Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________ FORM 10-Q ___________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended May 1, 2021 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: 001-34918 VERA BRADLEY, INC. (Exact name of registrant as specified in it ...

Financial Data and Key Metrics Changes - Consolidated net revenues increased by 57.5% to $109.1 million compared to $69.3 million in the prior year [13] - Non-GAAP consolidated net loss improved to $1.7 million or $0.05 per diluted share from a net loss of $10.2 million or $0.31 per diluted share last year [13] - Consolidated gross profit totaled $59.2 million, representing 54.2% of net revenues, up from 51.2% last year [16] - Consolidated SG&A expense decreased to 55.1% of net revenues from 74.5% in the prior year [17] Business Line Data and Key Metrics Changes - Vera Bradley direct segment revenues rose by 81.2% to $66.7 million from $36.8 million in the prior year [14] - Vera Bradley indirect segment revenues increased by 35.9% to $15.3 million from $11.2 million [15] - Pura Vida segment revenues grew by 27.7% to $27.1 million from $21.2 million [15] Market Data and Key Metrics Changes - E-commerce continued to show strength even with full store reopenings, indicating a shift in consumer behavior [7] - Store traffic is expected to increase, particularly in the second half of fiscal 2022, driven by pent-up demand [20] Company Strategy and Development Direction - The company aims to drive a digital-first strategy, enhance product innovation, build community through marketing, and evolve distribution channels [28] - Pura Vida is expanding its lifestyle offerings and strengthening its infrastructure, including an ERP integration [30] - Vera Bradley is focusing on sustainable fabrics and product innovation to attract younger customers [40][42] Management's Comments on Operating Environment and Future Outlook - Management noted a combination of tailwinds and headwinds, including increased store traffic and revenue, but also challenges like port congestion and rising freight costs [20] - The company raised its revenue and EPS estimates for the full year based on strong first-quarter performance [19] - Management emphasized the importance of sustainability and social impact in attracting younger customers [82] Other Important Information - The company appointed Nancy Twine to its board, enhancing female representation to 60% [10] - The company plans to open its first Pura Vida lab store in San Diego by August [36] Q&A Session Summary Question: Revenue outlook and guidance raise - Management indicated that revenue for the remainder of the year will be consistent with historical averages, with potential pent-up demand for back-to-school and travel [56] Question: M&A opportunities - Management is actively exploring M&A opportunities but is being prudent in finding the right fit [59] Question: Pura Vida production issues - Currently, there are no production issues with Pura Vida, and the company has found alternative sources for manufacturing [65] Question: Attracting younger customers - The company has seen an increase in younger customers due to sustainability efforts and targeted marketing [66] Question: Traffic in full-price vs outlet stores - Traffic remains lower in mall stores compared to outlet stores, with expectations for improvement as vaccination rates increase [71] Question: Pricing and inflation - Management is evaluating pricing strategies while being cautious not to raise prices too quickly [74] Question: Digital roadmap and customer data - The focus is on enhancing data analytics and targeted marketing to improve customer engagement [76] Question: Pura Vida's non-jewelry revenue potential - There is significant long-term opportunity to diversify Pura Vida's revenue beyond jewelry [79] Question: Sustainability focus - The company is committed to environmental and social impact, which resonates with younger customers [82]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________ FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended January 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to | Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, wi ...

Vera Bradley, Inc. (NASDAQ:VRA) Q4 2020 Earnings Conference Call March 10, 2021 9:30 AM ET Company Participants Mark Dely - CAO Rob Wallstrom - CEO John Enwright - CFO Conference Call Participants Mark Altschwager - Baird Oliver Chen - Cowen Eric Beder - SCC Research Steve Marotta - CL King & Associates Dana Telsey - Telsey Advisory Group Operator Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Vera Bradley Fourth Quarter and Fiscal Year End Conference Call. [Operator Instructi ...

[FORWARD-LOOKING STATEMENTS](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines statements regarding future expectations and projections, which are subject to various risks and uncertainties that may cause actual results to differ materially - Forward-looking statements are based on current expectations and projections, but actual results may differ due to **risks and uncertainties**[12](index=12&type=chunk)[13](index=13&type=chunk) - **Key risks** include the **COVID-19 pandemic**, civil unrest, inability to implement Vision 20/20, **declines in comparable sales**, **brand maintenance**, multi-channel model failure, economic conditions, inability to predict consumer demand, store operations, loss of key talent, data security breaches, tariffs, and Pura Vida acquisition integration issues[15](index=15&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations - The financial information is unaudited and prepared in accordance with SEC rules, condensing certain GAAP disclosures[42](index=42&type=chunk) - The **COVID-19 pandemic** had a **material adverse impact** on overall consumer demand, traffic, and sales, as well as the Company's operating results during the first nine months of fiscal **2021**[43](index=43&type=chunk)[163](index=163&type=chunk) [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This item provides the unaudited condensed consolidated financial statements and comprehensive notes on accounting policies and key financial details [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | Oct 31, 2020 | Feb 1, 2020 | Change | | :--------------------------------- | :----------- | :---------- | :----- | | **Assets** | | | | | Cash and cash equivalents | **$75,765** | **$49,917** | **+$25,848** | | Short-term investments | **$1,068** | **$8,977** | **-$7,909** | | Accounts receivable, net | **$36,027** | **$24,290** | **+$11,737** | | Inventories | **$141,588** | **$123,606** | **+$17,982** | | Total current assets | **$271,852** | **$218,789** | **+$53,063** | | Total assets | **$541,174** | **$535,061** | **+$6,113** | | **Liabilities & Equity** | | | | | Accounts payable | **$27,136** | **$20,235** | **+$6,901** | | Earn-out liability | **$—** | **$18,448** | **-$18,448** | | Total current liabilities | **$79,197** | **$87,405** | **-$8,208** | | Long-term debt | **$30,000** | **$—** | **+$30,000** | | Total liabilities | **$207,200** | **$201,242** | **+$5,958** | | Total shareholders' equity | **$304,828** | **$303,770** | **+$1,058** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement presents the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net revenues | **$124,849** | **$127,501** | **$325,903** | **$338,289** | | Cost of sales | **$51,018** | **$59,631** | **$138,263** | **$152,618** | | Gross profit | **$73,831** | **$67,870** | **$187,640** | **$185,671** | | Selling, general, and administrative expenses | **$61,703** | **$69,423** | **$183,640** | **$184,465** | | Operating income (loss) | **$12,164** | **$(1,476)** | **$4,089** | **$2,227** | | Net income (loss) | **$8,974** | **$(982)** | **$1,764** | **$2,331** | | Net income attributable to Vera Bradley, Inc. | **$8,874** | **$139** | **$753** | **$3,588** | | Basic net income per share | **$0.27** | **$0.00** | **$0.02** | **$0.11** | | Diluted net income per share | **$0.26** | **$0.00** | **$0.02** | **$0.10** | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details the company's net income and other comprehensive income or loss, reflecting all changes in equity during the period except those resulting from investments by and distributions to owners Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | **$8,974** | **$(982)** | **$1,764** | **$2,331** | | Unrealized (loss) gain on available-for-sale debt investments | **$(1)** | **$(3)** | **$(172)** | **$121** | | Cumulative translation adjustment | **$11** | **$(22)** | **$22** | **$(1)** | | Comprehensive income (loss), net of tax | **$8,984** | **$(1,007)** | **$1,614** | **$2,451** | | Less: Comprehensive income (loss) attributable to redeemable noncontrolling interest | **$100** | **$(1,121)** | **$1,011** | **$(1,257)** | | Comprehensive income attributable to Vera Bradley, Inc. | **$8,884** | **$114** | **$603** | **$3,708** | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This statement outlines changes in the company's equity accounts, including common stock, retained earnings, and accumulated other comprehensive income, over specific periods Condensed Consolidated Statements of Shareholders' Equity (in thousands, except share data) | Metric | Balance at Feb 1, 2020 | Balance at Oct 31, 2020 | | :------------------------------------------ | :--------------------- | :--------------------- | | Common Stock (shares) | **33,503,249** | **33,414,490** | | Treasury Stock (shares) | **8,011,372** | **8,393,207** | | Additional Paid-in Capital | **$100,357** | **$103,282** | | Retained Earnings | **$307,414** | **$308,598** | | Accumulated Other Comprehensive Income | **$158** | **$8** | | Treasury Stock (value) | **$(104,159)** | **$(107,060)** | | Total Shareholders' Equity of Vera Bradley, Inc. | **$303,770** | **$304,828** | - The company repurchased **381,835 shares** for **$2.9 million** during the thirty-nine weeks ended October 31, **2020**[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows into operating, investing, and financing activities, providing insight into the company's liquidity and solvency Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | **$1,630** | **$(9,235)** | | Net cash provided by (used in) investing activities | **$17,995** | **$(67,010)** | | Net cash provided by (used in) financing activities | **$6,201** | **$(11,248)** | | Net increase (decrease) in cash and cash equivalents | **$25,848** | **$(87,494)** | | Cash and cash equivalents, end of period | **$75,765** | **$25,999** | - **Net cash provided by operating activities** significantly increased to **$1.6 million** from a **$9.2 million** use, primarily due to changes in assets and liabilities, including deferred rent payments[239](index=239&type=chunk) - **Net cash provided by investing activities** was **$18.0 million**, a substantial shift from a **$67.0 million** use, mainly due to decreased capital expenditures and the absence of a large business acquisition (Pura Vida) in the current period[241](index=241&type=chunk) - **Financing activities** were positively impacted by **$30.0 million** in net borrowings under the **credit agreement**, partially offset by a **$18.7 million** contingent consideration payment for the Pura Vida acquisition[243](index=243&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information regarding the accounting policies, significant transactions, and balances presented in the financial statements [Note 1. Description of the Company and Basis of Presentation](index=12&type=section&id=Note%201.%20Description%20of%20the%20Company%20and%20Basis%20of%20Presentation) This note describes the company's business segments, the impact of the COVID-19 pandemic on operations, and the basis for financial statement presentation - Vera Bradley operates three reportable segments: **VB Direct**, **VB Indirect**, and **Pura Vida** (acquired July **2019**)[41](index=41&type=chunk) - The **COVID-19 pandemic** caused **material adverse impacts** on consumer demand, traffic, and sales, leading to temporary store closures, furloughs, and cost reductions[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - As of October **31, 2020**, substantially all furloughed associates have returned, most base compensation reductions reinstated, and **$30.0 million** of the **$60.0 million credit agreement** borrowing has been repaid[47](index=47&type=chunk) - The company is leveraging CARES Act tax provisions for retention credits and payroll tax deferrals[48](index=48&type=chunk) [Note 2. Revenue from Contracts with Customers](index=14&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers) This note details the company's revenue recognition policies and disaggregates net revenues by product category and operating segment Net Revenues by Product Category and Segment (Thirteen Weeks Ended October 31, 2020, in thousands) | Product Category | VB Direct Segment | VB Indirect Segment | Pura Vida Segment | Total Net Revenues | | :----------------- | :---------------- | :------------------ | :---------------- | :----------------- | | Bags | **$28,536** | **$8,453** | **$—** | **$36,989** | | Apparel/Footwear | **$11,055** | **$4,406** | **$744** | **$16,205** | | Travel | **$14,400** | **$4,758** | **$—** | **$19,158** | | Accessories | **$14,352** | **$2,607** | **$22,676** | **$39,635** | | Home | **$8,067** | **$839** | **$—** | **$8,906** | | Other | **$1,767** | **$1,281** | **$908** | **$3,956** | | **Total** | **$78,177** | **$22,344** | **$24,328** | **$124,849** | Net Revenues by Product Category and Segment (Thirty-Nine Weeks Ended October 31, 2020, in thousands) | Product Category | VB Direct Segment | VB Indirect Segment | Pura Vida Segment | Total Net Revenues | | :----------------- | :---------------- | :------------------ | :---------------- | :----------------- | | Bags | **$74,087** | **$20,236** | **$—** | **$94,323** | | Travel | **$37,594** | **$9,529** | **$—** | **$47,123** | | Accessories | **$34,626** | **$6,167** | **$74,295** | **$115,088** | | Apparel/Footwear | **$27,778** | **$10,986** | **$982** | **$39,746** | | Home | **$17,970** | **$1,492** | **$—** | **$19,462** | | Other | **$4,192** | **$2,893** | **$3,076** | **$10,161** | | **Total** | **$196,247** | **$51,303** | **$78,353** | **$325,903** | - Contract liabilities (unearned revenue) were **$3.7 million** as of October **31, 2020**, down from **$3.9 million** at February **1, 2020**[69](index=69&type=chunk) - **Accounts receivable, net**, increased to **$31.6 million** as of October **31, 2020**, from **$16.3 million** at February **1, 2020**[70](index=70&type=chunk) [Note 3. Leases](index=16&type=section&id=Note%203.%20Leases) This note provides information on the company's lease arrangements, including lease costs and the impact of COVID-19 on rent payments - Temporary store closures due to **COVID-19** resulted in deferred rent payments and immaterial rent abatements[73](index=73&type=chunk)[75](index=75&type=chunk) Total Lease Cost (in thousands) | Lease Cost Type | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | **$6,723** | **$7,254** | **$20,485** | **$21,621** | | Variable lease cost | **$1,730** | **$2,189** | **$4,283** | **$6,954** | | Short-term lease cost | **$117** | **$114** | **$262** | **$447** | | **Total lease cost** | **$8,570** | **$9,557** | **$25,030** | **$29,022** | - The **weighted-average remaining lease term** as of October **31, 2020**, was **5.6 years**[78](index=78&type=chunk) [Note 4. Earnings Per Share](index=18&type=section&id=Note%204.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share, including the impact of stock-based awards and redeemable noncontrolling interest Basic and Diluted Earnings Per Share (in thousands, except per share data) | Metric | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income attributable to Vera Bradley, Inc. | **$8,874** | **$139** | **$753** | **$3,588** | | Weighted-average common shares (basic) | **33,411** | **33,907** | **33,382** | **34,104** | | Dilutive effect of stock-based awards | **566** | **207** | **407** | **251** | | Weighted-average common shares (diluted) | **33,977** | **34,114** | **33,789** | **34,355** | | Basic net income per share | **$0.27** | **$0.00** | **$0.02** | **$0.11** | | Diluted net income per share | **$0.26** | **$0.00** | **$0.02** | **$0.10** | - The **redeemable noncontrolling interest** is classified in temporary equity and adjusted each period for income/loss and to the higher of redemption or carrying value, impacting retained earnings and EPS calculations[83](index=83&type=chunk) [Note 5. Fair Value of Financial Instruments](index=19&type=section&id=Note%205.%20Fair%20Value%20of%20Financial%20Instruments) This note describes the company's fair value measurements for financial instruments and discusses impairment charges related to store assets - Fair value measurements are categorized into Level **1** (quoted prices), Level **2** (observable inputs), and Level **3** (unobservable inputs)[86](index=86&type=chunk) - The company recorded **$3.8 million** in **impairment charges** for store assets (property, plant, and equipment, and lease right-of-use assets) for the thirty-nine weeks ended October **31, 2020**, driven by **COVID-19 impacts**[88](index=88&type=chunk)[90](index=90&type=chunk) - **Goodwill** and intangible assets were not impaired, but future deterioration in economic conditions due to **COVID-19** could lead to **material impairment charges**[91](index=91&type=chunk)[92](index=92&type=chunk) [Note 6. Debt](index=20&type=section&id=Note%206.%20Debt) This note details the company's credit agreement, including outstanding borrowings, availability, and compliance with covenants - The company has a **$75.0 million asset-based revolving Credit Agreement**, maturing September **7, 2023**[93](index=93&type=chunk)[100](index=100&type=chunk) Credit Agreement Status (in millions) | Metric | Oct 31, 2020 | Feb 1, 2020 | | :-------------------- | :----------- | :---------- | | Outstanding borrowings | **$30.0** | **$—** | | Availability | **$45.0** | **$75.0** | - The **Credit Agreement** includes various affirmative and negative covenants, and the company was in **compliance** as of October **31, 2020**[96](index=96&type=chunk)[98](index=98&type=chunk) [Note 7. Income Taxes](index=21&type=section&id=Note%207.%20Income%20Taxes) This note provides information on the company's effective tax rates and the factors influencing changes in tax expense Effective Tax Rate | Period | Oct 31, 2020 | Nov 2, 2019 | | :-------------------- | :----------- | :---------- | | 13 Weeks Ended | **24.4%** | **26.9%** | | 39 Weeks Ended | **45.5%** | **26.7%** | - Changes in the **effective tax rate** were primarily due to the relative impact of permanent and discrete items, particularly stock-based compensation[102](index=102&type=chunk)[103](index=103&type=chunk) [Note 8. Stock-Based Compensation](index=21&type=section&id=Note%208.%20Stock-Based%20Compensation) This note outlines the company's stock-based compensation plans, including restricted stock unit grants and unrecognized compensation costs - Stock-based compensation expense is recognized for **restricted stock units (RSUs)** at **fair market value** on the grant date[104](index=104&type=chunk) Restricted Stock Unit Grants (39 Weeks Ended October 31, 2020) | Period | Number of RSUs Granted | Aggregate Fair Value | | :-------------------- | :--------------------- | :------------------- | | 39 Weeks Ended Oct 31, 2020 | **1,460,130** | **$6.1 million** | | 39 Weeks Ended Nov 2, 2019 | **416,944** | **$5.4 million** | - As of October **31, 2020**, **$6.3 million** of **unrecognized compensation cost** related to nonvested **RSUs** is expected to be recognized over a **weighted-average period** of **1.8 years**[112](index=112&type=chunk) [Note 9. Commitments and Contingencies](index=22&type=section&id=Note%209.%20Commitments%20and%20Contingencies) This note discloses significant legal proceedings and other commitments that could potentially impact the company's financial position - The company faces a lawsuit from Vesi Incorporated alleging **breach of fiduciary duty** and other claims, seeking at least **$10.0 million** in damages[114](index=114&type=chunk) - A **class-action lawsuit** by Chidimma Igboakaeze alleges various **California Labor Code violations** related to wages, overtime, and breaks[115](index=115&type=chunk)[117](index=117&type=chunk) - Management believes current claims will not have a **material adverse effect** and intends to vigorously defend itself[113](index=113&type=chunk)[114](index=114&type=chunk)[117](index=117&type=chunk) [Note 10. Common Stock](index=23&type=section&id=Note%2010.%20Common%20Stock) This note provides details on the company's common stock, including share repurchase programs and treasury stock holdings - The **$50.0 million share repurchase program** (**2018**) was temporarily suspended on March **20, 2020**, due to **COVID-19** and extended through December **11, 2021**, but remains suspended[118](index=118&type=chunk)[119](index=119&type=chunk) Share Repurchase Activity (39 Weeks Ended October 31, 2020) | Metric | Value | | :------------------------------------------ | :---------- | | Shares repurchased | **381,835** | | Aggregate amount | **$2.9 million** | | Remaining available under program | **$32.9 million** | - As of October **31, 2020**, the company held **8,393,207 treasury shares** with an **aggregate carrying amount** of **$107.1 million**[121](index=121&type=chunk) [Note 11. Investments](index=23&type=section&id=Note%2011.%20Investments) This note describes the composition of the company's cash equivalents, short-term, and long-term investments - **Cash equivalents** primarily consist of money market funds[122](index=122&type=chunk) Short-Term Investments (in thousands) | Type | Oct 31, 2020 | Feb 1, 2020 | | :-------------------------- | :----------- | :---------- | | U.S. corporate debt securities | **$727** | **$3,435** | | Non-U.S. corporate debt securities | **$341** | **$1,136** | | Commercial paper | **$—** | **$2,489** | | Municipal securities | **$—** | **$1,594** | | U.S. asset-backed securities | **$—** | **$323** | | **Total short-term investments** | **$1,068** | **$8,977** | Long-Term Investments (in thousands) | Type | Oct 31, 2020 | Feb 1, 2020 | | :-------------------------- | :----------- | :---------- | | U.S. corporate debt securities | **$151** | **$5,613** | | Non-U.S. corporate debt securities | **$327** | **$2,409** | | U.S. asset-backed securities | **$—** | **$5,498** | | Other foreign securities | **$—** | **$810** | | Non-U.S. asset-backed securities | **$—** | **$582** | | **Total long-term investments** | **$478** | **$14,912** | [Note 12. Acquisition of Pura Vida](index=24&type=section&id=Note%2012.