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

PART I – FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information, including statements, notes, management's discussion, market risk, and controls Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income, and cash flows, along with detailed notes explaining the basis of presentation, revenue recognition, leases, and other financial details for the periods ended August 2, 2025, and August 3, 2024 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (Dollars in thousands) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :--------------- | :------------- | | Cash and cash equivalents | $39,108 | $27,758 | $25,163 | | Inventories, net | $81,758 | $69,775 | $66,977 | | Total current assets | $144,418 | $126,298 | $117,473 | | Total Assets | $318,238 | $289,956 | $279,459 | | Total current liabilities | $81,072 | $79,394 | $80,313 | | Total stockholders' equity | $155,395 | $139,082 | $125,791 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section outlines the company's financial performance over specific periods, including revenues, gross profit, net income, and earnings per share Condensed Consolidated Statements of Operations Highlights (Dollars in thousands, except per share data) | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :---------------------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Total revenues | $124,247 | $111,798 | $252,642 | $226,528 | | Consolidated gross profit | $71,511 | $60,569 | $144,498 | $122,734 | | Net income | $12,367 | $8,778 | $27,686 | $20,237 | | Basic income per common share | $0.94 | $0.64 | $2.11 | $1.47 | | Diluted income per common share | $0.94 | $0.64 | $2.11 | $1.46 | - Total revenues increased by 11.1% for the thirteen weeks ended August 2, 2025, and by 11.5% for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[14] - Net income increased by 40.9% for the thirteen weeks ended August 2, 2025, and by 36.8% for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[14] Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows Highlights (Dollars in thousands) | Metric | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :-------------------------------------- | :------------------------- | :------------------------- | | Net cash provided by operating activities | $32,017 | $12,413 | | Net cash used in investing activities | $(6,328) | $(5,700) | | Net cash used in financing activities | $(14,425) | $(25,867) | | Increase/(Decrease) in cash, cash equivalents, and restricted cash | $11,350 | $(19,164) | | Cash, cash equivalents and restricted cash, end of period | $39,108 | $25,163 | - Net cash provided by operating activities increased by $19.6 million for the twenty-six weeks ended August 2, 2025, primarily due to increased net income and favorable changes in working capital[17] - Net cash used in financing activities decreased by $11.4 million, mainly due to a reduction in share repurchases compared to the prior year[17] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Basis of Presentation This note explains the accounting principles and conventions used in preparing the unaudited condensed consolidated financial statements - The condensed consolidated financial statements are unaudited and prepared in accordance with SEC rules, with certain GAAP disclosures condensed or omitted[19] - Due to the seasonal nature of operations, results from a single reporting period are not indicative of full-year results[19] Note 2. Revenue This note details the company's revenue recognition policies and segment-wise revenue breakdown - The Direct-to-Consumer (DTC) segment accounts for 92% of consolidated revenue for the second quarter of fiscal 2025[23] - Revenue from gift cards is deferred until redemption, with unredeemed gift card breakage revenue recorded based on historical redemption patterns[26] - A hypothetical 1% change in the fiscal 2024 gift card breakage rate would have resulted in a $1.1 million change in breakage revenue[26] Note 3. Leases This note provides information on the company's operating lease arrangements, costs, and right-of-use assets Operating Lease Costs (Dollars in thousands) | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :---------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Operating lease costs | $10,765 | $10,021 | $21,208 | $19,605 | | Variable lease costs | $2,509 | $2,464 | $4,889 | $4,655 | | Short term lease costs | $21 | $33 | $49 | $58 | | Total Operating Lease costs | $13,295 | $12,518 | $26,146 | $24,318 | - The weighted-average remaining operating lease term was 6.1 years as of August 2, 2025, up from 5.6 years in the prior year[38] - The operating lease right-of-use asset increased to $101.0 million as of August 2, 2025, from $94.2 million in the prior year, driven by new stores