BOOT BARN HOLDINGS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) (2024)

The following discussion and analysis of the financial condition and results ofour operations should be read together with the unaudited financial statementsand related notes of Boot Barn Holdings, Inc. and Subsidiaries included inItem 1 of this Quarterly Report on Form 10-Q and with our audited financialstatements and the related notes included in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission (the "SEC"), on May 13, 2021(the "Fiscal 2021 10-K"). As used in this Quarterly Report on Form 10-Q, exceptwhere the context otherwise requires or where otherwise indicated, the terms"company", "Boot Barn", "we", "our" and "us" refer to Boot Barn Holdings, Inc.and its subsidiaries. Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements thatinvolve risks and uncertainties, as well as assumptions that, if they nevermaterialize or prove incorrect, could cause our results to differ materiallyfrom those expressed or implied by such forward-looking statements. Thestatements contained in this Quarterly Report on

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Form 10-Q that are not purely historical are forward-looking statements withinthe 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, asamended (the "Exchange Act"). Forward-looking statements are often identified bythe use of words such as, but not limited to, "anticipate", "believe", "can","continue", "could", "estimate", "expect", "intend", "may", "plan", "project","seek", "should", "target", "will", "would" and similar expressions orvariations intended to identify forward-looking statements. These statements arebased on the beliefs and assumptions of our management based on informationcurrently available to management. These forward-looking statements are subjectto numerous risks and uncertainties, including the risks and uncertaintiesdescribed under the section titled "Risk Factors" in our Fiscal 2021 10-K, andthose identified in this "Management's Discussion and Analysis of FinancialCondition and Results of Operations" and elsewhere in this Quarterly Report onForm 10-Q. Moreover, we operate in an evolving environment. New risks anduncertainties emerge from time to time and it is not possible for our managementto predict all risks and uncertainties, nor can we assess the impact of allrisks on our business or the extent to which any risk, or combination of risks,may cause actual results to differ materially from those contained in anyforward-looking statement. We qualify all of our forward-looking statements bythese cautionary statements.We caution you that the risks and uncertainties identified by us may not be allof the factors that are important to you. Furthermore, the forward-lookingstatements included in this Quarterly Report on Form 10-Q are made only as ofthe date hereof. Our forward-looking statements do not reflect the potentialimpact of any future acquisitions, mergers, dispositions, joint ventures orinvestments that we may make. We undertake no obligation to publicly update orrevise any forward-looking statement as a result of new information, futureevents or otherwise, except as otherwise required by law.The major global health pandemic caused by COVID-19 and resulting economicimpacts have had and may continue to have an impact on our operations, futuregrowth strategies and outlook. Our business and opportunities for growth dependon consumer discretionary spending, and as such, our results are particularlysensitive to economic conditions and consumer confidence. The extent to whichCOVID-19 impacts our operations will depend on future developments, which remainuncertain. For further discussion of the uncertainties and business risksassociated with COVID-19, see Item 1A, Risk Factors, of our Fiscal 2021 10-K. Overview

We believe that Boot Barn is the largest lifestyle retail chain devoted towestern and work-related footwear, apparel and accessories in the U.S. As ofDecember 25, 2021, we operated 289 stores in 37 states, as well as oure-commerce websites consisting primarily of bootbarn.com, sheplers.com andcountryoutfitter.com. Our product offering is anchored by an extensive selectionof western and work boots and is complemented by a wide assortment ofcoordinating apparel and accessories. Our stores feature a comprehensiveassortment of brands and styles, coupled with attentive, knowledgeable storeassociates. Many of the items that we offer are basics or necessities for ourcustomers' daily lives and typically represent enduring styles that are notmeaningfully impacted by changing fashion trends.We strive to offer an authentic, one-stop shopping experience that fulfills theeveryday lifestyle needs of our customers, and as a result, many of ourcustomers make purchases in both the western and work wear sections of ourstores. We target a broad and growing demographic, ranging from passionatewestern and country enthusiasts, to workers seeking dependable, high-qualityfootwear and apparel. Our broad geographic footprint, which comprises more thanthree times as many stores as our nearest direct competitor that sells primarilywestern and work wear, provides us with significant economies of scale, enhancedsupplier relationships, the ability to recruit and retain high quality storeassociates and the ability to reinvest in our business at levels that we believeexceed those of our competition. How We Assess the Performance of Our BusinessIn assessing the performance of our business, we consider a variety ofperformance and financial measures. The key indicators we use to evaluate thefinancial condition and operating performance of our business are net sales andgross profit. In addition, we also review other important metrics, such as samestore sales, new store openings, and selling, general and administrativeexpenses ("SG&A"), as well as the non-GAAP financial measures, earnings beforeinterest, taxes, depreciation and amortization ("EBITDA"), EBITDA adjusted toexclude certain items ("Adjusted EBITDA"), and earnings before interest andtaxes, adjusted to exclude certain items ("Adjusted EBIT"). See "-EBITDA,Adjusted 22 Table of Contents

EBITDA and Adjusted EBIT" below for more information and "-Results ofOperations" for a reconciliation of these measures to net income.

