Quarterly Report for Quarter Ending May 2, 2026 (Form 10-Q)

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

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q (this "Quarterly Report") constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "estimate," "intend," "plan," "continue," "believe," "expect" or "anticipate" or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," but may be found in other locations as well, and include statements regarding engagement with FullBeauty Brands in constructive discussions to determine the best path forward; the Board's belief in the industrial logic of the combination; the Board's belief that given the increasingly challenging consumer environment since the execution of the Merger Agreement in December 2025 and FullBeauty Brands' indebtedness, the existing terms of the Merger Agreement are not in the best interests of the Company's stockholders; our belief that profitability would return over the long term, while forecasting operating losses in the near term; our conclusion that the negative evidence outweighs available positive evidence regarding realizability of its deferred tax assets and that the full valuation allowance should remain against its net deferred tax assets; our belief that the macro and sector headwinds are influencing the core DXL big + tall consumer and are materially affecting traffic, which remains very challenged, particularly in stores; despite the shortfall in absolute traffic, guests that do visit DXL are buying, with conversion and average order value up in both stores and online, which we believe reinforces that the adjustments we are making to our assortment, promotional strategy, and customer experience are aligning better with today's value-conscious consumer; our advancement of several strategic initiatives designed to strengthen our market leadership in the big + tall sector while enhancing the customer experience across channels; our belief that the adjustments we are making to our merchandise assortment, promotional strategy, and customer experience to align better with today's value-conscious consumer; our belief that AI-powered search and discovery tools are becoming increasingly important in ecommerce; our belief that the new AI initiatives that were launched will improve product data quality, enrich item-level attributes and strengthen our ability to connect product, pricing and inventory information across AI-enabled platforms; our intention that our AI initiatives will improve discoverability, support future commerce applications and position us to compete effectively as digital shopping journeys become more conversational and agent-driven; our belief that GLP-1 medications provide both a near-term challenge and a long-term opportunity: our belief that the impact of GLP-1 medications and similar weight-loss medications are contributing to structural changes in customer demand within the big + tall category; our belief based on our research that while some customers may pause apparel purchases during periods of rapid size change, we expect them to return once they reach a more stable size profile; our belief that we can strengthen retention, reactivation and lifetime value over time by staying closely aligned with evolving customer needs; our belief that the slowdown in April reflects a combination of macroeconomic pressures impacting consumer confidence and discretionary spending, including global conflict, rising fuel costs, and inflation; our expectation that the impact of tariffs on gross margin, exclusive of any refunds realized, will be approximately 100 basis points, a decrease from the previous estimate of 150 basis points; our expectation that for fiscal 2026, marketing costs will be approximately 5.8% of sales; our belief that our cash and cash equivalent balances, short-term investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months; our belief that cash flows from operating activities and cash on hand will be sufficient to satisfy our current capital requirements. In the longer term, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility; our expectation that capital expenditures for fiscal 2026 will range from $8.0 million to $12.0 million, net of tenant incentives; our belief that store development plans for fiscal 2026 will be limited to conversions of a few remaining Casual Male XL stores to the DXL format, store relocations and other capital projects will be necessary to maintain our existing store portfolio and distribution center; our expectation that the remainder of our capital spend for fiscal 2026 will primarily be for technology-related projects to support our business initiatives; our belief that inclusion of the non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements; our belief that the comparability of adjusted net loss is useful in comparing the actual results period to period; our expectation that we will be able to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending, while at the same time, accelerating certain receipts to avoid potential delays caused by the recent conflict with Iran. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management's reasonable estimates of future results or trends. The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and notes to those statements included elsewhere in this Quarterly Report and our audited Consolidated Financial Statements for the year ended January 31, 2026, included in our Annual Report on Form 10-K for the year ended January 31, 2026, as filed with the Securities and Exchange Commission ("SEC") on March 19, 2026 (our "Fiscal 2025 Annual Report").

Numerous factors could cause our actual results to differ materially from such forward-looking statements. We encourage readers to refer to our filings with the SEC that set forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including risks related to the Merger and combining our business with FullBeauty Brands, changes in consumer

spending in response to economic factors, the impact of current tariffs, the impact of any further increases in tariffs, our ability to proactively react to the current and further potential changes in tariffs to minimize risk; rising fuel costs, high interest rates; the impact of ongoing worldwide conflicts on the global economy; and our ability to execute on our marketing, digital, store and collaboration strategies, ability to grow our market share, predict customer tastes and fashion trends, compete successfully in the United States men's big + tall apparel market, and the other risks and uncertainties as set forth in the "Risk Factors" section in Part I, Item 1A of our Fiscal 2025 Annual Report.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based.

