a.k.a. Brands (US:AKA)2024-11-07 21:11Customer Metrics - Active customers increased to 4.05 million in Q3 2024, up from 3.55 million in Q3 2023, representing a growth of 14.1%[73] - The brand portfolio targets Millennial and Gen Z consumers, focusing on social media for customer engagement and brand awareness[71] - The company aims to enhance customer retention through loyalty programs and effective marketing strategies[85] Financial Performance - Net loss for Q3 2024 was $5.44 million, a significant improvement from a net loss of $70.41 million in Q3 2023[76] - Adjusted EBITDA for Q3 2024 was $8.21 million, up from $4.70 million in Q3 2023, indicating a positive trend in operational performance[76] - Net sales for the three months ended September 30, 2024, increased by $9.1 million, or 6%, compared to the same period in 2023, driven by a 6% increase in the number of processed orders[92] - Gross profit for the three months ended September 30, 2024, increased by $9.0 million, or 11%, with a gross margin of 58%, up from 55% in the same period in 2023[94] - Net sales for the nine months ended September 30, 2024, increased by $18.3 million, or 5%, compared to the same period in 2023, driven by an 8% increase in the number of processed orders[101] - Gross profit increased by $14.7 million, or 7%, for the nine months ended September 30, 2024, with a gross margin of 57% compared to 56% in 2023[103] Expenses and Costs - Selling expenses increased by $5.2 million, or 14%, for the three months ended September 30, 2024, primarily due to the opening of additional stores[95] - General and administrative expenses rose by $3.2 million, or 13%, for the three months ended September 30, 2024, attributed to a $2.0 million accrual for a legal matter[97] - Selling expenses rose by $10.3 million, or 10%, for the nine months ended September 30, 2024, accounting for 28% of net sales[104] - General and administrative expenses increased by $1.7 million, or 2%, for the nine months ended September 30, 2024, representing 18% of net sales[106] - Cost of sales as a percentage of net sales decreased from 45% in September 2023 to 42% in September 2024, despite a flat dollar amount[93] Cash Flow and Liquidity - Free Cash Flow for the nine months ended September 30, 2024, was $(14.03) million, a decrease of $26.6 million compared to $12.58 million in the same period of 2023[81] - As of September 30, 2024, cash and cash equivalents totaled $23.1 million, with liquidity supported by a revolving line of credit and term loan[111] - The company owed a combined $91.2 million in term loan and accordion borrowings, with $21.5 million borrowed under the revolving line of credit as of September 30, 2024[112] - Net cash used in operating activities decreased by $24.4 million for the nine months ended September 30, 2024, primarily due to increased inventory purchases[116] - Net cash provided by financing activities increased by $54.5 million for the nine months ended September 30, 2024, mainly due to $18.2 million in net proceeds from the senior secured credit facility[118] Shareholder Actions - The board of directors approved a Share Repurchase Program, authorizing the repurchase of up to $2.0 million of common stock, followed by an additional $3.0 million in 2023[119] - During the three months ended September 30, 2024, the company repurchased 3,380 shares for $0.1 million at an average price of $24.66 per share[119] - For the nine months ended September 30, 2024, the company repurchased 120,579 shares for $1.3 million at an average price of $10.57 per share[119] Risks and Market Conditions - Macroeconomic factors such as inflation and elevated interest rates are identified as potential risks that could impact consumer spending and operational results[82] - (Provision for) benefit from income taxes changed by $4.2 million, or 110%, for the nine months ended September 30, 2024, reflecting an increase in the valuation allowance on deferred tax assets[109] - The benefit from income taxes changed by $3.2 million, or 97%, for the three months ended September 30, 2024, due to an increase in the valuation allowance on deferred tax assets in Australia[100] Accounting and Reporting - There have been no significant changes in critical accounting estimates from those reported in the 2023 Form 10-K[120] - As a "smaller reporting company," the company is not required to provide quantitative and qualitative disclosures about market risk[121]