Net salesNet sales reflect revenue from the sale of our merchandise at retail locations,as well as sales of merchandise through our e-commerce websites. We recognizerevenue upon the purchase of merchandise by customers at our stores and upondelivery of the product in the case of our e-commerce websites. Net sales alsoinclude shipping and handling fees for e-commerce shipments that have beendelivered to our customers. Net sales are net of returns on sales during theperiod as well as an estimate of returns and award redemptions expected in thefuture stemming from current period sales. Revenue from the sale of gift cardsis deferred until the gift cards are used to purchase merchandise.Our business is moderately seasonal and as a result our revenues fluctuate fromquarter to quarter. In addition, our revenues in any given quarter can beaffected by a number of factors including the timing of holidays, weatherpatterns, rodeos and country concerts. The third quarter of our fiscal year,which includes the Christmas shopping season, has historically produced highersales and disproportionately larger operating income than the other quarters ofour fiscal year. However, neither the western nor the work component of ourbusiness has been meaningfully impacted by fashion trends or seasonalityhistorically. We believe that many of our customers are driven primarily byutility and brand, and our best-selling styles.Same store sales

The term "same store sales" refers to net sales from stores that have been openat least 13 full fiscal months as of the end of the current reporting period,although we include or exclude stores from our calculation of same store salesin accordance with the following additional criteria:

? stores that are closed for five or fewer consecutive days in any fiscal month

are included in same store sales;

stores that are closed temporarily, but for more than five consecutive days in

any fiscal month, are excluded from same store sales beginning in the fiscal

? month in which the temporary closure begins (and for the comparable periods of

the prior or subsequent fiscal periods for comparative purposes) until the

first full month of operation once the store re-opens;

? stores that are closed temporarily and relocated within their respective trade

areas are included in same store sales;

stores that are permanently closed are excluded from same store sales beginning

? in the month preceding closure (and for the comparable periods of the prior or

subsequent fiscal periods for comparative purposes); and

acquired stores are added to same store sales beginning on the later of (a) the

applicable acquisition date and (b) the first day of the first fiscal month

? after the store has been open for at least 13 full fiscal months regardless of

 whether the store has been operated under our management or predecessor management.If the criteria described with respect to acquired stores above are met, thenall net sales of such acquired store, excluding those net sales before ouracquisition of that store, are included for the period presented. However, whenan acquired store is included for the period presented, the net sales of suchacquired store for periods before its acquisition are included (to the extentrelevant) for purposes of calculating "same store sales growth" and illustratingthe comparison between the applicable periods. Pre-acquisition net sales numbersare derived from the books and records of the acquired company, as preparedprior to the acquisition, and have not been independently verified by us.In addition to retail store sales, same store sales also includes e-commercesales, e-commerce shipping and handling revenue and actual retail store ore-commerce sales returns. Sales as a result of an e-commerce asset acquisitionare excluded from same store sales until the 13th full fiscal month subsequentto the Company's acquisition of such assets.

We exclude gift card escheatment, provision for sales returns and estimatedfuture loyalty award redemptions from sales in our calculation of net sales perstore.

 23 Table of ContentsMeasuring the change in year-over-year same store sales allows us to evaluatehow our store base is performing. Numerous factors affect our same store sales,including:

? national and regional economic trends, including those resulting from the

COVID-19 pandemic;

? our ability to identify and respond effectively to regional consumer

preferences;

? changes in our product mix;

 ? changes in pricing; ? competition;

? changes in the timing of promotional and advertising efforts;

? holidays or seasonal periods; and

 ? weather.Opening new stores is an important part of our growth strategy and we anticipatethat a percentage of our net sales in the near future will come from stores notincluded in our same store sales calculation. Accordingly, same store sales areonly one measure we use to assess the success of our business and growthstrategy. Some of our competitors and other retailers may calculate "same" or"comparable" store sales differently than we do. As a result, data in thisQuarterly Report on Form 10-Q regarding our same store sales may not becomparable to similar data made available by other retailers.New store openings

New store openings reflect the number of stores, excluding acquired stores, thatare opened during a particular reporting period. In connection with opening newstores, we incur pre-opening costs. Pre-opening costs consist of costs incurredprior to opening a new store and primarily consist of manager and other employeepayroll, travel and training costs, marketing expenses, initial opening suppliesand costs of transporting initial inventory and certain fixtures to storelocations, as well as occupancy costs incurred from the time that we takepossession of a store site to the opening of that store. Occupancy costs areincluded in cost of goods sold and the other pre-opening costs are included inSG&A expenses. All of these costs are expensed as incurred.New stores often open with a period of high sales levels, which subsequentlydecrease to normalized sales volumes. In addition, we experience typicalinefficiencies in the form of higher labor, advertising and other directoperating expenses, and as a result, store-level profit margins at our newstores are generally lower during the start-up period of operation. The numberand timing of store openings has had, and is expected to continue to have, asignificant impact on our results of operations. In assessing the performance ofa new store, we review its actual sales against the sales that we projected thatstore to achieve at the time we initially approved its opening. We also reviewthe actual number of stores opened in a fiscal year against the number of storeopenings that we included in our budget at the beginning of that fiscal year.Gross profit