BUSINESS SUMMARY

Destination XL Group, Inc., together with our consolidated subsidiaries (the "Company"), is the largest specialty retailer of big + tall men's clothing with retail and direct operations in the United States. We operate under the trade names of Destination XL®, DXL®, DXL Outlets, Casual Male XL® and Casual Male XL Outlets. At May 2, 2026, we operated 257 Destination XL stores, 17 DXL outlet stores, 5 Casual Male XL retail stores, 14 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site, m.destinationXL.com, mobile app and third-party marketplaces.

Unless the context indicates otherwise, all references to "we," "our," "us" and "the Company" refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years, which end on January 31, 2026 and February 1, 2025 as "fiscal 2026" and "fiscal 2025," respectively. Both fiscal years are 52-week periods.

SEGMENT REPORTING

We currently have two operating segments: our stores and our direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment consistent with our omni-channel business approach.

COMPARABLE SALES

Our customer's shopping experience continues to evolve across multiple channels and we are continually adapting to meet the guest's needs. The majority of our stores have the capability to fulfill online orders if merchandise is not available in the warehouse. As a result, certain transactions that begin online are ultimately completed at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in a store and at curbside. We define store sales as sales that originate and are fulfilled directly at the store level. Digital commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace.

Stores that have been open for at least 13 months are included in comparable sales. Stores that have been remodeled or relocated during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store is temporarily closed for more than 7 days, it is removed from the calculation of comparable sales until it reopens and upon its anniversary is once again removed from the calculation until the reopen date. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.

Update on Merger with FullBeauty Brands

In December 2025, DXL and FullBeauty Brands announced a Merger of equals to create a scaled, category-defining retailer for size-inclusive apparel.

On June 3, 2026, subsequent to the end of the first quarter of fiscal 2026, the Company issued a press release to provide an update on the status of its Merger with FullBeauty Brands. The Board has reevaluated the previously announced Merger and is engaging with FullBeauty Brands in constructive discussions to determine the best path forward. As part of its ongoing fiduciary duties to the Company's stockholders, the Board, with the assistance of external financial and legal advisors, has conducted a comprehensive reevaluation of the Merger. The Board continues to believe in the industrial logic of the combination. However, given the increasingly challenging consumer environment since the execution of the Merger Agreement on December 11, 2025 and FullBeauty Brands' indebtedness, the Board believes that the existing terms of the Merger Agreement are not in the best interests of the Company's stockholders.

EXECUTIVE SUMMARY

(1) The amounts and percentages for the three months ended May 3, 2025 reflect the reclassification of certain costs from SG&A expenses to Transaction-related costs for comparability with the amounts and percentages for the three months ended May 2, 2026.

We were encouraged by our first quarter results which reflected sales performance improving and continued progress against our strategic priorities. Although comparable sales were down (3.8)% for the first quarter of fiscal 2026, this represents our best quarterly comparable sales result since the second quarter of fiscal 2023. We believe macro and sector headwinds are influencing the core DXL big + tall consumer and are materially affecting traffic, which remains very challenged, particularly in stores. Despite the shortfall in absolute traffic, guests that do visit DXL are buying, with improvements in conversion and average order value in both stores and online. These trends reinforce that the adjustments we are making to our assortment, promotional strategy and customer experience are aligning better with today's value-conscious consumer.

Strategic Priorities:

We continue to advance several strategic initiatives designed to strengthen our market leadership in the big + tall sector while enhancing the customer experience across channels.

FiTMAP®

We have exclusive rights to our fit technology platform until 2030. FiTMAP® remains one of the Company's most important long-term growth drivers. During the quarter, we completed the rollout of FiTMAP technology in 188 stores to enhance the customer journey. Since launch, over 100,000 customers have engaged with the platform, and early results continue to reinforce its value. Customers who use FiTMAP have demonstrated stronger conversion, higher average order values, greater purchase frequency and lower return rates, underscoring the role personalized fit can play in driving both customer satisfaction and profitable growth.

Leverage AI

We are sharpening our focus on artificial intelligence ("AI") as consumer shopping behavior evolves. As AI-powered search and discovery tools become increasingly important in ecommerce, the Company is investing to ensure that its products and content are more visible, relevant and accessible in these emerging environments. During the quarter, DXL launched new AI initiatives to improve product data quality, enrich item-level attributes and strengthen its ability to connect product, pricing and inventory information across AI-enabled platforms. These efforts are intended to improve discoverability, support future commerce applications and position the Company to compete effectively as digital shopping journeys become more conversational and agent-driven.