%20Acquisition%20of%20Pura%20Vida) This note details the acquisition of Pura Vida, including the purchase price, contingent payments, and the put/call agreement for the remaining interest - Vera Bradley acquired a **75% interest** in **Pura Vida** on July **16, 2019**, for approximately **$75.0 million** cash[128](index=128&type=chunk) - A contingent payment of **$18.7 million** was made in Q**1** fiscal **2021** based on **Pura Vida's 2019 adjusted EBITDA**[129](index=129&type=chunk) - A Put/Call Agreement allows for the acquisition of the **remaining 25% interest** between the fifth and tenth anniversaries of the closing date[130](index=130&type=chunk) Pura Vida Acquisition Fair Value at Acquisition Date (in thousands) | Asset/Liability | Fair Value | | :------------------------------------------ | :--------- | | Total assets acquired | **$146,285** | | Total liabilities assumed | **$17,443** | | Contingent consideration related to earn-out provision | **$(20,098)** | | Redeemable noncontrolling interest | **$(32,210)** | | Cash acquired | **$(1,495)** | | **Total closing consideration amount, net of cash acquired** | **$75,039** | [Note 13. Redeemable Noncontrolling Interest](index=27&type=section&id=Note%2013.%20Redeemable%20Noncontrolling%20Interest) This note explains the redeemable noncontrolling interest representing the portion of Pura Vida not owned by Vera Bradley and changes in its value - **Redeemable noncontrolling interest** represents the **25% ownership** in **Pura Vida** not held by Vera Bradley[144](index=144&type=chunk) Changes in Redeemable Noncontrolling Interest (in thousands) | Metric | Balance at Feb 1, 2020 | Balance at Oct 31, 2020 | | :------------------------------------------ | :--------------------- | :--------------------- | | Balance at beginning of period | **$30,049** | **$29,654** (as of Aug **1, 2020**) | | Net income (loss) attributable to redeemable noncontrolling interest | **$(200)** (Feb-May) | **$1,111** (May-Aug) | | Distributions to redeemable noncontrolling interest | **$(296)** (Feb-May) | **$(579)** (May-Aug) | | Adjustment to redemption value | **$9,305** (Feb-May) | **$(9,736)** (May-Aug) | | **Balance at end of period** | **$38,858** (as of May **2, 2020**) | **$29,146** (as of Oct **31, 2020**) | [Note 14. Intangible Assets and Goodwill](index=28&type=section&id=Note%2014.%20Intangible%20Assets%20and%20Goodwill) This note provides information on the carrying value and amortization of intangible assets and goodwill, including potential impairment risks Intangible Assets (excluding goodwill) Carrying Value (in thousands) | Asset Type | Oct 31, 2020 | Feb 1, 2020 | | :-------------------------- | :----------- | :---------- | | Customer Relationships | **$12,065** | **$18,934** | | Non-competition Agreements | **$585** | **$703** | | Pura Vida Brand | **$36,668** | **$36,668** | | **Total intangible assets, excluding goodwill** | **$49,318** | **$56,305** | - **Goodwill** related to the **Pura Vida acquisition** remained at **$44.3 million** as of October **31, 2020**[150](index=150&type=chunk) - The **weighted-average amortization period** for definite-lived intangible assets is **3.6 years**[150](index=150&type=chunk) - Future impacts of **COVID-19** could lead to **material impairment charges** for **goodwill** and intangible assets[153](index=153&type=chunk) [Note 15. Inventories](index=29&type=section&id=Note%2015.%20Inventories) This note details the composition of the company's inventories, including raw materials and finished goods Inventories (in thousands) | Component | Oct 31, 2020 | Feb 1, 2020 | | :-------------------------- | :----------- | :---------- | | Raw materials | **$1,110** | **$1,056** | | Finished goods | **$140,478** | **$122,550** | | **Total inventories** | **$141,588** | **$123,606** | [Note 16. Segment Reporting](index=29&type=section&id=Note%2016.%20Segment%20Reporting) This note presents financial information by the company's three reportable segments: VB Direct, VB Indirect, and Pura Vida - The company has three reportable segments: **VB Direct**, **VB Indirect**, and **Pura Vida**[155](index=155&type=chunk) Segment Net Revenues (in thousands) | Segment | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | VB Direct | **$78,177** | **$78,397** | **$196,247** | **$243,913** | | VB Indirect | **$22,344** | **$24,087** | **$51,303** | **$63,971** | | Pura Vida | **$24,328** | **$25,017** | **$78,353** | **$30,405** | | **Total** | **$124,849** | **$127,501** | **$325,903** | **$338,289** | Segment Operating Income (Loss) (in thousands) | Segment | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | VB Direct | **$19,777** | **$14,675** | **$31,634** | **$45,172** | | VB Indirect | **$9,342** | **$9,324** | **$18,575** | **$24,193** | | Pura Vida | **$402** | **$(4,483)** | **$4,046** | **$(5,025)** | | Corporate unallocated | **$(17,357)** | **$(20,992)** | **$(50,166)** | **$(62,113)** | | **Total Operating Income (Loss)** | **$12,164** | **$(1,476)** | **$4,089** | **$2,227** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=31&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of financial performance, liquidity, and cash flows, detailing COVID-19 impacts and strategic responses - The **COVID-19 pandemic** **significantly impacted** operations, leading to store closures, reduced traffic, and sales declines, though **e-commerce operations** remained open[163](index=163&type=chunk) - The company implemented various actions to mitigate **COVID-19 impacts**, including temporary store closures, furloughs, compensation reductions, **credit agreement** drawdowns, and expense management[168](index=168&type=chunk) - As of October **31, 2020**, most stores have reopened, furloughed associates returned, and **$30.0 million** of the **credit agreement** borrowing was repaid[164](index=164&type=chunk)[166](index=166&type=chunk) [COVID-19](index=31&type=section&id=COVID-19) This section details the significant operational and financial impacts of the COVID-19 pandemic and the company's strategic responses - **COVID-19** led to widespread disruptions, including store and factory closures, reduced consumer demand, and adverse impacts on sales[163](index=163&type=chunk) - Company actions included temporary store closures, furloughing **80%** of the workforce, reducing executive compensation, suspending **share repurchases**, drawing **$60.0 million** from the **credit agreement**, and cutting non-payroll expenses[168](index=168&type=chunk) - By October **31, 2020**, nearly all stores reopened, most associates returned from furlough, and **$30.0 million** of the **credit agreement** was repaid[164](index=164&type=chunk)[166](index=166&type=chunk) - The company leveraged CARES Act tax provisions for retention credits and payroll tax deferrals[167](index=167&type=chunk) [Executive Summary](index=32&type=section&id=Executive%20Summary) This section provides a high-level overview of the company's strategic initiatives and key financial performance metrics for the quarter - Vera Bradley launched a new **e-commerce site**, migrated to cloud-based Microsoft D**365** systems, expanded mask offerings, and introduced new collections/collaborations[169](index=169&type=chunk) - **Pura Vida** expanded its signature cord bracelets, metal, "mood," and semi-precious collections, launched a "celestial" collection, expanded "above the keyboard" offerings, and began European wholesale distribution[170](index=170&type=chunk) Q3 Fiscal 2021 Financial Summary (vs. Q3 Fiscal 2020) | Metric | Q3 FY21 (Oct 31, 2020) | Q3 FY20 (Nov 2, 2019) | Change | | :------------------------------------------ | :--------------------- | :-------------------- | :----- | | Net revenues | **$124.8 million** | **$127.5 million** | **-2.1%** | | VB Direct segment sales | **$78.2 million** | **$78.4 million** | **-0.3%** | | VB