Financial Data and Key Metrics Changes - Consolidated net revenues for Q3 2022 totaled $134.7 million, a 7.9% increase from $124.8 million in the prior year and a 5.7% increase over $127.5 million in Q3 2020 [15] - Consolidated net income for Q3 2022 was $6.2 million or $0.18 per diluted share, compared to $10.2 million or $0.30 per diluted share in the prior year [15] - Non-GAAP EPS for the year-to-date was $0.41, ahead of last year and pre-pandemic levels [10] Business Line Data and Key Metrics Changes - Vera Bradley Direct segment revenues were $86.6 million, a 10.8% increase over $78.2 million last year, with comparable sales up 7.8% year-over-year [16] - Vera Bradley Indirect segment revenues decreased by 6.4% to $20.9 million, reflecting lower mask sales and reduced orders from key accounts [16] - Pura Vida segment revenues increased by 11.7% to $27.2 million, driven by growth in wholesale account sales [16] Market Data and Key Metrics Changes - The travel category for Vera Bradley exceeded both last year and fiscal 2020 levels, indicating a recovery in consumer behavior [25] - Digital sales for Vera Bradley grew nearly 60% over fiscal 2020 levels, highlighting the importance of e-commerce in revenue generation [33] - Pura Vida's e-commerce revenues were impacted by the Apple iOS update, which reduced the effectiveness of Facebook and Instagram advertising [6][37] Company Strategy and Development Direction - The company focuses on four key growth drivers: elevating digital strategy, enhancing product innovation, expanding customer community, and evolving distribution channels [11][45] - The company aims to balance online and physical distribution channels for Pura Vida, with plans to open 3 to 5 additional stores next year [6][38] - The company is committed to sustainability, with a goal to update 100% of fabrics to more sustainable alternatives by 2025 [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges and increased freight costs, which negatively impacted gross margins [7][21] - The company expects continued pressure on gross margins due to supply chain costs and inflationary pressures, but is implementing strategic price increases to mitigate these effects [8][55] - Management remains optimistic about long-term growth opportunities despite current headwinds [10][12] Other Important Information - The company resumed stock repurchasing, buying back 214,000 shares for approximately $2.1 million, and has a new $50 million share repurchase authorization plan [24] - Cash and cash equivalents at quarter-end totaled $75.3 million, with no borrowings on the credit facility [23] Q&A Session Summary Question: Can you provide more detail on customer file growth and engagement of newer customers? - Management noted that new collaborations are driving customer growth, with a younger and more diverse customer base emerging [51][53] Question: What is the outlook for gross margin in 2022 considering supply chain costs and price increases? - Management indicated that freight expenses are expected to remain high, and price increases are being implemented to offset these costs, with guidance to be provided in March [54][55] Question: How is the pricing strategy evolving and what is the inventory situation? - Management is taking a targeted approach to price increases, with overall increases expected to be in the low single digits, while Pura Vida inventory levels are higher than desired [58][60] Question: What is the status of the delayed renewal of GSP and its impact? - Management explained that the delay is due to differing perspectives in Congress, affecting sourcing from countries like Cambodia and Indonesia [62][65] Question: How is the company addressing the challenges posed by the iOS update on digital marketing? - Management emphasized the need to diversify marketing platforms and balance digital and traditional methods to engage customers effectively [67][68]

