Financial Analysis

( 10 ) Commitments and Contingencies Litigation In the normal course of business, the Company is subject to legal proceedings, government inquiries and claims, and other commercial disputes. If one or more of these matters has an unfavorable resolution, it is possible that the results of operations, liquidity or financial position of the Company could be materially affected in any particular period. The Company accrues a liability for these types of contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Gain contingencies are recorded when the underlying uncertainty has been settled. Assessments made by the U.K. customs authority in 2012 were appealed by the Company, which has paid the disputed duty, strictly under protest, pending the outcome of the continuing dispute, and this is included in receivables, net in the DTC segment. The U.K. customs authority contested the Company's appeal. Rulings by the First Tier Tribunal in November 2019 and Upper Tribunal in March 2021 held that duty was due on some, but not all, of the products at issue. The Company petitioned the Court of Appeal for permission to appeal certain elements of the Upper Tribunal decision, and in early November 2021, a judge granted the Company's petition for permission to appeal those elements of the Upper Tribunal decision on some, but not all, of the grounds of appeal that the Company had put forward. An appeal w …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"( 1 2 ) Stock Incentive Plans In 2017, the Company adopted the Build-A-Bear Workshop, Inc. 2017 Omnibus Incentive Plan (the ""2017 Plan""). On April 14, 2020, the Board of Directors (the Board) of Build-A-Bear Workshop, Inc. (the Company) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. 2020 Omnibus Incentive Plan (the 2020 Incentive Plan). On June 11, 2020, at the Companys 2020 Annual Meeting of Stockholders (the Annual Meeting), the Companys stockholders approved the 2020 Incentive Plan. On April 11, 2023, the Board adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. Amended and Restated 2020 Omnibus Incentive Plan (the Restated 2020 Incentive Plan). On June 8, 2023, at the Companys 2023 Annual Meeting of Stockholders (the Annual Meeting), the Companys stockholders approved the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan, which is administered by the Compensation and Development Committee of the Board, permits the grant of stock options (including both incentive and non-qualified stock options), stock appreciation rights, other stock-based awards, including restricted stock and restricted stock units, cash-based awards, and performance awards pursuant to the terms of the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan will terminate on April 11, 2033, unless earlier terminated by the Board. The total number of shares of the Companys common stock authorized for issuance under the Restated 2020 …

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( 8 ) Income Taxes The Companys income before income taxes from domestic and foreign operations (which include the U.K., Canada, China, and Ireland), is as follows (in thousands): Fiscal year ended January 31, February 1, February 3, 2026 2025 2024 Domestic $ 65,761 $ 63,872 $ 61,110 Foreign 1,466 3,269 5,219 Total income before income taxes $ 67,227 $ 67,141 $ 66,329 The components of the income tax expense (benefit) are as follows (in thousands): Fiscal year ended January 31, February 1, February 3, 2026 2025 2024 Current: U.S. Federal $ 11,382 $ 11,345 $ 12,080 U.S. State 3,037 2,834 3,205 Foreign 56 54 145 Deferred: U.S. Federal 924 683 (537 ) U.S. State 118 161 (212 ) Foreign (493 ) 279 (1,157 ) Income tax expense $ 15,024 $ 15,356 $ 13,524 The provision for income taxes was $15.0 million in fiscal 2025 compared to $15.4 million in fiscal 2024 . The 2025 effective rate of 22.3% differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax benefit of the foreign-derived intangible income (FDII) deduction and a favorable tax position affecting its U.K. net operating loss (NOL) from prior years. The 2024 effective rate of 22.9% differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the benefit of the FDII deduction. The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets based on …

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( 4 ) Leases The table below presents information related to the lease costs for operating leases for the periods presented (in thousands). For the Year Ended January 31, 2026 February 1, 2025 February 3, 2024 Operating lease costs $ 43,489 $ 39,792 $ 36,849 Variable lease costs (1) 11,858 11,063 10,782 Short term lease costs 101 101 110 Total Operating Lease costs $ 55,448 $ 50,956 $ 47,741 ( 1 ) Variable lease costs consist of leases with variable rent structures, which are intended to increase flexibility in an environment with expected high sales volatility and provide a natural hedge against potential sales declines. Other information The table below presents supplemental cash flow information related to leases for the periods presented (in thousands). For the Year Ended January 31, 2026 February 1, 2025 February 3, 2024 Operating cash flows for operating leases $ 41,803 $ 41,547 $ 39,598 As of January 31, 2026 , the weighted-average remaining operating lease term was 6.3 years and the weighted-average discount rate was 7.0% for operating leases recognized on the consolidated balance sheet. The Company recorded immaterial impairment charges during fiscal 2025 , fiscal 2024 and fiscal 2023 against its right-of-use operating lease assets in the Company's DTC segment. Undiscounted cash flows The table below reconciles the undiscounted cash flows for each of the first five years and total remaining years to the operating lease liabilities recorded on the balance sheet (in th …

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( 9 ) Line of Credit The Company had a revolving credit and security agreement with PNC Bank, as agent, which was set to expire on December 17, 2026, and provided for a secured revolving loan in aggregate principal of up to $ 25.0 million, subject to a borrowing base formula. On December 31, 2025, the Company entered into a Third Amendment to revolving credit and security agreement (the Third Amendment) with PNC Bank. The Third Amendment (i) increased the base borrowing amount under the facility from $25.0 million to $40.0 million (while retaining the accordion feature allowing such amount to increase up to $50.0 million); (ii) reduced the interest rates for borrowings under the facility; (iii) extended the maturity date of the Credit Agreement to December 31, 2030; and (iv) reduced the facility fee related to undrawn availability. The Third Amendment also updated various provisions regarding compliance with sanctions and anti-money laundering laws, international trade laws, and implemented certain other technical amendments. As amended, the new revolving credit and security agreement provides for a senior secured revolving loan in aggregate principal amount of up to $40.0 million (subject to a borrowing base formula), which may be increased with the consent of the lenders by an amount not to exceed $10.0 million, subject to the conditions set forth in the agreement (the Increase Option). The new revolving credit and security agreement continues to provide for swingline loans …

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"R ecent Accounting Pronouncements Adopted in the current year In December 2023, the FASB issued ASU No. 2023 - 09, ""Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures."" The ASU requires disaggregated information about a reporting entitys effective tax rate reconciliation as well as additional information on income taxes paid. We adopted this ASU on a prospective basis effective February 2, 2025. Refer to Note 8 - Income Taxes for the inclusion of new disclosures required. R ecent Accounting Pronouncements Pending adoption In November 2024, the FASB issued ASU No. 2024 - 03, ""Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses."" The amendment requires a public business entity (PBE) to disclose, on an annual and interim basis, disaggregated information about certain income statement line items in a tabular format in the notes to the financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Management is currently evaluating this ASU to determine its impact on the Company's disclosures. In September 2025, the FASB issued ASU No. 2025 - 06, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350 - 40 ): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all reference …

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"( 3 ) Revenue Nearly all of the Companys revenue is derived from retail sales (including e-commerce sites) and is recognized when control of the merchandise is transferred to the customer. The Company accounts for revenue in accordance with Topic 606, Revenue from Contracts with Customers. The Company's disaggregated revenue is fully disclosed as net sales to external customers by reporting segment and by geographic area (See Note 15 ""Segment Information"" for additional information). The Company's direct-to-consumer reporting segment represents nearly 92% of consolidated revenue. The majority of these sales transactions are single performance obligations that are recorded when control is transferred to the customer. The following is a description of principal activities from which the Company generates its revenue, by reportable segment. The Companys direct-to-consumer segment includes the operating activities of corporately-managed stores, other retail-delivered operations and online sales. Direct-to-consumer revenue is recognized when control of the merchandise is transferred to the customer and for the Companys online sales, control generally transfers upon delivery to the customer. Revenue is measured as the amount of consideration, including any discounts or incentives, the Company expects to receive in exchange for transferring the merchandise. Product returns have historically averaged less than one -half of one percent due to the interactive nature of sales, where …

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"( 15 ) Segment Information The Companys operations are conducted through three operating segments consisting of DTC, commercial and international franchising. The DTC segment includes the operating activities of corporately-managed locations and other retail delivery operations in the U.S., Canada, the Republic of Ireland and the U.K., including the Companys e-commerce sites and temporary stores. The commercial segment includes the Companys transactions with other businesses, mainly comprised of wholesale activities, licensing the Companys intellectual properties for third party use, and entertainment activities. The international franchising segment includes the licensing activities of the Companys franchise agreements with store locations in select countries in Asia, Australia, the Middle East, Africa, and South America. The operating segments have discrete sources of revenue, different capital structures and different cost structures. These operating segments represent the basis on which the Companys Chief Executive Officer, who is also the Chief Operating Decision Maker (""CODM""), regularly evaluates the business in assessing performance, determining the allocation of resources and the pursuit of future growth opportunities. The CODM uses contribution margin to allocate resources across the reportable segments as part of the Company's long-range and annual planning processes, and to evaluate planned versus actual results when assessing segment operating performance. Acc …