Indirect segment sales | **$22.3 million** | **$24.1 million** | **-7.2%** | | Pura Vida segment sales | **$24.3 million** | **$25.0 million** | **-2.8%** | | Gross profit | **$73.8 million** | **$67.9 million** | **+8.8%** | | Gross profit margin | **59.1%** | **53.2%** | **+5.9 pp** | | Operating income (loss) | **$12.2 million** | **$(1.5) million** | **+$13.7 million** | | Net income attributable to Vera Bradley, Inc. | **$8.9 million** | **$0.1 million** | **+$8.8 million** | | Cash and cash equivalents and investments | **$77.3 million** | N/A | N/A | [How We Assess the Performance of Our Business](index=32&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) This section explains the key financial metrics and operational factors used by management to evaluate the company's business performance - **Net revenues** include sales of merchandise, distribution, and shipping/handling fees, less returns and discounts, across **VB Direct**, **VB Indirect**, and **Pura Vida** segments[171](index=171&type=chunk)[172](index=172&type=chunk) - Comparable sales are calculated for stores open at least **12 months** and **e-commerce operations**, with **Pura Vida e-commerce** included from Q**3** FY**21**. Year-to-date comparable sales for FY**21** are not meaningful due to **COVID-19** store closures[173](index=173&type=chunk)[174](index=174&type=chunk) - **Gross profit** is **net revenues** minus cost of sales, influenced by volume, pricing, operational efficiencies, promotions, commodity prices, tariffs, and labor costs[175](index=175&type=chunk)[176](index=176&type=chunk) - **SG&A expenses** encompass selling, advertising, marketing, product development, and administrative costs[177](index=177&type=chunk) [Pura Vida Acquisition](index=34&type=section&id=Pura%20Vida%20Acquisition) This section discusses the strategic rationale and financial implications of the Pura Vida acquisition, including its consolidation into the company's reporting segments - Vera Bradley acquired **75%** of **Pura Vida** on July **16, 2019**, for **$75.0 million** cash, with a subsequent **$18.7 million** contingent payment in Q**1** FY**21**[184](index=184&type=chunk)[185](index=185&type=chunk) - **Pura Vida** is a rapidly growing, digitally native lifestyle brand, and its acquisition aims to strengthen Vera Bradley through product diversification and growth[184](index=184&type=chunk) - **Pura Vida** has been fully consolidated since July **17, 2019**, and is now a reportable segment[186](index=186&type=chunk) [Impairment Charges](index=34&type=section&id=Impairment%20Charges) This section details the impairment charges recognized for store assets, primarily driven by the adverse effects of the COVID-19 pandemic - **Impairment charges** of **$3.8 million** were recognized for property, plant, and equipment and lease right-of-use assets in underperforming Direct segment stores during the thirty-nine weeks ended October **31, 2020**[187](index=187&type=chunk) - The **COVID-19 pandemic**, including temporary store closures, was the main driver of these **impairment charges**[188](index=188&type=chunk) - Future economic deterioration due to **COVID-19** could result in additional **material impairment charges**[189](index=189&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section provides a comprehensive analysis of the company's consolidated financial performance, including net revenues, gross profit, and operating expenses Consolidated Results of Operations Summary (in thousands, except percentages) | Metric | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net revenues | **$124,849** (**100.0%**) | **$127,501** (**100.0%**) | **$325,903** (**100.0%**) | **$338,289** (**100.0%**) | | Gross profit | **$73,831** (**59.1%**) | **$67,870** (**53.2%**) | **$187,640** (**57.6%**) | **$185,671** (**54.9%**) | | SG&A expenses | **$61,703** (**49.4%**) | **$69,423** (**54.4%**) | **$183,640** (**56.3%**) | **$184,465** (**54.5%**) | | Operating income (loss) | **$12,164** (**9.7%**) | **$(1,476)** (**-1.2%**) | **$4,089** (**1.3%**) | **$2,227** (**0.7%**) | | Net income attributable to Vera Bradley, Inc. | **$8,874** (**7.1%**) | **$139** (**0.1%**) | **$753** (**0.2%**) | **$3,588** (**1.1%**) | [Consolidated Results of Operations Summary](index=36&type=section&id=Consolidated%20Results%20of%20Operations%20Summary) This summary table presents key consolidated financial metrics and their percentages of net revenues for the current and prior periods Consolidated Results of Operations Summary (in thousands, except percentages) | Metric | 13 Weeks Ended Oct 31, 2020 | 13 Weeks Ended Nov 2, 2019 | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net revenues | **$124,849** (**100.0%**) | **$127,501** (**100.0%**) | **$325,903** (**100.0%**) | **$338,289** (**100.0%**) | | Gross profit | **$73,831** (**59.1%**) | **$67,870** (**53.2%**) | **$187,640** (**57.6%**) | **$185,671** (**54.9%**) | | SG&A expenses | **$61,703** (**49.4%**) | **$69,423** (**54.4%**) | **$183,640** (**56.3%**) | **$184,465** (**54.5%**) | | Operating income (loss) | **$12,164** (**9.7%**) | **$(1,476)** (**-1.2%**) | **$4,089** (**1.3%**) | **$2,227** (**0.7%**) | | Net income attributable to Vera Bradley, Inc. | **$8,874** (**7.1%**) | **$139** (**0.1%**) | **$753** (**0.2%**) | **$3,588** (**1.1%**) | [Thirteen Weeks Ended October 31, 2020, Compared to Thirteen Weeks Ended November 2, 2019](index=38&type=section&id=Thirteen%20Weeks%20Ended%20October%2031%2C%202020%2C%20Compared%20to%20Thirteen%20Weeks%20Ended%20November%202%2C%202019) This section analyzes the company's financial performance for the thirteen-week period, comparing key metrics and segment results to the prior year - **Net revenues** decreased **2.1%** to **$124.8 million**, with **mask sales** representing approximately **10%** of consolidated **net revenues**[195](index=195&type=chunk) - **VB Direct net revenues** decreased **0.3%**, with **e-commerce sales** up **48.8%** offset by a **19.1% decline** in **comparable store sales**[196](index=196&type=chunk) - **VB Indirect net revenues** decreased **7.2%** due to reduced orders and fewer accounts[197](index=197&type=chunk) - **Pura Vida net revenues** decreased **2.8%**, with **e-commerce sales** up **17.2%** offset by a decline in wholesale[198](index=198&type=chunk) - **Gross profit margin** increased to **59.1%** from **53.2%**, primarily due to the absence of **$6.2 million Pura Vida inventory step-up amortization** and **cotton mask sales**[199](index=199&type=chunk) - **SG&A expenses** decreased **11.1%** due to **COVID-19** cost reduction initiatives (compensation, non-payroll expenses), reduced depreciation, and lower lease expenses[200](index=200&type=chunk)[201](index=201&type=chunk) - **Operating income** improved by **$13.7 million** to **$12.2 million**, and **Net income attributable to Vera Bradley, Inc.