Full Year 2022 Net Sales Grew 9% to $612
Million Dollars
Company Announces Omnichannel Initiatives
for 2023
Ended the Quarter with an Improved Inventory
Position; Up 9% Year over Year, Down 8% Sequentially
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, 2022.
Results for the Fourth Quarter
- Net sales decreased 18.3% to $149.1 million, compared to
$182.4 million in the fourth quarter of 2021; a decrease of 13% in
Constant Currency1.
- Net loss was $(173.9) million or $(1.35) per share in
the fourth quarter of 2022, compared to net income of $0.0 million
or $0.00 per share in the fourth quarter of 2021, and (28.9%) of
net sales. Included in this loss was a non-cash impairment charge
of $173.8 million.
- Net loss, as adjusted2 was $(3.4) million, or $(0.03)
per share in the fourth quarter of 2022, compared to net income, as
adjusted of $4.3 million or $0.03 per share in the fourth quarter
of 2021.
- Adjusted EBITDA2 was $6.1 million, or 4.1% of net sales,
compared to $16.1 million, or 8.8% of net sales in the fourth
quarter of 2021.
Results for Fiscal 2022
- Net sales increased 8.8% to $611.7 million, compared to
$562.2 million in 2021 or decreased 0.3% pro forma2 adjusting for
the acquisition of Culture Kings.
- Net loss was $(176.7) million or $(1.37) per share in
2022, compared to net loss attributable to a.k.a. Brands Holding
Corp. of $(6.0) million or $(0.06) per share in 2021, and (116.6%)
of net sales.
- Net loss, as adjusted2 was $(5.7) million, or $(0.04)
per share in 2022, compared to net income, as adjusted2 of $14.2
million or $0.15 per share in 2021.
- Adjusted EBITDA2 was $31.9 million, or 5.2% of net
sales, compared to $62.4 million, or 11.1% of net sales in
2021.
“I want to recognize our brands and teams for their unwavering
dedication in 2022 in the face of external pressures and a dynamic
environment,” said Jill Ramsey. “As we went through the quarter, we
saw lower marketing effectiveness given the highly promotional
environment, and we made the strategic decision to reduce our spend
compared to last year in an effort to balance growth and profit.
Additionally, as we aggressively tightened our inventory in the
second half of the year, there were fewer new styles in our women’s
brands during the peak holiday selling period. These decisions,
combined with the macroeconomic pressures, impacted our performance
in the quarter but enabled us to protect the integrity and
durability of our brands and business model for the long term.”
“As we look ahead, we remain laser focused on strengthening the
foundation of our brands and business. The omnichannel initiatives
we announced today, including the opening of our first Princess
Polly store in Southern California in the back half of the year and
testing wholesale, set the stage for continued growth and
profitability. We remain firmly committed to building great
next-generation brands for the long-term, and I am confident that
we have tremendous runway ahead of us,” concluded Ramsey.
The Company also announced today that Jill Ramsey, chief
executive officer, will be taking time to work through unforeseen
medical issues. Jill will remain as active in the business as her
health allows and will remain on the Board. During this time,
Ciaran Long, chief financial officer, will serve as acting chief
executive officer on an interim basis.
Recent Business
Highlights
- Culture Kings store in Las Vegas has exceeded expectations in
revenue and brand building activities since opening in November and
pleased with the positive impact on U.S. online sales.
- Princess Polly continues to refine their TikTok strategy, which
is now a top performing channel in terms of ROI, and saw a nearly
40% increase in followers in fiscal 2022.
- Petal & Pup continues to improve their marketing efficiency
with the introduction of five new channels in the back half of the
year, including CTV and TikTok.
- mnml is now a top ten performing brand on Culture Kings’
website and in the Las Vegas store.
- Subsequent to quarter end the company sold Rebdolls back to its
founder in an effort to focus on brands with greater scale that can
fully benefit from the a.k.a. business model.
Omnichannel Initiatives
As a.k.a. Brands builds durable, next-generation brands for the
long term, the Company will be testing wholesale and brick and
mortar initiatives in 2023. As part of these initiatives, the
Company announced:
- Princess Polly has signed a wholesale agreement with PacSun to
carry up to 50 styles online and in 15 stores beginning this month,
with a broader rollout to follow.
- Princess Polly will pilot a store in California in the back
half of the year.
- Petal & Pup is testing wholesale and omnichannel
initiatives and recently launched on Target Marketplace.
- The Company is in active discussions with other wholesale
partners within the U.S. and internationally for all of the brands
in its portfolio.
Fourth Quarter Financial
Details
- Net sales decreased 18.3% to $149.1 million, compared to
$182.4 million in the fourth quarter of 2021. The decrease was
driven by a 14% decrease in the number of orders processed and 8%
decrease in the average order value during the quarter. The
decrease in the number of orders and average order value were
primarily driven by lower marketing spend and a lower mix of full
priced items sold.
- Gross margin was 52.8% in the fourth quarter of 2022,
versus 54.6% in the same period last year. The 180 basis point
decline in gross margin rate was largely the result of a lower mix
of full priced items sold partially offset by a $3.7 million
non-cash purchase accounting charge in the prior year associated
with the Culture Kings and mnml acquisitions.
- Selling expenses were $39.0 million, compared to $45.5
million in the fourth quarter of 2021. Selling expenses were 26.2%
of net sales, compared to 24.9% of net sales in the fourth quarter
of 2021. The increase was primarily due to fixed cost deleverage
partially offset by improvements on outbound shipping and labor
productivity.
- Marketing expenses were $15.4 million, compared to $21.5
million in the fourth quarter of 2021. Marketing expenses were
10.3% of net sales, compared to 11.8% of net sales in the fourth
quarter of 2021. The lower marketing expense as a percentage of
sales was due to a strategic decision to pull back on marketing
spend given the marketing investment inefficiency in a highly
promotional environment.
- General and administrative (“G&A”) expenses were
$26.1 million, compared to $27.3 million in the fourth quarter of
2021. G&A expenses were 17.5% of net sales, compared to 14.9%
of net sales in the fourth quarter of 2021. The increase in G&A
expenses as a percent of net sales was primarily due to lower sales
in the fourth quarter of 2022.
- Adjusted EBITDA2 was $6.1 million, or 4.1% of net sales,
compared to $16.1 million, or 8.8% of net sales in the fourth
quarter of 2021.
Full year 2022 financial details are included in the Company’s
Form 10-K for the twelve months ended December 31, 2022.
Balance Sheet and Cash
Flow
- Cash and cash equivalents at the end of the fourth
quarter totaled $46.3 million compared to $38.8 million at the end
of the fourth quarter of 2021.
- Inventory at the end of the fourth quarter totaled
$126.5 million, compared to $115.8 million at the end of the fourth
quarter of 2021. Inventory decreased $10.4 million, or 8%, from the
end of the third quarter of 2022.
- Debt at the end of the fourth quarter totaled $143.6
million, compared to $108.8 million at the end of the fourth
quarter of 2021. The Company drew $25.0 million on its revolving
credit facility in the first quarter of 2022 and drew $15.0 million
on its revolving credit facility in October 2022.
- Cash flow from operations for the twelve months ended
December 31, 2022 was $(0.3) million, compared to $24.0 million for
the twelve months ended December 31, 2021.
Outlook
For the full year fiscal 2023, the Company expects:
- Net sales between $570 million and $600 million
- Adjusted EBITDA3 between $35 million and $37 million
- Weighted average diluted share count of 130 million
- Capital expenditures of approximately $8 million to $10
million
For the first quarter of 2023, the Company expects:
- Net sales between $113 million and $116 million
- Adjusted EBITDA3 between $1.5 million and $1.8 million
- Weighted average diluted share count of 130 million
The above outlook is based on several assumptions, including but
not limited to, foreign exchange rates remaining at the current
levels and a continued promotional environment. See
“Forward-Looking Statements” for additional information.
Conference Call
A conference call to discuss the Company’s fourth quarter and
full year 2022 results is scheduled for March 9, 2023, at 4:30 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 13735655. 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 performance measures
such as net income (loss), as adjusted, net income (loss) per
share, as adjusted, Adjusted EBITDA, Adjusted EBITDA margin and pro
forma net sales for purposes of evaluating ongoing operations and
for internal planning and forecasting purposes. We believe that
these non-GAAP operating measures, when reviewed collectively with
our GAAP financial information, provide useful supplemental
information to investors in assessing our operating performance.