and longer-term extensions[39] Note 4. Other Assets This note details the composition of prepaid expenses, other current assets, and other non-current assets Prepaid Expenses and Other Current Assets (Dollars in thousands) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------------- | :------------- | :--------------- | :------------- | | Prepaid occupancy | $3,757 | $2,213 | $3,109 | | Prepaid insurance | $451 | $1,248 | $693 | | Prepaid gift card fees | $388 | $493 | $600 | | Prepaid royalties | $203 | $736 | $195 | | Prepaid taxes | $143 | $1,512 | $526 | | Other | $5,084 | $6,467 | $8,135 | | Total | $10,026 | $12,669 | $13,258 | Other Non-Current Assets (Dollars in thousands) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :--------------- | :------------- | | Entertainment production asset | $4,336 | $4,222 | $4,562 | | Deferred compensation | $1,549 | $1,684 | $1,017 | | Other | $136 | $195 | $252 | | Total | $6,021 | $6,101 | $5,831 | Note 5. Accrued Expenses This note outlines the various categories of accrued expenses, including wages, taxes, and rent Accrued Expenses (Dollars in thousands) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------------- | :------------- | :--------------- | :------------- | | Accrued wages, bonuses and related expenses | $12,122 | $13,268 | $9,896 | | Current income taxes payable | $2,156 | $580 | $35 | | Sales and value added taxes payable | $2,597 | $1,359 | $2,372 | | Accrued rent and related expenses | $885 | $1,002 | $1,040 | | Accrued expense - other | $1,350 | $0 | $0 | | Total | $19,110 | $16,209 | $13,343 | Note 6. Stock-based Compensation This note provides details on stock-based compensation expense, unrecognized compensation, and vested shares - Stock-based compensation expense included in SG&A was $0.7 million for the thirteen weeks ended August 2, 2025 (vs. $0.6 million in 2024) and $1.2 million for the twenty-six weeks ended August 2, 2025 (vs. $1.0 million in 2024)[51] - As of August 2, 2025, there was $6.4 million of total unrecognized compensation expense related to unvested restricted stock awards, expected to be recognized over a weighted-average period of 2.1 years[51] - The total fair value of shares vested during the twenty-six weeks ended August 2, 2025, was $2.5 million, compared to $2.2 million in the prior year[53] Note 7. Income Taxes This note explains the company's effective tax rates and factors influencing tax expense Effective Tax Rates | Period | August 2, 2025 | August 3, 2024 | | :---------------------- | :------------- | :------------- | | 13 weeks ended | 19.3% | 24.0% | | 26 weeks ended | 20.8% | 23.8% | - The fiscal 2025 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting, foreign-derived intangible income deduction, and discrete benefits from a prior period tax position settlement[56] - The 'One Big Beautiful Bill Act' (OBBB), signed July 4, 2025, is expected to have an immaterial impact on FY25 and FY26 effective tax rates[55] Note 8. Stockholders' Equity This note details changes in stockholders' equity, including net income, share repurchases, and dividends Stockholders' Equity Changes (Dollars in thousands) | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :---------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Balance, beginning | $148,682 | $128,341 | $139,082 | $129,662 | | Net income | $12,367 | $8,778 | $27,686 | $20,237 | | Share repurchase | $(3,115) | $(9,149) | $(7,323) | $(18,347) | | Cash dividends | $(2,905) | $(2,755) | $(5,796) | $(5,565) | | Balance, ending | $155,395 | $125,791 | $155,395 | $125,791 | - The Company utilized $7.3 million in cash to repurchase 167,585 shares during the twenty-six weeks ended August 2, 2025, under its September 2024 Stock Repurchase Program[58] - As of September 8, 2025, $80.0 million remained available for future repurchases under the September 2024 Stock Repurchase Program[58] Note 9. Income per Share This note presents the basic and diluted income per common share for the reported periods Income per Common Share | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :-------------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Basic net income per common share | $0.94 | $0.64 | $2.11 | $1.47 | | Diluted net income per common share | $0.94 | $0.64 | $2.11 | $1.46 | Note 10. Comprehensive Income This note explains the components of comprehensive income, primarily foreign currency translation adjustments - The difference between comprehensive income and net income is solely due to foreign currency translation adjustments on subsidiaries' balance sheets[61] - There were no reclassifications out of accumulated other comprehensive loss for the thirteen weeks ended August 2, 2025, and August 3, 2024[61] Note 11. Segment Information This note provides a breakdown of total revenue by