GLP-1s and Similar Weight-Loss Medications

We continue to deepen our understanding of how the use of glucagon-like peptide-1 ("GLP-1") medications and similar weight-loss medications may be influencing customer behavior and category demand. Our research indicates that a meaningful portion of our customer base is currently using GLP-1 medications, contributing to more dynamic sizing needs over time. We are responding thoughtfully by broadening select assortments in smaller sizes and using customer insights to inform future merchandising, marketing and re-engagement strategies. Importantly, the Company sees this as both a near-term challenge and a long-term opportunity: while some customers may pause apparel purchases during periods of rapid size change, many express an intention to return once they reach a more stable size profile. By staying closely aligned with these evolving customer needs, we believe we can strengthen retention, reactivation and lifetime value over time.

RESULTS OF OPERATIONS

Sales

The following table presents sales by segment for the three months ended May 2, 2026 and May 3, 2025:

Total sales for the first quarter of fiscal 2026 were $103.3 million, as compared to $105.5 million in the first quarter of fiscal 2025. The decrease in total sales was primarily attributable to a decrease in comparable sales for the first quarter of 3.8%, partially offset by an increase in non-comparable store sales. Sales improved at the start of fiscal 2026 with comparable sales down 1.3% in February and down 2.7% in March and, in April, sales were down 6.8%. While the performance between March and April was impacted at some level by the earlier Easter holiday, we believe the slowdown in sales in April was primarily the result of a combination of macroeconomic pressures impacting consumer confidence and discretionary spending, including global conflict, rising fuel costs, and inflation. We also believe the impact of GLP-1 medications and similar weight-loss medications are contributing to structural changes in customer demand within the big + tall category.

The comparable sales decrease of 3.8% for the first quarter consisted of a comparable sales decrease of 4.6% from stores and a comparable sales decrease of 1.6% from our direct business. A decrease in traffic continued to be the primary driver, particularly in stores, partially offset by improvements in conversion and dollars per transaction. The direct business showed improvement during the first quarter, with increased demand being generated from our paid search, paid social and program marketing efforts. In addition, improvements to the website and app have helped to improve conversion during the first quarter of fiscal 2026. Contributing to this improvement were strong sales of clearance merchandise on the website.

Gross Margin Rate

For the first quarter of fiscal 2026, our gross margin rate, inclusive of occupancy costs, was 44.3% as compared to a gross margin rate of 45.1% for the first quarter of fiscal 2025.

Our gross margin rate decreased by 80 basis points, driven by a decrease of 100 basis points in merchandise margin, partially offset by a 20-basis point decrease in occupancy costs. The decrease in merchandise margin as compared to the first quarter of fiscal 2025 is primarily due to the impact of tariffs, increased shipping costs as a result of fuel surcharges and increased markdown activity associated with clearance sales. These increased costs were partially offset by an improvement in merchandise margins as a result of a shift in product mix toward our private brand merchandise and favorable loyalty costs.

The decrease in occupancy costs of 20 basis points, or $0.5 million, was primarily due to $1.4 million received from a landlord as a result of an early lease termination, partially offset by increased rents from lease extensions and new stores.

Tariffs

In April 2026, U.S. Customs and Border Protection ("CBP") launched an online portal through which companies may submit refund requests. During the first quarter of fiscal 2026, the Company submitted a claim seeking a refund of approximately $4.0 million related to tariffs previously paid. The timing and amount of any potential refund and recovery remain uncertain, and the Company expects to recognize any recovery when receipt is considered realizable.

Given the volatility that currently exists around trade discussions, it is difficult to determine the potential impact that tariffs may have on our financial results for fiscal 2026. However, if currently enacted rates remain in effect throughout fiscal 2026, and no additional tariffs, including those under U.S. trade laws, are added, we estimate that the impact of tariffs on pre-tariff gross margin, in fiscal 2026, exclusive of any refunds realized, will be approximately 100 basis points, a decrease from the previous estimate of 150 basis points.

Selling, General and Administrative Expenses

As a percentage of sales, selling, general and administrative ("SG&A") expenses for the first quarter of fiscal 2026 were 45.0% as compared to 44.9% for the first quarter of fiscal 2025.

On a dollar basis, SG&A expenses decreased by $0.9 million for the first quarter of fiscal 2026 as compared to the first quarter of fiscal 2025. The decrease was primarily due to a decrease in supporting payroll costs and incentive-based compensation partially offset by an increase in marketing costs.

