J.Jill, Inc. [JILL] Filings

10-Q 1 jill-20240803.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 3, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File Number: 001-38026

J.Jill, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		45-1459825
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4 Batterymarch Park, Quincy, MA 02169		02169
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (617) 376-4300

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	JILL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(g) of the Act: None

As of August 30, 2024 the registrant had 15,084,356 shares of common stock, $0.01 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of August 3, 2024 (Unaudited) and February 3, 2024	2
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Thirteen and Twenty-Six Weeks Ended August 3, 2024 and July 29, 2023 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Thirteen and Twenty-Six Weeks Ended August 3, 2024 and July 29, 2023 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Twenty-six weeks ended August 3, 2024 and July 29, 2023 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Exhibit Index		28
Signatures		29

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

J.Jill, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)


	August 3, 2024			February 3, 2024
Assets
Current assets:
Cash and cash equivalents	$	28,466		$	62,172
Accounts receivable		5,068			5,042
Inventories, net		52,709			53,259
Prepaid expenses and other current assets		19,447			17,656
Total current assets		105,690			138,129
Property and equipment, net		50,883			54,118
Intangible assets, net		63,430			66,246
Goodwill		59,697			59,697
Operating lease assets, net		107,842			108,203
Other assets		3,260			1,787
Total assets	$	390,802		$	428,180
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	44,552		$	41,112
Accrued expenses and other current liabilities		36,533			42,283
Current portion of long-term debt		4,375			35,353
Current portion of operating lease liabilities		33,903			36,204
Total current liabilities		119,363			154,952
Long-term debt, net of discount and current portion		68,831			120,595
Deferred income taxes		9,539			10,967
Operating lease liabilities, net of current portion		101,405			103,070
Other liabilities		1,300			1,378
Total liabilities		300,438			390,962
Commitments and contingencies (see Note 12)
Shareholders’ Equity
Common stock, par value $0.01 per share; 50,000,000 shares authorized; 11,766,868 and 10,614,454 shares issued and outstanding at August 3, 2024 and February 3, 2024, respectively (See Note 8)		117			107
Additional paid-in capital		241,485			213,236
Accumulated deficit		(151,238	)		(176,125	)
Total shareholders’ equity		90,364			37,218
Total liabilities and shareholders’ equity	$	390,802		$	428,180

The accompanying notes are an integral part of these condensed consolidated financial statements.

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J.Jill, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share data)


	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Net sales	$	155,242	$	156,631	$	316,755	$	306,877
Costs of goods sold (exclusive of depreciation and amortization)		45,848		44,260		89,624		86,140
Gross profit		109,394		112,371		227,131		220,737
Selling, general and administrative expenses		86,314		84,282		175,426		167,254
Impairment of long-lived assets		58		45		311		45
Operating income		23,022		28,044		51,394		53,438
Loss on extinguishment of debt		8,570		—		8,570		—
Loss on debt refinancing		—		—		—		12,702
Interest expense		3,724		6,630		10,160		12,257
Interest expense - related party		—		—		—		1,074
Interest income		538		473		1,526		1,043
Income before provision for income taxes		11,266		21,887		34,190		28,448
Income tax provision		3,075		6,665		9,303		8,630
Net income and total comprehensive income	$	8,191	$	15,222	$	24,887	$	19,818
Per share data (Note 9):
Net income per common share:
Basic	$	0.55	$	1.08	$	1.71	$	1.40
Diluted	$	0.54	$	1.06	$	1.69	$	1.38
Weighted average common shares:
Basic		14,906,662		14,158,837		14,581,796		14,111,124
Diluted		15,098,301		14,367,751		14,746,749		14,345,179

Cash dividends declared per common share	$	0.07		—	$	0.07		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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J.Jill, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except common share data)


	Common Stock						Additional Paid- in Capital			Accumulated Deficit			Total Shareholders’ Equity
	Shares			Amount
Balance, February 3, 2024		10,614,454		$	107		$	213,236		$	(176,125	)	$	37,218
Vesting of restricted stock units		201,827			2			(2	)		—			—
Surrender of shares to pay withholding taxes		(68,434	)		(2	)		(2,054	)		—			(2,056	)
Equity-based compensation		—			—			1,254			—			1,254
Net income		—			—			—			16,696			16,696
Balance, May 4, 2024		10,747,847		$	107		$	212,434		$	(159,429	)	$	53,112
Issuance of common stock, net of underwriting and issuance costs		1,000,000			10			28,539			—			28,549
Vesting of restricted stock units		31,875			—			—			—			—
Surrender of shares to pay withholding taxes		(12,854	)		—			(432	)		—			(432	)
Quarterly cash dividend declared ($0.07 per share)		—			—			(752	)		—			(752	)
Equity-based compensation		—			—			1,696			—			1,696
Net income		—			—			—			8,191			8,191
Balance, August 3, 2024		11,766,868		$	117		$	241,485		$	(151,238	)	$	90,364



	Common Stock					Additional Paid- in Capital			Accumulated Deficit			Total Shareholders’ Equity (Deficit)
	Shares			Amount
Balance, January 28, 2023		10,165,361		$	102	$	212,005		$	(212,326	)	$	(219	)
Vesting of restricted stock units		227,237			2		(2	)		—			—
Surrender of shares to pay withholding taxes		(66,423	)		—		(1,930	)		—			(1,930	)
Equity-based compensation		—			—		878			—			878
Exercise of warrants		254,627			3		(3	)		—			—
Net income		—			—		—			4,596			4,596
Balance, April 29, 2023		10,580,802		$	107	$	210,948		$	(207,730	)	$	3,325
Vesting of restricted stock units		39,334			—		—			—			—
Surrender of shares to pay withholding taxes		(17,431	)		—		(371	)		—			(371	)
Equity-based compensation		—			—		937			—			937
Net income		—			—		—			15,222			15,222
Balance, July 29, 2023		10,602,705		$	107	$	211,514		$	(192,508	)	$	19,113

The accompanying notes are an integral part of these condensed consolidated financial statements.

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J.Jill, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	For the Twenty-Six Weeks Ended
	August 3, 2024			July 29, 2023
Net income	$	24,887		$	19,818
Operating activities:
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		10,829			11,012
Impairment of long-lived assets		311			45
Adjustment for exited retail stores		(615	)		—
Loss on disposal of fixed assets		57			46
Loss on extinguishment of debt		8,570			—
Loss on debt refinancing		—			12,702
Noncash interest expense, net		1,044			2,191
Equity-based compensation		2,950			1,815
Deferred rent incentives		(63	)		(71	)
Deferred income taxes		(1,428	)		966
Changes in operating assets and liabilities:
Accounts receivable		(26	)		3,379
Inventories, net		550			4,896
Prepaid expenses and other current assets		(1,791	)		(550	)
Accounts payable		2,946			(2,992	)
Accrued expenses and other current liabilities		(5,800	)		(12,586	)
Operating lease assets and liabilities		(3,029	)		(3,230	)
Other noncurrent assets and liabilities		(1,512	)		(1,826	)
Net cash provided by operating activities		37,880			35,615
Investing activities:
Purchases of property and equipment		(3,139	)		(3,512	)
Capitalized software		(1,421	)		(3,593	)
Net cash used in investing activities		(4,560	)		(7,105	)
Financing activities:
Principal repayments on Term Loan		(89,775	)		(2,187	)
Prepayment premium on Term Loan		(2,562	)		—
Principal repayments on Priming Term Loan		—			(201,349	)
Principal repayments on Subordinated Term Loan - related party		—			(21,181	)
Proceeds from issuance of Term Loan		—			164,050
Third-party debt financing costs		—			(3,692	)
Proceeds from issuance of common stock, net of underwriting costs		29,450			—
Third-party common stock issuance costs		(901	)		—
Surrender of shares to pay withholding taxes		(2,486	)		(2,301	)
Quarterly cash dividend paid to shareholders		(752	)		—
Net cash used in financing activities		(67,026	)		(66,660	)
Net change in cash and cash equivalents		(33,706	)		(38,150	)
Cash and cash equivalents:
Beginning of Period		62,172			87,053
End of Period	$	28,466		$	48,903

The accompanying notes are an integral part of these condensed consolidated financial statements.

