Build-A-Bear Workshop(BBW) - 2026 Q2 - Quarterly Results

Executive Summary & Business Highlights This section provides an overview of the company's strong financial performance in Q2 and H1 FY2025 and highlights key strategic initiatives and future outlook Record Q2 and H1 FY2025 Performance Build-A-Bear Workshop reported record second quarter and first half fiscal year 2025 results, driven by strong store performance, Direct-to-Consumer segment contribution margins, and double-digit revenue growth in the Commercial segment, leading to an increase in annual revenue and profit guidance - The company achieved its most profitable second quarter and first half in its history, underscoring the durability of its evolved business model[3] Second Quarter Fiscal 2025 Key Financials (YoY Growth) | Metric | Value (Millions USD) | Growth | | :------------------- | :------------------- | :----- | | Total Revenues | $124.2 | +11.1% | | Pre-Tax Income | $15.3 | +32.7% | | Diluted EPS | $0.94 | +46.9% | First Half Fiscal 2025 Key Financials (YoY Growth) | Metric | Value (Millions USD) | Growth | | :------------------- | :------------------- | :----- | | Total Revenues | $252.6 | +11.5% | | Pre-Tax Income | $34.9 | +31.5% | | Diluted EPS | $2.11 | +44.5% | Strategic Initiatives and Outlook Update Management highlighted continued commitment to long-term strategic initiatives, particularly the global expansion of its partner-operated model, which has resulted in a stronger-than-anticipated pace of new location openings and an increase in net new unit guidance - The company is focused on advancing long-term strategic initiatives, with a particular emphasis on global expansion of the partner-operated model[2] - Achieved a stronger-than-anticipated pace of new location openings, leading to raised net new unit guidance[2] - The company's solid balance sheet, robust cash flow generation, and strong returns on capital reinforce confidence in future performance[3] Detailed Financial Results This section provides a comprehensive breakdown of the company's financial performance for the second quarter and first half of fiscal year 2025, highlighting revenue, profitability, and key drivers Second Quarter Fiscal 2025 Performance (13 Weeks) The second quarter of fiscal 2025 saw record revenues and significant growth in profitability, driven by strong retail sales, e-commerce demand, and commercial revenues, with gross margin improving due to reduced promotions and cost leverage, despite increased SG&A expenses Q2 FY2025 Revenue Breakdown (YoY Growth) | Revenue Type | Value (Millions USD) | Growth | | :----------------------------- | :------------------- | :----- | | Total Revenues | $124.2 | +11.1% | | Net Retail Sales | $114.6 | +10.8% | | Consolidated E-commerce Demand | N/A | +15.1% | | Commercial & International Franchise | $9.6 | +15.2% | Q2 FY2025 Profitability Metrics (YoY Growth/Change) | Metric | Value (Millions USD) | % of Total Revenues | YoY Change | | :------------------- | :------------------- | :------------------ | :--------- | | Pre-Tax Income | $15.3 | 12.3% | +32.7% (+200 bps) | | Diluted EPS | $0.94 | N/A | +46.9% | | EBITDA | $18.8 | 15.1% | +25.3% | | Gross Margin | N/A | N/A | +340 bps | | SG&A Expense | N/A | N/A | +140 bps | - Gross margin improvement was primarily from an expansion in Retail gross margin, driven by reduced promotional activity, leverage of fixed costs, and selective price increases, as well as an expansion in Commercial gross margin[6] - SG&A expense increase was mainly due to higher store-level compensation, corporate costs, and general inflationary pressures, partially offset by favorable marketing expense timing[6] First Half Fiscal 2025 Performance (26 Weeks) The first half of fiscal 2025 also demonstrated strong financial performance with record total revenues and significant increases in pre-tax income and diluted EPS, with gross margin expansion being a key driver, partially offset by higher SG&A H1 FY2025 Revenue Breakdown (YoY Growth) | Revenue Type | Value (Millions USD) | Growth | | :----------------------------- | :------------------- | :----- | | Total Revenues | $252.6 | +11.5% | | Net Retail Sales | $234.2 | +10.8% | | Consolidated E-commerce Demand | N/A | +6.8% | | Commercial & International Franchise | $18.4 | +21.1% | H1 FY2025 Profitability Metrics (YoY Growth/Change) | Metric | Value (Millions USD) | % of Total Revenues | YoY Change | | :------------------- | :------------------- | :------------------ | :--------- | | Pre-Tax Income | $34.9 | 13.8% | +31.5% (+210 bps) | | Diluted EPS | $2.11 | N/A | +44.5% | | EBITDA | $41.9 | 16.6% | +26.0% | | Gross Margin | N/A | N/A | +300 bps | | SG&A Expense | N/A | N/A | +80 bps | - Gross margin improvement was from an expansion in Retail gross margin, primarily from reduced promotional activity, leverage of fixed costs, and selective price increases, as well as an expansion in Commercial gross margin[6] - SG&A expense increase was mainly from higher store-level compensation, corporate costs, and general inflationary pressures, partially offset by favorable marketing expense timing, and a decline in interest income[6] Financial Position and Capital Allocation This section reviews the company's balance sheet, capital expenditures, and strategies for returning capital to shareholders, reflecting its financial health and resource deployment Balance Sheet Highlights The company maintained a strong balance sheet at the end of the second quarter, with a significant increase in