Childrens Place, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) May 3, 2025 February 1, 2025 May 4, 2024 (in thousands, except par value) ASSETS Current assets: Cash and cash equivalents $ 5,694 $ 5,347 $ 12,960 Accounts receivable 41,337 42,701 28,286 Inventories 422,204 399,602 425,156 Prepaid expenses and other current assets 31,374 20,354 43,210 Total current assets 500,609 468,004 509,612 Long-term assets: Property and equipment, net 92,094 97,487 116,779 Right-of-use assets 166,008 161,595 173,987 Tradenames, net 13,000 13,000 41,000 Other assets 7,891 7,466 6,957 Total assets $ 779,602 $ 747,552 $ 848,335 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Revolving loan $ 258,623 $ 245,659 $ 226,100 Accounts payable 131,392 126,716 193,100 Current portion of operating lease liabilities 66,522 67,407 70,668 Income taxes payable 1,134 2,441 3,476 Accrued expenses and other current liabilities 85,938 75,895 79,872 Total current liabilities 543,609 518,118 573,216 Long-term liabilities: Related party long-term debt 107,010 165,974 166,635 Long-term portion of operating lease liabilities 112,667 107,287 118,363 Income taxes payable — — 9,486 Other tax liabilities 5,405 5,291 4,928 Other long-term liabilities 9,496 10,293 10,557 Total liabilities 778,187 806,963 883,185 Commitments and contingencies (see Note 7) Stockholders’ equity (deficit): Preferred stock, $ 1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding — — — Common stock, $ 0.10 par value, 100,000 shares authorized; 22,065 , 12,785 , and 12,739 issued; 22,062 , 12,782 , and 12,679 outstanding 2,207 1,279 1,274 Additional paid-in capital 241,824 151,485 153,358 Treasury stock, at cost ( 3 , 3 , and 60 shares) ( 90 ) ( 90 ) ( 2,957 ) Deferred compensation 90 90 2,957 Accumulated other comprehensive loss ( 15,909 ) ( 19,491 ) ( 16,822 ) Accumulated deficit ( 226,707 ) ( 192,684 ) ( 172,660 ) Total stockholders’ equity (deficit) 1,415 ( 59,411 ) ( 34,850 ) Total liabilities and stockholders’ equity (deficit) $ 779,602 $ 747,552 $ 848,335 See accompanying notes to these consolidated financial statements. 1 Table of Contents THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands, except loss per common share) Net sales $ 242,125 $ 267,878 Cost of sales (exclusive of depreciation and amortization) 171,342 175,137 Gross profit 70,783 92,741 Selling, general, and administrative expenses 86,670 109,094 Depreciation and amortization 8,230 11,635 Operating loss ( 24,117 ) ( 27,988 ) Related party interest expense ( 1,871 ) ( 389 ) Other interest expense ( 6,701 ) ( 7,342 ) Interest income 10 10 Loss before provision for income taxes ( 32,679 ) ( 35,709 ) Provision for income taxes 1,344 2,086 Net loss $ ( 34,023 ) $ ( 37,795 ) Loss per common share Basic $ ( 1.57 ) $ ( 2.98 ) Diluted $ ( 1.57 ) $ ( 2.98 ) Weighted average common shares outstanding Basic 21,629 12,665 Diluted 21,629 12,665 See accompanying notes to these consolidated financial statements. 2 Table of Contents THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) Net loss $ ( 34,023 ) $ ( 37,795 ) Other comprehensive income (loss): Foreign currency translation adjustment 3,582 ( 326 ) Total comprehensive loss $ ( 30,441 ) $ ( 38,121 ) See accompanying notes to these consolidated financial statements. 3 Table of Contents THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) Thirteen Weeks Ended May 3, 2025 Accumulated Total Additional Other Stockholders’ Common Stock Paid-In Deferred Accumulated Comprehensive Treasury Stock Equity (in thousands) Shares Amount Capital Compensation Deficit Loss Shares Amount (Deficit) Balance, February 1, 2025 12,785 $ 1,279 $ 151,485 $ 90 $ ( 192,684 ) $ ( 19,491 ) ( 3 ) $ ( 90 ) $ ( 59,411 ) Vesting of stock awards 64 6 ( 6 ) — — — — — — Stock-based compensation expense — — 1,746 — — — — — 1,746 Purchase and retirement of common stock ( 15 ) ( 1 ) ( 83 ) — — — — — ( 84 ) Rights offering stock issuance 9,231 923 89,077 — — — — — 90,000 Stock issuance costs — — ( 395 ) — — — — — ( 395 ) Other comprehensive income — — — — — 3,582 — — 3,582 Net loss — — — — ( 34,023 ) — — — ( 34,023 ) Balance, May 3, 2025 22,065 $ 2,207 $ 241,824 $ 90 $ ( 226,707 ) $ ( 15,909 ) ( 3 ) $ ( 90 ) $ 1,415 Thirteen Weeks Ended May 4, 2024 Accumulated Additional Other Total Common Stock Paid-In Deferred Accumulated Comprehensive Treasury Stock Stockholders’ (in thousands) Shares Amount Capital Compensation Deficit Loss Shares Amount Deficit Balance, February 3, 2024 12,585 $ 1,259 $ 141,083 $ 2,909 $ ( 134,865 ) $ ( 16,496 ) ( 56 ) $ ( 2,909 ) $ ( 9,019 ) Vesting of stock awards 204 20 ( 20 ) — — — — — — Stock-based compensation expense — — 12,610 — — — — — 12,610 Purchase and retirement of common stock ( 50 ) ( 5 ) ( 315 ) — — — — — ( 320 ) Other comprehensive loss — — — — — ( 326 ) — — ( 326 ) Distribution of common stock into deferred compensation plan — — — 48 — — ( 4 ) ( 48 ) — Net loss — — — — ( 37,795 ) — — — ( 37,795 ) Balance, May 4, 2024 12,739 $ 1,274 $ 153,358 $ 2,957 $ ( 172,660 ) $ ( 16,822 ) ( 60 ) $ ( 2,957 ) $ ( 34,850 ) See accompanying notes to these consolidated financial statements. 4 Table of Contents THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 34,023 ) $ ( 37,795 ) Reconciliation of net loss to net cash used in operating activities: Non-cash portion of operating lease expense 17,563 19,212 Depreciation and amortization 8,230 11,635 Non-cash stock-based compensation expense 1,746 12,610 Other non-cash charges, net 638 361 Loss on extinguishment of debt 1,039 — Changes in operating assets and liabilities: Inventories ( 21,565 ) ( 63,452 ) Accounts receivable and other assets 453 5,565 Prepaid expenses and other current assets ( 8,945 ) ( 2,250 ) Income taxes payable, net of prepayments 690 5,783 Accounts payable and other current liabilities 9,424 ( 45,987 ) Lease liabilities ( 17,425 ) ( 16,117 ) Other long-term liabilities ( 783 ) ( 321 ) Net cash used in operating activities ( 42,958 ) ( 110,756 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 3,413 ) ( 4,694 ) Net cash used in investing activities ( 3,413 ) ( 4,694 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit facility 168,814 248,035 Repayments under revolving credit facility ( 155,850 ) ( 248,649 ) Proceeds from rights offering 90,000 — Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs ( 84 ) ( 320 ) Proceeds from issuance of related party term loans — 168,600 Repayment of related party term loan ( 60,187 ) — Repayment of term loan — ( 50,000 ) Payment of debt issuance costs — ( 2,777 ) Payment of stock issuance costs ( 395 ) — Net cash provided by financing activities 42,298 114,889 Effect of exchange rate changes on cash and cash equivalents 4,420 ( 118 ) Net increase (decrease) in cash and cash equivalents 347 ( 679 ) Cash and cash equivalents, beginning of period 5,347 13,639 Cash and cash equivalents, end of period $ 5,694 $ 12,960 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Net cash paid (received) for income taxes $ 667 $ ( 3,715 ) Cash paid for interest 5,142 7,591 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: Purchases of property and equipment not yet paid 2,492 5,849 See accompanying notes to these consolidated financial statements. 