** increased by **$8.8 million** to **$8.9 million**[204](index=204&type=chunk)[213](index=213&type=chunk) [Thirty-Nine Weeks Ended October 31, 2020, Compared to Thirty-Nine Weeks Ended November 2, 2019](index=40&type=section&id=Thirty-Nine%20Weeks%20Ended%20October%2031%2C%202020%2C%20Compared%20to%20Thirty-Nine%20Weeks%20Ended%20November%202%2C%202019) This section analyzes the company's financial performance for the thirty-nine-week period, comparing key metrics and segment results to the prior year - **Net revenues** decreased **3.7%** to **$325.9 million**, with **mask sales** representing approximately **10%** of consolidated **net revenues**[214](index=214&type=chunk) - **VB Direct net revenues** decreased **19.5%** due to temporary store closures, lower traffic, and cancellation of the annual outlet sale, partially offset by a **59.0% increase** in **e-commerce sales**[215](index=215&type=chunk) - **VB Indirect net revenues** decreased **19.8%** due to reduced orders from specialty and department stores[216](index=216&type=chunk) - **Pura Vida net revenues** increased significantly to **$78.4 million** from **$30.4 million** in the partial prior-year period (due to acquisition timing)[217](index=217&type=chunk) - **Gross profit margin** increased to **57.6%** from **54.9%**, primarily due to the absence of **$7.2 million Pura Vida inventory step-up amortization** and **mask sales**, despite **$1.3 million** in purchase order cancellation charges[218](index=218&type=chunk) - **SG&A expenses** decreased **0.4%** but increased as a **percentage** of **net revenues** to **56.3%** (from **54.5%**), due to sales de-leverage, incremental **Pura Vida operating expenses** (**$21.0 million**), Vera Bradley store **impairment charges** (**$3.8 million**), and increased intangible asset amortization (**$4.1 million**), partially offset by **COVID-19** cost reductions[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - **Operating income** increased by **$1.9 million** to **$4.1 million**, but **Net income attributable to Vera Bradley, Inc.** decreased by **$2.8 million** to **$0.8 million**[223](index=223&type=chunk)[231](index=231&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, capital expenditures, and cash flow activities, including the impact of the credit agreement [General Liquidity](index=42&type=section&id=General%20Liquidity) This section outlines the company's primary sources of liquidity and its ability to meet anticipated cash needs - Primary liquidity sources are **cash on hand**, **cash equivalents**, investments, and cash flow from operations, with access to a **$75.0 million asset-based revolving credit agreement**[232](index=232&type=chunk) - As of October **31, 2020**, **$30.0 million** was outstanding under the **credit agreement**, with **$45.0 million** available[251](index=251&type=chunk) - Despite anticipated increased cash needs due to **COVID-19**, current liquidity sources are expected to be sufficient[233](index=233&type=chunk) [Investments](index=42&type=section&id=Investments) This section describes the company's investment portfolio, including cash equivalents, short-term, and long-term debt securities - **Cash equivalents** primarily consist of money market funds[234](index=234&type=chunk) - **Short-term investments** consist of **U.S.** and **non-U.S. corporate debt securities** with maturity within one year[235](index=235&type=chunk) - **Long-term investments** consist of **U.S.** and **non-U.S. corporate debt securities** with maturity greater than one year[236](index=236&type=chunk) [Cash Flow Analysis](index=42&type=section&id=Cash%20Flow%20Analysis) This section provides a detailed analysis of cash flows from operating, investing, and financing activities for the reporting period Cash Flow Summary (in thousands) | Cash Flow Activity | 39 Weeks Ended Oct 31, 2020 | 39 Weeks Ended Nov 2, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | **$1,630** | **$(9,235)** | | Net cash provided by (used in) investing activities | **$17,995** | **$(67,010)** | | Net cash provided by (used in) financing activities | **$6,201** | **$(11,248)** | - **Net cash provided by operating activities** significantly increased to **$1.6 million** from a **$9.2 million** use, primarily due to changes in assets and liabilities, including deferred rent[239](index=239&type=chunk) - **Net cash provided by investing activities** was **$18.0 million**, a substantial shift from a **$67.0 million** use, mainly due to decreased capital expenditures and the prior-year **Pura Vida acquisition**[241](index=241&type=chunk) - **Net cash provided by financing activities** was **$6.2 million**, compared to an **$11.2 million** use, primarily due to **$30.0 million** net borrowings under the **Credit Agreement**, partially offset by a **$18.7 million** contingent consideration payment for **Pura Vida**[243](index=243&type=chunk) [Credit Agreement](index=43&type=section&id=Credit%20Agreement) This section details the terms of the company's asset-based revolving credit agreement, including outstanding borrowings and compliance with covenants - The company has a **$75.0 million asset-based revolving Credit Agreement**, maturing September **7, 2023**[244](index=244&type=chunk)[251](index=251&type=chunk) - As of October **31, 2020**, **$30.0 million** was outstanding, with **$45.0 million** availability, and the company was in **compliance** with all covenants[248](index=248&type=chunk)[251](index=251&type=chunk) - The agreement includes various affirmative and negative covenants, such as restrictions on debt, liens, investments, and a minimum fixed charge coverage ratio[247](index=247&type=chunk)[249](index=249&type=chunk) [Off-Balance-Sheet Arrangements](index=45&type=section&id=Off-Balance-Sheet%20Arrangements) This section confirms the absence of off-balance-sheet financing or unconsolidated special-purpose entities - The company has no off-balance-sheet financing or unconsolidated special-purpose entities[252](index=252&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section refers to the company's critical accounting policies and estimates as detailed in its Annual Report on Form 10-K - No significant changes were made to the critical accounting policies and estimates as of October **31, 2020**, which are detailed in the Annual Report on Form **10-K**[254](index=254&type=chunk) [Recently Issued Accounting Pronouncements](index=45&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section directs readers to Note 1 for information on recently issued accounting pronouncements - Refer to Note **1** for details on recently issued accounting pronouncements[255](index=255&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=46&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section confirms no material changes to market risks as of October 31, 2020, compared to the prior Annual Report on Form 10-K - No **material changes** to **market risks** were reported as of October **31, 2020**, compared to the prior Annual Report on Form **10-K**[257](index=257&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=46&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of disclosure controls and procedures, detailing the integration of Pura Vida and changes from new ERP and e-commerce platforms - **Disclosure controls and procedures** were **effective** as of October **31, 2020**[258](index=258&type=chunk) - The **Pura Vida business**, representing approximately **25%** of **total assets** and **20-24%** of **net revenues**, was integrated into **internal control over financial reporting** as of August **1, 2020**[259](index=259&type=chunk) - A **new ERP system and e-commerce platform** were implemented during the quarter, leading to certain changes in **internal control over financial reporting**[260](index=260&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part provides additional information including legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits - The section includes information on **legal proceedings**, **risk factors**, **equity sales**, and **exhibits**[261](index=261&type=chunk)[264](index=264&type=chunk)[274](index=274&type=chunk)[277](index=277&type=chunk) [ITEM 1. LEGAL PROCEEDINGS](index=47&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section details two significant legal proceedings, including a lawsuit seeking at least $10.0 million and a class-action lawsuit, with the company denying liability - Vesi