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J.Jill, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business

J.Jill, Inc., “J.Jill” or the “Company”, is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease. The brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter. J.Jill offers a high touch customer experience through over 200 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim condensed consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”) associated with reporting of interim period financial information. We consistently applied the accounting policies described in our Annual Report on Form 10-K (the “2023 Annual Report”) for the fiscal year ended February 3, 2024 (“Fiscal Year 2023”) in preparing these unaudited interim condensed consolidated financial statements. J.Jill operates on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal year ending February 1, 2025 (“Fiscal Year 2024”) is comprised of 52 weeks and Fiscal Year 2023 was comprised of 53 weeks.

In the opinion of management, these interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February 3, 2024 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended August 3, 2024 are not necessarily indicative of future results or results to be expected for Fiscal Year 2024. You should read these statements in conjunction with our audited consolidated financial statements and related notes in our 2023 Annual Report.

Financial Statement Presentation

Certain reclassifications have been made to prior periods to conform with the current period presentation.

On the condensed consolidated statements of operations and comprehensive income, the Company reclassified amounts for interest income for the thirteen and twenty-six weeks ended July 29, 2023 from Interest expense, net to a separate financial statement line item to conform with the current presentation for the thirteen and twenty-six weeks ended August 3, 2024.

On the consolidated statement of cash flows, the Company reclassified approximately $1.2 million of prepaid software project costs from Prepaid expenses and other current assets to Other assets for the twenty-six weeks ended July 29, 2023. For further details refer “Cloud-Based Software Arrangements” below under Note 2. Summary of Significant Accounting Policies.

Correction of Immaterial Error

Prior to Fiscal Year 2024, the Company had recorded processing fee income related to customer sales returns as a contra expense within Selling, general and administrative expenses rather than as a component of Net sales in the condensed consolidated statements of operations and comprehensive income. Beginning in Fiscal Year 2024, the Company recorded this revenue as a component of Net sales within the Direct channel. The Company reclassified this income, which increased previously reported Net sales and Selling, general and administrative expenses by $1.0 million for the thirteen weeks ended July 29, 2023, and by $1.8 million for the twenty-six weeks ended July 29, 2023. The Company has concluded that the reclassification of this income was immaterial to the prior period financial statements.

Cost of Goods Sold

Cost of goods sold (“COGS”) includes the direct costs of sold merchandise, which include customs, taxes, duties, commissions and inbound shipping costs, inventory shrinkage, adjustments and reserves for excess, aged and obsolete inventory. COGS does not include distribution center costs and allocations of indirect costs, such as occupancy, depreciation, amortization, or labor and benefits.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and operations at the headquarters, including utilities, depreciation and amortization. These expenses also consist of marketing expense, including catalog production and mailing costs, warehousing, distribution and outbound shipping costs, customer service operations, consulting and software services, professional services and other administrative costs.

Cloud-Based Software Arrangements

The costs incurred to implement cloud computing arrangements hosted by third party vendors are capitalized when incurred during the application development phase, and recognized as Prepaid expenses and other current assets for the current portion or Other assets for the long-term portion. Implementation costs are subsequently amortized on a straight-line basis over the expected term of the related cloud service, beginning on the date the related software or module is ready for its intended use. The amortization of cloud-based software implementation costs is recorded as a component of Selling, general, and administrative expenses, the same line item as the expense for the associated hosting arrangement. The carrying value of cloud computing implementation costs are tested for impairment when an event or circumstance indicates that the asset might be impaired. Cloud computing arrangement implementation costs are classified within operating activities in the consolidated statements of cash flows.

For the thirteen and twenty-six weeks ended August 3, 2024, the Company amortized $0.3 million and $0.5 million, respectively, of cloud-based software implementation costs. For the thirteen and twenty-six weeks ended July 29, 2023, the Company amortized immaterial amounts of cloud-based software implementation costs.

As of August 3, 2024, the Company had $5.0 million of gross capitalized cloud-based software implementation costs and $0.5 million of related accumulated amortization, for a net balance of $4.5 million, made up of $2.0 million recorded within Prepaid expenses and other current assets and $2.5 million recorded within Other assets on the Company’s consolidated balance sheets.

