necessary to manage inventory levels effectively [21] Other Important Information - Cash flow from operations was $31 million for Q3, with an end-of-quarter cash balance of just over $90 million [20] - The company plans to close a net of four stores in Q4 2022, ending the year with 243 stores [24] Q&A Session Summary Question: Can you expand on the top line performance and product category acceptance? - Management noted an up-and-down cadence throughout the quarter, with some resistance in basic categories but strong demand for unique items like dresses [30] Question: What is the outlook for moderating freight expenses? - Freight costs have moderated, contributing to improved gross margins, with expectations for continued benefits into 2023 [33] Question: Can you break down the store comps regarding price versus traffic mix? - Strategic price increases have been implemented, offsetting inflationary pressures, with a focus on maintaining a full-price promotional strategy [39] Question: Can you discuss the cash balance and potential uses for cash? - The cash balance was primarily driven by gross margin improvements, with potential uses including addressing the balance sheet and fueling growth initiatives [40] Question: What are the factors leading to EBITDA margin compression in Q4? - Increased SG&A expenses due to holiday operating hours and strategic marketing investments are expected to pressure margins, despite flat gross margins [43]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents J.Jill, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and detailed accounting notes [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Presents J.Jill, Inc.'s financial position, detailing assets, liabilities, and shareholders' deficit at specific dates | Metric | October 29, 2022 (in thousands) | January 29, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | | **Assets** | | | | Cash and cash equivalents | $90,080 | $35,957 | | Total current assets | $184,678 | $123,248 | | Total assets | $489,400 | $451,849 | | **Liabilities and Shareholders' Deficit** | | | | Total current liabilities | $148,823 | $138,745 | | Total liabilities | $491,392 | $496,503 | | Total shareholders' deficit | $(1,992) | $(44,654) | | Total liabilities and shareholders' deficit | $489,400 | $451,849 | - The company's cash and cash equivalents significantly increased from **$35.96 million** at January 29, 2022, to **$90.08 million** at October 29, 2022[11](index=11&type=chunk) - Total shareholders' deficit improved substantially from **$(44.65) million** at January 29, 2022, to **$(1.99) million** at October 29, 2022[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Presents J.Jill, Inc.'s financial performance, detailing net sales, gross profit, operating income, and net income (loss) | Metric | 13 Weeks Ended Oct 29, 2022 (in thousands) | 13 Weeks Ended Oct 30, 2021 (in thousands) | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net sales | $150,204 | $151,731 | $467,616 | $440,053 | | Gross profit | $105,023 | $104,535 | $326,960 | $301,714 | | Operating income | $18,850 | $19,004 | $70,928 | $51,198 | | Income (loss) before provision for income taxes | $13,410 | $13,830 | $56,552 | $(23,288) | | Net income (loss) | $8,919 | $11,238 | $41,139 | $(31,718) | | Basic EPS | $0.64 | $0.81 | $2.95 | $(2.65) | | Diluted EPS | $0.62 | $0.79 | $2.89 | $(2.65) | - For the thirty-nine weeks ended October 29, 2022, net sales increased by **6.3% to $467.6 million**, and the company reported a net income of **$41.1 million**, a significant turnaround from a net loss of **$31.7 million** in the prior year period[13](index=13&type=chunk) - Diluted EPS for the thirty-nine weeks ended October 29, 2022, was **$2.89**, compared to a diluted loss per share of **$(2.65)** in the same period last year[13](index=13&type=chunk) [Condensed Consolidated Statements of Shareholders' Deficit (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Deficit%20(Unaudited)) Outlines changes in J.Jill, Inc.'s shareholders' deficit, including net income (loss) and equity-based compensation | Metric | January 29, 2022 (in thousands) | October 29, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | | Total Shareholders' Deficit | $(44,654) | $(1,992) | | Net income (loss) (39 weeks) | N/A | $41,139 | | Equity-based compensation (39 weeks) | N/A | $2,615 | | Surrender of shares to pay withholding taxes (39 weeks) | N/A | $(1,092) | - The total shareholders' deficit significantly decreased from **$(44.65) million** at January 29, 2022, to **$(1.99) million** at October 29, 2022, primarily driven by net income and equity-based compensation[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Presents J.Jill, Inc.'s cash flows from operating, investing, and financing activities, and the resulting net change in cash | Metric | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $41,139 | $(31,718) | | Net cash provided by operating activities | $66,720 | $53,423 | | Net cash used in investing activities | $(5,173) | $(2,488) | | Net cash used in financing activities | $(7,424) | $(37,869) | | Net change in cash | $54,123 | $13,066 | | Cash and cash equivalents, End of Period | $90,080 | $17,473 | - Net cash provided by operating activities increased by **$13.3 million** to **$66.7 million** for the thirty-nine weeks ended October 29, 2022, primarily due to a positive change in net income[16](index=16&type=chunk)[120](index=120&type=chunk) - Cash and cash equivalents at the end of the period significantly increased to **$90.08 million** from **$17.47 million** in the prior year, reflecting a net change in cash of **$54.12 million**[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides detailed explanations and disclosures for J.Jill, Inc.'s unaudited condensed consolidated financial statements [1. Description of Business](index=9&type=section&id=1.%20Description%20of%20Business) Outlines J.Jill, Inc.'s core business as an omnichannel women's apparel retailer - J.Jill, Inc. is a premier omnichannel retailer specializing in women's apparel, operating 247 stores nationwide and a robust e-commerce platform[18](index=18&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Summarizes J.Jill, Inc.'s key accounting policies, including revenue recognition, cost of goods sold, and recent pronouncement adoptions - The interim condensed consolidated financial statements are unaudited and prepared in accordance with GAAP, omitting certain disclosures per SEC rules for interim reporting[19](index=19&type=chunk) - Cost of goods sold includes direct merchandise costs, inventory adjustments, and inbound freight, but excludes shipping to customers, distribution, buying, store occupancy, and depreciation/amortization, which are in SG&A[20](index=20&type=chunk) - Selling, general and administrative expenses primarily consist of payroll, store occupancy, depreciation/amortization, advertising, IT, freight to customers, insurance, and professional fees[22](index=22&type=chunk) - The company adopted ASU 2019-12 (Income Taxes) in Q1 FY2022 with no material impact, and ASU 2020-04 (Reference Rate Reform) had no impact[24](index=24&type=chunk)[25](index=25&type=chunk) [3. Revenues](index=10&type=section&id=3.%20Revenues) Details J.Jill, Inc.'s revenue disaggregation by source and contract liabilities, including gift card redemptions | Revenue Source | 13 Weeks Ended Oct 29, 2022 (in thousands) | 13 Weeks Ended Oct 30, 2021 (in thousands) | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Retail | $81,800 | $83,629 | $253,093 | $223,973 | | Direct | $68,404 | $68,102 | $214,523 | $216,080 | | Net revenues | $150,204 | $151,731 | $467,616 | $440,053 | - For the thirty-nine weeks ended October 29, 2022, Retail revenue increased by **$29.12 million (13.0%)** while Direct revenue slightly decreased by **$1.56 million (0.7%)**[26](index=26&type=chunk) | Contract Liabilities | October 29, 2022 (in thousands) | January 29, 2022 (in thousands) | | :------------------- | :------------------------------ | :------------------------------ | | Signing bonus | $118 | $224 | | Unredeemed gift cards | $5,181 | $7,410 | | Total contract liabilities | $5,299 | $7,634 | - The company recognized **$7.3 million** in revenue from gift card redemptions and breakage for the thirty-nine weeks ended October 29, 2022, up from **$6.9 million** in the prior year[28](index=28&type=chunk) [4. Asset Impairments](index=11&type=section&id=4.%20Asset%20Impairments) Discusses J.Jill, Inc.'s noncash impairment charges for long-lived assets, goodwill, and intangible assets - The company recorded noncash impairment charges of **$1.3 million** for long-lived assets during the thirty-nine weeks ended October 29, 2022, primarily related to a right-of-use asset for corporate headquarters and leasehold improvements/furniture at five store locations[31](index=31&type=chunk) - Goodwill balance remained at **$59.7 million**, with accumulated impairment losses of **$137.3 million** as of October 29, 2022[33](index=33&type=chunk) | Intangible Asset | October 29, 2022 Carrying Amount (in thousands) | January 29, 2022 Carrying Amount (in thousands) | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | | Trade name | $34,000 | $34,000 | | Customer relationships | $41,069 | $46,711 | | Total intangible assets | $75,069 | $80,711 | - Total amortization expense for amortizable intangible assets was **$5.6 million** for the thirty-nine weeks ended October 29, 2022, down from **$6.2 million** in the prior year[36](index=36&type=chunk) [5. Debt](index=12&type=section&id=5.%20Debt) Details J.Jill, Inc.'s debt structure, including Priming Term Loan, Subordinated Term Loan, ABL Facility, and covenant compliance | Debt Instrument | October 29, 2022 Balance Sheet (in thousands) | January 29, 2022 Balance Sheet (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Priming Term Loan due 2024 | $199,185 | $199,250 | | Subordinated Term Loan due 2024 | $8,428 | $5,605 | | Existing Term Loan due 2022 | — | $4,953 | | Total Net Long-Term Debt | $204,874 | $202,116 | - The Existing Term Loan was repaid on May 8, 2022[40](index=40&type=chunk) - The Priming Term Loan matures on May 8, 2024, and the Subordinated Term Loan matures on November 8, 2024[41](index=41&type=chunk)[45](index=45&type=chunk) - The ABL Facility maturity date was extended to May 8, 2024, and the benchmark interest rate changed from LIBOR to the secured overnight financing rate[49](index=49&type=chunk) - The company was in compliance with all debt covenants as of October 29, 2022, and January 29, 2022[43](index=43&type=chunk)[45](index=45&type=chunk)[50](index=50&type=chunk) - Available borrowing capacity under the ABL Facility was **$33.0 million** as of October 29, 2022, up from **$22.6 million** at January 29, 2022[51](index=51&type=chunk) [6. Fair Value Measurements](index=14&type=section&id=6.%20Fair%20Value%20Measurements) Explains J.Jill, Inc.'s fair value measurements for debt instruments, using observable market prices as Level 2 inputs - The company's debt instruments (Priming Loan, Subordinated Facility) are recorded at cost, with fair value determined using observable market prices (Level 2 inputs)[55](index=55&type=chunk) | Financial Instrument | Carrying Value (Oct 29, 2022, in thousands) | Fair Value (Oct 29, 2022, in thousands) | | :------------------- | :---------------------------------------- | :-------------------------------------- | | Total debt | $207,613 | $216,381 | [7. Income Taxes](index=15&type=section&id=7.%20Income%20Taxes) Presents J.Jill, Inc.'s income tax provision and effective tax rates for the reported periods | Metric | 13 Weeks Ended Oct 29, 2022 (in thousands) | 13 Weeks Ended Oct 30, 2021 (in thousands) | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Income tax provision | $4,491 | $2,592 | $15,413 | $8,430 | | Effective tax rate | 33.5% | 18.8% | 27.3% | (36.1)% | - The effective tax rate for the thirty-nine weeks ended October 29, 2022, was **27.3%**, differing from the federal statutory rate due to state/local income taxes, return to provision adjustments, and partial release of valuation allowance on state deferred tax assets[61](index=61&type=chunk)[114](index=114&type=chunk) [8. Net Income (Loss) Per Share](index=16&type=section&id=8.%20Net%20Income%20(Loss)%20Per%20Share) Details J.Jill, Inc.'s basic and diluted net income (loss) per share, including weighted average common shares | Metric | 13 Weeks Ended Oct 29, 2022 | 13 Weeks Ended Oct 30, 2021 | 39 Weeks Ended Oct 29, 2022 | 39 Weeks Ended Oct 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to common shareholders (in thousands) | $8,919 | $11,238 | $41,139 | $(31,718) | | Basic EPS | $0.64 | $0.81 | $2.95 | $(2.65) | | Diluted EPS | $0.62 | $0.79 | $2.89 | $(2.65) | | Weighted average common shares, diluted | 14,297,925 | 14,174,218 | 14,240,486 | 11,971,405 | - Warrants became exercisable into **3,820,748** shares of common stock on May 31, 2021, and were reclassified to Additional paid-in capital, impacting diluted EPS calculations[64](index=64&type=chunk)[65](index=65&type=chunk) [9. Equity-Based Compensation](index=16&type=section&id=9.%20Equity-Based%20Compensation) Reports J.Jill, Inc.'s equity-based compensation expense for the specified periods | Period | Equity-Based Compensation Expense (in thousands) | | :--------------------------------------- | :--------------------------------------------- | | 13 Weeks Ended Oct 29, 2022 | $900 | | 13 Weeks Ended Oct 30, 2021 | $800 | | 39 Weeks Ended Oct 29, 2022 | $2,600 | | 39 Weeks Ended Oct 30, 2021 | $1,900 | - Equity-based compensation expense increased to **$2.6 million** for the thirty-nine weeks ended October 29, 2022, from **$1.9 million** in the prior year[66](index=66&type=chunk) [10. Related Party Transactions](index=16&type=section&id=10.%20Related%20Party%20Transactions) Discloses J.Jill, Inc.'s related party transactions, primarily focusing on interest expense associated with the Subordinated Facility | Related Party Expense | 13 Weeks Ended Oct 29, 2022 (in thousands) | 13 Weeks Ended Oct 30, 2021 (in thousands) | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Interest expense, net – related party | $1,100 | $600 | $2,800 | $1,600 | | Fair value adjustment of warrants – related party | — | — | — | $57,000 | - Interest expense, net – related party, associated with the Subordinated Facility, increased to **$2.8 million** for the thirty-nine weeks ended October 29, 2022, from **$1.6 million** in the prior year[68](index=68&type=chunk) [11. Commitments and Contingencies](index=17&type=section&id=11.%20Commitments%20and%20Contingencies) Addresses J.Jill, Inc.'s involvement in legal proceedings and the assessment of their potential financial impact - The company is involved in various legal proceedings in the ordinary course of business but does not believe any will have a material adverse effect on its financial statements[70](index=70&type=chunk) [12. Subsequent Event](index=17&type=section&id=12.%20Subsequent%20Event) Reports a significant post-period event regarding federal income tax payments and refunds for J.Jill, Inc. - In November 2022, the company repaid an **$8.3 million** federal income tax payment received in error from the IRS and subsequently received a **$9.2 million** federal income tax refund, resulting in a net **$0.9 million** increase in operating cash flow in Q4 FY2022[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses J.Jill, Inc.'s financial condition and results of operations, covering performance, liquidity, capital resources, and critical accounting policies [Overview](index=18&type=section&id=Overview) Provides a brief overview of J.Jill, Inc.'s business as a premier omnichannel women's apparel retailer - J.Jill is a premier omnichannel women's apparel retailer with 247 stores and a robust e-commerce platform, focused on delivering an easy, thoughtful, and inspired style[74](index=74&type=chunk) [Factors Affecting Our Operating Results](index=18&type=section&id=Factors%20Affecting%20Our%20Operating%20Results) Identifies key external and internal factors influencing J.Jill, Inc.'s operating results, such as economic trends and competition - Operating results are influenced by overall economic trends (consumer confidence, inflation), consumer preferences and fashion trends, intense retail competition, the timing and returns of strategic initiatives (e-commerce, IT upgrades), pricing strategies, merchandise mix, supply chain issues, and potential changes in tax laws/regulations[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [How We Assess the Performance of Our Business](index=19&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) Explains the key performance metrics J.Jill, Inc. uses to evaluate its business, including net sales, gross profit, and Adjusted EBITDA - Key performance metrics include net sales (Retail and Direct), total company comparable sales, number of stores, gross profit, cost of goods sold (COGS), selling, general and administrative (SG&A) expenses, and Adjusted EBITDA[81](index=81&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - Net sales are driven by active customer base, product assortment, marketing, and customer spending habits, with omnichannel customers spending nearly **three times more** than single-channel customers[82](index=82&type=chunk) - Adjusted EBITDA is a non-GAAP measure used by management and investors to assess operating performance, planning, and forecasting, and is reconciled to net income (loss)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) | Metric | 13 Weeks Ended Oct 29, 2022 (in thousands) | 13 Weeks Ended Oct 30, 2021 (in thousands) | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $8,919 | $11,238 | $41,139 | $(31,718) | | Adjusted EBITDA | $27,523 | $26,960 | $94,392 | $76,591 | | Net sales | $150,204 | $151,731 | $467,616 | $440,053 | | Adjusted EBITDA margin | 18.3% | 17.8% | 20.2% | 17.4% | - Adjusted EBITDA for the thirty-nine weeks ended October 29, 2022, increased by **23.2% to $94.4 million**, with Adjusted EBITDA margin improving to **20.2%** from **17.4%** in the prior year[93](index=93&type=chunk) [Items Affecting Comparability of Financial Results](index=20&type=section&id=Items%20Affecting%20Comparability%20of%20Financial%20Results) Highlights specific items impacting the comparability of J.Jill, Inc.'s financial results between periods, such as impairment charges and warrant adjustments - The thirty-nine weeks ended October 29, 2022, included **$1.4 million** in impairment charges for long-lived assets, while the prior year had none[94](index=94&type=chunk) - Fair value adjustments for warrants and derivative liabilities, totaling **$59.8 million** in the prior year (thirty-nine weeks ended October 30, 2021), were reclassified to equity as of May 31, 2021, and thus had no impact on the current period's results[95](index=95&type=chunk)[96](index=96&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Analyzes J.Jill, Inc.'s financial performance, detailing net sales, gross profit, SG&A, and net income (loss) for the reported periods [Thirteen weeks ended October 29, 2022 Compared to Thirteen weeks ended October 30, 2021](index=21&type=section&id=Thirteen%20weeks%20ended%20October%2029%2C%202022%20Compared%20to%20Thirteen%20weeks%20ended%20October%2030%2C%202021) Compares J.Jill, Inc.'s financial results for the thirteen-week periods, focusing on changes in sales, margins, and net income | Metric | Oct 29, 2022 (in thousands) | Oct 30, 2021 (in thousands) | Change ($) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net sales | $150,204 | $151,731 | $(1,527) | (1.0)% | | Gross profit | $105,023 | $104,535 | $488 | 0.5% | | Gross margin | 69.9% | 68.9% | 1.0 pp | | | Selling, general and administrative expenses | $84,873 | $85,531 | $(658) | (0.8)% | | Operating income | $18,850 | $19,004 | $(154) | (0.8)% | | Net income | $8,919 | $11,238 | $(2,319) | (20.6)% | - Net sales decreased by **1.0%** due to a **1.2%** decrease in total company comparable sales, driven by lower traffic partially offset by higher average transaction value[98](index=98&type=chunk) - Gross margin improved by **1.0 percentage point** to **69.9%**, benefiting from strategic price increases despite higher raw material costs[100](index=100&type=chunk) - SG&A expenses decreased by **0.8%** primarily due to lower occupancy, depreciation, and insurance expenses, partially offset by increased marketing and shipping costs[101](index=101&type=chunk) - Net income decreased by **20.6%** to **$8.9 million**, influenced by a higher income tax provision[97](index=97&type=chunk)[104](index=104&type=chunk) [Thirty-nine weeks ended October 29, 2022 Compared to Thirty-nine weeks ended October 30, 2021](index=22&type=section&id=Thirty-nine%20weeks%20ended%20October%2029%2C%202022%20Compared%20to%20Thirty-nine%20weeks%20ended%20October%2030%2C%202021) Compares J.Jill, Inc.'s financial results for the thirty-nine-week periods, highlighting changes in sales, margins, and net income | Metric | Oct 29, 2022 (in thousands) | Oct 30, 2021 (in thousands) | Change ($) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net sales | $467,616 | $440,053 | $27,563 | 6.3% | | Gross profit | $326,960 | $301,714 | $25,246 | 8.4% | | Gross margin | 69.9% | 68.6% | 1.3 pp | | | Selling, general and administrative expenses | $254,624 | $250,516 | $4,108 | 1.6% | | Operating income | $70,928 | $51,198 | $19,730 | 38.5% | | Income (loss) before provision for income taxes | $56,552 | $(23,288) | $79,840 | (342.8)% | | Net income (loss) | $41,139 | $(31,718) | $72,857 | (229.7)% | - Net sales increased by **6.3%** to **$467.6 million**, driven by a **6.8%** increase in total company comparable sales, benefiting from higher Retail customer traffic, strong full-price sales, and fewer promotions[106](index=106&type=chunk) - Gross margin improved by **1.3 percentage points** to **69.9%**, attributed to an improved merchandise mix and lower promotional discounts[108](index=108&type=chunk)[109](index=109&type=chunk) - SG&A expenses increased by **1.6%** due to higher compensation and marketing expenses, partially offset by decreased occupancy costs from store closures and lease renegotiations[110](index=110&type=chunk) - The company achieved a net income of **$41.1 million**, a significant improvement from a net loss of **$31.7 million** in the prior year, largely due to the absence of fair value adjustments on warrants and derivatives[105](index=105&type=chunk)[112](index=112&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Examines J.Jill, Inc.'s liquidity sources, capital structure, debt compliance, and cash flow activities - Primary liquidity sources are cash from operations and availability