NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Description of the Business
Corporate Structure
Torrid Holdings Inc. is a Delaware corporation formed on October 29, 2019 and capitalized on February 20, 2020. Sycamore Partners Management, L.P. ("Sycamore") owns a majority of the voting power of Torrid Holdings Inc.'s outstanding common stock. Torrid Parent Inc. is a Delaware corporation formed on June 4, 2019 and is a wholly owned subsidiary of Torrid Holdings Inc. Torrid Intermediate LLC, formerly known as Torrid Inc., is a Delaware limited liability company formed on June 18, 2019 and a wholly owned subsidiary of Torrid Parent Inc. Torrid LLC is a wholly owned subsidiary of Torrid Intermediate LLC. Substantially all of Torrid Holdings Inc.'s financial position, operations and cash flows are generated through its wholly owned indirect subsidiary, Torrid LLC.
Throughout these financial statements, the terms "Torrid," "we," "us," "our," the "Company" and similar references refer to Torrid Holdings Inc. and its consolidated subsidiaries.
Fiscal Year
Our fiscal year ends on the Saturday nearest to January 31 and each fiscal year is generally comprised of four 13-week quarters (although in years with 53 weeks, the fourth quarter is comprised of 14 weeks). Fiscal year 2023 is a 53-week year and fiscal year 2022 was a 52-week year. Fiscal years are identified according to the calendar year in which they begin. For example, references to "fiscal year 2023" or similar references refer to the fiscal year ending February 3, 2024. References to the first quarter of fiscal years 2023 and 2022 and to the three-month periods ended April 29, 2023 and April 30, 2022 refer to the 13-week periods then ended.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial information. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the three-month periods ended April 29, 2023 and April 30, 2022 are not necessarily indicative of the results that may be expected for any future interim periods, the fiscal year ending February 3, 2024, or for any future fiscal year.
The condensed consolidated balance sheet information at January 28, 2023 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements and related footnotes should be read in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended January 28, 2023. The unaudited condensed consolidated financial statements include Torrid and those of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Description of Business
We are a direct-to-consumer brand of apparel, intimates and accessories in North America aimed at fashionable women who are curvy and wear sizes 10 to 30. We generate revenues primarily through our e-Commerce platform www.torrid.com and our stores in the United States of America, Puerto Rico and Canada.
Segment Reporting
We have determined that we have one reportable segment, which includes the operation of our e-Commerce platform and stores. The single segment was identified based on how the Chief Operating Decision Maker, who we have determined to be our Chief Executive Officer, manages and evaluates performance and allocates resources. Revenues and long-lived assets related to our operations in Canada and Puerto Rico during the three-month periods ended April 29, 2023 and April 30, 2022, and as of the end of the same periods, were not material, and therefore are not reported separately from domestic revenues and long-lived assets.
Store Pre-Opening Costs
Costs incurred in connection with the opening of new stores, store remodels or relocations are expensed as incurred in selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income. We incurred $0.3 million and $0.2 million of pre-opening costs during the three-month periods ended April 29, 2023 and April 30, 2022, respectively.
Change in Accounting Principle
In the fourth quarter of fiscal year 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 the Credit Card Agreement (as defined below). Historically, we recorded PLCC Funds as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income. Under the new policy, we record PLCC Funds in net sales in the consolidated statements of operations and comprehensive income. This reclassification does not have any impact on income from operations, income before provision for income taxes, net income or earnings per share and there was no cumulative effect to stockholders’ deficit or net assets. This reclassification has been retrospectively applied to all prior periods presented.
The recognition of PLCC Funds in net sales is preferable because it enhances 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 impact of this change in accounting principle is reflected in the table below (in thousands):
| | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, 2022 |
| As Previously Reported | | Change in Accounting Principle | | As Adjusted |
Net sales | $ | 328,409 | | | $ | 4,784 | | | $ | 333,193 | |
Cost of goods sold | 203,263 | | | — | | | 203,263 | |
Gross profit | 125,146 | | | 4,784 | | | 129,930 | |
Selling, general and administrative expenses | 67,431 | | | 4,784 | | | 72,215 | |
Marketing expenses | 17,974 | | | — | | | 17,974 | |
Income from operations | $ | 39,741 | | | $ | — | | | $ | 39,741 | |
Note 2. Accounting Standards
Recently Adopted Accounting Standards during the Three-Month Period Ended April 29, 2023
We did not adopt any new accounting standards during the three-month period ended April 29, 2023.
Accounting Pronouncements Not Yet Adopted
We have considered all recent accounting pronouncements and have concluded that there are no recent accounting pronouncements not yet adopted that are applicable to us, based on current information.
Note 3. Inventory
Our inventory is comprised solely of finished goods and is valued at the lower of moving average cost or net realizable value. We make certain assumptions regarding net realizable value in order to assess whether our inventory is recorded properly at the lower of cost or net realizable value. These assumptions are based on historical average selling price experience, current selling price information and estimated future selling price information. Physical inventory counts are conducted at least once during the year to determine actual inventory on hand and shrinkage. We accrue our estimated inventory shrinkage in our stores for the period between the last physical count and current balance sheet date.