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Vera Bradley, Inc.'s unaudited condensed consolidated financial statements and accompanying notes for the periods ended July 31, 2021, and August 1, 2020 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Condensed Consolidated Balance Sheets (in thousands):** | Metric | July 31, 2021 | January 30, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $75,753 | $64,175 | | Inventories | $148,048 | $141,416 | | Total current assets | $276,341 | $259,683 | | Total assets | $525,059 | $513,787 | | Total current liabilities | $83,818 | $77,426 | | Total liabilities | $171,873 | $169,071 | | Total shareholders' equity of Vera Bradley, Inc. | $322,822 | $314,907 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) **Condensed Consolidated Statements of Operations (in thousands, except per share data):** | Metric | Thirteen Weeks Ended July 31, 2021 | Thirteen Weeks Ended August 1, 2020 | Twenty-Six Weeks Ended July 31, 2021 | Twenty-Six Weeks Ended August 1, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $147,048 | $131,770 | $256,142 | $201,054 | | Gross profit | $80,361 | $79,621 | $139,525 | $113,809 | | Operating income (loss) | $12,648 | $17,499 | $10,689 | $(8,075) | | Net income (loss) attributable to Vera Bradley, Inc. | $9,050 | $7,216 | $6,905 | $(8,121) | | Diluted net income (loss) per share | $0.26 | $0.42 | $0.20 | $(0.24) | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) **Condensed Consolidated Statements of Comprehensive Income (in thousands):** | Metric | Thirteen Weeks Ended July 31, 2021 | Thirteen Weeks Ended August 1, 2020 | Twenty-Six Weeks Ended July 31, 2021 | Twenty-Six Weeks Ended August 1, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $9,857 | $8,327 | $8,339 | $(7,210) | | Comprehensive income (loss) attributable to Vera Bradley, Inc. | $9,046 | $7,231 | $6,893 | $(8,281) | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) **Condensed Consolidated Statements of Shareholders' Equity (in thousands, except share data):** | Metric | July 31, 2021 | January 30, 2021 | | :--- | :--- | :--- | | Common Stock (shares outstanding) | 34,021,330 | 33,414,490 | | Additional paid-in-capital | $106,455 | $105,433 | | Retained earnings | $323,431 | $316,526 | | Total shareholders' equity of Vera Bradley, Inc. | $322,822 | $314,907 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Condensed Consolidated Statements of Cash Flows (in thousands):** | Activity | Twenty-Six Weeks Ended July 31, 2021 | Twenty-Six Weeks Ended August 1, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $16,487 | $(77) | | Net cash (used in) provided by investing activities | $(1,671) | $18,901 | | Net cash (used in) provided by financing activities | $(3,229) | $6,816 | | Net increase in cash and cash equivalents | $11,578 | $25,651 | | Cash and cash equivalents, end of period | $75,753 | $75,568 | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of the Company and Basis of Presentation](index=12&type=section&id=1.%20Description%20of%20the%20Company%20and%20Basis%20of%20Presentation) Vera Bradley, Inc. operates two lifestyle brands, Vera Bradley and Pura Vida, across three reportable segments, with no material impact from ASU 2019-12 adoption in fiscal 2022 - Vera Bradley, Inc. operates two unique lifestyle brands: Vera Bradley and Pura Vida, both targeting emotionally-connected, multi-generational female customer bases with multi-channel distribution strategies[37](index=37&type=chunk) - The company has three reportable segments: Vera Bradley Direct (VB Direct), Vera Bradley Indirect (VB Indirect), and Pura Vida[40](index=40&type=chunk) - The adoption of ASU 2019-12, Income Taxes (Topic 740), in the first quarter of fiscal 2022 did not have a material impact on the Company's consolidated financial statements[46](index=46&type=chunk) [2. Revenue from Contracts with Customers](index=13&type=section&id=2.%20Revenue%20from%20Contracts%20with%20Customers) The company disaggregates net revenues by segment, with contract liabilities decreasing to **$3.6 million** and net accounts receivable increasing to **$28.7 million** as of July 31, 2021 Net Revenues by Segment (in thousands) **Thirteen Weeks Ended July 31, 2021 Net Revenues by Segment (in thousands):** | Segment | Net Revenues | | :--- | :--- | | VB Direct | $97,138 | | VB Indirect | $16,832 | | Pura Vida | $33,078 | | **Total** | **$147,048** | **Twenty-Six Weeks Ended July 31, 2021 Net Revenues by Segment (in thousands):** | Segment | Net Revenues | | :--- | :--- | | VB Direct | $163,870 | | VB Indirect | $32,096 | | Pura Vida | $60,176 | | **Total** | **$256,142** | - Contract liabilities (unearned revenue) were **$3.6 million** as of July 31, 2021, down from **$4.1 million** at January 30, 2021, primarily related to Pura Vida's monthly bracelet and jewelry clubs, unredeemed gift cards, and loyalty points[58](index=58&type=chunk) - Accounts receivable from contracts with customers, net of allowances, increased to **$28.7 million** as of July 31, 2021, from **$26.0 million** at January 30, 2021[59](index=59&type=chunk) [3. Leases](index=15&type=section&id=3.%20Leases) Total lease costs for the twenty-six weeks ended July 31, 2021, were **$15.9 million**, with cash paid for operating lease liabilities increasing to **$18.3 million** Total Lease Cost (in thousands) **Total Lease Cost (in thousands):** | Period | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Thirteen Weeks Ended | $8,404 | $8,339 | | Twenty-Six Weeks Ended | $15,949 | $16,460 | - The weighted-average remaining lease term as of July 31, 2021, was **5.4 years**, with a weighted-average discount rate of **4.7%**[65](index=65&type=chunk)[67](index=67&type=chunk) - Cash paid for operating lease liabilities for the twenty-six weeks ended July 31, 2021, was **$18.3 million**, compared to **$11.8 million** in the prior-year period, which included rent payment deferrals due to COVID-19[62](index=62&type=chunk)[68](index=68&type=chunk) [4. Earnings Per Share](index=16&type=section&id=4.%20Earnings%20Per%20Share) Diluted EPS for Vera Bradley, Inc. decreased to **$0.26** for the thirteen weeks but improved to **$0.20** for the twenty-six weeks ended July 31, 2021 Diluted Net Income (Loss) Per Share **Diluted Net Income (Loss) Per Share Available to Vera Bradley, Inc. Common Shareholders:** | Period | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Thirteen Weeks Ended | $0.26 | $0.42 | | Twenty-Six Weeks Ended | $0.20 | $(0.24) | - The noncontrolling interest in Pura Vida is classified as redeemable temporary equity due to a Put/Call Agreement, which allows the sellers or the company to buy/sell the remaining **25%** interest[71](index=71&type=chunk)[72](index=72&type=chunk) [5. Fair Value of Financial Instruments](index=18&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) Fair value measurements are classified into three levels, with no store asset impairment charges recorded in the current period, contrasting with **$3.8 million** in the prior year - Fair value measurements are classified into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs) Cash equivalents are Level 1, and short-term investments are Level 2[75](index=75&type=chunk)[76](index=76&type=chunk)[79](index=79&type=chunk) - No impairment charges were recorded for store assets (property, plant, and equipment, and lease right-of-use assets) for the thirteen weeks ended July 31, 2021, and August 1, 2020, or the twenty-six weeks ended July 31, 2021[77](index=77&type=chunk) - The company recorded **$3.8 million** in impairment charges related to store assets during the twenty-six weeks ended August 1, 2020[77](index=77&type=chunk) [6. Debt](index=19&type=section&id=6.%20Debt) The company maintains a **$75.0 million** asset-based revolving Credit Agreement with no outstanding borrowings and full covenant compliance as of July 31, 2021 - The company has an asset-based revolving Credit Agreement with an aggregate principal amount not to exceed **$75.0 million**, maturing on September 7, 2023[82](index=82&type=chunk)[88](index=88&type=chunk) - As of July 31, 2021, and January 30, 2021, there were no borrowings outstanding, and **$75.0 million** was available under the Credit Agreement[88](index=88&type=chunk) - The company was in compliance with all covenants under the Credit Agreement as of July 31, 2021[206](index=206&type=chunk) [7. Income Taxes](index=20&type=section&id=7.%20Income%20Taxes) The effective tax rate decreased to **21.3%** for the thirteen weeks but increased to **20.4%** for the twenty-six weeks ended July 31, 2021, due to various tax impacts Effective Tax Rate **Effective Tax Rate:** | Period | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Thirteen Weeks Ended | 21.3% | 51.1% | | Twenty-Six Weeks Ended | 20.4% | 16.5% | - The decrease in the thirteen-week effective tax rate was primarily due to the reversal of the impact from the net operating loss (NOL) carryback in the prior-year, estimated as a result of the CARES Act[91](index=91&type=chunk) - The increase in the twenty-six-week effective tax rate was primarily due to the relative impact of permanent and discrete items in the current-year period compared to the prior-year period, mainly stock-based compensation[92](index=92&type=chunk) [8. Stock-Based Compensation](index=20&type=section&id=8.%20Stock-Based%20Compensation) The company granted **640,915** RSUs with an aggregate fair value of **$6.6 million**, with **$8.7 million** in unrecognized compensation cost as of July 31, 2021 Restricted Stock Units Granted (Twenty-Six Weeks Ended) **Restricted Stock Units Granted (Twenty-Six Weeks Ended):** | Metric | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Time-based & Performance-based RSUs | 640,915 | 1,412,024 | | Aggregate Fair Value | $6.6 million | $5.8 million | - As of July 31, 2021, total unrecognized compensation cost related to nonvested restricted stock units was **$8.7 million**, expected to be recognized over a weighted-average period of **1.8 years**[101](index=101&type=chunk) [9. Commitments and Contingencies](index=21&type=section&id=9.%20Commitments%20and%20Contingencies) The company faces a legal dispute with Vesi Incorporated seeking at least **$10.0 million** in damages, while a prior class-action lawsuit was settled for an immaterial amount - Vesi Incorporated filed a lawsuit against the company in August 2019, alleging breach of fiduciary duty, unfair competition, defamation, and tortious interference, seeking damages of not less than **$10.0 million** The company denies liability and is vigorously defending itself[103](index=103&type=chunk) - A class-action lawsuit filed in April 2020 regarding California Labor Code violations was settled for an immaterial amount in the first quarter of fiscal 2022[104](index=104&type=chunk) [10. Common Stock](index=22&type=section&id=10.%20Common%20Stock) The **$50.0 million** share repurchase program resumed in March 2021, with no shares repurchased during the twenty-six weeks ended July 31, 2021, leaving **$32.9 million** available - The 2018 Share Repurchase Program, authorizing up to **$50.0 million** in common stock repurchases, was extended through December 11, 2021, and resumed on March 11, 2021, after a temporary suspension due to COVID-19[106](index=106&type=chunk) - No shares were purchased under the program during the twenty-six weeks ended July 31, 2021[107](index=107&type=chunk) - **$32.9 million** remained available to repurchase shares under the 2018 Share Repurchase Program as of July 31, 2021[107](index=107&type=chunk) [11. Cloud Computing Arrangements](index=22&type=section&id=11.%20Cloud%20Computing%20Arrangements) The company capitalizes and amortizes Cloud Computing Arrangement implementation costs, with unamortized costs totaling **$8.5 million** as of July 31, 2021 - Unamortized Cloud Computing Arrangement (CCA) implementation costs totaled **$8.5 million** as of July 31, 2021, up from **$8.1 million** at January 30, 2021[109](index=109&type=chunk) - CCA costs are amortized over the term of the related hosting agreement, with amortization expense recorded within selling, general, and administrative expenses[109](index=109&type=chunk) [12. Acquisition of Pura Vida](index=22&type=section&id=12.%20Acquisition%20of%20Pura%20Vida) Vera Bradley acquired a **75%** interest in Pura Vida for approximately **$75.0 million**, with a **$18.7 million** contingent payment made in fiscal 2021 - The company acquired a **75%** ownership interest in Creative Genius, Inc. (Pura Vida) on July 16, 2019, for approximately **$75.0 million** in cash[110](index=110&type=chunk) - A contingent payment of **$18.7 million**, based on Pura Vida's 2019 adjusted EBITDA, was made during the first quarter of fiscal 2021[111](index=111&type=chunk) [13. Redeemable Noncontrolling Interest](index=23&type=section&id=13.%20Redeemable%20Noncontrolling%20Interest) The redeemable noncontrolling interest in Pura Vida increased to **$30.36 million** as of July 31, 2021, reflecting attributable net income and distributions Redeemable Noncontrolling Interest (in thousands) **Redeemable Noncontrolling Interest (in thousands):** | Metric | July 31, 2021 | January 30, 2021 | | :--- | :--- | :--- | | Balance | $30,364 | $29,809 | **Net Income Attributable to Redeemable Noncontrolling Interest (in thousands):** | Period | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Thirteen Weeks Ended | $807 | $1,111 | | Twenty-Six Weeks Ended | $1,434 | $911 | [14. Intangible Assets and Goodwill](index=24&type=section&id=14.%20Intangible%20Assets%20and%20Goodwill) Intangible assets, excluding goodwill, totaled **$45.76 million**, with goodwill at **$44.3 million**, and no impairment charges recorded in fiscal 2022 Intangible Assets, Excluding Goodwill (in thousands) **Intangible Assets, Excluding Goodwill (in thousands):** | Asset | July 31, 2021 | January 30, 2021 | | :--- | :--- | :--- | | Customer Relationships | $8,625 | $10,083 | | Non-competition Agreements | $466 | $545 | | Pura Vida Brand | $36,668 | $36,668 | | **Total** | **$45,759** | **$47,296** | - Goodwill totaled **$44.3 million** as of July 31, 2021, and January 30, 2021, recorded within the Pura Vida segment[120](index=120&type=chunk) - No impairment charge was recorded for goodwill or intangible assets as a result of the annual impairment test for fiscal 2022[123](index=123&type=chunk) [15. Segment Reporting](index=25&type=section&id=15.