• Delivered Fourth Quarter Net Sales at the upper end of expectations
• Exceeded Fourth Quarter Adjusted EBITDA¹ guidance
• Initiates Fiscal 2023 Guidance

Torrid Holdings Inc. (“Torrid” or the “Company”) (NYSE: CURV), a direct-to-consumer apparel, intimates, and accessories brand in North America for women sizes 10 to 30, today announced its financial results for the quarter ended January 28, 2023.

Lisa Harper, Chief Executive Officer, stated, “This past year, we focused on improving the health of our organization and made operational changes that have set us up to drive long-term growth in the business. I’m proud of our team’s accomplishments and we ended the year with Net Sales at the upper end of our expectations, a beat to our Adjusted EBITDA¹ guidance, and improved inventory levels going into next year. We are pleased with the quality of our inventory and product moving forward, and we are starting to see our gross margin rates stabilize. Looking ahead, I believe we have the right strategies and priorities in place to deliver against long-term financial targets and drive shareholder value.”

Financial Highlights for the Fourth Quarter of Fiscal 2022

• Net sales decreased 5.5% to $301.2 million compared to the fourth quarter of last year. Comparable sales² decreased 5.4% in the fourth quarter.
• Gross profit margin was 31.9% and declined 70bps compared to 32.6% in the fourth quarter of last year. The decline was primarily driven by promotional events and higher inflationary costs, partially offset by higher royalties, profit-sharing and marketing and promotional funds we received associated with our private label credit card.
• Net loss was $3.8 million, or a loss of $0.04 per share, compared to net loss of $22.8 million, or a loss of $0.21 per share in the fourth quarter of last year. There was no adjustment to net income in the fourth quarter of fiscal 2022, but for comparison purposes, Adjusted net income¹ for the fourth quarter of last year was $9.7 million, or $0.09 per share.
• Adjusted EBITDA¹ was $16.4 million, or 5.6% of net sales, compared to $28.4 million, or 9.1% of net sales, in the fourth quarter of last year.
• Opened six Torrid stores and six Curv stores in the fourth quarter and closed two Torrid stores. The total store count at quarter end was 639 stores.

Financial Highlights for the Full Year of Fiscal 2022

• Net sales decreased 0.7% to $1,288.1 million compared to last fiscal year. Comparable sales² decreased 3.4% compared to last fiscal year.
• Gross profit margin was 35.7% compared to 41.4% last fiscal year.
• Net income was $50.2 million, or $0.48 per share, compared to net loss of $29.9 million, or a loss of $0.27 per share last fiscal year. There was no adjustment to net income in fiscal 2022, but for comparison purposes, Adjusted net income¹ last fiscal year was $121.2 million, or $1.10 per share.
• Adjusted EBITDA¹ was $152.3 million, or 12.1% of net sales, compared to $245.9 million, or 19.2% of net sales last fiscal year.
• Opened 18 Torrid stores and eight Curv stores during fiscal 2022 and closed 11 Torrid stores. The total store count at year end was 639 stores.
• Active customers grew 2% to 3.9 million.
• Average spend per customer was down 3%.

Reclassification of Certain Statements of Operations and Comprehensive Income (Loss) Items

In the fourth quarter of fiscal 2022, we made a voluntary change in our accounting policy regarding the classification of royalties, profit-sharing and marketing and promotional funds ("PLCC Funds") we receive pursuant to our private label credit card agreement. Historically, we recorded PLCC Funds as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Under the new policy, we record PLCC Funds in net sales in the consolidated statements of operations and comprehensive income (loss). This reclassification does not have any impact on income from operations, income before provision for income taxes, net income (loss) or earnings (loss) per share and there was no cumulative effect to stockholders’ deficit or net assets.

