# EDGAR Filing Document

**Accession Number:** 0001792781
**File Stem:** 0001628280-23-009533
**Filing Date:** 2023-3
**Character Count:** 589184
**Document Hash:** c37d82686d7bc7d80375e5a5d5201554
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001628280-23-009533.hdr.sgml**: 20230328

**ACCESSION NUMBER**: 0001628280-23-009533

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 134

**CONFORMED PERIOD OF REPORT**: 20230128

**FILED AS OF DATE**: 20230328

**DATE AS OF CHANGE**: 20230328

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Torrid Holdings Inc.
- **CENTRAL INDEX KEY:** 0001792781
- **STANDARD INDUSTRIAL CLASSIFICATION:** RETAIL-APPAREL & ACCESSORY STORES [5600]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0131

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40571
- **FILM NUMBER:** 23769683

**BUSINESS ADDRESS:**
- **STREET 1:** 18501 E. SAN JOSE AVENUE
- **CITY:** CITY OF INDUSTRY
- **STATE:** CA
- **ZIP:** 91748
- **BUSINESS PHONE:** 626-667-1002

**MAIL ADDRESS:**
- **STREET 1:** 18501 E. SAN JOSE AVENUE
- **CITY:** CITY OF INDUSTRY
- **STATE:** CA
- **ZIP:** 91748

?xml version="1.0" ? thi-20230128

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

**(Mark One)**

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

**For the fiscal year ended January 28, 2023**

**OR**

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

**For transition period from&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;to**

**Commission File Number 001-40571**

**TORRID HOLDINGS INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Delaware** | **84-3517567** |
| (State or other jurisdiction of<br>incorporation or organization) | (I.R.S. Employer<br>Identification Number) |

---

**18501 East San Jose Avenue**

**City of Industry, California 91748**

**(626) 667-1002**

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

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

---

| | | |
|:---|:---|:---|
| **<u>Title of each class</u>** | **<u>Trading Symbol</u>** | **<u>Name of each exchange on which registered</u>** |
| Common stock, par value $0.01 per share | CURV | New York Stock Exchange |

---

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

---

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

---

------

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

As of March 22, 2023, there were approximately 103,796,198 shares of the registrant's common stock outstanding. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of July 29, 2022 was approximately $53 million based upon the last reported sales price on the New York Stock Exchange on that date of $4.06. For the purposes of this disclosure only, the registrant has assumed that its directors, executive officers, and the beneficial owners of 5% or more of the registrant's outstanding common stock are the affiliates of the registrant.

**DOCUMENTS INCORPORATED BY REFERENCE**

Information required in response to Part III of Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference to portions of the registrant's definitive proxy statement for the 2023 Annual Meeting of Stockholders (the "2022 Proxy Statement"), to be filed with the Securities and Exchange Commission ("SEC") no later than 120 days after the end of the registrant's fiscal year ended January 28, 2023.

------

**Table of Contents**

---

| | | |
|:---|:---|:---|
| | | **PAGE** |
| <u>[PART I](#id6348a44f3d14a66a85938c86523a9fc_13)</u> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 1.](#id6348a44f3d14a66a85938c86523a9fc_16)</u> | <u>[Business](#id6348a44f3d14a66a85938c86523a9fc_16)</u> | <u>[1](#id6348a44f3d14a66a85938c86523a9fc_16)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 1A.](#id6348a44f3d14a66a85938c86523a9fc_19)</u> | <u>[Risk Factors](#id6348a44f3d14a66a85938c86523a9fc_19)</u> | <u>[8](#id6348a44f3d14a66a85938c86523a9fc_19)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 1B.](#id6348a44f3d14a66a85938c86523a9fc_22)</u> | <u>[Unresolved Staff Comments](#id6348a44f3d14a66a85938c86523a9fc_22)</u> | <u>[27](#id6348a44f3d14a66a85938c86523a9fc_22)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 2.](#id6348a44f3d14a66a85938c86523a9fc_25)</u> | <u>[Properties](#id6348a44f3d14a66a85938c86523a9fc_25)</u> | <u>[27](#id6348a44f3d14a66a85938c86523a9fc_25)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 3.](#id6348a44f3d14a66a85938c86523a9fc_28)</u> | <u>[Legal Proceedings](#id6348a44f3d14a66a85938c86523a9fc_28)</u> | <u>[28](#id6348a44f3d14a66a85938c86523a9fc_28)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 4.](#id6348a44f3d14a66a85938c86523a9fc_31)</u> | <u>[Mine Safety Disclosures](#id6348a44f3d14a66a85938c86523a9fc_31)</u> | <u>[28](#id6348a44f3d14a66a85938c86523a9fc_31)</u> |
| <u>[PART II](#id6348a44f3d14a66a85938c86523a9fc_34)</u> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 5.](#id6348a44f3d14a66a85938c86523a9fc_37)</u> | <u>[Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase](#id6348a44f3d14a66a85938c86523a9fc_37)[s](#id6348a44f3d14a66a85938c86523a9fc_37)[Of Equity Securities](#id6348a44f3d14a66a85938c86523a9fc_37)</u> | <u>[29](#id6348a44f3d14a66a85938c86523a9fc_37)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 6.](#id6348a44f3d14a66a85938c86523a9fc_40)</u> | <u>[Reserved]</u> | <u>[30](#id6348a44f3d14a66a85938c86523a9fc_40)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 7.](#id6348a44f3d14a66a85938c86523a9fc_43)</u> | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#id6348a44f3d14a66a85938c86523a9fc_43)</u> | <u>[31](#id6348a44f3d14a66a85938c86523a9fc_43)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 7A.](#id6348a44f3d14a66a85938c86523a9fc_73)</u> | <u>[Quantitative and Qualitative Disclosures About Market Risk](#id6348a44f3d14a66a85938c86523a9fc_73)</u> | <u>[48](#id6348a44f3d14a66a85938c86523a9fc_73)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 8.](#id6348a44f3d14a66a85938c86523a9fc_76)</u> | <u>[Financial Statements and Supplementary Data](#id6348a44f3d14a66a85938c86523a9fc_76)</u> | <u>[49](#id6348a44f3d14a66a85938c86523a9fc_76)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 9.](#id6348a44f3d14a66a85938c86523a9fc_160)</u> | <u>[Changes in and Disagreements](#id6348a44f3d14a66a85938c86523a9fc_160)[W](#id6348a44f3d14a66a85938c86523a9fc_160)[ith Accountants on Accounting and Financial Disclosure](#id6348a44f3d14a66a85938c86523a9fc_160)</u> | <u>[87](#id6348a44f3d14a66a85938c86523a9fc_160)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 9A.](#id6348a44f3d14a66a85938c86523a9fc_163)</u> | <u>[Controls and Procedures](#id6348a44f3d14a66a85938c86523a9fc_163)</u> | <u>[87](#id6348a44f3d14a66a85938c86523a9fc_163)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 9B.](#id6348a44f3d14a66a85938c86523a9fc_166)</u> | <u>[Other Information](#id6348a44f3d14a66a85938c86523a9fc_166)</u> | <u>[87](#id6348a44f3d14a66a85938c86523a9fc_166)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 9C.](#id6348a44f3d14a66a85938c86523a9fc_166)</u> | <u>Disclosure Regarding Foreign Jurisdictions that Prevent Inspections</u> | <u>[87](#id6348a44f3d14a66a85938c86523a9fc_166)</u> |
| <u>[PART III](#id6348a44f3d14a66a85938c86523a9fc_172)</u> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 10.](#id6348a44f3d14a66a85938c86523a9fc_175)</u> | <u>[Directors, Executive Officers and Corporate Governance](#id6348a44f3d14a66a85938c86523a9fc_175)</u> | <u>[89](#id6348a44f3d14a66a85938c86523a9fc_175)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 11.](#id6348a44f3d14a66a85938c86523a9fc_178)</u> | <u>[Executive Compensation](#id6348a44f3d14a66a85938c86523a9fc_178)</u> | <u>[89](#id6348a44f3d14a66a85938c86523a9fc_178)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 12.](#id6348a44f3d14a66a85938c86523a9fc_181)</u> | <u>[Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#id6348a44f3d14a66a85938c86523a9fc_181)</u> | <u>[89](#id6348a44f3d14a66a85938c86523a9fc_181)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 13.](#id6348a44f3d14a66a85938c86523a9fc_184)</u> | <u>[Certain Relationships and Related Transactions, and Director Independence](#id6348a44f3d14a66a85938c86523a9fc_184)</u> | <u>[89](#id6348a44f3d14a66a85938c86523a9fc_184)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 14.](#id6348a44f3d14a66a85938c86523a9fc_187)</u> | <u>[Principal Account](#id6348a44f3d14a66a85938c86523a9fc_187)[ant](#id6348a44f3d14a66a85938c86523a9fc_187)[Fees and Services](#id6348a44f3d14a66a85938c86523a9fc_187)</u> | <u>[89](#id6348a44f3d14a66a85938c86523a9fc_187)</u> |
| <u>[PART IV](#id6348a44f3d14a66a85938c86523a9fc_190)</u> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 15.](#id6348a44f3d14a66a85938c86523a9fc_193)</u> | <u>[Exhibit](#id6348a44f3d14a66a85938c86523a9fc_193)[and](#id6348a44f3d14a66a85938c86523a9fc_193)[Financial Statement Schedules](#id6348a44f3d14a66a85938c86523a9fc_193)</u> | <u>[90](#id6348a44f3d14a66a85938c86523a9fc_193)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 16.](#id6348a44f3d14a66a85938c86523a9fc_196)</u> | <u>[Form 10-K Summary](#id6348a44f3d14a66a85938c86523a9fc_196)</u> | <u>[93](#id6348a44f3d14a66a85938c86523a9fc_196)</u> |

---

------

**FORWARD-LOOKING STATEMENTS**

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"), and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements reflect our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "should," "can have," "likely" and other words and terms of similar meaning (including their negative counterparts or other various or comparable terminology). For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in consumer spending and general economic conditions, including as a result of rising interest rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inflationary pressures with respect to labor and raw materials and global supply chain constraints that could increase our expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to identify and respond to new and changing product trends, customer preferences and other related factors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our dependence on a strong brand image;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased competition from other brands and retailers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our reliance on third parties to drive traffic to our website;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the success of the shopping centers in which our stores are located;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our dependence upon independent third parties for the manufacture of all of our merchandise;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• availability constraints and price volatility in the raw materials used to manufacture our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• interruptions of the flow of our merchandise from international manufacturers causing disruptions in our supply chain;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our sourcing a significant amount of our products from China;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our reliance upon independent third-party transportation providers for substantially all of our product shipments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our growth strategy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our failure to attract and retain employees that reflect our brand image, embody our culture and possess the appropriate skill set;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• damage to our reputation arising from our use of social media, email and text messages;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our reliance on third parties for the provision of certain services, including real estate management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our dependence upon key members of our executive management team;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our reliance on information systems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• system security risk issues that could disrupt our internal operations or information technology services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• unauthorized disclosure of sensitive or confidential information, whether through a breach of our computer system or otherwise;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• payment-related risks that could increase our operating costs or subject us to potential liability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• claims made against us resulting in litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in laws and regulations applicable to our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• regulatory actions or recalls arising from issues with product safety;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to protect our trademarks or other intellectual property rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our substantial indebtedness and lease obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrictions imposed by our indebtedness on our current and future operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in tax laws or regulations or in our operations that may impact our effective tax rate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the possibility that we may recognize impairments of long-lived assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our failure to maintain adequate internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the threat of war, terrorism or other catastrophes that could negatively impact our business.

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. Important factors that could cause actual results to differ materially from our expectations, are disclosed under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties.

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 outcomes or affect us or our operations in the way we expect. The forward-looking statements included in this Annual Report on Form 10-K 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 except to the extent required by law.

------

**Part I**

**Item 1. Business**

**Overview**

Torrid Holdings Inc. ("Torrid," "we," "us," "our," the "Company") 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. Our proprietary product offering delivers a superior fit for the curvy woman that makes her love the way she looks and feels. Our style is unapologetically youthful and sexy and we are maniacally focused on fit. We believe our customer values the appeal and versatility of our curated product assortment that helps her look her best for any occasion, including weekend, casual, work and dressy, all at accessible price points. Through our product and brand experience we connect with customers in a way that other brands, many of which treat plus-size customers as an after-thought, have not.

**The Torrid Approach**

We have created a proprietary fit that empowers our customers and drives loyalty. In turn, our loyal customers provide us with a rich set of data that allows us to improve our product and experience, thus creating a virtuous cycle that reinforces our leading position in plus-size apparel and intimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We provide a fit she knew she wanted but never had access to;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We accomplish this by fitting every single article of clothing we produce on a real woman, tailoring for her special needs, not simply "grading up" non-plus-size apparel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We utilize a proprietary sizing process that is constantly updated through data and our continuous customer feedback loop, until we fit to perfection; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We deliver unparalleled technical fit combined with unapologetic attitude and style.

**Product**

***Product Offering***

We offer a full product assortment that addresses our customers' entire closet, including tops, bottoms, denim, dresses, intimates, activewear, shoes and accessories. We believe our products not only provide an unparalleled technical fit, but also have the style and attitude that enable our customers to dress like her non-plus-size friends. We believe we are a destination for our customers to shop for every occasion, from casual to dressy, and everything in between.

While we aim to bring her the latest in fashion trends, we do not rely on being a fashion leader. Our offering is built on the foundation of basic merchandise that represents year-round styles and colors that are constantly replenished and are not subject to a typical markdown cadence ("Basics"). Our core offering includes products that are on-trend interpretations of our Basics merchandise that we update with new fabrics, prints, embellishments or features ("Core"). For example, the Harper Blouse represents a Basics item with Core iterations that feature embellishments such as zippers or button-loops. Our trend driven items incorporate the latest fashions available in the broader market to excite and engage our customer but are bought narrowly and reordered as demand dictates to minimize inventory risk.

We are market leaders in bottoms and intimates, both attractive growth categories where fit is critical. These categories serve as entry point to the Torrid brand and drive customer loyalty. We believe the design of our intimates line, Torrid Curve, inspires confidence and allows our customer to move in effortless comfort throughout her day while feeling confident and sexy. Over the course of almost two decades, Torrid has developed the requisite design and engineering expertise for the highly technical bra category through a rigorous in-house research and development process. We have patent applications pending for our 360° Back Smoothing Bras and our Power Mesh Panels for Tummy-Flattening Pants, both exclusive creations for the woman in our size range.

***Product Design and Development***

We are relentlessly focused on creating youthful, unapologetically sexy products specifically for the woman in our size range. We design, develop and merchandise almost all of our products in-house, under the Torrid®, Torrid Curve®, CURV® and Lovesick® brand names. Our products are exclusive to us, with few exceptions, and provide a consistent quality and fit that we believe she cannot find elsewhere. Our product development is led by a team of more than seventy highly skilled designers,

------

artists and product engineers. Our core competency is our differentiated, market-leading fit that we achieve through the following strategies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Maniacal focus on fit across our entire organization;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Differentiated technical fit created through building and continuously refining a database of fit specifications derived from testing, measuring and cataloging garments on our fit models;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Proprietary fabrics specifically engineered to enhance the fit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fit all of our products on fit models and our staff, not mannequins; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We often test new fabrics, new silhouettes and new product lines on our community of loyal customers before launch.

Additionally, we employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews, and our ongoing dialogue with customers through social media and customer surveys.

***Merchandise Planning***

Our strategy is built around a consistent and stable base of Core products that provide our customer with year-round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers.

We regularly use the depth and breadth of our data to assess sales, market trends and new product development to inform purchasing decisions. As a result, we have the flexibility to react quickly to product performance, make in-season inventory purchasing adjustments where possible and to respond to the latest sales trends by ordering or re-ordering as appropriate. Further, we utilize a read-and-react testing approach, with small purchase quantities, to introduce our New product offering, minimizing fashion risk. This strategy also allows us to mitigate inventory risk, particularly for new products or styles, while simultaneously providing our customers access to current fashion.

***Customers***

Our typical customer is an employed, youthful woman between the ages of 25 and 40 years old with above-average annual household income, and wears sizes 10 to 30 (average of size 18). Approximately half of our customers are under 40 years old and the ethnic composition of our customer base largely parallels that of the U.S. population. She leads a busy life, is short on time and wants a curated presentation of quality apparel, intimates and accessories that are on trend and fit her well.

**Torrid Loyalty and Torrid Credit Card Programs**

We drive customer loyalty and engagement through our three-tier loyalty program, Torrid Rewards. Members earn one point for every dollar spent and receive a reward for every 250 points collected. The program is tiered by annual customer spend and offers incremental perks with each tier. Torrid Insider members are those who spend up to $499 annually, while members of Torrid Loyalist spend $500+ annually and Torrid VIP spend $1,000+ annually. We inspire loyalty by continuously engaging with our loyalty members through birthday gifts, social media, dedicated customer service lines and exclusive events. Members of the top two tiers of our loyalty program, Torrid VIP and Loyalist, are our most loyal customers who purchase from us more often and spend significantly more than the average customer, accounting for an outsized share of net sales.

Additionally, we provide our customers with access to our Torrid Credit Card Program through which customers receive points, discounts and other perks. Torrid Credit Card holders are among our most loyal and valuable customers. Our credit card program encourages customer loyalty, serves as a valuable source for data and allows us to further invest in marketing efforts while limiting exposure to incremental credit risk as our bank partner substantially manages all administrative processes, including underwriting, and bears a portion of the credit balance risk.

Torrid Rewards and our Torrid Credit Card program provide us with a strong ability to attribute sales and behavioral data to individual customers, which informs our decision making process.

**Unified Commerce Platform**

Through our unified commerce platform, which includes our e-Commerce and retail stores, we deliver a seamless brand experience to our customers wherever and whenever she chooses to shop. We are agnostic to the channel where our customers choose to shop, as we are highly profitable across both e-Commerce and store channels. We deliver a consistent brand message by coordinating our strategies across channels, which we believe influences our customers' buying decisions. This customer-

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centric strategy enhances customer acquisition, retention and customer lifetime value. Our e-Commerce and store channels complement and drive traffic to one another, creating more loyal omni-channel customers.

***e-Commerce***

Our e-Commerce channel is central to our unified commerce platform. Our online platform provides customers with a highly engaging shopping experience featuring access to our full product assortment, an aesthetically rich and easily navigable website and seamless ordering and fulfillment. Additionally, we successfully use our e-Commerce platform to expand our selection of styles, colors and merchandise meaningfully beyond what is available in our stores, making the online shopping experience highly engaging and additive to our in-store experience. Our website and mobile app feature updates on new collections, guidance on how to wear and put together outfits and a selection of web-only exclusives, all of which facilitate customer engagement and interaction.

We aim to be wherever she is and make the transaction process as convenient as possible. As a result, a majority of our e-Commerce orders and a material portion of all orders are placed directly from her phone. The functionality and features of our mobile app enable us to deliver enhanced personalization such as allowing her to find her recommended size while suggesting complementary items to expedite purchase decisions and increase frequency and order size. In December 2021, we went live with our new mobile app which incorporates a new design and new features such as advanced filter and search functionality, additional payment options and personalized notifications.

***Stores***

Our stores are highly valuable strategic assets that remain core to our strategy and continue to play one of the most important roles in our customer acquisition strategy. A majority of our new customer relationships begin in our stores. We believe our stores enhance brand awareness, drive traffic to our e-Commerce platform and encourage customers to shop across multiple channels of our unified commerce platform. We provide a sophisticated presentation of products that has an emphasis on outfits, which presents creative styling ideas to our customer and encourages incremental spend. Our stores include large, comfortable fitting rooms with features, such as cooling fans, that are specifically suited for our customers' needs. Additionally, our stores offer customers the opportunity to connect with a like-minded community, through exclusive in-store events and interactions with our store associates, who act as brand ambassadors and are often customers themselves.

As of January 28, 2023, we operated 639 stores in the U.S., Puerto Rico and Canada. Our stores are located primarily in premium malls, shopping plazas, lifestyle centers and outlet locations, and the quality of our real estate locations is high as substantially all of our stores are located in A and B malls or off-mall locations. Our stores are designed to deliver an immersive fit discovery experience and serve as desirable customer destinations. As a result, they are less dependent on broader traffic trends and perform consistently across all formats. Our average store size is approximately 3,100 square feet.

**People and Culture**

We have created a company culture focused on attracting, training and developing talent. Our work environment is open and collaborative with a flat organizational structure that facilitates efficient decision making. Approximately 93% of our employees identify as female, and many are also customers who believe in our mission to empower curvy women to love the way they look and feel. Additionally, we embrace the diversity of our employees and believe that diverse and inclusive teams at all levels across the organization strengthen our ability to serve our customers. Nearly 50% of our employees identify as minorities. In 2020, we established our Diversity & Inclusion Committee, which seeks to create a more equitable and inclusive workplace through open dialogue, training, recruiting, and retaining diverse talent.

The goal of creating a welcoming and supportive environment spans our full organization from our headquarters and distribution centers to our stores. We believe that our in-store brand ambassadors are critical to our success and often represent the face of our organization to our customers. We empower our managers and in-store brand ambassadors to deliver a superior shopping experience. We provide thorough product- and fit-oriented training that aims to strengthen our brand experience in the store. We also provide our in-store brand ambassadors with sales and key performance data that help them optimize their store's performance and foster a culture of accountability. Communications with our store associates is a critical channel for valuable product and customer feedback. We believe we have established effective two-way lines of communication throughout our organization, including using technologies to communicate with stores in real time and routinely synthesize store insights and customer feedback from the field to influence decision making.

As of January 28, 2023, we employed 2,061 full-time and 5,934 part-time employees. Of these employees, 720 are employed in our headquarters in City of Industry, California and 7,275 are employed in our stores and distribution centers. Our

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number of employees, particularly part-time employees, fluctuates depending upon seasonal needs. Our employees are not represented by a labor union and are not party to a collective bargaining agreement.

Our talent strategy is to attract, engage and retain the best and most qualified talent to create a diverse and inclusive workforce. We offer competitive compensation packages that are based on market-specific data for comparable roles and geographic locations. We believe in rewarding high performance and seek to design plans and programs to support this culture. To further support the advancement of our employees, we invest in a wide range of training and development opportunities at all levels across the organization, including through both online and instructor-led internal programs, as well as third-party programs. We regularly collect feedback from our employees to better understand and improve our learning and development offerings to meet their needs. To ensure we provide a rich and rewarding experience for our employees, we monitor culture and engagement to build on the competencies that are important for our future success. We routinely engage independent third parties to conduct cultural training sessions and engagement events. These include diversity and inclusion training sessions, fun employee engagement events, and virtual and on-demand learning sessions focused on emotional and social health.

Employee safety remains a priority. We develop and administer company-wide policies to ensure the safety of each team member and compliance with Occupational Safety and Health Administration standards. In 2020, the COVID-19 pandemic brought unprecedented challenges to our business, our communities, and our teams. As we managed through these challenges, we prioritized the health, safety and overall well-being of our teams and customers. At each of our retail stores, our headquarters and our West Jefferson, Ohio, distribution center, we continue to follow applicable local, state, and national government regulations, laws, and recommended guidance.

An important part of our culture is our focus on giving back to the community, which we do primarily through our Torrid Foundation that we established in 2017. The mission of the Torrid Foundation is to support various nonprofit organizations dedicated to helping women and changing lives for our customers and their diverse communities. The funds utilized in these efforts are raised from customer donations, including whole-dollar sale round-ups, and a portion of proceeds from certain product collaborations like our Breast Cancer Awareness Collection. In fiscal year 2022, the Torrid Foundation raised over $2.2 million in support of partner organizations dedicated to educating and empowering women.

**Data Analytics**

We have a significant volume of customer and transaction data, collected from a variety of sources, including e-Commerce and in-store interactions, our loyalty program, social media and customer surveys. For example, we have the ability to track page views, search history, clicks, linger time and purchase route for visitors to our e-Commerce platform. We use our data to drive decision making across the organization. This customer data is largely based on information provided by customers who have opted-in to be part of our loyalty program. Our extensive database contains valuable customer information that helps us better market to our customers.

We have significant visibility into our customers' transaction behavior, including purchases made across our channels. We use our customer database to acquire, develop and retain customers. We can identify customers who purchase products regardless of whether they shop on our e-Commerce platform or in-store. We leverage this customer database to drive data analysis and insights that we use in managing our business. For example, to grow the penetration of intimates sales, we are able to offer a promotion targeted at customers who have bought our apparel but not our intimates, which will encourage shopping across categories.

**Marketing and Advertising**

We promote a message of inclusivity that empowers all women to love the way they look and feel. Our brand inspires women to feel confident, sexy and youthful like they never have before. We believe our brand messaging built around our fit resonates with the attitudes of younger generations who are frustrated with being ignored by other brands. Our marketing collateral intentionally represents the diversity of our customer base, including women of all sizes from 10 to 30, and communicates the confidence and sexiness our product is intended to deliver.

We use a variety of marketing and advertising mediums to increase brand awareness, acquire new customers, and drive repeat purchases across our channels. These programs include our online marketing, such as paid search and social media, product listing ads and retargeting, combined with direct mail, store marketing and public relations initiatives. Further, we collaborate with other leading brands, including Betsey Johnson, Disney, and Warner Brothers to create capsule collections to reach new customers and increase our brand awareness. We strengthen the connection with our most engaged customers through special events featuring plus-size models, celebrities, bloggers and other influencers. We use our customer database to strategically optimize the value of our marketing investments across our customer base and channels. This enables us to efficiently acquire new customers, effectively market to repeat customers and reactivate lapsed customers.

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Our investments in digital and physical marketing drive customer acquisition and engagement across all of our channels. We coordinate the introduction of our collections across our e-Commerce platform and stores, allowing a customer to experience a consistent brand message wherever and whenever she chooses to shop. We have a large and growing following on our social media channels, including Facebook, Instagram, Pinterest, Twitter, YouTube and TikTok. We use these channels to communicate with our customers, disseminate our outbound marketing messages and collect feedback about their lifestyles and product preferences.

**Sourcing and Production**

We outsource the manufacturing of our products, which eliminates the need to own or operate manufacturing facilities. Thus, our product sourcing is not dependent on any one manufacturing facility, enabling a flexible and agile approach to sourcing. We internally design and develop the vast majority of our products, a model we describe as vertical sourcing, which gives us control to deliver consistent fit, quality and cost across our products.

We have a diversified vendor base. No single supplier accounted for more than 15% of merchandise purchased in fiscal year 2022. Approximately 98% of our product receipts in fiscal year 2022 were sourced internationally, primarily from Asia. We plan to continue diversifying our vendor bases by both vendor and geography. We continue to reduce our exposure to factories located within China. Though we are working towards decreasing our share of product manufactured in China, our manufacturing partners may source their own raw materials from third parties in other countries, including China. We maintain compliance guidelines for our vendors that dictate various standards including product quality, manufacturing practices, labor compliance and legal compliance. Through third parties, we periodically monitor our factories and suppliers to ensure compliance with these guidelines.

**Distribution and Fulfillment**

Our unified commerce business model is serviced by our distribution facility located in West Jefferson, Ohio. We acquired the operations of the fully-functional, state-of-the-art distribution center in West Jefferson, Ohio in 2018. This 750,000 square foot facility is highly automated and is capable of handling our existing and future needs. Additionally, the West Jefferson facility is equipped with omni-channel capabilities that enables buy-online-pickup-in-store ("BOPIS") while continuing to drive efficient online returns and allowing us to execute on our unified commerce strategy. During 2020 we also accelerated our omni-channel offerings such as ship from store and curbside pickup, which when combined with BOPIS continues to drive both customer acquisition and retention.

Our distribution center manages the transportation, receipt, storage, sorting, packing and distribution of merchandise for our e-Commerce platform and store channels. Stores are replenished at least once per week from this facility by third-party delivery services. This frequency provides our stores a steady flow of new inventory that helps maintain product freshness and in-stock availability.

**Information Systems**

We utilize a full range of third-party management information systems to support our store, e-Commerce, merchandising, customer data, financial and real estate business teams. We utilize these systems to provide us with various functions, including customer relationship management, point-of-sales, inventory management, merchandising support systems, financial reporting, e-Commerce solutions and other systems.

**Seasonality**

While the apparel industry is generally seasonal in nature, we have not historically experienced significant seasonal fluctuations in our sales. In fiscal year 2022, no single quarter contributed more than 27% of Torrid net sales. We believe this is partly attributable to our broad merchandise offering that encourages purchasing across seasons. We believe our reduced seasonality is also attributable to the behavior of our customer, who is generally purchasing products for herself, not as gifts.

**Competition**

We face competition across a variety of players within the broader apparel industry. Our competitors range from smaller, growing e-Commerce brands to considerably larger players with substantially greater financial, marketing and other resources. Further, we may face new competitors and increased competition from existing competitors as we expand into new markets and increase our presence in existing markets.

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Our competition in the women's plus-size apparel industry includes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ***Plus-Size Focused Specialty Retailers.*** We compete with other specialty retailers that, like Torrid, focus on plus-size customers. We offer a fit-first focus and a broad and stylish product assortment that is differentiated by our vertical sourcing capabilities. We target a younger, more stylish consumer with a wide assortment that has broad appeal. We further differentiate ourselves based on the strength of our brand, industry-leading unified commerce business model and e-Commerce penetration, strong data capabilities, loyal customer base, customer-focused product assortment and highly experienced leadership team.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ***Plus-Size Focused Direct to Consumer Brands.*** We compete with other plus-size focused direct to consumer brands. We operate on a large scale, which allows us to offer a wide product assortment, high product quality and convenience to provide a better experience and acquire customers more efficiently.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ***Local, National and International Retail Chains.*** We compete indirectly with department stores, specialty apparel players and mass merchandise retailers who also carry products in our size range and offer similar categories of merchandise to our customer segment. By maintaining a maniacal focus on fit, our proprietary product offering delivers a superior fit for the curvy woman that makes her love the way she looks and feels. Our sole focus on designing for our specific customer needs differentiate her experience when she shops with us.

Our distinct combination of first at fit design, service, product quality and value allows us to compete effectively within the women's plus-size apparel market.

**Intellectual Property**

Our trademarks are important to our marketing efforts. We own or have the rights to use certain trademarks, service marks and trade names that are registered with the U.S. Patent and Trademark Office or other foreign trademark registration offices or exist under common law in the United States and other jurisdictions. Trademarks that are important in identifying and distinguishing our products and services include, but are not limited to, Torrid®, Torrid Curve®, CURV® and Lovesick®. Our rights to some of these trademarks may be limited to select markets. We also own domain names, including our website, www.torrid.com. Further, we have patent applications pending for our innovative and most popular line of bras, the 360° Back Smoothing Bra, and for our Power Mesh Panels for Tummy-Flattening Pants and Tummy-Covering Garments.

**Regulation and Legislation**

We are required to comply with numerous laws and regulations at the state, federal and international levels. For instance, we are subject to labor and employment, tax, environmental, privacy and anti-bribery laws. We are also subject to regulations, trade laws and customs, truth-in-advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of stores and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.

A substantial portion of our products are manufactured outside the United States. These products are imported and are subject to U.S. customs laws, which impose tariffs as well as import quota restrictions for textiles and apparel. Some of our imported products are eligible for duty-advantaged programs. While importation of goods from foreign countries from which we buy our products may be subject to embargo by U.S. customs authorities if shipments exceed quota limits, we closely monitor import quotas and believe we have the sourcing network to efficiently shift production to factories located in countries with available quotas. The existence of import quotas has, therefore, not had a material adverse effect on our business. For more information, see "Risk Factors—Risks Related to Government Regulation and Litigation—Changes in laws, including employment laws and laws related to our merchandise, could make conducting our business more expensive or otherwise change the way we do business."

***Data Privacy and Security***

We collect, process, store and use confidential, proprietary and personal information, including information about our customers, our employees and other third parties. Consequently, our business is subject to increasingly complex and rigorous, and sometimes conflicting laws, regulatory standards, industry standards, external and internal privacy and security policies, contracts and other obligations governing data privacy and security in the U.S. and other jurisdictions where we do business, including with respect to the collection, storage, use, transmission, sharing and protection of personal information and other consumer data.

For example, the European Union ("EU") and United Kingdom ("UK"), have adopted strict data privacy and security regulations. The General Data Protection Regulation (EU 2016/679) ("EU GDPR"), effective May 2018, and the EU GDPR as

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it forms part of the laws of England and Wales, Scotland and Northern Ireland by virtue of section 3 of the European Union Withdrawal Act 2018 ("UK GDPR" and together with the EU GDPR, the "GDPR"), have compliance obligations applicable to businesses without an establishment in the EU, the European Economic Area ("EEA") or the UK, but that either (i) offer their goods or services to individuals located in the EU, EEA or UK, or (ii) monitor the behavior of individuals located in the EU, EEA or UK. As a result, it is possible the GDPR may apply to us.

The scope of our data privacy obligations worldwide continues to evolve as new, increasingly restrictive legislation and regulations are coming into force all around the world. For example, California enacted the California Consumer Privacy Act of 2018 (the "CCPA") which came into effect on January 1, 2020 and limits how we may collect and use personal information. In addition, on November 3, 2020, California voters approved significant modifications of the CCPA, as the California Privacy Rights Act (the "CPRA"), which further expanded consumers' rights with respect to certain personal information sharing and created a new state agency to oversee implementation and enforcement efforts. Many of the CPRA's amendments became effective on January 1, 2023. Given that enforcement of the CPRA amendments begins on July 1, 2023, it remains unclear how this law will be enforced and interpreted. Four additional states (Virginia, Colorado, Utah and Connecticut) have enacted data privacy and security laws that have, or will in the near future, come into effect. Each of these laws create additional obligations on businesses and could subject us to additional compliance costs as well as potential fines, individual claims and commercial liabilities.

We may publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences. For example, our compliance with our privacy policies and our general consumer data privacy and security practices may be subject to review by the Federal Trade Commission ("FTC"), which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations or material omissions therein.

Compliance with existing, proposed and recently enacted laws and regulations can be costly and time consuming, and any failure to comply with these regulatory standards could subject us to legal and reputational risks. Misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, imposition of fines by governmental authorities and damage to our reputation and credibility and could have a negative impact on revenues and profits. See "Risk Factors—Risks Related to Government Regulation and Litigation—Failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection, or the expansion of current or the enactment of new laws, regulations or industry standards relating to privacy, data protection, advertising and consumer protection, could adversely affect our business, financial condition, and results of operations."

**Available Information**

We make available on our website (investors.torrid.com) under "Financials" our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish them to the SEC. The information contained in, or that can be accessed through, our website is not part of, or incorporated by reference in, this Annual Report on Form 10-K. The SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The charters for committees of our board of directors (Audit, Compensation and Nominating and Corporate Governance Committees), our Corporate Governance Guidelines and our Code of Business Conduct are also available on our website under "Investors, Governance Documents."

Investors and others should note that we may announce material information to our investors using our investor relations website (https://investors.torrid.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our company, our business and other issues. It is possible that the information that we post on social media could be deemed to be material information. The information contained on such websites and social media posts is not incorporated by reference into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only.

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**Item 1A. Risk Factors**

*An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the financial and other information contained in this Annual Report on Form 10-K, including our financial statements and the related notes and under "Management's Discussion and Analysis of Financial Condition and Results of Operations," before you decide to purchase, hold or sell shares of our common stock. If any of the following risks actually occurs, our business, financial condition, results of operations and cash flows could be materially and adversely affected. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock.*

**Summary Risk Factors**

The following is a summary of some of the material risks and uncertainties that could adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of changes in consumer spending and general macroeconomic conditions on our operations and financial performance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability or failure to identify or respond to new trends;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to maintain and enhance our brand and attract sufficient numbers of customers to our stores or sell sufficient quantities of our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased competition from other brands or retailers and our ability to obtain favorable store locations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our dependency or reliance on third parties for different services, such as customer driving, product sourcing, manufacturing and transportation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our failure to successfully adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our failure to find employees that reflect our brand image and embody our culture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our failure to effectively utilize information systems and implement new technologies or misuse or unauthorized use of these systems and technologies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• price volatility and lack of availability of raw materials to manufacture our products and impact on transportation and labor costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our sourcing a significant amount of our products from China;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the interruption of the flow of merchandise from international manufacturers, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential liability arising from payment-related risks, litigation or regulatory proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in laws and regulations, including, among others, privacy, data protection, advertising, consumer protection, environmental and tax regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• government or consumer concerns about product safety that could result in regulatory actions, recalls or changes to laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our inability to protect our trademarks or other intellectual property rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our substantial indebtedness and lease obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our dependency on key members of our executive management team;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of infectious disease outbreaks, including the COVID-19 pandemic, on our operations and financial performance; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• war, terrorism and other catastrophes.

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**Risks Related to Our Business**

***Our business is sensitive to consumer spending and general economic conditions, and an economic slowdown or inflationary pressures could adversely affect our financial performance.***

Consumer purchases of discretionary items, including our products, generally decline during recessionary periods and other periods where disposable income is adversely affected. Our performance is subject to factors that affect domestic and worldwide economic conditions, particularly those that affect our target demographic. These factors may include unemployment rates, levels of consumer and student debt, the availability of consumer credit, healthcare costs, reductions in net worth, residential real estate and mortgage markets, taxation, fuel and energy prices, interest rates, inflation, consumer confidence, the value of the United States dollar versus foreign currencies and other macroeconomic factors, such as the economic disruption caused by the COVID-19 pandemic and the Russian invasion of Ukraine. Deterioration in economic conditions or increasing unemployment levels may reduce the level of consumer spending and inhibit consumers' use of credit, which may adversely affect our net sales and profits. In recessionary periods, we may have to increase the number of promotional sales or otherwise dispose of inventory for which we have previously paid to manufacture, which could adversely affect our profitability in those periods. Weakened economic conditions and a slowdown in the economy could also adversely affect shopping center traffic and new shopping center development, which could materially adversely affect us.

In addition, a weakened economic environment or recessionary period may exacerbate some of the risks noted below, including consumer demand, strain on available resources, store growth, decreases in mall traffic, brand reputation, our ability to develop and maintain a reliable omni-channel customer experience, our ability to execute our growth initiatives, interruption of the production and flow of merchandise from key vendors, foreign exchange rate fluctuations and leasing substantial amounts of space. The same risks could be exacerbated individually or collectively.

Recent inflationary pressures have increased the cost of energy and raw materials and may adversely affect our results of operations. If inflation continues to rise and further impact the cost of energy and raw materials, we may not be able to offset cost increases to our products through price adjustments without negatively impacting customer demand, which could adversely affect our sales and results of operations.

***Our business is dependent upon our ability to identify and respond to changes in customer preferences and other related factors. Our inability to identify or respond to these new trends may lead to inventory markdowns and write-offs, which could adversely affect our business and our brand image.***

Our target market of 25 to 40 year old plus-size women has stylistic preferences that cannot be predicted with certainty and are subject to change. Our success depends in large part upon our ability to effectively identify and respond to changing product trends and consumer demands among this segment, and to translate market trends into appropriate, salable product offerings. Our failure to identify and react appropriately to new and changing product trends or tastes, to accurately forecast demand for certain product offerings or an overall decrease in the demand for plus-size products could lead to, among other things, excess or insufficient amounts of inventory, markdowns and write-offs, which could materially adversely affect our business and our brand image. Because our success depends significantly on our brand image among our target segment, damage to our brand image as a result of our failure to identify and respond to changing product trends could have a material negative impact on our business. Additionally, as a direct-to-consumer brand focusing on young, plus-size women, we may not effectively identify product trends that appeal to our target segment or successfully adapt product trends prevailing in the market more broadly to this target segment. While we believe we have a flexible supply chain, we often enter into agreements for the manufacture and purchase of merchandise well ahead of the season in which that merchandise will be sold. Therefore, we are vulnerable to changes in consumer preferences and demand between the time we design and order our merchandise and the season in which this merchandise will be sold. Inventory levels for certain merchandise styles may exceed planned levels, leading to higher markdowns to sell through excess inventory and, therefore, lower than planned margins. Conversely, if we underestimate consumer demand for our merchandise, or if our manufacturers fail to supply quality products in a timely manner, we may experience inventory shortages, which may negatively impact customer relationships, diminish brand loyalty and result in lost sales.

There can be no assurance that our new product offerings will have the same level of acceptance as our product offerings in the past or that we will be able to adequately and timely respond to the preferences of our customers. The failure of our product offerings to appeal to our customers could have a material adverse effect on our business, results of operations and financial condition.

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***Our business depends in part on a strong brand image, and if we are not able to maintain and enhance our brand, particularly among our target segment and in new markets where we have limited brand recognition, we may be unable to attract sufficient numbers of customers to our stores or sell sufficient quantities of our products.***

Our ability to maintain our reputation is critical to our brand image. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity. Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure to maintain high ethical, social and environmental standards for all of our operations and activities, including those of our third-party manufacturers (if they do not, for instance, adhere to our vendor code of conduct), or adverse publicity regarding our responses to these concerns could also jeopardize our reputation. Damage to our reputation or loss of consumer confidence for any of these reasons could have a material adverse effect on our business, financial condition and results of operations, as well as require additional resources to rebuild our reputation.