Gross profit is equal to our net sales less our cost of goods sold. Cost ofgoods sold includes the cost of merchandise, obsolescence and shrinkageprovisions, store and warehouse occupancy costs (including rent, depreciationand utilities), inbound and outbound freight, supplier allowances,occupancy-related taxes, compensation costs for merchandise purchasing andwarehouse personnel, and other inventory acquisition-related costs. These costsare significant and can be expected to continue to increase as we grow. Thecomponents of our reported cost of goods sold may not be comparable to those ofother retail companies, including our competitors.Our gross profit generally follows changes in net sales. We regularly analyzethe components of gross profit, as well as gross profit as a percentage of netsales. Specifically, we examine the initial markup on purchases, markdowns andreserves, shrinkage, buying costs, distribution costs and occupancy costs. Anyinability to obtain acceptable levels of initial markups, a significant increasein our use of markdowns or in inventory shrinkage, or a significant increase infreight and other inventory acquisition costs, could have an adverse impact onour gross profit and results of operations. 24 Table of ContentsGross profit is also impacted by shifts in the proportion of sales of ourexclusive brand products compared to third-party brand products, as well as bysales mix changes within and between brands and major product categories such asfootwear, apparel or accessories.

Selling, general and administrative expenses

Our SG&A expenses are composed of labor and related expenses, other operatingexpenses and general and administrative expenses not included in cost of goodssold. Specifically, our SG&A expenses include the following:

Labor and related expenses - Labor and related expenses include all store-level

? salaries and hourly labor costs, including salaries, wages, benefits and

performance incentives, labor taxes and other indirect labor costs.

Other operating expenses - Other operating expenses include all operating

? costs, including those for advertising, pay-per-click, marketing campaigns,

operating supplies, utilities, and repairs and maintenance, as well as credit

card fees and costs of third-party services.

General and administrative expenses - General and administrative expenses

include expenses associated with corporate and administrative functions that

? support the development and operations of our stores, including compensation

and benefits, travel expenses, corporate occupancy costs, stock compensation

costs, legal and professional fees, insurance, long-lived asset impairment

 charges and other related corporate costs.

The components of our SG&A expenses may not be comparable to those of ourcompetitors and other retailers. We expect our selling, general andadministrative expenses will increase in future periods as a result ofincremental share-based compensation, legal, and accounting-related expenses andincreases resulting from growth in the number of our stores.

EBITDA, Adjusted EBITDA and Adjusted EBIT

EBITDA, Adjusted EBITDA and Adjusted EBIT are important non-GAAP financialmeasures used by our management, board of directors and lenders to assess ouroperating performance. We use EBITDA, Adjusted EBITDA and Adjusted EBIT as keyperformance measures because we believe that they facilitate operatingperformance comparisons from period to period by excluding potential differencesprimarily caused by the impact of variations from period to period in taxpositions, interest expense and depreciation and amortization, as well as, inthe case of Adjusted EBITDA, excluding non-cash expenses, such as stock-basedcompensation and the non-cash accrual for future award redemptions, and othercosts and expenses that are not directly related to our operations, includingloss on disposal of assets and gain/loss on adjustment of ROU assets and leaseliabilities. Similar to Adjusted EBITDA, Adjusted EBIT excludes theaforementioned adjustments while maintaining the impact of depreciation andamortization on our financial results. See "Results of Operations" below for areconciliation of our EBITDA, Adjusted EBITDA and Adjusted EBIT to net income,the most directly comparable financial measure calculated and presented inaccordance with GAAP. Because EBITDA, Adjusted EBITDA and Adjusted EBITfacilitate internal comparisons of our historical operating performance on amore consistent basis, we also use EBITDA, Adjusted EBITDA and Adjusted EBIT forbusiness planning purposes, in determining incentive compensation for members ofour management and in evaluating acquisition opportunities. Our creditfacilities also require us to use EBITDA, Adjusted EBITDA and Adjusted EBIT incalculating covenant compliance. In addition, we believe that EBITDA, AdjustedEBITDA and Adjusted EBIT and similar measures are widely used by investors,securities analysts, ratings agencies and other parties in evaluating companiesin our industry as a measure of financial performance and debt-servicecapabilities. Given that EBITDA, Adjusted EBITDA and Adjusted EBIT are measuresnot deemed to be in accordance with GAAP and are susceptible to varyingcalculations, our EBITDA, Adjusted EBITDA and Adjusted EBIT may not becomparable to similarly titled measures of other companies, including companiesin our industry, because other companies may calculate EBITDA, Adjusted EBITDAand Adjusted EBIT in a different manner than we calculate these measures. Critical Accounting Policies and EstimatesThe preparation of financial statements in accordance with accounting principlesgenerally accepted in the United States requires management to make estimatesand assumptions that affect the reported amounts of assets, liabilities, revenueand expenses, as well as the related disclosures of contingent assets andliabilities at the date of the financial 25

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statements. A summary of our significant accounting policies is included in Note2 to our consolidated financial statements included in the Fiscal 2021 10-K.