As of February 3, 2024, the Company had $2.5 million of gross capitalized cloud-based software implementation costs and $0.6 million of related accumulated amortization, for a net balance of $1.9 million, made up of $0.9 million recorded within Prepaid expenses and other current assets and $1.0 million recorded within Other assets on the Company’s consolidated balance sheets.

Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative”. This ASU amends the FASB ASC in response to the SEC’s disclosure update and simplification initiative. This guidance will be applied prospectively with effective date for each amendment to be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027, the SEC has not removed the related disclosures from Regulation S-X or Regulation S-K, the pending amendments will not become effective for any entity. The Company is assessing what impact this guidance will have on its disclosures in the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting, Improvements to Reportable Segment Disclosures”. This ASU enhances the disclosures required about a public entity’s reportable segments in its annual and interim condensed consolidated financial statements. The amendments in this update require additional detailed and enhanced information about reportable segments’ expense, including significant segment expenses and other segment items that bridge segment revenue, significant expenses to segment profit or loss. The ASU also requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”) on annual basis as well as an explanation of how CODM uses the reported measures and other disclosures. The amendments in this update do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for the Company for annual reporting periods beginning with the fiscal year ending February 1, 2025 and for interim reporting periods beginning in fiscal year 2026. Early adoption is permitted. The Company is assessing what impact this guidance will have on its disclosures in the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”. This ASU requires enhanced income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregated information related to income taxes paid. The other amendments in this update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit), and (2) removing disclosures that are no longer considered cost beneficial or relevant. The amendments in ASU 2023-09 are effective for the fiscal year ending January 31, 2026. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its disclosures in the Company’s consolidated financial statements.

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3. Revenues

Disaggregation of Revenue

Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through retail stores (“Retail”) and through our website and catalog orders (“Direct”). Net sales also include shipping and handling fees collected from customers, royalty revenues and marketing reimbursements related to our private label credit card agreement. Retail revenue is recognized at the time of sale and Direct revenue is recognized upon shipment of merchandise to the customer. The following table presents disaggregated revenues by source (in thousands):


	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Retail	$	82,148	$	86,110	$	167,755	$	168,314
Direct		73,094		70,521		149,000		138,563
Net sales	$	155,242	$	156,631	$	316,755	$	306,877

Performance Obligations

The Company has a remaining performance obligation of $0.5 million related to an upfront payment to support the marketing and promotion of the private label credit card program. This upfront payment will be amortized to revenue evenly through January 2031.

Contract Liabilities

The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):


	August 3, 2024		February 3, 2024
Contract liabilities:
Upfront Payment (1)		527		570
Unredeemed gift cards (2)		5,404		7,005
Total contract liabilities	$	5,931	$	7,575

(1)

The short-term portion of the upfront payment is included in Accrued expenses and other current liabilities and the long-term portion of the upfront payment is included in Other long-term liabilities on the Company’s consolidated balance sheets.

(2)

Revenue recognized for the twenty-six weeks ended August 3, 2024 related to the contract liability balance as of February 3, 2024 was $2,964.

The Company recognized revenue related to gift card redemptions and breakage for the thirteen and twenty-six weeks ended August 3, 2024 of approximately $2.5 million and $5.4 million, respectively, and for the thirteen and twenty-six weeks ended July 29, 2023 of approximately $2.6 million and $5.5 million, respectively. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued and redeemed during the period.

Practical Expedients and Policy Elections

The Company excludes from its revenue all amounts collected from customers for sales taxes that are remitted to taxing authorities.

Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.

The Company does not disclose remaining performance obligations that have an expected duration of one year or less.

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4. Asset Impairments

Long-lived Asset Impairments

For the thirteen weeks ended August 3, 2024, the Company recorded an immaterial amount of noncash impairment charges related to right of use assets at the corporate headquarters and leasehold improvements at certain store locations. For the twenty-six weeks ended August 3, 2024, the Company recorded noncash impairment charges of $0.3 million primarily related to leasehold improvements at certain store locations driven by the actual performance at these locations. The Company reduced the net carrying value of certain long-lived assets to their estimated fair value, which was determined using a discounted cash flows method.

For the thirteen and twenty-six weeks ended July 29, 2023, the Company recorded an immaterial amount of impairment charges.

