DESTINATION XL GROUP, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS Certain statements contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”) constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding our belief that our performance was due to the challenges present in the current economic downcycle and does not reflect on the opportunity in our total addressable market or the longer-term potential for our brand; our belief that the broader macroeconomic challenges and uncertainty within the apparel industry are impacting consumer sentiment and discretionary spending; our belief that our customers are trading down from national designer brands to our private label brands; our belief that our targeted promotions and the introduction of new value-driven brands have had a positive impact on our store traffic; our belief that our recently implemented initiatives will help to drive enhanced value and affinity for our brand; our belief that the impact of current tariffs on our financial results for fiscal 2025 could be an increase in costs of less than $2.0 million, or approximately 40 basis points as a percentage of sales; our ability to manage inventory; our belief that our FiTMAP technology will enhance customer engagement, attract new customers and establish DXL as a technology leader in men’s big + tall apparel; our expected expansion of FiTMAP to additional stores by the end of fiscal 2025 and the end of fiscal 2027; expected marketing costs; expected capital expenditures in 2025; expected store openings and store conversions for the remainder of fiscal 2025; and our expectations regarding liquidity needs for the next 12 months. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and notes to those statements included elsewhere in this Quarterly Report and our audited Consolidated Financial Statements for the year ended February 1, 2025, included in our Annual Report on Form 10-K for the year ended February 1, 2025, as filed with the Securities and Exchange Commission ("SEC") on March 20, 2025 (our “Fiscal 2024 Annual Report”). Numerous factors could cause our actual results to differ materially from such forward-looking statements. The Company encourages readers to refer to its filings with the SEC that set forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including risks related to changes in consumer spending in response to economic factors, the impact of current tariffs, the impact of any further increases in tariffs, the Company's ability to proactively react to the potential changes in tariffs to minimize risk, rising costs, high interest rates; the impact of ongoing worldwide conflicts on the global economy; and the Company’s ability to execute on its marketing, digital, store and collaboration strategies, ability to grow its market share, predict customer tastes and fashion trends, compete successfully in the United States men’s big + tall apparel market, and the other risks and uncertainties as set forth in the “Risk Factors” section in Part I, Item 1A of our Fiscal 2024 Annual Report. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based. BUSINESS SUMMARY Destination XL Group, Inc., together with our consolidated subsidiaries (the “Company”), is the largest specialty retailer of big + tall men’s clothing with retail and direct operations in the United States. We operate under the trade names of Destination XL ® , DXL ® , DXL Outlets, Casual Male XL ® and Casual Male XL Outlets. At May 3, 2025, we operated 251 Destination XL stores, 15 DXL outlet stores, 6 Casual Male XL retail stores, 18 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site, m.destinationXL.com, mobile app and third-party marketplaces. Unless the context indicates otherwise, all references to “we,” “our,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years, which end on January 31, 2026 and February 1, 2025 as "fiscal 2025" and “fiscal 2024,” respectively. Both fiscal years were 52-week periods. SEGMENT REPORTING We currently have two operating segments: our stores and our direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment consistent with our omni-channel business approach. 17 COMPARABLE SALES Our customer’s shopping experience continues to evolve across multiple channels, and we are continually adapting to meet the guest’s needs. The majority of our stores have the capability to fulfill online orders if merchandise is not available in the warehouse. As a result, certain transactions that begin online are ultimately completed at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in a store and at curbside. We define store sales as sales that originate and are fulfilled directly at the store level. Digital commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace. Stores that have been open for at least 13 months are included in comparable sales. Stores that have been remodeled or relocated during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store is temporarily closed for more than 7 days, it is removed from the calculation of comparable sales until it reopens and upon its anniversary is once again removed from the calculation until the reopen date. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers. RECENT DEVELOPMENTS - TARIFFS The U.S. economy continues to encounter considerable disruptions that have directly affected the retail sector and increased uncertainty as it relates to consumer spending. In light of the implications of new tariffs, many companies, including ours, have had to reassess their global sourcing strategy in an effort to minimize the impact of these tariffs. The frequent changes and unpredictability surrounding tariffs and trade policies has resulted in substantial uncertainty for companies’ operational management and their ability to forecast with confidence. This unpredictability has disrupted strategic planning cycles and added complexity to supply chain and cost management efforts. See “Risk Factors” section in Part I, Item 1A of our Fiscal 2024 Annual Report for further disclosure of the risks associated with the imposition of existing and new tariffs. EXECUTIVE SUMMARY For the three months ended May 3, 2025 May 4, 2024 (in millions, except percentage of sales and per share data) Sales $ 105.5 $ 115.5 Net income (loss) $ (1.9 ) $ 3.8 Adjusted EBITDA (non-GAAP basis) $ 0.1 $ 8.2 Gross margin, as a percentage of sales 45.1 % 48.2 % SG&A expenses, as a percentage of sales 45.0 % 41.1 % Adjusted EBITDA margin (non-GAAP basis) 0.1 % 7.1 % Per diluted share: Net income (loss) $ (0.04 ) $ 0.06 We are currently managing our business through an economic downcycle, and our performance does not reflect the opportunity in our total addressable market or the longer-term potential for our brand. We believe the broader macroeconomic challenges and uncertainty within the apparel industry are further impacting consumer sentiment and discretionary spending. We have observed many customers trading down from national designer brands to our private label brands, which have lower average retail prices but higher margins. Despite these macroeconomic headwinds, we saw a slight improvement in sales over the quarter, largely driven by our stores, which showed improvements in store traffic and conversion versus prior trends. Our comparable sales for the first quarter of fiscal 2025 were down 9.4%, but we saw gradual improvement over the course of the quarter with comparable sales down 13.9% in February, down 8.2% in March, and further improving to down 7.2% in April. We remain focused on key initiatives aimed specifically to appeal to our value-driven customers who are more price sensitive and less inclined to shop during this downward economic cycle. In late 2024, we implemented our price match guarantee, and during the first quarter of fiscal 2025, we launched fit exchange, a first responder program and our new loyalty program, all of which we believe is helping to drive affinity for our brand. We are also very excited about our FiTMAP sizing technology program, which allows customers to engage with our brand in a much more personalized manner using full body scanning technology. We have an exclusive license until 2030 for this proprietary FiTMAP Sizing Technology for big + tall men. 18 Although our overall sales performance was below expectations, we saw some improvement in sales velocity, while still maintaining a healthy merchandise margin and controlling costs. Our net loss for the first quarter was $(0.04) per diluted share, primarily driven by the sales shortfall. The situation with tariffs is very fluid and we continue to monitor trade discussions and changes to policy as they develop. We are leaning into relationships with our vendors and suppliers around the world and we are working very hard to mitigate the cost of those tariffs. Our discussions with our private label vendors have been productive. On the domestic side, we are also having dialogue with our national brands as we all try to navigate this environment. Where possible, we also accelerated the receipt of inventory within the quarter, ahead of certain tariffs, to minimize cost and ensure that we are well positioned ahead of Father's Day. Looking forward, we will continue to monitor these evolving trade discussions and look for opportunities to proactively mitigate the potential impact of such tariffs. As of May 3, 2025, we had cash and investments of $29.1 million as compared to $53.2 million at May 4, 2024 with no debt outstanding and unused excess availability of $77.1 million. Since May 4, 2024, we have used $13.6 million of our available cash to repurchase shares of our common stock. Our cash and investments balance also reflects a seasonal inventory build. We continued to maintain our strong financial position, successfully managing our liquidity and our inventory levels, which were down 6.3% to May 4, 2024. RESULTS OF OPERATIONS Sales The following table presents sales by segment for the three months ended May 3, 2025 and May 4, 2024: For the Three Months Ended (in thousands) May 3, 2025 May 4, 2024 Store sales $ 76,471 72.5% $ 80,848 70.0% Direct sales 29,062 27.5% 34,641 30.0% Total sales $ 105,533 $ 115,489 Total sales for the first quarter of fiscal 2025 were $105.5 million, as compared to $115.5 million in the first quarter of fiscal 2024. The decrease in total sales was primarily attributable to a decrease in comparable sales for the first quarter of 9.4%, partially offset by an increase in non-comparable sales. Sales trends