Certain of our accounting policies and estimates are considered critical, asthese policies and estimates are the most important to the depiction of ourconsolidated financial statements and require significant, difficult or complexjudgments, often about the effect of matters that are inherently uncertain. Suchpolicies are summarized in the "Management's Discussion and Analysis ofFinancial Condition and Results of Operations" section of our Fiscal 2021 10-K.As of the date of this filing, there were no significant changes to any of thecritical accounting policies and estimates described in the Fiscal 2021 10-K. Results of OperationsWe operate on a fiscal calendar that results in a 52- or 53-week fiscal yearending on the last Saturday of March unless April 1st is a Saturday, in whichcase the fiscal year ends on April 1st. In a 52-week fiscal year, each quarterincludes thirteen weeks of operations; in a 53-week fiscal year, the first,second and third quarters each include thirteen weeks of operations and thefourth quarter includes fourteen weeks of operations. Both the fiscal yearending on March 26, 2022 ("fiscal 2022") and the fiscal year ended on March 27,2021 ("fiscal 2021") consist of 52 weeks. We identify our fiscal years byreference to the calendar year in which the fiscal year ends.The following table summarizes key components of our results of operations forthe periods indicated, both in dollars and as a percentage of our net sales: Thirteen Weeks Ended Thirty-Nine Weeks Ended December 25, December 26, December 25, December 26,(dollars in thousands) 2021 2020 2021 2020Condensed Consolidated Statementsof Operations Data:Net sales $ 485,904 $ 302,338 $ 1,104,948 $ 634,619Cost of goods sold 294,245 195,529 678,711 432,119Gross profit 191,659 106,809 426,237 202,500Selling, general and administrativeexpenses 99,467 65,183 230,288 149,034Income from operations 92,192 41,626 195,949 53,466Interest expense 1,667 2,303 5,392 7,327Other income, net 43 152 161 294

Income before income taxes 90,568 39,475 

 190,718 46,433Income tax expense 21,337 9,909 42,981 11,599Net income $ 69,231 $ 29,566 $ 147,737 $ 34,834Percentage of Net Sales (1):Net sales 100.0 % 100.0 % 100.0 % 100.0 %Cost of goods sold 60.6 % 64.7 % 61.4 % 68.1 %Gross profit 39.4 % 35.3 % 38.6 % 31.9 %Selling, general and administrativeexpenses 20.5 % 21.6 % 20.8 % 23.5 %Income from operations 19.0 % 13.8 % 17.7 % 8.4 %Interest expense 0.3 % 0.8 % 0.5 % 1.2 %Other income, net - % 0.1 % - % - %Income before income taxes 18.6 % 13.1 % 17.3 % 7.3 %Income tax expense 4.4 % 3.3 % 3.9 % 1.8 %Net income 14.2 % 9.8 % 13.4 % 5.5 %

(1) Percentages may not recalculate due to rounding.

 26 Table of ContentsThe following table presents a reconciliation of EBITDA, Adjusted EBITDA andAdjusted EBIT to our net income, the most directly comparable financial measurecalculated and presented in accordance with GAAP, for each of the periodsindicated: Thirteen Weeks Ended Thirty-Nine Weeks Ended December 25, December 26, December 25, December 26,

(in thousands) 2021 2020 2021 2020EBITDA, Adjusted EBITDA and Adjusted EBITReconciliations:Net income $ 69,231 $ 29,566 $ 147,737 $ 34,834Income tax expense 21,337 9,909 42,981 11,599Interest expense 1,667 2,303 5,392 7,327Depreciation and intangible assetamortization 6,947 5,994 19,854 17,986EBITDA 99,182 47,772 215,964 71,746Non-cash stock-based compensation(a) 1,839 1,482 7,807 5,011Non-cash accrual for futureaward redemptions(b) 828 697 1,470 767Loss/(Gain) on disposal of assets(c) 61 (19) 151 23(Gain)/Loss on adjustment of right-of-useassets and lease liabilities(d) (12) 

 - (259) 295Store impairment charge(e) - - - 384Adjusted EBITDA $ 101,898 $ 49,932 $ 225,133 $ 78,226Depreciation and intangible assetamortization (6,947) (5,994) (19,854) (17,986)Adjusted EBIT $ 94,951 $ 43,938 $ 205,279 $ 60,240

Represents non-cash compensation expenses related to stock options,(a) restricted stock units and performance share units granted to certain of our

employees and directors.