Goodwill and Other Intangible Assets

The balance of goodwill was $59.7 million at August 3, 2024 and February 3, 2024. The accumulated goodwill impairment losses as of August 3, 2024 were $137.3 million.

A summary of other intangible assets as of August 3, 2024 and February 3, 2024 is as follows (in thousands):


		August 3, 2024
	Weighted Average Useful Life (Years)	Gross		Accumulated Amortization		Accumulated Impairment		Carrying Amount
Indefinite-lived:
Trade name	N/A	$	58,100	$	—	$	24,100	$	34,000
Definite-lived:
Customer relationships	13.2		134,200		102,150		2,620		29,430
Total intangible assets		$	192,300	$	102,150	$	26,720	$	63,430


		February 3, 2024
	Weighted Average Useful Life (Years)	Gross		Accumulated Amortization		Accumulated Impairment		Carrying Amount
Indefinite-lived:
Trade name	N/A	$	58,100	$	—	$	24,100	$	34,000
Definite-lived:
Customer relationships	13.2		134,200		99,334		2,620		32,246
Total intangible assets		$	192,300	$	99,334	$	26,720	$	66,246

Total amortization expense for these amortizable intangible assets was $1.2 million and $1.7 million for the thirteen weeks ended August 3, 2024 and July 29, 2023, respectively, and $2.8 million and $3.5 million for the twenty-six weeks ended August 3, 2024 and July 29, 2023, respectively.

Impairment Tests

Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Definite-lived intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable. Judgments regarding indicators of potential impairment are based on market conditions and operational performance of the business.

During the twenty-six weeks ended August 3, 2024 and July 29, 2023, the Company did not identify any events or circumstances that indicated the fair value of a reporting unit was less than its carrying value.

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5. Debt

The components of the Company’s outstanding long-term debt at August 3, 2024 and February 3, 2024 were as follows (in thousands):


	At August 3, 2024
	Outstanding Principal Balance			Original Issue Discount			Capitalized Fees & Expenses			Balance Sheet
Term Loan due 2028	$	78,663		$	(4,093	)	$	(1,364	)	$	73,206
Less: Current portion		(4,375	)		—			—			(4,375	)
Net long-term debt	$	74,288		$	(4,093	)	$	(1,364	)	$	68,831


	At February 3, 2024
	Outstanding Principal Balance			Original Issue Discount			Capitalized Fees & Expenses			Balance Sheet
Term Loan due 2028	$	168,438		$	(9,367	)	$	(3,123	)	$	155,948
Less: Current portion (including Excess Cash Flow payment)		(35,353	)		—			—			(35,353	)
Net long-term debt	$	133,085		$	(9,367	)	$	(3,123	)	$	120,595

Term Loan Credit Agreement

The Company is party to a secured $175.0 million term loan credit agreement (the “Term Loan Credit Agreement” and, such facility, the “Term Loan Facility”), dated April 5, 2023, by and among the lenders party thereto and Jefferies Finance LLC, as administrative and collateral agent, with a maturity date of May 8, 2028.

On May 10, 2024, the Company made a voluntary principal prepayment of $58.2 million on the Term Loan Credit Agreement, in lieu of the previously expected excess cash flow payment of $26.6 million. The expected excess cash flow payment was rejected by the lenders as permitted under the provisions of the Term Loan Credit Agreement. On June 21, 2024, the Company made an additional voluntary principal prepayment of $27.2 million (See Note 8. Shareholders’ Equity, Common Stock Issuance, for additional information). Together with the required quarterly payments, the Company has repaid $89.8 million in principal under the Term Loan Credit Agreement in Fiscal Year 2024. In connection with both of the voluntary principal prepayments, the Company paid a $2.6 million premium, amounting to 3% on the aggregate principal amount being prepaid, and $1.6 million towards interest, in accordance with the provisions of the Term Loan Credit Agreement.

In connection with the voluntary principal prepayments discussed above, for the thirteen and twenty-six weeks ended August 3, 2024, the Company recognized a loss on extinguishment of debt of approximately $8.6 million, consisting of $6.0 million of accelerated amortization of the discount and fees and $2.6 million of prepayment premium, in its condensed consolidated statements of operations and comprehensive income. As of August 3, 2024, the remaining Term Loan Facility principal balance was $78.7 million, which is to be repaid in two quarterly principal payments of $2.2 million through January 31, 2025, with the remaining balance of $74.3 million to be paid upon maturity on May 8, 2028. The remaining unamortized discount and fees of $5.5 million will continue to be amortized over the remaining term through maturity.

As of August 3, 2024, the Company was in compliance with all covenants contained in its outstanding debt arrangements.

Priming and Subordinated Term Loans

The Company was party to a priming and a subordinated credit agreement, dated as of September 30, 2020, by and among J.Jill, Inc., Jill Acquisition LLC, as the borrower, the lenders party thereto from time to time and Wilmington Trust, National Association, as administrative agent and collateral agent (as amended, the “Subordinated Credit Agreement” and, such facility, the Subordinated Facility), until it was repaid in full on April 5, 2023.

Asset-Based Revolving Credit Agreement

The Company is party to a secured $40.0 million asset-based revolving credit facility agreement (the “ABL Credit Agreement” and, such facility, the “ABL Facility”), as amended, with a maturity date of May 10, 2028 (or 180 days prior to the maturity date of the Company’s Term Loan Credit Agreement if the maturity date of such Term Loan Facility has not been extended to a date that is at least 180 days after the maturity date of the ABL Credit Agreement).

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The Company had no short-term borrowings under the Company’s ABL Facility as of August 3, 2024 and February 3, 2024. The Company’s available borrowing capacity under the ABL Facility as of August 3, 2024 and February 3, 2024 was $35.7 million and $34.2 million, respectively.

As of August 3, 2024 and February 3, 2024, there were outstanding letters of credit of $4.3 million and $5.8 million, respectively, which reduced the availability under the ABL Facility. As of August 3, 2024, the maximum commitment for letters of credit was $10.0 million.

As of August 3, 2024, the Company was in compliance with all covenants.

6. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1 - Quoted prices in active markets for identical assets or liabilities.

•

Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, including interest rates and yield curves, and market corroborated inputs.

•

Level 3 - Unobservable inputs for the assets or liabilities that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These are valued based on management’s estimates and assumptions that market participants would use in pricing the asset or liabilities.

The following table presents the carrying value and fair value hierarchy for debt as of August 3, 2024 and February 3, 2024, respectively (in thousands):


			Fair Value as of August 3, 2024
	Carrying Value		Level 1		Level 2		Level 3
Financial instruments not carried at fair value:
Total debt	$	73,206	$	—	$	75,223	$	—
Total financial instruments not carried at fair value	$	73,206	$	—	$	75,223	$	—


			Fair Value as of February 3, 2024
	Carrying Value		Level 1		Level 2		Level 3
Financial instruments not carried at fair value:
Total debt	$	155,948	$	—	$	161,871	$	—
Total financial instruments not carried at fair value	$	155,948	$	—	$	161,871	$	—

The Company’s debt instruments include the Term Loan Credit Agreement. The debt instruments are recorded at cost, net of debt issuance costs and any related discount. The fair value of the debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.

The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, accounts payable and any amounts drawn on its revolving credit facilities, consisting primarily of instruments without extended maturities, based on management’s estimates, approximates their fair value due to the short-term maturities of these instruments.

Assets and Liabilities with Recurring Fair Value Measurements - Certain assets and liabilities may be measured at fair value on an ongoing basis. We did not elect to apply the fair value option for recording financial assets and financial liabilities. Other than total debt, we do not have any assets or liabilities which we measure at fair value on a recurring basis.

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Assets and Liabilities with Nonrecurring Fair Value Measurements - Certain assets and liabilities are not measured at fair value on an ongoing basis. These assets and liabilities, which include long-lived assets, goodwill, intangible assets, and debt are subject to fair value adjustment in certain circumstances. From time to time, the fair value is determined on these assets and liabilities as part of related impairment tests or for disclosure purposes. See Note 4. Asset Impairments, for additional information.

