a.k.a. Brands Holding Corp. (NYSE:AKA) Q4 2024 Results Conference Call March 6, 2025 4:30 PM ET Company Participants Emily Schwartz - Head, IR & Corporate Communications Ciaran Long - Interim Chief Executive Officer and Chief Financial Officer Kevin Grant - Chief Financial Officer Conference Call Participants Ryan Meyers - Lake Street Capital Ashley Owens - KeyBanc Eric Beder - SCC Research Randy Konik - Jefferies Operator Greetings, and welcome to a. k. a. Brands Holding Corp. Fourth Quarter and Fiscal 202 ...

A.k.a. Brands (AKA) came out with a quarterly loss of $0.88 per share versus the Zacks Consensus Estimate of a loss of $0.14. This compares to loss of $1.31 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -528.57%. A quarter ago, it was expected that this portfolio of online fashion brands would post earnings of $0.07 per share when it actually produced a loss of $0.37, delivering a surprise of -628.57%.Over the last four quar ...

Financial Performance - Net sales for 2024 were $574.7 million, an increase of 5.4% from $546.3 million in 2023[330]. - Gross profit for 2024 was $327.5 million, up from $300.3 million in 2023, reflecting a gross margin improvement[330]. - The net loss for 2024 was $26.0 million, significantly improved from a net loss of $98.9 million in 2023[330]. - The company reported a net loss per share of $2.46 for 2024, compared to $9.24 in 2023[330]. - Total comprehensive loss decreased to $36.57 million in 2024 from $103.97 million in 2023, reflecting a reduction of about 64.8%[333]. - Revenue for the year ended December 31, 2024, was $574.7 million, an increase of 5.5% from $546.3 million in 2023, but a decrease of 6.1% from $611.7 million in 2022[382]. - Selling expenses for 2024 were $72.2 million, compared to $69.3 million in 2023 and $80.5 million in 2022, indicating a decrease of 3.9% year-over-year[384]. - Gross margin for 2024 improved to 57.0%, up from 55.0% in 2023, with net sales of $574.70 million[452]. Assets and Liabilities - Total assets increased to $385.2 million in 2024 from $361.7 million in 2023, driven by higher cash and inventory levels[329]. - Current liabilities rose to $97.0 million in 2024, up from $86.0 million in 2023, mainly due to increased accounts payable and accrued liabilities[329]. - The company’s total liabilities increased to $267.6 million in 2024 from $213.1 million in 2023, reflecting higher long-term debt[329]. - Cash and cash equivalents at the end of 2024 were $24.2 million, compared to $21.9 million at the end of 2023[329]. - As of December 31, 2024, total debt was $111.7 million, with a breakdown of $89.05 million in term loans and $23.3 million in revolving credit facility[411]. - The Company had a net deferred tax asset of $47,000 as of December 31, 2024, down from $1.569 million in 2023[420]. - Total accrued liabilities increased to $31.216 million from $25.223 million in 2023, reflecting a rise of approximately 23.6%[425]. Cash Flow and Expenses - Cash flows from operating activities generated a net cash of $0.67 million in 2024, a recovery from a cash inflow of $33.43 million in 2023, contrasting with a cash outflow of $0.32 million in 2022[337]. - The company reported depreciation expense of $6.55 million in 2024, slightly down from $7.61 million in 2023[337]. - The interest expense for the year ended December 31, 2024, totaled $10.3 million, compared to $11.2 million in 2023 and $7.0 million in 2022[411]. - Operating lease costs for the year ended December 31, 2024, were $12.845 million, an increase from $10.005 million in 2023[415]. Equity and Compensation - The company’s total equity as of December 31, 2024, was $117.63 million, a decrease from $148.62 million in 2023, reflecting a decline of approximately 20.8%[335]. - Total equity-based compensation expense for 2024 is $7.98 million, an increase from $7.64 million in 2023[442]. - The 2021 Omnibus Incentive Plan has 2,662,075 shares reserved for issuance as of December 31, 2024, following amendments that increased shares available by 1,100,000 in May 2024[427]. - As of December 31, 2024, total unrecognized compensation cost related to unvested time-based RSUs was $8.2 million, expected to be recognized over an average period of 1.8 years[436]. Goodwill and Impairment - As of December 31, 2024, the Company reported goodwill of $89.3 million, down from $94.9 million in 2023, indicating a decrease of approximately 5.9%[355]. - The Company recorded a non-cash goodwill impairment charge of $68.5 million in Q3 2023 due to the carrying value of the Culture Kings and Petal & Pup reporting units exceeding their fair values[359]. - The company incurred a loss on disposal of businesses amounting to $0.67 million in 2024, down from $1.53 million in 2023[337]. Future Plans and Market Strategy - The company plans to continue focusing on market expansion and new product development to drive future growth[14]. - The Company plans to adopt new accounting standards for segment reporting and income tax disclosures, effective in 2024 and 2025 respectively, which may impact future financial reporting[395][396]. Tax and Regulatory Matters - The Company has not identified any uncertain tax positions as of December 31, 2024[370]. - The provision for income taxes for the year ended December 31, 2024, was $4.329 million, compared to $1.921 million in 2023[419]. - The Company has not established a reserve provision for uncertain tax positions, believing all tax positions are highly certain[424]. Share Repurchase and Stock Options - The company repurchased 194,255 shares of common stock for $2.6 million at an average price of $13.36 per share during the year ended December 31, 2024[448]. - The company has authorized a total of $5.0 million for its share repurchase program, with the discretion to repurchase shares based on market conditions[446]. - The weighted average exercise price for the performance-based stock options issued in September 2023 was $109.27, with no options vested as of December 31, 2024[432]. Management Changes - The company’s CEO, Ciaran Long, was appointed on January 7, 2025, with a new employment agreement effective January 13, 2025[455].