improved month over month, with comparable sales down 13.9% in February, down 8.2% in March, and down 7.2% in April. Overall, the first quarter decline was consistent with the sales trend in fiscal 2024, as customers are continuing to pull back on discretionary spending. We continued to see customers shift toward our private-label merchandise and value-driven brands. The first quarter comparable sales decrease of 9.4% consisted of a comparable sales decrease of 6.6% from stores and a comparable decrease of 16.2% from our direct business. While store traffic remained negative for the first quarter of fiscal 2025, there was a gradual improvement over the course of the first quarter. We believe that our targeted promotions, which include our Fit Exchange by DXL, our Hero/First Responder discounts as well as the introduction of new value-driven brands, have had a positive impact on our store traffic. The direct business, which includes our website, app and marketplaces, struggled during the first quarter of fiscal 2025 and was challenged by decreases in online traffic and average order value, while conversion was relatively flat. In addition, in connection with our website conversion, we identified and corrected certain functionalities which we believe likely had a negative impact on sales in the beginning of the first quarter. Gross Margin Rate For the first quarter of fiscal 2025, our gross margin rate, inclusive of occupancy costs, was 45.1% as compared to a gross margin rate of 48.2% for the first quarter of fiscal 2024. Our gross margin rate decreased by 310 basis points, which was driven by an increase of 280 basis points in occupancy costs, as a percentage of sales, due to the deleveraging from lower sales and increased rents from new stores and lease extensions. Merchandise margin for the first quarter decreased by 30 basis points, as compared to the first quarter of fiscal 2024, primarily due to an increase in markdown activity and promotional offers associated with our new marketing initiatives, including the new loyalty program, as well as an increase in freight costs associated with the acceleration of inventory receipts. These increases were partially offset by an increase in merchandise margins as a result of a shift in product mix. There remains significant uncertainty with respect to evolving trade policies and the enactment of additional tariffs globally. We are proactively taking measures to mitigate the impact of such tariffs and trade restrictions on our business. Given the volatility that currently exists around these trade discussions, it is difficult to determine the potential impact that these tariffs may have on our financial results. However, if currently enacted rates remain in effect throughout this fiscal year, we estimate that the impact on our 19 financial results for fiscal 2025 could be an increase in costs of less than $2.0 million, or approximately 40 basis points as a percentage of sales. Selling, General and Administrative Expenses As a percentage of sales, selling, general and administrative ("SG&A") expenses for the first quarter of fiscal 2025 were 45.0% as compared to 41.1% for the first quarter of fiscal 2024. On a dollar basis, SG&A expenses decreased by $0.1 million for the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024. The decrease was primarily due to a decrease in marketing and incentive-based compensation, partially offset by an increase in store payroll and healthcare costs. On a percentage of sales basis, SG&A expenses increased due to the decrease in sales for the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024. Marketing costs were 6.1% of sales for the first quarter of fiscal 2025 as compared to 6.3% of sales for the first quarter of fiscal 2024. For fiscal 2025, marketing costs are expected to be approximately 5.9%. Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 25.2% of sales in the first quarter of fiscal 2025 as compared to 23.0% of sales in the first quarter of fiscal 2024. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 19.8% of sales in the first quarter of fiscal 2025 as compared to 18.1% of sales in the first quarter of fiscal 2024. Depreciation and Amortization Depreciation and amortization for the first quarter of fiscal 2025 increased slightly to $3.6 million as compared to $3.3 million for the first quarter of fiscal 2024. Our capital expenditures have increased in fiscal 2025 due to the opening of new store locations and investments in certain other infrastructure and technology projects. Interest Income, Net Net interest income for the first quarter of fiscal 2025 was $0.3 million as compared to $0.6 million for the first quarter of fiscal 2024. For both periods, interest income was earned from investments in U.S. government-backed investments and money market accounts. The decrease in interest income was due to the decrease in the average balance of investments during the first quarter of fiscal 2025 as compared to the prior year period. Interest costs for both periods were minimal because we had no outstanding debt and no borrowings under our credit facility. Income Taxes Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any. Each quarter, we update our estimate of the annual effective