%20Segment%20Reporting) The company operates and reports across three segments: VB Direct, VB Indirect, and Pura Vida, with all segments contributing positively to operating income - The company has three operating segments: Vera Bradley Direct (VB Direct), Vera Bradley Indirect (VB Indirect), and Pura Vida[124](index=124&type=chunk) Segment Net Revenues and Operating Income (in thousands) **Segment Net Revenues (in thousands):** | Segment | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :--- | :--- | :--- | :--- | :--- | | VB Direct | $97,138 | $81,233 | $163,870 | $118,070 | | VB Indirect | $16,832 | $17,730 | $32,096 | $28,959 | | Pura Vida | $33,078 | $32,807 | $60,176 | $54,025 | | **Total** | **$147,048** | **$131,770** | **$256,142** | **$201,054** | **Segment Operating Income (in thousands):** | Segment | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :--- | :--- | :--- | :--- | :--- | | VB Direct | $23,168 | $22,822 | $34,028 | $11,857 | | VB Indirect | $5,601 | $6,477 | $10,062 | $9,233 | | Pura Vida | $3,226 | $4,445 | $5,734 | $3,644 | | **Total Segment Op. Income** | **$31,995** | **$33,744** | **$49,824** | **$24,734** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Vera Bradley, Inc.'s financial condition, operating results, liquidity, and cash flows, highlighting COVID-19 impacts, supply chain disruptions, and strategic progress for both brands [The COVID-19 Pandemic](index=27&type=section&id=The%20COVID-19%20Pandemic) The COVID-19 pandemic significantly impacted prior-year operations with store closures and workforce adjustments, and future effects on liquidity and results remain uncertain - During the first and second quarters of the prior-year, the COVID-19 pandemic caused global travel restrictions, quarantines, factory/mall closures, temporary store closures, workforce furloughs (**80%**), and temporary base compensation reductions[133](index=133&type=chunk) - Vera Bradley retail stores began phased re-opening on May 5, 2020, with substantially all stores open by the end of July 2020 All stores remained open during the first six months of the current year[134](index=134&type=chunk)[135](index=135&type=chunk) - The company cannot predict the future impact of the COVID-19 pandemic on its liquidity, operating results, and financial condition, but it could have a significant adverse effect[136](index=136&type=chunk) [Supply Chain Disruptions](index=27&type=section&id=Supply%20Chain%20Disruptions) The Vera Bradley brand experienced supply chain disruptions, leading to delivery delays, increased freight expenses, and higher tariffs due to GSP expiration - The Vera Bradley brand faced supply chain disruptions, causing average delivery delays of **30 days** for product launches[137](index=137&type=chunk) - The company expects shipping delays and freight expense increases to continue for the near future[137](index=137&type=chunk) - Higher tariffs resulted from the expiration of the GSP duty-free status at the end of calendar year 2020, which could have a material adverse effect on liquidity, operating results, and financial condition[137](index=137&type=chunk) [Executive Summary](index=27&type=section&id=Executive%20Summary) Vera Bradley launched a Recycled Cotton Collection, Pura Vida completed ERP integration and expanded wholesale, while net revenues increased **11.6%** but operating income decreased - Vera Bradley launched its Recycled Cotton Collection, 'Cotton ReImagined,' and committed to updating **100%** of fabrics to sustainable alternatives by 2025[138](index=138&type=chunk) - Pura Vida substantially completed its Project Novus ERP integration, expanded wholesale distribution by over **250** new accounts, and rolled out Pura Vida shop-in-shops in **23** Vera Bradley full-line locations[140](index=140&type=chunk) Financial Summary (Q2 Fiscal 2022 vs Q2 Fiscal 2021) **Financial Summary (all comparisons are to the second quarter of fiscal 2021):** | Metric | Q2 FY22 | Q2 FY21 | Change | | :--- | :--- | :--- | :--- | | Net revenues | $147.0 million | $131.8 million | +11.6% | | VB Direct segment sales | $97.1 million | $81.2 million | +19.6% | | VB Indirect segment sales | $16.8 