***We could face increased competition from other brands or retailers that could adversely affect our ability to generate higher net sales and margins, as well as our ability to obtain favorable store locations.***

We face substantial competition in the plus-size women's apparel industry from both specialty and general retailers, including department stores, mass merchants, regional retail chains, web-based stores and other direct retailers that engage in the retail sale of apparel, accessories, footwear and other similar product categories. We compete with these businesses for customers, vendors, digital marketing channels, suitable store locations and personnel. We compete on the basis of a combination of factors, including among others, our knowledge of and focus on our target segment, price, breadth, quality, fit and style of merchandise offered, in-store experience, level of customer service, ability to identify and offer new and emerging product trends and brand image.

Many of our competitors have greater financial, marketing and other resources available. In many cases, our competitors sell their products in stores that are located in the same shopping centers as our stores. In addition to competing for sales, we compete for favorable site locations and lease terms in malls, strip centers, lifestyle centers and outlet centers and our competitors may be able to secure more favorable locations than we can as a result of their relationships with, or appeal to, landlords. Our competitors may also sell substantially similar products at reduced prices online or through outlet locations or discount stores, increasing the competitive pricing pressure for those products.

We also compete with other retailers for personnel. The competition for retail talent is increasing, and we may not be able to secure the talent we need to operate our stores without increasing wages. We cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on us.

***We rely on third parties to drive traffic to our website, and these providers may change their algorithms or pricing in ways that could negatively impact our business, operations, financial condition and prospects.***

We rely in part on digital advertising, including search engine marketing, to promote awareness of our online marketplace, grow our business, attract new customers and increase engagement with existing customers. In particular, we rely on search engines, such as Google, and the major mobile app stores as important marketing channels. Search engine companies change their search algorithms periodically, and our ranking in searches may be adversely impacted by those changes. Search engine companies or app stores may also determine that we are not in compliance with their guidelines and penalize us as a result. If search engines change their algorithms, terms of service, display or the featuring of search results, determine we are out of compliance with their terms of service or if competition increases for advertisements, we may be unable to cost-effectively attract customers. Our relationships with our marketing vendors are not long term in nature and do not require any specific performance commitments. In addition, many of our online advertising vendors provide advertising services to other companies, including companies with whom we may compete. As competition for online advertising has increased, the cost for some of these services has also increased. Our marketing initiatives may become increasingly expensive and generating a return on those initiatives may be difficult. Even if we successfully increase revenue as a result of our paid marketing efforts, such increase may not offset the additional marketing expenses we incur.

***Our ability to attract customers to our physical stores that are located in shopping centers depends on the success of these shopping centers, and any decrease in customer traffic in these shopping centers could cause our net sales and profitability to be less than expected.***

Our stores are primarily located in shopping centers, and some of these shopping centers have been experiencing declines in customer traffic, including as a result of an increasing number of customers that have begun to shop online. While we believe we are a destination for our customers, our sales at these stores are impacted by the volume of customer traffic in those

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shopping centers and the surrounding area. In centers that may experience declining customer traffic, certain of our expenses are contractually fixed and our ability to reduce these expenses if we were to experience sales declines is limited in the near term. To mitigate this potential risk, we have negotiated termination provisions in a majority of our store leases that allow us to terminate the lease if store sales fall below certain thresholds or if certain co-tenancy requirements are not met. However, these provisions may not be adequate to protect our results of operations if our sales were to decline.

Our stores in shopping centers benefit from the ability of other tenants, particularly anchor stores, such as department stores, to generate consumer traffic in the vicinity of our stores and maintain the overall popularity of the shopping center as a shopping destination. Our net sales volume and traffic generally may be adversely affected by, among other things, a decrease in popularity of the shopping centers in which our stores are located, the closing of anchor stores important to our business, a decline in the popularity of other stores in the shopping centers in which our stores are located, changing economic conditions and/or demographic patterns (including any increases in purchases of merchandise online as opposed to in-store), or a deterioration in the financial condition of shopping center operators or developers which could, for example, limit their ability to finance tenant improvements for us and other retailers. A reduction in customer traffic as a result of these or any other factors, or our inability to obtain or maintain favorable store locations within shopping centers could have a material adverse effect on us.

***If we are unable to successfully adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers, our financial performance and brand image could be adversely affected.***

We are continuing to grow our omni-channel business model. While we interact with many of our customers largely through our stores, our customers are increasingly using computers, tablets and smartphones to make purchases online and to help them in making purchasing decisions when in our stores. Our customers also engage with us online through our social media channels, including Facebook, Instagram, Pinterest, TikTok, YouTube and Twitter, by providing feedback and public commentary about all aspects of our business. Omni-channel retailing is rapidly evolving and our success depends on our ability to anticipate and implement innovations in customer experience and logistics in order to appeal to customers who increasingly rely on multiple channels to meet their shopping needs. If for any reason we are unable to implement our omni-channel initiatives or provide a convenient and consistent experience for our customers across all channels that provides the products they want, when and where they want them, then our financial performance and brand image could be adversely affected.

***Our growth strategy is dependent on a number of factors, any of which could strain our resources or delay or prevent the successful penetration into new markets.***

Our growth strategy is dependent on a number of factors, including growing our number of active customers and the spend per customer. Additional factors required for the successful implementation of our growth strategy include, but are not limited to, opening new stores and remodeling existing ones, continuing to operate an effective e-Commerce platform and implementing initiatives to improve our existing operations, obtaining desirable store locations, negotiating acceptable leases, completing projects on budget, supplying proper levels of merchandise and successfully hiring and training store managers and sales associates. In order to optimize profitability for new stores, we must secure desirable retail lease space when opening stores in new and existing markets. We must choose store sites, execute favorable real estate transactions on terms that are acceptable to us, hire competent personnel and effectively open and operate these new stores. We historically have received landlord allowances for store build outs, which offset certain capital expenditures we must make to open a new store. If landlord allowances cease to be available to us in the future or are decreased, opening new stores would require increased capital outlays, which could adversely affect our ability to continue opening new stores.

While we believe the opportunity exists to open a substantial number of stores without competing with our existing units, to the extent we open new stores in markets where we have existing stores, our existing stores in those markets may experience reduced net sales. Moving or expanding store locations and operating stores in new markets may present competitive, merchandising and regulatory challenges we do not have experience in or know how to face. Our planned growth will also require additional infrastructure for the development, maintenance and monitoring of those stores. In addition, if our current management systems and information systems are insufficient to support this expansion, our ability to open new stores and to manage our existing stores would be adversely affected. If we fail to continue to improve our infrastructure, we may be unable to implement our growth strategy or maintain current levels of operating performance in our existing stores.

Our growth plans will place increased demands on our financial, operational, managerial and administrative resources. These increased demands may cause us to operate our business less efficiently, which in turn could cause deterioration in the performance of our existing stores.

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Executing our growth plans and achieving our objectives is dependent upon our ability to successfully execute against such plans and objectives. There can be no guarantee that these plans or objectives will result in improved operating results or an increase in the value of the business.

***We have, and will continue to have, significant lease obligations. We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs and the need to generate cash flow to meet our lease obligations.***

We have, and will continue to have, significant lease obligations. We lease all of our store locations and our corporate headquarters. We typically occupy our stores under operating leases with initial terms of up to ten years. In the future, we may not be able to negotiate favorable lease terms. Our inability to do so may cause our occupancy costs to be higher in future years or may force us to close stores in desirable locations.

A majority of our leases have early termination clauses, which permit the lease to be terminated by us if certain sales levels are not met in specific periods or if the center does not meet specified occupancy standards. In addition to future minimum lease payments, some of our store leases provide for additional rental payments based on a percentage of net sales, or "percentage rent," if sales at the respective stores exceed specified levels, as well as the payment of common area maintenance charges, real property insurance and real estate taxes. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. As we expand our footprint, our lease expense and our cash outlays for rent under the lease terms will increase.

We depend on cash flow from operations to pay our lease expenses. If our business does not generate sufficient cash flow from operating activities to fund these expenses, we may not be able to service our lease expenses, which could materially harm our business. Furthermore, the significant cash flow required to satisfy our obligations under the leases increases our vulnerability to adverse changes in general economic, industry and competitive conditions, and could limit our ability to fund working capital, incur indebtedness and make capital expenditures or other investments in our business.

If an existing or future store is not generating positive contribution, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. Our inability to enter into new leases or renew existing leases on terms acceptable to us or be released from our obligations under leases for stores that we close could materially adversely affect us.

***Our failure to attract and retain employees that reflect our brand image, embody our culture and possess the appropriate skill set could adversely affect our business and our results of operations.***

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of employees who understand and appreciate our corporate culture and customers and are able to adequately and effectively represent this culture and establish credibility with our customers. The employee turnover rate in the retail industry is generally high and worsened during the COVID-19 pandemic. Excessive employee turnover will result in higher employee costs associated with finding, hiring and training new employees. If we are unable to hire and retain personnel capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture, understanding of our customers and knowledge of the merchandise we offer, our ability to open new stores may be impaired, the performance of our existing and new stores could be materially adversely affected, our brand image may be negatively impacted and our results of operations may be adversely affected. Competition for such qualified individuals could require us to pay higher wages to attract a sufficient number of employees. Changes to our office environments, the adoption of new work models and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees. As businesses increasingly operate remotely, traditional geographic competition for talent may change in ways that we cannot presently predict. If our employment proposition is not perceived as favorable compared to other companies, it could negatively impact our ability to attract and retain our employees.

Additionally, our labor costs are subject to many external factors, including unemployment levels, prevailing wage rates, minimum wage laws, potential collective bargaining arrangements, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation (including changes in entitlement programs such as health insurance and paid leave programs). Such increase in labor costs may adversely impact our profitability, or if we fail to pay such higher wages we could suffer increased employee turnover.

While we have not historically experienced significant sales seasonality, we may require temporary personnel to adequately staff our stores, with heightened dependence during busy periods such as the holiday season and when multiple new

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stores are opening. There can be no assurance that we will receive adequate assistance from our temporary personnel, or that there will be sufficient sources of suitable temporary personnel to meet our demand. Any such failure to meet our staffing needs or any material increases in employee turnover rates could have a material adverse effect on our business or results of operations.

***We rely on third parties to provide us with certain key services for our business. If any of these third parties fails to perform its obligations to us or declines to provide services to us in the future, we may suffer a disruption to our business. Furthermore, we may be unable to provide these services or implement substitute arrangements on a timely basis on terms favorable to us.***

We receive certain key services from a range of different third parties, including merchandise vendors, landlords, suppliers and logistics partners. For example, we rely on third parties to provide certain inbound and outbound transportation and delivery services, customs and brokerage services and real estate management services. In connection with our sourcing activities, we rely on vendors to help us source products. If any of these third parties fails to perform its obligations to us or declines to provide services to us in the future, we may suffer a disruption to our business or increased costs. Furthermore, we may be unable to provide these services or implement substitute arrangements on a timely and cost-effective basis on terms favorable to us.

***Failure to effectively utilize information systems and implement new technologies could disrupt our business or reduce our sales or profitability.***

We rely extensively on various information systems, including data centers, hardware and software and applications to manage many aspects of our business, including to process and record transactions in our stores, to enable effective communication systems, to track inventory flow, to manage logistics and to generate performance and financial reports. These various systems are substantially operated by our services provider, and we rely on them for efficient and consistent operations of these systems. We are dependent on the integrity, security and consistent operations of these systems and related back-up systems. Our computer systems and the third-party systems we rely on are also subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses, malware, phishing or distributed denial-of-service attacks; security breaches; cyber-attacks; catastrophic events such as fires, floods, earthquakes, tornadoes and hurricanes; acts of war or terrorism and design or usage errors by our associates or contractors. Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.

From time to time, our systems require modifications and updates, including by adding new hardware, software and applications; maintaining, updating or replacing legacy programs; integrating new service providers; and adding enhanced or new functionality. Although we are actively selecting systems and vendors and implementing procedures to enable us to maintain the integrity of our systems when we modify them, there are inherent risks associated with modifying or replacing systems and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented. Potential issues associated with implementation of these technology initiatives could reduce the efficiency of our operations in the short term. In addition, any interruption in the operation of our website, particularly our e-Commerce site, could cause us to suffer reputational harm or to lose sales if customers are unable to access our site or purchase merchandise from us during such interruption. The efficient operation and successful growth of our business depends upon our information systems. The failure of our information systems and the third-party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby harm our profitability.

***Unauthorized disclosure of sensitive or confidential information, whether through a breach of our computer system or otherwise, could severely hurt our business.***

Some aspects of our business, like that of most direct-to-consumer businesses, involves the receipt, storage and transmission of customers' personal information, consumer preferences and payment card information, including in relation to our private label credit card, as well as confidential information about our associates, our suppliers and our Company, some of which is entrusted to third-party service providers and vendors. We increasingly rely on commercially available systems, software, tools (including encryption technology) and monitoring to provide security and oversight for processing, transmission, storage and the protection of confidential information. Despite the security measures we have in place, our facilities and systems, and those of third parties with which we do business, may be vulnerable to security breaches, acts of vandalism and theft, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Additionally, as a result of state-sponsored cyber threats including those stemming from the Russian invasion of Ukraine, we

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may face increased cybersecurity risks as companies in the United States and its allied countries have become targets of malicious cyber activity.

Electronic security attacks designed to gain access to sensitive information by breaching mission critical systems of large organizations are constantly evolving, and high profile electronic security breaches leading to unauthorized release of confidential information have occurred recently at a number of major U.S. companies. Attempts by computer hackers or other unauthorized third parties to penetrate or otherwise gain access to our computer systems or the systems of third parties with which we do business through fraud or other means of deceit, if successful, may result in the misappropriation of personal information, payment card or check information or confidential business information. Such incidents have been attempted or have occurred in the past, and may occur in the future. Hardware, software or applications we utilize may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. In addition, our associates, contractors or third parties with which we do business or to which we outsource business operations may attempt to circumvent our security measures in order to misappropriate such information, and may purposefully or inadvertently cause a breach involving such information. Despite advances in security hardware, software and encryption technologies, the methods and tools used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time. We are implementing and updating our processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However, the ever- evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our respective systems, procedures, controls and processes, and there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data.

An electronic security breach in our systems (or in the systems of third parties with which we do business) that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless occur and have a material adverse effect on our reputation and lead to financial losses from remedial actions, loss of business or potential liability, including possible punitive damages. In addition, as the regulatory environment relating to retailers and other companies' obligation to protect such sensitive data becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could result in additional costs, and a material failure on our part to comply could subject us to fines or other regulatory sanctions and potentially to lawsuits. Further, we could be required to expend significant capital and other resources to address any data security incident or breach, which may not be covered or fully covered by our insurance and which may involve payments for investigations, forensic analyses, legal advice, public relations advice, system repair or replacement or other services.

***Use of social media, emails and text messages may adversely impact our reputation or subject us to fines or other penalties.***

We use social media, emails, push notifications and text messages as part of our omni-channel approach to marketing. As laws and regulations evolve to govern the use of these channels, the failure by us, our employees or third parties acting at our direction to comply with applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines or other penalties. In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential or sensitive personal information of our business, employees, consumers or others. Information concerning us or our brands, whether accurate or not, may be posted on social media platforms at any time, including by social media influencers, and may have an adverse impact on our brand, reputation or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our reputation, business, operating results, financial condition and prospects.

***We may recognize impairments on long-lived assets.***

Our long-lived assets, primarily stores and intangible assets, are subject to periodic testing for impairment. Store assets are reviewed using factors including, but not limited to, our future operating plans and projected future cash flows. Failure to achieve our future operating plans or generate sufficient levels of cash flow at our stores could result in impairment charges on long-lived assets, which could have a material adverse effect on our financial condition or results of operations.

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**Risks Related to the Manufacturing, Processing and Supply of Our Products**

***We do not own or operate any manufacturing facilities and therefore depend upon third parties for the manufacture of all of our merchandise. The inability of a manufacturer to ship goods on time and to our specifications, or to operate in compliance with our guidelines or any other applicable laws, could negatively impact our business.***

We do not own or operate any manufacturing facilities. As a result, we are dependent upon our timely receipt of quality merchandise from third-party manufacturers. If our manufacturers do not ship orders to us in a timely manner or meet our quality standards, it could cause delays in responding to consumer demands or inventory shortages and negatively affect consumer confidence in the quality and value of our brand or negatively impact our competitive position. Any of these factors could have a material adverse effect on our financial condition or results of operations. Furthermore, we are susceptible to increases in sourcing costs, which we may not be able to pass on to customers, and changes in payment terms from manufacturers, which could adversely affect our financial condition and results of operations.

We maintain compliance guidelines for our vendors that dictate various standards, including product quality, manufacturing practices, labor compliance and legal compliance. If any of our manufacturers fail to comply with applicable laws or these guidelines, or engage in any socially unacceptable business practices, such as poor working conditions, child labor, disregard for environmental standards or otherwise, our brand reputation could be negatively impacted and our results of operations could in turn be materially adversely affected.

***The raw materials used to manufacture our products and our transportation and labor costs are subject to availability constraints and price volatility, including as a result of climate change related governmental actions, which could result in increased costs.***

The raw materials used to manufacture our merchandise are subject to availability constraints and price volatility caused by high demand for cotton, high demand for petroleum-based synthetic and other fabrics, weather conditions, supply conditions, government regulations, economic climate and other unpredictable factors. In addition, our transportation and labor costs are subject to price volatility caused by many of these same factors. Increases in the demand for, or the price of, raw materials used to manufacture our merchandise or increases in transportation or labor costs could each have a material adverse effect on our cost of sales or our ability to meet our customers' needs. We may not be able to pass all or a material portion of such increased costs on to our customers, which could negatively impact our profitability. Higher gasoline prices may also affect the willingness of consumers to drive to our stores or the shopping centers where they are located, and thereby adversely affect customer traffic. Continued rises in energy or other commodity costs could adversely affect consumer spending and demand for our products and increase our operating costs, either of which could have a material adverse effect on our financial condition and results of operations.

We are also subject to risks associated with new governmental mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate change impacts, which have resulted in, and are likely to continue resulting in, increased costs for us and our suppliers. Governmental requirements directed at regulating greenhouse gas emissions could cause us to incur expenses that we cannot recover or that will require us to increase the price of products we sell to the point that it impacts demand for those products.

***The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports.***

We purchase the majority of our merchandise outside of the United States through arrangements with various vendors. Political, social or economic instability in regions where our products are made, could cause disruptions in trade, including exports to the United States. Actions in various countries, particularly China and the United States, have created uncertainty with respect to tariff impacts on the costs of some of our merchandise. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed and timing of the tariffs. Other events that could also cause disruptions to our supply chain include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the imposition of additional trade law provisions or regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the imposition of additional duties, tariffs and other charges on imports and exports, including as a result of the trade war between China and the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• quotas imposed by bilateral textile agreements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• foreign currency fluctuations;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• natural disasters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• public health issues and epidemic diseases, their effects (including any disruptions they may cause) or the perception of their effects, such as the COVID-19 pandemic;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• theft;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrictions on the transfer of funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the financial instability or bankruptcy of manufacturers; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• significant labor disputes, such as dock strikes.

We cannot predict whether the countries in which our merchandise is manufactured, or may be manufactured in the future, will be subject to new or additional trade restrictions imposed by the United States or other foreign governments, including the likelihood, type or effect of any such restrictions. Trade restrictions, including new or increased tariffs or quotas, border taxes, embargoes, safeguards and customs restrictions against apparel items, as well as labor strikes and work stoppages or boycotts, could increase the cost or reduce or delay the supply of apparel available to us and adversely affect our business, financial condition or results of operations. See also "—We source a significant amount of our product receipts from China, which exposes us to risks inherent in doing business there" and "—Changes in tax laws or regulations or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and results of operations."

***We source a significant amount of our product receipts from China, which exposes us to risks inherent in doing business there.***

In fiscal year 2022, we sourced approximately 56% of our products from manufacturing partners in China. Additionally, our manufacturing partners outside of China may source their own raw materials from third parties in other countries, including China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future. Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor contracts, paying remuneration, determining the term of employees' probation and unilaterally terminating labor contracts. Our results of operations will be materially and adversely affected if the labor costs of our third-party suppliers and manufacturers increase significantly. In addition, we and our manufacturers and suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.

Sourcing our product receipts from China exposes us to political, legal and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. Our ability to source product receipts from China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, hygiene supervision and other matters. In addition, we may not obtain or retain the requisite legal permits to continue to source our product receipts from China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits. In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China. Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. Also, outbreaks of epidemic, pandemic, or contagious diseases, such as the ongoing COVID-19 outbreak originating in China, may adversely impact our ability to source products from China, including fabrics, or to source them in a timely manner. Such impacts on our sourcing could result from, among other things, disruptions from the temporary closure of third-party supplier and manufacturer facilities, restrictions on the export or shipment of our products or significant cutback of ocean container delivery from China. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected. See also "—The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports" and "—Changes in tax laws or regulations or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and results of operations."

***If our distribution facility were to encounter difficulties or if it were to shut down for any reason, we could face shortages of inventory in our stores, delayed shipments to our e-Commerce customers and harm to our reputation. Any of these issues, as well as loss of the use of our corporate offices due to natural disasters, public health issues or otherwise could have a material adverse effect on our business operations.***

We operate and are continuing to invest in our own distribution facility in West Jefferson, Ohio. The success of our stores depends on their timely receipt of merchandise. The efficient flow of our merchandise requires that our distribution facility be

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operated effectively and have adequate capacity to support our current level of operations and any anticipated increased levels that may follow from the growth of our business.

If we encounter difficulties associated with our distribution facility or our facility were to shut down for any reason, including as a result of fire or other natural disaster, public health issues (including COVID-19) or work stoppage, we could face shortages of inventory, resulting in "out of stock" conditions in our stores, incur significantly higher costs and longer lead times associated with distributing our products to both our stores and e-Commerce customers and experience dissatisfaction from our customers. Any of these outcomes could have a material adverse effect on our business and harm our reputation.

In addition to our distribution facility, our corporate offices are also vulnerable to damage from natural disasters, fire, public health issues and other unexpected events which could cause us to experience significant disruption in our business, resulting in lost sales and productivity, and causing us to incur significant costs to repair, any of which could have a material adverse effect on our business.

***We rely upon independent third-party transportation providers for substantially all of our product shipments and are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver on a timely basis.***

We currently rely upon independent third-party transportation providers for substantially all of our product shipments, including shipments to our distribution center, to and from all of our stores and to our customers. Our utilization of these delivery services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather which may impact a shipping company's ability to provide delivery services that adequately meet our shipping needs. If we change the shipping companies we use, we could face logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such change. Moreover, we may not be able to obtain terms as favorable as those received from our current independent third-party transportation providers which, in turn, would increase our costs.

**Risks Related to Government Regulation and Litigation**

***Failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection, or the expansion of current or the enactment of new laws, regulations or industry standards relating to privacy, data protection, advertising and consumer protection, could adversely affect our business, financial condition, and results of operations.***

We rely on a variety of marketing and advertising techniques, including email communications, affiliate partnerships, social media interactions, influencer partnerships, digital marketing, direct mailers and public relations initiatives, and we are subject to various laws, regulations and industry standards that govern such marketing and advertising practices. Increasingly complex and rigorous, and sometimes conflicting laws, regulatory standards, industry standards, external and internal privacy and security policies, contracts and other obligations govern the collection, use, retention, sharing and security of consumer data, particularly in the context of digital marketing, which we rely upon to attract new customers.

Laws, regulations and industry standards (including, for example, the Payment Card Industry Data Security Standard, or PCI-DSS) relating to privacy, data protection, marketing and advertising and consumer protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, standards, requirements and obligations. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities, customers, suppliers or others or other liabilities or may require us to change our operations and/or cease using certain data sets. Any such claims, proceedings or actions may also hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of customers, suppliers or vendors and result in the imposition of monetary penalties. We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.

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Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party "cookie" and other methods of online tracking for behavioral advertising and other purposes. The U.S. government has enacted, has considered or is considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which could if widely adopted result in the use of third-party cookies and other methods of online tracking becoming significantly less effective. The regulation of the use of these cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and, consequently, materially and adversely affect our business, financial condition, and results of operations.

In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising. For example, on January 1, 2023, the CPRA amendments to the CCPA came into force. Among other operational requirements for covered companies, the CCPA mandates that covered companies provide new disclosures to California consumers and afford such consumers data privacy rights that include, among other things, the right to request a copy from a covered company of the personal information collected about them, the right to request correction or deletion of such personal information, and the right to request to opt-out of certain sales, or disclosures for the purposes of cross-context behavioral advertising, of such personal information. The California Attorney General and a standalone California data privacy agency can enforce the CCPA, including seeking an injunction and civil penalties for violations. The CCPA also provides a private right of action for certain data breaches that is expected to increase data breach litigation. Four additional states (Virginia, Colorado, Utah and Connecticut) have enacted data privacy and security laws that have, or will in the near future, come into effect and other states may follow. This legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, and could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. Additionally, the FTC and many state attorneys general are interpreting existing federal and state consumer protection laws to impose expanded standards for the online collection, use, dissemination and security of data.

Foreign privacy laws are also undergoing a period of rapid change, have become more stringent in recent years and may increase the costs and complexity of offering our products and services in new geographies. In Canada, where we operate, the Personal Information Protection and Electronic Documents Act ("PIPEDA") and various provincial laws require that companies give detailed privacy notices to consumers; obtain consent to use personal information, with limited exceptions; allow individuals to access and correct their personal information; and report certain data breaches. In addition, Canada's Anti-Spam Legislation ("CASL") prohibits email marketing without the recipient's consent, with limited exceptions. Failure to comply with PIPEDA, CASL or provincial privacy or data protection laws could result in significant fines and penalties or possible damage awards.

In addition, the data protection landscape in the EU, EEA and UK is continually evolving and in some cases, laws or regulations in one country may be inconsistent with, or contrary to, those of another country. Tracking existing data privacy laws and regulations, new data privacy laws and regulations, and changes to the same over time, together with implementing compliance measures may result in possible significant operational costs for internal compliance and risks to our business. Compliance with the GDPR may require adhering to stringent legal and operational obligations and therefore the dedication of substantial time and financial resources by the business, which may increase over time (in particular in relation to any transfers of any personal data to third parties located in certain jurisdictions). Failure to comply with the GDPR may lead to the business incurring fines and/or facing other enforcement action or reputational damage. For example, failure to comply with the GDPR, depending on the nature and severity of the breach (and with a requirement on regulators to ensure any enforcement action taken is proportionate), could (in the worst case) attract regulatory penalties of up to the greater of (i) €20 million / £17.5 million (as applicable); and (ii) 4% of an entire group's total annual worldwide turnover, as well as the possibility of other enforcement actions (such as suspension of processing activities and audits), and liabilities from third-party claims.

Further, we are subject to the Payment Card Industry, or PCI, Data Security Standard, which is a multifaceted security standard that is designed to protect credit card account data as mandated by payment card industry entities. We rely on vendors to handle PCI matters and to ensure PCI compliance. Despite our compliance efforts, we may become subject to claims that we have violated the PCI Data Security Standard, based on past, present, and future business practices, which could have an adverse impact on our business and reputation.

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Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct. In addition, any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could adversely affect our business, financial condition and results of operations. Finally, any actual or perceived failure to comply with these laws could result in a costly investigation or litigation resulting in potentially significant liability and a material and adverse impact on our reputation and business.

***We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.***

We accept payments using a variety of methods, including cash, checks, credit and debit cards and gift cards, and we may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly.

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. As a result, our business and operating results could be adversely affected.

***There are claims made against us from time to time that can result in litigation or regulatory proceedings which could distract management from our business activities and result in significant liability.***

We face the risk of litigation and other claims against us. Litigation and other claims may arise in the ordinary course of our business and include commercial disputes, employment related claims, including wage and hour claims, intellectual property disputes, such as trademark, copyright and patent infringement disputes, consumer protection and privacy matters, product-related allegations and premises liability claims. In addition, we could face a wide variety of employee claims against us, including general discrimination, privacy, labor and employment, ERISA and disability claims.

Any claims could result in litigation against us and could also result in regulatory proceedings being brought against us by various federal and state agencies that regulate our business, including the United States Equal Employment Opportunity Commission, the FTC or the Consumer Product Safety Commission. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and could require significant management time. Litigation and other claims and regulatory proceedings against us could result in unexpected expenses, legal liability and injunctions against us or restrictions placed upon us, which could disrupt our operations, preclude us from selling products, or otherwise have a material adverse effect on our operations, financial results and our reputation.

In addition, we may be subject to liability if we infringe the trademarks or other intellectual property rights of third parties. If we were to be found liable for any such infringement, we could be required to pay substantial damages and could be subject to injunctions preventing further infringement. Such infringement claims could subject us to boycotts by our customers and harm to our brand image. In addition, any payments we are required to make and any injunctions we are required to comply with as a result of such infringement actions could adversely affect our financial results.

***Changes in laws, including employment laws and laws related to our merchandise, could make conducting our business more expensive or otherwise change the way we do business.***

We are subject to numerous laws and regulations, including labor and employment, product safety, customs, truth-in-advertising, consumer protection, privacy and zoning and occupancy laws and ordinances, intellectual property laws and other laws that regulate retailers generally and/or govern the import and export of goods, advertising and promotions, the sale of merchandise, product content and the operation of stores and warehouse facilities. If these regulations were to change or were

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violated by our management, employees, vendors, buying agents or trading companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations.

In addition to increased regulatory compliance requirements, changes in laws could make ordinary conduct of our business more expensive or require us to change the way we do business. For example, changes in federal and state minimum wage laws could raise the wage requirements for certain of our employees, which would likely cause us to reexamine our entire wage structure for stores. Other laws related to employee benefits and treatment of employees, including laws related to limitations on employee hours, work scheduling, supervisory status, leaves of absence, mandated health benefits or overtime pay, could also negatively impact us, such as by increasing compensation and benefits costs for overtime and medical expenses.

Moreover, changes in product safety or other consumer protection laws, environmental laws and other regulations could lead to increased compliance costs to us for certain merchandise, or additional labor costs associated with readying merchandise for sale. It is often difficult for us to plan and prepare for potential changes to applicable laws and future compliance costs related to such changes could be material to us. See "—Failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection, or the expansion of current or the enactment of new laws, regulations or industry standards relating to privacy, data protection, advertising and consumer protection, could adversely affect our business, financial condition, and results of operations."

***Changes in tax laws or regulations or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and results of operations.***

Changes in tax laws or regulations in any of the 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 result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition and operating results. For example, the U.S. government recently enacted the Inflation Reduction Act of 2022 (the "IR Act"), which includes changes to the U.S. corporate income tax system, including a 15% alternate 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 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. While we do not believe that the IR Act will have a material impact on our consolidated financial statements, any future corporate tax legislation could have that effect.

Additionally, recent political developments have introduced greater uncertainty with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries. We source the majority of our merchandise from manufacturers located outside of the U.S., including a significant amount from Asia. China and the United States have each previously imposed tariffs on exports from the other in a trade war, and an escalation of the trade war remains a possibility. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term. Further major developments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported products, could have a material adverse effect on our business, results of operations and liquidity. See also "—The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports" and "—We source a significant amount of our product receipts from China, which exposes us to risks inherent in doing business there."

Presidential and congressional elections in the United States could also result in significant changes in, and uncertainty with respect to, tax legislation, regulation and government policy directly affecting us and our business. For example, the United States government may enact significant changes to the taxation of business entities including, among others, a permanent increase in the corporate income tax rate, an increase in the tax rate applicable to the global intangible low-taxed income and elimination of certain exemptions, and the imposition of minimum taxes or surtaxes on certain types of income. The likelihood of these changes being enacted or implemented is unclear. We are currently unable to predict whether such changes will occur and, if so, the ultimate impact on us or our business. To the extent that such changes have a negative impact on us or our business, these changes may materially and adversely impact our business, financial condition and results of operations.

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***Government or consumer concerns about product safety could result in regulatory actions, recalls or changes to laws, which could harm our reputation, increase costs or reduce sales.***

We are subject to regulation by the Consumer Product Safety Commission and similar state and international regulatory authorities, and our products could be subject to involuntary recalls and other actions by these authorities. We purchase merchandise from suppliers domestically as well as outside the United States. One or more of our suppliers might not adhere to product safety requirements or our quality control standards, and we might not identify the deficiency before such merchandise is received by our customers. Issues of product safety could result in a recall of products we sell. Additionally, regulatory authorities, including the Consumer Product Safety Commission, have undertaken reviews of product safety and are in the process of enacting or are considering various proposals for more stringent laws and regulations. In particular, the Consumer Product Safety Improvement Act of 2008 imposes significant requirements on the sale of consumer products and enhanced penalties for noncompliance. Such regulations contain provisions which have uncertain applicability to products we sell, and such lack of certainty may inhibit our willingness to carry products or cause us to carry product we otherwise would not. These regulations could result in delays in getting products to our stores, lost sales, the rejection of our products by consumers, damage to our reputation or material increases in our costs, and may have a material adverse effect on our business. Moreover, individuals and organizations may assert legal claims for our non-compliance with consumer product rules and regulations, and we may be subject to lawsuits relating to these claims. There is a risk that these claims or liabilities may exceed or fall outside the scope of indemnities provided by third parties or outside the coverages of our insurance policies.

***We may be unable to protect our trademarks or other intellectual property rights, which could harm our business.***

We rely on certain trademark registrations and common law trademark rights to protect the distinctiveness of our brand. However, there can be no assurance that the actions we have taken to establish and protect our trademarks will be adequate to prevent imitation of our trademarks by others or to prevent others from claiming that sales of our products infringe, dilute or otherwise violate third-party trademarks or other proprietary rights that could block sales of our products.

The laws of certain foreign countries may not protect the use of unregistered trademarks to the same extent as do the laws of the United States. As a result, international protection of our brand image may be limited and our right to use our trademarks outside the United States could be impaired. Other persons or entities may have rights to trademarks that contain portions of our marks or may have registered similar or competing marks for apparel and/or accessories in foreign countries in which our vendors source our merchandise. There may also be other prior registrations of trademarks identical or similar to our trademarks in other foreign countries of which we are not aware. Accordingly, it may be possible for others to prevent the manufacture of our branded goods in certain foreign countries or the sale or exportation of our branded goods from certain foreign countries to the United States. If we were unable to reach a licensing arrangement with these parties, our vendors may be unable to manufacture our products in those countries. Our inability to register our trademarks or purchase or license the right to use the relevant trademarks or logos in these jurisdictions could limit our ability to obtain supplies from less costly markets or penetrate new markets in jurisdictions outside the United States.

Litigation may be necessary to protect and enforce our trademarks and other intellectual property rights, or to defend against claims by third parties alleging that we infringe, dilute or otherwise violate third-party trademarks or other intellectual property rights. Any litigation or claims brought by or against us, whether with or without merit, and whether successful or not, could result in substantial costs and diversion of our resources, which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property rights, could subject us to significant liabilities, require us to seek licenses on unfavorable terms, if available at all, prevent us from manufacturing or selling certain products, limit our ability to market or sell to our customers using certain methods or technologies and/or require us to redesign or re-label our products or rename our brand, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

**Risks Related to Our Indebtedness**

***Our indebtedness and lease obligations could adversely affect our financial flexibility and our competitive position.***

On June 14, 2021, we entered into the New Term Loan Credit Agreement in an initial aggregate amount of $350.0 million and used borrowings thereunder to, among other things, repay and terminate the Original Term Loan Credit Agreement. Our New Term Loan Credit Agreement has a maturity date of June 14, 2028. As of January 28, 2023, we had $329.2 million of outstanding indebtedness, net of unamortized original issue discount ("OID") and financing costs, consisting of loans under the New Term Loan Credit Agreement and borrowings under the Existing ABL, as amended. For a description of our debt service obligations, including mandatory repayments, under the New Term Loan Credit Agreement, see "Note 12—

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Debt Financing Arrangements." Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. We also have, and will continue to have, significant lease obligations. As of January 28, 2023, the estimated annual future occupancy payments for lease terms that include periods covered by options to extend some of our leases was $257.4 million. Our indebtedness and lease obligations could have other important consequences to you and significant effects on our business. For example, it could:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increase our vulnerability to adverse changes in general economic, industry and competitive conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness and leases, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrict us from pursuing business opportunities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make it more difficult to satisfy our financial obligations, including payments on our indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• place us at a disadvantage compared to our competitors that have less debt and fewer lease obligations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.

In addition, the New Term Loan Credit Agreement and the agreement governing the Existing ABL Facility, as amended, contain, and the agreements evidencing or governing any other future indebtedness may contain, restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness.

***Our indebtedness may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.***

The New Term Loan Credit Agreement and the agreement governing the Existing ABL Facility, as amended, contain, and the agreements evidencing or governing any other future indebtedness, may contain, financial restrictions on us and our restricted subsidiaries, including restrictions on our or our restricted subsidiaries' ability to, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• place liens on our or our restricted subsidiaries' assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make investments other than permitted investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incur additional indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prepay or redeem certain indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• merge, consolidate or dissolve;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• sell assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• engage in transactions with affiliates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change the nature of our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change our or our subsidiaries' fiscal year or organizational documents; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make restricted payments (including certain equity issuances).

In addition, we are required to maintain compliance with various financial ratios in the agreement governing the Existing ABL Facility, as amended.

A failure by us or our subsidiaries to comply with the covenants under the New Term Loan Credit Agreement or the agreement governing the Existing ABL Facility, as amended, or to maintain the required financial ratios contained in the agreement governing the Existing ABL Facility, as amended, could result in an event of default under such indebtedness, which could adversely affect our ability to respond to changes in our business and manage our operations. Additionally, a default by us under the New Term Loan Credit Agreement, the agreement governing the Existing ABL Facility, as amended, or an agreement governing any other future indebtedness may trigger cross-defaults under the New Term Loan Credit Agreement, the agreement governing the Existing ABL Facility, as amended, or any other future agreements governing our indebtedness. Upon the occurrence of an event of default or cross-default under any of the present or future agreements governing our indebtedness,

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the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements. If any of our indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have a material adverse effect on our ability to continue to operate as a going concern. See "Note 12—Debt Financing Arrangements."

**Risks Related to Ownership of Our Common Stock**

***We are a "controlled company" and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. In addition, Sycamore's interests may conflict with our interests and the interests of other stockholders.***

As of January 28, 2023, Sycamore Partners Management, L.P. ("Sycamore") controlled the voting power of a majority of our common stock. As a result, we are a "controlled company" within the meaning of the applicable stock exchange corporate governance standards. Under the rules of the NYSE, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the requirement that a majority of our board of directors consists of independent directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the requirement that nominating and corporate governance matters be decided solely by independent directors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the requirement that employee and officer compensation matters be decided solely by independent directors.

So long as Sycamore controls a majority of the voting power of our common stock, we intend to utilize these exemptions. As a result, we may not have a majority of independent directors and our nominating and corporate governance and compensation functions may not be decided solely by independent directors. Accordingly, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the stock exchange corporate governance requirements.

The interests of Sycamore and its affiliates, which include Hot Topic, could conflict with or differ from our interests or the interests of our other stockholders. For example, the concentration of ownership held by Sycamore could delay, defer or prevent a change of control of our Company or impede a merger, takeover or other business combination which may otherwise be favorable for us and our other stockholders. Additionally, Sycamore is in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete, directly or indirectly, with us. Sycamore may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as Sycamore continues to directly or indirectly own a significant amount of our common stock, even if such amount is less than a majority thereof, Sycamore will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

***Our stock price has been volatile or may decline regardless of our operating performance.***

The market price for our common stock has been, and may continue to be, volatile. The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• quarterly variations in our operating results compared to market expectations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in preferences of our customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• announcements of new products, significant price reductions or other strategic actions by us or our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• public reactions to our press releases, public announcements and/or filings with the SEC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• speculation in the press or investment community;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• size of our public float;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• stock price performance and valuations of our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• fluctuations in stock market prices and volumes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• default on our indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actions by competitors or other shopping center tenants;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in senior management or key personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actions by our stockholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in financial estimates by securities analysts or our failure to meet any such estimates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• negative earnings or other announcements by us or other retail apparel companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• downgrades in our credit ratings or the credit ratings of our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• issuances (or sales by our stockholders) of capital stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• general market conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• global economic, legal and regulatory factors unrelated to our performance; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the realization of any of the risks described in this section, or other risks that may materialize in the future.

Numerous factors affect our business and cause variations in our operating results and affect our net sales and comparable store sales, including consumer preferences, buying trends and overall economic trends; our ability to identify and respond effectively to product trends and customer preferences; changes in the population of our target segment; actions by competitors and other shopping center tenants; changes in our merchandise mix; pricing; the timing of our releases of new merchandise and promotional events; the level of customer service that we provide in our stores; changes in sales mix among sales channels; our ability to source and distribute products effectively; inventory shrinkage; weather conditions, particularly during the holiday season; and the number of stores we open, close and convert in any period.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many retail companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

***Sales of substantial amounts of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.***

Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares.

In the future, we may also issue securities if we need to raise capital. The amount of shares of our common stock issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Our stockholders may experience immediate dilution upon such future equity issuances or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our stock option and incentive plans.

***Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.***

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the merger or acquisition of our Company more difficult without the approval of our board of directors. Among other things, these provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• would allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prohibit stockholder action by written consent from and after the date on which Sycamore, Sycamore Partners Torrid, L.L.C. and each of their respective affiliates (the "Sycamore Investors") cease to beneficially own at least 50% of the total voting power of all then outstanding shares of our common stock (the "Trigger Event") unless such action is recommended by all directors then in office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws and that from and after the Trigger Event our stockholders may only amend our bylaws with the approval of 75% or more of all of the outstanding shares of our capital stock entitled to vote; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Further, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our Company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and to cause us to take other corporate actions that they desire.

***We do not expect to pay any cash dividends for the foreseeable future.***

The continued operation and expansion of our business will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, our operating subsidiaries are currently restricted from paying cash dividends by the agreements governing their indebtedness, and we expect these restrictions to continue in the future.

***If we are unable to design, implement and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), we may not be able to report our financial results in a timely and reliable manner, which could have a material adverse effect on our business and stock price.***

As a public company, we have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. If we are unable to establish or maintain appropriate internal controls over financial reporting, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and harm our operating results. In addition, we are required to comply with the SEC's rules implementing Sections 302 and 404 of Sarbanes-Oxley, which require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Testing and maintaining internal controls may divert our management's attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of Sarbanes-Oxley.

If we are unable to conclude that we have effective internal control over financial reporting or material weaknesses or control deficiencies occur in the future, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements and investors may lose confidence in our financial reporting, which could have a material adverse effect on the trading price of our stock.

***Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with the Company or the Company's directors, officers or other employees.***

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threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternate forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. We note that there is uncertainty as to whether a court would enforce the choice of forum provision with respect to claims under the federal securities laws, and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provisions in our amended and restated certificate of incorporation. This choice-of-forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company's directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

**General Risk Factors**

***Our operations and financial performance have been affected by, and may continue to be affected by, infectious disease outbreaks, such as the COVID-19 pandemic.***

We could be adversely affected by infectious disease outbreaks, such as COVID-19. The spread of COVID-19 disrupted, and may continue to disrupt, local, regional and global economies and businesses in the countries in which we operate, as well as adversely affected workforces, customers, consumer sentiment, economies and financial markets, and impacted our financial results. The COVID-19 outbreak, including the spread of COVID-19 variants, caused a disruption in our supply chain and has adversely impacted economic conditions in North America, Europe, China and elsewhere. These and other disruptions, as well as poor economic conditions generally, may lead to a decline in the sales and operating results of our omni-channel business. In addition, the continuation of the global outbreak of COVID-19, or any other future pandemic, may adversely affect the economies and financial markets of many countries and could result in a sustained reduction in the demand for our products. A decline in the sales and operating results of our products could in turn materially and adversely affect our ability to pursue our growth strategy. Each of these results would reduce our future sales and profit margins, which in turn could materially and adversely affect our business and results of operations. To the extent the COVID-19 pandemic, or any other future pandemic, adversely affects our business, financial condition, results of operations, cash flows and prospects, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section, such as those relating to our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

***We depend on key members of our executive management team and may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business.***

We depend on the leadership and experience of key members of our executive management team. The loss of the services of any of our executive management could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. In addition, we believe that our future success will depend greatly on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in the retail industry. Our inability to meet our staffing requirements in the future could impair our growth and harm our business.

***If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.***

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

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***The requirements of being a public company may strain our resources, divert management's attention and affect our ability to attract and retain qualified board members.***

As a public company, we are subject to certain reporting requirements. We have incurred, and will continue to incur, significant costs associated with complying with the requirements of the Exchange Act, Sarbanes-Oxley and any rules promulgated thereunder, as well as the rules of the NYSE. The requirements of these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The expenses incurred by public companies generally for reporting and corporate governance purposes have also been increasing. We may need to hire additional accounting, finance and other personnel in connection with our continued efforts to comply with these requirements, and our management and other personnel will continue to devote a substantial amount of time toward maintaining compliance with these requirements. The various laws and regulations applicable to public companies also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

***War, terrorism and other catastrophes could negatively impact our customers, places where we do business and our &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;expenses.***

The continued threat of armed conflicts, war, political instability, terrorism, heightened security and military action in response to this threat, any future acts of terrorism, and significant natural disasters, public health issues or other catastrophic events may cause disruptions and create uncertainties that affect our business. To the extent that such disruptions or uncertainties negatively impact commercial transportation and shipping, shopping patterns and/or shopping center traffic, or adversely affect consumer confidence or the economy in general, our business, operating results and financial condition could be materially and adversely affected. A significant natural disaster, public health issue or other catastrophic event affecting our facilities could materially affect our supply chain, our information system and other aspects of our operations.

**Item 1B. Unresolved Staff Comments**

None.

**Item 2. Properties**

We are headquartered in City of Industry, California. Our principal executive offices are leased under a lease agreement expiring in 2024, with options to renew thereafter. We do not own any real property.

As of January 28, 2023, we operated 639 stores in 50 U.S. states, Puerto Rico and Canada. Our stores are located primarily in premium malls, strip centers, lifestyle centers or outlet locations. They perform consistently across all formats because, we believe, our stores serve as a shopping destination for our customers and are therefore less dependent on broader traffic trends. The average size of our stores is approximately 3,100 square feet. All of our stores are leased from third parties and we expect new leases to have initial terms of six years based on current discussions. A majority of our store leases, including all new leases signed since fiscal year 2013 include performance-based early termination provisions or "kickout" clauses. These clauses provide us the contractual flexibility to exit a store or renegotiate rent in the event a store's performance deteriorates. Approximately 70% of current leases will have a termination or kickout within 3 years of the end of fiscal year 2022, providing us with significant flexibility. The average remaining lease term was 3.4 years as of January 28, 2023, before the assumed benefit of kickout clauses. Assuming termination of each lease at the earlier of its first available kickout date or full term, the average remaining lease term was 2.0 years as of January 28, 2023. Substantially all of our store leases also include early termination provisions based on co-tenancy requirements for the shopping center. Given the positive performance trajectory of our stores, we have historically exercised these kick-out or co-tenancy termination provisions on a limited basis. As of January 28, 2023, 56% of our total leases were on variable rent structures, providing additional flexibility to our store fleet going forward. A number of our leases have built-in options to extend our tenancy for periods of up to five years.

Generally, store leases contain standard provisions concerning the payment of rent, events of default and the rights and obligations of each party. Rent due under the leases is generally comprised of annual base rent and sometimes includes a contingent rent payment based on the store's sales in excess of a specified threshold. The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise.

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The table below sets forth the number of Torrid stores by U.S. state or territory or Canadian province that we operated as of January 28, 2023.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **U.S. State** | **Number<br>of Stores** | **U.S. State** | **Number<br>of Stores** | **U.S. State** | **Number<br>of Stores** |
| AK | 2 | ME | 2 | SC | 6 |
| AL | 7 | MI | 22 | SD | 2 |
| AR | 6 | MN | 14 | TN | 15 |
| AZ | 15 | MO | 12 | TX | 57 |
| CA | 59 | MS | 5 | UT | 7 |
| CO | 12 | MT | 2 | VA | 15 |
| CT | 8 | NC | 17 | VT | 1 |
| DE | 2 | ND | 3 | WA | 16 |
| FL | 36 | NE | 3 | WI | 15 |
| GA | 19 | NH | 6 | WV | 5 |
| HI | 3 | NJ | 18 | WY | 1 |
| IA | 8 | NM | 5 |  |  |
| ID | 3 | NV | 7 |  | **Number <br>of Stores** |
| IL | 23 | NY | 19 | **Canada** | **Number <br>of Stores** |
| IN | 17 | OH | 28 | CAN-AB | 4 |
| KS | 3 | OK | 7 | CAN-BC | 2 |
| KY | 9 | OR | 8 | CAN-MB | 1 |
| LA | 10 | PA | 25 | CAN-NB | 1 |
| MA | 10 | PR | 2 | CAN-ON | 18 |
| MD | 12 | RI | 2 | CAN-WN | 2 |

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**Item 3. Legal Proceedings**

From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. We are not presently party to any legal proceedings the resolution of which we believe 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.

**Item 4. Mine Safety Disclosures**

Not applicable.

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**Part II**

**Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**

Our common stock is listed on the New York Stock Exchange under the symbol "CURV" and began trading on July 1, 2021. Prior to that date there was no public trading market for our common stock. Our website is www.torrid.com. The number of holders of record of our common stock as of March 22, 2023 was 35.

**Stock Performance Graph**

This performance graph shall not be deemed "filed" with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing of Torrid Holdings Inc. under the Securities Act or the Exchange Act.

The graph below presents our cumulative total shareholder returns on our common stock relative to the performance of the S&P 500 Index and the S&P Retail Select Industry Index. The graph assumes $100 was invested at the market close on July 1, 2021, which was the first day our common stock began trading and its relative performance is tracked through January 27, 2023. Data for the S&P 500 Index and the S&P Retail Select Industry Index assume reinvestment of dividends, if any. The graph uses the closing market price on July 1, 2021 of $24.15 per share as the initial value of our common stock. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.

![thi-20230128_g1.jpg](thi-20230128_g1.jpg)

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| | | |
|:---|:---|:---|
| **(in dollars)** | **July 1, 2021** | **January 28, 2023** |
| Torrid Holdings Inc. | $100.00 | $15.36 |
| S&P 500 | $100.00 | $94.23 |
| S&P 500 Retail Select Industry | $100.00 | $71.18 |

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**Dividends**

We have never declared nor paid any cash dividends on our common stock. We currently do not expect to pay any dividends on our common stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, our operating

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subsidiaries are currently restricted from paying cash dividends by the agreements governing their indebtedness, and we expect these restrictions to continue in the future. We are not obligated to pay dividends on our common stock.

**Recent Sales of Unregistered Securities and Use of Proceeds**

None.

**Share Repurchases**

On December 6, 2021, our board of directors 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. During the three months ended January 28, 2023, we did not repurchase any shares of our common stock. As of January 28, 2023, we had approximately $44.9 million remaining under the repurchase program.

**Item 6. [Reserved]**

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**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations**

*The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled "Risk Factors."*

**Overview**

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. Our proprietary product offering delivers a superior fit for the curvy woman that makes her love the way she looks and feels. Our style is unapologetically youthful and sexy. We believe our customer values the appeal and versatility of our curated product assortment that helps her look her best for any occasion, including weekend, casual, work and dressy, all at accessible price points. Through our product and brand experience we connect with customers in a way that other brands, many of which treat plus-size customers as an after-thought, have not.

**Key Financial and Operating Metrics**

We use the following metrics to assess the progress of our business, inform how we allocate our time and capital, and assess the near-term and longer-term performance of our business.

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **(in thousands, except net sales per active customer, number of<br>stores and percentages)** | **(in thousands, except net sales per active customer, number of<br>stores and percentages)** | **(in thousands, except net sales per active customer, number of<br>stores and percentages)** |
| | **January 28, 2023** | **January 29, 2022** | **January 30, 2021** |
| Active customers (as of end of period)<sup>(A)</sup> | 3902 | 3821 | 3182 |
| Net sales per active customer<sup>(A)</sup> | $330 | $340 | $309 |
| Comparable sales<sup>(B)</sup> | (3)% | 31% | (7)% |
| Number of stores (as of end of period) | 639 | 624 | 608 |
| Net income (loss) | $50209 | $(29944) | $24532 |
| Adjusted EBITDA<sup>(C)</sup> | $152350 | $245853 | $100797 |

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(A)Active customers and net sales per active customer calculated on a preceding four quarters basis.

(B)The computation of comparable sales includes results from stores that were temporarily closed due to COVID-19.

(C)Please refer to "Results of Operations" for a reconciliation of net income (loss) to Adjusted EBITDA.

***Active Customers.*** We define an active customer as a distinct, identifiable customer who has completed at least one purchase transaction either in-store or online in the preceding four quarters. We are able to identify the vast majority of our customers primarily through our robust loyalty program, which gives us access to extensive customer and sales data. We have improved our customer tracking capabilities and have grown the proportion of our net sales attributable to active customers over time. The proportion of net sales, excluding PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies"), that we are able to attribute to active customers was 97% for fiscal year 2022, 97% for fiscal year 2021 and 98% for fiscal year 2020. As a result, historical year-over-year growth in active customers may factor in increases attributable to our improved capabilities. We view the number of active customers as a key indicator of our growth, the reach of our e-Commerce and stores platform, the value proposition and consumer awareness of our brand and our customers' desire to purchase our products.

***Net Sales per Active Customer.*** We define net sales per active customer for any given period as the net sales in the preceding four quarters, divided by the total number of active customers at the end of that period. We view net sales per active customer as a key indicator of our customers' purchasing patterns, including their initial and repeat purchase behavior and intend to closely monitor this metric going forward.

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***Comparable Sales.*** We define comparable sales for any given period as the sales of our e-Commerce operations and stores that we have included in our comparable sales base during that period. We include a store in our comparable sales base after it has been open for 15 full fiscal months. If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. The computation of comparable sales includes results from stores that were temporarily closed due to COVID-19. Partial fiscal months are excluded from the computation of comparable sales. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of new store openings. We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of non-comparable sales.

***Number of Stores****.* Store count reflects all stores open at the end of a reporting period. In connection with opening new stores, we incur pre-opening costs, which primarily consist of payroll, travel, training, marketing, initial opening supplies, costs of transporting initial inventory and fixtures to store locations, and occupancy costs incurred from the time of possession of a store site to the opening of that store. These pre-opening costs are included in our selling, general and administrative expenses and are expensed as incurred.

***Adjusted EBITDA.*** Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with GAAP and our calculation 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 less (benefit from) income taxes, depreciation and amortization ("EBITDA"), and share-based compensation, noncash deductions and charges and other expenses. We believe Adjusted EBITDA facilitates 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.

Adjusted EBITDA has limitations as an analytical tool. This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to or substitutes for net income (loss), income (loss) from operations or any other performance measures determined in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Among other limitations, Adjusted EBITDA does not reflect:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• interest expense;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• interest income, net of other expense (income);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provision for income taxes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• depreciation and amortization;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• share-based compensation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• noncash deductions and charges; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other expenses.

**Material Events and Uncertainties Affecting Our Performance**

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and elsewhere in this Annual Report on Form 10-K in the section titled "Risk Factors."

***Customer Acquisition and Retention.*** Our success is impacted not only by efficient and profitable customer acquisition, but also by our ability to retain customers and encourage repeat purchases. It is important to maintain reasonable costs for these marketing efforts relative to the net sales and profit we expect to derive from customers. Failure to effectively attract customers on a cost-efficient basis would adversely impact our profitability and operating results. New requirements for consumer disclosures regarding privacy practices, and new application tracking transparency framework that requires opt-in consent for certain types of tracking were implemented by third party providers in 2021, which has increased the difficulty and cost of acquiring and retaining customers. These changes may adversely affect our results of operations.

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***Customer Migration from Single to Omni-channel.*** We have a history of converting customers from single-channel customers to omni-channel customers, defined as active customers who shopped both online and in-store within the last twelve months. Customers that shop across multiple channels purchase from us more frequently and spent approximately 3.4 times more per year than our single-channel customer.

***Overall Economic Trends.*** Our results of operations during any given period are often impacted by the overall economic conditions in the markets in which we operate. Consumer purchases of clothing generally remain constant or may increase during stable economic periods and decline during recessionary periods, inflationary periods and other periods when disposable income is adversely affected. Recent historic high rates of inflation have led to a softening of consumer demand. We have encountered inflation on our wages, transportation and product costs, and a material increase in these costs without any meaningful offsetting price increases may reduce our future profits. Additionally, the COVID-19 pandemic may continue to have a materially adverse impact on the macroeconomic environment in the United States as well as our results of operations.

***Demographic Changes.*** Our business has experienced growth over recent periods due, in part, to an increase in the plus-size population. Slower or negative growth in this demographic, in particular among women ages 25 to 40, specific to certain geographic markets, income levels or overall, could adversely affect our results of operations.

***Growth in Brand Awareness.*** We intend to continue investing in our brand, with a specific focus on growing brand awareness, customer engagement, and conversion through targeted investments in performance and brand marketing. We have made significant historical investments to strengthen the Torrid brand through our marketing efforts, brand partnerships, events and expansion of our social media presence. If we fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability may be adversely affected.

***Inventory Management.*** Our strategy is built around a base of core products that provide our customer with year-round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers. We employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews. We engage in ongoing dialogue with customers through social media and customer surveys. Shifts in inventory levels may result in fluctuations in the amount of regular price sales, markdowns, and merchandise mix, as well as gross margin.

***Impact of COVID-19****.* The COVID-19 pandemic has caused general business disruption worldwide. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are uncertain. A resurgence in the pandemic or the emergence of new variants of the coronavirus could have a negative impact on our business including, but not limited to, new closure requirements with respect to some or all of our physical locations, changes in consumer behavior, difficulties attracting and retaining employees and supply chain disruptions.

***Investments.*** We have invested significantly to strengthen our business, including augmenting leadership across our organization and enhancing our infrastructure and technology, and have delivered significant growth as a result. In order to realize such growth, we anticipate that our operating expenses will grow as we continue to increase our spending on advertising and marketing and hire additional personnel primarily in marketing, product design and development, merchandising, technology, operations, customer service and general and administrative functions. We will also continue to selectively expand our store footprint and make investments to improve the customer experience both in-store and online. We believe that such investments will increase the number and loyalty of our customers and, as a result, yield positive financial performance in the long term.

***Seasonality.*** While seasonality frequently impacts businesses in the retail sector, our business is generally not seasonal. Accordingly, our net sales do not fluctuate as significantly as those of other brands and retailers from quarter to quarter and any modest seasonal effect does not significantly change the underlying trends in our business. Additionally, we do not generate an outsized share of our net sales or Adjusted EBITDA during the holiday season. Typically, our Adjusted EBITDA generation is strongest in the first half of the year as we benefit from more favorable merchandise margins, lower advertising and lower shipping expenses relative to the second half of the year. The lack of net sales seasonality provides structural cost advantages relative to peers, including reduced staffing cyclicality and seasonal distribution capacity needs.

**Components of Our Results of Operations**

In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") we receive pursuant to the Credit Card

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Agreement (as defined in "Note 2–Summary of Significant Accounting Policies"). Historically, we recorded PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") 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 (as defined in "Note 2–Summary of Significant Accounting Policies") 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 (as defined in "Note 2–Summary of Significant Accounting Policies") 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.

***Net Sales.*** Net sales reflects our revenues from the sale of our merchandise, shipping and handling revenue received from e-Commerce sales, PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") and gift card breakage income, less returns, discounts and loyalty points/awards. Revenue from our stores is recognized at the time of sale and revenue from our e-Commerce channel is recognized upon shipment of the merchandise to the home of the customer; except in cases where the merchandise is shipped to a store and revenue is recognized when the customer retrieves the merchandise from the store. 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 (i.e., customers shopping only in-store or online) to omni-channel customers (i.e., customers shopping both in-store and online), who on average spend significantly more than single-channel customers in a given year.

***Gross Profit.*** Gross profit is equal to our net sales less cost of goods sold. Our cost of goods sold includes merchandise costs, freight, inventory shrinkage, payroll expenses associated with the merchandising department, distribution center expenses and store occupancy expenses, including rent, common area maintenance charges, real estate taxes and depreciation. Merchandising payroll costs and store occupancy costs included within cost of goods sold are largely fixed and do not necessarily increase as volume increases. We review our inventory levels on an ongoing basis in order to identify slow-moving merchandise and generally use markdowns to clear that merchandise. The timing and level of markdowns are driven primarily by customer acceptance of our merchandise. The primary drivers of our merchandise costs include the raw materials, labor in the countries where we source our merchandise, customs duties, and logistics costs.

***Selling, General and Administrative Expenses.*** Selling, general and administrative expenses include all operating costs not included in cost of goods sold or marketing expenses. Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. For instance, we continue to make payroll investments to support our long-term growth.

***Marketing Expenses.*** We continue to make investments in marketing in an effort to grow and retain our active customer base and increase our brand awareness. Marketing expenses consist primarily of (i) targeted online performance marketing costs, such as retargeting, paid search/product listing advertising, and social media advertisements, (ii) store and brand marketing, public relations and photographic production designed to acquire, retain and remain connected to customers and (iii) payroll and benefits expenses associated with our marketing team.

***Interest Expense.*** Interest expense consists primarily of interest expense and other fees associated with our Existing ABL Facility, as amended and New Term Loan Credit Agreement.

***Provision for Income Taxes.*** Our provision for income taxes consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions and uncertain tax positions.

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**Results of Operations**

***Fiscal Year 2022 Compared to Fiscal Year 2021***

The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28, 2023** | **% of Net<br>Sales** | **January 29, 2022** | **% of Net<br>Sales** |
| Net sales<sup>(A)</sup> | $1288144 | 100.0% | $1297271 | 100.0% |
| Cost of goods sold | 828605 | 64.3% | 759826 | 58.6% |
| Gross profit | 459539 | 35.7% | 537445 | 41.4% |
| Selling, general and administrative expenses<sup>(A)</sup> | 297973 | 23.1% | 439409 | 33.8% |
| Marketing expenses | 59941 | 4.7% | 52654 | 4.1% |
| Income from operations | 101625 | 7.9% | 45382 | 3.5% |
| Interest expense | 29736 | 2.3% | 29497 | 2.3% |
| Interest income, net of other expense | 207 | 0.0% | 56 | 0.0% |
| Income before provision for income taxes | 71682 | 5.6% | 15829 | 1.2% |
| Provision for income taxes | 21473 | 1.7% | 45773 | 3.5% |
| Net income (loss) | $50209 | 3.9% | $(29944) | (2.3)% |

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(A)In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") in the consolidated statements of operations and comprehensive income (loss). The reclassification is applied retrospectively to all prior periods presented. See "Note 2–Summary of Significant Accounting Policies" for further information.

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

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| | | |
|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28, 2023** | **January 29, 2022** |
| Net income (loss) | $50209 | $(29944) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense | 29736 | 29497 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income, net of other expense | 207 | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | 21473 | 45773 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization<sup>(A)</sup> | 36074 | 35204 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation<sup>(B)</sup> | 9980 | 159754 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncash deductions and charges<sup>(C)</sup> | 2493 | 615 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expenses<sup>(D)</sup> | 2178 | 4898 |
| Adjusted EBITDA | $152350 | $245853 |

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(A)Depreciation and amortization excludes amortization of debt issuance costs and original issue discount that are reflected in interest expense.

(B)Prior to the consummation of our IPO on July 6, 2021, share-based compensation was determined based on the remeasurement of our liability-classified incentive units.

(C)Noncash deductions and charges includes losses on property and equipment disposals and the net impact of noncash rent expense.

(D)Other expenses include IPO-related transaction fees, severance costs for certain key management positions and the reimbursement of certain management expenses, primarily for travel, incurred by Sycamore on our behalf, which are not considered to be part of our core business.

*Net Sales*

Net sales for fiscal year 2022 decreased $9.2 million, or 0.7%, to $1,288.1 million, from $1,297.3 million for fiscal year 2021. This decrease was primarily driven by a decrease in average sales transaction value relative to fiscal year 2021, as a result of increased promotional activity, partially offset by a $15.5 million increase in PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies"). Active customers increased 0.1 million, or 2.1%, to 3.9 million at the end of fiscal year 2022, from 3.8 million at the end of fiscal year 2021. Net sales per active customer decreased by $10 from $340 in fiscal year 2021 to $330 in fiscal year 2022. Comparable sales decreased 3.0%. The total number of stores we operate increased by 15

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stores, or 2.4%, to 639 stores at the end of fiscal year 2022, from 624 stores at the end of fiscal year 2021. Our new store openings during fiscal year 2022 include an eight-location test concept of our intimates brand, Curve.

*Gross Profit*

Gross profit for fiscal year 2022 decreased $77.9 million, or 14.5%, to $459.5 million, from $537.4 million for fiscal year 2021. This decrease was primarily due to increases in discounts and promotions related to inventory clearance activity, and product and transportation costs, primarily as a result of inflation. Gross profit as a percentage of net sales decreased 5.7% to 35.7% in fiscal year 2022 from 41.4% in fiscal year 2021. This decrease was primarily driven by increases in discounts and promotions related to inventory clearance activity, product costs and e-Commerce shipping costs. The increases in product and e-Commerce shipping costs were primarily as a result of inflation.

*Selling, General and Administrative Expenses*

Selling, general and administrative expenses for fiscal year 2022 decreased $141.4 million, or 32.2%, to $298.0 million, from $439.4 million for fiscal year 2021. The decrease was primarily due to a $149.8 million decrease in share-based compensation expense and a $19.4 million decrease in performance bonuses, partially offset by increases in store and e-Commerce payroll costs of $16.6 million, primarily due to inflationary pressures, headquarters general and administrative expenses of $6.8 million and other store operating costs of $3.4 million. The decrease in share-based compensation expense during fiscal year 2022 was due to an increase in the Torrid Holding LLC equity value during fiscal year 2021. Selling, general and administrative expenses as a percentage of net sales decreased 10.7% to 23.1% in fiscal year 2022 from 33.8% in fiscal year 2021. This decrease was driven by decreased share-based compensation expense and performance bonuses, partially offset by increases in store and e-Commerce payroll costs, primarily due to inflationary pressures, and other store operating costs.

*Marketing Expenses*

Marketing expenses for fiscal year 2022 increased $7.3 million, or 13.8%, to $59.9 million, from $52.7 million for fiscal year 2021. This increase was primarily due to increased television and digital marketing, partially offset by decreased direct mail program spend. Marketing expenses as a percentage of net sales increased by 0.6% to 4.7% in fiscal year 2022 from 4.1% in fiscal year 2021. This increase was primarily driven by increased television and digital marketing.

*Interest Expense*

Interest expense was $29.7 million for fiscal year 2022, compared to $29.5 million for fiscal year 2021. The increase was primarily due an increase in the variable interest rate associated with the New Term Loan Credit Agreement and an increase in borrowings on the Existing ABL Facility, as amended, during fiscal year 2022 compared to fiscal year 2021, partially offset by the absence of the write-off of $5.2 million of unamortized deferred financing costs and OID when we repaid the amended term loan credit agreement ("Amended Term Loan Credit Agreement"), and the absence of the $2.1 million prepayment penalty.

*Provision for Income Taxes*

The provision for income taxes for fiscal year 2022 decreased by $24.3 million to $21.5 million, from $45.8 million for fiscal year 2021. Our effective tax rate was 30.0% for fiscal year 2022 as compared to 289.2% for fiscal year 2021. The unconventional effective tax rate for fiscal year 2021 was primarily due to the increase in the amount of non-deductible items associated with share-based compensation, relative to income before provision for income taxes for fiscal year 2021. The increase in the amount of non-deductible items associated with share-based compensation during fiscal year 2021 was driven by a $111.4 million remeasurement adjustment related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO.

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***Fiscal Year 2021 Compared to Fiscal Year 2020***

The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 29, 2022** | **% of Net<br>Sales** | **January 30, 2021** | **% of Net<br>Sales** |
| Net sales<sup>(A)</sup> | $1297271 | 100.0% | $984170 | 100.0% |
| Cost of goods sold | 759826 | 58.6% | 643215 | 65.4% |
| Gross profit | 537445 | 41.4% | 340955 | 34.6% |
| Selling, general and administrative expenses<sup>(A)</sup> | 439409 | 33.8% | 232754 | 23.6% |
| Marketing expenses | 52654 | 4.1% | 51382 | 5.2% |
| Income from operations | 45382 | 3.5% | 56819 | 5.8% |
| Interest expense | 29497 | 2.3% | 21338 | 2.2% |
| Interest income, net of other expense (income) | 56 | 0.0% | (42) | 0.0% |
| Income before provision for income taxes | 15829 | 1.2% | 35523 | 3.6% |
| Provision for income taxes | 45773 | 3.5% | 10991 | 1.1% |
| Net (loss) income | $(29944) | (2.3)% | $24532 | 2.5% |

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(A)In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") in the consolidated statements of operations and comprehensive income (loss). The reclassification is applied retrospectively to all prior periods presented. See "Note 2–Summary of Significant Accounting Policies" for further information.

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

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| | | |
|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 29, 2022** | **January 30, 2021** |
| Net (loss) income | $(29944) | $24532 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense | 29497 | 21338 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income, net of other expense (income) | 56 | (42) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | 45773 | 10991 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization<sup>(A)</sup> | 35204 | 33072 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation<sup>(B)</sup> | 159754 | 7791 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncash deductions and charges<sup>(C)</sup> | 615 | 1984 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expenses<sup>(D)</sup> | 4898 | 1131 |
| Adjusted EBITDA | $245853 | $100797 |

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(A)Depreciation and amortization excludes amortization of debt issuance costs and original issue discount that are reflected in interest expense.

(B)Prior to the consummation of our IPO on July 6, 2021, share-based compensation was determined based on the remeasurement of our liability-classified incentive units.

(C)Noncash deductions and charges includes losses on property and equipment disposals and the net impact of noncash rent expense.

(D)Other expenses include IPO-related transaction fees and the reimbursement of certain management expenses, primarily for travel, incurred by Sycamore on our behalf, which are not considered to be part of our core business.

*Net Sales*

Net sales for fiscal year 2021 increased $313.1 million, or 31.8%, to $1,297.3 million, from $984.2 million for fiscal year 2020. This increase was primarily driven by an increase in orders placed and an increase in average order value relative to fiscal year 2020, which was impacted by disruption caused by the COVID-19 pandemic. Active customers increased 0.6 million, or 18.8%, to 3.8 million at the end of fiscal year 2021, from 3.2 million at the end of fiscal year 2020. Net sales per active customer increased by 10.0% from $309 in fiscal year 2020 to $340 in fiscal year 2021. The total number of stores we operate increased by 16 stores, or 2.6%, to 624 stores at the end of fiscal year 2021, from 608 stores at the end of fiscal year 2020.

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*Gross Profit*

Gross profit for fiscal year 2021 increased $196.5 million, or 57.6%, to $537.4 million, from $341.0 million for fiscal year 2020. This increase was primarily due to higher net sales volumes. Gross profit as a percentage of net sales increased 6.8% to 41.4% in fiscal year 2021 from 34.6% in fiscal year 2020. This increase was primarily driven by higher net sales volumes and leverage of store occupancy costs, distribution costs, merchandising payroll costs and store depreciation expense as a result of higher net sales volume.

*Selling, General and Administrative Expenses*

Selling, general and administrative expenses for fiscal year 2021 increased $206.7 million, or 88.8%, to $439.4 million, from $232.8 million for fiscal year 2020. This increase was primarily due to a $152.0 million increase in share-based compensation expense, increased store payroll costs of $27.7 million, increased performance bonuses of $8.0 million, other store operating cost increases of $6.9 million and increased headquarters general and administrative expenses of $4.2 million, primarily due to additional costs associated with being a publicly traded company. Selling, general and administrative expenses as a percentage of net sales increased 10.2% to 33.8% in fiscal year 2021 from 23.6% in fiscal year 2020. This increase was driven by increased share-based compensation expense and performance bonuses, partially offset by leverage of headquarters general and administrative expenses, other store operating costs and store/e-Commerce payroll costs as a result of higher net sales volume.

*Marketing Expenses*

Marketing expenses for fiscal year 2021 increased $1.3 million, or 2.5%, to $52.7 million, from $51.4 million for fiscal year 2020. This increase was primarily due to increased digital, store and brand marketing, partially offset by decreased direct mail program spend. Marketing expenses as a percentage of net sales decreased by 1.1% to 4.1% in fiscal year 2021 from 5.2% in fiscal year 2020. This decrease was driven by leverage of our marketing expenses as a result of higher net sales volume.

*Interest Expense*

Interest expense was $29.5 million for fiscal year 2021, compared to $21.3 million for fiscal year 2020. The increase was primarily due to the write-off of $5.2 million of unamortized deferred financing costs and OID when we repaid the Amended Term Loan Credit Agreement, and the $2.1 million prepayment penalty. The increase was also due to an increase in the total borrowings outstanding related to the New Term Loan Credit Agreement as of January 29, 2022 compared to the total borrowings outstanding related to the Amended Term Loan Credit Agreement as of January 30, 2021, partially offset by a lower variable interest rate related to the New Term Loan Credit Agreement compared to the variable interest rate related to the Amended Term Loan Credit Agreement.

*Provision for Income Taxes*

The provision for income taxes for fiscal year 2021 increased by $34.8 million to $45.8 million, from $11.0 million for fiscal year 2020. Our effective tax rate was 289.2% for fiscal year 2021 as compared to 30.9% for fiscal year 2020. The unconventional effective tax rate for fiscal year 2021 is primarily due to the increase in the amount of non-deductible items associated with share-based compensation, relative to income before provision for income taxes for fiscal year 2021. The increase in the amount of non-deductible items associated with share-based compensation during fiscal year 2021 was driven by a $111.4 million remeasurement adjustment related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO.

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**Quarterly Financial Data**

The following table summarizes our unaudited consolidated income (loss) from operations for each of the fiscal quarters in fiscal years 2022 and 2021 (dollars in thousands):

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
| | **January 28, 2023** | **October 29, 2022** | **July 30, 2022** | **April 30, 2022** | **January 29, 2022** | **October 30, 2021** | **July 31, 2021** | **May 1, 2021** |
| Net sales<sup>(A)</sup> | $301228 | $300201 | $353522 | $333193 | $318649 | $310890 | $337507 | $330225 |
| Cost of goods sold | 205049 | 198263 | 222030 | 203263 | 214767 | 181094 | 183150 | 180815 |
| Gross profit | 96179 | 101938 | 131492 | 129930 | 103882 | 129796 | 154357 | 149410 |
| Selling, general and administrative expenses<sup>(A)</sup> | 77837 | 69347 | 78574 | 72215 | 70292 | 71048 | 183678 | 114391 |
| Marketing expenses | 15827 | 12638 | 13502 | 17974 | 17378 | 15023 | 10728 | 9525 |
| Income (loss) from operations | 2515 | 19953 | 39416 | 39741 | 16212 | 43725 | (40049) | 25494 |

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(A)In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") in the consolidated statements of operations and comprehensive income (loss). The reclassification is applied retrospectively to all prior periods presented. See "Note 2–Summary of Significant Accounting Policies" and "Note 21–Quarterly Financial Data (Unaudited)" for further information.

**Liquidity and Capital Resources**

***General***

Our business relies on cash flows from operations as our primary source of liquidity. We do, however, have access to additional liquidity, if needed, through borrowings under our Existing ABL Facility, as amended. Our primary cash needs are for merchandise inventories, payroll, rent for our stores, headquarters and distribution center, capital expenditures associated with opening new stores and updating existing stores, logistics and information technology. We also need cash to fund our interest and principal payments on the New Term Loan Credit Agreement and make discretionary repurchases of our common stock. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable, accrued and other current liabilities and operating lease liabilities. We believe that cash generated from operations and the availability of borrowings under our Existing ABL Facility, as amended, or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our Existing ABL Facility, as amended, or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

***Cash Flow Analysis***

A summary of operating, investing and financing activities are shown in the following table (dollars in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended** | **Year Ended** | **Year Ended** |
| | **January 28, 2023** | **January 29, 2022** | **January 30, 2021** |
| Net cash provided by operating activities | $53311 | $121220 | $151821 |
| Net cash used in investing activities | (23369) | (17552) | (11570) |
| Net cash used in financing activities | (45117) | (197809) | (45925) |

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***Net Cash Provided By Operating Activities***

Operating activities consist primarily of net income (loss) adjusted for noncash items, including depreciation and amortization and share-based compensation, the effect of working capital changes and taxes paid.

Net cash provided by operating activities during fiscal year 2022 was $53.3 million compared to $121.2 million during fiscal year 2021. The decrease in cash provided by operating activities during fiscal year 2022 was primarily as a result of a decrease in share-based compensation expense added back to cash provided by operating activities as a noncash adjustment and a decrease in accrued and other current liabilities, partially offset by the following activities during fiscal year 2022: (i) an

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increase in net income, (ii) a decrease in prepaid income taxes and (iii) a decrease in inventory purchases. The decrease in share-based compensation expense during fiscal year 2022 was due to an increase in Torrid Holding LLC's equity value during fiscal year 2021. The decrease in accrued and other current liabilities was primarily as a result of decreases in accrued payroll and related expenses and accrued inventory-in-transit.

Net cash provided by operating activities during fiscal year 2021 was $121.2 million compared to $151.8 million during fiscal year 2020. The decrease in cash provided by operating activities was primarily as a result of increases in inventory purchases and prepaid income taxes and decreases in net income (loss), operating lease liabilities and income taxes payable and a lower increase in accounts payable compared to fiscal year 2020. The decrease in net cash provided by operating activities was partially offset by a $152.0 million increase in share-based compensation expense added back to net cash provided by operating activities as a noncash adjustment. The increase in share-based compensation expense for fiscal year 2021 was due to an increase in Torrid Holding LLC's equity value combined with share-based compensation pursuant to the Torrid Holdings Inc. 2021 Long-Term Incentive Plan adopted on June 22, 2021. The decrease in net cash provided by operating activities was also partially offset by an increase in accrued and other current liabilities related to increases in accrued inventory in-transit and accrued payroll and related expenses and an increase in due to related parties.

***Net Cash Used In Investing Activities***

Typical investing activities consist primarily of capital expenditures for growth (new store openings, relocations and major remodels), store maintenance (minor store remodels and investments in store fixtures), and infrastructure to support the business related primarily to information technology, our headquarters facility and our West Jefferson, Ohio distribution center.

Net cash used in investing activities were $23.4 million and $17.6 million in fiscal years 2022 and 2021, respectively. The increase in cash used in investing activities was primarily as a result of an increase in capital expenditures related to the opening of new stores and store relocations and investments in our West Jefferson, Ohio distribution center during fiscal year 2022, compared to fiscal year 2021.

Net cash used in investing activities were $17.6 million and $11.6 million in fiscal years 2021 and 2020, respectively. The increase in cash used in investing activities was primarily as a result of an increase in capital expenditures related to the opening of new stores, store relocations and investments in our West Jefferson, Ohio distribution center during fiscal year 2021, compared to fiscal year 2020.

***Net Cash Used In Financing Activities***

Financing activities consist primarily of (i) borrowings and repayments related to our Existing ABL Facility, as amended, (ii) borrowings and repayments related to the New Term Loan Credit Agreement and (iii) repurchases and retirement of our common stock.

Net cash used in financing activities were $45.1 million and $197.8 million for fiscal years 2022 and 2021, respectively. The decrease in net cash used in financing activities is primarily as a result of the following activities during fiscal year 2022: (i) the absence of the $300.0 million capital distribution to Torrid Holding LLC, (ii) the absence of the $212.8 million repayment of the Amended Term Loan Credit Agreement and related costs and (iii) $8.4 million net borrowing from the Existing ABL Facility, as amended, partially offset by repurchases and retirement of common stock of $31.7 million, principal payments of $21.9 million on the New Term Loan Credit Agreement and the absence of the $340.5 million proceeds received during fiscal year 2021 from the New Term Loan Credit agreement.

Net cash used in financing activities was $197.8 million for fiscal year 2021 compared to $45.9 million for fiscal year 2020. The increase in net cash used in financing activities is primarily as a result of the following activities during fiscal year 2021: (i) $300.0 million distribution to Torrid Holding LLC, (ii) principal payments on the Amended Term Loan Credit agreement of $210.7 million, (iii) $2.1 million prepayment penalty related to the Amended Term Loan Credit Agreement, (iv) tax payments of $2.1 million made on behalf of our employees related to the vesting of restricted stock awards and RSUs, (v) $0.7 million of deferred financing costs related to the 3rd Amendment to the Existing ABL Facility, as amended and (vi) $23.4 million for repurchases and retirement of common stock, partially offset by proceeds from the New Term Loan Credit Agreement of $340.5 million, net of OID and deferred financing costs and proceeds of $0.6 million for issuances under share-based compensation plans.

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***Debt Financing Arrangements***

For the stated periods, our debt financing arrangements consisted of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Existing ABL Facility, as amended | $8380 | $— |
| Term loan |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Term Loan Credit Agreement | 328125 | 350000 |
| Less: current portion of unamortized original issue discount and debt financing costs | (1356) | (1356) |
| Less: noncurrent portion of unamortized original issue discount and debt financing costs | (5928) | (7284) |
| Total term loan outstanding, net of unamortized original issue discount and debt financing costs | 320841 | 341360 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: current portion of term loan, net of unamortized original issue discount and debt financing costs | (16144) | (20519) |
| Total term loan, net of current portion and unamortized original issue discount and debt financing costs | $304697 | $320841 |

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*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.

The New Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million ("Principal"), which is recorded net of 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 $346.5 million proceeds of the New Term Loan Credit Agreement, net of OID, were used to (i) repay and terminate the Amended Term Loan Credit Agreement (as defined below); (ii) make a $131.7 million distribution to the direct and indirect holders of our equity interests; and (iii) pay for financing costs associated with the New Term Loan Credit Agreement.

Loans made pursuant to the New Term Loan Credit Agreement bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month, plus 1.00% (in each case, subject to a floor of 1.75%); or (b) at a LIBOR rate for the interest period relevant to such borrowing (subject to a floor of 0.75%), in each case plus an applicable margin of 5.50% for LIBOR borrowings and 4.50% for base rate borrowings.

If we elect the LIBOR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates. If we elect the Base rate loan, interest is due and payable the last day of each calendar quarter. The elected interest rate at the end of fiscal year 2022 was approximately 10%.

In addition to paying interest on the outstanding Principal under the New Term Loan Credit Agreement, we are required to make fixed mandatory repayments of the Principal on the last business day of each fiscal quarter until maturity commencing with the second full fiscal quarter following the closing date ("Repayment"). For each of the fiscal quarters until the maturity date and starting with the fourth fiscal quarter of 2021, Repayments represent 1.25% of the Principal, reduced as a result of the application of prior Prepayments (as defined below).

Under the New Term Loan Credit Agreement, we are also required to make variable mandatory prepayments of the Principal, under certain conditions as described below, approximately 102 days after the end of each fiscal year (each, a "Prepayment"). Prepayments, if applicable, commence at the end of fiscal year 2022 and represent between 0% and 50% (depending on our first lien net leverage ratio) of Excess Cash Flow (as defined in the New Term Loan Credit Agreement) in excess of $10.0 million, minus prepayments of Principal, the Existing ABL Facility, as amended (to the extent accompanied by a permanent reduction in the commitments thereunder) and certain other specified indebtedness and amounts in connection with certain other enumerated items. As of January 28, 2023, we did not meet the Excess Cash Flow threshold to require a Prepayment.

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In addition to mandatory Repayment and Prepayment obligations, we may at our option, prepay a portion of the outstanding Principal ("Optional Prepayment"). If we make Optional Prepayments before June 14, 2023, we will be subject to penalties ranging from 1.00% to 2.00% of the aggregate principal amount.

All of Torrid LLC's existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guarantee all obligations under the New Term Loan Credit Agreement. Substantially all of the assets of Torrid LLC, Torrid LLC's existing subsidiaries and Torrid Intermediate LLC will secure all such obligations and the guarantees of those obligations, subject to certain exceptions.

The New Term Loan Credit Agreement also contains a number of covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: create, incur or assume liens on our assets or property; incur additional indebtedness; issue preferred or disqualified stock; consolidate or merge; sell assets; pay dividends or make distributions, make investments, or engage in transactions with our affiliates.

At the end of fiscal year 2022, we were compliant with our financial covenants under the New Term Loan Credit Agreement.

At 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 20—Fair Value Measurements").

At the end of fiscal year 2022, total borrowings, net of OID and financing costs, of $320.8 million remain outstanding under the New Term Loan Credit Agreement. During fiscal year 2022, we recognized $26.3 million of interest expense and $1.4 million 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 consolidated balance sheets. We recognize interest payments, together with amortization of the OID and financing costs, in interest expense in our consolidated statements of operations and comprehensive income (loss).

*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, in conjunction with the Term Loan Credit Agreement, 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. All other material terms of the Existing ABL Facility, as amended, remain substantially the same as the previous agreements it replaced.

The borrowing base for the Existing ABL Facility, as amended, at any time equals the sum of 90% of eligible credit card receivables, plus 90% of the appraised net orderly liquidation value of eligible inventory and eligible in-transit inventory multiplied by the cost of such eligible inventory and eligible in-transit inventory (to be increased to 92.5% during the period beginning on September 1 of each year and ending on December 31 of each year). The Existing ABL Facility, as amended, includes borrowing capacity for letters of credit and for borrowings on same-day notice, referred to as Swing Line Loans, and is available in U.S. dollars.

Under the Existing ABL Facility, as amended, we have the right to request up to $50.0 million of additional commitments plus the aggregate principal amount of any permanent principal reductions we may take plus the amount by which the borrowing base exceeds the aggregate commitments (subject to customary conditions precedent). The lenders under this facility

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are not under any obligation to provide any such additional commitments, and any increase in commitments is subject to customary conditions precedent. If we were to request any such additional commitments and the existing lenders or new lenders

were to agree to provide such commitments, the size of the Existing ABL Facility, as amended, could increase to up to $200.0 million, but our ability to borrow under this facility would still be limited by the amount of the borrowing base.

Borrowings under the Existing ABL Facility, as amended, bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month adjusted for certain costs, plus 1.00%, in each case, plus an applicable margin that ranges from 0.25% to 0.75% based on average daily availability; or (b) at a LIBOR rate for the interest period relevant to such borrowing adjusted for certain costs ("Adjusted LIBOR"), in each case plus an applicable margin that ranges from 1.25% to 1.75%, based on average daily availability. At the end of fiscal year 2022, the applicable interest rate for borrowings under the Existing ABL Facility, as amended, was approximately 8% per annum.

If we elect the LIBOR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates. If we opt for the base rate (including a Swing Line Loan), interest is due and payable on the first business day of each month and on the maturity date.

In addition to paying interest on outstanding principal under the Existing ABL Facility, as amended, we are required to pay a commitment fee in respect of unutilized commitments. The commitment fee ranges between 0.25% and 0.375% per annum of unutilized commitments and will be subject to adjustment each fiscal quarter based on the amount of unutilized commitments during the immediately preceding fiscal quarter. We must also pay customary letter of credit fees and agent fees.

If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Existing ABL Facility, as amended, exceeds the lesser of (a) the commitment amount and (b) the borrowing base, we will be required to repay outstanding loans and/or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.

We may voluntarily reduce the unused portion of the commitment amount and repay outstanding loans at any time. Prepayment of the loans may be made without premium or penalty other than customary "breakage" costs with respect to LIBOR loans.

All obligations under the Existing ABL Facility, as amended, are unconditionally guaranteed by substantially all of Torrid Intermediate LLC's existing majority-owned domestic subsidiaries and will be required to be guaranteed by certain of Torrid Intermediate LLC's future domestic majority-owned subsidiaries. All obligations under the Existing ABL Facility, as amended, and the guarantees of those obligations, will be secured, subject to certain exceptions, by substantially all of Torrid Intermediate LLC's assets.

The Existing ABL Facility, as amended, requires us to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if we fail to maintain Specified Availability (as defined by the Existing ABL Facility, as amended) of at least the greater of 10% of the Loan Cap, as defined by the Existing ABL Facility, as amended, and $7.0 million. The Existing ABL Facility, as amended, contains a number of other covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: incur additional indebtedness; pay dividends on our capital stock or redeem, repurchase or retire our capital stock or our other indebtedness; make investments, loans and acquisitions; engage in transactions with our affiliates; sell assets, including capital stock of our subsidiaries; alter the business we conduct; consolidate or merge; and incur liens. At the end of fiscal year 2022, we were compliant with our debt covenants under the Existing ABL Facility, as amended.

The Existing ABL Facility, as amended, specifically restricts dividends and distributions, aside from amounts to cover ordinary operating expenses and taxes, between our subsidiaries and to us. However, dividends and distributions are permitted at any time that either (1) availability under the Existing ABL Facility, as amended, is equal to or greater than 15% of the maximum borrowing amount on a pro forma basis and we are pro forma compliant with a 1.00 to 1.00 fixed charge coverage ratio or (2) availability under the Existing ABL Facility, as amended, is equal to or greater than 20% of the maximum borrowing amount on a pro forma basis. At the end of fiscal year 2022, 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 it is carried at a market observable interest rate that resets periodically and is categorized as Level 2 in the fair value hierarchy.

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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. Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2022 was $123.9 million, which reflects no borrowings. Standby letters of credit issued and outstanding were $7.4 million and $5.3 million at the end of fiscal years 2022 and 2021, respectively. 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 consolidated balance sheets. During fiscal years 2022, 2021 and 2020, we amortized financing costs of $0.2 million, $0.1 million and $0.1 million, respectively. During fiscal years 2022, 2021 and 2020, interest payments were $1.8 million, $0.6 million and $0.6 million, respectively. We recognize amortization of financing costs and interest payments for the revolving credit facilities in interest expense in our consolidated statements of operations and comprehensive income (loss).

**Share Repurchases**

On December 6, 2021, our board of directors 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 January 28, 2023, we had approximately $44.9 million remaining under the repurchase program.

**Contractual Obligations**

We enter into long-term contractual obligations and commitments in the normal course of business, primarily debt obligations, purchase obligations and non-cancelable operating leases. As of January 28, 2023, our contractual cash obligations over the next several periods are set forth below (dollars in thousands).

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** |
| | **Total** | **<1 Year** | **1-3 Years** | **3-5 Years** | **Thereafter** |
| **Contractual Obligations:** | | | | | |
| New Term Loan Credit Agreement Obligations<sup>(1)</sup> | $328125 | $17500 | $35000 | $35000 | $240625 |
| Interest Expense on New Term Loan Credit Agreement Obligations<sup>(1)(2)</sup> | 158682 | 33536 | 61597 | 54297 | 9252 |
| Purchase Obligations | 209998 | 209998 |  |  |  |
| Letters of Credit and Other Obligations<sup>(3)</sup> | 36962 | 27217 | 9745 |  |  |
| Operating Lease Obligations<sup>(4)</sup> | 257350 | 56665 | 100724 | 57147 | 42814 |
| Total | $991117 | $344916 | $207066 | $146444 | $292691 |

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(1)Amounts assume that the New Term Loan Credit Agreement is paid upon maturity and does not consider any variable mandatory principal prepayments or optional principal prepayments which we may make in the future.

(2)Assumes an interest rate of approximately 10% per annum, consistent with the interest rate at January 28, 2023.

(3)Amounts listed above do not include cash obligations related to relocation expenses in connection with the involuntary separation of certain employees due to the uncertainty regarding the amount of such expenses.

(4)Includes estimated annual future minimum occupancy payments under operating leases including minimum base rents, common area maintenance charges and heating, ventilation and cooling charges, for lease terms that include periods covered by options to extend some of our leases, as we are reasonably certain to exercise those options. Options to terminate our leases have not been included in any lease terms as we are not reasonably certain to exercise those options. See "Note 9—Leases" contained in the consolidated financial statements and notes, included elsewhere in this Annual Report on Form 10-K for additional disclosure related to operating lease obligations.

We have not included any income tax audit settlement payments due in less than one year in the contractual obligations table above as we do not have any open income tax audits as of January 28, 2023 or any material gross unrecognized tax benefits for which the statutes of limitations are expected to expire in fiscal year 2023. In addition, due to the uncertainty regarding the timing of future cash outflows associated with noncurrent unrecognized tax benefits of $3.3 million, we are unable to make a reliable estimate of the periods of cash settlement with the respective tax authorities and have not included such amounts in the contractual obligations table above.

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**Critical Accounting Estimates**

Our discussion of results of operations and financial condition is based upon the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and certain assumptions about future events that affect the classification and amounts reported in our consolidated financial statements and accompanying notes, including revenue and expenses, assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on our historical results as well as management's judgment. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could vary materially from estimates based on assumptions used in the preparation of our consolidated financial statements.

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 consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for estimated merchandise returns and loyalty program expenses; estimating the value of inventory; determining operating lease liabilities; and estimating share-based compensation expense. Management evaluates its policies and assumptions on an ongoing basis. Our significant accounting estimates related to these accounts in the preparation of our consolidated financial statements are described below (see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our critical accounting policies).

***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. For arrangements that contain multiple performance obligations, we allocate the transaction price to each performance obligation on a relative stand-alone selling price basis.

At our retail store locations, we satisfy our performance obligation and recognize revenue at the point in time when a customer takes possession of the merchandise and tenders payment at the point-of-sale register. For e-Commerce sales shipped to a customer from our distribution center, or from a retail store location (ship from store), we satisfy our performance obligation and recognize revenue upon shipment, which is the point in time the customer obtains control of the merchandise after payment has been tendered. Income we receive from customers for shipping and handling is recognized as a component of revenue upon shipment of merchandise to the customer. We satisfy our performance obligation and recognize revenue from e-Commerce sales shipped to a retail store location from our distribution center, or fulfilled from merchandise already located at a retail store location (buy-online-pickup-in-store), at the point in time when the customer retrieves the merchandise from within the retail store location or at a retail store curbside.

We are required to estimate certain amounts included in a contract or an implied arrangement with a customer which add variability to the transaction price. Under certain conditions, we are obligated to accept customer returns for most of our merchandise. Sales returns reduce the revenue we expect to receive for merchandise and therefore add variability to the transaction price. Based on historical return pattern experience, we reasonably estimate the amount of merchandise expected to be returned and exclude it from revenue. We record a reserve for merchandise returns at the time revenue is recognized based on prior returns experience and expected future returns in accordance with our return policy and discretionary returns practices. We monitor our returns experience and resulting reserves on an ongoing basis and we believe our estimates are reasonable. We do not believe there is a reasonable likelihood that there will be a material change in the assumptions used to calculate the allowance for sales returns. However, if actual sales returns are significantly different than the estimated allowance, our results of operations could be materially affected.

We satisfy our performance obligation and recognize revenue from gift cards and store merchandise credits at the point in time when the customer presents the gift cards and store merchandise credits for redemption. Gift card breakage is income recognized due to the non-redemption of a portion of gift cards sold by us for which a liability was recorded in prior periods. We recognize estimated gift card breakage over time as a component of net sales in proportion to the pattern of rights exercised by the customer as reflected in actual gift card redemption patterns over the period. Based upon historical experience, we estimate the value of outstanding gift cards that will ultimately not be redeemed (breakage) nor escheated under statutory unclaimed property laws. This amount is recognized as revenue over the time pattern established by our historical gift card redemption experience. We monitor our gift card redemption experience and associated accounting on an ongoing basis. Our historical gift card redemption experience has not varied significantly from amounts historically recorded as breakage and we believe our assumptions are reasonable. While customer redemption patterns result in estimated gift card breakage, changes in

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our customers' behavior could impact the amount that ultimately is unused and could affect the amount recognized as a component of net sales.

If a customer earns loyalty program points in connection with the sales transactions described above, then we have a remaining performance obligation and cannot recognize all the revenue. A portion of the revenue is allocated to the loyalty program points earned during the transaction. We satisfy our performance obligation and recognize revenue allocated to these loyalty program points and the resulting awards at the point in time when the awards are redeemed for merchandise, when we determine that they will not be redeemed, or when the awards and points expire. Under our loyalty 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 activity and qualifying non-purchase activity. 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 consolidated statements of operations and comprehensive income (loss) in the period the points are earned by the customer.

***Inventory***

Inventory consists of finished goods merchandise held for sale to our customers. Inventory is valued at the lower of moving average cost or net realizable value.

In the normal course of business, we record inventory reserves based on past and projected sales performance, as well as the inventory on hand. 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 both historical average selling price experience, current selling price information and estimated future selling price information. The carrying value of inventory is reduced to estimated net realizable value when factors indicate that merchandise will not be sold on terms sufficient to recover its cost.

We monitor inventory levels, sales trends and sales forecasts to estimate and record reserves for excess, slow-moving and obsolete inventory. Accordingly, estimates of future sales prices requires management judgment based on historical experience, assessment of current conditions and assumptions about future transactions. In addition, we conduct physical inventory counts to determine and record actual shrinkage. Estimates for shrinkage are recorded between physical counts, based on actual shrinkage experience. Actual shrinkage can vary from these estimates. We believe our assumptions are reasonable, and we monitor actual results to adjust estimates and inventory balances on an ongoing basis.

***Leases***

We consider an agreement to be or contain a lease if it conveys us with the right to control the use of an identified asset for a period of time in exchange for consideration. Based on these criteria, we have operating lease agreements for our retail stores, distribution center and headquarter office space; and vehicles and equipment; under primarily non-cancelable leases with terms ranging from approximately two to seventeen years.

Certain of our operating lease agreements contain one or more options to extend the leases at our sole discretion. However, the periods covered by the options to extend the leases of our retail stores, vehicles and equipment are not recognized as part of the associated right of use ("ROU") assets and lease liabilities, as we are not reasonably certain to exercise the options. The periods covered by the options to extend the leases of our distribution center and headquarter office space are recognized as part of the associated ROU assets and lease liabilities, as we are reasonably certain to exercise the options. Some of our operating lease agreements contain options to terminate the lease under certain conditions.

The retail space leases provide for rents based upon the greater of the minimum annual rental amounts or a percentage of annual store net sales volume. Certain leases provide for increasing minimum annual rental amounts. We consider rents based upon a percentage of annual store net sales volume, and other rent-related payments that generally vary because of changes in facts and circumstances (other than due to the passage of time), to be variable lease payments. Variable lease payments associated with retail space leases are recognized as occupancy costs within cost of goods sold in the consolidated statements of operations and comprehensive income (loss) in the period in which the obligation for those payments is incurred. We generally consider all other lease payments to be fixed in nature and the sum of all the discounted remaining fixed payments in the lease terms make up the lease liabilities in our consolidated balance sheet (if the lease terms are longer than 12 months).

We discount the fixed lease payments that make up the lease liabilities using an incremental borrowing rate ("IBR"), as the rates implicit in our leases are not readily determinable. The IBR is the rate of interest that we would have to pay to borrow

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on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The determination of the IBR for each lease term incorporates various inputs and assumptions including our publicly available credit rating, credit spreads of other publicly traded debt issued by companies with a similar credit rating to ours and a risk-free interest rate. All inputs and assumptions and corresponding IBRs are highly subjective.

We choose not to separate nonlease components (such as common area maintenance charges and heating, ventilation and air conditioning charges), from lease components (such as fixed minimum rent payments), and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component. We do not apply ASU 2016-02, *Leases*, and all related guidance ("ASC 842") requirements to leases that have lease terms of 12 months or less upon commencement, and instead recognize short-term lease payments, if applicable, in the consolidated statements of operations and comprehensive income (loss) on a straight-line basis over the lease term.

In response to the COVID-19 pandemic, the Financial Accounting Standards Board issued interpretive guidance in April 2020, which provides entities the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease terms. We elected this option; accordingly, we did not remeasure the lease liabilities or record a change to the ROU assets for any concessions we received for our retail store leases. Rather, deferred lease payments were recorded to operating lease liabilities until paid and lease concessions were recorded in the period they were negotiated or when the lower lease expense was paid.

***Share-Based Compensation***

On June 22, 2021, in connection with our IPO, our board of directors 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 and 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, all of which are accounted for in accordance with ASC 718, *Compensation-Stock Compensation*. The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes share-based compensation cost as expense over the vesting period. As share-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, the amount of expense has been reduced for actual forfeitures as they occur.

Stock options are valued utilizing a Black-Scholes options pricing model ("OPM"). The OPM used to value the stock options incorporates various assumptions, including dividend yield, expected volatility, risk-free interest rate and expected term of the stock options. 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. 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. The expected term of the stock options represents the estimated period of time until exercise and is calculated using the simplified method which deems the term to be the average of the time-to-vesting and the contractual life of the options.

The grant date fair value of restricted stock and RSUs is based on the closing price per share of our common stock on the grant date. We recognize compensation expense for time-based awards on a straight-line basis and for performance-based awards on the graded-vesting method over the vesting period of the awards.

The fair value of PSUs is estimated at the grant date using a Monte Carlo simulation following a Geometric Brownian Motion which incorporates various assumptions, including dividend yield, expected volatility, risk-free interest rate and expected term of the PSUs. 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. 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. The expected term of the PSUs represents the time period from the grant date and the full vesting date.

Prior to our IPO, Torrid Holding LLC issued 13,660,000 Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J Torrid incentive units, in the aggregate, net of forfeitures, to certain members of our management. These incentive units were intended to constitute profits interests.

We recognized the impact of share-based compensation associated with incentive units issued by Torrid Holding LLC in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). The share-based compensation expense and related capital contribution are reflected in our consolidated financial statements as these awards were deemed to be for our benefit. The intent of the incentive units was to provide profit-sharing opportunities to management rather than equity ownership in our then parent, Torrid Holding LLC. The incentive units did not have any voting

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or distribution rights and contained a repurchase feature, whereby upon termination, Torrid Holding LLC had the right to purchase from former employees any or all of the vested incentive units at fair value. In addition, although the fair value of the incentive units was determined through an option pricing methodology that utilized the possible equity values of Torrid Holding LLC, the settlement amounts and method of settlement of the incentive units were at the discretion of our board of directors. Based on these aforementioned features and characteristics, we determined that the incentive units were in-substance liabilities accounted for as liability instruments in accordance with ASC 710, *Compensatio*n. The incentive units were remeasured based on the fair value of the awards at the end of each reporting period. We recorded the expense associated with changes in the fair value of these incentive units as a capital contribution from our former parent, Torrid Holding LLC, as our former parent was the legal obligor for the incentive units.

The incentive units were valued utilizing a contingent claims analysis ("CCA") methodology based on a Black-Scholes OPM. Under the OPM, each class of incentive units was modeled as a call option with a unique claim on the assets of Torrid Holding LLC. The characteristics of each class of incentive units determined the uniqueness of the claim on the assets of Torrid Holding LLC. The OPM used to value the incentive units incorporated various assumptions, including the time to liquidity event, equity volatility and risk-free interest rate of return. Equity volatility was based on the historical volatilities of comparable publicly traded companies for the time horizon equal to the time to the anticipated liquidity event; and the risk-free interest rate was for a term corresponding to the time to liquidity event. The assumptions underlying the valuation of the incentive units represented our best estimates, which involved inherent uncertainties and the application of our judgment. The most recent remeasurement of the fair value of the incentive units utilizing the CCA methodology was performed as of May 1, 2021. Following the pricing of our IPO, the vested portion of the incentive units was exchanged for shares of our common stock of an equivalent fair value as the vested incentive units and the unvested portion was cancelled. As such, the fair value of these incentive units is no longer recognized in our consolidated statements of operations and comprehensive income (loss).

**Recently Issued Accounting Pronouncements**

Refer to "Note 3—Accounting Standards" in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

**Item 7A. Quantitative and Qualitative Disclosures About Market Risk**

***Interest Rate Risk***

We are subject to interest rate risk in connection with borrowings under our Existing ABL Facility, as amended, and New Term Loan Credit Agreement, which bear interest at a variable rate equal to LIBOR plus an applicable margin. On June 14, 2021, we entered into the New Term Loan Credit Agreement and used borrowings thereunder to, among other things, repay and terminate the Amended Term Loan Credit Agreement. Prior to June 14, 2021 we were subject to interest rate risk in connection with borrowings under the Amended Term Loan Credit Agreement, which bore interest at a variable rate equal to LIBOR plus an applicable margin. As of January 28, 2023, we had $320.8 million of outstanding variable rate loans under the New Term Loan Credit Agreement and $8.4 million of borrowings under the Existing ABL Facility, as amended. An increase or decrease of 1% in the variable rates on the amount outstanding under the New Term Loan Credit Agreement will increase or decrease our annual interest expense by approximately $3.3 million.

***Foreign Exchange Risk***

The reporting currency for our consolidated financial statements is U.S. dollars. To date, net sales generated outside of the United States have not been significant. As a result, we have not been impacted materially by changes in exchange rates and do not expect to be impacted materially for the foreseeable future. However, as our net sales generated outside of the United States increase, our results of operations could be adversely impacted by changes in exchange rates. For example, if we recognize international sales in local foreign currencies (as we currently do in Canada), as the U.S. dollar strengthens it would have a negative impact on our international results upon translation of those results into U.S. dollars during consolidation. We also purchase a significant quantity of merchandise from foreign countries. However, these purchases are made in U.S. dollar-denominated purchase contracts. We do not currently hedge foreign currency fluctuations and do not intend to do so for the foreseeable future.

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**Item 8. Financial Statements and Supplementary Data**

**Torrid Holdings Inc. Index to Consolidated Financial Statements**

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| | **Page** |
| <u>[Report of Independent Registered Public Accounting Firm](#id6348a44f3d14a66a85938c86523a9fc_79)</u> <u>(PCAOB ID 238)</u> | <u>[50](#id6348a44f3d14a66a85938c86523a9fc_79)</u> |
| <u>[Consolidated Balance Sheets as of](#id6348a44f3d14a66a85938c86523a9fc_82)January 28, 2023[and](#id6348a44f3d14a66a85938c86523a9fc_82)January 29, 2022</u> | <u>[52](#id6348a44f3d14a66a85938c86523a9fc_82)</u> |
| <u>[Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal years ended](#id6348a44f3d14a66a85938c86523a9fc_85)January 28, 2023,</u> <br>&nbsp;&nbsp;&nbsp;&nbsp; <u>January 29, 2022 and January 30, 2021</u> | <u>[53](#id6348a44f3d14a66a85938c86523a9fc_85)</u> |
| <u>[Consolidated Statements of Stockholders'](#id6348a44f3d14a66a85938c86523a9fc_88)[Deficit](#id6348a44f3d14a66a85938c86523a9fc_88)[for the fiscal years ended](#id6348a44f3d14a66a85938c86523a9fc_88)January 28, 2023[,](#id6348a44f3d14a66a85938c86523a9fc_88)January 29, 2022</u> <br>&nbsp;&nbsp;&nbsp;&nbsp; <u>and January 30, 2021</u> | <u>[54](#id6348a44f3d14a66a85938c86523a9fc_88)</u> |
| <u>[Consolidated Statements of Cash Flows for the fiscal years ended](#id6348a44f3d14a66a85938c86523a9fc_91)January 28, 2023[,](#id6348a44f3d14a66a85938c86523a9fc_91)January 29, 2022[and](#id6348a44f3d14a66a85938c86523a9fc_91)</u><br>&nbsp;&nbsp;&nbsp;&nbsp; <u>January 30, 2021</u> | <u>[55](#id6348a44f3d14a66a85938c86523a9fc_91)</u> |
| <u>[Notes to Consolidated Financial Statements](#id6348a44f3d14a66a85938c86523a9fc_94)</u> | <u>[56](#id6348a44f3d14a66a85938c86523a9fc_94)</u> |

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**Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Stockholders of Torrid Holdings Inc.

***Opinion on the Financial Statements***

We have audited the accompanying consolidated balance sheets of Torrid Holdings Inc. and its subsidiaries (the "Company") as of January 28, 2023 and January 29, 2022, and the related consolidated statements of operations and comprehensive income (loss), of stockholders' deficit and of cash flows for each of the three years in the period ended January 28, 2023, including the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 28, 2023 and January 29, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2023 in conformity with accounting principles generally accepted in the United States of America.

*Change in Accounting Principle*

As described in Note 2 to the consolidated financial statements, the Company changed the classification of funds received under its private label credit card program in 2022.

***Basis for Opinion***

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

***Critical Audit Matters***

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Inventory*

As described in Note 2 to the consolidated financial statements, inventory is valued at the lower of moving average cost or net realizable value. As of January 28, 2023, the Company's inventory balance was $180 million. Management makes certain assumptions regarding net realizable value in order to assess whether the Company's 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. As disclosed by management, management monitors inventory levels, sales trends and sales forecasts to estimate and record reserves for excess, slow-moving and obsolete inventory. Physical inventory counts are conducted at least once during the year to determine actual inventory on hand and shrinkage.

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The principal considerations for our determination that performing procedures relating to inventory is a critical audit matter are the significant audit effort in performing procedures and evaluating audit evidence related to inventory existence and accuracy.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the existence of inventory, including controls over the adjustment of the perpetual inventory listings based on the results of physical inventory counts. These procedures also included, among others (i) testing the existence of inventory by conducting physical inventory observations by performing sample test counts of inventory quantities at a sample of locations and assessing rollforward activity between the time of the inventory observations and January 28, 2023; (ii) testing the accuracy of the cost of inventory for a sample of inventory items by obtaining third-party invoices and other supporting documents and recalculating the moving average cost; and (iii) testing the accuracy of inventory reserves which included testing the reconciliation of the reserve calculations to the general ledger, testing the accuracy of the data inputs and reserve calculation for a sample of inventory items, and testing the completeness of the inventory items included in the reserve calculations.

/s/PricewaterhouseCoopers LLP

Los Angeles, California

March 28, 2023

We have served as the Company's auditor since 2015.

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**TORRID HOLDINGS INC.**

**CONSOLIDATED BALANCE SHEETS**

**(In thousands, except share and per share data)**

---

| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| **Assets** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $13569 | $29025 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 366 | 262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 180055 | 170608 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 20050 | 14686 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid income taxes | 2081 | 6345 |
| Total current assets | 216121 | 220926 |
| Property and equipment, net | 113613 | 127565 |
| Operating lease right-of-use assets | 177179 | 209637 |
| Deposits and other noncurrent assets | 8650 | 7100 |
| Deferred tax assets | 3301 | 4873 |
| Intangible asset | 8400 | 8400 |
| Total assets | $527264 | $578501 |
| **Liabilities and stockholders' deficit** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $76207 | $77448 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued and other current liabilities | 108847 | 138708 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | 45008 | 45716 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowings under credit facility | 8380 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of term loan | 16144 | 20519 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties | 12741 | 14622 |
| Total current liabilities | 267327 | 297013 |
| Noncurrent operating lease liabilities | 172103 | 207049 |
| Term loan | 304697 | 320841 |
| Deferred compensation | 4246 | 6873 |
| Other noncurrent liabilities | 9115 | 5044 |
| Total liabilities | 757488 | 836820 |
| Commitments and contingencies (Note 16) |  |  |
| **Stockholders' deficit:** |  |  |
| Common shares: $0.01 par value; 1,000,000,000 shares authorized; 103,774,813 shares issued and outstanding at January 28, 2023; 107,857,625 shares issued and outstanding at January 29, 2022 | 1038 | 1078 |
| Additional paid-in capital | 128205 | 118286 |
| Accumulated deficit | (359206) | (377759) |
| Accumulated other comprehensive (loss) income | (261) | 76 |
| Total stockholders' deficit | (230224) | (258319) |
| Total liabilities and stockholders' deficit | $527264 | $578501 |

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

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**TORRID HOLDINGS INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)**

**(In thousands, except per share data)**

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** | **January 30,<br>2021** |
| Net sales | $1288144 | $1297271 | $984170 |
| Cost of goods sold | 828605 | 759826 | 643215 |
| Gross profit | 459539 | 537445 | 340955 |
| Selling, general and administrative expenses | 297973 | 439409 | 232754 |
| Marketing expenses | 59941 | 52654 | 51382 |
| Income from operations | 101625 | 45382 | 56819 |
| Interest expense | 29736 | 29497 | 21338 |
| Interest income, net of other expense (income) | 207 | 56 | (42) |
| Income before provision for income taxes | 71682 | 15829 | 35523 |
| Provision for income taxes | 21473 | 45773 | 10991 |
| Net income (loss) | $50209 | $(29944) | $24532 |
| Comprehensive income (loss): |  |  |  |
| Net income (loss) | $50209 | $(29944) | $24532 |
| Other comprehensive (loss) income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | (337) | 84 | 2 |
| Total other comprehensive (loss) income | (337) | 84 | 2 |
| Comprehensive income (loss) | $49872 | $(29860) | $24534 |
| **Net earnings (loss) per share:** |  |  |  |
| Basic | $0.48 | $(0.27) | $0.22 |
| Diluted | $0.48 | $(0.27) | $0.22 |
| **Weighted average number of shares:** |  |  |  |
| Basic | 104342 | 109886 | 110000 |
| Diluted | 104489 | 109886 | 110000 |

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

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**TORRID HOLDINGS INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT**

**(In thousands)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Common Shares** | **Common Shares** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Accumulated<br>Other<br>Comprehensive<br> (Loss) Income** | **Total<br>Stockholders'<br>Deficit** |
| | **Shares** | **Amount** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Accumulated<br>Other<br>Comprehensive<br> (Loss) Income** | **Total<br>Stockholders'<br>Deficit** |
| **Balance at February 1, 2020** | 110000 | $1100 | $2535 | $(99123) | $(10) | $(95498) |
| Net income |  |  |  | 24532 |  | 24532 |
| Capital contribution from Torrid Holding LLC for incentive units |  |  | 7791 |  |  | 7791 |
| Other comprehensive income |  |  |  |  | 2 | 2 |
| **Balance at January 30, 2021** | 110000 | 1100 | 10326 | (74591) | (8) | (63173) |
| Net loss |  |  |  | (29944) |  | (29944) |
| Capital distribution to Torrid Holding LLC |  |  | (50105) | (249895) |  | (300000) |
| Capital contribution from Torrid Holding LLC for incentive units |  |  | 151166 |  |  | 151166 |
| Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units | 127 | 1 | (2074) |  |  | (2073) |
| Issuance of common stock related to employee stock purchase plan | 46 |  | 385 |  |  | 385 |
| Share-based compensation |  |  | 8588 |  |  | 8588 |
| Repurchases and retirement of common stock | (2315) | (23) |  | (23329) |  | (23352) |
| Other comprehensive income |  |  |  |  | 84 | 84 |
| **Balance at January 29, 2022** | 107858 | 1078 | 118286 | (377759) | 76 | (258319) |
| Net income |  |  |  | 50209 |  | 50209 |
| Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units | 184 | 2 | (670) |  |  | (668) |
| Issuance of common stock related to employee stock purchase plan | 198 | 2 | 609 |  |  | 611 |
| Share-based compensation |  |  | 9980 |  |  | 9980 |
| Repurchases and retirement of common stock | (4465) | (44) |  | (31656) |  | (31700) |
| Other comprehensive loss |  |  |  |  | (337) | (337) |
| **Balance at January 28, 2023** | 103775 | $1038 | $128205 | $(359206) | $(261) | $(230224) |

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

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**TORRID HOLDINGS INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28, 2023** | **January 29, 2022** | **January 30, 2021** |
| **OPERATING ACTIVITIES** | | | |
| Net income (loss) | $50209 | $(29944) | $24532 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write down of inventory | 2297 | 696 | 6099 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating right-of-use assets amortization | 41839 | 41648 | 40316 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and other amortization | 37592 | 36748 | 34579 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write off of unamortized original issue discount and deferred financing costs for Amended Term Loan Credit Agreement |  | 5231 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation | 9980 | 159754 | 7791 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred taxes | 1863 | 1266 | (2325) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | (1209) | (457) | (1226) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | (12028) | (65709) | 7880 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | (5364) | (1949) | 1394 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid income taxes | 4264 | (5928) | 1200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits and other noncurrent assets | (1712) | (3058) | (749) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (1241) | 5639 | 37849 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued and other current liabilities | (29659) | 28090 | 19748 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (42912) | (49597) | (33895) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other noncurrent liabilities | 3900 | 1222 | 544 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation | (2627) | 342 | 1316 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties | (1881) | 6562 | (626) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable |  | (9336) | 7394 |
| Net cash provided by operating activities | 53311 | 121220 | 151821 |
| **INVESTING ACTIVITIES** |  |  |  |
| Purchases of property and equipment | (23369) | (17552) | (11570) |
| Net cash used in investing activities | (23369) | (17552) | (11570) |
| **FINANCING ACTIVITIES** |  |  |  |
| Capital distribution to Torrid Holding LLC |  | (300000) |  |
| Proceeds from revolving credit facility | 832635 | 5700 | 50700 |
| Payments on revolving credit facility | (824255) | (5700) | (50700) |
| Deferred financing costs for revolving credit facility |  | (688) |  |
| Proceeds from Amended Term Loan Credit Agreement, net of original issue discount and deferred financing costs |  |  | (525) |
| Principal payments on New Term Loan Credit Agreement and repayment of Amended Term Loan Credit Agreement and related costs | (21875) | (212775) | (45400) |
| Proceeds from New Term Loan Credit Agreement, net of original issue discount and deferred financing costs |  | 340509 |  |
| Proceeds from issuances under share-based compensation plans | 746 | 569 |  |
| Withholding tax payments related to vesting of restricted stock units and awards | (668) | (2072) |  |
| Repurchases and retirement of common stock | (31700) | (23352) |  |
| Net cash used in financing activities | (45117) | (197809) | (45925) |
| Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash | (177) | 213 | (110) |
| (Decrease) increase in cash, cash equivalents and restricted cash | (15352) | (93928) | 94216 |
| Cash, cash equivalents and restricted cash at beginning of period | 29287 | 123215 | 28999 |
| Cash, cash equivalents and restricted cash at end of period | $13935 | $29287 | $123215 |
| **SUPPLEMENTAL INFORMATION** |  |  |  |
| Cash paid during the period for interest related to the revolving credit facility and term loan | $29564 | $24120 | $21258 |
| Cash paid during the period for income taxes | $15601 | $58134 | $3921 |
| **SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES** |  |  |  |
| Property and equipment purchases included in accounts payable and accrued liabilities | $3959 | $3338 | $1238 |

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

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**TORRID HOLDINGS INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**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. Prior to the IPO (as defined below), Torrid Holdings Inc. was a wholly owned subsidiary of Torrid Holding LLC, which is majority-owned by investment funds managed by Sycamore. 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.

***Reorganization***

On July 1, 2021, Torrid Holding LLC, our then parent, completed a reorganization pursuant to which (i) Torrid Holding LLC contributed, assigned, transferred and delivered its issued and outstanding equity interest in Torrid Parent Inc. to Torrid, and (ii) Torrid assumed the obligations of Torrid Holding LLC under the related party promissory notes due to Torrid Parent Inc. (together, the "Reorganization"). The Reorganization was accounted for as a combination of entities under common control in accordance with subsections of Accounting Standards Codification ("ASC") 805-50, Business Combinations ("ASC 805-50"). Consequently, the equity interests of Torrid Parent Inc. contributed by Torrid Holding LLC to Torrid were recorded at historical carrying amounts and our financial position, results of operations and cash flows prior to the Reorganization have been adjusted to reflect the retrospective combination of the entities for all periods presented as if the combination had been in effect since the inception of common control.

***Stock Split***

On June 22, 2021, Torrid's stockholder approved an amendment to Torrid's certificate of incorporation to (i) effect a 110,000-for-1 stock split of all shares of the issued and outstanding common stock, which was effected on June 22, 2021 and (ii) authorize 5.0 million shares of preferred stock. All share and per-share data in the consolidated financial statements and notes to the consolidated financial statements has been retroactively adjusted to reflect the stock split for all periods presented. The par value of the common stock was not adjusted as a result of the stock split.

***Initial Public Offering***

Our registration statement on Form S-1 related to our initial public offering ("IPO") was declared effective on June 30, 2021, and our common stock began trading on the New York Stock Exchange on July 1, 2021. On July 6, 2021, subsequent to the Reorganization, we completed the IPO and certain of our shareholders sold 12,650,000 shares of common stock at a public offering price of $21.00 per share, including 1,650,000 shares of common stock after full exercise of the underwriters' option, for net proceeds of $248.4 million, after deducting underwriting discounts of $17.3 million. The offering costs of approximately $6.0 million were borne by us. We did not receive any proceeds from the sale of our shares of common stock by the selling stockholders.

***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 years 2022, 2021 and 2020 are 52-week years. Fiscal years are identified according to the calendar year in which they begin. For example, references to "fiscal year 2022" or similar references refer to the fiscal year ended January 28, 2023.

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***Description of Business***

We are a direct-to-consumer brand of apparel, intimates and accessories targeting the 25- to 40-year old woman who wears 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.

***COVID-19***

Our business operations, including net sales, were substantially affected by COVID-19 in fiscal year 2020 and there continues to be uncertainty regarding the extent of future impacts of COVID-19 on our business, including the duration and impact on overall customer demand. A resurgence in the pandemic or the emergence of new variants of the coronavirus could have a negative impact on our business.

**Note 2. Summary of Significant Accounting Policies**

***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 (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. This reclassification has been retrospectively applied to all prior periods presented.

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 impact of this change in accounting principle is reflected in the tables below (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended January 29, 2022** | **Fiscal Year Ended January 29, 2022** | **Fiscal Year Ended January 29, 2022** |
| | **As Previously Reported** | **Change in <br>Accounting <br>Principle** | **As Adjusted** |
| Net sales | $1278794 | $18477 | $1297271 |
| Cost of goods sold | 759826 |  | 759826 |
| Gross profit | 518968 | 18477 | 537445 |
| Selling, general and administrative expenses | 420932 | 18477 | 439409 |
| Marketing expenses | 52654 |  | 52654 |
| Income from operations | $45382 | $— | $45382 |

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended January 30, 2021** | **Fiscal Year Ended January 30, 2021** | **Fiscal Year Ended January 30, 2021** |
| | **As Previously Reported** | **Change in <br>Accounting <br>Principle** | **As Adjusted** |
| Net sales | $973514 | $10656 | $984170 |
| Cost of goods sold | 643215 |  | 643215 |
| Gross profit | 330299 | 10656 | 340955 |
| Selling, general and administrative expenses | 222098 | 10656 | 232754 |
| Marketing expenses | 51382 |  | 51382 |
| Income from operations | $56819 | $— | $56819 |

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***Principles of Consolidation***

The accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include our accounts and those of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

***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. Net sales and long-lived assets related to our operations in Canada and Puerto Rico during fiscal years 2022, 2021 and 2020 and as of the end of the same periods were not material, and therefore, are not reported separately from domestic net sales and long-lived assets.

***Use of Estimates***

We are required to make certain estimates and assumptions in order to prepare consolidated financial statements in conformity with GAAP. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. We believe the estimates and assumptions most critical to the preparation of our consolidated financial statements include those made in connection with revenue recognition, including accounting for estimated merchandise returns and loyalty program expenses; estimating the value of inventory; determining operating lease liabilities; and estimating share-based compensation expense. The estimation process required to prepare our consolidated financial statements requires assumptions to be made about future events and conditions, and as such, is inherently subjective and uncertain. Our actual results could differ materially from those estimates.

***Concentration Risks***

We consider all highly liquid investments with maturities of less than three months when purchased to be cash equivalents. All credit and debit card receivable balances are also classified as cash and cash equivalents. As of the end of fiscal years 2022 and 2021, the amounts due from third party financial institutions for these transactions classified as cash and cash equivalents totaled $8.0 million and $14.1 million, respectively. Cash and cash equivalents used primarily for working capital purposes are maintained with various major third party financial institutions in amounts which are in excess of the Federal Deposit Insurance Corporation ("FDIC") insurance limits. We are potentially exposed to a concentration of credit risk when cash and cash equivalent deposits in these financial institutions are in excess of FDIC limits. We consider the credit risk associated with these financial instruments to be minimal as cash and cash equivalents are held by financial institutions with high credit ratings and we have not historically sustained any credit losses associated with our cash and cash equivalents balances.

In addition, one supplier, MGF Sourcing US, LLC, an entity indirectly controlled by affiliates of Sycamore, accounted for approximately 15% of total net purchases in fiscal year 2022, two suppliers, one of which was MGF Sourcing US, LLC, accounted for approximately 11% of total net purchases in fiscal year 2021 and one supplier accounted for approximately 14% of total net purchases in fiscal year 2020.

***Fair Value of Financial Instruments***

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. We consider carrying amounts of cash equivalents, accounts payable and accrued and other current liabilities to approximate fair value because of the short maturity of these financial instruments. See "Note 20—Fair Value Measurements" for more details about how we determine the fair value of our financial instruments.

***Inventory***

Inventory 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

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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 for the period between the last physical count and current balance sheet date.

***Property and Equipment***

Property and equipment are recorded at cost less accumulated depreciation. Major repairs and improvements are capitalized, while routine maintenance and repairs are expensed as incurred. The gross carrying amounts of property and equipment sold or retired and the related accumulated depreciation are eliminated in the year of disposal, and any resulting gains or losses are included in the consolidated statements of operations and comprehensive income (loss). Application and development costs associated with internally developed software such as salaries of employees and payments made to third parties and consultants working on the software development are capitalized. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they constitute major enhancements. Capitalized internal-use software costs are amortized using the straight-line method over their estimated useful lives, which are generally three years.

Depreciation expense is calculated using the straight-line method over the following estimated useful lives:

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| | |
|:---|:---|
| Leasehold improvements | shorter of the 3- to 10-year estimated useful life or the respective lease term |
| Furniture, fixtures and equipment | 2 to 10 years |
| Software and licenses | 3 to 7 years |

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The carrying value of property and equipment is subject to assessment for potential impairment whenever events or changes in circumstances indicate that an asset's carrying value may not be recoverable, as further described below.

***Definite-Lived Assets***

We assess the carrying value of long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. 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. Factors we consider important that could trigger an impairment review of our stores or e-Commerce operations include significant underperformance relative to historical or projected future operating results, a significant change in the manner of the use of the asset or a significant negative industry or economic trend. If we determine the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors, we test for the recoverability of the carrying value of our long-lived assets by comparing the carrying value of the asset groups to our estimated undiscounted future net cash flows attributable to the asset groups. If the carrying value of the long-lived assets is greater than the related undiscounted future net cash flows, the long-lived assets are measured for impairment. We measure the impairment by comparing the difference between the long-lived asset's carrying value and the discounted future net cash flows attributable to the long-lived asset, which represent its fair value. We calculate the discounted future net cash flows of a store by netting future estimated sales of each store against estimated cost of goods sold, store occupancy costs and other store operating expenses such as payroll, supplies, repairs and maintenance and credit/debit card fees. Changes in these assumptions may cause the fair value to be significantly impacted. In the event future performance is lower than forecasted results, future cash flows may be lower than expected, which could result in future impairment charges. While we believe that recently opened stores will provide sufficient cash flow, material changes in financial performance could result in future store impairment charges.

***Indefinite-Lived Intangible Assets***

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

At the end of the third quarter of each fiscal year, we perform an impairment analysis of indefinite-lived intangible assets. We assess our indefinite-lived intangible asset for impairment using a qualitative analysis to determine whether it is more likely than not that the fair value of the asset is less than its carrying value. If it is determined that it is more likely than not that the fair value of the asset is less than its carrying amount or if a qualitative assessment is not performed, then we would perform the quantitative analysis to determine the fair value of the asset. If we conclude, based on our assessment, that the asset's fair value is less than its carrying value, then an impairment charge is recorded in the amount of the excess.

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***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 costs are included in prepaid expenses and other current assets in the 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 consolidated statements of operations and comprehensive income (loss) using the straight-line method over three to five years, which generally represents the noncancellable terms of the cloud computing arrangements, plus any optional renewal periods that we are reasonably certain to exercise. Deferred implementation costs are subject to assessment for potential impairment whenever events or changes in circumstances indicate that the carrying values may not be recoverable.

***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 and 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 consolidated statements of operations and comprehensive income (loss) in the period the points are earned by the customer. As of the end of fiscal years 2022 and 2021, we had $13.4 million and $13.5 million, respectively, in accrued loyalty program included in accrued and other current liabilities in the consolidated balance sheets. We recorded $0.1 million as a benefit to net sales in fiscal year 2022. We recorded $1.1 million and $0.3 million as a reduction of net sales in fiscal years 2021 and 2020, respectively. Future updates to the estimated liability may result in changes to net sales.

***Self-Insurance***

We are self-insured for certain losses related to medical and workers' compensation claims although we maintain stop loss coverage with third party insurers to limit our total liability exposure. In general, our self-insurance reserves are recorded on an undiscounted basis. The estimate of our self-insurance liability involves uncertainty since we must use judgment to estimate the ultimate cost that will be incurred to settle reported claims and unreported claims for incidents incurred but not reported as of the balance sheet date. When estimating our self-insurance liability, we consider a number of factors, which include historical claim experience and valuations provided by independent third party actuaries. While the ultimate amount of claims incurred is dependent on future developments, we believe recorded reserves are adequate to cover the future payment of claims. However, it is possible that recorded reserves may not be adequate to cover the future payment of claims. Adjustments, if any, to estimates recorded resulting from ultimate claim payments will be reflected in our consolidated statements of operations and comprehensive income (loss) in the periods in which such adjustments are known.

***Comprehensive Income (Loss)***

Comprehensive income (loss) includes all changes in equity during a period except those that resulted from investments by, or distributions to, stockholders. Other comprehensive (loss) income refers to revenues, expenses, gains and losses that, under GAAP, are included in comprehensive income (loss), but excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders' deficit. Components of our comprehensive income (loss) include net income (loss) and foreign currency translation adjustments. Foreign currency translation adjustments in fiscal years 2022, 2021 and 2020 were not material.

***Foreign Currency Translation***

The functional currency for our wholly owned foreign subsidiaries included in these consolidated financial statements that are domiciled outside of the United States is the applicable local currency. Assets and liabilities of our foreign subsidiaries are translated into United States dollars at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average rate in effect during the period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in the consolidated statements of stockholders' deficit as a component of accumulated other comprehensive (loss) income. Adjustments that arise from exchange rate changes on transactions denominated in a

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currency other than the local currency are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss) as incurred.

***Share Repurchases***

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.

***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. For arrangements that contain multiple performance obligations, we allocate the transaction price to each performance obligation on a relative standalone selling price basis.

At our retail store locations, we satisfy our performance obligation and recognize revenue at the point in time when a customer takes possession of the merchandise and tenders payment at the point-of-sale register. For e-Commerce sales shipped to a customer from our distribution center, or from a retail store location (ship from store), we satisfy our performance obligation and recognize revenue upon shipment, which is the point in time the customer obtains control of the merchandise after payment has been tendered. Income we receive from customers for shipping and handling is recognized as a component of revenue upon shipment of merchandise to the customer. We satisfy our performance obligation and recognize revenue from e-Commerce sales shipped to a retail store location from our distribution center, or fulfilled from merchandise already located at a retail store location (buy-online-pickup-in-store), at the point in time when the customer retrieves the merchandise from within the retail store location or at a retail store curbside.

If a customer earns loyalty program points in connection with the retail store or e-Commerce sales transactions described above, then we have a remaining performance obligation and cannot recognize all the revenue. A portion of the revenue is allocated to the loyalty program points earned during the transaction. We satisfy our performance obligation and recognize revenue allocated to these loyalty program points and the resulting awards at the point in time when the awards are redeemed for merchandise, when we determine that they will not be redeemed, or when the awards and points expire.

We satisfy our performance obligation and recognize revenue from gift cards and store merchandise credits at the point in time when the customer presents the gift cards and store merchandise credits for redemption. Gift card breakage is income recognized due to the non-redemption of a portion of gift cards sold by us for which a liability was recorded in prior periods. We recognize estimated gift card breakage over time as a component of net sales in proportion to the pattern of rights exercised by the customer as reflected in actual gift card redemption patterns over the period. Our estimated gift card breakage rate is approximately 4%. While customer redemption patterns result in estimated gift card breakage, changes in our customers' behavior could impact the amount that ultimately is unused and could affect the amount recognized as a component of net sales. During fiscal years 2022, 2021 and 2020, we recognized $1.0 million, $1.1 million and $0.9 million, respectively, of estimated gift card breakage as a component of net sales.

We are required to estimate certain amounts included in a contract or an implied arrangement with a customer which add variability to the transaction price. Under certain conditions, we are obligated to accept customer returns for most of our merchandise. Sales returns reduce the revenue we expect to receive for merchandise and therefore add variability to the transaction price. Based on historical return pattern experience, we reasonably estimate the amount of merchandise expected to be returned and exclude it from revenue. Similarly, losses we bear arising from uncollectible customer credit card payments are recorded as a reduction of revenue as they reduce the revenue we expect to receive for the merchandise.

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. Consequently, we consider our remaining performance obligations to be representative of our contract liability, most of which is not expected to last for more than one year and has therefore been classified as current. Our contract liability balances increase as gift cards and store merchandise credits are purchased and received by the customer; and as loyalty points are earned based on purchase activity and qualifying non-purchase activity. Contract liability balances decrease as gift cards and store merchandise credits are redeemed for merchandise or when we determine that they will not be redeemed; as loyalty points expire or when we determine that they will not be converted into a loyalty award; and as loyalty awards are redeemed for merchandise or expire.

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Sales taxes collected from customers and remitted directly to governmental authorities are not considered revenue and are excluded from the transaction price.

We have an agreement with a third party 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 are eligible to receive royalties, profit-sharing and marketing and promotional funds from the third party financing company ("PLCC Funds") based on usage of the PLCCs. These PLCC Funds are recorded as a component of net sales in the consolidated statements of operations and comprehensive income (loss).

***Cost of Goods Sold***

Cost of goods sold includes: merchandise costs; freight; inventory shrinkage; payroll expenses associated with the merchandising and distribution departments; distribution center expenses, including rent, common area maintenance ("CAM") charges, real estate taxes, depreciation, utilities, supplies and maintenance; and store occupancy expenses, including rents, CAM charges, heating, ventilation and air conditioning ("HVAC") charges, real estate taxes and depreciation.

***Vendor Allowances***

We receive certain allowances from our vendors primarily related to damaged merchandise, markdowns and pricing. Allowances received from vendors related to damaged merchandise and pricing are reflected as a reduction of inventory in the period they are received and allocated to cost of goods sold during the period in which the items are sold. Markdown allowances received from vendors are reflected as reductions to cost of goods sold in the period they are received if the goods have been sold or marked down, or as a reduction of inventory if the goods have not yet been sold. During fiscal years 2022, 2021 and 2020, we received vendor allowances of $3.8 million, $3.5 million and $2.8 million, respectively, substantially all of which were accounted for as a reduction of cost of goods sold.

***Selling, General and Administrative Expenses***

Selling, general and administrative expenses include: payroll expenses associated with stores and e-Commerce; store and e-Commerce operating expenses other than store occupancy; store pre-opening costs; credit card processing fees; share-based compensation; and payroll and other expenses associated with headquarters and administrative functions.

***Marketing Expenses***

Marketing expenses are expensed as incurred. Costs associated with communicating advertising that has been produced, such as television and webisodes, are recorded in prepaid expenses and other current assets in the consolidated balance sheets and are expensed the first time each advertising event takes place. Marketing expenses include photographic production, television, store and brand marketing and targeted online performance marketing costs such as retargeting, paid search/product listing advertising, and social media advertisements.

***Store Pre-Opening Costs***

Costs incurred in connection with the opening of new stores, store remodels or relocations are expensed as incurred. We incurred $1.2 million, $0.9 million and $0.1 million of pre-opening costs in fiscal years 2022, 2021 and 2020, respectively, which are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

***Shipping and Handling Costs***

We classify shipping and handling costs in costs of goods sold in the consolidated statements of operations and comprehensive income (loss). We account for shipping and handling activities that occur after the customer has obtained control of merchandise as a fulfillment cost rather than an additional promised service.

***Leases***

We consider an agreement to be or contain a lease if it conveys us as the lessee with the right to control the use of an identified property, plant and equipment asset for a period of time in exchange for consideration. Based on these criteria, we as

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the lessee have operating lease agreements with lessors for our retail stores, distribution center and headquarter office space; and vehicles and equipment; under primarily non-cancelable leases with terms ranging from approximately two to seventeen years.

Certain of our operating lease agreements contain one or more options to extend the leases at our sole discretion. However, the periods covered by the options to extend the leases of our retail stores, vehicles and equipment are not recognized as part of the associated right of use ("ROU") assets and lease liabilities, as we are not reasonably certain to exercise the options. The periods covered by the options to extend the leases of our distribution center and headquarter office space are recognized as part of the associated ROU assets and lease liabilities, as we are reasonably certain to exercise the options due to the significant effort and investment it would take to move out of these locations. Some of our operating lease agreements contain options to terminate the lease under certain conditions.

The retail space leases provide for rents based upon the greater of the minimum annual rental amounts or a percentage of annual store sales volume. Certain leases provide for increasing minimum annual rental amounts. We consider rents based upon a percentage of annual store sales volume, and other rent-related payments that generally vary because of changes in facts and circumstances (other than due to the passage of time), to be variable lease payments. Variable lease payments associated with retail space leases are recognized as occupancy costs within cost of goods sold in the consolidated statements of operations and comprehensive income (loss) in the period in which the obligation for those payments is incurred. We generally consider all other lease payments to be fixed in nature and the sum of all the discounted remaining fixed payments in the lease terms make up the lease liabilities in our consolidated balance sheet (if the lease terms are longer than 12 months).

Our operating lease agreements do not contain any residual value guarantees or restrictive covenants, and we have not entered into any sublease agreements, lease agreements with related parties, or build-to-suit arrangements that may create significant rights and obligations for us.

We discount the fixed lease payments that make up the lease liabilities using an incremental borrowing rate ("IBR"), as the rates implicit in our leases are not readily determinable. The IBR is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The determination of the IBR for each lease term incorporates various inputs and assumptions including our publicly available credit rating, credit spreads of other publicly traded debt issued by companies with a similar credit rating to ours and a risk-free interest rate. All inputs and assumptions and corresponding IBRs are highly subjective.

We choose not to separate nonlease components (such as CAM charges and HVAC charges), from lease components (such as fixed minimum rent payments), and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component. We do not apply Accounting Standards Update ("ASU") 2016-02, *Leases*, and all related guidance (ASC 842) requirements to leases that have lease terms of 12 months or less upon commencement, and instead recognize short-term lease payments, if applicable, in the consolidated statements of operations and comprehensive income (loss) on a straight-line basis over the lease term.

In response to the COVID-19 pandemic, the Financial Accounting Standards Board ("FASB") issued interpretive guidance in April 2020, which provides entities the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease terms. We elected this option; accordingly, we did not remeasure the lease liabilities or record a change to the ROU assets for any concessions we received for our retail store leases. Rather, deferred lease payments were recorded to operating lease liabilities until paid and lease concessions were recorded in the period they were negotiated or when the lower lease expense was paid.

***Income Taxes***

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if we believe it is more likely than not that some portion or the entire deferred tax asset will not be realized.

Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.

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We prescribe a recognition threshold and a measurement attribute for the consolidated financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We include interest and penalties related to uncertain tax positions in income tax expense in the consolidated statements of operations and comprehensive income (loss).

The amount of income taxes we pay may be subject to periodic audits by the Internal Revenue Service ("IRS") and other taxing authorities. These audits may challenge certain of our tax positions, such as the timing and amount of deductions and allocation of taxable income to various jurisdictions.

We recognize tax liabilities for our estimate of the potential outcome of any uncertain tax issue, which is subject to our assessment of the relevant risks, facts and circumstances existing at the time, and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense and the effective tax rate in the period in which the new information becomes available.

As of the end of fiscal year 2022, we had accumulated undistributed earnings and profits of our foreign subsidiary of approximately $8.1 million. We continue to treat undistributed earnings of our foreign subsidiary as indefinitely reinvested according to our current operating plans and no deferred tax liability has been recorded for potential future taxes related to such earnings. According to current tax law, any future dividends paid from our foreign subsidiary will not be subject to income tax in the United States, except for withholding taxes and state taxes, which are not material. We have made a determination on our accounting policy choice to treat taxes related to Global Intangible Low Taxed Income ("GILTI") as a period cost.

***Share-Based Compensation***

On June 22, 2021, in connection with our IPO, our board of directors 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 stock options, restricted stock and restricted stock units ("RSUs"), among other types of awards, all of which are accounted for in accordance with ASC 718, *Compensation-Stock Compensation*. The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes share-based compensation cost as expense over the vesting period. As share-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, the amount of expense has been reduced for actual forfeitures as they occur.

Stock options are valued utilizing a Black-Scholes option pricing model ("OPM"). The OPM used to value the stock options incorporates various assumptions, including dividend yield, expected volatility, risk-free interest rate and expected term of the stock options. 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. 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. The expected term of the stock options represents the estimated period of time until exercise and is calculated using the simplified method which deems the term to be the average of the time-to-vesting and the contractual life of the options. The grant date fair value of restricted stock and RSUs is based on the closing price per share of our common stock on the grant date. We recognize compensation expense for time-based awards on a straight-line basis and for performance-based awards on the graded-vesting method over the vesting period of the awards.

Prior to the IPO, Torrid Holding LLC issued 13,660,000 Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J Torrid incentive units, in the aggregate, net of forfeitures, to certain members of our management. These incentive units were intended to constitute profits interests.

We recognized the impact of share-based compensation associated with incentive units issued by Torrid Holding LLC in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). The share-based compensation expense and related capital contribution are reflected in our consolidated financial statements as these awards were deemed to be for our benefit. The intent of the incentive units was to provide profit-sharing opportunities to management rather than equity ownership in our then parent, Torrid Holding LLC. The incentive units did not have any voting or distribution rights and contained a repurchase feature, whereby upon termination, Torrid Holding LLC had the right to purchase from former employees any or all of the vested incentive units at fair value. In addition, although the fair value of the incentive units was determined through an option pricing methodology that utilized the possible equity values of Torrid Holding LLC, the settlement amounts and method of settlement of the incentive units were at the discretion of our board of

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directors. Based on these aforementioned features and characteristics, we determined that the incentive units were in-substance liabilities accounted for as liability instruments in accordance with ASC 710, *Compensation*. The incentive units were remeasured based on the fair value of the awards at the end of each reporting period. We recorded the expense associated with changes in the fair value of these incentive units as a capital contribution from our former parent, Torrid Holding LLC, as our former parent is the legal obligor for the incentive units.

The incentive units were valued utilizing a contingent claims analysis ("CCA") methodology based on a Black-Scholes OPM. Under the OPM, each class of incentive units was modeled as a call option with a unique claim on the assets of Torrid Holding LLC. The characteristics of each class of incentive units determined the uniqueness of the claim on the assets of Torrid Holding LLC. The OPM used to value the incentive units incorporated various assumptions, including the time to liquidity event, equity volatility and risk-free interest rate of return. Equity volatility was based on the historical volatilities of comparable publicly traded companies for the time horizon equal to the time to the anticipated liquidity event; and the risk-free interest rate was for a term corresponding to the time to liquidity event. The assumptions underlying the valuation of the incentive units represented our best estimates, which involved inherent uncertainties and the application of our judgment. The most recent remeasurement of the fair value of the incentive units utilizing the CCA methodology was performed as of May 1, 2021. Following the pricing of our IPO, the vested portion of the incentive units was exchanged for shares of our common stock of an equivalent fair value as the vested incentive units and the unvested portion was cancelled. As such, the fair value of these incentive units is no longer recognized in our consolidated statements of operations and comprehensive income (loss).

***Earnings Per Share***

Basic earnings per share is computed by dividing net income (loss) 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 and 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, as all potentially dilutive securities would be anti-dilutive.

***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. From March 2020 to July 2020, we suspended our contributions to eligible employees' accounts as a precautionary measure in light of uncertainty resulting from COVID-19. During fiscal years 2022 and 2021, we contributed 50% of the first 4% of participants' eligible contributions into their 401(k) Plan accounts. Except for the period during fiscal year 2020 in which we suspended our contributions to eligible employees' accounts in response to COVID-19, we contributed 50% of the first 4% of participants' eligible contributions into their 401(k) Plan accounts. During fiscal years 2022, 2021 and 2020, we contributed $0.8 million, $0.7 million and $0.4 million, respectively, to eligible employees' Torrid 401(k) Plan accounts.

***Deferred Compensation Plan***

On August 1, 2015, we established the Torrid 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. From March 2020 to July 2020, we suspended our contributions to eligible employees' accounts as a precautionary measure in light of uncertainty resulting from COVID-19. During fiscal years 2022 and 2021, to the extent participants were ineligible to receive contributions from participation in our 401(k) Plan, we contributed 50% of the first 4% of participants' eligible contributions into their Deferred Compensation Plan accounts. Except for the period during fiscal year 2020 in which we suspended our contributions to eligible employees' accounts in response to COVID-19, we contributed 50% of the first 4% of participants' eligible contributions into their Deferred Compensation Plan accounts. As of January 28, 2023 and January 29, 2022, we did not have any assets of the Deferred Compensation Plan and the associated liabilities were $5.6 million and $7.2 million, respectively, included in our consolidated balance sheets. As of January 28, 2023, $1.4 million of the $5.6 million Deferred Compensation Plan liabilities were included in accrued and other current liabilities in our consolidated balance sheet. As of January 29, 2022, $0.4 million of the $7.2 million Deferred Compensation Plan liabilities were included in accrued and other current liabilities in our consolidated balance sheet.

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**Note 3. Accounting Standards**

***Recently Adopted Accounting Standards in Fiscal Year 2022***

In December 2022, the FASB issued Accounting Standards Update ("ASU") No. 2022-06, *Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848*. This ASU defers the sunset provision originally set forth by ASU No. 2020-04, *Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting for the LIBOR cessation* ("Topic 848"). Previously, the FASB had issued accounting guidance set forth by Topic 848 to ease the potential burden in accounting for the effects of reference rate reform on financial reporting as it relates to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The sunset provision was set for December 31, 2022 and is now changed to December 31, 2024. The amendments in this update are effective for all entities upon issuance of ASU No. 2022-06. Our adoption of this guidance in the fourth quarter of fiscal year 2022 did not have a material impact on our consolidated financial statements.

***Accounting Standards 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 4. Prepaid Expenses and Other Current Assets**

Prepaid expenses and other current assets consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Prepaid and other information technology expenses | $9048 | $5692 |
| Prepaid advertising | 1068 | 700 |
| Prepaid casualty insurance | 2557 | 3050 |
| Other | 7377 | 5244 |
| Prepaid expenses and other current assets | $20050 | $14686 |

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**Note 5. Property and Equipment**

Property and equipment are summarized as follows (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Property and equipment, at cost |  |  |
| Leasehold improvements | $176222 | $168084 |
| Furniture, fixtures and equipment | 115618 | 108261 |
| Software and licenses | 14140 | 15356 |
| Construction-in-progress | 2956 | 4743 |
|  | 308936 | 296444 |
| Less: Accumulated depreciation and amortization | (195323) | (168879) |
| Property and equipment, net | $113613 | $127565 |

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We recorded depreciation and amortization expense related to our property and equipment in the amounts of $36.1 million, $35.2 million and $33.1 million during fiscal years 2022, 2021 and 2020, respectively.

**Note 6. Implementation Costs Incurred in Cloud Computing Arrangements that are Service Contracts**

We defer implementation costs incurred in cloud computing arrangements that are service contracts. The short-term portion of deferred implementation costs incurred in cloud computing arrangements that are service contracts are included in prepaid expenses and other current assets in the consolidated balance sheets, while the long-term portion of these deferred costs are included in deposits and other noncurrent assets.

Deferred implementation costs incurred in cloud computing arrangements that are service contracts are summarized as follows (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Internal use of third party hosted software, gross | $16612 | $11877 |
| Less: Accumulated amortization | (6772) | (3892) |
| Internal use of third party hosted software, net | $9840 | $7985 |

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During fiscal years 2022, 2021 and 2020, we amortized approximately $2.9 million, $1.7 million and $1.1 million, respectively, of implementation costs incurred in cloud computing arrangements that are service contracts.

**Note 7. Intangible Assets**

Indefinite-lived intangible assets are summarized as follows (in thousands):

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **January 28, 2023** | **January 28, 2023** | **January 28, 2023** | **January 29, 2022** | **January 29, 2022** | **January 29, 2022** |
| | **Gross** | **Accumulated<br>Amortization** | **Net Book<br>Value** | **Gross** | **Accumulated<br>Amortization** | **Net Book<br>Value** |
| Indefinite-lived intangible assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade name | $8400 | $— | $8400 | $8400 | $— | $8400 |
| Total | $8400 | $— | $8400 | $8400 | $— | $8400 |

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We performed our annual impairment assessment of our trade name at the end of the third quarter of fiscal year 2022. We performed a qualitative assessment and determined that it is not more likely than not that the fair value of our trade name is less than its carrying value, which indicated there was no impairment.

**Note 8. Accrued and Other Current Liabilities**

Accrued and other current liabilities consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Accrued inventory-in-transit | $20878 | $37156 |
| Accrued payroll and related expenses | 20232 | 31194 |
| Accrued loyalty program | 13389 | 13481 |
| Gift cards | 12300 | 11695 |
| Accrued sales return allowance | 6562 | 4347 |
| Accrued freight | 5840 | 6048 |
| Accrued marketing | 4103 | 5419 |
| Accrued sales and use tax | 3666 | 4136 |
| Accrued lease costs | 3593 | 5242 |
| Accrued self-insurance liabilities | 2853 | 2891 |
| Accrued purchases of property and equipment | 2825 | 2208 |
| Deferred revenue | 1471 | 2879 |
| Term loan interest payable | 188 | 1762 |
| Other | 10947 | 10250 |
| Accrued and other current liabilities | $108847 | $138708 |

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**Note 9. Leases**

Our lease costs reflected in the tables below include minimum base rents, CAM charges and HVAC 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 consolidated statements of operations and comprehensive income (loss).

Our lease costs consisted of the following (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28, 2023** | **January 29, 2022** | **January 30, 2021** |
| Operating (fixed) lease cost | $52940 | $50446 | $40192 |
| Short-term lease cost | 186 | 82 | 124 |
| Variable lease cost | 17951 | 20655 | 17550 |
| Total lease cost | $71077 | $71183 | $57866 |

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In response to the COVID-19 pandemic, the FASB issued interpretive guidance in April 2020, which provides entities the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease terms. We elected this option; accordingly, we did not remeasure the lease liabilities or record a change to the ROU assets for any concessions we received for our retail store leases. Rather, deferred lease payments were recorded to operating lease liabilities until paid and lease concessions were recorded in the period they were negotiated or when the lower lease expense was paid.

As of the end of fiscal year 2021, we had received substantially all of the lease concessions negotiated in response to the COVID-19 pandemic and as a result, deferred fixed lease payments during fiscal year 2022 were not material. During fiscal year 2022, we did not record any reduction to lease costs as a result of negotiated lease concessions. During fiscal years 2021 and 2020, we recorded reductions to lease costs of $1.3 million and $18.6 million, respectively, as a result of negotiated lease concessions.

A maturity analysis of our operating lease liabilities, for lease terms that include periods covered by options to extend some of our leases that we are reasonably certain of being executed, for each of the next five years and thereafter, reconciled to our operating lease liabilities recognized in the consolidated balance sheet as of January 28, 2023, is as follows (in thousands):

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| | |
|:---|:---|
| **Fiscal Year** | |
| 2023 | $56665 |
| 2024 | 55279 |
| 2025 | 45445 |
| 2026 | 34226 |
| 2027 | 22921 |
| Thereafter | 42814 |
| Total operating lease liabilities | $257350 |
| Less: Imputed interest | (40239) |
| Total operating lease liabilities | $217111 |
| Less: Current portion of operating lease liabilities | (45008) |
| Noncurrent operating lease liabilities | $172103 |

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Other supplementary information related to our leases is reflected in the table below (in thousands except lease term and discount rate data):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28, 2023** | **January 29, 2022** | **January 30, 2021** |
| Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating cash outflows for operating leases | $58050 | $59066 | $40025 |
| Right-of-use assets obtained in exchange for new operating lease liabilities | $19113 | $11912 | $3814 |
| Decrease in right-of-use assets resulting from operating lease modifications or remeasurements | $9007 | $5190 | $6493 |
| Weighted average remaining lease term - operating leases | 6 years | 6 years | 7 years |
| Weighted average discount rate - operating leases | 6% | 6% | 6% |

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**Note 10. Revenue Recognition**

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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):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** | **January 30,<br>2021** |
| Apparel | $1119336 | $1169668 | $890511 |
| Non-apparel | 134800 | 109126 | 83003 |
| Other | 34008 | 18477 | 10656 |
| Total net sales | $1288144 | $1297271 | $984170 |

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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. During fiscal years 2022, 2021 and 2020, e-Commerce penetration of total net sales was 61%, 63% and 70%, respectively.

***Contract Liabilities***

During fiscal year 2022, we recognized revenue of $12.2 million and $6.3 million related to our accrued loyalty program and gift cards, respectively, that existed at the beginning of fiscal year 2022. During fiscal year 2021, we recognized revenue of $10.9 million and $5.2 million related to our accrued loyalty program and gift cards, respectively, that existed at the beginning of fiscal year 2021.

**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, in connection with the IT Asset Purchase Agreement (as defined below), 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 consolidated statements of operations and comprehensive income (loss). During fiscal years 2022, 2021 and 2020, we incurred costs of $1.6 million, $3.4 million and $3.0 million, respectively, 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 fiscal year 2022, Hot Topic charged us $2.4 million, all of which was recorded as a component of selling, general and administrative expenses. During fiscal years 2021 and 2020, Hot Topic charged us $7.5 million and $12.3 million,

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respectively, for various services under the applicable service agreements, of which $4.9 million and $9.6 million, respectively, were recorded as components of cost of goods sold, and the remaining $2.6 million and $2.7 million, respectively, were charged to selling, general and administrative expenses. As of January 28, 2023 and January 29, 2022, we owed $0.2 million and $0.7 million, respectively, 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 provided 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 negotiate 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 fiscal year 2022, we charged Hot Topic $1.0 million for these services and as of January 28, 2023, Hot Topic owed us $0.1 million 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 January 28, 2023 and January 29, 2022, the net amount we owed Hot Topic for these expenses was $1.1 million and $1.7 million, respectively, which is included in due to related parties in our consolidated balance sheets.

***IT Asset Purchase Agreement with Hot Topic***

On June 14, 2019, we entered into an asset purchase agreement ("IT Asset Purchase Agreement") with Hot Topic pursuant to which we purchased certain information technology assets from Hot Topic for $29.5 million on August 1, 2019. Funds obtained from the Term Loan Credit Agreement (as defined in "Note 12—Debt Financing Arrangements") were used to make the purchase. We accounted for the purchase in accordance with subsections of ASC 805-50, related to transactions between entities under common control. Consequently, we recorded the information technology assets we purchased from Hot Topic at their historical carrying amounts totaling $3.5 million and recognized the difference between the historical carrying amounts and the purchase price in equity. In addition, certain information technology-related obligations and personnel, along with associated assets of $1.4 million and liabilities of $0.1 million, were transferred from Hot Topic to Torrid. In connection with the IT Asset Purchase Agreement, we and Hot Topic agreed to enter into the Reverse Services Agreement and Amendment to Amended and Restated Services Agreement upon the closing date of the IT Asset Purchase Agreement, which was August 1, 2019.

***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 fiscal years 2022 and 2021, there were no amounts due and during fiscal years 2022, 2021 and 2020, no amounts were paid under this agreement.

From time to time, we reimburse Sycamore for certain management expenses it pays on our behalf. As of January 28, 2023, there was no amount due, and as of January 29, 2022, the amount due was not material. During fiscal year 2022, the reimbursements we made to Sycamore for such expenses were not material. During fiscal years 2021 and 2020, the reimbursements we made to Sycamore for such expenses were $0.7 million and $0.1 million, respectively.

***Other Related Party Transactions***

MGF Sourcing US, LLC, an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During fiscal years 2022, 2021 and 2020, cost of goods sold included $70.0 million, $55.4 million and $45.4 million, respectively, related to the sale of merchandise purchased from this supplier. Purchases from this supplier accounted for approximately 15%, 11% and 9% of total net purchases in fiscal years 2022, 2021 and 2020, respectively. As of January 28, 2023 and January 29, 2022, the net amounts we owed MGF Sourcing US, LLC for these purchases were $11.6 million and $12.1 million, respectively. This liability is included in due to related parties in our consolidated balance sheets.

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HU Merchandising, LLC, a subsidiary of Hot Topic, is one of our suppliers. During fiscal years 2022, 2021 and 2020, cost of goods sold included $0.5 million, $0.7 million and $0.4 million, respectively, related to the sale of merchandise purchased from this supplier. As of January 28, 2023, there was no amount due and as of January 29, 2022, the amount we owed HU Merchandising, LLC for these purchases was $0.1 million.

Staples, Inc., an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During fiscal years 2022, 2021 and 2020, purchases from this supplier were not material. As of January 28, 2023 and January 29, 2022, amounts due to this supplier were not material.

In April 2020, we received a letter of support from Sycamore for up to $20.0 million of additional equity funding which, if necessary and sufficient, would be provided to further prevent noncompliance with the financial covenants in the Amended Term Loan Credit Agreement (as defined in "Note 12—Debt Financing Arrangements") through May 2021. In September 2020, we received an updated letter of support from Sycamore extending the equity funding commitment of up to $20.0 million, if necessary and sufficient, through January 2022. The letter of support was terminated as of May 6, 2021.

In March 2021, Hot Topic entered into a consulting services agreement with our Chief Financial Officer, George Wehlitz, Jr. ("CFO"), pursuant to which Hot Topic agreed to pay our CFO a consulting fee of $10,000 per month. The agreement was effective from January 3, 2021 and terminated on May 31, 2021.

**Note 12. Debt Financing Arrangements**

Our debt financing arrangements consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Existing ABL Facility, as amended | $8380 | $— |
| Term loan |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Term Loan Credit Agreement | 328125 | 350000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: current portion of unamortized original issue discount and debt financing costs | (1356) | (1356) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: noncurrent portion of unamortized original issue discount and debt financing costs | (5928) | (7284) |
| Total term loan outstanding, net of unamortized original issue discount and debt financing costs | 320841 | 341360 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: current portion of term loan, net of unamortized original issue discount and debt financing costs | (16144) | (20519) |
| Total term loan, net of current portion and unamortized original issue discount and debt financing costs | $304697 | $320841 |

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Fixed mandatory principal repayments due on the outstanding term loan are as follows as of January 28, 2023 (in thousands):

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| | |
|:---|:---|
| **Fiscal Year** | |
| 2023 | $17500 |
| 2024 | 17500 |
| 2025 | 17500 |
| 2026 | 17500 |
| 2027 | 17500 |
| 2028 | 240625 |
|  | $328125 |

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***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.

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The New Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million ("Principal"), 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 $346.5 million proceeds of the New Term Loan Credit Agreement, net of OID, were used to (i) repay and terminate the Amended Term Loan Credit Agreement (as defined below); (ii) make a $131.7 million distribution to the direct and indirect holders of our equity interests; and (iii) pay for financing costs associated with the New Term Loan Credit Agreement.

Loans made pursuant to the New Term Loan Credit Agreement bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month, plus 1.00% (in each case, subject to a floor of 1.75%); or (b) at a LIBOR rate for the interest period relevant to such borrowing (subject to a floor of 0.75%), in each case plus an applicable margin of 5.50% for LIBOR borrowings and 4.50% for base rate borrowings.

If we elect the LIBOR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates. If we elect the Base rate loan, interest is due and payable the last day of each calendar quarter. The elected interest rate at the end of fiscal year 2022 was approximately 10%*.***

In addition to paying interest on the outstanding Principal under the New Term Loan Credit Agreement, we are required to make fixed mandatory repayments of the Principal on the last business day of each fiscal quarter until maturity commencing with the second full fiscal quarter following the closing date ("Repayment"). For each of the fiscal quarters until the maturity date and starting with the fourth fiscal quarter of 2021, Repayments represent 1.25% of the Principal, reduced as a result of the application of prior Prepayments, as defined below.

Under the New Term Loan Credit Agreement, we are also required to make variable mandatory prepayments of the Principal, under certain conditions as described below, approximately 102 days after the end of each fiscal year (each, a "Prepayment"). Prepayments, if applicable, commence at the end of fiscal year 2022 and represent between 0% and 50% (depending on our first lien net leverage ratio) of Excess Cash Flow (as defined in the New Term Loan Credit Agreement) in excess of $10.0 million, minus prepayments of Principal, the Existing ABL Facility, as amended (to the extent accompanied by a permanent reduction in the commitments thereunder) and certain other specified indebtedness and amounts in connection with certain other enumerated items. As of January 28, 2023, we did not meet the Excess Cash Flow threshold to require a Prepayment.

In addition to mandatory Repayment and Prepayment obligations, we may at our option, prepay a portion of the outstanding Principal ("Optional Prepayment"). If we make Optional Prepayments before June 14, 2023, we will be subject to penalties ranging from 1.00% to 2.00% of the aggregate principal amount.

All of Torrid LLC's existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guarantee all obligations under the New Term Loan Credit Agreement. Substantially all of the assets of Torrid LLC, Torrid LLC's existing subsidiaries and Torrid Intermediate LLC will secure all such obligations and the guarantees of those obligations, subject to certain exceptions.

The New Term Loan Credit Agreement also contains a number of covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: create, incur or assume liens on our assets or property; incur additional indebtedness; issue preferred or disqualified stock; consolidate or merge; sell assets; pay dividends or make distributions, make investments, or engage in transactions with our affiliates.

As of the end of fiscal years 2022 and 2021, we were compliant with our financial covenants under the New Term Loan Credit Agreement.

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 20—Fair Value Measurements").

As of the end of fiscal year 2022, total borrowings, net of OID and financing costs, of $320.8 million remain outstanding under the New Term Loan Credit Agreement. During fiscal year 2022, we recognized $26.3 million of interest expense and $1.4 million of OID and financing costs related to the New Term Loan Credit Agreement. During fiscal year 2021, we recognized $14.0 million of interest expense and $0.9 million of OID and financing costs related to the New Term Loan Credit

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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 consolidated balance sheets. We recognize interest payments, together with amortization of the OID and financing costs, in interest expense in our consolidated statements of operations and comprehensive income (loss).

***Term Loan Credit Agreement***

On June 14, 2019, we entered into a term loan credit agreement ("Term Loan Credit Agreement") with Cortland Capital Market Services LLC, as agent, KKR Credit Advisors (US) LLC, as structuring advisor, and the lenders party thereto (the "Lenders"). On September 17, 2020, we entered into an amended term loan credit agreement ("Amended Term Loan Credit Agreement") with the Lenders, pursuant to which the definition of total debt used in the calculation of Total Net Leverage Ratio (as defined below) was amended. All other material terms of the Term Loan Credit Agreement remained substantially the same. In September 2020, in conjunction with the Amended Term Loan Credit Agreement, we prepaid $35.0 million of the outstanding Amended Term Loan Credit Agreement Principal (as defined below), associated accrued interest of $0.2 million and an amendment fee of $0.5 million. On June 14, 2021, we utilized the proceeds from the New Term Loan Credit Agreement to pay the remaining outstanding Amended Term Loan Credit Agreement Principal (as defined below) of $207.5 million, associated accrued interest of $1.2 million and a prepayment penalty of $2.1 million.

The Amended Term Loan Credit Agreement provided for term loans in an initial aggregate amount of $260.0 million ("Amended Term Loan Credit Agreement Principal"), which was recorded net of OID of $2.9 million and had a maturity date of December 14, 2024. In connection with the Term Loan Credit Agreement, we paid financing costs of approximately $4.6 million.

The $257.1 million proceeds of the Term Loan Credit Agreement, net of OID, were used to i) purchase $213.2 million of senior participating preferred stock from Hot Topic's parent, HT Intermediate Holdings Corp. for which we subsequently received a promissory note receivable in exchange from our parent; ii) purchase certain information technology assets from Hot Topic for $29.5 million; iii) make a $10.0 million distribution to Torrid Holding LLC; and iv) pay for financing costs associated with the Term Loan Credit Agreement.

Loans made pursuant to the Amended Term Loan Credit Agreement bore interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month, plus 1.00% or (b) at a LIBOR rate for the interest period relevant to such borrowing, in each case plus an applicable margin of either 6.75% or 7.00% for LIBOR borrowings and either 5.75% or 6.00% for base rate borrowings, in each case, based upon our total net leverage ratio as of the relevant testing date.

If we elected the LIBOR rate, interest was due and payable on the last day of each interest period, unless an interest period exceeded three months, then the respective dates that fell every three months after the beginning of the interest period would also be interest payment dates. If we elected the Base rate loan, interest was due and payable the last day of each fiscal quarter.

In addition to paying interest on the outstanding Principal under the Amended Term Loan Credit Agreement, we were required to make fixed mandatory repayments of the Principal on the last business day of each fiscal quarter until maturity ("Amended Term Loan Credit Agreement Repayment"). Amended Term Loan Credit Agreement Repayments for the first four fiscal quarters, starting in the third quarter of fiscal year 2019, represented 0.75% of the Amended Term Loan Credit Agreement Principal, reduced as a result of the application of prior Amended Term Loan Credit Agreement Prepayments (as defined below). For each of the eight fiscal quarters thereafter, Amended Term Loan Credit Agreement Repayments represented 1.25% of the Amended Term Loan Credit Agreement Principal, reduced as a result of the application of prior Amended Term Loan Credit Agreement Prepayments (as defined below). For each of the 10 fiscal quarters thereafter until the maturity date, Amended Term Loan Credit Agreement Repayments represented 1.875% of the Amended Term Loan Credit Agreement Principal, reduced as a result of the application of prior Amended Term Loan Credit Agreement Prepayments (as defined below).

Under the Amended Term Loan Credit Agreement, we were also required to make variable mandatory prepayments of the Amended Term Loan Credit Agreement Principal, under certain conditions as described below, approximately 102 days after the end of each fiscal year (each, an "Amended Term Loan Credit Agreement Prepayment"). Amended Term Loan Credit Agreement Prepayments, if applicable, commenced at the end of fiscal year 2018 and represented between 25% and 75% (depending on our first lien net leverage ratio) of Excess Cash Flow (as defined in the Amended Term Loan Credit Agreement) in excess of $2.0 million, minus prepayments of Amended Term Loan Credit Agreement Principal, the Existing ABL Facility,

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as amended (as defined below), (to the extent accompanied by a permanent reduction in the commitments thereunder) and certain other specified indebtedness and amounts in connection with certain other enumerated items.

All of Torrid LLC's existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guaranteed all obligations under the Amended Term Loan Credit Agreement. Substantially all of the assets of Torrid LLC, Torrid LLC's existing subsidiaries and Torrid Intermediate LLC secured all such obligations and the guarantees of those obligations, subject to certain exceptions.

Our borrowings under the Amended Term Loan Credit Agreement were subject to a financial covenant that required us to maintain a maximum ratio of our total debt to EBITDA (as defined in the Amended Term Loan Credit Agreement) ("Total Net Leverage Ratio"). The maximum ratio was 3.60 for the quarter ended November 2, 2019, 3.35 for the quarters ended February 1, 2020, May 2, 2020, and August 1, 2020, 3.10 for the quarter ended October 31, 2020, 2.50 for the quarter ended January 30, 2021, 2.35 for the quarter ended May 1, 2021, 2.10 for the quarters ended July 31, 2021 and October 30, 2021, and 1.85 for all quarters thereafter. The Amended Term Loan Credit Agreement amended the definition of total debt used in the Total Net Leverage Ratio calculation for the quarters ended October 31, 2020, January 30, 2021, May 1, 2021 and July 31, 2021. The amended definition of total debt permitted us to exclude indebtedness associated with our Existing ABL Facility, as amended, through the quarter ended October 31, 2020, removed the $20.0 million cap from the amount of cash and cash equivalents on-hand that we were permitted to net against our total debt for purposes of the ratio calculation through the quarter ended January 30, 2021, and raised the $20.0 million cap to $40.0 million and $30.0 million for the quarters ended May 1, 2021 and July 31, 2021, respectively, before reverting to $20.0 million for all quarters thereafter.

The Amended Term Loan Credit Agreement contained a limitation on our capital expenditures paid in cash in any fiscal year and such expenditures could not exceed 37.5% of prior year Adjusted EBITDA (as defined by the Amended Term Loan Credit Agreement). If the amount of our capital expenditures paid in cash in any fiscal year was less than the 37.5% threshold, 50% of the difference was to be automatically applied to increase the maximum threshold in the next fiscal year. The Amended Term Loan Credit Agreement also contained a number of other covenants that, among other things and subject to certain exceptions, would restrict our ability and the ability of our subsidiaries to: create, incur or assume liens on our assets or property; incur additional indebtedness; make capital expenditures; issue preferred or disqualified stock; incur hedging obligations; consolidate or merge; sell assets; pay dividends or make distributions, make investments or engage in transactions with our affiliates.

During fiscal year 2021, we recognized $8.2 million of interest expense and recognized $0.4 million of OID and financing costs related to the Amended Term Loan Credit Agreement. During fiscal year 2020, we recognized $19.2 million of interest expense and recognized $1.4 million of OID and financing costs related to the Amended Term Loan Credit Agreement. The OID and financing costs were amortized over the Amended Term Loan Credit Agreement's five and a half-year term and were reflected as a direct deduction of the face amount of the term loan in our consolidated balance sheets. On June 14, 2021, upon repayment of the outstanding borrowings under the Amended Term Loan Credit Agreement, we wrote off $5.2 million of unamortized OID and financing costs and incurred a $2.1 million prepayment penalty. We recognized interest payments, together with amortization of the OID and financing costs, in interest expense in our consolidated statements of operations and comprehensive income (loss).

***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, in conjunction with the Term Loan Credit Agreement, 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

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outstanding of the loans would be due and payable in full from October 23, 2022 to June 14, 2026. All other material terms of the Existing ABL Facility, as amended, remain substantially the same as the previous agreements it replaced.

The borrowing base for the Existing ABL Facility, as amended, at any time equals the sum of 90% of eligible credit card receivables, plus 90% of the appraised net orderly liquidation value of eligible inventory and eligible in-transit inventory multiplied by the cost of such eligible inventory and eligible in-transit inventory (to be increased to 92.5% during the period beginning on September 1 of each year and ending on December 31 of each year). The Existing ABL Facility, as amended, includes borrowing capacity for letters of credit and for borrowings on same-day notice, referred to as Swing Line Loans, and is available in U.S. dollars.

Under the Existing ABL Facility, as amended, we have the right to request up to $50.0 million of additional commitments plus the aggregate principal amount of any permanent principal reductions we may take plus the amount by which the borrowing base exceeds the aggregate commitments (subject to customary conditions precedent). The lenders under this facility are not under any obligation to provide any such additional commitments, and any increase in commitments is subject to customary conditions precedent. If we were to request any such additional commitments and the existing lenders or new lenders

were to agree to provide such commitments, the size of the Existing ABL Facility, as amended, could increase to up to $200.0 million, but our ability to borrow under this facility would still be limited by the amount of the borrowing base.

Borrowings under the Existing ABL Facility, as amended, bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month adjusted for certain costs, plus 1.00%, in each case, plus an applicable margin that ranges from 0.25% to 0.75% based on average daily availability; or (b) at a LIBOR rate for the interest period relevant to such borrowing adjusted for certain costs ("Adjusted LIBOR"), in each case plus an applicable margin that ranges from 1.25% to 1.75%, based on average daily availability. As of the end of fiscal year 2022, the applicable interest rate for borrowings under the Existing ABL Facility, as amended, was approximately 8% per annum.

If we elect the LIBOR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates. If we opt for the base rate (including a Swing Line Loan), interest is due and payable on the first business day of each month and on the maturity date.

In addition to paying interest on outstanding principal under the Existing ABL Facility, as amended, we are required to pay a commitment fee in respect of unutilized commitments. The commitment fee ranges between 0.25% and 0.375% per annum of unutilized commitments and will be subject to adjustment each fiscal quarter based on the amount of unutilized commitments during the immediately preceding fiscal quarter. We must also pay customary letter of credit fees and agent fees.

If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Existing ABL Facility, as amended, exceeds the lesser of (a) the commitment amount and (b) the borrowing base, we will be required to repay outstanding loans and/or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.

We may voluntarily reduce the unused portion of the commitment amount and repay outstanding loans at any time. Prepayment of the loans may be made without premium or penalty other than customary "breakage" costs with respect to LIBOR loans.

All obligations under the Existing ABL Facility, as amended, are unconditionally guaranteed by substantially all of Torrid Intermediate LLC's existing majority-owned domestic subsidiaries and will be required to be guaranteed by certain of Torrid Intermediate LLC's future domestic majority-owned subsidiaries. All obligations under the Existing ABL Facility, as amended, and the guarantees of those obligations, will be secured, subject to certain exceptions, by substantially all of Torrid Intermediate LLC's assets.

The Existing ABL Facility, as amended, requires us to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if we fail to maintain Specified Availability (as defined by the Existing ABL Facility, as amended) of at least the greater of 10% of the Loan Cap, as defined by the Existing ABL Facility, as amended, and $7.0 million. The Existing ABL Facility, as amended, contains a number of other covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: incur additional indebtedness; pay dividends on our capital stock or redeem, repurchase or retire our capital stock or our other indebtedness; make investments, loans and acquisitions; engage in transactions with our affiliates; sell assets, including capital stock of our subsidiaries; alter the business we conduct; consolidate or merge; and incur liens. As

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of the end of fiscal years 2022 and 2021, we were compliant with our debt covenants under the Existing ABL Facility, as amended.

The Existing ABL Facility, as amended, specifically restricts dividends and distributions, aside from amounts to cover ordinary operating expenses and taxes, between our subsidiaries and to us. However, dividends and distributions are permitted at any time that either (1) availability under the Existing ABL Facility, as amended, is equal to or greater than 15% of the maximum borrowing amount on a pro forma basis and we are pro forma compliant with a 1.00 to 1.00 fixed charge coverage ratio or (2) availability under the Existing ABL Facility, as amended, is equal to or greater than 20% of the maximum borrowing amount on a pro forma basis. As of the end of fiscal years 2022 and 2021, the maximum restricted payments utilizing the Existing ABL Facility, as amended, that our subsidiaries could make from its net assets were $127.5 million and $109.8 million, respectively.

We consider the carrying amounts of the Existing ABL Facility, as amended, to approximate fair value because it is carried at a market observable interest rate that resets periodically and is categorized as Level 2 in the fair value hierarchy.

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. Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2021 was $123.9 million, which reflects no borrowings. Standby letters of credit issued and outstanding were $7.4 million and $5.3 million at the end of fiscal years 2022 and 2021, respectively. 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 consolidated balance sheets. During fiscal years 2022, we amortized financing costs of $0.2 million. During fiscal years 2021 and 2020, we amortized financing costs of $0.1 million in each period. During fiscal years 2022, 2021 and 2020, interest payments were $1.8 million, $0.6 million and $0.6 million, respectively. We recognize amortization of financing costs and interest payments for the revolving credit facilities in interest expense in our consolidated statements of operations and comprehensive income (loss).

**Note 13. Income Taxes**

***Income Before Provision for Income Taxes***

The domestic and foreign income before provision for income taxes during fiscal years 2022, 2021 and 2020 is as follows (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** | **January 30,<br>2021** |
| Domestic | $69273 | $15010 | $38698 |
| Foreign | 2409 | 819 | (3175) |
| Income before provision | $71682 | $15829 | $35523 |

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***Provision for Income Taxes***

The composition of the provision for income taxes during fiscal years 2022, 2021 and 2020 is as follows (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** | **January 30,<br>2021** |
| Current: |  |  |  |
| Federal | $14442 | $36410 | $9528 |
| State | 4693 | 8051 | 2559 |
| Foreign | 487 |  | (37) |
|  | $19622 | $44461 | $12050 |
| Deferred: |  |  |  |
| Federal | $1632 | $785 | $(157) |
| State | 4 | 305 | (361) |
| Foreign | 215 | 222 | (541) |
|  | 1851 | 1312 | (1059) |
| Total income tax provision | $21473 | $45773 | $10991 |

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Significant components of our deferred tax assets and liabilities are as follows (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28,<br>2023** | **January 29,<br>2022** |
| Deferred tax assets (liabilities): |  |  |
| Inventory | $1671 | $2197 |
| Loyalty reserve | 3562 | 3591 |
| Accrued bonus | 227 | 3944 |
| Deferred rent | 695 | 639 |
| Deferred compensation | 1046 | 1694 |
| Lease liability | 52113 | 61112 |
| Equity based compensation | 721 | 459 |
| Other deferred tax assets | 5160 | 4562 |
| ROU assets | (43950) | (52611) |
| Intangible assets | (2069) | (2071) |
| Depreciation | (14367) | (16446) |
| Other deferred tax liabilities | (1799) | (2197) |
| Total net deferred tax assets | $3010 | $4873 |

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A reconciliation of the provision for income taxes to the statutory tax rate is as follows:

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** | **January 30,<br>2021** |
| Statutory federal rate | 21.0% | 21.0% | 21.0% |
| State and local taxes, net of federal benefit | 5.3 | 35.5 | 5.5 |
| Share-based compensation | 2.1 | 202.9 | 4.6 |
| Liability for uncertain tax positions | (0.2) | 9.4 | (1.2) |
| Information technology services charge | 0.4 | 4.5 | 1.8 |
| Non-deductible IPO transaction costs |  | 11.0 |  |
| Limitation on Section 162(m) officers | 1.3 | 5.8 |  |
| Foreign derived intangible income | (0.2) | (2.0) | (0.3) |
| Other differences, net | 0.3 | 1.1 | (0.5) |
| Effective income tax rate | 30.0% | 289.2% | 30.9% |

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The effective tax rates in fiscal years 2021 and 2020 reflect non-deductible and non-taxable fair market value adjustments to the share-based compensation expense, for which there is no associated income tax benefit or expense. The unconventional effective tax rate in fiscal year 2021 is primarily due to the increase in the amount of non-deductible items associated with share-based compensation, relative to income before provision for income taxes for fiscal year 2021. The increase in the amount of non-taxable items associated with share-based compensation during fiscal year 2021 was driven by the $111.4 million remeasurement adjustment related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO. Please refer to "Note 14—Share-Based Compensation" for further discussion regarding the $111.4 million remeasurement adjustment.

Excess tax benefits or detriments associated with share-based payment awards are recognized as income tax benefits or expense in the consolidated statements of operations and comprehensive income (loss). The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. The income tax detriment resulting from share-based awards was $1.7 million for fiscal year 2022 and is reflected as an increase to the income tax provision.

As of the end of fiscal year 2022, we had accumulated undistributed earnings and profits of our foreign subsidiary of approximately $8.1 million. We continue to treat undistributed earnings of our foreign subsidiary as indefinitely reinvested according to our current operating plans and no deferred tax liability has been recorded for potential future taxes related to such earnings. According to current tax law, any future dividends paid from our foreign subsidiary will not be subject to income tax in the United States, except for withholding taxes and state taxes, which are not material. We have made a determination on our accounting policy choice to treat taxes related to GILTI as a period cost.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law, and has resulted in significant changes to the U.S. federal corporate tax law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. Additionally, several state and foreign jurisdictions have enacted additional legislation to comply with federal changes. On December 27, 2020, the Consolidated Appropriations Act ("CAA") was enacted in further response to the COVID-19 pandemic. The CAA, among other things, revised certain tax measures enacted under the CARES Act, such as the deductibility of payroll tax credits, charitable contributions for corporate taxpayers, certain meals and entertainment expenses paid or incurred in calendar years 2021 and 2020, and employment retention credit claims. On March 11, 2021, the American Rescue Plan Act ("ARPA") was signed into law with additional funding for COVID-19 pandemic relief. The ARPA includes the expansion of employment retention credit claims and other pandemic funding provisions. 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 CARES Act, CAA, ARPA and IR Act tax law changes in our tax provision for the year ended January 28, 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 fiscal year 2022, the total liability for income taxes 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 2021, the total liability for income taxes associated with unrecognized tax benefits, including interest and penalties, was $4.0 million ($3.5 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.

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The following table reconciles the amount recorded for the liability for income taxes associated with unrecognized tax benefits as of the end of fiscal years 2022, 2021 and 2020 (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** | **January 30,<br>2021** |
| Unrecognized tax benefits at the beginning of the fiscal year | $3293 | $2187 | $1308 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions: |  |  |  |
| Tax positions related to the current period | 59 | 1535 | 1455 |
| Tax positions related to the prior period | (356) | (429) | (576) |
| Unrecognized tax benefits at the end of the fiscal year | $2996 | $3293 | $2187 |

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Our continuing practice is to recognize interest and penalties related to unrecognized tax benefits as a tax expense. In fiscal years 2022, 2021 and 2020, tax expense related to interest and penalties was $0.8 million, $0.5 million and $0.3 million, respectively.

We operate stores throughout the United States, Puerto Rico and Canada, and as a result, we file income tax returns in the United States federal jurisdiction and various state, local and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. The federal statute of limitations period is three years and most states follow this limitations period with few exceptions. Consequently, tax years between 2019 and 2021 are open for examination.

***IT Asset Purchase Agreement with Hot Topic***

In connection with the IT Asset Purchase Agreement we entered into with Hot Topic on August 1, 2019, we generated a tax amortizable basis of the $29.5 million purchase price, amortizable over three years commencing in fiscal year 2019. We recorded the $26.0 million variance between the $3.5 million net book value and $29.5 million tax amortizable basis of the information technology assets in equity, net of $6.7 million deferred tax. As of the end of fiscal year 2022, the tax basis has been fully amortized.

**Note 14. Share-Based Compensation**

Our share-based compensation expense, by award type, consists of the following (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28, 2023** | **January 29, 2022** | **January 30, 2021** |
| Restricted stock units | $1818 | $4040 | $— |
| Restricted stock awards | 6304 | 3864 |  |
| Performance-based restricted stock units | 568 |  |  |
| Stock options | 972 | 514 |  |
| Employee stock purchase plan | 318 | 170 |  |
| Remeasurement adjustments for incentive units |  | 151166 | 7791 |
| Share-based compensation expense before income taxes | 9980 | 159754 | 7791 |
| Income tax detriment | 340 | 293 |  |
| Net share-based compensation expense | $10320 | $160047 | $7791 |

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On June 22, 2021, in connection with our IPO, our board of directors 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 fiscal year 2022, 10,687,500 shares were authorized for issuance under the 2021 LTIP.

On June 22, 2021, in connection with our IPO, our board of directors 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

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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. As of the end of fiscal year 2022, 3,650,000 shares were authorized for issuance under the ESPP.

***Incentive Units***

Prior to the IPO, Torrid Holding LLC issued 13,660,000 Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J Torrid incentive units, in the aggregate, net of forfeitures, to certain members of our management.

We recognized the impact of share-based compensation associated with incentive units issued by Torrid Holding LLC in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). The share-based compensation expense and related capital contribution are reflected in our consolidated financial statements as these awards were deemed to be for our benefit. The intent of the incentive units was to provide profit-sharing opportunities to management rather than equity ownership in our then parent, Torrid Holding LLC. The incentive units did not have any voting or distribution rights and contained a repurchase feature, whereby upon termination, Torrid Holding LLC had the right to purchase from former employees any or all of the vested incentive units at fair value. In addition, although the fair value of the incentive units was determined through an option pricing methodology that utilized the possible equity values of Torrid Holding LLC, the settlement amounts and method of settlement of the incentive units were at the discretion of our board of directors. Based on these aforementioned features and characteristics, we determined that the incentive units were in-substance liabilities accounted for as liability instruments in accordance with ASC 710, *Compensation*. The incentive units were remeasured based on the fair value of the awards at the end of each reporting period. We recorded the expense associated with changes in the fair value of these incentive units as a capital contribution from our former parent, Torrid Holding LLC, as our former parent is the legal obligor for the incentive units.

The incentive units were valued utilizing a contingent claims analysis ("CCA") methodology based on a Black-Scholes OPM. Under the OPM, each class of incentive units was modeled as a call option with a unique claim on the assets of Torrid Holding LLC. The characteristics of each class of incentive units determined the uniqueness of the claim

on the assets of Torrid Holding LLC. The OPM used to value the incentive units incorporated various assumptions, including the time to liquidity event, equity volatility and risk-free interest rate of return. Equity volatility was based on the historical volatilities of comparable publicly traded companies for the time horizon equal to the time to the anticipated liquidity event; and the risk-free interest rate was for a term corresponding to the time to liquidity event. The assumptions underlying the valuation of the incentive units represented our best estimates, which involved inherent uncertainties and the application of our judgment. The most recent remeasurement of the fair value of the incentive units utilizing the CCA methodology was performed as of May 1, 2021.

During the second quarter of fiscal year 2021, we recorded a share-based compensation expense remeasurement adjustment of $111.4 million related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO. The vested portion of the incentive units was exchanged for 13,353,122 shares of our common stock of an equivalent fair value as the vested incentive units and the unvested portion was cancelled. As such, the fair value of these incentive units is no longer recognized in our consolidated statements of operations and comprehensive income (loss).

During fiscal years 2021 and 2020, we recognized share-based compensation expense of $159.8 million and $7.8 million, respectively, primarily due to an increase in the Torrid Holding LLC equity value.

***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 the IPO, such employees received one-time grants of RSUs ("IPO Awards") in an aggregate amount equal to $5.7 million. 50% of the IPO Awards were fully vested on the date of grant, and the remaining 50% will 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. Consequently, we recognized $2.8 million of share-based compensation expense related to these IPO Awards upon the consummation of our IPO with the remainder recognized over the three-year vesting period.

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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, during fiscal year 2022 under the 2021 LTIP consists of the following (in thousands except per share amounts):

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| | | |
|:---|:---|:---|
| | **Shares** | **Weighted average grant date value per share** |
| Nonvested, January 29, 2022 | 278 | $26.75 |
| Granted | 1371 | $5.07 |
| Vested | (66) | $25.65 |
| Forfeited | (197) | $18.07 |
| Nonvested, January 28, 2023 | 1386 | $6.55 |

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As of the end of fiscal year 2022, unrecognized compensation expense related to unvested RSUs, including PSUs, was $7.2 million, which is expected to be recognized over a weighted average period of approximately 2.5 years. The total vesting date fair value of RSUs which vested during fiscal year 2022 was $0.3 million.

The weighted average grant date fair value of PSUs granted during fiscal year 2022 was $4.15 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:

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| | |
|:---|:---|
| Dividend yield | —% |
| Expected volatility<sup>(1)</sup> | 70.7% |
| Risk-free interest rate<sup>(2)</sup> | 3.2% |
| Expected term<sup>(3)</sup> | 3.00 years |
| Grant date fair value per share | $4.15 |

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(1) &nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;&nbsp;&nbsp;&nbsp;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 during fiscal year 2022 under the 2021 LTIP consists of the following (in thousands except per share amounts):

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| | | |
|:---|:---|:---|
| | **Shares** | **Weighted average grant date fair value per share** |
| Nonvested, January 29, 2022 | 532 | $27.00 |
| Granted |  |  |
| Vested | (241) | $27.00 |
| Forfeited | (80) | $27.00 |
| Nonvested, January 28, 2023 | 211 | $27.00 |

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As of the end of fiscal year 2022, unrecognized compensation expense related to unvested restricted stock awards was $5.0 million, which is expected to be recognized over a weighted average period of approximately 1.3 years. The total vesting date fair value of restricted stock awards which vested during fiscal year 2022 was $1.4 million.

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***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):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Shares** | **Weighted average exercise price per share** | **Weighted average remaining contractual life (years)** | **Aggregate intrinsic value** |
| Outstanding, January 29, 2022 | 337 | $21.03 | 9.4 | $— |
| Granted | 1420 | $5.58 |  |  |
| Exercised |  |  |  |  |
| Expired / forfeited | (313) | $13.90 |  |  |
| Outstanding, January 28, 2023 | 1444 | $7.38 | 9.4 | $114.6 |
| Exercisable, January 28, 2023 | 44 | $21.03 |  |  |

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The weighted average grant date fair value of stock option awards granted during fiscal year 2022 was $3.25 per option and was estimated at the grant date using the Black-Scholes OPM with the following weighted average assumptions:

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| | |
|:---|:---|
| Dividend yield | —% |
| Expected volatility<sup>(1)</sup> | 59.0% |
| Risk-free interest rate<sup>(2)</sup> | 3.1% |
| Expected term<sup>(3)</sup> | 6.25 years |
| Grant date fair value per share | $3.25 |

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(1) &nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;&nbsp;&nbsp;&nbsp;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 fiscal year 2022, unrecognized compensation expense related to unvested stock options was $4.8 million, which is expected to be recognized over a weighted average period of approximately 3.4 years.

**Note 15. Other Noncurrent Liabilities**

Other noncurrent liabilities consist of the following (in thousands):

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| | | |
|:---|:---|:---|
| | **January 28, 2023** | **January 29, 2022** |
| Noncurrent portion of lease incentives | $1097 | $1053 |
| Noncurrent income taxes payable | 3769 | 3991 |
| Deferred PLCC Funds | 3958 |  |
| Other | 291 |  |
| Other noncurrent liabilities | $9115 | $5044 |

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**Note 16. Commitments and Contingencies**

***Operating Lease Agreements***

We have entered into operating lease agreements for retail, distribution and office space; and vehicles and equipment, under primarily non-cancelable leases with terms ranging from approximately two to seventeen years. Please refer to "Note 9—Leases" for further discussion regarding our leases.

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***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. The complaint alleges that certain statements in our registration statement on Form S-1 related to our IPO 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 these other matters of litigation to have a material adverse effect on our consolidated financial statements.

***Indemnities, Commitments and Guarantees***

During the ordinary course of business, we have made certain other 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 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 consolidated financial statements.

**Note 17. Stockholders' Deficit**

Torrid was formed on October 29, 2019 and capitalized on February 20, 2020. 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 103,774,813 shares of common stock and no shares of preferred stock issued and outstanding as of January 28, 2023. Historical periods prior to the formation of Torrid have been revised to reflect our current capital structure.

On June 22, 2021, Torrid's stockholder approved an amendment to Torrid's certificate of incorporation to (i) effect a 110,000-for-1 stock split of all shares of the issued and outstanding common stock, which was effected on June 22, 2021 and (ii) authorize 5.0 million shares of preferred stock. All share and per-share data in the financial statements and notes to the financial statements has been retroactively adjusted to reflect the stock split for all periods presented. The par value of the common stock was not adjusted as a result of the stock split.

**Note 18. Share Repurchases**

On December 6, 2021, our board of directors 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 January 28, 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):

---

| | | |
|:---|:---|:---|
| | **Fiscal Year Ended** | **Fiscal Year Ended** |
| | **January 28,<br>2023** | **January 29,<br>2022** |
| Number of shares repurchased | 4464367 | 2315266 |
| Total cost | $31700 | $23352 |
| Average per share cost including commissions | $7.10 | $10.09 |

---

------

**Note 19. Earnings Per Share**

Basic earnings per share is computed by dividing net income (loss) 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 shares outstanding for the period. Periods of net loss require the diluted computation to be the same as the basic computation. During fiscal year 2022, there were approximately 0.1 million potentially dilutive common share equivalents outstanding that were included in the computation of diluted earnings per share. During fiscal years 2021 and 2020, there were no potentially dilutive common share equivalents outstanding that were included in the computation of diluted earnings per share. During fiscal year 2022, there were approximately 0.9 million restricted stock awards and RSUs, including PSUs, and approximately 0.9 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 fiscal year 2021 there were approximately 0.9 million restricted stock awards and RSUs and approximately 0.3 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive.

**Note 20. 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 fiscal year 2022 consisted of the following (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **January 28,<br>2023** | **Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Items<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market funds (cash equivalent) | $29 | $29 | $— | $— |
| Total assets | $29 | $29 | $— | $— |
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation plan liability (noncurrent) | $4246 | $— | $4246 | $— |
| Total liabilities | $4246 | $— | $4246 | $— |

---

------

Financial assets and liabilities measured at fair value on a recurring basis as of the end of fiscal year 2021 consisted of the following (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **January 29,<br>2022** | **Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Items<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market funds (cash equivalent) | $11411 | $11411 | $— | $— |
| Total assets | $11411 | $11411 | $— | $— |
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation plan liability (noncurrent) | $6873 | $— | $6873 | $— |
| Total liabilities | $6873 | $— | $6873 | $— |

---

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 21. Quarterly Financial Data (Unaudited)**

In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds. 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. This reclassification has been retrospectively applied to all prior periods presented.

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
| **As Previously Reported** | **January 28, 2023**<sup>(A)</sup> | **October 29, 2022** | **July 30, 2022** | **April 30, 2022** | **January 29, 2022** | **October 30, 2021** | **July 31, 2021** | **May 1, 2021** |
| &nbsp;&nbsp;Net sales | $294817 | $290034 | $340876 | $328409 | $313936 | $306241 | $332870 | $325747 |
| &nbsp;&nbsp;Cost of goods sold | 205049 | 198263 | 222030 | 203263 | 214767 | 181094 | 183150 | 180815 |
| &nbsp;&nbsp;Gross profit | 89768 | 91771 | 118846 | 125146 | 99169 | 125147 | 149720 | 144932 |
| &nbsp;&nbsp;Selling, general and administrative expenses | 71426 | 59180 | 65928 | 67431 | 65579 | 66399 | 179041 | 109913 |
| &nbsp;&nbsp;Marketing expenses | 15827 | 12638 | 13502 | 17974 | 17378 | 15023 | 10728 | 9525 |
| &nbsp;&nbsp;Income (loss) from operations | $2515 | $19953 | $39416 | $39741 | $16212 | $43725 | $(40049) | $25494 |
| **Adjustment** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Net sales | $6411 | $10167 | $12646 | $4784 | $4713 | $4649 | $4637 | $4478 |
| &nbsp;&nbsp;Cost of goods sold |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Gross profit | 6411 | 10167 | 12646 | 4784 | 4713 | 4649 | 4637 | 4478 |
| &nbsp;&nbsp;Selling, general and administrative expenses | 6411 | 10167 | 12646 | 4784 | 4713 | 4649 | 4637 | 4478 |
| &nbsp;&nbsp;Marketing expenses |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Income (loss) from operations | $— | $— | $— | $— | $— | $— | $— | $— |
| **As Adjusted** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Net sales | $301228 | $300201 | $353522 | $333193 | $318649 | $310890 | $337507 | $330225 |
| &nbsp;&nbsp;Cost of goods sold | 205049 | 198263 | 222030 | 203263 | 214767 | 181094 | 183150 | 180815 |
| &nbsp;&nbsp;Gross profit | 96179 | 101938 | 131492 | 129930 | 103882 | 129796 | 154357 | 149410 |
| &nbsp;&nbsp;Selling, general and administrative expenses | 77837 | 69347 | 78574 | 72215 | 70292 | 71048 | 183678 | 114391 |
| &nbsp;&nbsp;Marketing expenses | 15827 | 12638 | 13502 | 17974 | 17378 | 15023 | 10728 | 9525 |
| &nbsp;&nbsp;Income (loss) from operations | $2515 | $19953 | $39416 | $39741 | $16212 | $43725 | $(40049) | $25494 |

---

(A) &nbsp;&nbsp;&nbsp;&nbsp;The amounts for the three months ended January 28, 2023 have not been previously reported but are presented based on the previous classification.

------

**Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure**

Not applicable.

**Item 9A. Controls and Procedures**

***Management's Evaluation of Disclosure Controls and Procedures***

We, under the supervision of and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 28, 2023, to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

***Management's Report on Internal Control Over Financial Reporting***

The Securities and Exchange Commission ("SEC"), as directed by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules which require us to include in this Annual Report on Form 10-K, an assessment by management of the effectiveness of our internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting as of January 28, 2023 based on the framework in *Internal Control — Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, our management concluded that our internal control over financial reporting was effective as of January 28, 2023.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. The effectiveness of our internal control over financial reporting has not been audited by our independent registered public accounting firm because we are a "non-accelerated filer" as defined under SEC rules.

***Changes in Internal Control Over Financial Reporting***

There have been no changes in our internal control over financial reporting during the fiscal quarter ended January 28, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**Item 9B. Other Information**

On March 22, 2023, our board of directors adopted and approved, effective immediately, amended and restated bylaws (as amended and restated, the "Amended and Restated Bylaws") of the Company. The Amended and Restated Bylaws, among other things, revise procedures and disclosure requirements for stockholders to provide notice of the nomination of directors and the submission of proposals for consideration at annual meetings of the stockholders of the Company, including, among other things, adding a requirement that a stockholder seeking to nominate director(s) deliver to the Company reasonable evidence that it has complied with the requirements of Rule 14a-19 of the Exchange Act no later than five business days before the meeting; and make certain other administrative, modernizing, clarifying and conforming changes, including making updates to reflect recent amendments to the DGCL.

------

The foregoing description of the Amended and Restated Bylaws is not complete and is qualified in its entirety by reference to the complete text of the Amended and Restated Bylaws, which is filed as Exhibit 3.2 hereto and are incorporated herein by reference.

**Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections**

Not applicable.

------

**Part III**

**Item 10. Directors, Executive Officers and Corporate Governance**

The information required by this item is incorporated herein by reference to the sections entitled "Board of Directors and Corporate Governance" in the 2022 Proxy Statement.

We have adopted a code of ethics, our Code of Business Conduct and Ethics, which applies to all employees including our principal executive officer, principal financial officer and persons performing similar functions. Our Code of Business Conduct and Ethics is available on our website, www.torrid.com, under "Investors, Governance, Governance Documents, Code of Business Conduct." Any amendments and waivers to our Code of Business Conduct and Ethics will also be available on the website.

**Item 11. Executive Compensation**

The information required by this item is incorporated herein by reference to the sections entitled "Executive and Director Compensation" in the 2022 Proxy Statement.

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**

The information required by this item is incorporated herein by reference to the sections entitled "Security Ownership of Certain Beneficial Owners and Management" in the 2022 Proxy Statement.

**Item 13. Certain Relationships and Related Transactions, and Director Independence**

The information required by this item is incorporated herein by reference to the sections entitled "Certain Relationships and Related Party Transactions" in the 2022 Proxy Statement.

**Item 14. Principal Accountant Fees and Services**

The information required by this item is incorporated herein by reference to the sections entitled "Ratification of Appointment of Independent Registered Public Accounting Firm" in the 2022 Proxy Statement.

------

**Part IV**

**Item 15. Exhibit and Financial Statement Schedules**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Financial Statements

See "Index to Consolidated Financial Statements" in Part II, Item 8 of this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Exhibits

The exhibit index attached hereto is incorporated herein by reference.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Financial Statement Schedules

All financial statement schedules have been omitted, since the required information is not applicable, or because the information required is included in the consolidated financial statements and accompanying notes.

------

**Exhibit Index**

---

| | |
|:---|:---|
| **Exhibit<br>Number** | **Description** |
| 3.1 | <u>[Amended and Restated Certificate of Incorporation of Torrid Holdings Inc.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex31.htm)[(Incorporated by reference to Exhibit 3.1 to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 6, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex31.htm)</u> |
| 3.2\* | <u>[Amended and Restated Bylaws of Torrid Holdings Inc.](amendedby-laws2023322torri.htm)</u> |
| 4.1\* | <u>[Description of Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.](torridholdingsincxex41xdes.htm)</u> |
| 10.1 | <u>[Term Loan Credit Agreement, dated June 14, 2019, among Torrid Inc., Torrid LLC, Cortland Capital Market Services LLC, as administrative agent and collateral agent, KKR Credit Advisors (US) LLC, as structuring advisor, KKR Capital Markets LLC, as sole lead arrange and bookrunner and the lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex101.htm)[(Incorporated by reference to Exhibit 10.1 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex101.htm)</u> |
| 10.2 | <u>[Amendment No. 1 to the Credit Agreement, dated September 17, 2020, among Torrid Intermediate LLC (f/k/a Torrid Inc.), Torrid LLC, Cortland Capital Market Services LLC, as administrative agent, and the lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex102.htm)[(Incorporated by reference to Exhibit 10.2 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex102.htm)</u> |
| 10.3 | <u>[Amended and Restated Credit Agreement, dated October 23, 2017, among Torrid LLC, the borrowers and guarantors named therein, Bank of America, N.A. Wells Fargo Bank, National Association, as joint lead arrangers and joint bookrunning managers, and the other lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex103.htm)[(Incorporated by reference to Exhibit 10.3 to Torrid's Amendment No. 2 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 30, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex103.htm)</u> |
| 10.4 | <u>[Amendment No. 1 to the Amended and Restated Credit Agreement, dated June 14, 2019, among Torrid Inc., Torrid LLC, Bank of America, N.A., as administrative and collateral agent, and the lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex104.htm)[(Incorporated by reference to Exhibit 10.4 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex104.htm)</u> |
| 10.5 | <u>[Amendment No. 2 to the Amended and Restated Credit Agreement, dated September 4, 2019, Torrid LLC, Torrid Intermediate LLC (f/k/a Torrid Inc.), Bank of America, N.A., as administrative and collateral agent, and the lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex105.htm)[(Incorporated by reference to Exhibit 10.5 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex105.htm)</u> |
| 10.6 | <u>[Amended and Restated Services Agreement, dated March 21, 2019, between Torrid LLC and Hot Topic Inc.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex106.htm)[(Incorporated by reference to Exhibit 10.6 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex106.htm)</u> |
| 10.7 | <u>[Amendment to Amended and Restated Services Agreement, dated August 1, 2019, between Torrid LLC and Hot Topic Inc.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex107.htm)[(Incorporated by reference to Exhibit 10.7 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex107.htm)</u> |
| 10.8 | <u>[Services Agreement, dated August 1, 2019, between Torrid LLC and Hot Topic Inc.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex108.htm)[(Incorporated by reference to Exhibit 10.8 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex108.htm)</u> |
| 10.9 | <u>[Stockholders' Agreement](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)[(Incorporated by reference to Exhibit 10.2 to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 6, 2021)](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)</u><u>[.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)</u> |
| 10.10 | <u>[Registration Rights Agreement](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex101.htm)[(Incorporated by reference to Exhibit 10.1 to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 6, 2021)](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex101.htm)</u><u>[.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex101.htm)</u> |
| 10.11+ | <u>[Employment Agreement, dated December 13, 2019, by and between Torrid LLC and Elizabeth Muñoz](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1011.htm)[(Incorporated by reference to Exhibit 10.11 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1011.htm)</u> |
| 10.12+ | <u>[Employment Agreement, dated December 13, 2019, by and between Torrid LLC and Marc Katz](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1012.htm)[(Incorporated by reference to Exhibit 10.12 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1012.htm)</u> |
| 10.13+ | <u>[Employment Offer and Agreement, dated May 14, 2018, by and between Torrid LLC and Michael Salmon](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1013.htm)[(Incorporated by reference to Exhibit 10.13 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1013.htm)</u> |
| 10.14+ | <u>[Employment Offer and Agreement, dated August 9, 2019, by and between Torrid LLC and Anne Stephenson](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1014.htm)[(Incorporated by reference to Exhibit 10.14 to Torrid's Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 7, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521184502/d895088dex1014.htm)</u> |
| 10.15+ | <u>[Torrid Holdings Inc. Long-term Incentive Plan.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1015.htm)[(Incorporated by reference to Exhibit 10.15 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1015.htm)</u> |

---

------

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| | |
|:---|:---|
| 10.16 | <u>[Credit Agreement, dated June 14, 2021, among Torrid LLC, Torrid Intermediate LLC, Bank of America, N.A., as administrative and collateral agent, and the lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1016.htm)[(Incorporated by reference to Exhibit 10.16 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1016.htm)</u> |
| 10.17 | <u>[Amendment No. 3 to the Amended and Restated Credit Agreement, dated June 14, 2021, among Torrid LLC, the other borrowers party thereto, Torrid Intermediate LLC (f/k/a Torrid Inc.), the other guarantors party thereto, Bank of America, N.A., as administrative and collateral agent, and the lenders party thereto.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1017.htm)[(Incorporated by reference to Exhibit 10.17 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1017.htm)</u> |
| 10.18+ | <u>[Form of Restricted Stock Agreement.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1018.htm)[(Incorporated by reference to Exhibit 10.18 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1018.htm)</u> |
| 10.19+ | <u>[Form of Restricted Stock Unit Agreement.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1019.htm)[(Incorporated by reference to Exhibit 10.19 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1019.htm)</u> |
| 10.20+ | <u>[Form of Nonqualified Stock Option Agreement.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1020.htm)[(Incorporated by reference to Exhibit 10.20 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1020.htm)</u> |
| 10.21+ | <u>[Employee Stock Purchase Plan.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1021.htm)[(Incorporated by reference to Exhibit 10.21 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1021.htm)</u> |
| 10.22+ | <u>[Form of Director and Officer Indemnification Agreement.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1022.htm)[(Incorporated by reference to Exhibit 10.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1022.htm)[22 to Torrid's Amendment No. 1 to Form S-1 Registration Statement filed with the Securities and Exchange Commission on June 23, 2021).](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1022.htm)</u> |
| 10.23+ | <u>[Amendment No. 1 to Employment Agreement by and among Torrid LLC, Torrid Holdings Inc. and Elizabeth Muñoz, dated as of May 2, 2022](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a101torrid-amendmenttoempl.htm)[(](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1022.htm)[Incorporated by reference to Exhibit 10.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)[1](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)[to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)[May 4, 2022](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)[)](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521208840/d68074dex102.htm)[.](https://www.sec.gov/Archives/edgar/data/0001792781/000119312521196688/d895088dex1022.htm)</u> |
| 10.24+ | <u>[Employment Agreement by and between Lisa M. Harper and Torrid Holdings Inc., dated as of May 3, 2022](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a102torrid-executiveemploy.htm)[(](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a102torrid-executiveemploy.htm)[Incorporated by reference to Exhibit 10.2 to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a102torrid-executiveemploy.htm)</u> |
| 10.25+ | <u>[Performance Stock Unit Agreement by and between Lisa M. Harper and Torrid Holdings Inc., dated as of May 3, 2022](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a103torrid-psuagreementxli.htm)[(](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a103torrid-psuagreementxli.htm)[Incorporated by reference to Exhibit 10.](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a103torrid-psuagreementxli.htm)[3](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a103torrid-psuagreementxli.htm)[to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2022)](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a103torrid-psuagreementxli.htm)[.](https://www.sec.gov/Archives/edgar/data/1792781/000162828022012272/a103torrid-psuagreementxli.htm)</u> |
| 10.26+ | <u>[First Amendment to the Services Agreement between Torrid LLC and Hot Topic Inc., dated July 31, 2022 (Incorporated by reference to Exhibit 10.5 to Torrid's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 7, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022024493/reversetsaextensionamend.htm)</u> |
| 10.27+ | <u>[Employment Agreement by and between Tim Martin and Torrid Holdings Inc., dated as of August 1, 2022 (Incorporated by reference to Exhibit 10.1 to Torrid's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022020682/a101-employmentagreementby.htm)</u> |
| 10.28+ | <u>[Form of Performance Stock Unit Agreement (Incorporated by reference to Exhibit 10.6 to Torrid's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 7, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022024493/torrid-psuagreementform_88.htm)</u> |
| 10.29+ | <u>[Separation Agreement by and between Kelly McGuire Diehl and Torrid Holdings Inc., dated as of November 22, 2022 (Incorporated by reference to Exhibit 10.1 to Torrid's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 8, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022031580/diehlkellyseparationagre.htm)</u> |
| 10.30+ | <u>[Second Amendment to the Services Agreement between Torrid LLC and Hot Topic Inc., dated September 30, 2022 (Incorporated by reference to Exhibit 10.2 to Torrid's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 8, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022031580/reverse_tsaxextensionsec.htm)</u> |
| 10.31+ | <u>[Third Amendment to the Services Agreement between Torrid LLC and Hot Topic Inc., dated December 1, 2022 (Incorporated by reference to Exhibit 10.3 to Torrid's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 8, 2022).](https://www.sec.gov/Archives/edgar/data/1792781/000162828022031580/reversetsaextensionitcle.htm)</u> |
| 10.32+\* | <u>[Separation Agreement by and between Michael Salmon and Torrid Holdings Inc., dated as of January 5, 2023](salmon_michaelxseparatio.htm)</u> |
| 18.1\* | <u>[Letter from PricewaterhouseCoopers LLP related to change in preferable accounting principles dated](torrid-pwcpreferabilitylet.htm)[M](torrid-pwcpreferabilitylet.htm)[arch 28, 2023](torrid-pwcpreferabilitylet.htm)</u> |
| 21.1\* | <u>[List of subsidiaries of Torrid Holdings Inc.](exhibit211listofsubsidiari.htm)</u> |
| 23.1\* | <u>[Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.](exhibit231-consentofindepe.htm)</u> |
| 31.1\*\* | <u>[Certification of Principal Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](exhibit311certificationoft.htm)</u> |
| 31.2\*\* | <u>[Certification of Principal Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1](exhibit312certificationoft.htm)[9](exhibit312certificationoft.htm)[34, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](exhibit312certificationoft.htm)</u> |
| 32.1\*\* | <u>[Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](exhibit321certificationoft.htm)</u> |

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| | |
|:---|:---|
| 32.2\*\* | <u>[Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](exhibit322certificationoft.htm)</u> |
| 101\* | Interactive Data Files (formatted as Inline XBRL) |
| 104\* | Cover Page Interactive Data Files (Embedded within the Inline XBRL document and included in Exhibit 101) |

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| | |
|:---|:---|
| + | Indicates a management contract or compensatory plan or arrangement. |
| \* | Filed herewith |
| \*\* | Furnished herewith |

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**Item 16. Form 10-K Summary**

None.

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**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 28, 2023.

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| | |
|:---|:---|
| Torrid Holdings Inc. | Torrid Holdings Inc. |
| By: | /S/ LISA HARPER |
| Name: | Lisa Harper |
| Title: | Chief Executive Officer and Director |
|  | (Principal Executive Officer) |
| By: | /S/ TIM MARTIN |
| Name: | Tim Martin |
| Title: | Chief Operating Officer and Chief Financial Officer |
|  | (Principal Financial and Accounting Officer) |

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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| | | |
|:---|:---|:---|
| **<u>Signature</u>** | **<u>Title</u>** | **<u>Date</u>** |
| /S/ LISA HARPER | Chief Executive Officer and Director | March 28, 2023 |
| Lisa Harper | (Principal Executive Officer) |  |
| /S/ TIM MARTIN | Chief Operating Officer and Chief Financial Officer | March 28, 2023 |
| Tim Martin | (Principal Financial and Accounting Officer) |  |
| /S/ STEFAN L. KALUZNY | Chairman of the Board and Director | March 28, 2023 |
| Stefan L. Kaluzny |  |  |
| /S/ DARY KOPELIOFF | Director | March 28, 2023 |
| Dary Kopelioff |  |  |
| /S/ THEO KILLION | Director | March 28, 2023 |
| Theo Killion |  |  |
| /S/ VALERIA RICO NIKOLOV | Director | March 28, 2023 |
| Valeria Rico Nikolov |  |  |
| /S/ MICHAEL SHAFFER | Director | March 28, 2023 |
| Michael Shaffer |  |  |

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## Exhibit 3.2

**AMENDED AND RESTATED BYLAWS** 

**OF** 

**TORRID HOLDINGS INC.** 

*A Delaware corporation* 

(Adopted as of March 22, 2023)

**ARTICLE I** 

**OFFICES** 

Section 1.01 <u>Registered Office</u>. The registered office and registered agent of Torrid Holdings Inc. (the "**Corporation**") in the State of Delaware shall be as set forth in the Amended and Restated Certificate of Incorporation (as defined below). The name of the Corporation's registered agent at such address is Corporation Trust Company. The Corporation may also have offices in such other places in the United States or elsewhere (and may change the Corporation's registered agent) as the Board of Directors of the Corporation (the "**Board**") may, from time to time, determine or as the business of the Corporation may require.

**ARTICLE II** 

**MEETINGS OF STOCKHOLDERS** 

Section 2.01 <u>Annual Meetings</u>. Annual meetings of stockholders of the Corporation may be held at such place, if any, either within or without the State of Delaware, and at such time and date as the Board shall determine and state in the notice of meeting. The Board may, in its sole discretion, determine that any meeting of stockholders of the Corporation shall not be held at any place, but may instead be held solely by means of remote communication as described in Section 2.11 hereof and in accordance with the General Corporation Law of the State of Delaware (the "**DGCL**"). At the annual meeting, the stockholders of the Corporation shall elect directors and transact such other business as may properly be brought before the annual meeting. The Board may postpone, reschedule or cancel any annual meeting of stockholders of the Corporation.

Section 2.02 <u>Special Meetings</u>. Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock (as defined in the Corporation's Amended and Restated Certificate of Incorporation as then in effect (as the same may be amended and/or restated from time to time, the "**Amended and Restated Certificate of Incorporation**")), special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time only by or at the direction of the Board or the Chairman of the Board; *provided*, *however*, that at any time before the Trigger Event (as defined in the Amended and Restated Certificate of Incorporation), special meetings of the stockholders of the Corporation for any purpose or purposes shall also be called by or at the direction of the Board or the Chairman of the Board at the request of the holders of 50% or more of the voting power of all the outstanding shares of Common Stock (as defined in the Amended and Restated Certificate of Incorporation). Special meetings of the stockholders of the Corporation may be held at such place, if any, either within or without the State of Delaware, and at such time and date as determined by the Board, the Chairman of the Board, the Chief Executive Officer of the Corporation (the "**CEO**") and, before the Trigger Event, by or at the direction of the Board, the Chairman of the Board or the CEO at the request of holders of 50% or more of the voting power of all the outstanding shares of Common Stock. The Board may postpone, reschedule or cancel any special meeting of stockholders of the Corporation; *provided*, *however*, that with respect to any special meeting of stockholders of the Corporation previously scheduled at the request of holders of 50% or more of the voting power of all the outstanding shares of Common Stock, the Board shall not postpone, reschedule or cancel such special meeting without the prior written consent of such holders.

Section 2.03 <u>Notice of Stockholder Business and Nominations; Form and Requirements of Notice</u>.

(A) <u>Annual Meetings of Stockholders</u>.

(1) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders of the Corporation may be made at an annual meeting of stockholders of the Corporation only (a) pursuant to the Corporation's notice of meeting (or any supplement thereto) delivered pursuant to Section 2.04 hereof; (b) by or at the direction of the Board or any authorized committee thereof; or (c) by any stockholder of the Corporation who is entitled to vote at the meeting, who, subject to Section 2.03(C)(4) hereof, complies with the notice procedures set forth in Sections 2.03(A)(2) and (A)(3) hereof and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation (the "**Secretary**"), on the record date for the determination of stockholders of the Corporation entitled to vote at the annual meeting, and at the time of the annual meeting.

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(3) To be in proper form, a Noticing Stockholder's notice to the Secretary under this Section 2.03(A) must:

(a) as to each person whom the Noticing Stockholder proposes to nominate for election or re-election as a director, set forth or provide (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person (present and for the past five years), (iii) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and/or of record by such person (*provided*, *however*, that for purposes of this Section 2.03(A)(3)(a), such person shall in all events be deemed to beneficially own any shares of the Corporation as to which such person has a right to acquire beneficial ownership of at any time in the future), (iv) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest or that is otherwise required pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the "**Exchange Act**") and the rules and regulations promulgated thereunder, (v) a complete and accurate description of any current or prior agreements, arrangements and understandings, and any other material relationships between or among the Noticing Stockholder, any beneficial owner on whose behalf the nomination or proposal is made (collectively with the Noticing Stockholder, the "**Holders**"), any of their respective affiliates and associates within the meaning of Rule 12b-2 under the Exchange Act, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K (or any successor provision) if any Holder, any affiliate or associate thereof or person acting in concert therewith, were the "registrant" for purposes of such rule and the nominee were a director or executive officer of such registrant, (vi) a complete and accurate description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings (whether written or oral) during the past three years, between or among any Holder, any of its affiliates or associates, or others acting in concert therewith, on the one hand, and each nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, (vii) a notarized letter signed by such person stating his or her acceptance of the nomination by the Holder, stating his or her intention to serve as a director for a full term on the Board, if elected, and consenting to being named as a proposed nominee of the Noticing Stockholder in proxy statements relating to such election, (viii) a completed and signed questionnaire and written representation and agreement, each as may be required by Section 2.03(A)(4) hereof and (ix) all information relating to the nominee that would be required by this Section 2.03(A) to be set forth in a Noticing Stockholder's notice with respect to a director nomination if such nominee were a Noticing Stockholder;

(b) as to any business that the Noticing Stockholder proposes to bring before the meeting, set forth or provide (i) a brief description of the business desired to be brought before the meeting, (ii) the text, if any, of the proposal (including the text of any resolutions proposed for consideration and in the event that such business includes a

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proposal to amend the Amended and Restated Bylaws ("**Bylaws**") of the Corporation, the language of the proposed amendment), (iii) the reasons for conducting such business at the meeting and any material interest in such business of any Holder and (iv) a complete and accurate description of any current or prior agreements, arrangements and understandings, and any other material relationships between or among the Holders, any of their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, in connection with the proposal of such business by such Noticing Stockholder, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K (or any successor provision) if any Holder, any affiliate or associate thereof or person acting in concert therewith, were the "registrant" for purposes of such rule and the nominee were a director or executive officer of such registrant; and

(c) as to the Holders, set forth (i) the name and address of the Noticing Stockholder as they appear on the Corporation's books, (ii) the name and address of all other Holders, if any, (iii) the class or series and number of shares of the Corporation that are, directly or indirectly, owned beneficially and/or of record by each Holder (*provided*, *however*, that for purposes of this Section 2.03(A)(3)(c), any such person shall in all events be deemed to beneficially own any shares of the Corporation as to which such person has a right to acquire beneficial ownership of at any time in the future), any person controlling, directly or indirectly, or acting in concert with, any Holder and any person controlled by or under common control with any Holder, (iv) the Ownership Information (as defined below) for each Holder and Stockholder Associated Person (as defined below), (v) a representation by the Noticing Stockholder that the Noticing Stockholder is a stockholder of record of the Corporation entitled to vote at the meeting, will continue to be a stockholder of record of the Corporation entitled to vote at such meeting through the date of such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation as to whether any Holder intends or is part of a group which intends to (A) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the outstanding shares of the Corporation required to approve or adopt the proposal or elect the nominee and/or (B) otherwise solicit proxies from stockholders of the Corporation in support of such proposal or nomination, provided that if such Noticing Stockholder intends to, or is a part of a group that intends to, solicit proxies in support of director nominees other than the Corporation's nominees, such Noticing Stockholder must represent that it will file a proxy statement in accordance with the requirements of Rule 14a-19(a)(2) under the Exchange Act (or any successor provision) and must provide the statement required by Rule 14a-19(b)(3) under the Exchange Act (or any successor provision), (vii) a certification regarding whether each Holder has complied with all applicable federal, state and other legal requirements in connection with its acquisition of shares or other securities of the Corporation and such Holder's acts or omissions as a stockholder of the Corporation, (viii) the names and addresses of other stockholders (including beneficial owners) known by any Holder and/or Stockholder Associated Person to support such proposals and/or nominations, and to the extent known the class or series and number of all shares of the Corporation's capital stock owned beneficially or of record by each such other stockholder or other beneficial owner, and (ix) the Noticing Stockholder's representation as to the accuracy of the information set forth in the notice.

The Corporation may also, as a condition to any such nomination or business being deemed properly brought before an annual meeting, request any Holder or proposed nominee to deliver to the Secretary, within five business days of any such request, including such other information as may be reasonably requested by the Corporation, including, without limitation, such other information as may be reasonably required by the Board, in its sole discretion, to determine (i) the eligibility of a proposed nominee to serve as a director of the Corporation, (ii) whether such nominee qualifies as an "independent director" or "audit committee financial expert" under applicable law, securities exchange rule or regulation, or any publicly disclosed corporate governance guideline or committee charter of the Corporation and (iii) such other information that the Board determines, in its sole discretion, could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such nominee.

A Noticing Stockholder shall further update and supplement its notice of any nomination or other business proposed to be brought before a meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.03 shall be true and correct (i) as of the record date for the meeting and (ii) as of the date that is 10 business days prior to the meeting or any adjournment, recess, rescheduling or postponement thereof and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date) and not later than seven business days prior to the date for the meeting, if practicable (or, if not practicable, on the first practicable date prior to the meeting), or any adjournment, recess, rescheduling or postponement thereof (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment, recess, rescheduling or postponement thereof).

Notwithstanding the foregoing provisions of this Section 2.03, unless otherwise required by law, if the Noticing Stockholder (or a qualified representative of the Noticing Stockholder) does not appear at the meeting of stockholders of the Corporation and present his or her proposed business or nomination(s), such proposed business will not be transacted and any such nomination will be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.03, to be considered a qualified

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representative of a stockholder of the Corporation, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) stating that such person is authorized to act for such stockholder as a proxy at the meeting of stockholders of the Corporation, and such person must produce proof that he or she is a duly authorized officer, manager or partner of such stockholder or such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, as well as valid government-issued photo identification, at the meeting of stockholders of the Corporation.

No Noticing Stockholder may solicit proxies in support of director nominees other than the Corporation's nominees unless such Noticing Stockholder complies with the requirements of these Bylaws and the requirements of Rule 14a-19 (or any successor provision), including, without limitation, the filing of a proxy statement in accordance with Rule 14a-19(a)(2) and the minimum solicitation requirements of Rule 14a-19(a)(3). If a Noticing Stockholder provides notice pursuant to Rule 14a-19(b) under the Exchange Act and subsequently either (1) notifies the Corporation that such Noticing Person no longer intends to, or is part of a group that no longer intends to, solicit proxies in support director nominees other than the nominees of the Board of Directors of the Corporation or (2) fails to comply with the requirements of Rules 14a-19 under the Exchange Act (or any successor provision) (or with the interpretation of such requirements by the Securities and Exchange Commission with respect to special meetings, if applicable), then the Corporation shall disregard any proxies or votes solicited for the Noticing Stockholder's nominees. In addition, if a Noticing Stockholder has delivered to the Corporation a notice relating to the nomination of directors, such Noticing Stockholder shall deliver to the Corporation, no later than five (5) business days prior to the applicable meeting or any adjournment, recess, rescheduling or postponement thereof, reasonable evidence (as determined by the Corporation or one of its representatives in good faith) that it has complied with the requirements of Rule 14a-19 of the Exchange Act (or any successor provision).

Notwithstanding anything to the contrary contained in these Bylaws, if the person whom the Noticing Stockholder proposes to nominate for election or re-election as a director pursuant to the notice procedures set forth in Sections 2.03(A)(2) and (A)(3) hereof becomes ineligible or unwilling to serve on the Board, the Noticing Stockholder may not, at the annual meeting for which its notice for nomination has previously been given, propose to nominate any substitute, successor or replacement nominee for election or re-election as a director, unless it gives a new timely notice pursuant to Section 2.03(A).

(d) For purposes of this section, "**Ownership Information**" means: (i) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole in or part from the value of any class or series of shares of the Corporation, whether or not the instrument or right is subject to settlement in the underlying class or series of shares of the Corporation or otherwise (a "**Derivative Instrument**") that is directly or indirectly owned beneficially by any Holder, Stockholder Associated Person or proposed nominee and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of any security of the Corporation; (ii) any agreement, arrangement or understanding (including any contract to purchase or sell, acquisition or grant of any option, right or warrant to purchase or sell, swap or other instrument) between any Holder, Stockholder Associated Person, proposed nominee and/or any others acting in concert with any of the foregoing the intent or effect of which may be to transfer to or from any such person, in whole or in part, any of the economic consequences of ownership of any security of the Corporation or to increase or decrease the voting power of any such person or any of such person's affiliates or associates with respect to any security of the Corporation; (iii) any proxy, contract, arrangement, understanding or relationship pursuant to which any Holder, Stockholder Associated Person or proposed nominee has a right to vote or has granted a right to vote any shares of the Corporation; (iv) any short interest held by any Holder, Stockholder Associated Person or proposed nominee presently or within the last 12 months in any shares of the Corporation (for purposes of this Section 2.03, a Holder, Stockholder Associated Person or proposed nominee is deemed to hold a short interest in a security if such Holder, Stockholder Associated Person or proposed nominee, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security); (v) any right to dividends on shares of the Corporation owned beneficially by any Holder, Stockholder Associated Person or proposed nominee that is separated or separable from the underlying shares of the Corporation; (vi) any proportionate interest in shares of the Corporation; (vii) any Derivative Instrument held, directly or indirectly, by a general or limited partnership or limited liability company or similar entity in which any Holder, Stockholder Associated Person or proposed nominee is (a) a general partner or, directly or indirectly, beneficially owns any interest in a general partner, or (b) is the manager or managing member or, directly or indirectly, beneficially owns any interest in the manager or managing member of a limited liability company or similar entity; (vii) any performance-related fees (other than an asset-based fee) that any Holder, Stockholder Associated Person or proposed nominee is entitled to based on any increase or decrease in the value of shares of the Corporation or any Derivative Instrument; (viii) any direct or indirect legal, economic or financial interest (including short interest) of any Holder, Stockholder Associated Person or proposed nominee in the outcome of any vote to be taken at any annual or special meeting of stockholders of the Corporation or any other entity with respect to any matter that is substantially related, directly or indirectly, to any nomination or

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business proposed by any Holder under these Bylaws and; (ix) any arrangement, right or other interest described in the preceding clauses of this paragraph held by any member of the immediate family of any Holder, Stockholder Associated Person or proposed nominee that shares the same household with such Holder or Stockholder Associated Person. "**Stockholder Associated Person"** means as to any Holder (x) any person acting in concert with such Holder, (y) any person controlling, controlled by or under common control with such Holder or any of their respective affiliates and associates, or person acting in concert therewith and (z) any member of the immediate family of such Holder or an affiliate or associate of such Holder. As used in these Bylaws, the terms "affiliate(s)" and "associate(s)" shall have the meanings attributed to such terms in Rule 12b-2 under the Exchange Act and the rules and regulations promulgated thereunder.

(4) To be eligible to be a nominee for election or reelection as a director of the Corporation pursuant to this Section 2.03, a proposed nominee must deliver (in the case of nominee nominated by a stockholder of the Corporation pursuant to this Section 2.03, in accordance with the time periods and other requirements prescribed for delivery of notice under these Bylaws and applicable law) to the Secretary at the principal executive offices of the Corporation (i) a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (in the form to be provided by the Secretary upon written request of any stockholder of record identified by name within five business days of such written request) and (ii) a written representation and agreement (in the form to be provided by the Secretary upon written request of any stockholder of record identified by name within five business days of such written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding (whether written or oral) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote in such capacity on any issue or question (a "**Voting Commitment**") that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person's ability to comply, if elected as a director of the Corporation, with such person's fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding (whether written or oral) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (C) if elected as director of the Corporation, intends to serve for a full term on the Board and (D) in such person's individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable laws and all applicable rules of the U.S. exchanges upon which the securities of the Corporation are listed and all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and other guidelines of the Corporation duly adopted by the Board.

(B) <u>Special Meetings of Stockholders of the Corporation</u>. Only such business shall be conducted at a special meeting of stockholders of the Corporation as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders of the Corporation at which directors are to be elected pursuant to the Corporation's notice of meeting (1) by or at the direction of the Board or (2) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is entitled to vote at the meeting, who (subject to Section 2.03(C)(4)) complies with the notice procedures set forth in this Section 2.03 and who is a stockholder of record at the time such notice is delivered to the Secretary at the principal executive offices of the Corporation, on the record date for the determination of stockholders of the Corporation entitled to vote at the special meeting and at the time of the special meeting. In the event that the Corporation calls a special meeting of stockholders of the Corporation for the purpose of electing one or more directors to the Board, any Noticing Stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation's notice of meeting if the Noticing Stockholder's notice as required, if such Noticing Stockholder's notice for a special meeting were for an annual meeting, by Section 2.03(A)(2) hereof shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the Close of Business on the 120th day prior to such special meeting and not later than the Close of Business on the later of the 90th day prior to such special meeting or the 10th day following the day on which Public Announcement is first made of the date of such special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the adjournment or postponement of a special meeting (or the Public Announcement of the adjournment or postponement thereof) commence a new time period (or extend any time period) for the giving of a Noticing Stockholder's notice as described above.

(C) <u>General</u>. (1) Except as provided in Section 2.03(C)(4) hereof, only such persons who are nominated in accordance with the procedures set forth in this Section 2.03 shall be eligible to serve as a director and only such business shall be conducted at an annual or special meeting of stockholders of the Corporation as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.03. Except as otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the chairman of any meeting of stockholders of the Corporation shall, in addition to making any other determination that may be appropriate for the conduct of the meeting, have the power and duty to determine whether a nomination or any

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business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws (including whether the Noticing Stockholder or other Holder, if any, on whose behalf the nomination is made or other business is being proposed solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such Noticing Stockholder's nominee or other business in compliance with the representation required by Section 2.03(A)(3)(c)(vi) hereof) and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall be disregarded. The date and time of the opening and the closing of the polls for each matter upon which the stockholders of the Corporation will vote at a meeting shall be announced at the meeting by the chairman of the meeting. After the polls close, no ballots, proxies or votes or any revocations or changes thereto shall be accepted. The Board may adopt by resolution such rules, regulations and procedures for the conduct of the meeting of stockholders of the Corporation as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of the Corporation entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time allotted to questions or comments by participants; and (f) restricting the use of cell phones, audio or video recording devices and similar devices at the meeting. Notwithstanding the foregoing provisions of this Section 2.03, unless otherwise required by law, if the Noticing Stockholder (or a qualified representative of the Noticing Stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Unless and to the extent determined by the Board or the chairman of the meeting, no meeting of stockholders of the Corporation shall be required to be held in accordance with the rules of parliamentary procedure.

(2) Whenever used in these Bylaws, (a) "**Public Announcement**" shall mean disclosure (i) in a press release issued by the Corporation, provided such press release is issued by the Corporation following its customary procedures, that is reported by the Dow Jones News Service, Associated Press or comparable national news service, or is generally available on internet news sites or (ii) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder; (b) the "**Close of Business**" means 5:00 p.m. local time at the Corporation's principal executive offices, and if an applicable deadline falls on the "Close of Business" on a day that is not a Business Day, then the applicable deadline shall be deemed to be the Close of Business on the immediately preceding Business Day; and (c) "**Business Day**" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are authorized or obligated by law or executive order to close. Further, "**delivery**" of any notice or materials by a stockholder as required under this Section 2.03 shall be made by both (1) hand delivery, overnight courier service, or by certified or registered mail, return receipt required, in each case, to the Secretary at the principal executive offices of the Corporation, and (2) electronic mail to the Secretary at the principal executive offices of the Corporation or such other email address for the Secretary as may be specified in the Corporation's proxy statement for the annual meeting of stockholders immediately preceding such delivery of notice or materials.

(3) Notwithstanding the foregoing provisions of this Section 2.03, the Noticing Stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.03, including, without limitation, the requirements of Rule 14a-19 under the Exchange Act (or any successor provision); *provided*, *however*, that, to the fullest extent permitted by law, any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to these Bylaws (including Sections 2.03 (A)(1)(c) and (B) hereof), and compliance with this Section 2.03 shall be the exclusive means for a stockholder of the Corporation to make nominations or submit other business at any meeting of stockholders of the Corporation (other than business properly brought under and in compliance with Rule 14a-8 of the Exchange Act (or any successor provision)). Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or the rights of the holders of any class or series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation to elect directors under specified circumstances (including any certificate of designation relating to any series of Preferred Stock (as defined in the Amended and Restated Certificate of Incorporation)).

(4) Notwithstanding anything to the contrary contained in this Section 2.03, prior to the Trigger Event, the Investors (as defined in the Amended and Restated Certificate of Incorporation) shall not be subject to the notice procedures set forth in Sections 2.03(A)(2), (A)(3) or (B) hereof with respect to any annual or special meeting of stockholders of the Corporation.

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Section 2.04 <u>Notice of Meetings</u>. Whenever stockholders of the Corporation are required or permitted to take any action at a meeting, a timely notice, in the manner provided in Section 232 of the DGCL, of the meeting, which shall state the place, if any, date and time of the meeting, the means of remote communication, if any, by which stockholders of the Corporation and proxyholders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders of the Corporation entitled to vote at the meeting, if such date is different from the record date for determining stockholders of the Corporation entitled to notice of the meeting, and, in the case of a special meeting, the purposes for which the meeting is called, shall be mailed to or transmitted electronically by the Secretary to each stockholder of record entitled to vote thereat as of the record date for determining the stockholders of the Corporation entitled to notice of the meeting. Unless otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the notice of any meeting shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of the Corporation entitled to vote at such meeting as of the record date for determining the stockholders of the Corporation entitled to notice of the meeting.

Section 2.05 <u>Quorum</u>. Unless otherwise required by law, the Amended and Restated Certificate of Incorporation or the rules of any stock exchange upon which the Corporation's securities are listed, the holders of record of a majority of the voting power of the issued and outstanding shares of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders of the Corporation. Notwithstanding the foregoing, where a separate vote by a class or series or classes or series is required, a majority in voting power of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on that matter. Once a quorum is present at any meeting, it shall not be broken by the subsequent withdrawal of any stockholder of the Corporation.

Section 2.06 <u>Voting</u>. Except as otherwise provided by or pursuant to the provisions of the Amended and Restated Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders of the Corporation shall be entitled to one vote for each share of Common Stock held by such stockholder that has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders of the Corporation or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy in any manner provided by applicable law, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder of the Corporation may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a written revocation of the proxy or a new proxy bearing a later date. Unless required by the Amended and Restated Certificate of Incorporation or applicable law, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by such stockholder's proxy, if there be such proxy. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the voting power of the shares of the Corporation present in person or represented by proxy and entitled to vote on the subject matter shall decide any question brought before such meeting, unless the question is one upon which, by express provision of applicable law, of the rules or regulations of any stock exchange applicable to the Corporation, of any regulation applicable to the Corporation or its securities, of the Amended and Restated Certificate of Incorporation or of these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Notwithstanding anything to the contrary in these Bylaws and subject to the Amended and Restated Certificate of Incorporation, all elections of directors shall be determined by a plurality of the votes cast in respect of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

Section 2.07 <u>Chairman of Meetings</u>. The Chairman of the Board, if one is elected, or, in his or her absence or disability, the CEO, or in the absence of the Chairman of the Board and the CEO, a person designated by the majority of the directors shall be the chairman of the meeting and, as such, shall preside at all meetings of the stockholders of the Corporation.

Section 2.08 <u>Secretary of Meetings</u>. The Secretary shall act as secretary at all meetings of the stockholders of the Corporation. In the absence or disability of the Secretary, the chairman of the meeting shall appoint a person to act as secretary at such meetings.

Section 2.09 <u>Consent of Stockholders in Lieu of Meeting</u>. Any action required or permitted to be taken at any meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote only in the manner provided in the Amended and Restated Certificate of Incorporation and in accordance with applicable law.

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Section 2.10 <u>Adjournment</u>. The chairman of any meeting of stockholders of the Corporation shall have the power to adjourn the meeting from time to time, whether or not a quorum is present. At any meeting of stockholders of the Corporation, if less than a quorum be present, the chairman of the meeting or stockholders of the Corporation holding a majority in voting power of the shares of stock of the Corporation, present in person or by proxy and entitled to vote thereat, shall have the power to adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum shall be present. No notice of the adjourned meeting need be given if the time and place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are (A) announced at the meeting at which the adjournment is taken, (B) displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication or (C) set forth in the notice of meeting given in accordance with these Bylaws. Any business may be transacted at the adjourned meeting that might have been transacted at the meeting originally noticed. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders of the Corporation entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders of the Corporation entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders of the Corporation entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date so fixed for notice of such adjourned meeting.

Section 2.11 <u>Remote Communication</u>. If authorized by the Board in its sole discretion, and subject to such rules, regulations and procedures as the Board may adopt, stockholders of the Corporation and proxyholders not physically present at a meeting of stockholders of the Corporation may, by means of remote communication:

(A) participate in a meeting of stockholders of the Corporation; and

(B) be deemed present in person and vote at a meeting of stockholders of the Corporation whether such meeting is to be held at a designated place or solely by means of remote communication; *provided*, *however*, that:

(1) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder of the Corporation or proxyholder;

(2) the Corporation shall implement reasonable measures to provide such stockholders of the Corporation and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders of the Corporation, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and

(3) if any stockholder of the Corporation or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

Section 2.12 <u>Inspectors of Election</u>. The Corporation may, and shall if required by law, in advance of any meeting of stockholders of the Corporation, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders of the Corporation, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (a) ascertain the number of shares of the Corporation outstanding and the voting power of each such share, (b) determine the shares of the Corporation represented at the meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and (e) certify their determination of the number of shares of the Corporation represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election.

**ARTICLE III** 

**BOARD OF DIRECTORS** 

Section 3.01 <u>Powers</u>. Except as otherwise provided in the Amended and Restated Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The

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Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not, by the DGCL or the Amended and Restated Certificate of Incorporation, directed or required to be exercised or done by the stockholders of the Corporation.

Section 3.02 <u>Number and Term; Chairman</u>. Subject to the Amended and Restated Certificate of Incorporation, the number of directors shall be fixed exclusively by resolution of the Board. The term of each director elected to the Board shall be as set forth in the Amended and Restated Certificate of Incorporation. Directors need not be stockholders of the Corporation. The Board shall elect a Chairman of the Board, who shall have the powers and perform such duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairman of the Board shall preside at all meetings of the Board at which he or she is present. If the Chairman of the Board is not present at a meeting of the Board, the CEO (if the CEO is a director and is not also the Chairman of the Board) shall preside at such meeting, and, if the CEO is not present at such meeting or is not a director, a majority of the directors present at such meeting shall elect one of their members to preside.

Section 3.03 <u>Resignations</u>. Any director may resign at any time upon notice given in writing or by electronic transmission to the Board, the Chairman of the Board, the CEO or the Secretary. The resignation shall take effect at the time or upon the happening of any event specified therein, and if no specification is so made, at the time of its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise expressly provided in the resignation.

Section 3.04 <u>Removal</u>. Directors of the Corporation may be removed in the manner provided in the Amended and Restated Certificate of Incorporation and applicable law.

Section 3.05 <u>Vacancies and Newly-Created Directorships</u>. Except as otherwise provided by applicable law, vacancies occurring in any directorship (whether by death, resignation, retirement, disqualification, removal or other cause) and newly-created directorships resulting from any increase in the number of directors shall be filled in accordance with the Amended and Restated Certificate of Incorporation. Any director elected to fill a vacancy or newly-created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.

Section 3.06 <u>Meetings</u>. Regular meetings of the Board may be held at such places and times as shall be determined from time to time by the Board, either within or without the State of Delaware. Special meetings of the Board may be called by the CEO of the Corporation or the Chairman of the Board or as provided by the Amended and Restated Certificate of Incorporation, and shall be called by the CEO or the Secretary if directed by the Board and shall be at such places and times as they or he or she shall fix. Before the Trigger Event, special meetings of the Board may also be called by holders of 50% or more of the voting power of all the outstanding shares of Common Stock, and shall be at such places and times as such holders shall fix. Notice need not be given of regular meetings of the Board. At least 24 hours before each special meeting of the Board, written notice, notice by electronic transmission or oral notice (either in person or by telephone) of the time, date and place of the meeting shall be given to each director. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting of the Board.

Section 3.07 <u>Quorum, Voting and Adjournment</u>. A majority of the total number of directors shall constitute a quorum for the transaction of business at a meeting of the Board. Except as otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the act of a majority of the directors present at a meeting of the Board at which a quorum is present shall be the act of the Board. In the absence of a quorum, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of such adjourned meeting need not be given if the time and place of such adjourned meeting are announced at the meeting so adjourned.

Section 3.08 <u>Committees; Committee Rules</u>. The Board may, by resolution passed by a majority of the directors, designate one or more committees, each such committee to consist of one or more of the directors of the Corporation. The meetings of any such committee shall be held in compliance with these Bylaws. The Board may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board establishing such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it. Notwithstanding the foregoing, no committee shall have the power or authority of the Board in reference to the following matters: (a) approving or adopting, or recommending to the stockholders of the Corporation, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders of the Corporation for approval or (b) adopting, amending or repealing any Bylaw of the Corporation. All committees of the Board shall keep minutes of their meetings and shall

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report their proceedings to the Board when requested or required by the Board. Each committee of the Board may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board designating such committee. Unless otherwise provided in such a resolution, (i) the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum for the transaction of business at a meeting of the committee unless the committee shall consist of one or two members, in which event one member shall constitute a quorum and (ii) all matters shall be determined by a majority vote of the members present at a meeting of the committee at which a quorum is present. In the absence of a quorum, a majority of the directors present may adjourn the meeting of the committee to another time and place. Notice of such adjourned meeting need not be given if the time and place of such adjourned meeting are announced at the meeting so adjourned. Unless otherwise provided in such a resolution, in the event that a member and that member's alternate, if alternates are designated by the Board, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member, to the extent permitted by applicable law.

Section 3.09 <u>Action Without a Meeting</u>. Unless otherwise restricted by the Amended and Restated Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or any committee thereof, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed in the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form or shall be in electronic form if the minutes are maintained in electronic form.

Section 3.10 <u>Remote Meeting</u>. Unless otherwise restricted by the Amended and Restated Certificate of Incorporation, members of the Board, or any committee designated by the Board, may participate in a meeting by means of conference telephone or other communications equipment in which all persons participating in the meeting can hear each other. Participation in a meeting by means of conference telephone or other communications equipment shall constitute presence in person at such meeting.

Section 3.11 <u>Compensation</u>. The Board shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

Section 3.12 <u>Reliance on Books and Records</u>. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person's duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation or the Board.

**ARTICLE IV** 

**OFFICERS** 

Section 4.01 <u>Number</u>. The officers of the Corporation shall include a CEO, a Chief Financial Officer and a Secretary, each of whom shall be elected by the Board and who shall hold office for such terms as shall be determined by the Board and until their successors are elected and qualify or until their earlier resignation or removal. In addition, the Board may elect one or more Vice Presidents, including one or more Executive Vice Presidents, Senior Vice Presidents, a Treasurer and one or more Assistant Treasurers and one or more Assistant Secretaries, who shall hold their office for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Any number of offices may be held by the same person.

Section 4.02 <u>Other Officers and Agents</u>. The Board may appoint such other officers and agents as it deems advisable, who shall hold their office for such terms and shall exercise and perform such powers and duties as shall be determined from time to time by the Board. The Board may appoint one or more officers called a Vice Chairman, each of whom does not need to be a member of the Board.

Section 4.03 <u>Chief Executive Officer</u>. The CEO shall have general executive charge, management, and control of the properties and operations of the Corporation in the ordinary course of its business, with all such powers with respect to such properties and operations as may be reasonably incident to such responsibilities. If the Board has not elected a Chairman of the Board or in the absence or inability to act as the Chairman of the Board, the CEO shall exercise all of the powers and discharge all of the duties of the Chairman of the Board, but only if the CEO is a director of the Corporation.

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Section 4.04 <u>Chief Financial Officer</u>. The Chief Financial Officer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation as shall be necessary or desirable in accordance with applicable law or generally accepted accounting principles; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the Chairman of the Board or the Board of Directors; shall receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever; shall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the Corporation; shall have such powers and perform such duties as the Board of Directors, the Chairman of the Board, the Chief Executive Officer, or these Bylaws may, from time to time, prescribe. The Treasurer, if any, shall in the absence or disability of the Chief Financial Officer, perform the duties and exercise the powers of the chief financial officer, subject to the power of the board of directors. The Treasurer, if any, shall perform such other duties and have such other powers as the board of directors may, from time to time, prescribe.

Section 4.05 <u>Vice Presidents</u>. Each Vice President, if any are appointed, of whom one or more may be designated an Executive Vice President or Senior Vice President, shall have such powers and shall perform such duties as shall be assigned to him or her by the CEO or the Board.

Section 4.06 <u>Secretary</u>. The Secretary shall: (a) cause minutes of all meetings of the stockholders of the Corporation and directors to be recorded and kept properly; (b) cause all notices required by these Bylaws or otherwise to be given properly; (c) see that the minute books, stock books and other nonfinancial books, records and papers of the Corporation are kept properly; and (d) cause all reports, statements, returns, certificates and other documents to be prepared and filed when and as required. The Secretary shall have such further powers and perform such other duties as prescribed from time to time by the CEO or the Board.

Section 4.07 <u>Assistant Treasurers and Assistant Secretaries</u>. Each Assistant Treasurer and each Assistant Secretary, if any are appointed, shall be vested with all the powers and shall perform all the duties of the Treasurer and Secretary, respectively, in the absence or disability of such officer, unless or until the CEO or the Board shall otherwise determine. In addition, Assistant Treasurers and Assistant Secretaries shall have such powers and shall perform such duties as shall be assigned to them by the CEO or the Board.

Section 4.08 <u>Corporate Funds and Checks</u>. The funds of the Corporation shall be kept in such depositories as shall from time to time be prescribed by the Board or its designees selected for such purposes. All checks or other orders for the payment of money shall be signed by the CEO, the Chief Financial Officer, a Vice President, the Treasurer or the Secretary or such other person or agent as may from time to time be authorized and with such countersignature, if any, as may be required by the Board.

Section 4.09 <u>Contracts and Other Documents</u>. The CEO and the Secretary, or such other officer or officers as may from time to time be authorized by the Board or any other committee given specific authority in the premises by the Board during the intervals between the meetings of the Board, shall have power to sign and execute on behalf of the Corporation deeds, conveyances and contracts and any and all other documents requiring execution by the Corporation.

Section 4.10 <u>Ownership of Stock of Another Corporation</u>. Unless otherwise directed by the Board, the CEO, the Chief Financial Officer, a Vice President, the Treasurer or the Secretary, or such other officer or agent as shall be authorized by the Board, shall have the power and authority, on behalf of the Corporation, to attend and to vote at any meeting of securityholders of any entity in which the Corporation holds securities or equity interests and may exercise, on behalf of the Corporation, any and all of the rights and powers incident to the ownership of such securities or equity interests at any such meeting, including the authority to execute and deliver proxies and consents on behalf of the Corporation.

Section 4.11 <u>Delegation of Duties</u>. In the absence, disability or refusal of any officer to exercise and perform his or her duties, the Board may delegate to another officer such powers or duties.

Section 4.12 <u>Resignation and Removal</u>. Any officer of the Corporation may be removed from office for or without cause at any time by the Board. Any officer may resign at any time in the same manner prescribed under Section 3.03 hereof.

Section 4.13 <u>Vacancies</u>. The Board shall have the power to fill vacancies occurring in any office.

Section 4.14 <u>Compensation</u>. Compensation of all executive officers shall be approved by the Board, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the Corporation;

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*provided*, *however*, that compensation of all executive officers may be determined by a committee established for that purpose if so authorized by the unanimous vote of the Board.

**ARTICLE V** 

**STOCK** 

Section 5.01 <u>Shares With Certificates</u>. The shares of stock of the Corporation shall be represented by certificates; *provided*, *however*, that the Board may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation's stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock in the Corporation represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by any two authorized officers of the Corporation (it being understood that each of the Chairman of the Board, the Vice Chairman of the Board, the CEO, the Chief Financial Officer, or a Vice President, the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation shall be an authorized officer for such purpose), certifying the number and class of shares of the Corporation owned by such holder. Any or all of the signatures on the certificate may be a facsimile. The Board shall have the power to appoint one or more transfer agents and/or registrars for the transfer or registration of certificates of stock of any class, and may require stock certificates to be countersigned or registered by one or more of such transfer agents and/or registrars.

Section 5.02 <u>Shares Without Certificates</u>. If the Board chooses to issue shares of stock without certificates, the Corporation, if required by the DGCL, shall, within a reasonable time after the issuance or transfer of shares without certificates, send the stockholder of the Corporation a written statement of the information required by the DGCL. The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates; *provided*, *however*, that the use of such system by the Corporation is permitted by applicable law.

Section 5.03 <u>Transfer of Shares</u>. Shares of stock of the Corporation shall be transferable upon its books by the holders thereof, in person or by their duly authorized attorneys or legal representatives, in the manner prescribed by law, the Amended and Restated Certificate of Incorporation and in these Bylaws, upon surrender to the Corporation by delivery thereof (to the extent evidenced by a physical stock certificate) to the person in charge of the stock and transfer books and ledgers. Certificates representing such shares, if any, shall be cancelled and new certificates, if the shares are to be certificated, shall thereupon be issued. Shares of the Corporation that are not represented by a certificate shall be transferred in accordance with applicable law. A record shall be made of each transfer. Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented, both the transferor and transferee request the Corporation to do so. The Board shall have power and authority to make such rules and regulations as it may deem necessary or proper concerning the issuance, transfer and registration of certificates for shares of stock of the Corporation.

Section 5.04 <u>Lost, Stolen, Destroyed or Mutilated Certificates</u>. A new certificate of stock or uncertificated shares may be issued in the place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed, and the Corporation may, in its discretion, require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond, in such sum as the Corporation may direct, in order to indemnify the Corporation against any claims that may be made against it in connection therewith. A new certificate or uncertificated shares of stock may be issued in the place of any certificate previously issued by the Corporation that has become mutilated upon the surrender by such owner of such mutilated certificate and, if required by the Corporation, the posting of a bond by such owner in an amount sufficient to indemnify the Corporation against any claim that may be made against it in connection therewith.

Section 5.05 <u>List of Stockholders Entitled To Vote</u>. The Corporation shall prepare no later than the 10th day before each meeting of stockholders of the Corporation, a complete list of the stockholders of the Corporation entitled to vote at the meeting (*provided*, *however*, that if the record date for determining the stockholders of the Corporation entitled to vote is less than 10 days before the date of the meeting, the list shall reflect the stockholders of the Corporation entitled to vote as of the 10th day before the meeting date), arranged in alphabetical order and showing the address of each stockholder of the Corporation and the number of shares registered in the name of each such stockholder. Such list shall be open to the examination of any stockholder of the Corporation, for any purpose germane to the meeting for a period of 10 days ending on the day before the date of the meeting (a) on a reasonably accessible electronic network (*provided* that the information required to gain access to such list is provided with the notice of the meeting) or (b) during ordinary business hours at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders of the

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Corporation entitled to examine the list of stockholders of the Corporation required by this Section 5.05 or to vote in person or by proxy at any meeting of stockholders of the Corporation.

Section 5.06 <u>Fixing Date for Determination of Stockholders of Record</u>.

(A) In order that the Corporation may determine the stockholders of the Corporation entitled to notice of any meeting of stockholders of the Corporation or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than 60 nor less than 10 days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders of the Corporation entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders of the Corporation entitled to notice of or to vote at a meeting of stockholders of the Corporation shall be at the Close of Business on the day next preceding the day on which notice is given, or, if notice is waived, at the Close of Business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders of the Corporation shall apply to any adjournment of the meeting; *provided*, *however*, that the Board may fix a new record date for determination of stockholders of the Corporation entitled to vote at the adjourned meeting and in such case shall also fix as the record date for stockholders of the Corporation entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders of the Corporation entitled to vote in accordance herewith at the adjourned meeting.

(B) In order that the Corporation may determine the stockholders of the Corporation entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than 60 days prior to such action. If no such record date is fixed, the record date for determining stockholders of the Corporation for any such purpose shall be at the Close of Business on the day on which the Board adopts the resolution relating thereto.

(C) Unless otherwise restricted by the Amended and Restated Certificate of Incorporation, in order that the Corporation may determine the stockholders of the Corporation entitled to express consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. Subject to the provisions of the Amended and Restated Certificate of Incorporation, any stockholder of record seeking to have the stockholders of the Corporation authorize or take corporate action by written consent shall, by written notice to the Secretary, request that the Board fix a record date, which notice shall include the text of any proposed resolution. If no record date for determining stockholders of the Corporation entitled to express consent to corporate action in writing without a meeting is fixed by the Board, (a) when no prior action of the Board is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law and (b) if prior action by the Board is required by law, the record date for such purpose shall be at the Close of Business on the day on which the Board adopts the resolution taking such prior action.

Section 5.07 <u>Registered Stockholders</u>. Prior to the surrender to the Corporation of the certificate or certificates for a share or shares of stock or notification to the Corporation of the transfer of uncertificated shares with a request to record the transfer of such share or shares, the Corporation may treat the registered owner of such share or shares as the person entitled to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner of such share or shares. To the fullest extent permitted by law, the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.

**ARTICLE VI** 

**NOTICE AND WAIVER OF NOTICE** 

Section 6.01 <u>Notice</u>. If mailed, notice to stockholders of the Corporation shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder of the Corporation at such stockholder's address as it appears on the records of the Corporation, and if given by any other form, including any form of electronic transmission permitted by the DGCL shall be deemed given as provided in the DGCL. Without limiting the manner by which notice otherwise may be given effectively to stockholders of the Corporation, any notice to stockholders of the Corporation may be given by electronic transmission in the manner provided in Section 232 of the DGCL.

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Notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the "householding" rules set forth in Rule 14a-3(e) under the Exchange Act and Section 233 of the DGCL.

Section 6.02 <u>Waiver of Notice</u>. A written waiver of any notice, signed by a stockholder of the Corporation or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any meeting (in person or by remote communication) shall constitute waiver of notice except attendance for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

**ARTICLE VII** 

**INDEMNIFICATION** 

Section 7.01 <u>Right to Indemnification</u>. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (each a "**proceeding**"), by reason of the fact that he or she is or was a director or an officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an "**indemnitee**"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, agent or trustee or in any other capacity while serving as a director, officer, employee, agent or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Delaware law, as the same exists or may hereafter be amended (but, in the case of any such amendment, if permitted, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; *provided*, *however*, that, except as provided in Section 7.03 hereof with respect to proceedings to enforce rights to indemnification or advancement of expenses or with respect to any compulsory counterclaim brought by such indemnitee, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

Section 7.02 <u>Right to Advancement of Expenses</u>. In addition to the right to indemnification conferred in Section 7.01 hereof, an indemnitee shall also have the right to be paid by the Corporation the expenses (including attorneys' fees) incurred in appearing at, participating in or defending any such proceeding in advance of its final disposition or in connection with a proceeding brought to establish or enforce a right to indemnification or advancement of expenses under this Article VII (which shall be governed by Section 7.03 hereof) (hereinafter an "**advancement of expenses**"); *provided*, *however*, that, if the DGCL requires or in the case of an advance made in a proceeding brought to establish or enforce a right to indemnification or advancement, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including service to an employee benefit plan) shall be made solely upon delivery to the Corporation of an undertaking (an "**undertaking**"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a "**final adjudication**") that such indemnitee is not entitled to be indemnified or entitled to advancement of expenses under Sections 7.01 and 7.02 hereof or otherwise.

Section 7.03 <u>Right of Indemnitee to Bring Suit</u>. If a claim under Section 7.01 or 7.02 hereof is not paid in full by the Corporation within (a) 45 days after a written claim for indemnification has been received by the Corporation or (b) 20 days after a claim for an advancement of expenses has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or to obtain advancement of expenses, as applicable. To the fullest extent permitted by law, if successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking or otherwise, the indemnitee shall be entitled to be paid also the expense (including attorneys' fees) of prosecuting or defending such suit. In (a) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL and (b) any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking or otherwise, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the

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indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking or otherwise, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VII or otherwise shall be on the Corporation.

Section 7.04 <u>Indemnification Not Exclusive</u>.

(A) The provision of indemnification to or the advancement of expenses and costs to any indemnitee under this Article VII, or the entitlement of any indemnitee to indemnification or advancement of expenses and costs under this Article VII, shall not limit or restrict in any way the power of the Corporation to indemnify or advance expenses and costs to such indemnitee in any other way permitted by law or be deemed exclusive of, or invalidate, any right to which any indemnitee seeking indemnification or advancement of expenses and costs may be entitled under any law, agreement, vote of stockholders of the Corporation or disinterested directors or otherwise, both as to action in such indemnitee's capacity as an officer, director, employee or agent of the Corporation and as to action in any other capacity.

(B) Given that certain jointly indemnifiable claims (as defined below) may arise due to the service of the indemnitee as a director and/or officer of the Corporation at the request of the indemnitee-related entities (as defined below), the Corporation shall be fully and primarily responsible for the payment to the indemnitee in respect of indemnification or advancement of all expenses judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of the Amended and Restated Certificate of Incorporation or these Bylaws (or any other agreement between the Corporation and such persons) in connection with any such jointly indemnifiable claims, pursuant to and in accordance with the terms of this Article VII, irrespective of any right of recovery the indemnitee may have from the indemnitee-related entities. Any obligation on the part of any indemnitee-related entities to indemnify or advance expenses to any indemnitee shall be secondary to the Corporation's obligation and shall be reduced by any amount that the indemnitee may collect as indemnification or advancement from the Corporation. The Corporation irrevocably waives, relinquishes and releases the indemnitee-related entities from any and all claims against the indemnitee-related entities for contribution, subrogation or any other recovery of any kind in respect thereof. Under no circumstance shall the Corporation be entitled to any right of subrogation or contribution by the indemnitee-related entities and no right of advancement or recovery the indemnitee may have from the indemnitee-related entities shall reduce or otherwise alter the rights of the indemnitee or the obligations of the Corporation hereunder. In the event that any of the indemnitee-related entities shall make any payment to the indemnitee in respect of indemnification or advancement of expenses with respect to any jointly indemnifiable claim, the indemnitee-related entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee against the Corporation and the indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the indemnitee-related entities effectively to bring suit to enforce such rights. Each of the indemnitee-related entities shall be third-party beneficiaries with respect to this Section 7.04(B), entitled to enforce this Section 7.04(B).

For purposes of this Section 7.04(B), the following terms shall have the following meanings:

(1) The term "**indemnitee-related entities**" means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Corporation or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise for which the indemnitee has agreed, on behalf of the Corporation or at the Corporation's request, to serve as a director, officer, employee or agent and which service is covered by the indemnity described herein) from whom an indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, the Corporation may also have an indemnification or advancement obligation.

(2) The term "**jointly indemnifiable claims**" shall be broadly construed and shall include, without limitation, any action, suit or proceeding for which the indemnitee shall be entitled to indemnification or advancement of expenses from both the indemnitee-related entities and the Corporation pursuant to Delaware law, any agreement or Amended and Restated Certificate of Incorporation, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents of the Corporation or the indemnitee-related entities, as applicable.

Section 7.05 <u>Corporate Obligations; Reliance</u>. The rights granted pursuant to the provisions of this Article VII shall vest at the time a person becomes a director or officer of the Corporation and shall be deemed to create a binding

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contractual obligation on the part of the Corporation to the persons who from time to time are elected as officers or directors of the Corporation and such persons in acting in their capacities as officers or directors of the Corporation or any subsidiary shall be entitled to rely on such provisions of this Article VII without giving notice thereof to the Corporation. Such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee's heirs, executors and administrators. Any amendment, alteration or repeal of this Article VII that adversely affects any right of an indemnitee or any indemnitee-related entity or their respective successors shall be prospective only and shall not limit, eliminate, or impair any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

Section 7.06 <u>Insurance</u>. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 7.07 <u>Indemnification of Employees and Agents of the Corporation</u>. The Corporation may, to the extent authorized by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VII with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

**ARTICLE VIII** 

**MISCELLANEOUS** 

Section 8.01 <u>Electronic Transmission</u>. For purposes of these Bylaws, "**electronic transmission**" means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

Section 8.02 <u>Corporate Seal</u>. The Board may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board or a committee thereof, duplicates of the seal may be kept and used by the Chief Financial Officer, the Treasurer or by an Assistant Secretary or Assistant Treasurer.

Section 8.03 <u>Fiscal Year</u>. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 8.04 <u>Section Headings</u>. Section headings in these Bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

Section 8.05 <u>Inconsistent Provisions</u>. In the event that any provision of these Bylaws is or becomes inconsistent with any provision of the Amended and Restated Certificate of Incorporation, the DGCL or any other applicable law, such provision of these Bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

Section 8.06 <u>Severability</u>. If any provision of these Bylaws shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provision in any other circumstance and of the remaining provisions of these Bylaws and the application of such provision to other persons or entities or circumstances shall not in any way be affected or impaired thereby.

**ARTICLE IX** 

**AMENDMENTS** 

Section 9.01 <u>Amendments</u>. The Board is authorized to make, repeal, alter, amend and rescind, in whole or in part, these Bylaws without the assent or vote of the stockholders of the Corporation in any manner not inconsistent with the laws of the State of Delaware or the Amended and Restated Certificate of Incorporation. Before the Trigger Event, the affirmative vote of the holders of a majority in voting power of all the then-outstanding shares of Common Stock entitled to vote thereon shall be required in order for the stockholders of the Corporation to alter, amend, repeal or rescind, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith. Notwithstanding any other provisions of these Bylaws or any provision of law that might otherwise permit a lesser vote of the stockholders of the Corporation, from and after the Trigger Event, in addition to any vote

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of the holders of any class or series of shares of the Corporation required by the Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock), these Bylaws or applicable law, the affirmative vote of the holders of at least 75% in voting power of all the then-outstanding shares of Common Stock entitled to vote thereon shall be required in order for the stockholders of the Corporation to alter, amend, repeal or rescind, in whole or in part, any provision of these Bylaws (including this Section 9.01) or to adopt any provision inconsistent herewith.

[*Remainder of Page Intentionally Left Blank*]

## Ex-4

**Exhibit 4.1**

**DESCRIPTION OF CAPITAL STOCK**

**General**

Below is a summary of the material terms and provisions of our certificate of incorporation and our bylaws affecting the rights of our stockholders, as well as relevant provisions of Delaware law affecting the rights of our stockholders. This summary does not purport to be complete and is qualified in its entirety by the provisions of our certificate of incorporation, our bylaws and the Delaware General Corporation Law (the "DGCL"). References in this section to the "Company," "we," "us" and "our" refer to Torrid Holdings Inc. and not to any of its subsidiaries.

**Authorized Capital**

Our authorized capital stock consists of 1.0 billion shares of common stock, par value $0.01 per share, and 5.0 million shares of preferred stock, par value $0.01 per share.

**Common Stock**

***Voting Rights***

Each share of common stock entitles the holder to one vote with respect to each matter presented to our stockholders on which the holders of common stock are entitled to vote. Subject to any rights that may be applicable to any then outstanding preferred stock, our common stock votes as a single class on all matters relating to the election and removal of directors on our board of directors and as provided by law. Holders of our common stock do not have cumulative voting rights. Except in respect of matters relating to the election or removal of directors on our board of directors and as otherwise provided in our certificate of incorporation or required by law, all matters to be voted on by our stockholders must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter. In the case of election of directors, all matters to be voted on by our stockholders must be approved by a plurality of the votes entitled to be cast by all shares of common stock.

***Dividend Rights***

Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of our outstanding shares of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. Because we are a holding company, our ability to pay dividends on our common stock is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions under the terms of the agreements governing our indebtedness.

***Liquidation Rights***

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of our debts and other liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.

***Other Rights***

Our stockholders have no preemptive, conversion or other rights to subscribe for additional shares. All outstanding shares are validly issued, fully paid and nonassessable. No redemption or sinking fund provisions are applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

**Preferred Stock**

Our certificate of incorporation authorizes our board of directors to provide for the issuance of shares of preferred stock in one or more series and to fix the powers (including voting powers, if any), preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption rights and liquidation preference and to fix the number of shares to be included in any such series without any further vote or action by our stockholders. Any

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preferred stock so issued may rank senior to our common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up, or both. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our Company without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others. At present, we have no plans to issue any of the preferred stock.

***Corporate Opportunity***

As permitted under the DGCL, in our certificate of incorporation, we renounce any interest or expectancy in, or any offer of an opportunity to participate in, specified business opportunities that are presented to us or one or more of our officers, directors or stockholders. In recognition that (i) directors, principals, members, associated funds, employees, officers and/or other representatives of Sycamore Partners Management, L.P., Sycamore Partners Torrid, L.L.C. and each of their respective affiliates (the "Sycamore Investors") may serve as directors and/or officers of ours, and the Sycamore Investors, not including us (the "Sycamore Entities"), may engage in similar activities or lines of business that we do, and (ii) members of our board of directors who are not employees of the Company ("Non-Employee Directors" and, collectively with the Sycamore Entities, the "Identified Persons") and their respective affiliates may engage in similar activities or lines of business that we do, our certificate of incorporation provides for the allocation of certain corporate opportunities between us and the Identified Persons. Specifically, none of the Identified Persons have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business in which we or any of our affiliates now engage in or propose to engage in or otherwise competing with us or any of our affiliates. In the event that a Identified Person acquires knowledge of a potential transaction or matter which may be a corporate opportunity for such person and us or any of our affiliates, we will not have any expectancy in such corporate opportunity, and the Identified Person will not have any duty to present such corporate opportunity to us or our affiliates and may pursue or acquire such corporate opportunity for itself or direct such opportunity to another person. A corporate opportunity that a Non-Employee Director acquires knowledge of will not belong to us unless the corporate opportunity at issue is expressly offered in writing to such person solely in his or her capacity as a director or officer of ours. In addition, the following corporate opportunities will not be deemed to be a potential Corporate Opportunity for the Company: (1) those we are not financially able, contractually permitted or legally able to undertake; (2) those not in our line of business; (3) those of no practical advantage to us; and (4) those in which we have no interest or reasonable expectancy. Except with respect to the Identified Persons, the corporate opportunity doctrine applies as construed pursuant to applicable Delaware laws, without limitation.

***Antitakeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws***

Our certificate of incorporation and our bylaws contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the power to discourage acquisitions that some stockholders may favor.

**Action By Written Consent, Special Meeting of Stockholders and Advance Notice Requirements for Stockholder Proposals**

Our certificate of incorporation provides that stockholder action can be taken only at an annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting from and after the date on which the Sycamore Investors cease to beneficially own at least 50% of the total voting power of all then outstanding shares of our common stock (the "Trigger Event"). Our certificate of incorporation and bylaws also provides that, except as otherwise required by law and subject to the rights of the holders of any series of preferred stock, special meetings of the stockholders can be called by or at the direction of our board of directors or the chairman of our board of directors, including at the request of holders of not less than a majority of the combined voting power of our common stock, and, from and after the Trigger Event, only by or at the direction of our board of directors or the chairman of our board of directors. Except as described above, stockholders will not be permitted to call a special meeting or to require our board of directors to call a special meeting.

In addition, our bylaws require advance notice procedures for stockholder proposals to be brought before an annual meeting of the stockholders, including the nomination of directors. Stockholders at an annual meeting may only consider the proposals specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors, or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered a timely written notice in proper form to our secretary, of the stockholder's intention

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to bring such business before the meeting. Prior to the Trigger Event, the Sycamore Investors will not be required to comply with the advance notice procedures applicable to other stockholders.

These provisions could have the effect of delaying until the next stockholder meeting any stockholder actions, even if they are favored by the holders of a majority of our outstanding voting securities.

**Classified Board of Directors**

Our certificate of incorporation provides that our board of directors is divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board of directors.

**Removal of Directors**

Under the DGCL, unless otherwise provided in our certificate of incorporation, directors serving on a classified board may be removed by the stockholders only for cause. Our certificate of incorporation provides that directors (other than the directors elected by the holders of any series of preferred stock, voting separately as a series or together with one or more other such series, as the case may be) may be removed with or without cause at any time upon the affirmative vote of holders of at least a majority of the votes to which all the stockholders would be entitled to cast until the Trigger Event. From and after the Trigger Event, directors may only be removed from office for cause and only upon the affirmative vote of at least 75% of the voting power of all the then-outstanding shares of our capital stock entitled to vote thereon, voting together as a single class.

**Amendment to Certificate of Incorporation and Bylaws**

The DGCL provides generally that the affirmative vote of a majority of the outstanding stock entitled to vote on amendments to a corporation's certificate of incorporation or bylaws is required to approve such amendment, unless a corporation's certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended, altered, changed or repealed by a majority vote of our board of directors, provided that, in addition to any other vote otherwise required by law, from and after the Trigger Event, the affirmative vote of at least 75% of the voting power of our outstanding shares of common stock will be required to amend, alter, change or repeal our bylaws. Additionally, from and after the Trigger Event, the affirmative vote of at least 75% of the voting power of the outstanding shares of common stock entitled to vote on the adoption, alteration, amendment or repeal of our certificate of incorporation, voting as a single class, will be required to amend or repeal or to adopt any provision inconsistent with the following provisions of our certificate of incorporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provision requiring a 75% supermajority vote for stockholders to amend our bylaws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions providing for a classified board of directors (the election and term of our directors);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions regarding removal of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions regarding stockholder action by written consent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions regarding calling special meetings of stockholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions regarding filling vacancies on our board of directors and newly created directorships;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions regarding competition and corporate opportunities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions regarding Section 203 of the DGCL;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the provisions eliminating monetary damages for breaches of fiduciary duty by a director; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the amendment provision requiring that the above provisions be amended only with a 75% supermajority vote.

This requirement of a supermajority vote to approve amendments to our certificate of incorporation and bylaws could enable a minority of our stockholders to exercise veto power over any such amendments.

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**Delaware Anti-Takeover Statute**

Section 203 of the DGCL provides that if a person acquires 15% or more of the voting stock of a Delaware corporation, such person becomes an "interested stockholder" and may not engage in certain "business combinations" with the corporation for a period of three years from the time such person acquired 15% or more of the corporation's voting stock, unless: (1) our board of directors approves the acquisition of stock or the merger transaction before the time that the person becomes an interested stockholder; (2) the interested stockholder owns at least 85% of the outstanding voting stock of the corporation at the time the merger transaction commences (excluding voting stock owned by directors who are also officers and certain employee stock plans); or (3) the merger transaction is approved by our board of directors and by the affirmative vote at a meeting, not by written consent, of stockholders of 2/3 of the holders of the outstanding voting stock which is not owned by the interested stockholder. A Delaware corporation may elect in its certificate of incorporation or bylaws not to be governed by this particular Delaware law.

We have elected in our certificate of incorporation to opt out of Section 203 of the DGCL.

**Transfer Agent and Registrar**

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

**Listing**

Our common stock is listed on NYSE under the symbol "CURV."

## Exhibit 10.32

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 1 SEPARATION AGREEMENT This Separation Agreement and Release ("Agreement") sets forth the agreement reached concerning the separation of Michael Salmon ("Employee"), from Torrid Merchandising, Inc. and its parent companies, subsidiaries and affiliates (collectively, the "Company"). WHEREAS, due to business reasons, the Company will be terminating Employee's employment effective January 4, 2023 ("Separation Date"). NOW THEREFORE, in consideration of the mutual promises contained in this Agreement, Employee and the Company (collectively referred to as "the Parties") hereby agree as follows: 1. Final Payments. a. Wages and Vacation: Regardless of whether Employee signs this Agreement, on Employee's Separation Date, Employee will receive a final paycheck which will include payment for any unpaid final wages for time worked through and including the Separation Date and other benefits to which Employee is entitled by virtue of Employee's service with the Company up to and including the Separation Date, including payment for accrued but unused vacation pay. b. Reimbursement for Business Expenses. Employee will be reimbursed for any outstanding approved business expenses that are submitted to the Company for reimbursement no later than three (3) weeks after Employer Separation Date in accordance with Company policy. However, Employee acknowledges Employee's responsibility for the payment of personal expenses that remain on Employee's corporate card, if any. c. Benefits. Employee's benefits will terminate as of Employee" Separation Date except as set forth below. The Company's Human Resources Department will send Employee information concerning any conversion rights Employee may have for medical and life insurance coverage, as well as information about other benefit plans consistent with any obligations imposed by the plans and/or required by law. 2. Consideration. In exchange for the release of claims and the promises set forth below, the Company will provide Employee with the following separation benefits which Employee acknowledges Employee is not otherwise entitled to receive upon the termination of Employee's employment: a. In consideration for the execution by Employee of this Agreement, Company agrees to provide Employee 12 months of base pay in the gross amount of Five Hundred and Fifty Thousand Dollars and Zero Cents ($550,000.00) ("Separation Pay"), less applicable withholding and deductions. The Separation Pay will be paid on the Company's regular DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 2 payroll schedule in equal installments. The first Separation Payment shall be paid to Employee in the first regularly scheduled payroll period following execution of this Agreement and expiration of the seven (7) day revocation period, provided Employee has executed and not revoked this Agreement and is otherwise in compliance with this Agreement. b. The Company is not offering any tax advice to Employee regarding the Separation Pay or any amounts paid under this Agreement. Employee understands and agrees that upon Employee's receipt of the payments described above Employee will have been fully compensated for any amounts owed under this Agreement. c. The Company also agrees to pay the premium to the third-party administrator for the maintenance of Employee's health insurance under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") through January 31, 2024, or until Employee becomes re- insured under a different plan, whichever occurs first. Employee must immediately notify the Company of re-insurance under a different plan. Except as set forth in this Agreement, Employee acknowledges, represents, and warrants that (a) the Company owes Employee no other wages, commissions, bonuses, vacation pay or other compensation or payments of any nature, and has made no other representations and/or commitments to Employee not set forth in this Agreement, and (b) the Company will have no other financial obligation to Employee with regard to Employee's employment or termination. 3. General Release. a. Employee agrees to release any and all claims that Employee has or may have against the Company arising out of Employee's employment with the Company (including Employee's termination of employment). Employee agrees that this release includes not only the Company, but also the Company's parents, subsidiaries, divisions, affiliates, predecessors, successors, and assigns, and its past and present officers, directors, agents, employees, counsel and insurers (the "Released Parties"). Employee understands and agrees that this release includes any and all claims of every kind and nature, whether known or unknown, actual or contingent, asserted or unasserted, arising under common law, statutory law, or otherwise that Employee has, had, now has, or may have against the Released Parties occurring up through the date Employee sign this Agreement, including, without limitation, claims arising pursuant to the Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974, Worker Adjustment and Retraining Notification (WARN) Act; the Sarbanes-Oxley Act, or any other federal, state or local statute, ordinance, or regulation regarding employment, termination of employment, or discrimination in employment as such acts may have been amended. Employee understands and agrees that the only claims that are exempt from this release are claims the law does not allow Employee to waive by signing this Agreement. For the purpose of implementing a full and complete release, Employee expressly acknowledges that the releases given in this Agreement are intended to include, without limitation, claims that Employee did not know or DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 3 suspect to exist in Employee's favor at the time of the date of Employee's execution of this Agreement, regardless of whether the knowledge of such claims, or the facts upon with which they might be based, would have materially affected Employee's decision to sign this Agreement, and that the consideration provided under this Agreement was also for the release of those claims and contemplates the extinguishment of any such unknown claims. b. This release also includes all claims arising under, relating to, or in any way involving the California Fair Employment and Housing Act ("FEHA"), California Constitution, the California Labor Code, and any corresponding regulations, and any claims arising out of the California Business & Professions Code, and any other alleged violation of any federal, state or local law, ordinance, and/or public policy, contract or tort or common-law having any bearing whatsoever on the terms and conditions and/or cessation of Employee's employment with the Company which Employee ever had, now has, or shall have from the beginning of world to the date of this Separation Agreement. 4. WAIVER OF CIVIL CODE SECTION 1542 Employee hereby expressly waives and relinquishes all rights and benefits under California Civil Code § 1542 to the fullest extent that Employee may lawfully waive such rights. Section 1542 of the Civil Code of California provides as follows: A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party. 5. Non-Disparagement. Employee agrees that Employee will not make any oral or written statement that disparages the Company or Released Parties, or is likely to be harmful to them or their business, business reputation or personal reputation; provided that Employee may respond accurately and fully to any question, inquiry or request for information when required by legal process. The Parties acknowledge that this provision is to the mutual benefit of both parties and is not intended to prohibit truthful statements or disclosures about alleged unlawful employment practices. Nothing in this agreement prevents Employee from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that Employee has reason to believe is unlawful. 6. Neutral Reference. Employment references are provided by a third party and shall only include dates of employment and last position held in response to any business inquiry Employee authorizes. Employee agrees and acknowledges that the Company is not responsible for any references or information provided in response to inquiries to any other individual. 7. Restrictive Covenants. Employee agrees and acknowledges that Employee continues to be bound by any confidentiality, non-solicitation, and assignment of invention provisions or agreements that Employee has signed with the Company either prior to or during Employee's employment (collectively, "Restrictive Covenant Agreements"), and this Agreement incorporates all such agreements by reference. 8. Confidentiality. DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 4 a. Confidential Information: Employee acknowledges that during Employee' employment Employee has learned Confidential Information relating to the business conducted and to be conducted by the Company and Employee agrees not to disclose such information to a new employer or to any other person, and Employee agrees to abide by the terms of the Proprietary Information and Inventions Agreement Employee signed electronically with the new hire paperwork on June 6, 2018. Employee agrees that Employee will not at any time after Employee's employment disclose or use or authorize any third party to disclose or use any such Confidential Information, without prior written approval of the Company. As used in this Agreement, "Confidential Information" means all information belonging to the Company or provided to the Company by a customer that is not known generally to the public or the Company's competitors and includes all trade secrets, client lists and information related to client files, know-how, show-how, technical, operating, financial, and other business information and materials. Confidential Information shall not include any general know-how or skills that Employee possess whether obtained through Employee's employment at the Company or elsewhere. Confidential Information also does not include information that (i) is publicly known or becomes publicly known through no fault of Employee's, or (ii) is generally or readily obtainable by the public. Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. By signing this Agreement, Employee represents and warrants that Employee has not disclosed any Confidential Information to a third party, or sent/downloaded any Confidential Information to Employee's personal email account(s), personal computer(s), personal mobile device(s), and/or external and removable hard or thumb drives. b. Confidentiality of Agreement. Employee further understands and agrees that this Agreement and the matters discussed in negotiating the terms of this Agreement, are entirely confidential. It is therefore expressly understood and agreed by Employee that Employee will not reveal, discuss, publish, or in any way communicate any of the terms of this Agreement, and the matters discussed in negotiating the terms of this Agreement to any person, organization or other entity, except to Employee's immediate family members and professional representatives, if any, as needed, who shall also be informed of and bound by this confidentiality clause; but in no event should Employee discuss this Agreement or its terms with any current or prospective employee of the Company. Should any of the aforementioned disclose the subject matter of this provision, then Employee will be responsible for their disclosure. Employee represents and warrants that, prior to signing this Agreement, Employee has not made any disclosures that would have been prohibited by this Agreement had they been made after the full execution of this Agreement. However, Employee understands that nothing in this Agreement precludes Employee from disclosing factual information (other than the amount of any settlement) related to any claim against Released Parties of harassment or discrimination or any other conduct Employee has reason to believe to be unlawful, or from disclosing DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 5 factual information related to an administrative claim or civil action concerning sexual assault, sexual harassment, workplace harassment or discrimination, failure to prevent an act of workplace harassment or discrimination, or an act of retaliation against a person for reporting or opposing harassment or discrimination that was filed in a civil or administrative action. c. In the event that Employee believes that he is legally obligated by statutory or regulatory requirements (including compulsory legal process), to make such disclosures, Employee will contact the Company's Chief Human Resources Officer and Chief Legal Officer, Bridgett Zeterberg within 24 hours of receiving notice that Employee is so obligated. 9. Non-Solicitation. On behalf of himself or on behalf of any entity or person, Employee agrees not to, directly or in directly, solicit or encourage any Company employee to leave the Company. This section will expire two (2) years after Employee executes this agreement. 10. Return of Company Materials. No later than the Separation Date or as soon as possible thereafter, Employee represents that Employee has returned or will return to the Company, and has not retained in any form or format, all Company documents and other Company property containing Confidential Information that Employee had in Employee's possession at any time. 11. Consideration of Medicare's Interests. Employee affirms, covenants, and warrants he has made no claim for illness or injury against, nor is he aware of any facts supporting any claim against, the released parties under which the released parties could be liable for medical expenses incurred by the Employee before or after the execution of this agreement. Furthermore, Employee is aware of no medical expenses which Medicare has paid and for which the released parties are or could be liable now or in the future. Employee agrees and affirms that, to the best of his knowledge, no liens of any governmental entities, including those for Medicare conditional payments, exist. Employee will indemnify, defend, and hold the released parties harmless from Medicare claims, liens, damages, conditional payments, and rights to payment, if any, including attorneys' fees, and Employee further agrees to waive any and all future private causes of action for damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) et seq. 12. Notification of Rights. a. This Agreement is intended to comply with the Older Workers Benefit Protection Act ("OWBPA") with regard to Employee's waiver of rights under the Age Discrimination in Employment Act of 1967 ("ADEA"). b. Employee acknowledges and agrees that: i. Employee has read and understand this Agreement in its entirety, including the release of ADEA claims. ii. Employee was informed that Employee may consult with an attorney, at Employee's expense. DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 6 iii. Employee will have 21 days to review (including consulting an attorney) and sign this Agreement and return it via email it to bzeterberg@torrid.com. Employee may use as much or as little of this 21-day period prior to signing; however, Employee may not sign until after Employee's Separation Date. Pursuant to 29 C.F.R. §16.22(e)(4), the Parties agree that any modifications to this Agreement, whether material or immaterial, will not restart the 21-day consideration period. iv. If Employee signs this Agreement, Employee has done so knowingly, willingly and voluntarily and under no compulsion or duress, in exchange for the separation benefits provided herein. v. The Agreement provides consideration in addition to anything of value to which Employee may be entitled independent of the Agreement. vi. This Agreement is not intended to be a waiver of claims, including claims under the ADEA, arising after the date Employee execute this Agreement. c. Employee has seven (7) days to revoke this Agreement in writing by emailing bzeterberg@torrid.com no later than the close of business on the 7th day after Employee signs. If Employee revokes this Agreement as provided in this Section, it shall be null and void and Employee will not be entitled to any of the consideration from the Company described above. If Employee does not revoke this Agreement within seven (7) days of executing it, this Agreement shall become enforceable on the 8th day after execution of this Agreement (the "Effective Date"). 13. Waiver. Neither party shall, by mere lapse of time, without giving notice or taking other action hereunder, be deemed to have waived any breach by the other party of any of the provisions of this Agreement. Further, the waiver by either party of a particular breach of this Agreement by the other shall neither be construed as, nor constitute, a continuing waiver of such breach or of other breaches of the same or any other provision of this Agreement. 14. Severability. If any of the provisions, terms or clauses of this Agreement are declared illegal, unenforceable, or ineffective, those provisions, terms and clauses shall be deemed severable, and all other provisions, terms and clauses of this Agreement shall remain valid and binding upon both parties. 15. Governing Law and Venue. This Agreement will be governed and enforced in accordance with the laws of the State of California, without regard to its conflict of laws principles. 16. Entire Agreement. This Agreement, including the Restrictive Covenants Agreements incorporated by reference, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral. However, nothing in this Agreement is intended to nullify any benefits already vested pursuant to the DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Page \| 7 Company's Deferred Compensation Plan. This Agreement may not be altered or amended except by a written document signed by Employee and an authorized representative of the Company. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute but one and the same agreement. Employee has the right to consult with an attorney and has been advised by the Company to do so before signing this Agreement, and this paragraph constitutes such advice in writing. IN WITNESS WHEREOF, the undersigned have executed this Agreement freely and voluntarily with the intention of being legally bound by it. MICHAEL SALMON Signature: _________________________________ Print Name: _________________________________ Date: ______________ _________________________________ TORRID MERCHANDISING, INC. Signature: ____________________________________ Title: _______________________________ Date: _______________ ____________________________________ DocuSign Envelope ID: A221BD7B-848F-4F1E-89D2-924F6B1E3B7A Michael Salmon 1/5/2023 CEO 1/5/2023

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## Ex-18

**Exhibit 18.1**

March 28, 2023

Board of Directors

Torrid Holdings Inc.

18305 E. San Jose Avenue

City of Industry, CA 91748

Dear Directors:

We are providing this letter to you for inclusion as an exhibit to Torrid Holdings Inc.'s (the "Company") Annual Report on Form 10-K for the year ended January 28, 2023 (the "Form 10-K") pursuant to Item 601 of Regulation S-K.

We have audited the consolidated financial statements included in the Form 10-K and issued our report thereon dated March 28, 2023. Note 2 to the consolidated financial statements describes a change in accounting principle regarding the classification of royalties, profit sharing, and marketing and promotion funds the Company receives from its private label credit card provider from a reduction of selling, general and administrative expenses to net sales. It should be understood that the preferability of one acceptable method of accounting over another for the classification of funds received from private label credit card providers has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management's determination that this change in accounting principle is preferable. Based on our reading of management's stated reasons and justification for this change in accounting principle in the Form 10-K, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company's circumstances, a change to a preferable accounting principle in conformity with Accounting Standards Codification 250, *Accounting Changes and Error Corrections*.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

## Ex-21

**Exhibit 21.1**

TORRID HOLDINGS INC.

<u>List of Subsidiaries as of January 28, 2023</u>

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| | |
|:---|:---|
| <u>Subsidiary</u> | <u>Jurisdiction of organization</u> |
| Torrid Parent Inc. | Delaware |
| Torrid Intermediate LLC | Delaware |
| Torrid LLC | California |
| Torrid Administration, Inc. | California |
| Torrid Merchandising, Inc. | California |
| Torrid Ohio, LLC | Ohio |
| Torrid Canada Inc. | Canada |

---

## Ex-23

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-

257738) of Torrid Holdings Inc. of our report dated March 28, 2023 relating to the financial statements,

which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

March 28, 2023

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO**

**RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Lisa Harper, certify that:

1. I have reviewed this Annual Report on Form 10-K of Torrid Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 28, 2023&nbsp;&nbsp;&nbsp;&nbsp;By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Lisa Harper&nbsp;&nbsp;&nbsp;&nbsp;</u>

Lisa Harper

Chief Executive Officer<br>(Principal Executive Officer)

## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO**

**RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Tim Martin, certify that:

1. I have reviewed this Annual Report on Form 10-K of Torrid Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 28, 2023&nbsp;&nbsp;&nbsp;&nbsp;By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Tim Martin&nbsp;&nbsp;&nbsp;&nbsp;</u>

Tim Martin

Chief Operating Officer and Chief Financial Officer<br>(Principal Financial Officer)

## Exhibit 32.1

**&nbsp;&nbsp;&nbsp;&nbsp;EXHIBIT 32.1**

**CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with this Annual Report of Torrid Holdings Inc. (the "Company") on Form 10-K for the year ended January 28, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lisa Harper, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 28, 2023&nbsp;&nbsp;&nbsp;&nbsp;By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Lisa Harper&nbsp;&nbsp;&nbsp;&nbsp;</u>

Lisa Harper

Chief Executive Officer and Director<br>(Principal Executive Officer)

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with this Annual Report of Torrid Holdings Inc. (the "Company") on Form 10-K for the year ended January 28, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Tim Martin, Chief Operating Officer and Chief Finance Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 28, 2023&nbsp;&nbsp;&nbsp;&nbsp;By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Tim Martin&nbsp;&nbsp;&nbsp;&nbsp;</u>

Tim Martin

Chief Operating Officer and Chief Financial Officer<br>(Principal Financial Officer)

<br>