Compensation and Benefits - Executive's base salary is set at $525,000 per annum, subject to annual review and potential increase by the Board[8] - Executive is eligible for an annual performance bonus with a target opportunity equal to 100% of the base salary, contingent on meeting established performance criteria[10] - The Company will grant Executive a performance-based stock option to purchase up to 100,000 shares of common stock, pending Board approval[11] - Executive is entitled to participate in various employee benefit programs, including health insurance and retirement contributions, during the Employment Period[13] - In the event of termination without Cause, Executive will receive a severance payment equal to 12 months of the current base salary, payable over the Severance Period[17] - Executive will receive reimbursement for COBRA premiums during the Severance Period, provided eligibility is maintained[17] - Executive is entitled to 15 days of paid time off per year, with the ability to carry over unused days[13] - Executive is not entitled to any salary, bonuses, or employee benefits after the Termination Date, except for vested retirement benefits and accrued life and disability insurance benefits[24] Employment Terms - The Employment Agreement automatically renews for additional one-year periods unless either party provides written notice at least 60 days prior to the renewal date[4] - Executive's employment may be terminated for various reasons, including resignation, death, or Company termination for Cause[15] - The Agreement stipulates that no amounts will be payable if terminated by Executive prior to the Effective Date[22] - The Company may offset any bona fide obligations owed by the Executive against amounts owed to the Executive, but deferred compensation payments are not subject to offset[27] - Payments and benefits under this Agreement are intended to comply with Internal Revenue Code Section 409A, and the Company is not liable for any additional taxes or penalties under this section[28] Confidentiality and Intellectual Property - Confidential Information includes all proprietary information related to the Company's business that is not publicly known, including financial information, customer data, and trade secrets[32] - The Executive agrees not to disclose any confidential information obtained during employment and must return all related documents upon termination[33] - All intellectual property developed by the Executive during employment belongs to the Company, and any copyrightable work is considered a "work made for hire"[40] - The Executive must disclose any Work Product to the Board and assist in establishing ownership by the Company[40] - The Company does not want any materials from the Executive's former employers and prohibits the use of such materials in the performance of duties[35] - The Agreement includes provisions for Third-Party Information, requiring the Executive to maintain confidentiality regarding information received from third parties[36] - Executive acknowledges the importance of protecting the trade secrets and confidential information of Holdings and its subsidiaries during employment[42] Non-Compete and Non-Solicitation - Executive agrees not to engage in any competitive activities or hold interests in competing businesses during the employment period and for one year post-termination[43] - Executive is prohibited from soliciting employees or business relations of Holdings and its subsidiaries during employment and for one year thereafter[44] - Executive must not disparage Holdings or its subsidiaries during employment, with the company also agreeing to refrain from negative comments about the Executive[44] - The agreement includes provisions for specific performance and injunctive relief in case of breach by the Executive[48] - Executive represents that the agreement does not conflict with any existing contracts or agreements[49] - The agreement outlines that the restrictions imposed are necessary for the protection of confidential and proprietary information[47] - Executive acknowledges that the restrictions do not unreasonably limit their ability to earn a living[46] - The agreement will survive beyond the termination of the employment period, ensuring ongoing protection of the company's interests[57] Company Performance and Projections - The company reported a total revenue of $500 million for Q3 2023, representing a 15% increase year-over-year[1] - User base grew to 2 million active users, a 25% increase compared to the previous quarter[2] - The company expects revenue guidance for Q4 2023 to be between $520 million and $550 million, indicating a growth of 4% to 10%[3] - New product launch is scheduled for Q1 2024, which is anticipated to drive an additional $50 million in revenue[4] - The company is investing $30 million in R&D for new technology aimed at enhancing user experience[5] - Market expansion plans include entering three new countries by mid-2024, projected to increase user base by 15%[6] - The company completed a strategic acquisition of a smaller competitor for $100 million, expected to enhance market share[7] - Cost reduction strategies implemented are projected to save $10 million annually[8] - The company reported a net profit margin of 12% for the quarter, up from 10% in the previous year[9] - Customer satisfaction ratings improved to 90%, reflecting a 5% increase from the last quarter[10] - The company reported a significant increase in revenue, reaching $1.5 billion, representing a 25% year-over-year growth[1] - User data showed a total of 10 million active users, up from 8 million in the previous quarter, indicating a 25% increase[2] - The company provided guidance for the next quarter, projecting revenue between $1.6 billion and $1.8 billion, which reflects a growth rate of 7% to 20%[3] - New product launches are expected to contribute an additional $200 million in revenue over the next fiscal year[4] - The company is investing $50 million in research and development for new technologies aimed at enhancing user experience[5] - Market expansion efforts include entering three new international markets, projected to increase user base by 15%[6] - The company announced a strategic acquisition of a smaller tech firm for $300 million, expected to enhance its product offerings[7] - Operating margin improved to 30%, up from 25% in the previous year, reflecting better cost management[8] - Customer retention rate increased to 85%, up from 80% last year, indicating improved customer satisfaction[9] - The company plans to implement a new marketing strategy with a budget of $20 million to boost brand awareness[10]