cash and cash equivalents and no borrowings under its revolving credit facility, while inventory levels increased primarily due to tariffs and accelerated core product purchases Balance Sheet Snapshot (Q2 End FY2025 vs. Q2 End FY2024) | Metric | Q2 FY2025 (Millions USD) | Q2 FY2024 (Millions USD) | YoY Change | | :------------------- | :----------------------- | :----------------------- | :--------- | | Cash & Cash Equivalents | $39.1 | $25.2 | +55.4% | | Inventory | $81.8 | $67.0 | +22.1% | - The company finished the quarter with no borrowings under its revolving credit facility[7] - Inventory increase was primarily driven by added cost of tariffs and accelerated purchase of core products aligned with tariff-mitigation plans[8] Capital Expenditures Capital expenditures for the second quarter and first half of fiscal 2025 were $3.4 million and $6.3 million, respectively Capital Expenditures | Period | Amount (Millions USD) | | :----- | :-------------------- | | Q2 FY2025 | $3.4 | | H1 FY2025 | $6.3 | Shareholder Returns Build-A-Bear continued to return capital to shareholders through share repurchases and quarterly dividends, utilizing $13.1 million in the first half of fiscal 2025 Return of Capital to Shareholders (H1 FY2025) | Activity | Amount (Millions USD) | Shares Repurchased | | :---------------- | :-------------------- | :----------------- | | Share Repurchases | $7.3 | 167,585 | | Quarterly Dividends | $5.8 | N/A | | Total | $13.1 | N/A | - As of August 27, the company has $80.3 million remaining under its board-authorized $100.0 million stock repurchase program[10] Operational Overview This section details the company's operational activities, focusing on store expansion and the growth of its global experience locations through partner-operated and franchise models Store Activity and Global Expansion The company achieved net new unit growth of 14 global experience locations during the quarter, primarily driven by partner-operated and franchise models, reflecting its strategic focus on global expansion Q2 FY2025 Net New Unit Growth | Type of Location | Number | | :--------------------- | :----- | | Partner-operated | 9 | | Franchise | 6 | | Corporately-managed | -1 | | Total Net New Units | 14 | Global Locations at Q2 End FY2025 | Type of Location | Number | | :--------------------- | :----- | | Corporately-managed | 368 | | Partner-operated | 157 | | Franchise | 102 | | Total Global Locations | 627 | Fiscal Year 2025 Outlook This section outlines the company's updated financial and operational guidance for fiscal year 2025, reflecting increased confidence in its growth trajectory and strategic initiatives Updated Financial and Operational Guidance Build-A-Bear has increased its fiscal year 2025 guidance for revenue, pre-tax income, and net new unit growth, reflecting confidence in its business model and strategic initiatives, with the guidance considering various factors including tariffs, labor costs, and inflationary pressures - The company increases its 2025 revenue, pre-tax income, and net new unit guidance[11] Updated Fiscal Year 2025 Guidance | Metric | Guidance | | :-------------------------- | :------------------------------------ | | Total Revenues Growth | Mid-to-high-single-digit percentage | | Pre-Tax Income | $62 million to $70 million | | Net New Unit Growth | At least 60 experience locations (up from 50) | | Capital Expenditures | $20 million to $25 million | | Depreciation and Amortization | Approximately $16 million | | Income Tax Rate | 22% to 24% (excluding discrete items) | - Guidance considers current tariff rates, medical and labor costs, changes in freight expense, and ongoing inflationary challenges[12] Supplemental Information This section provides additional context about Build-A-Bear, clarifies the use of non-GAAP financial measures, addresses forward-looking statements, and details investor communication channels About Build-A-Bear Build-A-Bear is a multi-generational brand established in 1997, known for its interactive 'furry friend' creation experience, operating over 600 locations globally, alongside e-commerce and licensing agreements, and reported consolidated total revenues of $496.4 million for fiscal 2024 - Build-A-Bear is a multi-generational brand focused on its mission to 'add a little more heart to life,' allowing guests to create custom stuffed animals[17] - The company operates over 600 company-owned, partner-operated, and franchise experience locations worldwide, complemented by e-commerce and non-plush branded consumer categories via licensing[17] - Build-A-Bear Workshop, Inc. posted consolidated total revenues of $496.4 million for fiscal 2024[17] Non-GAAP Financial Measures The press release includes financial results presented in accordance with GAAP and certain non-GAAP measures, which management uses to identify underlying business trends and provide useful information, emphasizing that these should not substitute GAAP results - Financial results are provided in accordance with GAAP and using certain non-GAAP financial measures, specifically historic income adjusted to exclude certain costs[14] - Management believes non-GAAP measures help identify underlying trends and provide useful information by excluding items not indicative of core operating results[14] - These non-GAAP measures should not be considered a substitute for or superior to GAAP results[14] Forward-Looking Statements This section contains forward-looking statements regarding future events and financial performance, which