The recognition of PLCC Funds in net sales is preferable because it will enhance the comparability of our financial statements with those of many of our industry peers and provide greater transparency into performance metrics relevant to our industry by showing the gross impact of the funds received as net sales instead of as a reduction to selling, general and administrative expenses. This reclassification has been retrospectively applied to all periods presented in this earnings release. A table reflecting the effects of the reclassification is included at the end of this release (see “Reclassification of Certain Statements of Operations and Comprehensive Income (Loss) Items”).

Full Year Fiscal 2022 Financial and Operating Metrics

Balance Sheet and Cash Flow

Cash and cash equivalents at the end of fiscal 2022 totaled $13.6 million. Total liquidity at the end of the fourth quarter, including available borrowing capacity under our revolving credit agreement, was $147.8 million.

Cash flow from operations for the twelve-month period ended January 28, 2023 was $53.3 million, compared to $121.2 million for the twelve-month period ended January 29, 2022.

Outlook

For the first quarter of fiscal 2023 the Company expects:

• Net sales between $305 million and $313 million.
• Adjusted EBITDA¹ between $35 million and $40 million.

For the full year fiscal 2023 the Company expects:

• Net sales between $1.265 billion and $1.320 billion.
• Adjusted EBITDA¹ between $140 million and $152 million.
• Capital expenditures between $40 and $45 million reflecting infrastructure and technology investments as well as between 30 and 40 new stores for the year.

The above outlook is based on several assumptions, including, but not limited to, the macroeconomic challenges in the industry continuing into fiscal 2023 as well as higher raw material and labor costs, which are expected to be more pronounced this year. While COVID-19-related restrictions have eased in recent months, a level of uncertainty remains regarding potential supply chain disruption during fiscal 2023. See “Forward-Looking Statements” for additional information.

Conference Call Details

A conference call to discuss the Company’s fourth quarter fiscal 2022 results is scheduled for March 23, 2023, at 4:30 p.m. ET. Those who wish to participate in the call may do so by dialing (877) 407-9208 or (201) 493-6784 for international callers. The conference call will also be webcast live at investors.torrid.com in the Events and Presentations section. A recording will be available shortly after the conclusion of the call. To access the replay, please dial (844) 512-2921 or (412) 317-6671 for international callers, conference ID 13735712. An archive of the webcast will be available on Torrid’s investor relations website.

Notes

About Torrid

Torrid is a direct-to-consumer brand of apparel, intimates and accessories in North America targeting the 25- to 40-year old woman who wears sizes 10 to 30. Torrid is focused on fit and offers high quality products across a broad assortment that includes tops, bottoms, denim, dresses, intimates, activewear, footwear and accessories.

Non-GAAP Financial Measures

In addition to results determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management utilizes certain non-GAAP performance measures such as Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings (loss) per share for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance.

Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings (loss) per share are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP and our calculations thereof may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents GAAP net income (loss) plus interest expense less interest income, net of other expense (income), plus provision for income taxes, depreciation and amortization (“EBITDA”), and share-based compensation, non-cash deductions and charges, and other expenses. Adjusted net income (loss) represents GAAP net income (loss) plus remeasurement adjustments for share-based compensation, net of tax. Adjusted earnings (loss) per share represents Adjusted net income (loss) divided by the diluted weighted average number of shares outstanding at the end of the period.

We believe Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings (loss) per share facilitate operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to ongoing operating performance. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting the 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 and analyze our results and as a benchmark to determine certain non-equity incentive payments made to executives. We use Adjusted net income (loss) and Adjusted earnings (loss) per share to facilitate operating performance comparisons by isolating the effects of share-based compensation that vary from period to period and across our peer companies without any correlation to ongoing operating performance.

Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings (loss) per share have limitations as analytical tools. These measures are not measurements of our financial performance under GAAP and should not be considered in isolation or as alternatives to or substitutes for net income (loss), income (loss) from operations, earnings (loss) per share or any other performance measures determined in accordance with GAAP or as alternatives to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings (loss) per share should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Forward-Looking Statements

Certain statements made in this release are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. For example, all statements we make relating to our expected first quarter of fiscal 2023, our full year fiscal 2023 performance and our plans and objectives for future operations, growth or initiatives are forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Torrid’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements, including: changes in consumer spending and general economic conditions; including as a result of rising interest rates; inflationary pressures with respect to labor and raw materials and global supply chain constraints that could increase our expenses; our ability to identify and respond to new and changing product trends, customer preferences and other related factors; our dependence on a strong brand image; damage to our reputation arising from our use of social media, email and text messages; increased competition from other brands and retailers; our reliance on third parties to drive traffic to our website; the success of the shopping centers in which our stores are located; our ability to adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers; our dependence upon independent third parties for the manufacture of all of our merchandise; availability constraints and price volatility in the raw materials used to manufacture our products; interruptions of the flow of our merchandise from international manufacturers causing disruptions in our supply chain; our sourcing a significant amount of our products from China; shortages of inventory, delayed shipments to our e-Commerce customers and harm to our reputation due to difficulties or shut-down of our distribution facility (including as a result of COVID-19); our reliance upon independent third-party transportation providers for substantially all of our product shipments; our growth strategy; our failure to attract and retain employees that reflect our brand image, embody our culture and possess the appropriate skill set; our reliance on third-parties for the provision of certain services, including real estate management; our ability to successfully manage risks relating to the spread of COVID-19, including any adverse impacts on our supply chain, workforce, facilities, customer services and operations; our dependence upon key members of our executive management team; our reliance on information systems; system security risk issues that could disrupt our internal operations or information technology services; unauthorized disclosure of sensitive or confidential information, whether through a breach of our computer system or otherwise; our failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection; payment-related risks that could increase our operating costs or subject us to potential liability; claims made against us resulting in litigation; changes in laws and regulations applicable to our business; regulatory actions or recalls arising from issues with product safety; our inability to protect our trademarks or other intellectual property rights; our substantial indebtedness and lease obligations; restrictions imposed by our indebtedness on our current and future operations; changes in tax laws or regulations or in our operations that may impact our effective tax rate; the possibility that we may recognize impairments of long-lived assets; our failure to maintain adequate internal control over financial reporting; and the threat of war, terrorism or other catastrophes that could negatively impact our business.

The outcome of the events described in any of our forward-looking statements are also subject to risks, uncertainties and other factors described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2022 and in our other filings with the SEC. You should evaluate all forward-looking statements made in this communication in the context of these risks and uncertainties.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the effect of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect.

The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Reclassification of Certain Statements of Operations and Comprehensive Income (Loss) Items

In the fourth quarter of fiscal 2022, we made a voluntary change in our accounting policy regarding the classification of royalties, profit-sharing and marketing and promotional funds ("PLCC Funds") we receive pursuant to our private label credit card agreement. Historically, we recorded PLCC Funds as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Under the new policy, we record PLCC Funds in net sales in the consolidated statements of operations and comprehensive income (loss). This reclassification does not have any impact on income from operations, income (loss) before provision for income taxes, net income (loss) or earnings (loss) per share and there was no cumulative effect to stockholders’ deficit or net assets.

The recognition of PLCC Funds in net sales is preferable because it will enhance the comparability of our financial statements with those of many of our industry peers and provide greater transparency into performance metrics relevant to our industry by showing the gross impact of the funds received as net sales instead of as a reduction to selling, general and administrative expenses. The following tables show this change in presentation which has been retrospectively applied to all prior periods presented in this earnings release.

The following table shows the impact of this change in accounting policy for all previously reported fiscal quarters during fiscal years 2022 and 2021:

Non-GAAP Reconciliations

The following table provides a reconciliation of Net (loss) income to Adjusted EBITDA for the periods presented (dollars in thousands):

The following table provides a reconciliation of Net (loss) income to Adjusted net (loss) income for the periods presented (in thousands, except per share data):

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