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.
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 geopolitical, economic and
market conditions, including heightened inflation, slower growth or
recession, changes to fiscal and monetary policy, higher interest
rates, currency fluctuations, the impact of the COVID-19 pandemic,
challenges in the supply chain and any disruptions in European
economies as a result of the conflict in Ukraine on our operations,
customer demand and our supplier's ability to meet our needs; 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 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;
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 filed with
the Securities and Exchange Commission on March 9, 2023. 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,
Twelve Months Ended December
31,
2022
2021
2022
2021
Net sales
$
149,126
$
182,423
$
611,738
$
562,191
Cost of sales
70,379
82,891
274,491
254,527
Gross profit
78,747
99,532
337,247
307,664
Operating expenses:
Selling
39,002
45,486
166,070
144,345
Marketing
15,429
21,525
66,730
58,120
General and administrative
26,086
27,266
102,700
88,816
Goodwill impairment
173,786
—
173,786
—
Total operating expenses
254,303
94,277
509,286
291,281
Income (loss) from operations
(175,556
)
5,255
(172,039
)
16,383
Other expense, net:
Interest expense
(2,556
)
(1,164
)
(7,043
)
(9,485
)
Loss on extinguishment of debt
—
—
—
(10,924
)
Other expense
503
(591
)
(1,532
)
(1,213
)
Total other expense, net
(2,053
)
(1,755
)
(8,575
)
(21,622
)
Income (loss) before income taxes
(177,609
)
3,500
(180,614
)
(5,239
)
Benefit from (provision for) income
tax
3,713
(3,477
)
3,917
(852
)
Net income (loss)
(173,896
)
23
(176,697
)
(6,091
)
Net loss attributable to noncontrolling
interests
—
—
—
123
Net income (loss) attributable to a.k.a.
Brands Holding Corp.
$
(173,896
)
$
23
$
(176,697
)
$
(5,968
)
Net income (loss) per share
Basic
$
(1.35
)
$
0.00
$
(1.37
)
$
(0.06
)
Diluted
$
(1.35
)
$
0.00
$
(1.37
)
$
(0.06
)
Weighted average shares outstanding
Basic
128,873,269
128,334,709
128,716,710
93,231,377
Diluted
128,873,269
128,334,709
128,716,710
93,231,377
a.k.a. BRANDS HOLDING CORP. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited)
December 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
$
46,319
$
38,832
Restricted cash
2,054
2,186
Accounts receivable
3,231
2,663
Inventory, net
126,533
115,783
Prepaid income taxes
6,089
4,059
Prepaid expenses and other current
assets
13,378
20,809
Total current assets
197,604
184,332
Property and equipment, net
28,958
14,657
Operating lease right-of-use assets
37,317
26,415
Intangible assets, net
76,105
98,287
Goodwill
167,731
363,305
Deferred tax assets
1,070
—
Other assets
853
850
Total assets
$
509,638
$
687,846
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
20,903
$
25,088
Accrued liabilities
39,806
53,375
Sales returns reserve
3,968
6,887
Deferred revenue
11,421
11,344
Operating lease liabilities, current
6,643
5,721
Current portion of long-term debt
5,600
5,600
Total current liabilities
88,341
108,015
Long-term debt
138,049
103,182
Operating lease liabilities
34,404
21,370
Other long-term liabilities
1,483
1,333
Deferred income taxes
284
2,920
Total liabilities
262,561
236,820
Stockholders’ equity:
Preferred stock
—
—
Common stock
129
129
Additional paid-in capital
460,660
453,807
Accumulated other comprehensive loss
(45,185
)
(11,080
)
Retained earnings (accumulated
deficit)
(168,527
)
8,170
Total stockholders’ equity
247,077
451,026