Incorporated filed a lawsuit against the company seeking at least **$10.0 million** for alleged **breach of fiduciary duty**, unfair competition, defamation, and tortious interference[261](index=261&type=chunk) - Chidimma Igboakaeze filed a **class-action lawsuit** alleging various **California Labor Code violations** related to wages, overtime, and breaks[262](index=262&type=chunk) - The company denies liability and intends to vigorously defend itself, not currently able to estimate a **material adverse loss**[261](index=261&type=chunk)[262](index=262&type=chunk) [ITEM 1A. RISK FACTORS](index=47&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section updates risk factors, focusing on the ongoing adverse impacts of the COVID-19 pandemic on revenue, operations, and supply chain, alongside the importance of brand strength - The **COVID-19 pandemic** continues to cause **significant disruptions** to revenue streams, operations, and the **global supply chain**, potentially leading to further adverse impacts on financial results and share price[265](index=265&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) - Specific impacts include reduced traffic and sales despite store reopenings, potential for additional closures, production and logistics constraints (**China production** ~**20%** in FY**21**), and **increased shipping costs**[265](index=265&type=chunk)[266](index=266&type=chunk) - **Mitigation efforts**, such as temporary furloughs, compensation reductions, and **credit agreement** drawdowns, may introduce additional risks (e.g., increased interest costs) or be ineffectual[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - The business relies on **strong brands** and **effective digital marketing**, and failure in these areas could adversely impact results[272](index=272&type=chunk)[273](index=273&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=48&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the temporary suspension of the company's $50.0 million share repurchase program due to COVID-19, with no activity during the quarter and remaining available funds - The **$50.0 million share repurchase program** (**2018**) was temporarily suspended on March **20, 2020**, due to **COVID-19** and remains suspended, though extended to December **11, 2021**[274](index=274&type=chunk) - No shares were repurchased under the program during the thirteen weeks ended October **31, 2020**[275](index=275&type=chunk)[276](index=276&type=chunk) - As of October **31, 2020**, **$32.9 million** remained available for repurchases under the program[276](index=276&type=chunk) [ITEM 6. EXHIBITS](index=49&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including the 2020 Equity and Incentive Plan, CEO and CFO certifications, and Inline XBRL documents - Exhibits include the **2020 Equity and Incentive Plan**, **CEO and CFO certifications** (Section **302** and **906**), and **Inline XBRL documents**[277](index=277&type=chunk)

Vera Bradley, Inc. (NASDAQ:VRA) Q3 2021 Results Earnings Conference Call December 9, 2020 9:30 AM ET Company Participants Mark Dely - Chief Administrative Officer Rob Wallstrom - Chief Executive Officer John Enwright - Chief Financial Officer Conference Call Participants Oliver Chen - Cowen Mark Altschwager - Baird Steve Marotta - CL King & Associates Dana Telsey - Telsey Advisory Group Eric Beder - SCC Research Operator Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Vera Brad ...

PART I. FINANCIAL INFORMATION [Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Vera Bradley, Inc.'s unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows, for periods ending August 1, 2020 Condensed Consolidated Balance Sheets (as of Aug 1, 2020 vs Feb 1, 2020) | (in thousands) | August 1, 2020 | February 1, 2020 | | :--- | :--- | :--- | | **Total current assets** | $260,979 | $218,789 | | **Total assets** | $542,084 | $535,061 | | **Total current liabilities** | $82,240 | $87,405 | | **Long-term debt** | $30,000 | $— | | **Total liabilities** | $218,656 | $201,242 | | **Total shareholders' equity** | $293,774 | $303,770 | Condensed Consolidated Statements of Operations (Thirteen Weeks Ended) | (in thousands, except per share data) | Thirteen Weeks Ended Aug 1, 2020 | Thirteen Weeks Ended Aug 3, 2019 | | :--- | :--- | :--- | | **Net revenues** | $131,770 | $119,785 | | **Gross profit** | $79,621 | $67,333 | | **Operating income** | $17,499 | $7,348 | | **Net income** | $8,327 | $5,718 | | **Net income attributable to Vera Bradley, Inc.** | $7,216 | $5,854 | | **Diluted net income per share** | $0.42 | $0.17 | Condensed Consolidated Statements of Operations (Twenty-Six Weeks Ended) | (in thousands, except per share data) | Twenty-Six Weeks Ended Aug 1, 2020 | Twenty-Six Weeks Ended Aug 3, 2019 | | :--- | :--- | :--- | | **Net revenues** | $201,054 | $210,788 | | **Gross profit** | $113,809 | $117,801 | | **Operating (loss) income** | $(8,075) | $3,703 | | **Net (loss) income** | $(7,210) | $3,313 | | **Net (loss) income attributable to Vera Bradley, Inc.** | $(8,121) | $3,449 | | **Diluted net (loss) per share** | $(0.24) | $0.10 | Condensed Consolidated Statements of Cash Flows (Twenty-Six Weeks Ended) | (in thousands) | Twenty-Six Weeks Ended Aug 1, 2020 | Twenty-Six Weeks Ended Aug 3, 2019 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(77) | $1,091 | | **Net cash provided by (used in) investing activities** | $18,901 | $(61,412) | | **Net cash provided by (used in) financing activities** | $6,816 | $(6,351) | | **Net increase (decrease) in cash and cash equivalents** | $25,651 | $(66,651) | | **Cash and cash equivalents, end of period** | $75,568 | $46,842 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of the COVID-19 pandemic on operations, Q2 revenue growth driven by Pura Vida, and first-half operating loss, alongside liquidity management and strategic initiatives - The company took significant actions to mitigate the impact of COVID-19, including temporarily closing all Vera Bradley stores, furloughing **~80%** of its workforce, reducing executive compensation, suspending share repurchases, and drawing **$60.0 million** from its credit agreement[158](index=158&type=chunk)[162](index=162&type=chunk) - Strategic progress during the quarter included the launch of the Vera Bradley + Harry Potter collaboration, expansion of face mask offerings, and migration of the e-commerce site to Shopify Plus[164](index=164&type=chunk)[165](index=165&type=chunk) Q2 Fiscal 2021 vs Q2 Fiscal 2020 Results | Metric | Q2 FY2021 | Q2 FY2020 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $131.8M | $119.8M | +10.0% | | Gross Profit % | 60.4% | 56.2% | +420 bps | | SG&A Expenses | $62.2M | $60.7M | +2.3% | | Operating Income | $17.5M | $7.3M | +139.7% | Q2 Fiscal 2021 Net Revenues by Segment | Segment | Q2 FY2021 (in millions) | Q2 FY2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | VB Direct | $81.2 | $94.4 | -13.9% | | VB Indirect | $17.7 | $20.0 | -11.4% | | Pura Vida | $32.8 | $5.4 | N/A (partial period in prior year) | - The company recorded **$3.8 million** in impairment charges for the first half of the year related to underperforming store assets, driven by the impact of the COVID-19 pandemic[183](index=183&type=chunk)[184](index=184&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risks as of August 1, 2020, compared to those disclosed in its prior Annual Report on Form 10-K - There was no material change in the Company's market risks as of August 1, 2020, compared to the risks disclosed in the Annual Report on Form 10-K for the fiscal year ended February 1, 2020[248](index=248&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of August 1, 