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Share Name | Share Symbol | Market | Type |
---|---|---|---|
aka Brands Holding Corp | NYSE:AKA | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.03 | 0.14% | 22.03 | 24.61 | 22.2723 | 22.88 | 11,499 | 01:00:00 |
U.S. Net Sales Grew ~12% Compared to the Fourth Quarter of 2022
Strengthened Balance Sheet Through $50.7 Million Debt Paydown in FY23
Scaling Omnichannel Strategy through Additional Stores, Marketplace and Wholesale Opportunities in 2024
a.k.a. Brands Holding Corp. (NYSE: AKA), a brand accelerator of next generation fashion brands, today announced financial results for the fourth quarter and full year ended December 31, 2023.
Fourth Quarter Financial Highlights
Fiscal 2023 Financial Highlights
“2023 was a transformational year for a.k.a. Brands, and I want to thank our teams for their continued dedication to building next-generation fashion brands for the next generation of consumers,” said Ciaran Long, Interim Chief Executive Officer and Chief Financial Officer. “I’m pleased that we delivered net sales growth in the U.S. in the fourth quarter of 2023, which marks the second consecutive quarter of growth in our largest market. I’m proud of the teams’ strong execution across regions, which enabled us to reduce our year-end inventory by 28% compared to last year. Additionally, we continued to manage the business prudently and strengthened our balance sheet - we paid off more than $50 million of debt this year, effectively reducing our debt by 35% in fiscal 2023.”
“As we look ahead, we will continue to deepen our relationships with customers by delivering fashion newness, launching new categories and leveraging innovative technologies. Additionally, based on the success of our omnichannel tests in 2023, we are expanding our omnichannel initiatives in 2024 with the opening of three to four Princess Polly stores and new marketplace and wholesale opportunities to attract new customers and expand our total addressable market. And lastly, we remain committed to streamlining our operations to deliver long-term profitable growth,” concluded Long.
Recent Brand Highlights
Fourth Quarter Financial Details
Full year 2023 financial details are included in the Company’s Form 10-K for the year ended December 31, 2023.
Balance Sheet and Cash Flow
Outlook
For the full year fiscal 2024, the Company expects:
For the first quarter of 2024, the Company expects:
The above outlook is based on several assumptions, including but not limited to, foreign exchange rates remaining at the current levels, the opening of three to four Princess Polly stores and continued macroeconomic pressures, specifically in Australia and New Zealand. See “Forward-Looking Statements” for additional information.
Conference Call
A conference call to discuss the Company’s fourth quarter and full year 2023 results is scheduled for March 7, 2024, at 4:15 p.m. ET. Those who wish to participate in the call may do so by dialing (877) 858-5495 (or (201) 689-8853 for international callers). The conference call will also be webcast live at https://ir.aka-brands.com in the Events and Presentations section. A recording will be available shortly after the conclusion of the call. To access the replay, please dial (877) 660-6853 or (201) 612-7415 for international callers, conference ID 13744095. An archive of the webcast will be available on a.k.a. Brands’ investor relations website.
Use of Non-GAAP Financial Measures and Other Operating Metrics
In addition to results determined in accordance with accounting principles generally accepted in the United States of America (GAAP), management utilizes certain non-GAAP financial measures such as Adjusted EBITDA, Adjusted EBITDA margin, net income (loss), as adjusted, net income (loss) per share, as adjusted and pro forma net sales for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance. The non-GAAP financial measures should not be considered in isolation or as a substitute for the GAAP financial measures. The non-GAAP financial measures used by the Company may be different from similarly-titled non-GAAP financial measures used by other companies. See additional information at the end of this release regarding non-GAAP financial measures.
About a.k.a. Brands
a.k.a. Brands is a brand accelerator of next generation fashion brands. Each brand in the a.k.a. portfolio targets a distinct Gen Z and millennial audience, creates authentic and inspiring social content and offers quality exclusive merchandise. a.k.a. Brands leverages its next-generation retail platform to help each brand accelerate its growth, scale in new markets and enhance its profitability. Current brands in the a.k.a. Brands portfolio include Princess Polly, Culture Kings, mnml and Petal & Pup.
Forward-Looking Statements
Certain statements made in this release are “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.