million | $17.7 million | -5.1% | | Pura Vida segment sales | $33.1 million | $32.8 million | +0.8% | | Gross profit | $80.4 million | $79.6 million | +0.9% | | Operating income | $12.6 million | $17.5 million | -27.8% | | Net income attributable to Vera Bradley, Inc. | $9.1 million | $7.2 million | +26.4% | | Cash and cash equivalents and investments (at July 31, 2021) | $76.5 million | N/A | N/A | [How We Assess the Performance of Our Business](index=28&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) The company assesses business performance using key financial measures such as net revenues, gross profit, SG&A, operating income, and net income, with comparable sales not meaningful due to prior-year store closures - Key performance indicators include Net Revenues, Comparable Sales, Gross Profit, Selling, General, and Administrative Expenses (SG&A), Other Income, Operating Income (Loss), and Net Income (Loss)[141](index=141&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - Comparable sales calculations were not meaningful for the current period due to the temporary closure of all Vera Bradley stores during portions of the first and second quarters of the prior-year due to COVID-19[143](index=143&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Net revenues increased **11.6%** to **$147.0 million** for thirteen weeks, but operating income decreased **27.8%**; for twenty-six weeks, net revenues surged **27.4%** to **$256.1 million**, with operating income improving to **$10.7 million** Consolidated Financial Highlights (in thousands, except percentages) **Consolidated Financial Highlights (in thousands, except percentages):** | Metric | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended Aug 1, 2020 | YoY Change | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended Aug 1, 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net revenues | $147,048 | $131,770 | +11.6% | $256,142 | $201,054 | +27.4% | | Cost of sales | $66,687 | $52,149 | +27.9% | $116,617 | $87,245 | +33.7% | | Gross profit | $80,361 | $79,621 | +0.9% | $139,525 | $113,809 | +22.6% | | Gross profit % | 54.6% | 60.4% | -5.8 pts | 54.5% | 56.6% | -2.1 pts | | SG&A expenses | $68,729 | $62,155 | +10.6% | $129,625 | $121,937 | +6.3% | | SG&A % | 46.7% | 47.2% | -0.5 pts | 50.6% | 60.6% | -10.0 pts | | Operating income (loss) | $12,648 | $17,499 | -27.8% | $10,689 | $(8,075) | N/A (from loss to profit) | | Operating income (loss) % | 8.6% | 13.3% | -4.7 pts | 4.2% | -4.0% | +8.2 pts | | Net income (loss) attributable to Vera Bradley, Inc. | $9,050 | $7,216 | +25.4% | $6,905 | $(8,121) | N/A (from loss to profit) | Vera Bradley Store Data **Vera Bradley Store Data:** | Metric | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Total stores open at end of period | 145 | 149 | | Total gross square footage at end of period (all stores) | 393,592 | 389,144 | [Thirteen Weeks Ended July 31, 2021, Compared to Thirteen Weeks Ended August 1, 2020](index=32&type=section&id=Thirteen%20Weeks%20Ended%20July%2031,%202021,%20Compared%20to%20Thirteen%20Weeks%20Ended%20August%201,%202020) - Net revenues increased **$15.2 million** (**11.6%**) to **$147.0 million**, primarily driven by a **19.6%** increase in VB Direct segment sales due to higher store sales as stores were temporarily closed in the prior year[161](index=161&type=chunk)[162](index=162&type=chunk) - VB Indirect net revenues decreased **5.1%** to **$16.8 million**, mainly due to a reduction in mask sales, partially offset by a rebound in other product categories[163](index=163&type=chunk) - Pura Vida net revenues increased **0.8%** to **$33.1 million**, but e-commerce sales were negatively impacted by the Apple iOS 14.5 update affecting primary marketing vehicles like Facebook and Instagram[164](index=164&type=chunk) - Gross profit margin decreased to **54.6%** from **60.4%**, primarily due to a decrease in higher-margin mask sales and an increase in shipping and duty costs[165](index=165&type=chunk) - SG&A expenses increased **$6.5 million** (**10.6%**) to **$68.7 million**, mainly due to the non-recurrence of prior-year COVID-19 expense reduction initiatives (furloughs, compensation reductions, marketing cuts)[166](index=166&type=chunk) - Operating income decreased **$4.9 million** (**27.8%**) to **$12.6 million**, primarily due to the factors affecting gross profit and SG&A[169](index=169&type=chunk) - Net income attributable to Vera Bradley, Inc. increased **$1.9 million** (**26.4%**) to **$9.1 