Marketing costs were 6.5% of sales for the first quarter of fiscal 2026 as compared to 6.1% of sales for the first quarter of fiscal 2025. For fiscal 2026, marketing costs are expected to be approximately 5.8% of sales.

Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 26.1% of sales for the first quarter of fiscal 2026 as compared to 25.2% of sales for the first quarter of fiscal 2025. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 18.9% of sales for the first quarter of fiscal 2026 as compared to 19.7% of sales for the first quarter of fiscal 2025.

Transaction-Related Costs

Transaction-related costs for the first quarter of fiscal 2026 and fiscal 2025 were $1.2 million and $0.1 million, respectively, and primarily related to fees paid for professional services in connection with costs related to the Merger.

Depreciation and Amortization

Depreciation and amortization for the first quarter of fiscal 2026 increased to $4.0 million as compared to $3.6 million for the first quarter of fiscal 2025. The increase in depreciation and amortization in fiscal 2026 is due to capital projects, including new stores, completed in fiscal 2025.

Interest Income, Net

Net interest income for the first quarter of fiscal 2026 was $0.1 million as compared to $0.3 million for the first quarter of fiscal 2025. The decrease in interest income for the first quarter of fiscal 2026 was primarily due to the decrease in the average balance of investments as compared to the first quarter of fiscal 2025.

For both periods, interest income was earned from investments in U.S. government-backed investments and money market accounts. Interest costs for both periods were minimal because we had no outstanding debt and no borrowings under our credit facility.

Income Taxes

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any. Each quarter, we update our estimate of the annual effective tax rate and make a year-to-date adjustment to the provision.

For the first quarter of fiscal 2026 and 2025, the Company's effective tax rate was (1.1)% and 39.7%, respectively. In the fourth quarter of fiscal 2025, a full valuation allowance was established against the net deferred tax assets. As a result, the effective tax rate for the first quarter of fiscal 2026 primarily reflects a provision for state margin tax, based on gross receipts less certain deductions. The effective tax rate for the first quarter of fiscal 2025 reflected the impact of permanent book-to-tax differences.

Net Loss

For the first quarter of fiscal 2026, we recorded a net loss of $(5.9) million, or $(0.11) per diluted share, as compared to a net loss of $(1.9) million, or $(0.04) per diluted share, for the first quarter of fiscal 2025.

The decrease in earnings for the first quarter of fiscal 2026 as compared to first quarter of fiscal 2025 was driven primarily by a decrease in sales, an increase in transaction-related expenses and a decrease in the effective tax rate. We have fully reserved against our deferred tax assets and, therefore, the net loss in the first quarter of fiscal 2026 is not reflective of earnings assuming a normal tax position for the Company.

On a non-GAAP basis, adjusting for a normal tax rate of 26% and the add back of transaction-related costs, adjusted net loss for the first quarter of fiscal 2026 was $(0.06) per diluted share as compared to adjusted net loss for the first quarter of fiscal 2025 of $(0.04) per diluted share.

Inventory

As of May 2, 2026, our inventory decreased by $4.1 million to $81.4 million, as compared to $85.5 million at May 3, 2025. We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending. At the same time, we may accelerate certain receipts to avoid potential delays caused by the recent conflict with Iran. At May 2, 2026, our clearance inventory was 9.9% of our total inventory, as compared to 9.5% at May 3, 2025. Our inventory position is very strong and our clearance levels are in line with our benchmark of 10%. Our inventory turnover rate has improved by over 30% from fiscal 2019.

SEASONALITY

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income, net income, and free cash flow. Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the second and fourth quarters. Our inventory is typically at peak levels by the end of the third quarter, which represents a significant use of cash, which is then relieved in the fourth quarter as we sell-down our inventory through the holiday shopping season.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are our cash and cash equivalents, short-term investments, cash generated from operations and availability under our credit facility, which is discussed below. At May 2, 2026, we had no outstanding debt, including no borrowings under our credit facility during the first quarter of fiscal 2026. Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S. government-backed securities.

We believe that our cash and cash equivalent balances, short-term investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. We believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our current capital requirements. In the longer term, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility.

For the first three months of fiscal 2026, cash flow from operations was $(8.8) million as compared to $(12.0) million for the first three months of fiscal 2025. The improvement in cash flow from operations was primarily due to the timing of other working capital partially offset by a decrease in earnings.

Free cash flow, before capital expenditures for store development, a non-GAAP measure, was $(12.3) million for the first three months of fiscal 2026 as compared to $(14.5) million for the first three months of fiscal 2025. Free cash flow, a non-GAAP measure, was $(12.7) million for the first three months of fiscal 2026 as compared to $(18.8) million for the first three months of fiscal 2025.