reportable segment and geographic area Total Revenue by Reportable Segment (Dollars in thousands) | Segment | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :------------------------ | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Direct-to-Consumer | $114,635 | $103,455 | $234,224 | $211,323 | | Commercial | $8,629 | $7,294 | $16,251 | $13,278 | | International Franchising | $983 | $1,049 | $2,167 | $1,927 | | Total Revenue | $124,247 | $111,798 | $252,642 | $226,528 | Net Sales to External Customers by Geographic Area (Dollars in thousands) | Geographic Area | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :---------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | North America | $107,066 | $96,766 | $218,339 | $196,217 | | Europe | $15,775 | $14,012 | $31,402 | $28,461 | | Other | $1,406 | $1,020 | $2,901 | $1,850 | | Total Net Sales | $124,247 | $111,798 | $252,642 | $226,528 | Note 12. Contingencies This note discusses ongoing legal disputes and their potential financial impact on the company - The Company is involved in an ongoing dispute with the U.K. customs authority (HMRC) regarding duty assessments since 2012[68] - As of August 2, 2025, the gross receivable balance related to the HMRC matter was $5.1 million, with a reserve of $3.6 million, resulting in a net receivable of $1.5 million[68] - Management believes the outcome of this dispute will not have a material adverse impact on the Company's results of operations, liquidity, or financial position[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's business, recent updates, and a detailed analysis of its financial performance for the thirteen and twenty-six weeks ended August 2, 2025, compared to the prior year. It also discusses liquidity, capital resources, seasonality, inflation, and critical accounting estimates Cautionary Notice Regarding Forward-Looking Statements This section warns that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially[70] - Key risks include global economic conditions, inflation, consumer spending, tariffs, competition, supply chain disruptions, and the ability to manage store leases and technology[70] Business Overview This section describes the company's brand evolution, strategic focus, and global operational footprint - Build-A-Bear has evolved into a multi-generational brand offering interactive experiences for creating stuffed animals, expanding into e-commerce, licensing, and entertainment content[72] - The company's strategy focuses on leveraging brand strength to evolve its brick-and-mortar footprint, expand internationally via partner-operated and franchise models, and grow its e-commerce business[74] - As of August 2, 2025, the company operated 368 corporately-managed stores, 157 partner-operated locations, and 102 international franchised stores globally[75] Business Update This section highlights the company's strategic priorities, including global expansion, digital transformation, and capital allocation - Strategic priorities include global expansion of experience locations, accelerating comprehensive digital transformation, and driving profitable growth through investment while returning capital to shareholders[81] - The company opened a net 29 retail experience locations during the first twenty-six weeks of fiscal 2025 and expects at least 60 net new units in fiscal 2025[81] - Over a third of total stores are now in non-traditional settings, reflecting a shift in location strategy[81] Retail Stores This section provides an overview of the company's retail store strategy and operational models, including corporately-managed, partner-operated, and international franchise locations Corporately-Managed Locations This section details the number and format of stores directly managed by the company across different regions Corporately-Managed Store Count | Region | August 2, 2025 | August 3, 2024 | | :------------- | :------------- | :------------- | | North America | 327 | 321 | | Europe | 41 | 40 | | Total | 368 | 361 | - As of August 2, 2025, 53% of corporately-managed stores were in an updated Discovery format[82] - Future expansion of the retail store fleet may include more non-traditional locations, such as concourse format shops[82] Partner-Operated Locations This section describes the growth and capital-light nature of the company's partner-operated retail locations Partner-Operated Store Count | Metric | August 2, 2025 | August 3, 2024 | | :---------------- | :------------- | :------------- | | Beginning of period | 138 | 92 | | Opened | 19 | 15 | | Closed | 0 | 0 | | End of period | 157 | 107 | - The partner-operated model is capital-light for the Company, with partners building and operating the workshops, covering real estate, labor, and inventory costs[83] - These locations are heavily weighted towards the