Total liabilities and stockholders’
equity
$
509,638
$
687,846
a.k.a. BRANDS HOLDING CORP. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(unaudited)
Twelve Months Ended December
31,
2022
2021
Cash flows from operating
activities:
Net loss
$
(176,697
)
$
(6,091
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation expense
6,156
2,694
Amortization expense
14,192
14,016
Amortization of inventory fair value
adjustment
707
15,908
Amortization of debt issuance costs
647
596
Non-cash interest expense
—
11
Loss on extinguishment of debt
—
10,924
Lease incentives
1,722
361
Non-cash operating lease expense
9,779
6,246
Equity-based compensation
6,730
8,043
Deferred income taxes, net
(4,064
)
(11,951
)
Goodwill impairment
173,786
—
Changes in operating assets and
liabilities, net of effects of acquisitions:
Accounts receivable
(602
)
(858
)
Inventory
(16,257
)
(32,131
)
Prepaid expenses and other current
assets
6,134
(11,543
)
Accounts payable
(1,888
)
6,038
Income taxes payable
(2,442
)
(9,329
)
Accrued liabilities
(7,419
)
26,678
Returns reserve
(2,678
)
3,091
Deferred revenue
267
7,197
Lease liabilities
(8,392
)
(5,932
)
Net cash provided by operating
activities
(319
)
23,968
Cash flows from investing
activities:
Acquisition of businesses, net of cash
acquired
(5,321
)
(249,302
)
Purchase of noncontrolling interest
—
(20,198
)
Purchases of intangible assets
(247
)
(841
)
Purchases of property and equipment
(19,746
)
(7,734
)
Net cash used in investing activities
(25,314
)
(278,075
)
Cash flows from financing
activities:
Proceeds from initial public offering, net
of issuance costs
—
96,863
Payments of costs related to initial
public offering
(1,142
)
—
Proceeds from line of credit, net of
issuance costs
40,000
34,150
Repayment of line of credit
—
(42,204
)
Proceeds from issuance of debt, net of
issuance costs
(121
)
254,134
Repayment of debt
(5,600
)
(155,762
)
Taxes paid related to net share settlement
of equity awards
(104
)
—
Proceeds from issuances under equity-based
compensation plans
227
—
Proceeds from issuance of units
—
82,669
Net cash provided by financing
activities
33,260
269,850
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(272
)
(1,824
)
Net increase in cash, cash equivalents and
restricted cash
7,355
13,919
Cash, cash equivalents and restricted cash
at beginning of period
41,018
27,099
Cash, cash equivalents and restricted cash
at end of period
$
48,373
$
41,018
Reconciliation of cash, cash
equivalents and restricted cash:
Cash and cash equivalents
$
46,319
$
38,832
Restricted cash
2,054
2,186
Total cash, cash equivalents and
restricted cash
$
48,373
$
41,018
a.k.a. BRANDS HOLDING CORP. KEY
OPERATING AND FINANCIAL METRICS (unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Gross margin
53
%
55
%
55
%
55
%
Net income (loss) (in thousands)
$
(173,896
)
$
23
$
(176,697
)
$
(6,091
)
Net income (loss) margin
(117
)%
—
%
(29
)%
(1
)%
Adjusted EBITDA2 (in thousands)
$
6,093
$
16,129
$
31,872
$
62,431
Adjusted EBITDA2 margin
4
%
9
%
5
%
11
%
Key Operational Metrics and Regional
Sales
Three Months Ended December
31,
Twelve Months Ended December
31,
(metrics in millions, except AOV; sales
in thousands)
2022
2021
2022
2021
Key Operational
Metrics
Active customers4
3.8
3.7
3.8
3.7
Active customers across a.k.a.
Brands4,5
3.8
3.7
3.8
3.7
Average order value
$
77
$
84
$
82
$
86
Average order value across a.k.a.
Brands5
$
77
$
84
$
82
$
87
Number of orders
1.9
2.2
7.4
6.5
Number of orders across a.k.a. Brands5
1.9
2.2
7.4
7.0
Sales by Region
(actual)
U.S.