These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.
Important factors, among others, that may affect actual results or outcomes include the effects of economic downturns and unstable market conditions; our ability in the future to continue to comply with the New York Stock Exchange’s (NYSE) listing standards and maintain the listing of our common stock on the NYSE; risks related to doing business in China; our ability to anticipate rapidly-changing consumer preferences in the apparel, footwear and accessories industries; our ability to execute our strategic initiatives, including transitioning Culture Kings to a data-driven, short lead time merchandising cycle; our ability to acquire new customers, retain existing customers or maintain average order value levels; the effectiveness of our marketing and our level of customer traffic; merchandise return rates; our ability to manage our inventory effectively; our success in identifying brands to acquire, integrate and manage on our platform; our ability to expand into new markets; the global nature of our business, including international economic, geopolitical instability (including the ongoing Russia-Ukraine and Israel-Palestine wars), legal, compliance and supply chain risks; interruptions in or increased costs of shipping and distribution, which could affect our ability to deliver our products to the market; our use of social media platforms and influencer sponsorship initiatives, which could adversely affect our reputation or subject us to fines or other penalties; fluctuating operating results; the inherent challenges in measuring certain of our key operating metrics, and the risk that real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business; the potential for tax liabilities that may increase the costs to our consumers; our ability to attract and retain highly qualified personnel, including key members of our leadership team; fluctuations in wage rates and the price, availability and quality of raw materials and finished goods, which could increase costs; foreign currency fluctuations; and other risks and uncertainties set forth in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on March 7, 2024. a.k.a. Brands does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
a.k.a. BRANDS HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data) (unaudited)
Three Months Ended December 31,
Year Ended December 31,
2023
2022
2023
2022
Net sales
$
148,912
$
149,126
$
546,258
$
611,738
Cost of sales
72,456
70,379
245,978
274,491
Gross profit
76,456
78,747
300,280
337,247
Operating expenses:
Selling
42,309
39,002
149,307
166,070
Marketing
17,265
15,429
68,907
66,730
General and administrative
22,270
26,086
96,951
102,700
Goodwill impairment
—
173,786
68,524
173,786
Total operating expenses
81,844
254,303
383,689
509,286
Loss from operations
(5,388
)
(175,556
)
(83,409
)
(172,039
)
Other expense, net:
Interest expense
(2,676
)
(2,556
)
(11,165
)
(7,043
)
Other expense
(65
)
503
(2,391
)
(1,532
)
Total other expense, net
(2,741
)
(2,053
)
(13,556
)
(8,575
)
Loss before income taxes
(8,129
)
(177,609
)
(96,965
)
(180,614
)
(Provision for) benefit from income tax
(5,754
)
3,713
(1,921
)
3,917
Net loss
$
(13,883
)
$
(173,896
)
$
(98,886
)
$
(176,697
)
Net loss per share, basic and diluted*
$
(1.31
)
$
(16.26
)
$
(9.24
)
$
(16.47
)
Weighted average shares outstanding, basic and diluted*
10,619,178
10,694,559
10,707,024
10,726,392
* Adjusted for the one-for-12 reverse stock split effected on September 29, 2023 (the “Reverse Stock Split”).
a.k.a. BRANDS HOLDING CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
December 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
21,859
$
46,319
Restricted cash
2,170
2,054
Accounts receivable
4,796
3,231
Inventory, net
91,024
126,533
Prepaid income taxes
—
6,089
Prepaid expenses and other current assets
15,846
13,378
Total current assets
135,695
197,604
Property and equipment, net
27,154
28,958
Operating lease right-of-use assets
37,465
37,317
Intangible assets, net
64,322
76,105
Goodwill
94,898
167,731
Deferred tax assets
1,569
1,070
Other assets
618
853
Total assets
$
361,721
$
509,638
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
28,279
$
20,903
Accrued liabilities
25,223
39,806
Sales returns reserve
9,610
3,968
Deferred revenue
11,782
11,421
Income taxes payable
257
—
Operating lease liabilities, current
7,510
6,643
Current portion of long-term debt
3,300
5,600
Total current liabilities
85,961
88,341
Long-term debt
90,094
138,049
Operating lease liabilities
35,344
34,404
Other long-term liabilities
1,704
1,483
Deferred income taxes
—
284
Total liabilities
213,103
262,561
Stockholders’ equity:
Preferred stock
—
—
Common stock
128
129
Additional paid-in capital
466,172
460,660
Accumulated other comprehensive loss
(50,269
)
(45,185
)
Accumulated deficit
(267,413
)
(168,527
)
Total stockholders’ equity
148,618
247,077
Total liabilities and stockholders’ equity
$
361,721
$
509,638
a.k.a. BRANDS HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Year Ended December 31,
2023
2022
Cash flows from operating activities:
Net loss
$
(98,886
)
$
(176,697
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense
7,605
6,156
Amortization expense
11,536
14,192
Amortization of inventory fair value adjustment
—
707
Amortization of debt issuance costs
624
647
Lease incentives
1,596
1,722
Loss on disposal of businesses
1,533
—
Non-cash operating lease expense
7,766
9,779
Equity-based compensation
7,640
6,730
Deferred income taxes, net
(745
)
(4,064
)
Goodwill impairment
68,524
173,786
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable
(1,283
)
(602
)
Inventory
32,149
(16,257
)
Prepaid expenses and other current assets
(2,789
)
6,134
Accounts payable
7,512
(1,888
)
Income taxes payable
6,214
(2,442
)
Accrued liabilities
(13,982
)
(7,419
)
Returns reserve
5,566
(2,678
)
Deferred revenue
522
267
Lease liabilities
(7,676
)
(8,392
)
Net cash provided by (used in) operating activities
33,426
(319
)
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired
—
(5,321
)
Purchases of intangible assets
(61
)
(247
)
Purchases of property and equipment
(5,970
)
(19,746
)
Net cash used in investing activities
(6,031
)
(25,314
)
Cash flows from financing activities:
Payments of costs related to initial public offering
—
(1,142
)
Proceeds from line of credit, net of issuance costs
11,500
40,000
Repayment of line of credit
(51,500
)
—
Proceeds from issuance of debt, net of issuance costs
—
(121
)
Repayment of debt
(10,700
)
(5,600
)
Taxes paid related to net share settlement of equity awards
(191
)
(104
)
Proceeds from issuances under equity-based compensation plans
162
227
Repurchase of shares
(2,100
)
—
Net cash (used in) provided by financing activities
(52,829
)
33,260
Effect of exchange rate changes on cash, cash equivalents and restricted cash
1,090
(272
)
Net change in cash, cash equivalents and restricted cash
(24,344
)
7,355
Cash, cash equivalents and restricted cash at beginning of period
48,373
41,018
Cash, cash equivalents and restricted cash at end of period
$
24,029
$
48,373
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
$
21,859
$
46,319
Restricted cash
2,170
2,054
Total cash, cash equivalents and restricted cash
$
24,029
$
48,373
a.k.a. BRANDS HOLDING CORP. KEY OPERATING AND FINANCIAL METRICS (unaudited)
Three Months Ended December 31,
Year Ended December 31,
(dollars in thousands)
2023
2022
2023
2022
Gross margin
51
%
53
%
55
%
55
%
Net loss
$
(13,883
)
$
(173,896
)
$
(98,886
)
$
(176,697
)
Net loss margin
(9
)%
(117
)%
(18
)%
(29
)%
Adjusted EBITDA2
$
1,339
$
6,093
$
13,790
$
31,872
Adjusted EBITDA2 margin
1
%
4
%
3
%
5
%
Key Operational Metrics and Regional Sales
Three Months Ended December 31,
Year Ended December 31,
(metrics in millions, except AOV; sales in thousands)
2023
2022
% Change
2023
2022
% Change
Key Operational Metrics
Active customers4
3.7
3.8
(2.6
)%
3.7
3.8
(2.6
)%
Average order value
$
76
$
77
(1.3
)%
$
80
$
82
(2.4
)%
Number of orders
1.97
1.93
2.1
%
6.85
7.42
(7.7
)%
Sales by Region
U.S.
$
79,057
$
70,860
11.6
%
$
315,496
$
312,977
0.8
%
Australia/New Zealand
63,272
72,235
(12.4
)%
202,777
268,873
(24.6
)%
Rest of world
6,583
6,031
9.2
%
27,985
29,888
(6.4
)%
Total
$
148,912
$
149,126
(0.1
)%
$
546,258
$
611,738
(10.7
)%
Year-over-year growth on a constant currency basis1
—
%
(8.7
) %
Sales by Region - Two-Year Stack
Three Months Ended December 31,
Year Ended December 31,
2023
2021
% Change
2023
2021
% Change
U.S.
$
79,057
$
79,558
(0.6
)%
$
315,496
$
270,028
16.8
%
Australia/New Zealand
63,272
95,487
(33.7
)%
202,777
265,365
(23.6
)%
Rest of world
6,583
7,378
(10.8
)%
27,985
26,798
4.4
%
Total
$
148,912
$
182,423
(18.4
)%
$
546,258
$
562,191
(2.8
)%
Active Customers
We view the number of active customers as a key indicator of our growth, our value proposition and consumer awareness of our brand, and their desire to purchase our products. In any particular period, we determine our number of active customers by counting the total number of unique customer accounts who have made at least one purchase in the preceding 12-month period, measured from the last date of such period.
Average Order Value
We define average order value (“AOV”) as net sales in a given period divided by the total orders placed in that period. AOV may fluctuate as we expand into new categories or geographies or as our assortment changes.
a.k.a. BRANDS HOLDING CORP. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (in thousands, except per share data) (unaudited)
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that management uses to assess our operating performance. Because Adjusted EBITDA and Adjusted EBITDA margin facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.
We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business. We expect Adjusted EBITDA margin to increase over the long-term as we continue to scale our business and achieve greater leverage in our operating expenses.
We calculate Adjusted EBITDA as net income (loss) adjusted to exclude: interest and other expense; provision for (benefit from) income taxes; depreciation and amortization expense; equity-based compensation expense; costs to establish or relocate distribution centers; transaction costs; costs related to severance from headcount reductions; goodwill and intangible asset impairment; sales tax penalties; insured losses, net of any recoveries; and one-time or non-recurring items. We calculate Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA and Adjusted EBITDA margin are considered non-GAAP financial measures under the SEC’s rules because they exclude certain amounts included in net income (loss) and net income (loss) margin, the most directly comparable financial measures calculated in accordance with GAAP.
A reconciliation of non-GAAP Adjusted EBITDA to net loss for the three months and year ended December 31, 2023 and 2022 is as follows:
Three Months Ended December 31,
Year Ended December 31,
2023
2022
2023
2022
Net loss
$
(13,883
)
$
(173,896
)
$
(98,886
)
$
(176,697
)
Add (deduct):
Total other expense, net
2,741
2,053
13,556
8,575
Provision for (benefit from) income tax
5,754
(3,713
)
1,921
(3,917
)
Depreciation and amortization expense
4,446
4,975
19,141
20,348
Equity-based compensation expense
2,162
2,282
7,640
6,730
Inventory step-up amortization expense
—
—
—
707
Transaction costs
—
—
—
140
Goodwill impairment
—
173,786
68,524
173,786
Non-routine items5
119
606
1,894
2,200
Adjusted EBITDA
$
1,339
$
6,093
$
13,790
$
31,872
Net loss margin
(9.3
)%
(116.6
)%
(18.1
)%
(28.9
)%
Adjusted EBITDA margin
0.9
%
4.1
%
2.5
%
5.2
%
Net Income (Loss), As Adjusted and Net Income (Loss) Per Share, As Adjusted
Net income (loss), as adjusted and net income (loss) per share, as adjusted are considered non-GAAP financial measures under the SEC’s rules because they exclude certain amounts included in net income (loss) and net income (loss) per share calculated in accordance with GAAP, the most directly comparable financial measures calculated in accordance with GAAP. Management believes that net income (loss), as adjusted, and net income (loss) per share, as adjusted, are meaningful measures to provide investors because they better enable comparison of the performance with that of the comparable period. In addition, net income (loss), as adjusted and net income (loss) per share, as adjusted, afford investors a view of what management considers to be a.k.a.’s core earnings performance, thereby providing investors the ability to make a more informed assessment of such core earnings performance with that of the prior year.