hospitality industry, advancing the focus on non-traditional and tourist areas[83] International Franchise Stores This section outlines the expansion and operational model of the company's international franchise store network International Franchise Store Count | Metric | August 2, 2025 | August 3, 2024 | | :---------------- | :------------- | :------------- | | Beginning of periods | 92 | 83 | | Opened | 15 | 6 | | Closed | (5) | 0 | | End of period | 102 | 89 | - The Company leverages new formats developed for corporately-managed locations, such as concourses and shop-in-shops, with its franchisees[86] - Sourcing fixtures and other supplies for franchisees from China significantly reduces capital and expenses for opening new franchises[86] Results of Operations This section analyzes the company's financial performance, including revenues, gross profit, and expenses, for the reported periods Thirteen weeks ended August 2, 2025 compared to August 3, 2024 This section compares the company's financial results for the thirteen-week period, highlighting changes in revenue, gross margin, and SG&A expenses - Consolidated revenues increased by $12.4 million (11.1%) to $124.2 million, driven by a $11.2 million (10.8%) increase in Net Retail sales and a $1.3 million (18%) increase in Commercial revenue[88] - Retail gross margin increased by $10.3 million to $66.1 million, with the rate improving by 370 basis points due to improved merchandise margin[93] - Selling, general and administrative (SG&A) expenses increased to $56.4 million (45.4% of consolidated revenue) from $49.2 million (44.0%), primarily due to higher store-level compensation, corporate costs, and general inflationary pressures[94] Twenty-six weeks ended August 2, 2025 compared to August 3, 2024 This section compares the company's financial results for the twenty-six-week period, detailing changes in revenue, gross margin, and SG&A expenses - Consolidated revenues increased by $26.1 million (11.5%) to $252.6 million, driven by a $22.9 million (10.8%) increase in Net Retail sales and a $3.0 million (22%) increase in Commercial revenue[97] - Retail gross margin increased by $19.8 million to $134.1 million, with the rate improving by 320 basis points due to improved merchandise margin[101] - SG&A expenses increased to $110.0 million (43.5% of consolidated revenue) from $96.8 million (42.7%), driven by higher store-level compensation, corporate costs, and general inflationary pressures[102] Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) This section presents the company's EBITDA and analyzes the factors contributing to its changes for the reported periods EBITDA (Dollars in millions) | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :------------------------------------------------ | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Income before income taxes (pre-tax) | $15,318 | $11,545 | $34,949 | $26,574 | | Interest income, net | $(206) | $(188) | $(406) | $(614) | | Depreciation and amortization expense | $3,668 | $3,636 | $7,368 | $7,294 | | Earnings before interest, taxes, depreciation, and amortization | $18,780 | $14,993 | $41,911 | $33,254 | - EBITDA increased by $3.8 million (25.3%) to $18.8 million for the thirteen weeks ended August 2, 2025, and by $8.7 million (26.0%) to $41.9 million for the twenty-six weeks ended August 2, 2025[105][106] - The increase in EBITDA was driven by gross profit resulting from increased retail and commercial margins, partially offset by higher SG&A expenses[105][106] Seasonality and Quarterly Results This section discusses the impact of seasonal factors and other variables on the company's operating results and quarterly performance - Operating results can fluctuate significantly due to factors such as economic conditions, consumer spending, timing of licensed product sales, marketing initiatives, and store operations[107][108] - Sales historically peak in the fourth quarter due to the holiday season, and the timing of holidays and school vacations can impact quarterly results[110] Liquidity and Capital Resources This section assesses the company's cash position, operating cash flows, inventory levels, and planned capital expenditures - As of August 2, 2025, the consolidated cash balance was $39.1 million, with 82% domiciled within the U.S[112] - Net cash provided by operating activities increased by $19.6 million for the twenty-six weeks ended August 2, 2025, primarily due to increased net income and favorable working capital changes[113] - Total inventory at quarter-end was $81.8 million, a 22% increase from the fiscal 2024 second quarter, driven by additional tariff costs and accelerated purchases for tariff-mitigation plans[120] - The Company expects to spend approximately $20 to $25 million on capital expenditures in fiscal 