$
70,860
$
79,558
$
312,977
$
270,028
Australia
60,552
76,400
226,929
218,563
Rest of world
17,714
26,465
71,832
73,600
Total
$
149,126
$
182,423
$
611,738
$
562,191
Year-over-year growth
(18.3
)%
8.8
%
Year-over-year growth on a constant
currency basis1
(13.0
)%
13.3
%
Active Customers
We view the number of active customers as a key indicator of our
growth, the 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 key performance
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 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; and one-time or non-recurring items, and Adjusted EBITDA
margin as Adjusted EBITDA as a percentage of net income (loss).
Adjusted EBITDA is considered a non-GAAP financial measure under
the SEC’s rules because it excludes certain amounts included in net
income (loss), the most directly comparable financial measure
calculated in accordance with GAAP.
A reconciliation of non-GAAP Adjusted EBITDA to net income
(loss) for the three and twelve months ended December 31, 2022 and
2021 is as follows:
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Net income (loss)
$
(173,896
)
$
23
$
(176,697
)
$
(6,091
)
Add (deduct):
Total other expense, net
2,053
1,755
8,575
21,622
Provision for (benefit from) income
tax
(3,713
)
3,477
(3,917
)
852
Depreciation and amortization expense
4,975
5,374
20,348
16,710
Equity-based compensation expense
2,282
1,329
6,730
8,043
Inventory step-up amortization expense
—
3,657
707
15,908
Distribution relocation costs
—
—
1,302
—
Transaction costs
—
514
140
5,387
Severance
15
—
306
—
Goodwill impairment
173,786
—
173,786
—
Sales tax penalties
591
—
592
—
Adjusted EBITDA
$
6,093
$
16,129
$
31,872
$
62,431
Net income (loss) margin
(116.6
)%
—
%
(28.9
)%
(1.1
)%
Adjusted EBITDA margin
4.1
%
8.8
%
5.2
%
11.1
%
Net Income Attributable to a.k.a. Brands Holding Corp., As
Adjusted (or Net Loss, As Adjusted) and Net Income (Loss) Per
Share, As Adjusted
Net income attributable to a.k.a. Brands Holding Corp., as
adjusted (or net 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) attributable to a.k.a. Brands Holding Corp. (or
net 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 attributable to a.k.a. Brands Holding Corp., as adjusted (or
net loss, as adjusted) and net income (loss) per share, as adjusted
are meaningful measures to share with investors because they better
enable comparison of the performance with that of the comparable
period. In addition, net income attributable to a.k.a. Brands
Holding Corp., as adjusted (or net loss, as adjusted) and net
income (loss) per share, as adjusted afford investors a view of
what management considers a.k.a.’s core earnings performance and
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 three and twelve months ended December 31, 2022
by adjusting net loss and net loss per share for the following:
- Inventory step-up amortization expense resulting from the
acquisition of mnml;
- Impairment recognized on the goodwill recorded from the
acquisitions of the Culture Kings and Rebdolls reporting units,
which is a result of the worsening economic trends, including
continued inflation and rising interest rates, as well as
unfavorable demand due to a gradual customer shift from primarily
online shopping to a mix of online and physical store shopping;
and
- The tax benefit related to the finalization of Australia tax
basis allocation pertaining to the inventory and intangibles
included in the purchase of the Culture Kings non-controlling
interest, as well as an intra-entity transfer of intellectual
property rights.
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 and twelve months ended December 31, 2022
are as follows:
Three Months Ended
December 31, 2022
Twelve Months 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
$
(0.03
)
$
(0.04
)
Weighted-average shares, diluted
128,873,269
128,716,710
We have calculated net income attributable to a.k.a. Brands
Holding Corp, as adjusted and net income per share, as adjusted for
the three and twelve months ended December 31, 2021 by adjusting
net income (loss), net loss per share and net loss attributable to
noncontrolling interests, as applicable, for the following:
- Inventory step-up amortization expense resulting from the
acquisition of Culture Kings;
- Equity-based compensation expense related to performance-based
awards that vested upon IPO;
- Loss on extinguishment of debt; and
- Removal of the tax effect of non-deductible incentive
units.
A reconciliation of non-GAAP net income, as adjusted to net
income (loss) attributable to a.k.a. Brands Holding Corp., as well
as the resulting calculation of net income per share, as adjusted
for the three and twelve months ended December 31, 2021 are as
follows:
Three Months Ended
December 31, 2021
Twelve Months Ended
December 31, 2021
Net income (loss) attributable to a.k.a.