Note 4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
| | | | | | | | | | | |
| April 29, 2023 | | January 28, 2023 |
Prepaid and other information technology expenses | 12,960 | | | 9,048 | |
Prepaid advertising | 1,067 | | | 1,068 | |
Prepaid casualty insurance | 1,347 | | | 2,557 | |
Other | 6,503 | | | 7,377 | |
Prepaid expenses and other current assets | $ | 21,877 | | | $ | 20,050 | |
Note 5. Property and Equipment
Property and equipment are summarized as follows (in thousands):
| | | | | | | | | | | |
| April 29, 2023 | | January 28, 2023 |
Property and equipment, at cost | | | |
Leasehold improvements | $ | 178,009 | | | $ | 176,222 | |
Furniture, fixtures and equipment | 115,250 | | | 115,618 | |
Software and licenses | 14,150 | | | 14,140 | |
Construction-in-progress | 3,165 | | | 2,956 | |
| 310,574 | | | 308,936 | |
Less: Accumulated depreciation and amortization | (202,430) | | | (195,323) | |
Property and equipment, net | $ | 108,144 | | | $ | 113,613 | |
We recorded depreciation expense related to our property and equipment in the amounts of $9.2 million and $9.3 million during the three-month periods ended April 29, 2023 and April 30, 2022, respectively.
We group and evaluate long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. During the three-month periods ended April 29, 2023 and April 30, 2022, we did not recognize any impairment charges.
Note 6. Implementation Costs Incurred in Cloud Computing Arrangements that are Service Contracts
Our cloud computing arrangements that are service contracts primarily consist of arrangements with third party vendors for our internal use of their software applications that they host. We defer implementation costs incurred in relation to such arrangements, including costs for software application coding, configuration, integration and customization, while associated process reengineering, training, maintenance and data conversion costs are expensed. Subsequent implementation costs are deferred only to the extent that they constitute major enhancements. The short-term portion of deferred implementation costs are included in prepaid expenses and other current assets in the condensed consolidated balance sheets, while the long-term portion of deferred costs are included in deposits and other noncurrent assets. Amortized implementation costs incurred in cloud computing arrangements that are service contracts are recognized in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.
Deferred implementation costs incurred in cloud computing arrangements that are service contracts are summarized as follows (in thousands):
| | | | | | | | | | | |
| April 29, 2023 | | January 28, 2023 |
Internal use of third party hosted software, gross | $ | 19,340 | | | $ | 16,612 | |
Less: Accumulated amortization | (7,733) | | | (6,772) | |
Internal use of third party hosted software, net | $ | 11,607 | | | $ | 9,840 | |
During the three-month periods ended April 29, 2023 and April 30, 2022, we amortized approximately $1.0 million and $0.6 million, respectively, of implementation costs incurred in cloud computing arrangements that are service contracts.
Note 7. Accrued and Other Current Liabilities
Accrued and other current liabilities consist of the following (in thousands):
| | | | | | | | | | | |
| April 29, 2023 | | January 28, 2023 |
Accrued inventory-in-transit | $ | 14,080 | | | $ | 20,878 | |
Accrued payroll and related expenses | 13,299 | | | 20,232 | |
Accrued loyalty program | 12,696 | | | 13,389 | |
Gift cards | 10,360 | | | 12,300 | |
Accrued sales return allowance | 7,026 | | | 6,562 | |
Accrued freight | 6,237 | | | 5,840 | |
Accrued marketing | 4,098 | | | 4,103 | |
Accrued sales and use tax | 3,599 | | | 3,666 | |
Accrued self-insurance liabilities | 2,989 | | | 2,853 | |
Deferred revenue | 1,683 | | | 1,471 | |
Accrued purchases of property and equipment | 1,255 | | | 2,825 | |
Accrued lease costs | 2,958 | | | 3,593 | |
Term loan interest payable | 189 | | | 188 | |
Other | 10,159 | | | 10,947 | |
Accrued and other current liabilities | $ | 90,628 | | | $ | 108,847 | |
Note 8. Leases
Our lease costs reflected in the tables below include minimum base rents, common area maintenance charges and heating, ventilation and air conditioning charges. We recognize such lease costs in the applicable expense category in either cost of goods sold, or selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.
Our lease costs during the three-month periods ended April 29, 2023 and April 30, 2022 consist of the following (in thousands):
| | | | | | | | | | | |
| Three Months Ended |
| April 29, 2023 | | April 30, 2022 |
Operating (fixed) lease cost | $ | 13,651 | | | $ | 12,785 | |
Short-term lease cost | 28 | | | 53 | |
Variable lease cost | 5,142 | | | 3,344 | |
Total lease cost | $ | 18,821 | | $ | 16,182 | |
Other supplementary information related to our leases is reflected in the table below (in thousands except lease term and discount rate data):
| | | | | | | | | | | |
| Three Months Ended |
| April 29, 2023 | | April 30, 2022 |
Cash paid for amounts included in the measurement of lease liabilities: | | | |
Operating cash flows for operating leases | $ | 15,582 | | | $ | 14,458 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 4,364 | | | $ | 4,342 | |
Decrease in right-of-use assets resulting from operating lease modifications or remeasurements | $ | 2,491 | | | $ | 1,450 | |
Weighted average remaining lease term - operating leases | 6 years | | 6 years |
Weighted average discount rate - operating leases | 6 | % | | 6 | % |
Note 9. Revenue Recognition
We recognize revenue when our performance obligations under the terms of a contract or an implied arrangement with a customer are satisfied, which is when the merchandise is transferred to the customer and the customer obtains control of it. The amount of revenue we recognize reflects the total consideration we expect to receive for the merchandise, which is the transaction price.
Our revenue, disaggregated by product category, consists of the following (in thousands):
| | | | | | | | | | | |
| Three Months Ended |
| April 29, 2023 | | April 30, 2022 |
Apparel | $ | 258,913 | | | $ | 291,653 | |
Non-apparel | 26,848 | | | 36,756 | |
Other | 8,093 | | | 4,784 | |
Total net sales | $ | 293,854 | | | $ | 333,193 | |
Amounts within Apparel include revenues earned from the sale of tops, bottoms, dresses, intimates, sleep wear, swim wear and outerwear. Amounts within Non-apparel include revenues earned from the sale of accessories, footwear and beauty. Amounts within Other represent PLCC Funds received.
We have an agreement with a third party, which is amended from time to time, to provide customers with private label credit cards ("Credit Card Agreement"). Each private label credit card ("PLCC") bears the logo of the Torrid brand and can only be used at our store locations and on www.torrid.com. A third-party financing company is the sole owner of the accounts issued under the PLCC program and absorbs the losses associated with non-payment by the PLCC holders and a portion of any fraudulent usage of the accounts. Pursuant to the Credit Card Agreement, we receive royalties, profit-sharing and marketing and promotional funds from the third-party financing company based on usage of the PLCCs. These PLCC Funds are recorded as a component of net sales in the condensed consolidated statements of operations and comprehensive income.
We recognize a contract liability when we receive consideration from a customer before our performance obligations under the terms of a contract or an implied arrangement with the customer are satisfied. During the three-month period ended April 29, 2023, we recognized revenue of approximately $6.8 million and $3.2 million related to our accrued loyalty program and gift cards, respectively, that existed at the beginning of fiscal year 2023. During the three-month period ended April 30, 2022, we recognized revenue of approximately $7.8 million and $3.6 million related to our accrued loyalty program and gift cards, respectively, that existed at the beginning of fiscal year 2022.
Note 10. Loyalty Program
We operate our loyalty program, Torrid Rewards, in all our stores and on www.torrid.com. Under this program, customers accumulate points based on purchase activity and qualifying non-purchase activity. Upon reaching a certain point level, customers can earn awards that may only be redeemed for merchandise. Unredeemed points typically expire after 13 months without additional purchase and qualifying non-purchase activity and unredeemed awards typically expire 45 days after issuance. We use historical redemption rates to estimate the value of future award redemptions and we recognize the estimated value of these future awards as a reduction of revenue in the condensed consolidated statements of operations and comprehensive income in the period the points are earned by the customer. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, we had $12.7 million and $13.4 million, respectively, in deferred revenue related to our loyalty program included in accrued and other current liabilities in the condensed consolidated balance sheets. During the three-month period ended April 29, 2023, we recorded $0.7 million as a benefit to net sales. During the three-month period ended April 30, 2022 we recorded $0.1 million as a reduction of net sales. Actual results may differ from our estimates, resulting in changes to net sales.
Note 11. Related Party Transactions
Services Agreements with Hot Topic
Hot Topic Inc. ("Hot Topic") is an entity indirectly controlled by affiliates of Sycamore. From June 2, 2017 until its termination on March 21, 2019, we had a services agreement ("Third Party Services Agreement") with Hot Topic, pursuant to which Hot Topic provided us (or caused applicable third parties to provide) certain services, including information technology, distribution and logistics management, real estate leasing and construction management and other services as may have been
specified. On March 21, 2019, we entered into an amended and restated services agreement ("Amended and Restated Services Agreement") with Hot Topic under which Hot Topic provides us (or causes applicable third parties to provide) substantially similar services to those provided under the Third Party Services Agreement. The term of the Amended and Restated Services Agreement is three years, unless we or Hot Topic extend the agreement, or we terminate the agreement (or certain services under the agreement). We may terminate the various services upon written notice. Rates and costs related to the services provided under the Amended and Restated Services Agreement may change with approval from both parties. Each month, we are committed to pay Hot Topic for these services and reimburse Hot Topic for certain costs it incurs in the course of providing these services. We record payments made to Hot Topic under these service agreements in the applicable expense category in either cost of goods sold, or selling, general and administrative expenses. On August 1, 2019, we entered into a services agreement ("Reverse Services Agreement") with Hot Topic, under which Torrid provided Hot Topic with certain information technology services. The term of the Reverse Services Agreement was three years, unless we or Hot Topic extended the agreement, or Hot Topic terminated the agreement. Torrid provided Hot Topic with the specified information technology services at no cost for the first three years of the Reverse Services Agreement, however Hot Topic bore certain capital and operating expenses that it incurred. Costs incurred in connection with providing the specified information technology services to Hot Topic were expensed as incurred in our condensed consolidated statements of operations and comprehensive income. During the three-month period ended April 30, 2022, we incurred costs of $0.9 million in connection with providing these information technology services to Hot Topic. In connection with the Reverse Services Agreement, we entered into an amendment to the Amended and Restated Services Agreement ("Amendment to Amended and Restated Services Agreement") with Hot Topic on August 1, 2019, pursuant to which sections pertaining to Hot Topic's provision of information technology services to Torrid were removed.
During the three-month periods ended April 29, 2023 and April 30, 2022, Hot Topic charged us $0.6 million and $0.6 million, respectively, for various services under the applicable services agreements, all of which were recorded as a component of selling, general and administrative expenses. As of the end of the first quarter of fiscal year 2023, we owed $0.2 million to Hot Topic for these services and as of the end of fiscal year 2022, we owed $0.2 million to Hot Topic for these services.
On July 31, 2022, we entered into a first amendment to the Reverse Services Agreement (“Amended Reverse Services Agreement”) with Hot Topic, under which Torrid provided Hot Topic with certain information technology services for a fixed fee. The term of the Amended Reverse Services Agreement was five months while both parties negotiated a longer-term amendment to the Reverse Services Agreement with modified terms and conditions. On September 30, 2022, we entered into a second amendment to the Reverse Services Agreement (“Second Amended Reverse Services Agreement”) with Hot Topic, under which Torrid provides Hot Topic with certain information technology services for a fixed fee. The term of the Second Amended Reverse Services Agreement was two months while both parties negotiated a longer-term amendment to the Reverse Services Agreement with modified terms and conditions. Effective December 1, 2022, we entered into a third amendment to the Reverse Services Agreement (“Third Amended Reverse Services Agreement”) with Hot Topic, under which Torrid provides Hot Topic with certain information technology services for a fixed fee. The term of the Third Amended Reverse Services Agreement ends on May 4, 2024, unless we and Hot Topic mutually agree to extend the agreement, or we or Hot Topic terminate the agreement (or certain services under the agreement), upon written notice. During the three-month period ended April 29, 2023, we charged Hot Topic $0.4 million for these services. As of the end of the first quarter of fiscal year 2023, and as of the end of fiscal year 2022, Hot Topic owed us $0.1 million and $0.1 million, respectively for these services.
Hot Topic incurs certain direct expenses on our behalf, such as payments to our non-merchandise vendors and each month, we pay Hot Topic for these pass-through expenses. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, the net amount we owed Hot Topic for these expenses was $0.6 million and $1.1 million, respectively, which is included in due to related parties in our condensed consolidated balance sheets.
Sponsor Advisory Services Agreement
On May 1, 2015, we entered into an advisory services agreement with Sycamore, pursuant to which Sycamore agreed to provide strategic planning and other related services to us. We are obligated to reimburse Sycamore for its expenses incurred in connection with providing such advisory services to us. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, there were no amounts due, and during the three-month periods ended April 29, 2023 and April 30, 2022, no amounts were paid under this agreement.
From time to time, we reimburse Sycamore for certain management expenses it pays on our behalf. During the three-month period ended April 29, 2023, the amount paid to Sycamore for these expenses was not material. During the period ended April 30, 2022, we did not make any reimbursements to Sycamore. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, there was no amount due.
Other Related Party Transactions
MGF Sourcing US, LLC, an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During the three-month periods ended April 29, 2023 and April 30, 2022, cost of goods sold included $15.3 million and $17.0 million, respectively, related to the sale of merchandise purchased from this supplier. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, the net amounts we owed MGF for these purchases were $8.9 million and $11.6 million, respectively. This liability is included in due to related parties in our condensed consolidated balance sheets.
HU Merchandising, LLC, a subsidiary of Hot Topic, is one of our suppliers. During the three-month period ended April 29, 2023, the cost of goods sold related to the sale of merchandise purchased from this supplier was not material, and during the three-month period ended April 30, 2022, cost of goods sold included $0.1 million related to the sale of merchandise purchased from this supplier. As of the end of the first quarter of fiscal year 2023, the amount due to HU Merchandising, LLC was $0.2 million and as of the end of fiscal year 2022, there was no amount due. This liability is included in due to related parties in our condensed consolidated balance sheets.
Staples, Inc., an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During the three-month periods ended April 29, 2023 and April 30, 2022, purchases from this supplier were not material. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, the amounts due to Staples, Inc. were not material.
Note 12. Debt Financing Arrangements
Our debt financing arrangements consist of the following (in thousands):
| | | | | | | | | | | |
| April 29, 2023 | | January 28, 2023 |
Existing ABL Facility, as amended | $ | 11,950 | | | $ | 8,380 | |
Term loan | | | |
New Term Loan Credit Agreement | 323,750 | | | 328,125 | |
Less: current portion of unamortized original issue discount and debt financing costs | (1,356) | | | (1,356) | |
Less: noncurrent portion of unamortized original issue discount and debt financing costs | (5,589) | | | (5,928) | |
Total term loan outstanding, net of unamortized original issue discount and debt financing costs | 316,805 | | | 320,841 | |
Less: current portion of term loan, net of unamortized original issue discount and debt financing costs | (16,144) | | | (16,144) | |
Total term loan, net of current portion and unamortized original issue discount and debt financing costs | $ | 300,661 | | | $ | 304,697 | |
Fixed mandatory principal repayments due on the outstanding term loan are as follows as of the end of the first quarter of fiscal year 2023 (in thousands):
| | | | | |
2023 | 13,125 | |
2024 | 17,500 | |
2025 | 17,500 | |
2026 | 17,500 | |
2027 | 17,500 | |
2028 | 240,625 | |
| $ | 323,750 | |
New Term Loan Credit Agreement
On June 14, 2021, we entered into a term loan credit agreement ("New Term Loan Credit Agreement") among Bank of America, N.A., as agent, and the lenders party thereto. On May 24, 2023, subsequent to the end of the first quarter of the fiscal year 2023, we entered into an amendment to the New Term Loan Credit Agreement (the "1st Amendment to the New Term Loan Credit Agreement"). The 1st Amendment to the New Term Loan Credit Agreement replaced the London Interbank Offered Rate ("LIBOR") interest rate benchmark with the Secured Overnight Financing Rate ("SOFR") benchmark. All other material terms of the New Term Loan Credit Agreement remained substantially the same after giving effect to the 1st
Amendment to the New Term Loan Credit Agreement. In March 2020 and January 2021, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Updates ("ASU") 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") and 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"), respectively. ASU 2020-04 and ASU 2021-01 include practical expedients which provide entities the option to account for qualifying amendments as if the modification was not substantial in accordance with Accounting Standards Codification ("ASC") 470, Debt. We elected this option, accordingly, the 1st Amendment to the New Term Loan Credit Agreement did not have a material impact on our condensed consolidated financial statements.
The New Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million, which is recorded net of an original issue discount ("OID") of $3.5 million and has a maturity date of June 14, 2028. In connection with the New Term Loan Credit Agreement, we paid financing costs of approximately $6.0 million.
The elected interest rate on April 29, 2023 was approximately 11%.
As of the end of the first quarter of fiscal year 2023, we were compliant with our debt covenants under the New Term Loan Credit Agreement.
As of April 29, 2023, the fair value of the New Term Loan Credit Agreement was approximately $286.5 million. As of the end of fiscal year 2022, the fair value of the New Term Loan Credit Agreement was approximately $267.4 million. The fair value of the New Term Loan Credit Agreement is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement (as defined in "Note 19—Fair Value Measurements").
As of the end of the first quarter of fiscal year 2023, total borrowings, net of OID and financing costs, of $316.8 million remain outstanding under the New Term Loan Credit Agreement. During the three-month periods ended April 29, 2023 and April 30, 2022, we recognized $8.6 million and $5.5 million, respectively, of interest expense related to the New Term Loan Credit Agreement. During the three-month periods ended April 29, 2023 and April 30, 2022, we recognized $0.3 million and $0.3 million, respectively, of OID and financing costs related to the New Term Loan Credit Agreement. The OID and financing costs are amortized over the New Term Loan Credit Agreement's seven-year term and are reflected as a direct deduction of the face amount of the term loan in our condensed consolidated balance sheets. We recognize interest payments, together with amortization of the OID and financing costs, in interest expense in our condensed consolidated statements of operations and comprehensive income.
Senior Secured Asset-Based Revolving Credit Facility
In May 2015, we entered into a credit agreement for a senior secured asset-based revolving credit facility ("Original ABL Facility") of $50.0 million (subject to a borrowing base), with Bank of America, N.A. On October 23, 2017, we entered into an amended and restated credit agreement ("Existing ABL Facility"), which amended our Original ABL Facility. The Existing ABL Facility increased the aggregate commitments available under the Original ABL Facility from $50.0 million to $100.0 million (subject to a borrowing base); and increased our right to request additional commitments from up to $30.0 million to up to $30.0 million plus the aggregate principal amount of any permanent principal reductions we may take (subject to customary conditions precedent). On June 14, 2019, we entered into an amendment to the Existing ABL Facility (the "1st Amendment"). The 1st Amendment decreased the aggregate commitments available under the Existing ABL Facility from $100.0 million to $70.0 million (subject to a borrowing base), permitted indebtedness incurred pursuant to the Term Loan Credit Agreement and made certain other modifications. On September 4, 2019, we entered into another amendment to the Existing ABL Facility (the "2nd Amendment"). The 2nd Amendment permitted parent company financial statements to be used to satisfy reporting requirements and made certain other modifications. On June 14, 2021, in conjunction with the New Term Loan Credit Agreement, we entered into a third amendment to the Existing ABL Facility (the "3rd Amendment"), which amended our Existing ABL Facility, as amended. The 3rd Amendment increased the aggregate commitments available under the Existing ABL facility, as amended, from $70.0 million to $150.0 million (subject to a borrowing base) and extended the date upon which the principal amount outstanding of the loans would be due and payable in full from October 23, 2022 to June 14, 2026. On April 21, 2023, we entered into a fourth amendment to the Existing ABL Facility (the "4th Amendment"). The 4th Amendment replaced the LIBOR interest rate benchmark with the SOFR benchmark. All other material terms of the Existing ABL Facility, as amended, remained substantially the same after giving effect to the 4th Amendment. We elected to apply the practical expedients included in ASU 2020-04 and 2021-01, accordingly, the 4th Amendment did not have a material impact on our condensed consolidated financial statements.
As of the end of the first quarter of fiscal year 2023, the applicable interest rate for borrowings under the Existing ABL Facility, as amended, was approximately 8% per annum.
As of the end of the first quarter of fiscal year 2023, we were compliant with our debt covenants under the Existing ABL Facility, as amended.
As of the end of the first quarter of fiscal year 2023, the maximum restricted payment utilizing the Existing ABL Facility, as amended, that our subsidiaries could make from its net assets was $127.5 million.
We consider the carrying amounts of the Existing ABL Facility, as amended, to approximate fair value because of the variable interest rate of this facility, a Level 2 measurement (as defined in "Note 19—Fair Value Measurements").
Availability under the Existing ABL Facility, as amended, as of the end of the first quarter of fiscal year 2023 was $130.7 million, which reflects borrowings of $12.0 million. Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2022 was $134.2 million, which reflects borrowings of $8.4 million. Standby letters of credit issued and outstanding were $7.4 million as of the end of the first quarter of fiscal year 2023 and $7.4 million as of the end of fiscal year 2022. During the third quarter of fiscal year 2017, we incurred $0.5 million of financing costs for the Existing ABL Facility, which were reduced in fiscal year 2019 by $0.1 million written off to account for the impact of our entry into the 1st Amendment. During the second quarter of fiscal year 2021, we incurred an additional $0.7 million of financing costs in connection with our entry into the 3rd Amendment. These financing costs, together with the unamortized financing costs of $0.1 million associated with the Original ABL Facility, are amortized over the five-year term of the Existing ABL Facility, as amended, and are reflected in prepaid expenses and other current assets and deposits and other noncurrent assets in our condensed consolidated balance sheets. During the three-month periods ended April 29, 2023 and April 30, 2022, amortization of financing costs for the Existing ABL Facility, as amended, was not material. During the three-month periods ended April 29, 2023 and April 30, 2022, interest payments were $0.5 million and $0.4 million, respectively. We recognize amortization of financing costs and interest payments for the revolving credit facility in interest expense in our condensed consolidated statements of operations and comprehensive income.
Note 13. Income Taxes
Effective Tax Rate
During the three-month periods ended April 29, 2023 and April 30, 2022, the provision for income taxes were $4.7 million and $9.4 million, respectively. The effective tax rates for the three-month periods ended April 29, 2023 and April 30, 2022 were 28.6% and 28.1%, respectively. The increase in the effective tax rate for the three months ended April 29, 2023 as compared to the three months ended April 30, 2022 was primarily due to an increase in the amount of non-deductible compensation for covered employees relative to income before provision for income taxes for the three months ended April 29, 2023.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was enacted to reduce inflation and promote clean energy in the United States. Among other things, the IR Act introduced a 15% alternative minimum tax based on the adjusted financial statement income of corporations or their predecessors with a three-year taxable year average annual adjusted financial statement income in excess of $1 billion and imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. In addition, the current administration has announced a proposal to increase such excise tax to 4%. The IR Act also includes provisions intended to mitigate climate change by, among others, providing tax credit incentives for reductions in greenhouse gas emissions. We have considered the applicable IR Act tax law changes in our tax provision for the three-month period ended April 29, 2023, and continue to evaluate the impact of these tax law changes on future periods.
Uncertain Tax Positions
The amount of income taxes we pay is subject to ongoing audits by taxing authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. As of the end of the first quarter of fiscal year 2023, the total liability for income tax associated with unrecognized tax benefits, including interest and penalties, was $3.8 million ($3.3 million, net of federal benefit). As of the end of fiscal year 2022, the total liability for income tax associated with unrecognized tax benefits, including interest and penalties, was $3.8 million ($3.3 million, net of federal benefit). Our effective tax rate will be affected by any portion of this liability we may recognize.
We believe that it is reasonably possible that $1.7 million ($1.6 million net of federal benefit) of our liability for unrecognized tax benefits, of which the associated interest and penalties are not material, may be recognized in the next 12 months due to the expiration of statutes of limitations.
Note 14. Share-Based Compensation
Our share-based compensation expense, by award type, consists of the following (in thousands):
| | | | | | | | | | | |
| Three Months Ended |
| April 29, 2023 | | April 30, 2022 |
Restricted stock units | $ | 640 | | | $ | 501 | |
Restricted stock awards | 945 | | | 1,677 | |
Performance stock units | 281 | | | — | |
Stock options | 435 | | | 194 | |
Restricted cash units | 111 | | | — | |
Employee stock purchase plan | 76 | | | 108 | |
Share-based compensation before income taxes | 2,488 | | | 2,480 | |
Income tax benefit | (308) | | | (288) | |
Net share-based compensation expense | $ | 2,180 | | | $ | 2,192 | |
On June 22, 2021, the board of directors ("Board") adopted the Torrid Holdings Inc. 2021 Long-Term Incentive Plan (the "2021 LTIP"), for employees, consultants and directors. The 2021 LTIP provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs") including performance-based restricted stock units ("PSUs"), stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of service providers, with those of our shareholders. As of the end of the first quarter of fiscal year 2023, 10,687,500 shares were authorized for issuance under the 2021 LTIP.
On June 22, 2021, the Board adopted the Torrid Holdings Inc. 2021 Employee Stock Purchase Plan (the "ESPP"), intended to qualify under Section 423 of the U.S. Internal Revenue Code of 1986, as amended, in order to provide all of our eligible employees with a further incentive towards ensuring our success and accomplishing our corporate goals. The ESPP allows eligible employees to contribute up to 15% of their base earnings towards purchases of common stock, subject to an annual maximum. The purchase price is 85% of the lower of (i) the fair market value of the stock on the date of enrollment and (ii) the fair market value of the stock on the last day of the related purchase period.
RSUs
RSUs are awarded to certain employees, non-employee directors and consultants and entitle the grantee to receive shares of common stock at the end of a vesting period, subject to the employee's continued employment or service as a director or consultant. In general, RSUs vest in equal installments each year over 4 years.
Pursuant to the agreements we entered into with certain members of our management, upon completion of our initial public offering ("IPO") in July 2021, such employees received one-time grants of RSUs ("IPO Awards"). 50% of the IPO Awards were fully vested on the date of grant, and the remaining 50% vest in equal installments on the first, second and third anniversaries of the date of our IPO. These members of our management must remain employed by us through each vesting date in order to vest in the applicable portions of their IPO Awards.
PSUs are awarded to certain employees, non-employee directors and consultants and entitle the grantee to receive shares of common stock based on the achievement of various company performance targets and market conditions. In general, PSUs vest in equal installments over a three year period subject to the achievement of the performance targets or market conditions.
RSU activity, including IPO Awards and PSUs, under the 2021 LTIP consists of the following (in thousands except per share amounts):
| | | | | | | | | | | |
| Shares | | Weighted average grant date fair value per share |
Nonvested, January 28, 2023 | 1,386 | | | $ | 6.55 | |
Granted | 977 | | | $ | 2.98 | |
Vested | (42) | | | $ | 6.22 | |
Forfeited | (5) | | | $ | 20.41 | |
Nonvested, April 29, 2023 | 2,316 | | | $ | 5.02 | |
As of the end of the first quarter of fiscal year 2023, unrecognized compensation expense related to unvested RSUs, including PSUs, was $9.1 million, which is expected to be recognized over a weighted average period of approximately 2.8 years.
The weighted average grant date fair value of PSUs granted during the three months ended April 29, 2023 was $1.66 per share and was estimated at the grant date using a Monte Carlo simulation following a Geometric Brownian Motion with the following weighted average assumptions:
| | | | | |
Dividend yield | — | % |
Expected volatility(1) | 68.4 | % |
Risk-free interest rate(2) | 3.75 | % |
Expected term(3) | 3.00 years |
Grant date fair value per share | $ | 1.66 | |
(1) The expected volatility is estimated based on the historical volatility of a select peer group of similar publicly traded companies for a term that is consistent with the expected term of the PSUs.
(2) The risk-free interest rates are based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected term of the PSUs.
(3) The expected term of the PSUs represents the time period from the grant date and the full vesting date.
Restricted Stock Awards
Restricted stock awards are awarded to certain employees, non-employee directors and consultants, subject to the employee's continued employment or service as a director or consultant. Restricted stock awards vest over periods ranging from 2 to 4 years, subject to the employee's continued employment or service as an employee, non-employee director or consultant, as applicable, on each vesting date.
Restricted stock award activity under the 2021 LTIP consists of the following (in thousands except per share amounts):
| | | | | | | | | | | |
| Shares | | Weighted average grant date fair value per share |
Nonvested, January 28, 2023 | 211 | | | $ | 27.00 | |
Granted | — | | | |
Vested | (44) | | | $ | 27.00 | |
Forfeited | (104) | | | |
Nonvested, April 29, 2023 | 63 | | | $ | 27.00 | |
As of the end of the first quarter of fiscal year 2023, unrecognized compensation expense related to unvested restricted stock awards was $1.2 million, which is expected to be recognized over a weighted average period of approximately 0.5 years.
Stock Options
Stock options generally vest in equal installments each year over 4 years and generally expire 10 years from the grant date.
Stock option activity under the 2021 LTIP consists of the following (in thousands except per share and contractual life amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted average exercise price per share | | Weighted average remaining contractual life (years) | | Aggregate intrinsic value |
Outstanding, January 28, 2023 | 1,444 | | | $ | 7.38 | | | 9.4 | | $ | 115 | |
Granted | 1,370 | | | $ | 3.26 | | | | | |
Exercised | — | | | | | | | |
Forfeited | (6) | | | $ | 14.52 | | | | | |
Outstanding, April 29, 2023 | 2,808 | | | $ | 5.35 | | | 9.5 | | $ | 319 | |
Exercisable, April 29, 2023 | 117 | | | $ | 11.74 | | | 8.5 | | $ | — | |
The weighted average grant date fair value of stock option awards granted during the three months ended April 29, 2023 was $1.95 per option and was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:
| | | | | |
Dividend yield | — | % |
Expected volatility(1) | 60.4 | % |
Risk-free interest rate(2) | 3.60 | % |
Expected term(3) | 6.25 years |
Grant date fair value per share | $ | 1.95 | |
(1) The expected volatility is estimated based on the historical volatility of a select peer group of similar publicly traded companies for a term that is consistent with the expected term of the stock options.
(2) The risk-free interest rates are based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected term of the stock options.
(3) The expected term of the stock options represents the estimated period of time until exercise and is calculated using the simplified method.
As of the end of the first quarter of fiscal year 2023, unrecognized compensation expense related to unvested stock options was $7.0 million, which is expected to be recognized over a weighted average period of approximately 3.6 years.
RCUs
Restricted cash units ("RCUs") are awarded to certain employees, non-employee directors and consultants and
represent the right to receive a cash payment at the end of a vesting period, subject to the employee's continued employment or service as a director or consultant. In general, RCUs vest in equal installments each year over 4 years. RCUs are cash-settled with the value of each vested RCU equal to the lower of the closing price per share of our common stock on the vesting date or a specified per share price cap. We determined that RCUs are in-substance liabilities accounted for as liability instruments in accordance with ASC 718, Compensation—Stock Compensation, due to this cash settlement feature. RCUs are remeasured based on the closing price per share of our common stock at the end of each reporting period. The liability associated with the RCUs is included in accrued and other current liabilities in the condensed consolidated balance sheet.
Note 15. Commitments and Contingencies
Litigation
In November 2022, a class action complaint was filed against us in the U.S. District Court for the Central District of California, captioned Sandra Waswick v. Torrid Holdings Inc., et al. An amended complaint was filed in May 2023.
The amended complaint alleges that certain statements in our registration statement on Form S-1 related to our IPO and in
subsequent SEC filings and earnings calls were allegedly false and misleading. We believe that these allegations are without merit and intend to vigorously defend ourselves against these claims. We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.
From time to time, we are involved in other matters of litigation that arise in the ordinary course of business. Though significant litigation or awards against us could seriously harm our business and financial results, we do not at this time expect any of our pending matters of litigation to have a material adverse effect on our overall financial condition.
Indemnities, Commitments and Guarantees
During the ordinary course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include those given to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to our board of directors and officers to the maximum extent permitted. Commitments include those given to various merchandise vendors and suppliers. From time to time, we have issued guarantees in the form of standby letters of credit as security for workers' compensation claims (our letters of credit are discussed in more detail in "Note 12—Debt Financing Arrangements"). The durations of these indemnities, commitments and guarantees vary. Some of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying condensed consolidated financial statements as no demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our condensed consolidated financial statements.
Note 16. Stockholders' Deficit
Torrid is authorized to issue 1.0 billion shares of common stock at $0.01 par value, and 5.0 million shares of preferred stock at $0.01 par value. Torrid had 103,827,701 shares of common stock and no shares of preferred stock issued and outstanding as of April 29, 2023.
Note 17. Share Repurchases
On December 6, 2021, the Board authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding common stock. Repurchases may be made from time to time, depending upon a variety of factors, including share price, corporate and regulatory requirements, and other market and business conditions, as determined by us. We may purchase shares of our common stock in the open market at current market prices at the time of purchase, in privately negotiated transactions, or by other means. The authorization does not, however, obligate us to acquire any particular amount of shares, and the share repurchase program may be suspended or terminated at any time at our discretion. As of April 29, 2023, we had approximately $44.9 million remaining under the share repurchase program.
Share repurchase activity consists of the following (in thousands, except share and per share amounts):
| | | | | | | | | | | |
| Three Months Ended |
| April 29, 2023 | | April 30, 2022 |
Number of shares repurchased | — | | | 2,918,556 | |
Total cost | $ | — | | | $ | 22,865 | |
Average per share cost including commissions | | | $ | 7.83 | |
We have elected to retire shares repurchased to date. Shares retired become part of the pool of authorized but unissued shares. We have elected to record the purchase price of the retired shares in excess of par value, including transaction costs, directly as an increase in accumulated deficit.
Note 18. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is applicable only in periods of net income and is computed by dividing net income by the weighted average number of common shares outstanding for the period, inclusive of potentially dilutive common share equivalents outstanding for the period. Periods of net loss require the diluted computation to be the same as the basic computation. During the three-month period ended April 29, 2023, there were approximately 0.2 million potentially dilutive common share equivalents outstanding that were included in the computation of diluted earnings per share. During the three-month period ended April 29, 2023, there were approximately 1.0 million restricted stock awards and RSUs, including PSUs, and approximately 2.0 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive or were PSUs with performance conditions that had not yet been
achieved. During the three-month period ended April 30, 2022, there were approximately 17.0 thousand potentially dilutive common share equivalents outstanding that were included in the computation of diluted earnings per share. During the three-month period ended April 30, 2022, there were approximately 0.8 million restricted stock awards and RSUs, including PSUs, and approximately 0.5 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive or were PSUs with performance conditions that had not yet been achieved.
Note 19. Fair Value Measurements
We carry certain of our assets and liabilities at fair value in accordance with GAAP. 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 us 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 asset or liability 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 our estimates and assumptions that market participants would use in pricing the asset or liability.
Financial assets and liabilities measured at fair value on a recurring basis as of the end of the first quarter of fiscal year 2023 consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| April 29, 2023 | | Quoted Prices in Active Markets for Identical Items (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Money market funds (cash equivalent) | $ | 32 | | | $ | 32 | | | $ | — | | | $ | — | |
Total assets | $ | 32 | | | $ | 32 | | | $ | — | | | $ | — | |
Liabilities: | | | | | | | |
Deferred compensation plan liability (noncurrent) | $ | 4,541 | | | $ | — | | | $ | 4,541 | | | $ | — | |
Total liabilities | $ | 4,541 | | | $ | — | | | $ | 4,541 | | | $ | — | |
Financial assets and liabilities measured at fair value on a recurring basis as of the end of fiscal year 2022 consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| January 28, 2023 | | Quoted Prices in Active Markets for Identical Items (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3 |
Assets: | | | | | | | |
Money market funds (cash equivalent) | $ | 29 | | | $ | 29 | | | $ | — | | | $ | — | |
Total assets | $ | 29 | | | $ | 29 | | | $ | — | | | $ | — | |
Liabilities: | | | | | | | |
Deferred compensation plan liability (noncurrent) | $ | 4,246 | | | $ | — | | | $ | 4,246 | | | $ | — | |
Total liabilities | $ | 4,246 | | | $ | — | | | $ | 4,246 | | | $ | — | |
The fair value of our money market funds is based on quoted prices in active markets. The deferred compensation plan liability represents the amount that would be earned by participants if the funds were invested in securities traded in active markets. The fair value of the deferred compensation plan liability is determined based on quoted prices of similar assets that are traded in observable markets, or represents the cash withheld by participants prior to any investment activity.
Note 20. Deferred Compensation Plan
On August 1, 2015, we established the Torrid LLC Management Deferred Compensation Plan ("Deferred Compensation Plan") for the purpose of providing highly compensated employees a program to meet their financial planning needs. The Deferred Compensation Plan provides participants with the opportunity to defer up to 80% of their base salary and up to 100% of their annual earned bonus, all of which, together with the associated investment returns, are 100% vested from the outset. The Deferred Compensation Plan is designed to be exempt from most provisions of the Employee Retirement Security Act of 1974, as amended. All deferrals and associated earnings are our general unsecured obligations. We may at our discretion contribute certain amounts to eligible employees' accounts. To the extent participants are ineligible to receive contributions from participation in our 401(k) Plan (as defined in "Note 21—Employee Benefit Plan"), we may contribute 50% of the first 4% of participants' eligible contributions into their Deferred Compensation Plan accounts. As of the end of the first quarter of fiscal year 2023 and as of the end of fiscal year 2022, we did not have any assets of the Deferred Compensation Plan and the associated liabilities were $5.7 million and $5.6 million, respectively, included in our condensed consolidated balance sheets. As of the end of the first quarter of fiscal year 2023, $1.2 million of the $5.7 million Deferred Compensation Plan liabilities were included in accrued and other current liabilities in our condensed consolidated balance sheets. As of the end of fiscal year 2022, $1.4 million of the $5.6 million Deferred Compensation Plan Liabilities were included in accrued and other current liabilities in our condensed consolidated balance sheets.
Note 21. Employee Benefit Plan
On August 1, 2015, we adopted the Torrid 401(k) Plan ("401(k) Plan"). All employees who have been employed by us for at least 200 hours and are at least 21 years of age are eligible to participate. Employees may contribute up to 80% of their eligible compensation to the 401(k) Plan, subject to a statutorily prescribed annual limit. We may at our discretion contribute certain amounts to eligible employees' accounts. We may contribute 50% of the first 4% of participants' eligible contributions into their 401(k) Plan accounts. During the three-month periods ended April 29, 2023 and April 30, 2022, we contributed $0.2 million and $0.2 million, respectively, to eligible employees' 401(k) Plan accounts.