7. Income Taxes

The Company recorded an income tax provision of $3.1 million and $6.7 million during the thirteen weeks ended August 3, 2024 and July 29, 2023, respectively. The Company recorded an income tax provision of $9.3 million and $8.6 million during the twenty-six weeks ended August 3, 2024 and July 29, 2023, respectively.

The effective tax rate was 27.3% and 30.5% for the thirteen weeks ended August 3, 2024 and July 29, 2023, respectively, and 27.2% and 30.3% for the twenty-six weeks ended August 3, 2024 and July 29, 2023, respectively.

The effective tax rate for the thirteen and twenty-six weeks ended August 3, 2024 differs from the federal statutory rate of 21% primarily due to the impact of state and local income taxes and executive compensation limitations. The effective tax rate for the thirteen and twenty-six weeks ended July 29, 2023 differs from the federal statutory rate of 21% primarily due to the impact of state and local income taxes, executive compensation limitations and non-deductible expenses.

8. Shareholders’ Equity

Common Stock Issuance

On June 12, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, William Blair & Company, L.L.C., and TD Securities (USA) LLC (collectively, the “Underwriters”), as well as TowerBrook Capital Partners, LP (“TowerBrook”), an affiliate and the Company’s largest stockholder (the “Selling Stockholder”). Pursuant to the Underwriting Agreement, (i) the Company offered, issued, and sold 1,000,000 shares of its common stock and, (ii) the Selling Stockholder offered and sold 1,300,000 shares of the Company’s common stock, which included 300,000 shares sold as a result of the Underwriters’ full exercise of their option to purchase additional shares (collectively, the “Equity Offering”). The shares were offered at an offering price of $31.00 per share, less underwriting discounts and commissions. The Equity Offering was completed on June 14, 2024.

The gross proceeds to the Company from the issuance of the Company’s 1,000,000 shares amounted to $31.0 million and the Company did not receive any proceeds from the shares sold by the Selling Stockholder. After deducting underwriting discounts and commissions of approximately $1.5 million, the net proceeds to the Company from the Equity Offering were $29.5 million. The issuance of the 1,000,000 new shares sold by the Company increased the total number of outstanding shares and are reflected in the stockholders’ equity section of the Company’s condensed consolidated balance sheet as of August 3, 2024. In connection with the Equity Offering, the Company incurred $0.9 million of third- party expenses. The net proceeds, after deducting both underwriting discounts and commissions and third- party expenses have been recorded in Additional paid-in capital and are detailed in the condensed consolidated statements of shareholders’ equity for the thirteen and twenty-six weeks ended August 3, 2024.

The Company utilized the net proceeds from its sale of shares in the Equity Offering for repayment of its debt and general corporate purposes.

Dividends

On May 14, 2024, the Board of Directors (the “Board”) declared a quarterly cash dividend of $0.07 per share of common stock (the “Dividend”). The Dividend was paid on June 12, 2024, to all holders of record of issued and outstanding shares of the Company’s common stock as of the close of business on May 29, 2024. During the thirteen and twenty-six weeks ended August 3, 2024, the Company paid $0.8 million in dividends. The Company may pay dividends on its common stock only from net profits and surplus as determined under Delaware state law. Given the current financial position, the Dividend was paid from Additional paid-in capital rather than retained earnings as reflected in the condensed consolidated statements of shareholders’ equity for the thirteen and twenty-six weeks ended August 3, 2024.

The Company intends to pay dividends quarterly in the future, subject to market conditions and the discretion and approval by the Board of any such dividends.

The payment of cash dividends in the future, if any, will be at the discretion of the Board and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements and any other factors deemed relevant by the Board. As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us, under our debt agreements and under future indebtedness that we or they may incur.

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Refer Note 13. Subsequent Events for information on the declaration of dividend subsequent to August 3, 2024.

