J.Jill(JILL) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited Q1 2022 consolidated financial statements show significant performance improvement, with net income of $14.4 million and positive operating cash flow Condensed Consolidated Balance Sheets (Unaudited) As of April 30, 2022, total assets increased to $463.6 million, liabilities slightly decreased, and shareholders' deficit improved to $30.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 30, 2022 | January 29, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $40,839 | $35,957 | | Inventories, net | $63,216 | $56,024 | | Total current assets | $138,786 | $123,248 | | Total assets | $463,582 | $451,849 | | Liabilities & Shareholders' Deficit | | | | Total current liabilities | $138,156 | $138,745 | | Long-term debt, net | $202,664 | $202,116 | | Total liabilities | $493,900 | $496,503 | | Total shareholders' deficit | $(30,318) | $(44,654) | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) Q1 2022 reported a significant turnaround with $14.4 million net income, driven by 21.7% net sales growth and improved gross margin Statement of Operations Summary (in thousands, except per share data) | Metric | For the Thirteen Weeks Ended April 30, 2022 | For the Thirteen Weeks Ended May 1, 2021 | | :--- | :--- | :--- | | Net sales | $157,069 | $129,086 | | Gross profit | $109,463 | $87,826 | | Operating income | $23,885 | $8,687 | | Net income (loss) | $14,415 | $(18,308) | | Diluted EPS | $1.02 | $(1.89) | Condensed Consolidated Statements of Shareholders' Deficit (Unaudited) Shareholders' deficit improved from $(44.7) million to $(30.3) million as of April 30, 2022, driven by $14.4 million net income - The shareholders' deficit decreased from $(44,654) thousand at the start of the quarter to $(30,318) thousand at the end, mainly due to the $14,415 thousand in net income[14] Condensed Consolidated Statements of Cash Flows (Unaudited) Q1 2022 net cash from operations was $7.2 million, a significant improvement from prior year's $4.1 million use, driven by higher net income Cash Flow Summary (in thousands) | Cash Flow Activity | For the Thirteen Weeks Ended April 30, 2022 | For the Thirteen Weeks Ended May 1, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,168 | $(4,133) | | Net cash used in investing activities | $(750) | $(476) | | Net cash (used in) provided by financing activities | $(1,536) | $10,927 | | Net change in cash | $4,882 | $6,318 | | Cash, End of Period | $40,839 | $10,725 | Notes to Condensed Consolidated Financial Statements (Unaudited) Notes detail accounting policies, revenue disaggregation, stable goodwill, debt facilities, covenant compliance, and related party transactions - J.Jill is an omnichannel retailer of women's apparel, operating about 250 stores and a robust e-commerce platform[18] Disaggregated Revenue by Source (in thousands) | Channel | For the Thirteen Weeks Ended April 30, 2022 | For the Thirteen Weeks Ended May 1, 2021 | | :--- | :--- | :--- | | Retail | $84,212 | $54,916 | | Direct | $72,857 | $74,170 | | Net revenues | $157,069 | $129,086 | - Goodwill balance was stable at $59.7 million as of April 30, 2022, with no impairment losses recorded during the period. Accumulated goodwill impairment losses from prior periods total $137.3 million[31] - Total outstanding debt was $226.1 million as of April 30, 2022. The company was in compliance with all financial covenants[36][40] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 2022 performance to 24.0% comparable sales growth, 21.7% net sales increase, expanded gross margin, and significantly higher Adjusted EBITDA - Key factors affecting operating results include overall economic trends, consumer preferences, competition, strategic initiatives like e-commerce enhancement, pricing, and potential changes in tax laws[67][68][70] Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | For the Thirteen Weeks Ended April 30, 2022 | For the Thirteen Weeks Ended May 1, 2021 | | :--- | :--- | :--- | | Net income (loss) | $14,415 | $(18,308) | | Adjusted EBITDA | $31,297 | $16,925 | | Net sales | $157,069 | $129,086 | | Adjusted EBITDA margin | 19.9% | 13.1% | Results of Operations Q1 2022 net sales increased 21.7% to $157.1 million, driven by 24.0% comparable sales growth and improved gross margin to 69.7%, leading to a 175.0% surge in operating income - Net sales increased by $28.0 million (21.7%) to $157.1 million, driven by a 24.0% increase in total company comparable sales, increased retail traffic, and strong full-price sales[91] - Gross margin improved to 69.7% from 68.0% in the prior year, benefiting from better full-price selling and lower promotional activity[93] - SG&A expenses increased by $6.4 million (8.1%), mainly due to a $3.8 million increase in management incentive bonus expense and a $1.4 million increase in marketing expenses[94] - The effective tax rate was 25.8% for Q1 2022, compared to (8.2%) for Q1 2021. The prior year's negative rate was due to nondeductible fair value adjustments of warrants and other items[99] Liquidity and Capital Resources Primary liquidity sources include $40.8 million cash and $35.5 million ABL Facility availability, with cash flow from operations significantly improving to $7.2 million - As of April 30, 2022, the company had $40.8 million in cash and $35.5 million of total availability under its ABL Facility[100] - The maturity date of the ABL Facility was extended from May 8, 2023, to May 8, 2024, and the benchmark interest rate was changed from LIBOR to SOFR[100][47] Cash Flow Summary (in thousands) | Cash Flow Activity | For the Thirteen Weeks Ended April 30, 2022 | For the Thirteen Weeks Ended May 1, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,168 | $(4,133) | | Net cash used in investing activities | $(750) | $(476) | | Net cash (used in) provided by financing activities | $(1,536) | $10,927 | Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure occurred during Q1 Fiscal Year 2022, consistent with prior Annual Report disclosures - There have been no material changes in the Company's exposure to market risk during the first quarter of Fiscal Year 2022[122] Controls and Procedures Management concluded disclosure controls and procedures were effective as of April 30, 2022, with no material changes to internal controls during Q1 - The Chief Executive Officer and Chief Financial Officer concluded that as of April 30, 2022, the company's disclosure controls and procedures are effective[123] - No changes in internal control over financial reporting occurred during the first quarter of Fiscal Year 2022 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[124] PART II. OTHER INFORMATION Legal Proceedings The company is subject to ordinary course legal proceedings, none of which are expected to have a material adverse effect on its financial condition or operations - Management does not believe the company is party to any legal proceedings that would have a material adverse effect on its business, financial condition, operating results, or cash flows[127] Risk Factors No material changes to previously disclosed risk factors occurred as of the date of this Quarterly Report - As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed in the 2021 Annual Report[128] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None[129] Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - None[130] Mine Safety Disclosures This item is not applicable to the company - Not applicable[131] Other Information No other information was reported for the period - None[132] Exhibits Exhibits listed in the Exhibit Index are filed or furnished as part of this Quarterly Report - The exhibits listed on the Exhibit Index are filed or furnished as part of this Quarterly Report[133]