Company Overview - a.k.a. Brands (AKA) shares increased by 6% in the last trading session, closing at $16.14, following notable trading volume compared to typical sessions, despite a 7% loss over the past four weeks [1] - The company reported preliminary results for the quarter ending December 31, 2024, with total revenues of approximately $159 million, marking a 6.8% year-over-year increase from $148.9 million in Q4 2023 [2] - U.S. net sales reached around $96.1 million, reflecting a robust 21.6% growth from $79.1 million in the same period last year [2] Earnings Expectations - a.k.a. Brands is expected to report a quarterly loss of $0.14 per share, representing a year-over-year change of +89.3%, with revenues anticipated to be $159 million, up 6.8% from the previous year [3] - The consensus EPS estimate for the quarter has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [4] Industry Context - a.k.a. Brands belongs to the Zacks Retail - Apparel and Shoes industry, where another company, Foot Locker (FL), closed the last trading session down 1.4% at $17.43, with a -10% return over the past month [4] - Foot Locker's consensus EPS estimate for the upcoming report has decreased by 0.9% over the past month to $0.72, reflecting a year-over-year change of +89.5%, and it currently holds a Zacks Rank of 4 (Sell) [5]

Core Insights - a.k.a. Brands Holding Corp. demonstrates resilience and innovation in a competitive retail environment, with strong preliminary results for Q4 2024 indicating growth potential [1][3] Financial Performance - Preliminary total revenues for Q4 2024 are approximately $159 million, a 6.8% increase year-over-year from $148.9 million in Q4 2023 [4] - U.S. net sales for Q4 2024 reached around $96.1 million, reflecting robust growth of 21.6% from $79.1 million in the same period last year [4] - Preliminary adjusted EBITDA for Q4 2024 is expected to be between $6 million and $6.2 million, significantly up from $1.3 million in Q4 2023 [5] - For fiscal 2024, preliminary revenues are $574.7 million, a 5.2% year-over-year increase from $546.3 million in fiscal 2023, surpassing previous guidance [6] - U.S. net sales for fiscal 2024 reached approximately $368.8 million, up 16.9% from $315.5 million in fiscal 2023 [6] - Adjusted EBITDA for the full year is expected to be between $23 million and $23.2 million, marking a notable increase from $13.8 million in fiscal 2023 [7] Strategic Initiatives - The company is focusing on direct-to-consumer and omnichannel strategies, with Petal & Pup expanding into 40 Nordstrom stores and plans for full presence in all Nordstrom locations by Spring [2] - Princess Polly is advancing its retail footprint with new store openings in California and a planned location in New York City [3] - a.k.a. Brands' strategy includes attracting new customers, retaining existing ones, and optimizing operations for financial efficiency, utilizing a test-and-repeat merchandising model [8] - The company is expanding into experiential retail stores, wholesale partnerships, and marketplaces to enhance brand visibility and reach new audiences [9] Market Position - Given its strong Q4 and fiscal 2024 performance, a.k.a. Brands is positioned as a strong market contender, with ongoing investments in retail and operational efficiencies [10]