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"( 2 ) Summary of Significant Accounting Policies For each accounting topic that is addressed in its own note, the description of the accounting policy may be found in the related note. The Companys other significant accounting policies applied in the preparation of the accompanying consolidated financial statements are as follows: Principles of Consolidation The accompanying consolidated financial statements include the accounts of Build-A-Bear Workshop, Inc. and its wholly-owned subsidiaries. All intercompany accounts are eliminated in consolidation. Fiscal Year The Company operates on a 52 - or 53 -week fiscal year ending on the Saturday closest to January 31. The periods presented in these financial statements are fiscal 2025 ( 52 weeks ended January 31, 2026 ), fiscal 2024 ( 52 weeks ended February 1, 2025 ) and fiscal 2023 ( 53 weeks ended February 3, 2024 ). References to years in these financial statements relate to fiscal years or year-ends rather than calendar years. Cash, Cash Equivalents and Restricted Cash Cas h and cash equivalents include cash, money market funds, and short-term highly liquid investments with an original maturity of three months or less held in both domestic and foreign financial institutions. In addition, the Company has a long-term deposit to satisfy contractual terms with the UK Customs Authority (unrelated to the matter discussed in Note 10 - Commitments and Contingencies). The Company also has deposits from franchisees under contractual ag …

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( 1 3 ) Stockholders Equity The following table summarizes the changes in outstanding shares of common stock for fiscal 2025 and fiscal 2024 : Common Stock Shares as of February 3, 2024 14,172,362 Shares issued under employee stock plans, net of shares withheld in lieu of tax withholding 105,773 Share repurchase (1,021,004 ) Shares as of February 1, 2025 13,257,131 Shares issued under employee stock plans, net of shares withheld in lieu of tax withholding 60,768 Share repurchase (508,945 ) Shares as of January 31, 2026 12,808,954 …

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"( 16 ) Subsequent Events On February 20, 2026, the U.S Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (""IEEPA""). The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. Following the Supreme Courts decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on the Company's business. The Company continues to monitor and evaluate these developments and assess their potential impact on its business, financial condition, and results of operations."

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12. Contingencies In the normal course of business, the Company is subject to legal proceedings, government inquiries and claims, and other commercial disputes. If one or more of these matters has an unfavorable resolution, it is possible that the results of operations, liquidity or financial position of the Company could be materially affected in any particular period. The Company accrues a liability for these types of contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Gain contingencies are recorded when the underlying uncertainty has been settled. Assessments made by the U.K. customs authority in 2012 were appealed by the Company, which has paid the disputed duty, strictly under protest, pending the outcome of the continuing dispute, and this is included in receivables, net in the DTC segment. The U.K. customs authority contested the Company's appeal. Rulings by the First Tier Tribunal in November 2019 and Upper Tribunal in March 2021 held that duty was due on some, but not all, of the products at issue. The Company petitioned the Court of Appeal for permission to appeal certain elements of the Upper Tribunal decision, and in early November 2021, a judge granted the Company's petition for permission to appeal those elements of the Upper Tribunal decision on some, but not all, of the grounds of appeal that the Company had put forward. An appeal was heard by the Court of Appea …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

6. Stock-based Compensation On April 14, 2020, the Company's Board of Directors (the Board) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. 2020 Omnibus Incentive Plan (the 2020 Incentive Plan). On June 11, 2020, the Companys stockholders approved the 2020 Incentive Plan. On April 11, 2023, the Board adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. Amended and Restated 2020 Omnibus Incentive Plan (the Restated 2020 Incentive Plan). On June 8, 2023, at the Companys 2023 Annual Meeting of Stockholders, the Companys stockholders approved the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan, which is administered by the Compensation and Human Capital Committee of the Board, permits the grant of stock options (including both incentive and non-qualified stock options), stock appreciation rights, other stock-based awards, including restricted stock and restricted stock units, cash-based awards, and performance awards pursuant to the terms of the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan will terminate on April 11, 2033, unless earlier terminated by the Board. The total number of shares of the Companys common stock authorized for issuance under the Restated 2020 Incentive Plan increased by 800,000 to a maximum of 1,800,000 since its inception as the 2020 Incentive Plan, subject to customary capitalization adjustments, substitutions of acquired company awards and certain additions of acquired company …

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7. Income Taxes The Company's effective tax rate was 23.4% for the thirteen weeks ended May 2, 2026 compared to 22.0% for the thirteen weeks ended May 3, 2025 . In the first quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting and the foreign-derived deduction eligible income (formerly foreign derived intangible income). In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and foreign derived intangible income. In addition, in the first quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.

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3. Leases The majority of the Company's leases relate to retail stores and corporate offices. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Most new retail store leases have an original term of a five to ten -year base period and may include renewal options to extend the lease term beyond the initial base period. The extension periods are typically much shorter than the original lease term given the Company's strategic decision to maintain a high level of lease optionality. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property. The table below presents certain information related to the lease costs for operating leases for the thirteen weeks ended May 2, 2026 and May 3, 2025 (in thousands). Thirteen weeks ended May 2, 2026 May 3, 2025 Operating lease costs $ 11,409 $ 10,443 Variable lease costs (1) 2,214 2,380 Short term lease costs 27 28 Total Operating Lease costs $ 13,650 $ 12,851 ( 1 ) Variable lease c …

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"2. Revenue Currently, most of the Companys revenue is derived from direct-to-consumer (""DTC"") retail sales (including from its e-commerce sites) and is recognized when control of the merchandise is transferred to the customer. The Company's disaggregated revenue is fully disclosed as net sales to external customers by reporting segment and by geographic area (See Note 11 Segment Information for additional information). The Company's direct-to-consumer reporting segment represents 91% of consolidated revenue for the first quarter of fiscal 2026 . The majority of these sales transactions were single performance obligations that were recorded when control of merchandise was transferred to the customer. The following is a description of principal activities from which the Company generates its revenue through three reportable segments. The Companys direct-to-consumer segment includes the operating activities of corporately-managed stores, other retail-delivered operations and online sales. Direct-to-consumer revenue is recognized when control of the merchandise is transferred to the customer and for the Company's online sales, control generally transfers upon delivery to the customer. Revenue is measured as the amount of consideration, including any discounts or incentives, the Company expects to receive in exchange for transferring the merchandise. Product returns have historically averaged less than one -half of one percent due to the personalized and interactive nature of s …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

11. Segment Information The Companys operations are conducted through three operating segments, consisting of DTC, commercial and international franchising. The DTC segment includes the operating activities of corporately-managed locations and other retail delivery operations in the U.S., Canada, Puerto Rico, the Republic of Ireland and the U.K., including the Companys e-commerce sites and temporary stores. The commercial segment includes the Companys transactions with other businesses, mainly comprised of wholesale sales of merchandise, supplies and fixtures, licensing the Company's intellectual properties for third party use, and revenues generated from entertainment activities. The international franchising segment includes the licensing activities of the Companys franchise agreements with store locations in select countries in Asia, Australia, the Middle East, Africa, and South America. The operating segments have discrete sources of revenue, different capital structures and different cost structures. These operating segments represent the basis on which the Companys chief operating decision maker regularly evaluates the business in assessing performance, determining the allocation of resources and the pursuit of future growth opportunities. Accordingly, the Company has determined that each of its operating segments represent a reportable segment. The three reportable segments follow the same accounting policies used for the Companys consolidated financial statements. The …

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"8. Stockholders Equity The following table sets forth the changes in stockholders equity (in thousands) for the thirteen weeks ended May 2, 2026 and May 3, 2025 (in thousands). For the thirteen weeks ended May 2, 2026 For the thirteen weeks ended May 3, 2025 Common Retained Common Retained stock APIC (1) AOCI (2) earnings Total stock APIC (1) AOCI (2) earnings Total Balance, beginning $ 128 $ 60,821 $ (10,760 ) $ 104,839 $ 155,028 $ 133 $ 61,987 $ (12,554 ) $ 89,516 $ 139,082 Shares issued under employee stock plans 243 243 1,103 1,103 Stock-based compensation 381 381 284 284 Shares withheld in lieu of tax withholdings - (350 ) (350 ) (1,266 ) (1,266 ) Share repurchase (2 ) (1,176 ) (10,331 ) (11,509 ) (1 ) (506 ) (3,701 ) (4,208 ) Cash dividends (2,894 ) (2,894 ) (2,891 ) (2,891 ) Other - - - Other comprehensive income (179 ) (179 ) 1,259 1,259 Net income 18,299 18,299 15,319 15,319 Balance, ending $ 126 $ 59,919 $ (10,939 ) $ 109,913 $ 159,019 $ 132 $ 61,602 $ (11,295 ) $ 98,243 $ 148,682 ( 1 ) Additional paid-in capital (APIC) ( 2 ) Accumulated other comprehensive loss (AOCI) During the thirteen weeks ended May 2, 2026 , the Company utilized $11.4 million in cash to repurchase 248,118 shares under its $100 million stock repurchase program that was authorized by the Board on September 11, 2024 ( the ""September 2024 Stock Repurchase Program""). Between the end of the first fiscal quarter of 2026 and June 9, 2026, the Company utilized an additional $3.8 million in cash to r …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing