J.Jill, Inc.: Form 10-Q for the period ended Oct 28, 2023

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q (the “Quarterly Report”). The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in the sections of this Quarterly Report titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

We operate 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 3, 2024 (“Fiscal Year 2023”) is comprised of 53 weeks and fiscal year ended January 28, 2023 (“Fiscal Year 2022”) is comprised of 52 weeks.

All references in this Quarterly Report to “J.Jill,” “we,” “our,” “us,” “the Company” or similar terms are to J.Jill, Inc. and its subsidiaries.

Overview

J.Jill 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.

Factors Affecting Our Operating Results

Various factors are expected to continue to affect our results of operations going forward, including the following:

Overall Economic Trends. Consumer purchases of clothing and other merchandise generally decline during recessionary periods and other periods when disposable income is adversely affected, and consequently our results of operations may be affected by general economic conditions. For example, reduced consumer confidence, lower availability, inflationary pressures and higher cost of consumer credit may reduce demand for our merchandise and may limit our ability to increase or sustain prices. The growth rate of the market could be affected by macroeconomic conditions in the United States. Additionally, the occurrence or reoccurrence of any significant pandemic, regional conflicts, or other geopolitical disruptions could impact our sales and business operations.

Consumer Preferences and Fashion Trends. Our ability to maintain our appeal to existing customers and attract new customers depends on our ability to anticipate fashion trends. During periods in which we have successfully anticipated fashion trends, we have generally had more favorable results.

Competition. The retail industry is highly competitive and retailers compete based on a variety of factors, including design, quality, price and customer service. Levels of competition and the ability of our competitors to more accurately predict fashion trends and otherwise attract customers through competitive pricing or other factors may impact our results of operations.

Our Strategic Initiatives. The ongoing implementation of strategic initiatives will continue to have an impact on our results of operations. These initiatives include our ecommerce platform and our initiative to upgrade and enhance our information systems, including the upgrade of our order management system and the completion of the rollout of our new Point of Sale ("POS") systems. Although initiatives of this nature are designed to create growth in our business and continue improvement in our operating results, the timing of expenditures related to these initiatives, as well as the achievement of returns on our investments, may affect our results of operations in future periods.

Pricing and Changes in Our Merchandise Mix or Supply Chain Issues. Our product offering changes from period to period, as do the prices at which goods are sold and the margins we are able to earn from the sales of those goods. The levels at which we are able to price our merchandise are influenced by a variety of factors, including the quality of our products, cost of production, prices at which our competitors are selling similar products, sourcing and/or distributing product, and the willingness of our customers to pay for products.

Potential Changes in Tax Laws and/or Regulations. Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could adversely affect our business, financial condition and operating results. Additionally, any potential changes with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries could adversely affect our business, as we source the majority of our merchandise from manufacturers located outside of the U.S.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of financial and operating metrics, including financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) and non-GAAP financial measures, including the following:

Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our 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.

Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers to omnichannel customers who, on average, spend three times more than single-channel customers.

Total company comparable sales include net sales generated from our retail stores that have been open for more than 52 weeks and from our Direct channel. This measure highlights the performance of existing stores open during the period, while excluding the impact of new store openings and closures. When a store in the total company comparable store base is temporarily closed for four or more days within a fiscal week, the store is excluded from the comparable store base; if it is temporarily closed for three or fewer days within a fiscal week, the store is included within the comparable store base. Certain of our competitors and other retailers may calculate total company comparable sales differently than we do. As a result, the reporting of our total company comparable sales may not be comparable to sales data made available by other companies.

Number of stores reflects all stores open at the end of a reporting period. In connection with opening new stores, we incur pre-opening costs. Pre-opening costs include expenses incurred prior to opening a new store and primarily consist of payroll, travel, training, marketing, initial opening supplies and costs of transporting initial inventory and fixtures to retail stores, as well as occupancy costs incurred from the time of possession of a store site to the opening of that store. In connection with closing stores, we incur store-closing costs. Store-closing costs primarily consist of lease termination penalties and costs of transporting inventory and fixtures to other store locations. These pre-opening and store-closing costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store or closing a store.

Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin.

Costs of goods sold (“COGS”) includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory. We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise. The Company’s COGS, and consequently gross profit, may not be comparable to those of other retailers, as inclusion of certain costs vary across the industry.

The variability in COGS is due to raw materials, transportation and freight costs. These costs fluctuate based on certain factors beyond our control, including labor conditions, inbound transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in U.S. dollars and, as a result, are not exposed to significant foreign currency exchange risk.

Selling, general and administrative (“SG&A”) expenses include all operating costs not included in COGS. These expenses include all payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization. These expenses also include 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. Additionally, our outbound shipping costs may fluctuate due to surcharges from shipping vendors based on demand for shipping services.

With the exception of store selling expenses, certain marketing expenses and incentive compensation, SG&A expenses generally do not vary proportionately with net sales. As a result, SG&A expenses as a percentage of net sales are usually higher in lower-volume periods and lower in higher-volume periods.

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA Margin. Adjusted EBITDA represents net income plus net interest expense, provision for income taxes, depreciation and amortization, equity-based compensation expense, asset impairments, write-off of property and equipment, loss on debt refinancing, adjustments for exited retail stores, and other non-recurring items, consisting of professional fees, retention expenses and costs related to the COVID-19 pandemic. We present Adjusted EBITDA on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and as such, use it internally to report results. Adjusted EBITDA margin represents, for any period, Adjusted EBITDA as a percentage of net sales.

While we believe that Adjusted EBITDA is useful in evaluating our business, Adjusted EBITDA is a non-GAAP financial measure that has limitations as an analytical tool. Adjusted EBITDA should not be considered an alternative to, or substitute for, net income, which is calculated in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate Adjusted EBITDA differently or not at all, which reduces the usefulness of Adjusted EBITDA as a tool for comparison. We recommend that you review the reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, and the calculation of the resultant Adjusted EBITDA margin below and not rely solely on Adjusted EBITDA or any single financial measure to evaluate our business.

Reconciliation of Net Income to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin

The following table provides a reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented.

(in thousands)

(a) Represents expenses associated with equity incentive instruments granted to our management and board of directors. Incentive instruments are accounted for as equity-classified awards with the related compensation expense recognized based on fair value at the date of the grant.

(b) Represents net gain or loss on the disposal of fixed assets.

(c) Represents loss on the repayment of Priming Term Loan Credit Agreement (the “Priming Credit Agreement”) and the Subordinated Term Loan Credit Agreement (the “Subordinated Credit Agreement”).

(d) Represents non-cash gains associated with exiting store leases earlier than anticipated.

(e) Represents impairment of long-lived assets related to leasehold improvements.

(f) Represents items management believes are not indicative of ongoing operating performance, including professional fees, retention expenses and costs related to the COVID-19 pandemic.

Results of Operations

Thirteen weeks ended October 28, 2023 Compared to Thirteen weeks ended October 29, 2022

The following table summarizes our consolidated results of operations for the periods indicated:

(in thousands)

Net Sales

Net sales for the thirteen weeks ended October 28, 2023 decreased $0.1 million, or 0.1%, to $150.1 million from $150.2 million for the thirteen weeks ended October 29, 2022. At the end of those same periods, we operated 245 and 247 retail stores, respectively. The decrease in net sales was driven primarily by higher estimated returns offset by an increase in total company comparable sales of 1.9% for the thirteen weeks ended October 28, 2023.

Our Retail channel contributed 54.7% of our net sales in the thirteen weeks ended October 28, 2023 and 54.5% in the thirteen weeks ended October 29, 2022. Our Direct channel contributed 45.3% of our net sales in the thirteen weeks ended October 28, 2023 and 45.5% in the thirteen weeks ended October 29, 2022.

Gross Profit and Costs of Goods Sold

Gross profit for the thirteen weeks ended October 28, 2023 increased $2.8 million, or 2.7%, to $107.8 million from $105.0 million for the thirteen weeks ended October 29, 2022. The gross margin for the thirteen weeks ended October 28, 2023 was 71.8% compared to 69.9% for the thirteen weeks ended October 29, 2022. The increase in gross profit and gross margin for the thirteen weeks ended October 28, 2023 was driven largely by favorability from freight, lower average product cost, the mix of full price selling and lower promotions, compared to the thirteen weeks ended October 29, 2022.

Selling, General and Administrative Expenses

SG&A expenses for the thirteen weeks ended October 28, 2023 increased $0.8 million, or 1.0%, to $85.7 million from $84.9 million for the thirteen weeks ended October 29, 2022. The increase is driven primarily by a $0.8 million increase in Compensation and Benefits expense compared to the thirteen weeks ended October 29, 2022.

As a percentage of net sales, SG&A expenses were 57.1% for the thirteen weeks ended October 28, 2023 compared to 56.5% for the thirteen weeks ended October 29, 2022.

Interest Expense, Net

Interest expense, net was $5.8 million and $5.4 million for the thirteen weeks ended October 28, 2023 and October 29, 2022, respectively. The increase was due to a higher interest rate offset by a lower principal balance for the thirteen weeks ended October 28, 2023. Interest expense, net, consists of interest expense on the Term Loan Facility and ABL Facility for the thirteen weeks ended October 28, 2023 and, on the Company’s former term loan facility prior to repayment in full on May 8, 2022, Priming Credit Agreement, Subordinated Credit Agreement and ABL Facility for the thirteen weeks ended October 29, 2022, partially offset by interest earned on cash for the thirteen weeks ended October 28, 2023 and October 29, 2022.

Income Tax Provision

The income tax provision was $4.7 million for the thirteen weeks ended October 28, 2023 compared to $4.5 million for the thirteen weeks ended October 29, 2022, while our effective tax rates for the same periods were 28.9% and 33.5%, respectively. The effective tax rate during the thirteen weeks ended October 28, 2023 is lower primarily due to the impact of state and local income taxes, executive compensation limitations and non-deductible expenses.

Thirty-Nine weeks ended October 28, 2023 Compared to Thirty-Nine weeks ended October 29, 2022

The following table summarizes our consolidated results of operations for the periods indicated:

(in thousands)

Net Sales

Net sales for the thirty-nine weeks ended October 28, 2023 decreased $12.4 million, or 2.7%, to $455.2 million from $467.6 million for the thirty-nine weeks ended October 29, 2022. At the end of those same periods, we operated 245 and 247 retail stores, respectively. The decrease in net sales was driven primarily by a decrease in total company comparable sales of 0.7% and higher estimated returns for the thirty-nine weeks ended October 28, 2023.

Our Retail channel contributed 55.0% of our net sales in the thirty-nine weeks ended October 28, 2023 and 54.1% in the thirty-nine weeks ended October 29, 2022. Our Direct channel contributed 45.0% of our net sales in the thirty-nine weeks ended October 28, 2023 and 45.9% in the thirty-nine weeks ended October 29, 2022.

Gross Profit and Costs of Goods Sold

Gross profit for the thirty-nine weeks ended October 28, 2023 decreased $0.2 million, or 0.1%, to $326.8 million from $327.0 million for the thirty-nine weeks ended October 29, 2022. The gross margin for the thirty-nine weeks ended October 28, 2023 was 71.8% compared to 69.9% for the thirty-nine weeks ended October 29, 2022. The increase in gross margin for the thirty-nine weeks ended October 28, 2023 was driven largely by lower freight costs compared to the thirty-nine weeks ended October 29, 2022.

Selling, General and Administrative Expenses

SG&A expenses for the thirty-nine weeks ended October 28, 2023 decreased $3.5 million, or 1.4%, to $251.2 million from $254.6 million for the thirty-nine weeks ended October 29, 2022. The decrease is driven by a $2.6 million decrease in depreciation and amortization expense and a $1.4 million decrease in compensation expense compared to the thirty-nine weeks ended October 29, 2022.

As a percentage of net sales, SG&A expenses were 55.2% for the thirty-nine weeks ended October 28, 2023 compared to 54.5% for the thirty-nine weeks ended October 29, 2022.

Loss on debt refinancing

During the thirty-nine weeks ended October 28, 2023, the Company recognized a loss on debt refinancing of $12.7 million related to entering into a Term Loan Credit Agreement and the repayment of the Priming Credit Agreement and Subordinated Credit Agreement, as discussed in the Liquidity and Capital Resources section below. The Company did not incur any gain or loss on debt refinancing during the thirty-nine weeks ended October 29, 2022.

Interest Expense, Net

Interest expense, net was $18.1 million and $14.4 million for the thirty-nine weeks ended October 28, 2023 and October 29, 2022, respectively. The increase was due to a higher interest rate offset by a lower principal balance for the thirty-nine weeks ended October 28, 2023. Interest expense, net, during the thirty-nine weeks ended October 28, 2023 and October 29, 2022 consists of interest expense on the Term Loan, Priming Credit Agreement and Subordinated Credit Agreement prior to refinancing on April 5, 2023, and ABL Facility, partially offset by interest earned on cash.

Income Tax Provision

The income tax provision was $13.3 million for the thirty-nine weeks ended October 28, 2023 compared to $15.4 for the thirty-nine weeks ended October 29, 2022, while our effective tax rates for the same periods were 29.8% and 27.3%, respectively. The effective tax rate during the thirty-nine weeks ended October 28, 2023 is lower primarily due to the impact of state and local income taxes, executive compensation limitations and non-deductible expenses.

Liquidity and Capital Resources

General

Our primary sources of liquidity and capital resources are cash generated from operating activities and availability under our ABL facility (governed by the “ABL Credit Agreement” and, such facility the “ABL Facility”), so long as certain conditions related to the maturity of the Term Loan Credit Agreement are met. As of October 28, 2023, we had $64.1 million in cash and $34.2 million of total availability under our ABL Facility. In addition, through our shelf registration statement on file with the SEC, depending on conditions prevailing in the public capital markets, we may from time to time issue equity securities in one or more series in one or more offerings.

On April 5, 2023, the Company entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”). The Term Loan Credit Agreement provides for a secured term loan facility in an aggregate principal amount of $175.0 million with a maturity date of May 8, 2028. The proceeds of the Term Loan Credit Agreement, combined with a portion of the Company’s existing cash on hand, were used to fully repay the Priming Credit Agreement and the Subordinated Credit Agreement. All security interests and liens incurred in connection with the Priming Credit Agreement and Subordinated Credit Agreement have been released.

The Term Loan Credit Agreement includes customary negative covenants, including covenants limiting the ability of the Borrower to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness.

The Term Loan Credit Agreement also has certain customary representations and warranties (see Note 5. Debt to the condensed consolidated financial statements included in this Quarterly Report). As of October 28, 2023, the Company is in compliance with all covenants.

On May 10, 2023, the Company entered into Amendment No. 6 to the ABL Credit Agreement (the “ABL Amendment”).

The ABL Amendment extended the maturity date of the ABL Credit Agreement from May 8, 2024 to 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 has not been extended to a date that is at least 180 days after the maturity date of the ABL Credit Agreement). The other terms and conditions of the ABL Credit Facility remain substantially unchanged.

We believe our cash and cash equivalents balance, along with our future cash flows from operations, capacity for borrowings under the ABL Facility and access to credit and capital markets, provide sufficient liquidity to meet the needs of our business operations and to satisfy our projected cash requirements for the next 12 months and the foreseeable future.