5 Table of Contents THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION Description of Business The Children’s Place, Inc. and its subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty retailer in North America with an omni-channel portfolio of brands and an industry-leading digital-first model. The Company designs, contracts to manufacture, and sells fashionable, high-quality apparel, accessories and footwear predominantly at value prices, primarily under the Company’s proprietary brands “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”. Its global retail and wholesale network includes two digital storefronts, 495 stores in North America, wholesale marketplaces, 228 international points of distribution in 12 countries through seven international franchise partners and social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest. The Company’s digital storefronts are at www.childrensplace.com and www.gymboree.com , where its customers are able to shop online for the same merchandise available in its physical stores, but also certain exclusive merchandise only available at its e-commerce sites. The Company classifies its business into two segments: The Children’s Place U.S. and The Children’s Place International. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and net sales from its U.S.-based wholesale business. Included in The Children’s Place International segment are its Canadian-based stores and net sales from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com . Terms that are commonly used in the notes to the Company’s consolidated financial statements are defined as follows: • First Quarter 2025 — The thirteen weeks ended May 3, 2025 • First Quarter 2024 — The thirteen weeks ended May 4, 2024 • Fiscal 2025 — The fifty-two weeks ending January 31, 2026 • Fiscal 2024 — The fifty-two weeks ended February 1, 2025 • Fiscal 2023 — The fifty-three weeks ended February 3, 2024 • SEC — U.S. Securities and Exchange Commission • U.S. GAAP — Generally Accepted Accounting Principles in the United States • FASB — Financial Accounting Standards Board • FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants Basis of Presentation The unaudited consolidated financial statements and accompanying notes to the consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. As of May 3, 2025, February 1, 2025 and May 4, 2024, the Company did not have any investments in unconsolidated affiliates. FASB ASC 810— Consolidation is considered when determining whether an entity is subject to consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the consolidated balance sheets of the Company as of May 3, 2025 and May 4, 2024, the results of its consolidated operations, consolidated comprehensive loss, and consolidated changes in stockholders’ equity (deficit) for the thirteen weeks ended May 3, 2025 and May 4, 2024, and consolidated cash flows for the thirteen weeks ended May 3, 2025 and May 4, 2024. The consolidated balance sheet as of February 1, 2025 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirteen weeks ended May 3, 2025 and May 4, 2024 are not necessarily indicative of operating results for a full fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2025. 6 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Fiscal Year The Company’s fiscal year is a fifty-two week or fifty-three week period ending on the Saturday on or nearest to January 31. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company’s financial position or results of operations. Critical accounting estimates inherent in the preparation of the consolidated financial statements include impairment of long-lived assets, impairment of indefinite-lived intangible assets, income taxes, stock-based compensation, and inventory valuation. Recent Accounting Standards Updates Accounting Pronouncement Recently Adopted In November 2023, the FASB issued Accounting Standards Update No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” (“ASU 2023-07”). The amendments in ASU 2023-07 are designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses during interim and annual periods. The Company adopted ASU 2023-07 on a retrospective basis and is effective for the Company’s Annual Report on Form 10-K for Fiscal 2024, and subsequent interim periods. The adoption of ASU 2023-07 expanded our disclosures but did not have a material impact on our consolidated financial statements. Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued Accounting Standards Update No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU 2023-09”). The amendments in ASU 2023-09 are designed to enhance the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of ASU 2023-09 will expand our disclosures, but we do not expect it to have a material impact on our consolidated financial statements. In November 2024, the FASB issued Accounting Standards Update No. 2024-03 “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40),” (“ASU 2024-03”). The amendments in ASU 2024-03 are designed to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods with fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements. 7 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 2. REVENUES The following table presents the Company’s net sales disaggregated by geography: Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) South $ 85,657 $ 103,257 Northeast 45,854 54,228 West 27,741 33,917 Midwest 25,920 32,538 International and other (1) 56,953 43,938 Total net sales $ 242,125 $ 267,878 ____________________________________________ (1) Includes retail and e-commerce sales in Canada and Puerto Rico, wholesale and franchisee sales, and certain amounts earned under the Company’s private label credit card program. Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company recognizes revenue, including shipping and handling fees billed to customers, as applicable, upon purchase at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon redemptions and anticipated sales returns. The Company deferred sales of $ 7.6 million, $ 3.2 million, and $ 5.3 million within Accrued expenses and other current liabilities as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively, based upon estimated time of delivery, at which point control passes to the customer. Sales tax collected from customers is excluded from revenue. For its wholesale business, the Company recognizes revenue, when title of the goods passes to the customer, net of commissions, discounts, operational chargebacks, and cooperative advertising. The allowance for wholesale revenue included within Accounts receivable was $ 8.0 million, $ 8.7 million, and $ 7.0 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively. For the sale of goods to retail customers with a right of return, the Company recognizes revenue for the consideration it expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return experience. Adjustments to the allowance for estimated sales returns in subsequent periods have not been material based on historical data, thereby reducing the uncertainty inherent in such estimates. The allowance for estimated sales returns, which is recorded in Accrued expenses and other current liabilities, was $ 1.2 million, $ 1.0 million, and $ 1.3 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively. The Company’s private label credit card is issued to customers for use exclusively at The Children’s Place and Gymboree stores in the U.S. and online at www.childrensplace.com and www.gymboree.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company. The private label credit card includes multiple performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the operation of the loyalty rewards program. Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company and an additional bonus to extend the term of the agreement. These bonuses are recognized as revenue and allocated between brand and reward obligations. As the license of the Company’s brand is the predominant item in the performance obligation, the amount allocated to the brand obligation is recognized on a straight-line basis over the term of the agreement. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur. 8 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-sharing, over the life of the private label credit card program. Similar to the upfront bonus, the usage-based royalties and bonuses are recognized as revenue and allocated between the brand and reward obligations. The amount allocated to the brand obligation is recognized on a straight-line basis over the remaining term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur. In addition, the annual profit-sharing amount is recognized quarterly within an annual period when it can be estimated reliably. The additional bonuses are amortized over the contract term based on anticipated progress against future targets and level of risk associated with achieving the targets. The Company has a points-based customer loyalty program in which customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. The redemption cycle for coupons is 45 days. A contract liability is estimated based on the standalone selling price of benefits earned by customers through the program and the related redemption experience under the program. The value of each point earned is recorded as deferred revenue and is included within Accrued expenses and other current liabilities. The total contract liabilities related to this program were $ 5.4 million, $ 3.7 million, and $ 2.3 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively. During the First Quarter 2025 and the First Quarter 2024, the Company recognized Net sales of $ 3.7 million and $ 1.7 million related to the points-based customer loyalty program balance that existed at February 1, 2025 and February 3, 2024, respectively. The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for merchandise. The Company recognizes gift card breakage income in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property. Gift card breakage is recorded within Net sales. Prior to their redemption, gift cards are recorded as a liability within Accrued expenses and other current liabilities. The liability is estimated based on expected breakage that considers historical patterns of redemption. The gift card liability balance as of May 3, 2025, February 1, 2025, and May 4, 2024 was $ 4.4 million, $ 4.8 million, and $ 6.4 million, respectively. During the First Quarter 2025 and the First Quarter 2024, the Company recognized Net sales of $ 1.4 million and $ 1.7 million related to the gift card liability balance that existed at February 1, 2025 and February 3, 2024, respectively. The Company has an international program of territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company recognizes revenue on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to its customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights and based on the opening of new stores. The Company records these territorial fees as deferred revenue and amortizes the fee into Net sales over the life of the territorial agreement. 3. INTANGIBLE ASSETS On April 4, 2019, the Company acquired certain intellectual property and related assets of Gymboree Group, Inc. and related entities, which included the worldwide rights to the Gymboree tradename. The Gymboree tradename is recorded in the long-term assets section of the consolidated balance sheets. 9 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The Company’s intangible assets were as follows: May 3, 2025 Useful Life Gross Amount Accumulated Amortization Net Amount (in thousands) Gymboree tradename Indefinite $ 13,000 $ — $ 13,000 Total intangible assets $ 13,000 $ — $ 13,000 February 1, 2025 Useful Life Gross Amount Accumulated Amortization Net Amount (in thousands) Gymboree tradename Indefinite $ 13,000 $ — $ 13,000 Crazy 8 tradename 5 years 4,000 ( 4,000 ) — Total intangible assets $ 17,000 $ ( 4,000 ) $ 13,000 May 4, 2024 Useful Life Gross Amount Accumulated Amortization Net Amount (in thousands) Gymboree tradename Indefinite $ 41,000 $ — $ 41,000 Crazy 8 tradename 5 years 4,000 ( 4,000 ) — Total intangible assets $ 45,000 $ ( 4,000 ) $ 41,000 The Company recorded an impairment charge on the Gymboree tradename of $ 28.0 million in Fiscal 2024, which reduced the carrying value to its fair value of $ 13.0 million. The Company did not identify any indicators of impairment in the First Quarter 2025 and First Quarter 2024. 4. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following: May 3, 2025 February 1, 2025 May 4, 2024 (in thousands) Land and land improvements $ 3,404 $ 3,403 $ 3,403 Building and improvements 36,635 36,527 36,187 Material handling equipment 84,659 88,092 89,427 Leasehold improvements 160,393 159,992 161,922 Store fixtures and equipment 151,884 151,810 165,887 Capitalized software 228,679 228,227 335,523 Construction in progress 3,366 1,647 4,939 669,020 669,698 797,288 Less: accumulated depreciation and amortization ( 576,926 ) ( 572,211 ) ( 680,509 ) Property and equipment, net $ 92,094 $ 97,487 $ 116,779 The Company reviewed its store related long-lived assets for indicators of impairment, and performed a recoverability test if indicators were identified. Based on the results of the analyses performed, the Company did not record asset impairment charges in the First Quarter 2025 and First Quarter 2024. 10 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 5. LEASES The Company has operating leases for retail stores, corporate offices, distribution facilities, and certain equipment. The Company’s leases have remaining lease terms ranging from less than one year up to twelve years , some of which include options to extend the leases for up to five years , and some of which include options to terminate the lease early. The Company records all occupancy costs in Cost of sales, except costs for administrative office buildings, which are recorded in Selling, general, and administrative expenses. As of the periods presented, the Company’s finance leases were not material to the Consolidated Balance Sheets, Consolidated Statements of Operations, or Consolidated Statements of Cash Flows. The following components of operating lease expense were recognized in the Company’s Consolidated Statements of Operations: Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) Fixed operating lease cost $ 21,199 $ 22,502 Variable operating lease cost 5,759 7,846 Total operating lease cost $ 26,958 $ 30,348 The following table provides the weighted-average remaining lease term of the Company’s operating leases, the weighted-average discount rate used to calculate the Company’s operating liabilities, cash paid for amounts included in the measurement of the Company’s operating lease liabilities, and right-of-use (“ROU”) assets obtained in exchange for the Company’s new operating lease liabilities: Thirteen Weeks Ended May 3, 2025 May 4, 2024 Weighted-average remaining lease term (years) 4.4 4.4 Weighted average discount rate (%) 8.6 % 7.6 % Cash paid for amounts included in the measurement of operating lease liabilities ($, in millions) 17.4 19.7 ROU assets obtained in exchange for new operating lease liabilities ($, in millions) 23.1 22.1 As of May 3, 2025, the maturities of operating lease liabilities were as follows: May 3, 2025 (in thousands) Remainder of 2025 $ 64,047 2026 55,614 2027 28,633 2028 19,393 2029 13,402 Thereafter 39,146 Total operating lease payments 220,235 Less: imputed interest ( 41,046 ) Present value of operating lease liabilities $ 179,189 11 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 6. DEBT ABL Credit Facility The Company and certain subsidiaries maintain the $ 433.0 million asset-based revolving credit facility (the “ABL Credit Facility”) under its Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with Wells Fargo Bank, National Association (“Wells Fargo”), Bank of America, N.A., JPMorgan Chase Bank, N.A., Truist Bank, HSBC Bank (USA), N.A., and PNC Bank, National Association, as the lenders party thereto and Wells Fargo, as Administrative Agent, Collateral Agent, and Swing Line Lender. The ABL Credit Facility will mature in November 2026. As of April 18, 2024, which is the effective date of the seventh amendment to the Credit Agreement (the “Seventh Amendment”), the ABL Credit Facility includes a $ 25.0 million Canadian sublimit and a $ 25.0 million sublimit for standby and documentary letters of credit. Under the ABL Credit Facility, prior to February 4, 2025, borrowings outstanding bore interest, at the Company’s option, at: (i) the prime rate per annum, plus a margin of 2.000 %; or (ii) the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100 %, plus a margin of 3.000 %. From and after February 4, 2025 and on the first day of each fiscal quarter thereafter, based on the amount of the Company’s average daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility bear interest, at the Company’s option, at: (i) the prime rate per annum, plus a margin of 1.750 % or 2.000 %; or (ii) the SOFR per annum, plus 0.100 %, plus a margin of 2.750 % or 3.000 %. As of April 18, 2024, based on the size of the unused portion of the commitments, the Company is charged a fee ranging from 0.250 % to 0.375 %. Prior to February 4, 2025, letter of credit fees were at 1.125 % for commercial letters of credit and 1.750 % for standby letters of credit. As of February 4, 2025, letter of credit fees range from 1.000 % to 1.125 % for commercial letters of credit and range from 1.500 % to 1.750 % for standby letters of credit. These fees are determined based on the amount of the Company’s average daily excess availability under the facility. The amount available for loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting of certain credit card receivables, certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves and an availability block. For the First Quarter 2025 and First Quarter 2024, the Company recognized $ 4.8 million and $ 5.7 million, respectively, in interest expense related to the ABL Credit Facility. As of April 18, 2024, credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of the Company’s U.S. and Canadian assets, including the Company’s intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock. The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain customary events of default, as described below. The Company is not subject to any early termination fees. The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments. These covenants also limit the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of its business. Pursuant to the Seventh Amendment, the requisite payment condition thresholds for some of these covenants have been heightened, resulting in certain actions such as the repurchase of shares and payment of cash dividends becoming more difficult to perform. Additionally, if the Company is unable to maintain a certain amount of excess availability for borrowings (the “excess availability threshold”), the Company may be subject to cash dominion. The ABL Credit Facility contains customary events of default, which include (subject in certain cases to customary grace and cure periods) nonpayment of principal or interest, breach of covenants, failure to pay certain other indebtedness, and certain events of bankruptcy, insolvency or reorganization, such as a change of control. 12 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) As of May 3, 2025, February 1, 2025, and May 4, 2024, unamortized deferred financing costs amounted to $ 3.3 million, $ 3.8 million, and $ 2.9 million, related to the Company’s ABL Credit Facility. The tables below present the components of the Company’s ABL Credit Facility: May 3, 2025 February 1, 2025 May 4, 2024 (in millions) Total borrowing base availability $ 315.5 $ 301.9 $ 286.0 Credit facility availability 433.0 433.0 433.0 Maximum borrowing availability (1) 315.5 301.9 286.0 Outstanding borrowings 258.6 245.7 226.1 Letters of credit outstanding—standby 18.2 16.0 12.2 Utilization of credit facility at end of period 276.8 261.7 238.3 Availability (2) $ 38.7 $ 40.2 $ 47.7 Interest rate at end of period 7.7 % 7.6 % 9.9 % Average end-of-day loan balance during the period $ 247.2 $ 284.5 $ 228.2 Highest end-of-day loan balance during the period $ 262.3 $ 366.9 $ 251.6 Average interest rate 7.7 % 8.7 % 9.6 % ____________________________________________ (1) The lower of the credit facility availability and the total borrowing base availability. (2) The sub-limit availability for letters of credit was $ 6.8 million as of May 3, 2025, $ 9.0 million at February 1, 2025, and $ 12.8 million as of May 4, 2024. Mithaq Term Loans Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), is a controlling stockholder of the Company. The Company and certain subsidiaries maintain an interest-free, unsecured and subordinated promissory note with Mithaq for a $ 78.6 million term loan (the “Initial Mithaq Term Loan”), dated February 29, 2024, by and among the Company, certain of its subsidiaries, and Mithaq. During the First Quarter 2025, $ 60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of the Company’s rights offering on February 6, 2025 (“Rights Offering”), leaving $ 18.4 million outstanding under the Initial Mithaq Term Loan as of May 3, 2025. The Company recorded a loss on extinguishment of debt of $ 1.0 million during the First Quarter 2025, due to this partial prepayment of the Initial Mithaq Term Loan, which is recorded within Other interest expense. For more information about the Rights Offering, see “Note 8. Stockholders’ Equity (Deficit)” below. The Initial Mithaq Term Loan matures on February 15, 2027 and is guaranteed by each of the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility. The Company and certain subsidiaries also maintain an unsecured and subordinated promissory note with Mithaq for a $ 90.0 million term loan (the “New Mithaq Term Loan”; and together with the Initial Mithaq Term Loan, collectively, the “Mithaq Term Loans”), dated April 16, 2024, by and among the Company, certain of its subsidiaries, and Mithaq. The New Mithaq Term Loan matures on April 16, 2027, and requires monthly payments equivalent to interest charged at the SOFR plus 4.000 % per annum, with the first year’s monthly payments to Mithaq deferred until April 30, 2025. On April 28, 2025, the Company and Mithaq entered into Amendment No. 1 to the New Mithaq Term Loan promissory note, which subjected these deferred monthly payments due as of April 30, 2025 to a payment plan, payable in installments prior to the end of Fiscal 2025. The New Mithaq Term Loan is guaranteed by each of the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility. For the First Quarter 2025 and First Quarter 2024, the Company recognized $ 1.9 million and $ 0.4 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan. As of May 3, 2025 and May 4, 2024, interest-equivalent expense payable to Mithaq was $ 8.4 million and $ 0.4 million, respectively, which is recorded within Accrued expenses and other current liabilities. 13 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The Mithaq Term Loans are subject to an amended and restated subordination agreement (as amended from time to time, the “Subordination Agreement”), dated as of April 16, 2024, by and among the Company and certain subsidiaries, Wells Fargo and Mithaq, pursuant to which the Mithaq Term Loans are subordinated in payment priority to the obligations of the Company and its subsidiaries under the Credit Agreement. Subject to such subordination terms, the Mithaq Term Loans are prepayable at any time and from time to time without penalty and do not require any mandatory prepayments. The Mithaq Term Loans contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, including limits on the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of its business. The Mithaq Term Loans, however, do not provide for any closing, prepayment or exit fees, or other fees typical for transactions of this nature, do not impose additional reserves on borrowings under the Credit Agreement, and do not contain certain other restrictive covenants. The Mithaq Term Loans contain certain customary events of default, which include (subject in certain cases to customary grace periods), nonpayment of principal, breach of other covenants of the Mithaq Term Loans, inaccuracy in representations or warranties, acceleration of certain other indebtedness (including under the Credit Agreement), certain events of bankruptcy, insolvency or reorganization, such as a change of control, and invalidity of any part of the Mithaq Term Loans. As of May 3, 2025, February 1, 2025, and May 4, 2024, unamortized deferred financing costs amounted to $ 1.4 million, $ 2.6 million, and $ 2.0 million, respectively, related to the Mithaq Term Loans. Maturities of the Company’s principal debt payments on the Mithaq Term Loans as of May 3, 2025 are as follows: May 3, 2025 (in thousands) Remainder of 2025 $ — 2026 — 2027 108,400 Thereafter — Total related party debt $ 108,400 Mithaq Commitment Letter On May 2, 2024, the Company entered into a commitment letter (the “Commitment Letter”) with Mithaq for a senior unsecured $ 40.0 million credit facility (the “Mithaq Credit Facility”). Under the Mithaq Credit Facility, the Company had the ability to request for advances at any time prior to July 1, 2025. On September 10, 2024, the Company and Mithaq entered into an Amendment No. 1 to the Commitment Letter, that extended the deadline for requesting advances until July 1, 2026. If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged at the SOFR plus 5.000 % per annum. Such debt shall be unsecured and shall be guaranteed by each of the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility. Similar to the Mithaq Term Loans, such debt shall also be subject to the Subordination Agreement, contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, and contain certain customary events of default. Additionally, such debt shall require no mandatory prepayments and shall mature no earlier than July 1, 2026. As of May 3, 2025, no debt had been incurred under the Mithaq Credit Facility. 7. COMMITMENTS AND CONTINGENCIES The Company is a defendant in Rael v. The Children’s Place, Inc. , a purported class action, pending in the U.S. District Court, Southern District of California. In the initial complaint filed in February 2016, the plaintiff alleged that the Company falsely advertised discount prices in violation of California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The plaintiff filed an amended complaint in April 2016, adding allegations of violations of other state consumer protection laws. In August 2016, the plaintiff filed a second amended complaint, adding an additional plaintiff and removing the other state law claims. The plaintiffs’ second amended complaint sought to represent a class of California purchasers and sought, among other items, injunctive relief, damages, and attorneys’ fees and costs. 14 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The Company engaged in mediation proceedings with the plaintiffs in December 2016 and April 2017. The parties reached an agreement in principle in April 2017, and signed a definitive settlement agreement in November 2017, to settle the matter on a class basis with all individuals in the U.S. who made a qualifying purchase at The Children’s Place from February 11, 2012 through January 28, 2020, the date of preliminary approval by the court of the settlement. The Company submitted its memorandum in support of final approval of the class settlement on March 2, 2021. On March 29, 2021, the court granted final approval of the class settlement and denied plaintiff’s motion for attorney’s fees, with the amount of attorney’s fees to be decided after the class recovery amount has been determined. The settlement provides merchandise vouchers for qualified class members who submit valid claims, as well as payment of legal fees and expenses and claims administration expenses. Vouchers were distributed to class members on November 15, 2021 and they were eligible for redemption in multiple rounds through November 2023. On February 23, 2024, a hearing on motion for preliminary injunction and permanent injunction and to enforce judgement and settlement agreement was held. Pending receipt of the court’s ruling, upon the court’s order, the plaintiff filed a renewed motion for attorneys’ fees, costs and incentive awards on March 4, 2024, to which the Company filed a statement of non-opposition on April 1, 2024. Because the plaintiff was seeking less than the maximum amount agreed to in the settlement, the Company requested that such difference in amount be distributed as vouchers to authorized class members, pursuant to the settlement agreement. The hearing for the motion for attorneys’ fees, costs, and incentive awards resulted in the court granting the plaintiff’s counsel approximately $ 0.3 million in fees, costs and incentive awards. The balance of funds initially reserved for the plaintiff counsel’s fees and costs have been issued as a single, final round of merchandise vouchers for qualified class members, which expired in March 2025. Following the expiration of the vouchers in March, the Company has fully satisfied its obligations under the settlement agreement and considers this matter closed. In connection with the settlement, the Company recorded a reserve for $ 5.0 million in its consolidated financial statements in the first quarter of 2017. Following the court’s decision(s), the Company released $ 0.8 million and $ 2.3 million during the First Quarter 2025 and First Quarter 2024, respectively, from its previously established reserve, which is recorded within Selling, general and administrative expenses. Similar to the Rael case above, the Company is also a defendant in Gabriela Gonzalez v. The Children’s Place, Inc. , a purported class action, pending in the U.S. District Court, Central District of California. The plaintiff alleged that the Company had falsely advertised discounts that do not exist, in violation of California’s Unfair Competition Laws, False Advertising Law and the California Consumer Legal Remedies Act. The Company filed a motion to compel arbitration, which the plaintiff did not oppose, and the court granted the motion on August 17, 2022—staying the case pending the outcome of the arbitration. The demand for arbitration was filed on October 4, 2022, in connection with the individual claim of the plaintiff. A mass arbitration firm associated with plaintiff’s counsel then conducted an advertising campaign for claimants to conduct a mass arbitration. In part, to avoid the mass arbitration, the parties stipulated to return the original plaintiff’s claim to court to proceed as a class action. Accordingly, the arbitration would not be proceeding and the Company’s response to the original plaintiff’s complaint in court was filed on July 20, 2023. On August 16, 2023, however, the Company began to receive notices regarding an initial tranche of approximately 1,300 individual demands that were filed with Judicial Arbitration and Mediation Services, Inc. (“JAMS”) as part of a related mass arbitration claim. The parties participated in mediation proceedings on November 15, 2023 and February 9, 2024. The parties agreed to further discuss settlement options in May 2024, which occurred without resolution. In late May 2024, due to the judge’s retirement, the Gonzalez action was transferred and reassigned to a different judge. Deadlines were therefore reset, including the Company’s motion to dismiss. On June 10, 2024, JAMS advised that it would be pausing its administration of the claims until the parties resolve their dispute over which set of arbitration terms apply to the case. The Company’s motion to dismiss was denied in November 2024. Any liability arising out of these proceedings is not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows. The Company is also involved in various legal proceedings arising in the normal course of business. In the opinion of management, any ultimate liability arising out of these proceedings is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows. 15 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 8. STOCKHOLDERS’ EQUITY (DEFICIT) Rights Offering On February 6, 2025, the Company completed a Rights Offering pursuant to which the Company distributed to the holders of record of the Company’s Common stock as of the close of business on December 13, 2024, the record date for the Rights Offering, non-transferable subscription rights to purchase, in the aggregate, up to 9.2 million shares of Common stock. Each subscription right entitled its holder to purchase 0.7220 shares of Common stock at a subscription price of $ 9.75 per whole share of Common stock. Additionally, rights holders who fully exercised their basic subscription rights were entitled to subscribe for additional shares of Common stock that remained unsubscribed as a result of any unexercised basic subscription rights. The subscription price was payable by rights holders (i) in cash, (ii) by delivery in lieu of cash of an equivalent amount of any indebtedness for borrowed money (principal and/or accrued and unpaid interest) owed by the Company to such rights holder, or (iii) by delivery of a combination of cash and such indebtedness. Upon the completion of the Rights Offering, the Company issued 9.2 million shares of Common stock for a total purchase price of $ 90.0 million. Mithaq purchased 6.7 million shares of Common stock pursuant to the Rights Offering and currently owns and controls the voting power of 62 % of the Company’s outstanding shares of Common stock. It paid (i) $ 5.1 million of the subscription price for such shares in cash and (ii) the remaining $ 60.2 million of the subscription price for such shares by delivery of indebtedness for borrowed money owed by the Company to Mithaq pursuant to the Initial Mithaq Term Loan. The Company received approximately $ 29.8 million in gross cash proceeds from the Rights Offering on February 6, 2025. Substantially all of the gross cash proceeds from the Rights Offering were used towards prepaying the Company’s ABL Credit Facility. Share Repurchase Program In November 2021, the Company’s Board of Directors authorized a $ 250.0 million share repurchase program (the “Share Repurchase Program”). Under this program, the Company may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions. The Company may suspend or discontinue the program at any time and may thereafter reinstitute purchases, all without prior announcement. Currently, pursuant to the terms of the Company’s Credit Agreement as amended by its Seventh Amendment described above, the repurchase of any shares would require fulfilling the heightened payment conditions under the Credit Agreement, except that repurchases of shares as described below, pursuant to the Company’s practice as a result of its insider trading policy, are expressly permitted. As of May 3, 2025, there was $ 156.5 million remaining availability under the Share Repurchase Program. Pursuant to the Company’s practice, including due to restrictions imposed by the Company’s insider trading policy during black-out periods, the Company withholds and repurchases shares of vesting stock awards and makes payments to taxing authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. The Company’s payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of its common stock. The Company also acquires shares of its common stock in conjunction with liabilities owed under the Company’s deferred compensation plan, which are held in treasury. The following table summarizes the Company’s share repurchases: Thirteen Weeks Ended May 3, 2025 May 4, 2024 Shares Amount Shares Amount (in thousands) Share repurchases related to: Share repurchase program 15 $ 84 43 $ 320 Shares acquired and held in treasury — $ — 4 $ 48 In accordance with the FASB ASC 505— Equity , the par value of the shares retired is charged against Common stock and the remaining purchase price is allocated between Additional paid-in capital and Accumulated deficit. The portion charged against Additional paid-in capital is determined using a pro-rata allocation based on total shares outstanding. 16 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Dividends Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the Board of Directors based on a number of factors, including business and market conditions, the Company’s financial performance, and other investment priorities. Currently, pursuant to the terms of the Company’s Credit Agreement as amended by its Seventh Amendment as described above, the Company has no current plans to pay regular cash dividends in Fiscal 2025. 9. STOCK-BASED COMPENSATION The Company generally grants time-vesting stock awards (“Deferred Awards”) and performance-based stock awards (“Performance Awards”) to employees at senior management levels. The Company also grants Deferred Awards to its non-employee independent directors. The following table summarizes the Company’s stock-based compensation expense: Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) Deferred Awards $ 1,239 $ 2,418 Performance Awards 507 10,192 Total stock-based compensation expense (1) $ 1,746 $ 12,610 ___________________________________________ (1) Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $ 0.3 million and $ 1.0 million in the First Quarter 2025 and First Quarter 2024, respectively. All other stock-based compensation expense is included in Selling, general, and administrative expenses. During the First Quarter 2024, there was a change of control of the Company, which triggered a conversion of all then-outstanding Performance Awards into service-based Performance Awards in accordance with their terms. As a result, the Fiscal 2023, fiscal year 2022, and fiscal year 2021 Performance Awards will all vest or have vested, as applicable, at their target shares on their respective vesting dates without regard to the achievement of any of the performance metrics associated with those awards, provided that the recipient be employed at the Company on each such vesting date. The incremental expense recorded for Performance Awards in the First Quarter 2024 due to the change of control was $ 9.9 million. 10. LOSS PER COMMON SHARE During the First Quarter 2025, the Company completed its Rights Offering. As the exercise price of the subscription right was less than the fair value of the Common stock, the subscription right contained a bonus element. In connection with this transaction, and in accordance with FASB ASC 260— Earnings Per Share , the Company’s weighted average common shares outstanding and basic and diluted loss per share were retroactively adjusted for all periods presented by a factor of 1.002 . The following table reconciles net loss and common share amounts utilized to calculate basic and diluted loss per common share: Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) Net loss $ ( 34,023 ) $ ( 37,795 ) Basic weighted average common shares outstanding 21,629 12,665 Diluted weighted average common shares outstanding 21,629 12,665 Anti-dilutive shares excluded from diluted loss per common share calculation 93 78 17 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 11. FAIR VALUE MEASUREMENT The Company’s cash and cash equivalents and investments in the rabbi trust are short-term in nature. As such, their carrying amounts approximate fair value. These assets and liabilities fall within Level 1 of the fair value hierarchy. The Company stock included in the deferred compensation plan is not subject to fair value measurement. The fair value of the Initial Mithaq Term Loan with a carrying value (gross of debt issuance costs) of $ 18.4 million as of May 3, 2025, was approximately $ 14.6 million. The fair value of the New Mithaq Term Loan with a carrying value (gross of debt issuance costs) of $ 90.0 million as of May 3, 2025, was approximately $ 81.8 million. The fair value of debt was estimated using a market approach, which considers the Company’s credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy. The Company’s non-financial assets measured at fair value on a nonrecurring basis include long-lived assets, such as intangible assets, fixed assets, and ROU assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy. Impairment of Long-Lived Assets The fair value of the Company’s long-lived assets is primarily calculated using a discounted cash-flow model directly associated with those assets, which consist principally of property and equipment and ROU assets. These assets are tested for impairment when events indicate that their carrying value may not be recoverable. The Company performed periodic quantitative impairment assessments of its long-lived assets and did no t record an impairment charge in the First Quarter 2025 and First Quarter 2024. Impairment of Indefinite-Lived Intangible Assets The Company estimates the fair value of its indefinite-lived Gymboree tradename based on an income approach using the relief-from-royalty method. Estimating fair value using this method requires management to estimate future revenues, royalty rates, discount rates, long-term growth rates, and other factors in order to project future cash flows. The Company performs a periodic impairment assessment of the Gymboree tradename, in accordance with FASB ASC 350 — Intangibles – Goodwill and Other . Based on this assessment, the Company did not identify any indicators of impairment in the First Quarter 2025 and First Quarter 2024. 12. INCOME TAXES The Company utilizes the asset and liability method of accounting for income taxes as set forth in FASB ASC 740— Income Taxes . This method requires recognition of deferred tax assets and liabilities, measured by currently enacted rates, attributable to temporary differences between the financial statement and income tax basis of assets and liabilities. The Company’s deferred tax assets and liabilities are comprised largely of differences relating to depreciation and amortization, rent expense, inventory, stock-based compensation, net operating loss carryforwards, tax credits, and various accruals and reserves. The Company’s provision for income taxes was $ 1.3 million during the First Quarter 2025, compared to $ 2.1 million during the First Quarter 2024. The Company’s effective tax rate was a provision of ( 4.1 )% and ( 5.8 )% in the First Quarter 2025 and First Quarter 2024, respectively. The Company continues to adjust its valuation allowance based upon its ongoing operating results. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act allows net operating losses (“NOLs”) incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100 % of taxable income and to generate a refund of previously paid income taxes. Pursuant to the CARES Act, the Company carried back the taxable year 2020 tax loss of $ 150.0 million to prior years. As of May 3, 2025, the remaining income tax receivable of $ 19.1 million is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets. 18 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The Company accrues interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. The total amount of unrecognized tax benefits was $ 6.6 million, $ 6.5 million, and $ 7.4 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively, and is included within long-term liabilities. Additional interest expense recognized in the First Quarter 2025 and First Quarter 2024 related to unrecognized tax benefits was not significant. The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company files a consolidated U.S. income tax return for federal income tax purposes. The Company is no longer subject to income tax examinations by U.S. federal, state and local or foreign tax authorities for tax years 2015 and prior. The Internal Revenue Service is currently conducting an examination of the Company’s tax return for fiscal year 2020 in conjunction with its review of the CARES Act NOL carryback to earlier fiscal years. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. 13. SEGMENT INFORMATION The Company’s reportable segments are based on the financial information the chief operating decision maker (“CODM”) uses to allocate resources and assess performance of its business. The Company’s President and Interim Chief Executive Officer is the CODM. The Company’s CODM evaluates the performance of each segment and measures its segment profitability based on operating income (loss), defined as income (loss) before interest and taxes. Operating income (loss) is used as a key metric during the annual budget process, and on a quarterly basis to monitor actual performance against the annual budget and forecasts. The Company reports segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com . Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and net sales from the Company’s U.S.-based wholesale business. Included in The Children’s Place International segment are the Company’s Canadian-based stores and net sales from international franchisees. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions, such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. The Company periodically reviews these allocations and adjusts them based upon changes in business circumstances. Major Customers Net sales to external customers are derived from merchandise sales, and the Company has one U.S. wholesale customer that individually accounted for more than 10% of its net sales, amounting to $ 32.2 million for the First Quarter 2025, and accounts for a majority of the Company’s accounts receivable, amounting to $ 25.2 million as of May 3, 2025. Store Count by Segment As of May 3, 2025, The Children’s Place U.S. had 437 stores and The Children’s Place International had 58 stores. As of May 4, 2024, The Children’s Place U.S. had 455 stores and The Children’s Place International had 63 stores. 19 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The tables below present certain segment information for our reportable segments for the periods indicated: Thirteen Weeks Ended May 3, 2025 The Children’s Place U.S. The Children’s Place International (1) Total (in thousands) Net sales $ 221,767 $ 20,358 $ 242,125 Cost of sales (2) 153,986 17,356 171,342 Selling, general, and administrative expenses (3) 87,496 7,404 94,900 Segment operating loss $ ( 19,715 ) $ ( 4,402 ) $ ( 24,117 ) Segment operating loss as a percentage of net sales ( 8.9 )% ( 21.6 )% ( 10.0 )% Thirteen Weeks Ended May 4, 2024 The Children’s Place U.S. The Children’s Place International (1) Total (in thousands) Net sales $ 246,188 $ 21,690 $ 267,878 Cost of sales (2) 159,162 15,975 175,137 Selling, general, and administrative expenses (3) 111,005 9,724 120,729 Segment operating loss $ ( 23,979 ) $ ( 4,009 ) $ ( 27,988 ) Segment operating income (loss) as a percentage of net sales ( 9.7 )% ( 18.5 )% ( 10.4 )% ___________________________________________ (1) The Company’s foreign subsidiaries, primarily in Canada, have operating results based in foreign currencies and are thus subject to the fluctuations of the corresponding translation rates into U.S. dollars. (2) Cost of sales includes the cost of inventory sold, certain buying, design, and distribution expenses, shipping and handling costs on merchandise sold directly to customers, and all occupancy costs, except for administrative office buildings. (3) Selling, general, and administrative expenses include store expenses, marketing, corporate payroll, including long-term incentive compensation, information technology, other administrative expenses, and depreciation and amortization. The table below presents a reconciliation of reportable segment operating loss to Loss before provision for income taxes: Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) Total segment operating loss $ ( 24,117 ) $ ( 27,988 ) Related party interest expense ( 1,871 ) ( 389 ) Other interest expense ( 6,701 ) ( 7,342 ) Interest income 10 10 Loss before provision for income taxes $ ( 32,679 ) $ ( 35,709 ) 20 THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Additional Segment Data Thirteen Weeks Ended May 3, 2025 May 4, 2024 (in thousands) Depreciation and amortization: The Children’s Place U.S. $ 7,656 $ 9,654 The Children’s Place International 574 1,981 Total depreciation and amortization $ 8,230 $ 11,635 Capital expenditures: The Children’s Place U.S. $ 3,273 $ 4,678 The Children’s Place International 140 16 Total capital expenditures $ 3,413 $ 4,694 May 3, 2025 February 1, 2025 May 4, 2024 (in thousands) Total assets: The Children’s Place U.S. $ 739,736 $ 711,564 $ 807,625 The Children’s Place International 39,866 35,988 40,710 Total assets $ 779,602 $ 747,552 $ 848,335 Long-lived assets: United States $ 264,293 $ 267,751 $ 326,152 Canada 12,739 9,801 11,999 Asia 1,961 1,996 572 Total long-lived assets (1) $ 278,993 $ 279,548 $ 338,723 ___________________________________________ (1) The Company’s long-lived assets are comprised of net Property and equipment, ROU assets, Tradenames, and Other assets, and are recorded in the long-term assets section of the consolidated balance sheets. 21