tax rate and make a year-to-date adjustment to the provision. For the first quarter of fiscal 2025 and fiscal 2024, our effective tax rate was 39.7% and 30.4%, respectively. The increase in the effective tax rate for the first quarter of fiscal 2025, as compared to the first quarter of fiscal 2024, was primarily due to permanent book-to-tax differences. While in dollars, these permanent book-to-tax differences are down, the impact as a percentage of our estimated annual pretax income is greater. Net Income (Loss) For the first quarter of fiscal 2025, we recorded a net loss of $1.9 million, or $(0.04) per diluted share, as compared to net income of $3.8 million, or $0.06 per diluted share, for the first quarter of fiscal 2024. The decrease in earnings for the first quarter of fiscal 2025 was driven primarily by the decrease in sales. Inventory As of May 3, 2025, our inventory decreased by approximately $5.8 million to $85.5 million, as compared to $91.2 million at May 4, 2024. We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending while, at the same time, accelerating certain receipts to avoid the impact of potential tariffs. At May 3, 2025, our clearance inventory was 9.5% of our total inventory, as compared to 9.7% at May 4, 2024. Our inventory position is very strong and our clearance levels are in line with our benchmark of 10% even with the 6.3% decrease in total inventory. Our inventory turnover rate has improved by over 30% from fiscal 2019. 20 SEASONALITY Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income, net income, and free cash flow. Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the second and fourth quarters. Our inventory is typically at peak levels by the end of the third quarter, which represents a significant use of cash, which is then relieved in the fourth quarter as we sell-down our inventory through the holiday shopping season. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are our cash and cash equivalents, short-term investments, cash generated from operations and availability under our credit facility, which is discussed below. At May 3, 2025, we had no outstanding debt, including no borrowings under our credit facility during the first three months of fiscal 2025. Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S. government-backed securities. We believe that our cash and cash equivalent balances, short-term investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. However, we remain cautious regarding the effect that the current macroeconomic conditions may have on consumer spending, including geopolitical conflicts around the world, the imposition of tariffs, inflation and high interest costs. We also believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our current capital requirements and our stock repurchase program. In the longer term, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility. For the first three months of fiscal 2025, cash flow from operations was $(12.0) million as compared to $(1.1) million for the first three months of fiscal 2024. The decrease in cash flow from operations was primarily due to a decrease in earnings and the timing of payables associated with the acceleration of inventory receipts during the first quarter of fiscal 2025. We operate in a seasonal business that typically includes greater uses of cash in the first quarter as we build inventory in anticipation of the summer selling season. Free cash flow, before capital expenditures for store development, a non-GAAP measure, was $(14.5) million for the first three months of fiscal 2025 as compared to $(4.6) million for the first three months of fiscal 2024. Free cash flow, a non-GAAP measure, was $(18.8) million for the first three months of fiscal 2025 as compared to $(7.0) million for the first three months of fiscal 2024. For the three months ended (in millions) May 3, 2025 May 4, 2024 Cash flow from operating activities (GAAP basis) $ (12.0 ) $ (1.1 ) Capital expenditures, excluding store development (2.4 ) (3.5 ) Free Cash Flow before capital expenditures for store development (non-GAAP basis) $ (14.5 ) $ (4.6 ) Capital expenditures for store development (4.3 ) (2.4 ) Free Cash Flow (non-GAAP basis) $ (18.8 ) $ (7.0 ) Cash flow provided by investing activities was $8.3 million as compared to cash flow used for investing activities of $10.0 million for the first three months of fiscal 2024. The increase in cash flow provided by investing activities of $18.3 million was primarily due to the maturity, net of purchases, of short-term investments, partially offset by an increase in capital expenditures. Credit Facility The Company has a $125.0 million revolving credit agreement with Citizens Bank, N.A., with a maturity date of October 28, 2026 (the "Credit Facility"). The Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. Borrowings under the Credit Facility bear interest at either a Base Rate or Daily Simple SOFR rate, at the Company's option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the Daily Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10% (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. We are subject to an unused line fee of 0.25%. We had no outstanding borrowings under the Credit Facility at May 3, 2025 and no borrowings during the first three months of fiscal 2025. At May 3, 2025, outstanding standby letters of credit were $4.2 million. The average unused excess availability during the first three months of fiscal 2025 was approximately $68.7 million and the unused excess availability at May 3, 2025 was $77.1 million. 