We have calculated net loss, as adjusted and net loss per share, as adjusted, for the year ended December 31, 2023, by adjusting net loss and net loss per share for the following:
A reconciliation of non-GAAP net loss, as adjusted to net loss, as well as the resulting calculation of net loss per share, as adjusted, for the year ended December 31, 2023, are as follows:
Year Ended December 31, 2023
Net loss
$
(98,886
)
Adjustments:
Loss on disposal of the Rebdolls reporting unit
951
Goodwill impairment
68,524
Tax effects of adjustments
—
Net loss, as adjusted
$
(29,411
)
Net loss per share, as adjusted
$
(2.75
)
Weighted-average shares, diluted
10,707,024
We have calculated net loss, as adjusted and net loss per share, as adjusted for the three months and year ended December 31, 2022, by adjusting net loss and net loss per share for the following:
A reconciliation of non-GAAP net loss, as adjusted, to net loss, as well as the resulting calculation of net loss per share, as adjusted for the three months and year ended December 31, 2022, are as follows:
Three Months Ended December 31, 2022
Year Ended December 31, 2022
Net loss
$
(173,896
)
$
(176,697
)
Adjustments:
Inventory step-up amortization expense
—
707
Goodwill impairment
173,786
173,786
Tax benefit - Culture Kings change in tax basis of inventory and intangibles; intra-entity transfer of intellectual property rights
(3,263
)
(3,263
)
Tax effects of adjustments
—
(212
)
Net loss, as adjusted
$
(3,373
)
$
(5,679
)
Net loss per share, as adjusted*
$
(0.31
)
$
(0.53
)
Weighted-average shares, diluted*
10,739,439
10,726,392
*Adjusted for the one-for-12 Reverse Stock Split.
Pro Forma Net Sales
Pro forma net sales is considered a non-GAAP financial measure under the SEC’s rules. We believe that pro forma net sales is useful information for investors as it provides a better understanding of sales performance, and relative changes therein, on a comparable basis. We calculate pro forma net sales as net sales including the historical net sales relating to the pre-acquisition periods of Culture Kings, assuming that the Company acquired Culture Kings at the beginning of the period presented. Pro forma net sales is not necessarily indicative of what the actual results would have been if the acquisition had in fact occurred on the date or for the periods indicated nor does it purport to project net sales for any future periods or as of any date. A reconciliation of non-GAAP pro forma net sales to net sales, which is the most directly comparable financial measure calculated in accordance with GAAP, in each case disaggregated by geography, for the year ended December 31, 2023 and 2021 is as follows:
Year Ended December 31, 2023
Year Ended December 31, 2021
Growth Rate
Actual
Actual
Culture Kings
Pro Forma
Actual
Pro Forma
U.S.
$
315,496
$
270,028
$
7,669
$
277,697
16.8
%
13.6
%
Australia/New Zealand
202,777
265,365
43,314
308,679
(23.6
)%
(34.3
)%
Rest of world
27,985
26,798
280
27,078
4.4
%
3.3
%
Total
$
546,258
$
562,191
$
51,263
$
613,454
(2.8
)%
(11.0
)%
1 In order to provide a framework for assessing the performance of our underlying business, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period using a constant currency methodology wherein current and comparative prior period results for our operations reporting in currencies other than U.S. dollars are converted into U.S. dollars at constant exchange rates (i.e., the rates in effect on December 31, 2022, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods. 2 See additional information at the end of this release regarding non-GAAP financial measures. 3 The Company has not provided a quantitative reconciliation of its Adjusted EBITDA outlook to a GAAP net income (loss) outlook because it is unable, without making unreasonable efforts, to project certain reconciling items. These items include, but are not limited to, future equity-based compensation expense, income taxes, interest expense and transaction costs. These items are inherently variable and uncertain and depend on various factors, some of which are outside of the Company’s control or ability to predict. See additional information at the end of this release regarding non-GAAP financial measures. 4 Trailing twelve months. 5 Non-routine items include costs to establish or relocate distribution centers; severance from headcount reductions; sales tax penalties; insured losses, net of recoveries; and non-routine legal matters.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240307571810/en/
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