(b) Represents the non-cash accrual for future award redemptions in connection

with our customer loyalty program.

(c) Represents loss/(gain) on disposal of assets.

(d) Represents (gain)/loss on adjustment of right-of-use assets and lease

liabilities.

(e) Represents store impairment charges recorded in order to reduce the carrying

 amount of the assets to their estimated fair values.The following table presents store operating data for the periods indicated: Thirteen Weeks Ended Thirty-Nine Weeks Ended December 25, December 26, 

December 25, December 26,

 2021 2020 2021 2020Selected Store Data:Same Store Sales growth/(decline) 54.2 % 4.6 % 61.8 % (3.2) %Stores operating at end of period 289 266 289 266Total retail store square footage,end of period (in thousands) 3,063 2,787 3,063 2,787Average store square footage, endof period 10,597 10,477 10,597 10,477Average net sales per store (inthousands) $ 1,372 $ 889 $ 3,218 $ 1,858

Thirteen Weeks Ended December 25, 2021 Compared to Thirteen Weeks Ended December26, 2020

Net sales. Net sales increased $183.6 million, or 60.7%, to $485.9 million forthe thirteen weeks ended December 25, 2021 from $302.3 million for the thirteenweeks ended December 26, 2020. Consolidated same store sales increased 54.2%.Excluding the impact of the 48.4% increase in e-commerce same store sales, samestore sales increased by 55.7%. The increase in net sales was the result of anincrease of 54.2% in same store sales, and the incremental sales from new storesopened over the past twelve months. 27 Table of ContentsGross profit. Gross profit increased $84.9 million, or 79.4%, to $191.7 millionfor the thirteen weeks ended December 25, 2021 from $106.8 million for thethirteen weeks ended December 26, 2020. As a percentage of net sales, grossprofit was 39.4% and 35.3% for the thirteen weeks ended December 25, 2021 andDecember 26, 2020, respectively. Gross profit increased primarily due to highersales. The increase in gross profit rate of 410 basis points was driven by 140basis points of leverage in buying and occupancy costs as a result of expenseleverage on higher sales, and a 270-basis point increase in merchandise marginrate. Merchandise margin rate increased 270 basis points primarily as a resultof better full-price selling and growth in exclusive brand penetration.Selling, general and administrative expenses. SG&A expenses increased $34.3million, or 52.6%, to $99.5 million for the thirteen weeks ended December 25,2021 from $65.2 million for the thirteen weeks ended December 26, 2020. Theincrease in SG&A expenses was primarily a result of higher store payroll, higherstore overhead and increased marketing expenses in the current-year periodcompared to the prior-year period. As a percentage of net sales, SG&A decreasedby 110 basis points to 20.5% for the thirteen weeks ended December 25, 2021 from21.6% for the thirteen weeks ended December 26, 2020. SG&A expenses as apercentage of net sales decreased by 110 basis points primarily as a result ofexpense leverage on higher sales.Income from operations. Income from operations increased $50.6 million, or121.5%, to $92.2 million for the thirteen weeks ended December 25, 2021 from$41.6 million for the thirteen weeks ended December 26, 2020. The increase inincome from operations was attributable to the factors noted above. As apercentage of net sales, income from operations was 19.0% and 13.8% for thethirteen weeks ended December 25, 2021 and December 26, 2020, respectively.Interest expense. Interest expense was $1.7 million and $2.3 million for thethirteen weeks ended December 25, 2021 and December 26, 2020, respectively. Thedecrease in interest expense was primarily the result of a lower debt balance inthe current-year period compared to the prior-year period. Interest expense forthe thirteen weeks ended December 25, 2021 includes the write off of $0.6million in debt issuance costs and debt discount associated with the $50.0million prepayment on the 2015 Golub Term Loan.Income tax expense. Income tax expense was $21.3 million for the thirteen weeksended December 25, 2021, compared to $9.9 million for the thirteen weeks endedDecember 26, 2020. Our effective tax rate was 23.6% and 25.1% for the thirteenweeks ended December 25, 2021 and December 26, 2020, respectively. The tax ratefor the thirteen weeks ended December 25, 2021 was lower than the tax rate forthe thirteen weeks ended December 26, 2020, primarily due to a higher taxbenefit due to income tax accounting for share-based compensation compared to alower tax benefit in the thirteen weeks ended December 26, 2020.Net income. Net income was $69.2 million for the thirteen weeks ended December25, 2021 compared to $29.6 million for the thirteen weeks ended December 26,2020. The increase in net income was primarily attributable to the factors

notedabove.

Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA increased $52.0 million, or104.1%, to $101.9 million for the thirteen weeks ended December 25, 2021 from$49.9 million for the thirteen weeks ended December 26, 2020. Adjusted EBITincreased $51.0 million, or 116.1%, to $95.0 million for the thirteen weeksended December 25, 2021 from $43.9 million for the thirteen weeks ended December26, 2020. The increase in Adjusted EBITDA and Adjusted EBIT was primarily aresult of the year-over-year increase in income from operations driven by anincrease in net sales and gross profit and a decrease in SG&A as a percentage ofnet sales.

Thirty-Nine Weeks Ended December 25, 2021 Compared to Thirty-Nine Weeks EndedDecember 26, 2020

Note: Comparisons to the thirty-nine weeks ended December 26, 2020 reflect theeffect the COVID-19 crisis had on our results during such time period.

Net sales. Net sales increased $470.3 million, or 74.1%, to $1.1 billion for thethirty-nine weeks ended December 25, 2021 from 634.6 million for the thirty-nineweeks ended December 26, 2020. Consolidated same store sales increased 61.8%.Excluding the impact of the 35.8% increase in e-commerce same store sales, samestore sales increased by 68.7%. The increase in net sales was the result of anincrease of 61.8% in same store sales, the sales contribution from 28

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temporarily closed stores that were excluded from the comp base, and theincremental sales from new stores opened over the past twelve months. Net salesin the thirty-nine weeks ended December 26, 2020 were adversely impacted bydecreases in retail store sales resulting from decreased traffic in our storesfrom customers staying at home in response to the COVID-19 crisis and temporarystore closures.Gross profit. Gross profit increased $223.7 million, or 110.5%, to $426.2million for the thirty-nine weeks ended December 25, 2021 from $202.5 millionfor the thirty-nine weeks ended December 26, 2020. As a percentage of net sales,gross profit was 38.6% and 31.9% for the thirty-nine weeks ended December 25,2021 and December 26, 2020, respectively. Gross profit increased primarily dueto higher sales. The increase in gross profit rate of 670 basis points wasdriven by 340 basis points of leverage in buying and occupancy costs as a resultof expense leverage on higher sales, and a 330 basis point increase inmerchandise margin rate. Merchandise margin rate increased 330 basis pointsprimarily as a result of better full-price selling, the increased penetration ofstore sales when compared to the prior year, and growth in exclusive brandpenetration.Selling, general and administrative expenses. SG&A expenses increased $81.3million, or 54.5%, to $230.3 million for the thirty-nine weeks ended December25, 2021 from $149.0 million for the thirty-nine weeks ended December 26, 2020.The increase in SG&A expenses was primarily a result of higher store payroll,higher store overhead and increased marketing expenses in the current-yearperiod compared to the prior-year period which was impacted by COVID-19. As apercentage of net sales, SG&A decreased by 260 basis points to 20.8% for thethirty-nine weeks ended December 25, 2021 from 23.5% for the thirty-nine weeksended December 26, 2020. SG&A expenses as a percentage of net sales decreased by260 basis points primarily as a result of expense leverage on higher sales.Income from operations. Income from operations increased $142.5 million, or266.5%, to $195.9 million for the thirty-nine weeks ended December 25, 2021 from$53.5 million for the thirty-nine weeks ended December 26, 2020. The increase inincome from operations was attributable to the factors noted above. As apercentage of net sales, income from operations was 17.7% and 8.4% for thethirty-nine weeks ended December 25, 2021 and December 26, 2020, respectively.Interest expense. Interest expense was $5.4 million and $7.3 million for thethirty-nine weeks ended December 25, 2021 and December 26, 2020, respectively.Interest expense in the thirty-nine weeks ended December 25, 2021 includes thewrite off of $1.4 million in debt issuance costs and debt discount associatedwith the $111.5 million prepayment on the 2015 Golub Term Loan. Excluding thewrite off, interest expense was $4.0 million for the thirty-nine weeks endedDecember 25, 2021 compared to $7.3 million for the thirty-nine weeks endedDecember 26, 2020. The decrease in interest expense was primarily the result ofa lower debt balance in the current-year period compared to the prior-yearperiod.Income tax expense. Income tax expense was $43.0 million for the thirty-nineweeks ended December 25, 2021, compared to $11.6 million for the thirty-nineweeks ended December 26, 2020. Our effective tax rate was 22.5% and 25.0% forthe thirty-nine weeks ended December 25, 2021 and December 26, 2020,respectively. The tax rate for the thirty-nine weeks ended December 25, 2021 waslower than the tax rate for the thirty-nine weeks ended December 26, 2020,primarily due to a higher tax benefit due to income tax accounting forshare-based compensation compared to a lower tax benefit in the thirty-nineweeks ended December 26, 2020.

Net income. Net income was $147.7 million for the thirty-nine weeks endedDecember 25, 2021 compared to $34.8 million for the thirty-nine weeks endedDecember 26, 2020. The increase was primarily attributable to the factors notedabove.

Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA increased $146.9 million, or187.8%, to $225.1 million for the thirty-nine weeks ended December 25, 2021 from$78.2 million for the thirty-nine weeks ended December 26, 2020. Adjusted EBITincreased $145.0 million, or 240.8%, to $205.3 million for the thirty-nine weeksended December 25, 2021 from $60.2 million for the thirty-nine weeks endedDecember 26, 2020. The increase in Adjusted EBITDA and Adjusted EBIT wasprimarily a result of the year-over-year increase in income from operationsdriven by an increase in net sales and gross profit and a decrease in SG&A as apercentage of net sales. 29 Table of Contents Liquidity and Capital ResourcesWe rely on cash flows from operating activities and our credit facilities as ourprimary sources of liquidity. Our primary cash needs are for inventories,operating expenses, capital expenditures associated with opening new stores andremodeling or refurbishing existing stores, improvements to our distributionfacilities, marketing and information technology expenditures, debt service andtaxes. We have also used cash for acquisitions, the subsequent rebranding andintegration of the stores acquired in those acquisitions and costs toconsolidate the corporate offices. In addition to cash and cash equivalents, themost significant components of our working capital are accounts receivable,inventories, accounts payable and accrued expenses and other currentliabilities. We believe that cash flows from operating activities and theavailability of cash under our credit facilities or other financing arrangementswill be sufficient to cover working capital requirements, anticipated capitalexpenditures and other anticipated cash needs for at least the next 12 months.

Our liquidity is moderately seasonal. Our cash requirements generally increasein our third fiscal quarter as we increase our inventory in advance of theChristmas shopping season.

We are planning to continue to open new stores, remodel and refurbish ourexisting stores, and make improvements to our e-commerce and informationtechnology infrastructure, which will result in increased capital expenditures.We estimate that our total capital expenditures in fiscal 2022 will be between$41.0 million and $43.0 million (including the capital expenditures made duringthe thirty-nine weeks ended December 25, 2021), net of landlord tenantallowances, and we anticipate that we will use cash flows from operations tofund these expenditures.

June 2015 Wells Fargo Revolver and 2015 Golub Term Loan

On June 29, 2015, we, as guarantor, and our wholly-owned primary operatingsubsidiary, Boot Barn, Inc., refinanced a previous Wells Fargo credit facilitywith the $125.0 million syndicated senior secured asset-based revolving creditfacility for which Wells Fargo Bank, National Association ("June 2015 WellsFargo Revolver"), is agent, and the $200.0 million syndicated senior securedterm loan for which GCI Capital Markets LLC ("2015 Golub Term Loan") was agent.During the thirty-nine weeks ended December 25, 2021, we repaid the remaining$111.5 million outstanding principal under the 2015 Golub Term Loan andterminated the agreement.

The borrowing base of the June 2015 Wells Fargo Revolver is calculated on amonthly basis and is based on the amount of eligible credit card receivables,commercial accounts, inventory, and available reserves.

Borrowings under the June 2015 Wells Fargo Revolver bear interest at per annumrates equal to, at our option, either (i) London Interbank Offered Rate("LIBOR") plus an applicable margin for LIBOR loans, or (ii) the base rate plusan applicable margin for base rate loans. The base rate is calculated as thehighest of (a) the federal funds rate plus 0.5%, (b) the Wells Fargo prime rateand (c) one-month LIBOR plus 1.0%. The applicable margin is calculated based ona pricing grid that in each case is linked to quarterly average excessavailability. For LIBOR Loans, the applicable margin ranges from 1.00% to 1.25%,and for base rate loans it ranges from 0.00% to 0.25%. We also pay a commitmentfee of 0.25% per annum of the actual daily amount of the unutilized revolvingloans. The interest on the June 2015 Wells Fargo Revolver is payable inquarterly installments ending on the maturity date. On May 26, 2017, the Companyentered into an amendment to the June 2015 Wells Fargo Revolver (the "2017 WellsAmendment"), increasing the aggregate revolving credit facility to $135.0million and extending the maturity date to the earlier of May 26, 2022 or 90days prior to the previous maturity of the 2015 Golub Term Loan, which was thenscheduled to mature on June 29, 2021. On June 6, 2019, we entered into AmendmentNo. 3 to the Credit Agreement (the "2019 Wells Amendment"), further increasingthe aggregate revolving credit facility to $165.0 million and extending thematurity date to the earlier of June 6, 2024 or 90 days prior to the maturity ofthe 2015 Golub Term Loan, which was then currently scheduled to mature on June29, 2023. The 2019 Wells Amendment further made changes to the 2015 Wells FargoRevolver in connection with the transition away from LIBOR as the benchmarkrate. On July 26, 2021, the Company entered in an amendment, increasing theaggregate revolving credit facility to $180.0 million. The amount outstandingunder the June 2015 Wells Fargo Revolver as of both December 25, 2021 and March27, 2021 was zero. Total interest expense incurred in the thirteen andthirty-nine weeks ended December 25, 2021 on the June 2015 Wells Fargo Revolverwas $0.2 million and $0.5 million, respectively. Total interest expense incurredin the thirteen and thirty-nine weeks ended December 26, 2020 30

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on the June 2015 Wells Fargo Revolver was $0.3 million and $1.3 million,respectively, and the weighted average interest rate for the thirteen weeksended December 26, 2020 was 1.7%.