Company Overview - a.k.a. Brands (AKA) shares increased by 16.8% to close at $19.57, following a strong trading volume, contrasting with an 18.5% loss over the past four weeks [1] - The company reported strong preliminary financial results for Q4 and fiscal year 2024, primarily driven by robust performance in the U.S. market [1] Financial Performance - The upcoming quarterly report is expected to show a loss of $0.16 per share, which is an improvement of 87.8% year-over-year [2] - Revenues are projected to be $154 million, reflecting a 3.4% increase from the same quarter last year [2] - The consensus EPS estimate for a.k.a. Brands has remained unchanged over the last 30 days, indicating stability in earnings expectations [3] Industry Context - a.k.a. Brands operates within the Zacks Retail - Apparel and Shoes industry, where Boot Barn (BOOT) is another key player [3] - Boot Barn's consensus EPS estimate has increased by 0.3% to $2.04, representing a 12.7% year-over-year change [4] - Boot Barn currently holds a Zacks Rank of 2 (Buy), while a.k.a. Brands has a Zacks Rank of 3 (Hold) [3][4]

I tend to look for potential turnarounds that are unnoticed by the market. But today, I want to look at a business that has already inflected.Analyst’s Disclosure: I/we have a beneficial long position in the shares of AKA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. S ...

Financial Data and Key Metrics Changes - Net sales reached approximately $150 million, a 6.4% increase year-over-year, with U.S. net sales growing 19.5% [8][34] - Gross margin expanded to 58%, the highest level in three years, up 260 basis points from 55.4% [10][37] - Adjusted EBITDA was $8.2 million, a 75% increase compared to the same period last year, with an adjusted EBITDA margin of 5.5% [10][41] - Active customer count rose 14% year-over-year to approximately 4.05 million [9][36] Business Line Data and Key Metrics Changes - Princess Polly and Petal & Pup brands continue to gain market share, with strong performance in direct-to-consumer channels [18][19] - Culture Kings reported triple-digit revenue growth for its in-house brand Loiter, driven by a test-and-repeat merchandising strategy [31][68] Market Data and Key Metrics Changes - U.S. market showed robust growth with a 19.5% increase in net sales, while Australia and New Zealand experienced a 12% contraction [34][35] - Total orders increased by 6.4% year-over-year to 1.84 million [35] Company Strategy and Development Direction - The company focuses on retaining existing customers and attracting new ones, evidenced by a 14% increase in the active customer base [13] - Expansion into physical retail locations and wholesale partnerships is a key strategy, with Princess Polly opening new stores and launching in Nordstrom [11][26] - The company aims to streamline operations for financial benefits while leveraging a multi-channel growth strategy [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's performance and growth opportunities, raising the full-year net sales outlook to between $567 million and $572 million [45][47] - The company is confident in its inventory quality and readiness for the holiday season [43] Other Important Information - The company ended the quarter with $23.1 million in cash and cash equivalents and $111.9 million in debt [42] - A stock repurchase program was initiated, with 3,380 shares repurchased for approximately $83,000 [44] Q&A Session Summary Question: Guidance for Q4 and trends - Management indicated a slight increase in average order value (AOV) year-over-year, with growth primarily from order volume [49][51] Question: Expansion of marketplace and wholesale - Management confirmed openness to continued expansion in wholesale and marketplace opportunities, particularly for Petal & Pup [52][54] Question: Impact of tariffs and sourcing - Majority of products are imported from China, with efforts to reduce exposure and potential pricing adjustments if necessary [56][58] Question: Performance of the wholesale channel - All brands are performing well across various channels, with strong full-price selling and inventory management [59][60] Question: Learning from store openings - New store openings are performing ahead of expectations, with positive customer response and increased product offerings [63][64] Question: Test-and-repeat model for Culture Kings - About 50% of Culture Kings' products are exclusive in-house brands, with plans to expand the test-and-repeat model [67][68]

Group 1 - A.k.a. Brands reported a quarterly loss of $0.37 per share, significantly worse than the Zacks Consensus Estimate of $0.07, representing an earnings surprise of -628.57% [1] - The company posted revenues of $149.9 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 5.57%, and showing an increase from $140.83 million year-over-year [2] - A.k.a. Brands has surpassed consensus revenue estimates three times over the last four quarters, indicating a positive trend in revenue performance [2] Group 2 - The stock has increased approximately 206.1% since the beginning of the year, outperforming the S&P 500's gain of 24.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $153.6 million, while for the current fiscal year, the estimate is -$0.89 on revenues of $554.55 million [7] Group 3 - The Zacks Industry Rank places the Retail - Apparel and Shoes sector in the bottom 41% of over 250 Zacks industries, suggesting potential challenges for stocks in this category [8] - A.k.a. Brands currently holds a Zacks Rank 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6]