2020, with the Pura Vida business integrated into internal controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of August 1, 2020[249](index=249&type=chunk) - The acquired Pura Vida business has been integrated into the company's system of internal control over financial reporting and was included in the effectiveness assessment[250](index=250&type=chunk)[251](index=251&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two legal proceedings, including a lawsuit by Vesi Incorporated seeking at least $10.0 million and a class-action lawsuit alleging California Labor Code violations - Vesi Incorporated filed a suit in August 2019 related to the Company's licensing business, seeking damages of not less than **$10.0 million**[252](index=252&type=chunk) - In April 2020, a class-action lawsuit was filed by Chidimma Igboakaeze in California, alleging various violations of the state's Labor Code regarding wages, overtime, and breaks[253](index=253&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section highlights updated risk factors, primarily focusing on the significant and uncertain adverse impacts of the COVID-19 pandemic on revenue, operations, and the global supply chain - A significant new risk factor is the continued disruption from the COVID-19 pandemic, which may adversely impact revenue streams, operations, and the global supply chain[256](index=256&type=chunk) - Despite reopening most stores, the company has experienced and may continue to experience significantly reduced traffic, demand, and sales[256](index=256&type=chunk) - The supply chain faces risks, particularly from China, which is expected to account for approximately **20%** of production in fiscal 2021[257](index=257&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports on its $50.0 million share repurchase program, which was temporarily suspended to conserve cash due to the COVID-19 pandemic, with no repurchases during the thirteen weeks ended August 1, 2020 - The Company's **$50.0 million** share repurchase program, approved in November 2018, was temporarily suspended to conserve cash as a result of the COVID-19 pandemic[263](index=263&type=chunk) - There were no shares repurchased during the thirteen weeks ended August 1, 2020, with approximately **$32.9 million** remaining available for repurchase under the program as of this date[264](index=264&type=chunk)[265](index=265&type=chunk) [Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits filed with this report include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as various Inline XBRL documents[267](index=267&type=chunk)

Financial Data and Key Metrics Changes - Total company year-over-year second quarter revenue grew by 10% driven by the addition of Pura Vida and a doubling of Vera Bradley's ecommerce sales, despite a decrease in store revenues due to COVID-19 [9][22] - Consolidated net revenues totaled $131.8 million for the current year second quarter, an increase of 10% over the prior year [22] - Non-GAAP consolidated net income was $10.9 million or $0.32 per diluted share for the second quarter compared to $8.7 million or $0.25 per diluted share last year [22] - Consolidated gross margin totaled $79.6 million or 60.4% of net revenues compared to 57.1% in the prior year [25] Business Line Data and Key Metrics Changes - Vera Bradley direct segment revenues totaled $81.2 million, a 13.9% decrease from $94.4 million in the prior year second quarter, primarily due to store closures [23] - Ecommerce revenues for Vera Bradley increased by 99.1% during the quarter [23] - Pura Vida segment revenues totaled $32.8 million compared to $5.4 million in the prior year, reflecting strong growth post-acquisition [24] Market Data and Key Metrics Changes - The 133 stores that were open for the entire fiscal month of July generated approximately 70% of the prior year's sales [13][56] - Ecommerce business remained strong even as stores began to reopen, indicating a shift in consumer behavior towards online shopping [14][84] Company Strategy and Development Direction - The company is focused on innovation and product marketing to enhance customer experience, particularly through new fabric innovations and collaborations [35][42] - A significant emphasis is placed on digital transformation and enhancing ecommerce capabilities, with investments in technology to streamline operations [32][49] - The company aims to maintain a strong balance sheet while managing expenses and cash flow effectively [11][73] Management's Comments on Operating Environment and Future Outlook - Management noted that the continuing uncertainties related to COVID-19 make financial performance difficult to predict, and they are not providing forward-looking guidance [28] - The company anticipates a recovery in core business as the impact of COVID-19 lessens, despite expecting a slowdown in mask sales [39][121] - Management expressed confidence in the long-term growth potential of both Vera Bradley and Pura Vida brands, particularly in the casual and comfortable product segments [74] Other Important Information - The company has initiated diversity and inclusion efforts, appointing a manager to lead these initiatives [17] - Significant community support initiatives were highlighted, including donations from mask sales to healthcare workers [47] Q&A Session Summary Question: Clarification on mask sales and future expectations - Management confirmed that cotton masks represented over 10% of total sales in the quarter, with a mix of approximately 60/40 direct to indirect sales [80][81] - Future mask sales are expected to moderate, with August sales running similarly to July [82] Question: Store productivity and digital trends - Store performance remained around 70% of prior year sales, with digital sales continuing to show strength even after store reopenings [83][84] Question: Operating margin insights - The operating margin of 16% was influenced by temporary factors such as mask sales and cost savings from furloughed employees, with expectations for some permanent savings moving forward [86][90] Question: Back-to-school strategy - Management noted a slow start to back-to-school sales but expects the season to elongate into the fall, allowing for inventory adjustments [95][97] Question: Pura Vida's performance and customer engagement - Pura Vida has shown strong customer engagement and resilience, with no significant migration of customers between the two brands [100][101] Question: New fabric innovations and customer base expansion - New fabric innovations like ReActive are attracting younger, sustainability-focused customers, while performance twill is expected to grow as office activities resume [106][107] Question: Digital shipping expenses and operating margin impact - Management acknowledged potential pressure on shipping costs but is exploring creative solutions to manage expenses effectively [117][120]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________ FORM 10-Q ___________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended May 2, 2020 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: 001-34918 ___________________________ VERA BRADLEY, INC. (Exact name of r ...

Vera Bradley, Inc. (NASDAQ:VRA) Q1 2021 Earnings Conference Call June 3, 2020 9:30 AM ET Company Participants Mark Dely - Chief Administrative Officer Rob Wallstrom - Chief Executive Officer John Enwright - Chief Financial Officer Conference Call Participants Eric Beder - SCC Research Oliver Chen - Cowen Operator Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Vera Bradley First Quarter Conference Call. At this time, all participants are in a listen-only mode. Following the pre ...