2025[119] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for the company - The Company has no off-balance sheet arrangements[123] Inflation This section addresses the impact of inflationary pressures on the company's costs and its strategies for mitigation - Inflationary pressures, particularly rising store labor costs and tariffs on inventory purchases, are expected to continue into fiscal 2025[124] - The Company is implementing mitigating actions, such as strategic price increases on highly sought-after products and leveraging distribution costs[124] - Failure to recover increased costs through price increases or a decrease in consumer spending due to inflation could adversely affect financial results[124] Critical Accounting Estimates This section reviews the company's significant accounting policies and estimates that require management's judgment - The Company's accounting policies and estimates, including those related to long-lived assets, leases, revenue recognition, and income taxes, are reevaluated on an ongoing basis[126] - There have been no material changes to the critical accounting estimates disclosed in the Annual Report on Form 10-K for the year ended February 1, 2025[127] Recent Accounting Pronouncements This section refers to disclosures regarding recent accounting pronouncements in the company's annual report - Information on recent accounting pronouncements is disclosed in Note 1 to the Condensed Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended February 1, 2025[128] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's quantitative and qualitative disclosures about market risk since its last Annual Report on Form 10-K - There have been no material changes to the Company's Quantitative and Qualitative Disclosures About Market Risk as disclosed in its Annual Report on Form 10-K for the fiscal year ended February 1, 2025[129] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 2, 2025. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of August 2, 2025[130] - No material changes in internal control over financial reporting occurred during the quarter covered by this report[132] - Control systems provide reasonable, not absolute, assurance and are subject to inherent limitations such as faulty judgments, errors, collusion, or management override[131] PART II – OTHER INFORMATION This section contains additional information not covered in the financial statements, including risk factors, equity sales, other disclosures, and exhibits Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the Company's risk factors as disclosed in its Annual Report on Form 10-K for the year ended February 1, 2025[135] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases under its September 2024 Stock Repurchase Program during the quarter ended August 2, 2025 Issuer Purchases of Equity Securities (May 4, 2025 - August 2, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Dollar Value Remaining Under Program | | :-------------------------- | :----------------------------- | :--------------------------- | :------------------------------------------- | | May 4, 2025 - May 31, 2025 | - | $ - | $84,992,834 | | June 1, 2025 - July 5, 2025 | 23,720 | $52.71 | $83,742,469 | | July 6, 2025 - August 2, 2025 | 35,363 | $52.08 | $81,900,801 | | Total | 59,083 | $52.33 | $81,900,801 | - The September 2024 Stock Repurchase Program, authorized for up to $100 million, allows repurchases through September 30, 2028[138] Item 5. Other Information This section discloses the adoption of Rule 10b5-1 trading plans by several directors and executive officers for the sale of company common stock - CFO Voin Todorovic adopted a Rule 10b5-1 Trading Plan on June 9, 2025, for the sale of up to 12,744 shares, expiring December 11, 2025[139] - President and CEO Sharon John adopted a Rule 10b5-1 Trading Plan on June 13, 2025, for the sale of up to 42,643 shares, expiring December 5, 2025[139] - Chairman of the Board Craig Leavitt adopted a Rule 10b5-1 Trading Plan on July 1, 2025, for the sale of up to 8,250 shares, expiring December 5, 2025[139] Item 6. Exhibits This section lists all exhibits filed as part of the quarterly report on Form 10-Q, including organizational documents, employment agreements, and various certifications - The exhibits include certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, executed by the President and CEO and the CFO[141] - Various Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are filed as part of the report[141] Signatures This section contains the official signatures of the company's President and Chief Executive Officer and Chief Financial Officer, certifying the quarterly report - The report was signed on September 11, 2025, by Sharon John, President and Chief Executive Officer, and Voin Todorovic, Chief Financial Officer[145]