Total interest expense incurred in the thirteen and thirty-nine weeks endedDecember 25, 2021 on the 2015 Golub Term Loan was $0.6 million and $2.5 million,respectively, and the weighted average interest rate for the thirteen weeksended December 25, 2021 was 5.5%. Total interest expense incurred in thethirteen and thirty-nine weeks ended December 26, 2020 on the 2015 Golub TermLoan was $1.6 million and $4.7 million, respectively, and the weighted averageinterest rate for the thirteen weeks ended December 26, 2020 was 5.9%.All obligations under the June 2015 Wells Fargo Revolver are unconditionallyguaranteed by us and each of our direct and indirect domestic subsidiaries(other than certain immaterial subsidiaries) which are not named as borrowersunder the June 2015 Wells Fargo Revolver.The June 2015 Wells Fargo Revolver contains customary provisions relating tomandatory prepayments, restricted payments, voluntary payments, affirmative andnegative covenants, and events of default, and requires the Company to maintain,on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio of at least1.00:1.00 during such times as a covenant trigger event shall exist. TheJune 2015 Wells Fargo Revolver also requires us to pay additional interest of2.0% per annum upon triggering certain specified events of default as set forththerein. For financial accounting purposes, the requirement for us to pay ahigher interest rate upon an event of default is an embedded derivative. As ofDecember 25, 2021, the fair value of this embedded derivative was estimated

andwas not significant.

As of December 25, 2021, we were in compliance with the June 2015 Wells FargoRevolver covenants.

 Cash Position and Cash Flow

Cash and cash equivalents were $114.7 million as of December 25, 2021 comparedto $73.1 million as of March 27, 2021.

The following table presents summary cash flow information for the periodsindicated: Thirty-Nine Weeks Ended December 25, December 26,(in thousands) 2021 2020Net cash provided by/(used in):Operating activities $ 190,556 $ 156,604Investing activities (39,749) (20,508)Financing activities (109,241) (129,317)Net increase in cash $ 41,566 $ 6,779Operating ActivitiesNet cash provided by operating activities was $190.6 million for the thirty-nineweeks ended December 25, 2021. The significant components of cash flows providedby operating activities were net income of $147.7 million, the add-back ofnon-cash depreciation and intangible asset amortization expense of $19.9million, and stock-based compensation expense of $7.8 million. Accounts payableand accrued expenses and other current liabilities increased by $157.9 milliondue to the timing of payments. Inventory increased by $109.9 million as a resultof an increase in purchases.Net cash provided by operating activities was $156.6 million for the thirty-nineweeks ended December 26, 2020. The significant components of cash flows providedby operating activities were net income of $34.8 million, the add-back ofnon-cash depreciation and intangible asset amortization expense of $18.0million, and stock-based compensation expense of $5.0 million. Accounts payableand accrued expenses and other current liabilities increased by $52.0 milliondue to the timing of payments, particularly with elevated December sales whencompared to sales in March. Inventory decreased by $42.7 million as a result ofa reduction in purchases due to the COVID-19 crisis combined with elevated

December sales. 31 Table of ContentsInvesting Activities

Net cash used in investing activities was $39.7 million for the thirty-nineweeks ended December 25, 2021, which was attributable to $39.7 million incapital expenditures related to store construction, improvements to oure-commerce information technology infrastructure, and improvements to ourdistribution facilities.

Net cash used in investing activities was $20.5 million for the thirty-nineweeks ended December 26, 2020, which was primarily attributable to $20.5 millionin capital expenditures related to store construction, improvements to oure-commerce information technology infrastructure, and improvements to ourdistribution facilities.

Financing ActivitiesNet cash used in financing activities was $109.2 million for the thirty-nineweeks ended December 25, 2021. We repaid $112.1 million on our debt and financelease obligations during the period and paid $2.7 million in taxes related tothe vesting of restricted stock. We also received $5.6 million from the exerciseof stock options.Net cash used in financing activities was $129.3 million for the thirty-nineweeks ended December 26, 2020. We repaid $130.4 million on our debt and financelease obligations during the period. We also paid $0.5 million in taxes relatedto the vesting restricted stock. We also received $1.6 million from the exerciseof stock options. Contractual ObligationsDuring the thirteen and thirty-nine weeks ended December 25, 2021, there were nosignificant changes to our contractual obligations described in the"Management's Discussion and Analysis of Financial Condition and Results ofOperations" section of our Fiscal 2021 10-K, other than those which occur in thenormal course of business. Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements.

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