under the ABL Facility. As of October 29, 2022, the company had **$90.1 million** in cash and cash equivalents and **$33.0 million** available under its ABL Facility[115](index=115&type=chunk) - The ABL Facility's maturity date was extended to May 8, 2024, and its benchmark interest rate was changed from LIBOR to the secured overnight financing rate[115](index=115&type=chunk) - The company received a total federal income tax refund of **$26.7 million** related to Fiscal Year 2020, benefiting from CARES Act provisions allowing net operating loss carrybacks[116](index=116&type=chunk)[117](index=117&type=chunk) - All debt agreements (Priming Loan, Subordinated Term Loan, ABL) include customary covenants, and the company was in compliance as of October 29, 2022[118](index=118&type=chunk) | Cash Flow Activity | 39 Weeks Ended Oct 29, 2022 (in thousands) | 39 Weeks Ended Oct 30, 2021 (in thousands) | | :------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $66,720 | $53,423 | | Net cash used in investing activities | $(5,173) | $(2,488) | | Net cash used in financing activities | $(7,424) | $(37,869) | - Net cash provided by operating activities increased by **$13.3 million**, primarily due to improved net income[120](index=120&type=chunk) - Net cash used in financing activities significantly decreased to **$7.4 million** from **$37.9 million**, as the prior year included a **$25.0 million** voluntary principal payment on the Priming Loan[124](index=124&type=chunk) [Critical Accounting Policies and Significant Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) Outlines J.Jill, Inc.'s critical accounting estimates, including revenue recognition, inventory valuation, and asset impairment assessments - Critical accounting estimates involve revenue recognition (gift card breakage, merchandise returns), inventory valuation, and impairment assessments for goodwill, indefinite-lived intangible assets, and long-lived assets[130](index=130&type=chunk) - No significant changes to critical accounting policies and estimates were reported since the 2021 Annual Report[131](index=131&type=chunk) [Recent Accounting Pronouncements](index=25&type=section&id=Recent%20Accounting%20Pronouncements) Refers to Note 2 for details on J.Jill, Inc.'s recently adopted accounting standards and their estimated effects - Refer to Note 2 for details on recently adopted accounting standards and their estimated effects[132](index=132&type=chunk) [Special Note Regarding Forward-Looking Statements](index=25&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) Warns readers about forward-looking statements in the report, emphasizing inherent risks and uncertainties that may cause actual results to differ - The report contains forward-looking statements identified by terms like 'anticipate,' 'expect,' and 'will,' which involve known and unknown risks and uncertainties[133](index=133&type=chunk)[134](index=134&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially due to factors discussed in 'Risk Factors' and other cautionary statements[134](index=134&type=chunk)[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the company's exposure to market risk during the third quarter of Fiscal Year 2022 - No material changes in market risk exposure occurred during the third quarter of Fiscal Year 2022[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of October 29, 2022, ensuring timely and accurate reporting of material information. No material changes to internal control over financial reporting occurred during the third quarter of Fiscal Year 2022 - Disclosure controls and procedures were deemed effective as of October 29, 2022, by management, including the CEO and CFO[137](index=137&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of Fiscal Year 2022[138](index=138&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings in the ordinary course of business but does not believe any will have a material adverse effect on its financial statements. Reserves are established for probable and estimable losses - The company is involved in routine legal proceedings, but management does not anticipate any material adverse effects on financial statements[140](index=140&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the company's 2021 Annual Report, stating that no material changes to these risks have occurred as of the date of this Quarterly Report. However, additional or currently immaterial risks may emerge - No material changes to previously disclosed risk factors in the 2021 Annual Report have occurred as of this filing date[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports that there were no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds occurred during the period[142](index=142&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities during the period - No defaults upon senior securities occurred during the period[143](index=143&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[144](index=144&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report - No other information is reported under this item[145](index=145&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report, including certificates of incorporation, bylaws, certifications of principal executive and financial officers, and Inline XBRL documents - The exhibit index includes corporate governance documents (Certificate of Incorporation, Bylaws), officer certifications (31.1, 31.2, 32.1, 32.2), and Inline XBRL documents for financial data[146](index=146&type=chunk)[148](index=148&type=chunk) SIGNATURES - The report is duly signed on December 6, 2022, by Claire Spofford, Chief Executive Officer, and Mark Webb, Executive Vice President, Chief Financial Officer/Chief Operating Officer[150](index=150&type=chunk)[152](index=152&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 ...

Financial Data and Key Metrics Changes - The company reported total sales of $160 million for Q2 2022, an increase of 0.7% compared to Q2 2021 [21] - Adjusted EBITDA reached $36 million, or 22.2% of sales, compared to $33 million, or 20.5% of sales in Q2 2021 [25] - Gross profit was $112 million, up $3 million from Q2 2021, with a gross margin of 70.1%, an increase of 150 basis points year-over-year [23] - Cash generated from operations was $28 million for the quarter, with total cash at the end of Q2 amounting to $62 million and no borrowings against the ABL [26] Business Line Data and Key Metrics Changes - Store sales increased by 2% compared to Q2 2021, driven by higher average unit retails through strategic price increases and reduced promotions [21] - Direct sales as a percentage of total sales were 46%, down 0.7% compared to the previous year [22] Market Data and Key Metrics Changes - The company experienced a strong start to the quarter, particularly around Mother's Day, but noted a slowdown in purchasing in the latter part of the quarter as customers had shopped early [8][40] - The company remains optimistic about customer return for fall wardrobe purchases based on feedback from store associates [9][40] Company Strategy and Development Direction - The company is investing in brand awareness and customer base growth, particularly through the "Welcome Everybody" campaign focused on size inclusivity [10][11] - The strategy includes merging missy and women's collections to create a size-integrated shopping experience and enhancing marketing efforts to reach new customers [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed a conservative outlook regarding the consumer landscape but remains confident in leveraging operational disciplines for continued execution of objectives [18] - For Q3 2022, the company projects sales to be flat to down 3% compared to Q3 2021, with adjusted EBITDA expected between $21 million and $23 million [31] Other Important Information - Inventory levels increased by 12% compared to Q2 2021, driven by elevated levels of goods in transit [28] - The company plans to close a net of 10 to 14 stores in fiscal 2022, including the opening of up to two new stores late in the fourth quarter [35] Q&A Session Summary Question: What did you see regarding customer traffic and the Welcome Everybody campaign? - Management noted a slowdown in traffic in the latter half of the quarter, attributing it to early shopping and summer vacations, but expressed optimism for fall purchases [39][40] - Positive feedback was received regarding the Welcome Everybody campaign, with consumers appreciating the extended sizes and price parity [41] Question: What is the expectation for refinancing and its implications? - Management indicated that refinancing is not urgent but is being prepared for when market conditions are favorable [44][45] Question: Any updates on store openings and the environment? - Management confirmed ongoing opportunities for store growth but noted a slight revision down in expected store openings due to lead times and negotiations [46] Question: Can you elaborate on cash flow drivers and working capital? - Cash flow was primarily driven by full-price sales, with inventory investments aimed at ensuring on-time delivery [48]