million**[177](index=177&type=chunk) [Twenty-Six Weeks Ended July 31, 2021, Compared to Twenty-Six Weeks Ended August 1, 2020](index=34&type=section&id=Twenty-Six%20Weeks%20Ended%20July%2031,%202021,%20Compared%20to%20Twenty-Six%20Weeks%20Ended%20August%201,%202020) - Net revenues increased **$55.0 million** (**27.4%**) to **$256.1 million**, with VB Direct segment sales up **38.8%** due to higher store sales as stores were temporarily closed in the prior year[178](index=178&type=chunk)[179](index=179&type=chunk) - VB Indirect net revenues increased **10.8%** to **$32.1 million**, driven by increased orders from specialty and key accounts, partially offset by a decline in mask sales[180](index=180&type=chunk) - Pura Vida net revenues increased **11.4%** to **$60.2 million**, with wholesale sales increasing, but e-commerce sales negatively impacted by the Apple iOS 14.5 update[181](index=181&type=chunk) - Gross profit margin decreased to **54.5%** from **56.6%**, primarily due to a decline in higher-margin mask sales and increased shipping and duty costs[182](index=182&type=chunk) - SG&A expenses increased **$7.7 million** (**6.3%**) to **$129.6 million**, primarily due to the non-recurrence of prior-year COVID-19 expense reductions, increased incentive compensation, and cloud computing amortization, partially offset by the absence of prior-year store impairment charges and reduced depreciation[183](index=183&type=chunk) - Operating income significantly improved by **$18.8 million**, turning from a loss of **$(8.1) million** to a profit of **$10.7 million**[185](index=185&type=chunk) - Net income attributable to Vera Bradley, Inc. increased **$15.0 million**, turning from a net loss of **$(8.1) million** to a net income of **$6.9 million**[193](index=193&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with cash, investments, and a **$75.0 million** credit facility; operating cash flow significantly improved to **$16.5 million**, while investing and financing activities shifted to net cash used - Primary sources of liquidity include cash on hand, cash equivalents, investments, and cash flow from operations, with access to a **$75.0 million** asset-based revolving credit agreement (no debt outstanding as of July 31, 2021)[194](index=194&type=chunk) Cash Flow Summary (Twenty-Six Weeks Ended, in thousands) **Cash Flow Summary (Twenty-Six Weeks Ended, in thousands):** | Activity | July 31, 2021 | August 1, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $16,487 | $(77) | | Net cash (used in) provided by investing activities | $(1,671) | $18,901 | | Net cash (used in) provided by financing activities | $(3,229) | $6,816 | - Net cash provided by operating activities increased to **$16.5 million**, primarily due to improved net income and favorable changes in assets and liabilities (e.g., accounts receivable collections, lower inventory receipts)[198](index=198&type=chunk) - Net cash used in investing activities was **$1.7 million**, a shift from cash provided in the prior year, primarily due to non-recurring proceeds from investment activity in the prior-year period Capital expenditures for fiscal 2022 are expected to be **$8.0 million** to **$10.0 million**[200](index=200&type=chunk) - Net cash used in financing activities was **$3.2 million**, a shift from cash provided in the prior year, primarily due to non-recurring prior-year activities such as net borrowings under the credit agreement and a contingent consideration payment for the Pura Vida acquisition[201](index=201&type=chunk) [Off-Balance-Sheet Arrangements](index=38&type=section&id=Off-Balance-Sheet%20Arrangements) The company has no off-balance-sheet financing or unconsolidated special-purpose entities - The company does not have any off-balance-sheet financing or unconsolidated special-purpose entities[210](index=210&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No significant changes occurred in the company's critical accounting policies and estimates as of July 31, 2021, compared to the prior Annual Report on Form 10-K - There were no significant changes to any of the critical accounting policies and estimates described in the Annual Report as of July 31, 2021[212](index=212&type=chunk) [Recently Issued Accounting Pronouncements](index=38&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Recently issued accounting pronouncements are discussed in Note 1, 'Description of the Company and Basis of Presentation,' within Item 1 of this Quarterly Report on Form 10-Q - Refer to Note 1 'Description of