Cash Flow Analysis

The following table shows our cash flows information for the periods presented:

(in thousands)

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased by $10.0 million during the thirty-nine weeks ended October 28, 2023 compared to the thirty-nine weeks ended October 29, 2022. The decrease was driven primarily by net cash used by working capital of $8.9 million. The decrease was driven primarily by lower accrued expenses of $22.5 million and higher payments for inventory of $2.0 million, offset by a change in accounts payable of $12.2 million due to timing of payments and lower accounts receivable of $3.0 million.

Net cash provided by operating activities during the thirty-nine weeks ended October 28, 2023 was $56.7 million. Key elements of cash provided by operating activities were (i) net income of $31.4 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $35.2 million, primarily driven by loss on debt refinancing and depreciation and amortization, and (iii) uses of cash totaling $9.9 million for net operating assets and liabilities.

Net cash provided by operating activities during the thirty-nine weeks ended October 29, 2022 was $66.7 million. Key elements of cash provided by operating activities were (i) net income of $41.1 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $26.6 million, primarily driven by depreciation and amortization, and (iii) uses of cash totaling $1.0 million for net operating assets and liabilities to support increased sales, primarily driven by higher payments for merchandise inventory offset by higher accrued expenses and other current liabilities, including an $8.3 million federal income payment received from the IRS in error.

Net Cash Used in Investing Activities

Net cash used in investing activities during the thirty-nine weeks ended October 28, 2023 and October 29, 2022 was $10.8 million and $5.2 million, respectively, representing purchases of property, equipment, software and technology-related investments, including the new POS system.

Net Cash Used in Financing Activities

Net cash used in financing activities was $68.9 million for the thirty-nine weeks ended October 28, 2023 compared to $7.4 million for the thirty-nine weeks ended October 29, 2022. The change was primarily driven by the repayment of the previously existing Priming and Subordinated Credit Agreements for the thirty-nine weeks ended October 28, 2023 offset by the proceeds from issuance of the Term Loan.

Dividends

The payment of cash dividends in the future, if any, will be at the discretion of our board of directors 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 our board of directors. 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.

Credit Facilities

There were no short-term borrowings outstanding under the Company’s ABL Facility as of October 28, 2023 and January 28, 2023. At October 28, 2023 and January 28, 2023, the Company had outstanding letters of credit in the amount of $5.8 million and $7.0 million, respectively, and had a maximum additional borrowing capacity of $34.2 million and $30.0 million, respectively.

Contractual Obligations

The Company’s contractual obligations consist primarily of debt obligations, interest payments, operating leases and purchase orders for merchandise inventory. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs.

Contingencies

We are subject to various legal proceedings that arise in the ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that we are presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements.

Critical Accounting Policies and Significant Estimates

The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our condensed consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for gift card breakage and estimated merchandise returns; estimating the value of inventory; impairment assessments for goodwill and other indefinite-lived intangible assets, and long-lived assets. Management evaluates its policies and assumptions on an ongoing basis.

Our significant accounting policies related to these accounts in the preparation of our condensed consolidated financial statements are described under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 (the “2022 Annual Report”). As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates previously described in our 2022 Annual Report.

Special Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. All written and oral forward-looking statements made in connection with this Quarterly Report that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Risk Factors set forth in our 2022 Annual Report and other cautionary statements included therein and herein.

These forward-looking statements reflect our views with respect to future events as of the date of this Quarterly Report and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report. We anticipate that subsequent events and developments will cause our views to change. We qualify all of our forward-looking statements by these cautionary statements.

Market Risk

There have been no material changes in our exposure to market risk during the third quarter of Fiscal Year 2023. For a discussion of the Company’s exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in the Company’s 2022 Annual Report.

The Company’s management, including its Chief Executive Officer and Chief Financial and Operating Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial and Operating Officer concluded as of October 28, 2023, that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Quarterly Report has been recorded, processed, summarized and reported when required and the information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial and Operating Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any changes in the Company’s internal control over financial reporting that occurred during the third quarter of Fiscal Year 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Factors that could cause our actual results to differ materially from those in this report are described under the heading “Risk Factors” in our 2022 Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed in our 2022 Annual Report. However, additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations and we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.