21 Capital Expenditures The following table sets forth the open stores and related square footage at May 3, 2025 and May 4, 2024, respectively: May 3, 2025 May 4, 2024 Store Concept Number of Stores Square Footage Number of Stores Square Footage (square footage in thousands) DXL Retail 251 1,814 233 1,732 DXL Outlets 15 76 15 76 Casual Male XL Retail 6 18 17 55 Casual Male Outlets 18 53 19 57 Total Stores 290 1,961 284 1,920 During the first three months of fiscal 2025, we opened two new DXL stores and converted one Casual Male XL retail store and one Casual Male XL outlet to DXL stores. We expect to open six additional DXL stores during fiscal 2025 and expect our capital expenditures to range from $19.0 million to $21.0 million, net of tenant incentives. FiTMAP® Over the past two years, we have been working with and testing a proprietary FiTMAP Sizing Technology for which we have an exclusive license for big + tall men until 2030. This innovative, contactless, digital scanning technology captures 242 unique measurements and offers custom clothing options for all our customers, and size recommendations across the variety of brands for a great fit. FiTMAP offers a unique experience for our customers, whether selecting from our Ready-to-Wear clothing or opting for custom garments. This technology currently provides recommended sizes in all of our private label brands, as well as 15 of our exclusive national brands. We believe this technology will enhance customer engagement, attract new customers and establish DXL as a technology leader in men's big + tall apparel. To date, we have scanned over 20,000 customers. FiTMAP is currently in 52 DXL retail locations with a plan to end fiscal 2025 with 85 stores and to further expand to as many as 200 stores by the end of fiscal 2027. CRITICAL ACCOUNTING POLICIES AND ESTIMATES There have been no material changes to the critical accounting policies and estimates disclosed in our Fiscal 2024 Annual Report. See Note 1, Basis of Presentation to the Consolidated Financial Statements included in this Quarterly Report for information on recent accounting pronouncements and changes in accounting principles. Non-GAAP Financial Measures Free cash flow, free cash flow before capital expenditures for store development, adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures. These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for net income (loss), net income (loss) per diluted share or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies. We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements. Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding) : Free Cash Flow. We define free cash flow as cash flow from operating activities less capital expenditures. We define free cash flow before capital expenditures for store development as cash flow from operations activities less all capital expenditures except capital expenditures for store development. Capital expenditures for store development includes capital expenditures for new stores, conversions of Casual Male XL stores to DXL and remodels. Capital expenditures related to store relocations and maintenance are not included in store development. Free cash flow excludes the mandatory and discretionary repayment of debt. Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors because it demonstrates the Company's ability to strengthen liquidity while supporting its capital projects and new store development. We expect to fund our ongoing capital expenditures with cash flow from operations. The following table reconciles free cash flow: 22 For the three months ended (in millions) May 3, 2025 May 4, 2024 Cash flow from operating activities (GAAP basis) $ (12.0 ) $ (1.1 ) Capital expenditures, excluding store development (2.4 ) (3.5 ) Free Cash Flow before capital expenditures for store development (non-GAAP basis) $ (14.5 ) $ (4.6 ) Capital expenditures for store development (4.3 ) (2.4 ) Free Cash Flow (non-GAAP basis) $ (18.8 ) $ (7.0 ) Adjusted EBITDA and Adjusted EBITDA Margin . Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and adding back impairment (gain) of assets and accrual for estimated non-recurring legal settlement costs, if any. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Sales. We believe that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors in evaluating our performance and are key metrics to measure profitability and economic productivity. The following table reconciles adjusted EBITDA from net income and calculates adjusted EBITDA margin: For the three months ended May 3, 2025 May 4, 2024 (in millions) Net income (loss) (GAAP basis) $ (1.9 ) $ 3.8 Add back: Provision (benefit) for income taxes (1.3 ) 1.7 Interest income, net (0.3 ) (0.6 ) Depreciation and amortization 3.6 3.3 Adjusted EBITDA (non-GAAP basis) $ 0.1 $ 8.2 Sales $ 105.5 $ 115.5 Adjusted EBITDA margin (non-GAAP basis), as a percentage of sales 0.1 % 7.1 %