the Company and Basis of Presentation' within Item 1 'Financial Statements' for a discussion of recently issued accounting pronouncements[213](index=213&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's market risks as of July 31, 2021, compared to those described in the prior Annual Report on Form 10-K - As of July 31, 2021, there was no material change in the market risks described in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021[214](index=214&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of July 31, 2021, with no material changes in internal control over financial reporting during the most recent fiscal quarter - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of July 31, 2021[215](index=215&type=chunk) - There has been no change in internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[216](index=216&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a lawsuit with Vesi Incorporated seeking at least **$10.0 million** in damages, while a prior class-action lawsuit was settled for an immaterial amount - Vesi Incorporated filed a lawsuit against the company in August 2019, seeking not less than **$10.0 million** for punitive damages, attorney fees, and prejudgment interest The company denies liability and intends to vigorously defend itself[218](index=218&type=chunk) - A class-action lawsuit filed in April 2020 regarding California Labor Code violations was settled for an immaterial amount in the first quarter of fiscal 2022[219](index=219&type=chunk) [ITEM 1A. RISK FACTORS](index=40&type=page&id=Item%201A.%20Risk%20Factors) No material changes to prior risk factors, but new risks include distribution system disruptions and challenges in attracting and retaining qualified employees, exacerbated by the pandemic - No material changes to risk factors previously set forth in the Company's Annual Report on Form 10-K, except for those related to distribution systems and employee retention[221](index=221&type=chunk) - New or emphasized risks include losses or disruptions associated with distribution systems, such as those caused by public health pandemics (COVID-19), port disruptions, shipping container shortages, and lack of available shipping vessels[222](index=222&type=chunk)[223](index=223&type=chunk) - The company faces risks if it is unable to attract and retain a sufficient number of qualified retail and distribution center employees, a challenge amplified by the COVID-19 pandemic[224](index=224&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The **$50.0 million** share repurchase program resumed in March 2021, with no shares repurchased during the thirteen weeks ended July 31, 2021, leaving **$32.9 million** available - The 2018 Share Repurchase Program, authorizing up to **$50.0 million** of common stock repurchases, was extended through December 11, 2021, and resumed on March 11, 2021, after a temporary suspension due to COVID-19[226](index=226&type=chunk) - There was no activity under the share repurchase program during the thirteen weeks ended July 31, 2021[227](index=227&type=chunk)[228](index=228&type=chunk) - **$32,939,607** remained available to repurchase shares under the program as of July 31, 2021[228](index=228&type=chunk) [ITEM 6. EXHIBITS](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and various Inline XBRL documents - Exhibits include CEO Section 302 Certification (31.1) and CFO Section 302 Certification (31.2)[229](index=229&type=chunk) - The filing includes various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF) and a Cover Page Interactive Data File (104)[229](index=229&type=chunk) [SIGNATURE](index=43&type=section&id=SIGNATURE) The Quarterly Report on Form 10-Q was signed by John Enwright, Chief Financial Officer, on behalf of Vera Bradley, Inc. on September 8, 2021 - The report was signed by John Enwright, Chief Financial Officer, on behalf of Vera Bradley, Inc. on September 8, 2021[231](index=231&type=chunk)

Vera Bradley, Inc. (NASDAQ:VRA) Q2 2022 Results Earnings Conference Call September 1, 2021 9:30 AM ET Company Participants Robert Wallstrom - President, Chief Executive Officer John Enwright - Executive Vice President, Chief Financial Officer Mark Dely - Chief Administrative Officer Conference Call Participants Mark Altschwager - Baird Eric Beder - SCC Research Oliver Chen - Cowen Steve Marotta - CLK & Associates Dana Telsey - Telsey Group Operator Good morning ladies and gentlemen. Thank you for standing b ...

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)