are based on current expectations and projections, involving risks and uncertainties that could cause actual results to differ materially, and the company does not undertake to publicly update them - The press release contains forward-looking statements reflecting current views on future events and financial performance, identified by words like 'expect,' 'plan,' 'anticipate,' 'believe,' 'estimate,' 'intend,' 'predict,' 'future,' 'potential' or 'continue'[18] - These statements are based only on current expectations and projections and involve risks and uncertainties that could cause actual results to differ materially[19] - The company does not undertake to publicly update or revise its forward-looking statements, except as required by law[20] Webcast and Conference Call Details Build-A-Bear Workshop hosted a conference call on August 28, 2025, to discuss its financial results, with webcast and telephone replay options available for investors and financial analysts - A conference call was hosted on August 28, 2025, at 9:00 AM ET to discuss financial results[15] - The call was webcast on Build-A-Bear's Investor Relations website, and a replay will be available for one year[15][16] Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited condensed consolidated financial statements, including statements of operations, balance sheets, and selected financial and store data for various periods Statements of Operations (13 Weeks Ended August 2, 2025) This section presents the unaudited condensed consolidated statements of operations for the 13 weeks ended August 2, 2025, compared to the same period in the prior year, detailing revenues, cost of merchandise sold, gross profit, operating expenses, and net income Unaudited Condensed Consolidated Statements of Operations (13 Weeks) | Metric | August 2, 2025 (Thousands USD) | August 3, 2024 (Thousands USD) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $124,247 | $111,798 | | Consolidated gross profit | $71,511 | $60,569 | | Selling, general and administrative expense | $56,399 | $49,212 | | Income before income taxes | $15,318 | $11,545 | | Net income | $12,367 | $8,778 | | Diluted EPS | $0.94 | $0.64 | Statements of Operations (26 Weeks Ended August 2, 2025) This section provides the unaudited condensed consolidated statements of operations for the 26 weeks ended August 2, 2025, compared to the prior year's first half, outlining the company's revenue streams, cost structure, and overall profitability for the period Unaudited Condensed Consolidated Statements of Operations (26 Weeks) | Metric | August 2, 2025 (Thousands USD) | August 3, 2024 (Thousands USD) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $252,642 | $226,528 | | Consolidated gross profit | $144,497 | $122,734 | | Selling, general and administrative expense | $109,954 | $96,774 | | Income before income taxes | $34,949 | $26,574 | | Net income | $27,686 | $20,237 | | Diluted EPS | $2.11 | $1.46 | Balance Sheets (August 2, 2025) This section presents the unaudited condensed consolidated balance sheets as of August 2, 2025, February 1, 2025, and August 3, 2024, detailing assets, liabilities, and stockholders' equity Unaudited Condensed Consolidated Balance Sheets (Thousands USD) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :------------------------------------ | :------------- | :--------------- | :------------- | | Total Assets | $318,238 | $289,956 | $279,459 | | Total Current Assets | $144,418 | $126,298 | $117,473 | | Cash, cash equivalents and restricted cash | $39,108 | $27,758 | $25,163 | | Inventories, net | $81,758 | $69,775 | $66,977 | | Total Liabilities | $162,843 | $150,874 | $153,668 | | Total Stockholders' Equity | $155,395 | $139,082 | $125,791 | Selected Financial and Store Data This section provides selected unaudited financial and store data, including retail gross margin, capital expenditures, depreciation and amortization, and the number and square footage of corporately-managed, franchised, and third-party retail locations Selected Financial Data (Thousands USD) | Metric | Q2 FY2025 | Q2 FY2024 | H1 FY2025 | H1 FY2024 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | | Retail gross margin ($) | $66,083 | $55,848 | $134,101 | $114,301 | | Retail gross margin (%) | 57.6% | 54.0% | 57.3% | 54.1% | | Capital expenditures | $3,421 | $3,270 | $6,328 | $5,700 | | Depreciation and amortization | $3,668 | $3,636 | $7,368 | $7,294 | Store Data (End of Period) | Metric | H1 FY2025 | H1 FY2024 | | :------------------------------------ | :-------- | :-------- | | Total corporately-managed retail locations | 368 | 361 | | Number of franchised stores | 102 | 89 | | Number of third-party retail locations | 157 | 107 | | Total corporately-managed store square footage | 788,713 | 785,943 | Reconciliation of GAAP to Non-GAAP Figures This section provides a reconciliation of GAAP income before income taxes to the non-GAAP measure of Earnings before interest, taxes, depreciation and amortization (EBITDA) for the 13 and 26 weeks ended August 2, 2025, and August 3, 2024 Reconciliation of GAAP to Non-GAAP Figures (Thousands USD) | Metric | Q2 FY2025 | Q2 FY2024 | H1 FY2025 | H1 FY2024 | | :------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Income before income taxes (pre-tax) | $15,318 | $11,545 | $34,949 | $26,574 | | Interest (income) expense, net | $(206) | $(188) | $(406) | $(614) | | Depreciation and amortization expense | $3,668 | $3,636 | $7,368 | $7,294 | | EBITDA | $18,780 | $14,993 | $41,911 | $33,254 |