Brands Holding Corp.
$
23
$
(5,968
)
Adjustments:
Inventory step-up amortization expense
3,657
15,908
Equity-based compensation expense related
to performance-based awards
—
4,903
Loss on extinguishment of debt
—
10,924
Tax expense - removal of the tax effect of
non-deductible incentive units
1,689
1,689
Tax effects of adjustments
(1,097
)
(9,521
)
Net income, as adjusted
$
4,272
$
17,935
Net loss attributable to noncontrolling
interests
$
—
$
123
Adjustments:
Inventory step-up amortization expense
—
(5,513
)
Tax effects of adjustment
—
1,654
Net income attributable to noncontrolling
interests, as adjusted
$
—
$
(3,736
)
Net income, as adjusted
$
4,272
$
17,935
Net loss attributable to noncontrolling
interests, as adjusted
—
(3,736
)
Net income attributable to a.k.a. Brands
Holding Corp., as adjusted
$
4,272
$
14,199
Net income per share, as adjusted
$
0.03
$
0.15
Weighted-average shares, diluted
128,334,709
93,231,377
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, for certain periods is as
follows:
Twelve Months Ended December
31, 2022
Twelve Months Ended December
31, 2021
Growth Rate
Actual
Actual
Culture Kings
Pro Forma
Actual
Pro Forma
U.S.
$
312,977
$
270,028
$
7,735
$
277,763
15.9
%
12.7
%
Australia
226,929
218,563
36,000
254,563
3.8
%
(10.9
)%
Rest of world
71,832
73,600
7,464
81,064
(2.4
)%
(11.4
)%
Total
$
611,738
$
562,191
$
51,199
$
613,390
8.8
%
(0.3
)%
Three Months Ended December
31, 2021
Three Months Ended December
31, 2020
Growth Rate
Actual
Actual
Culture Kings
Pro Forma
Actual
Pro Forma
U.S.
$
79,558
$
42,098
$
3,563
$
45,661
89.0
%
74.2
%
Australia
76,400
22,070
45,940
68,010
246.2
%
12.3
%
Rest of world
26,465
6,613
7,150
13,763
300.2
%
92.3
%
Total
$
182,423
$
70,781
$
56,653
$
127,434
157.7
%
43.2
%
Three Months Ended December
31, 2022
Three Months Ended December
31, 2020
Two-year Growth Rate
Actual
Actual
Culture Kings
Pro Forma
Actual
Pro Forma
U.S.
$
70,860
$
42,098
$
3,563
$
45,661
68.3
%
55.2
%
Australia
60,552
22,070
45,940
68,010
174.4
%
(11.0
)%
Rest of world
17,714
6,613
7,150
13,763
167.9
%
28.7
%
Total
$
149,126
$
70,781
$
56,653
$
127,434
110.7
%
17.0
%
Twelve Months Ended
December 31, 2021
Twelve Months Ended December
31, 2020
Growth Rate
Pro Forma
Actual
Culture Kings
Pro Forma
Actual
Pro Forma
U.S.
$
277,763
$
125,179
$
12,968
$
138,147
115.7
%
101.1
%
Australia
254,563
67,850
134,318
202,168
222.1
%
25.9
%
Rest of world
81,064
22,887
21,846
44,733
221.6
%
81.2
%
Total
$
613,390
$
215,916
$
169,132
$
385,048
160.4
%
59.3
%
________________________ 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, 2021, 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 key operating and financial metrics and
non-GAAP financial measures.
3 The Company has not provided a
quantitative reconciliation of its Adjusted EBITDA outlook to a
GAAP net income 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 Metrics “across a.k.a. Brands” assume we
owned Culture Kings for all periods presented.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230309005677/en/
Investor Contact investors@aka-brands.com
Media Contact media@aka-brands.com
aka Brands (NYSE:AKA)
Historical Stock Chart
From Feb 2024 to Mar 2024
aka Brands (NYSE:AKA)
Historical Stock Chart
From Mar 2023 to Mar 2024