9. Net Income Per Share

The following table summarizes the computation of basic and diluted net income per common share (“EPS”) (in thousands, except share and per share data):


	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Numerator
Net income	$	8,191	$	15,222	$	24,887	$	19,818
Denominator
Weighted average number of common shares outstanding		11,336,014		10,594,381		11,014,128		10,512,944
Assumed exercise of warrants		3,570,648		3,564,456		3,567,668		3,598,180
Weighted average common shares, basic		14,906,662		14,158,837		14,581,796		14,111,124
Dilutive effect of equity compensation awards		191,639		208,914		164,953		234,055
Weighted average common shares, diluted		15,098,301		14,367,751		14,746,749		14,345,179
Net income per common share, basic	$	0.55	$	1.08	$	1.71	$	1.40
Net income per common share, diluted	$	0.54	$	1.06	$	1.69	$	1.38

Equity compensation awards are excluded from the diluted earnings per share calculation when their inclusion would have an antidilutive effect such as when the Company has a net loss for the reporting period, or if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Accordingly, 62,288 and 171,037 shares for the thirteen and twenty-six weeks ended August 3, 2024, respectively, and 146,356 and 90,775 shares for the thirteen and twenty-six weeks ended July 29, 2023, respectively, were excluded from the diluted earnings per share calculation because their inclusion would be antidilutive.

For the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023, warrants issued to the Subordinated Facility holders have been included in the denominator for basic and diluted EPS calculations as the exercise of the warrants is near certain because the exercise price is non-substantive in relation to the fair value of the common shares to be issued upon exercise.

In accordance with the terms of the warrant agreement, dated as of October 2, 2020, and as amended on December 4, 2020, the exercise ratio of the outstanding warrants has been proportionately adjusted from 0.2054 to 0.2059 on May 29, 2024 to account for the increase in the total number of shares of common stock issuable resulting from the cash dividend paid on June 12, 2024.

Refer Note 13. Subsequent Events for information on the exercise of warrants subsequent to August 3, 2024.

10. Equity-Based Compensation

The J.Jill, Inc. Omnibus Equity Incentive Plan, as amended and restated on June 1, 2023 (the “A&R Plan”), reserves a maximum 2,043,453 shares of common stock for issuance upon exercise of options, or in respect of granted awards. As of August 3, 2024, the A&R Plan had an aggregate of 869,106 shares remaining for future issuance pursuant to awards that may be granted by the Board.

During the twenty-six weeks ended August 3, 2024 and July 29, 2023, the Board approved and granted RSUs, dividend equivalent RSUs, PSUs and dividend equivalent PSUs under the A&R Plan.

Restricted Stock Units

For the twenty-six weeks ended August 3, 2024 and July 29, 2023, the Board granted RSUs under the A&R Plan, which vest in one to three equal annual installments, beginning one year from the date of grant. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. In connection with the cash dividend paid on the Company’s common stock and in accordance with the terms of the A&R Plan, participants holding RSUs were credited with dividend equivalent RSUs, which are subject to the same vesting terms as the RSUs. For the twenty-six weeks ended August 3, 2024 and July 29, 2023, the fair market value of RSUs was determined based on the market price of the Company’s shares on the date of the grant.

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The following table summarizes the RSU awards activity for the twenty-six weeks ended August 3, 2024:


	Number of RSUs			Weighted Average Grant Date Fair Value
Unvested units outstanding at February 3, 2024		458,299		$	14.15
Granted		208,013		$	32.58
Vested		(233,702	)	$	13.53
Forfeited

J.Jill, Inc. [JILL] Filings
10-Q	[2024-09-04]
10-Q	[2024-06-07]
10-K	[2024-04-04]
10-Q	[2023-12-05]
10-Q	[2023-08-31]
10-Q	[2023-06-07]
10-K	[2023-03-30]
10-Q	[2022-12-06]
10-Q	[2022-09-01]
10-Q	[2022-06-08]
10-K	[2022-04-13]
10-Q	[2021-12-14]
10-Q	[2021-09-09]
10-Q	[2021-06-09]
10-K	[2021-04-12]
10-Q	[2020-12-11]
10-Q	[2020-09-10]
10-Q	[2020-07-28]
10-K	[2020-06-15]
10-Q	[2019-12-12]
10-Q	[2019-09-11]
10-Q	[2019-06-11]
10-K	[2019-04-08]
10-Q	[2018-12-13]
10-Q	[2018-09-18]
10-Q	[2018-06-14]
10-K	[2018-04-13]
10-Q	[2017-12-12]
10-Q	[2017-09-12]
10-Q	[2017-06-12]
10-K	[2017-04-28]
S-1	[2017-02-10]