Cash flow used for investing activities was $(3.8) million as compared to cash flow provided by investing activities of $8.3 million for the first three months of fiscal 2025. The decrease in cash flow from investing activities of $(12.1) million was primarily due to a decrease in proceeds from short-term investments partially offset by a decrease in capital expenditures in fiscal 2026 as compared to fiscal 2025.

Credit Facility

We have a revolving credit agreement with Citizens Bank, N.A., which was most recently amended in the third quarter of fiscal 2025 (as amended, the "Credit Facility"). The Credit Facility, which expires August 13, 2030, provides a revolving commitment of $100.0 million, a sublimit for swing-line loans of $10.0 million and a sublimit of $20.0 million for commercial and standby letters of credit.

Borrowings under the Credit Facility bear interest at either a Base Rate (as defined in the Credit Facility) or Daily Simple Secured Overnight Financing Rate ("SOFR") rate, at our option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (a) the Prime Rate (as defined in the Credit Facility), (b) the Federal Funds (as defined in the Credit Facility) effective rate plus 0.50% per annum and (c) the Daily Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on our average excess availability, of either 0.25% or 0.50% (the "Applicable Margin"). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10% (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. We are subject to an unused line fee of 0.25%.

We had no outstanding borrowings under the Credit Facility at May 2, 2026 and no borrowings during the first three months of fiscal 2026. At May 2, 2026, outstanding standby letters of credit were $3.6 million. The average unused excess availability during the first three months of fiscal 2026 was approximately $73.6 million and the unused excess availability at May 2, 2026 was $70.0 million.

Capital Expenditures

The following table sets forth the open stores and related square footage at May 2, 2026 and May 3, 2025, respectively:

During the first three months of fiscal 2026, we closed one DXL retail store and one Casual Male XL outlet store. We expect our capital expenditures for fiscal 2026 to range from $8.0 million to $12.0 million, net of tenant incentives. Our store development plans for fiscal 2026 will be limited to conversions of a few remaining Casual Male XL stores to the DXL format, store relocations and other capital projects necessary to maintain our existing store portfolio and distribution center. The remainder of our expected capital spend for fiscal 2026 will primarily be for technology-related projects to support our business initiatives.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to the critical accounting policies and estimates disclosed in our Fiscal 2025 Annual Report. See Note 1, Basis of Presentation to the Consolidated Financial Statements included in this Quarterly Report for information on recent accounting pronouncements and changes in accounting principles.

Non-GAAP Financial Measures

Free cash flow, free cash flow before capital expenditures for store development, adjusted net loss, adjusted net loss per diluted share, adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures. These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for net income (loss), net income (loss) per diluted share or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies. We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements.

Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding):

Adjusted Net Loss and Adjusted Net Loss Per Diluted Share

Adjusted net loss and adjusted net loss per diluted share reflect an adjustment assuming a normal tax rate of 26% and the add back of transaction-related costs. We have fully reserved against our net deferred tax assets and, therefore, the net loss in the first quarter of fiscal 2026 is not reflective of earnings assuming a "normal" tax position. Adjusted net loss provides investors with a useful indication of the financial performance of the business, on a comparative basis, assuming a normalized tax rate of 26%. The estimated normal tax rate of 26% includes a blended state income tax rate. The Company believes that this comparability is useful in comparing the actual results period to period. Adjusted net loss per diluted share is then calculated by dividing the adjusted net loss by the weighted average shares outstanding for the respective period, on a diluted basis. The following table is a reconciliation of net loss on a GAAP basis to adjusted net loss, on a non-GAAP basis, for each period:

Free Cash Flow. We define free cash flow as cash flow from operating activities less capital expenditures. We define free cash flow before capital expenditures for store development as cash flow from operations less all capital expenditures except capital expenditures for store development. Capital expenditures for store development includes capital expenditures for new stores, conversions of Casual Male XL stores to DXL and remodels. Capital expenditures related to store relocations and maintenance are not included in store development. Free cash flow excludes the mandatory and discretionary repayment of debt. Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors because it demonstrates the Company's ability to strengthen liquidity while supporting its capital projects and new store development. We expect to fund our ongoing capital expenditures with cash flow from operations.

The following table reconciles free cash flow:

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and adding back transaction-related expenses. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Sales. We believe that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors in evaluating our performance and are key metrics to measure profitability and economic productivity. The following table reconciles adjusted EBITDA from net income and calculates adjusted EBITDA margin: