Q1 2022 AKA Brands Holding Corp Earnings Call

May 10, 2022

Operator: Greetings, and welcome to a.k.a. Brands Holding Corp. Q1 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Emily Goldberg. Thank you, ma'am. You may begin your presentation.

Greetings and welcome to AKA Brands Holding Core First Quarter 2022 Earnings Conference Call. At this time all participants are in a listen only mode.

Greetings and welcome to AK, a brand holding corps first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad.

If anyone should require operator assistance during today's conference, please press star-zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn this conference over to your host Ms. Emily Goldberg. Thank you Ma'am you may begin your presentation. Good afternoon. Thank you for joining AK brands first quarter 2022 conference call to discuss the results. We released this afternoon, which can be found on our website at IR Dot AK dash brands Dot com.

I would not like to turn this conference over to your host miss Emily Goldberg. Thank you ma'am. You may begin

Emily Goldberg: Good afternoon. Thank you for joining a.k.a. Brands Q1 2022 conference call to discuss the results we released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call are Jill Ramsey, Chief Executive Officer, and Ciarán Long, Chief Financial Officer. Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward-looking statements which refer to expectations, projections, or other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially than those expressed. For a further discussion of the risks related to our business, please see our filings with the SEC. Please note we assume no obligation to update any such forward-looking statements. This call will contain non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin.

Good afternoon. Thank you for joining AKA Brands first quarter 2022 conference calls to discuss the results we released this afternoon, which can be found on our website at IR.aka-brands.com.

With me on the call are Jill Ramsey, Chief Executive Officer, and Kiran Long, Chief Financial Officer.

On the call are Jill Ramsey, Chief Executive Officer, and Kieran long Chief Financial Officer.

Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward-looking statements which refer to expectations, projections, or other characterizations of future events, including guidance and underlying assumptions.

Before we get started I'd like to remind you of the company's Safe Harbor language management may make forward looking statements, which refer to expectations projections or other characterizations of future events, including guidance and underlying assumptions forward looking statements involve risks and uncertainties that could cause actual results to differ materially than those expressed.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially than those expressed.

For further discussion of the risks related to our business, please see our filings with the SEC.

For further discussion of the rest related to our business. Please see our filings with the SEC.

Please note we assume no obligation to update any such forward-looking statement.

Please note we assume no obligation to update any such forward looking statements.

This call will contain non-GAF financial measures such as adjusted EBITDA and adjusted EBITDA margin.

This call will contain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin.

Emily Goldberg: Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. The call will also contain certain numbers presented on a pro forma basis, which includes the impact of Culture Kings as if we had owned it for all periods and comparable periods described. Now I'll turn the call over to Jill.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release, furnished to the SEC, and available on our website.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website.

The call will also contain certain numbers presented on a pro forma basis, which includes the impact of culture kinks as if we had owned it for all periods and comparable periods described. Now I'll bring the call over to jail.

The call will also contain certain numbers presented on a pro forma basis, which includes the impact of culture Kings as if we had owned for all periods in comparable periods described now I'll turn the call over to Joe.

Jill Ramsey: Thank you, Emily, and thanks everyone for joining our call today. I would like to start by recognizing our brands and teams for their impressive and agile execution through what continues to be a challenging environment. I'm extremely proud of our Q1 results, which exceeded our expectations, reflecting the strength of our brands and the agility of our business model. Q1 net sales grew 116% to $148 million. Pro forma net sales increased 24%, which is on top of an incredibly impressive 98% growth last year on a pro forma basis. Importantly, we continue to deliver on our unique combination of growth and profitability with adjusted EBITDA margin ahead of expectations at 7.2%.

Thank you, Emily, and thanks everyone for joining our call today. I would like to start by recognizing our brands and teams for their impressive and agile execution through what continues to be a challenging environment.

Thank you Emily and thanks, everyone for joining our call today.

I would like to start by recognizing our brands and teams for their impressive and agile execution through what continues to be a challenging environment.

I'm extremely proud of our first quarter results, which exceeded our expectations, reflecting the strength of our brand and the agility of our business model.

Im extremely proud of our first quarter results, which exceeded our expectations, reflecting the strength of our brand and the agility of our business model.

First quarter net sales grew 116% to $148 million.

Proforma net sales increased 24%, which is on top of an incredibly impacted 98% growth last year on a Proforma base.

Pro forma net sales increased 24%, which is on top of an incredibly in prostate and 98% growth last year on a pro forma basis.

Importantly, we continue to deliver on our unique combination of growth and profitability with adjusted EBITDA margin ahead of expectations at 7.2 percent.

Importantly, we continue to deliver on our unique combination of growth and profitability with adjusted EBITDA margin ahead of expectations at seven 2%.

Jill Ramsey: Equally exciting is the continued expansion of our customer base with a 46% increase in active customers on a pro forma basis to over 3.8 million customers. We are laser-focused on growing awareness with Gen Z and millennial customers and remain confident that there is tremendous potential for our brands to drive continued market share gains in the US and globally. Our US business outperformed expectations with incredible net sales growth of 54% on a pro forma basis. I'm pleased to share that the US now makes up the majority of our volume and is by far the fastest-growing region. Our international region also had a robust quarter with 30% growth on a pro forma basis.

Equally exciting is the continued expansion of our customer base with a 46% increase in active customers on a pro forma basis to over 3.8 million customers.

Equally exciting is the continued expansion of our customer base with a 46% increase in active customers on a pro forma basis to over $3 8 million customers.

We are laser focused on growing awareness with Gen Z and Millennial customers and remain confident that there is tremendous potential for our brands to drive continued market share gains in the US and globally.

We are laser focused on growing awareness with Gen Z and millennial customers and remain confident that there is tremendous potential for our brands to drive continued market share gains in the U S and globally.

Our U.S. business outperformed expectations with incredible net sales growth of 54 percent on a pro forma basis.

Our U S business outperformed expectations with incredible net sales growth of 54% on a pro forma basis.

I'm pleased to share that the U.S. now makes up the majority of our volume and is by far the fastest growing region.

I'm pleased to share that the U S. Now makes up the majority of our volume and it's by far the fastest growing region.

Our international region also had a robust border with 30% growth on a pro forma basis.

Our international region also had a robust quarter with 30% growth on a pro forma basis.

Jill Ramsey: Turning to Australia, as we shared on our last earnings call, this region experienced an unprecedented Omicron surge in January and February, resulting in a disruption in consumer behavior and a decrease in demand. While trends improved as the quarter progressed, net sales were down 6% on a pro forma basis in the quarter. As expected, Culture Kings was disproportionately impacted due to the current penetration in Australia and their physical store footprint. I'll briefly share some highlights from our brands in Q1 before turning it over to Ciarán. Across our brands, we saw a strong start to spring and summer in the US, which is when our brands truly shine. First, Princess Polly had another great quarter of momentum and growth, particularly in the US, where we continue to gain awareness and market share as demonstrated by the recent Piper Sandler Taking Stock With Teens survey.

Turning to Australia, as we shared on our last earnings call, this region experienced an unprecedented omicron surge in January and February , resulting in a disruption in consumer behavior and a decrease in demand.

Turning to Australia as we shared on our last earnings call. This region experienced an unprecedented Omar Khan surge in January and February resulting in disruption in consumer behavior and a decrease in demand.

While trends improved as the quarter progressed, net sales were down six percent on a pro-forma basis in the quarter.

While trends improved as the quarter progressed net sales were down 6% on a pro forma basis in the quarter.

As expected, culture came with disproportionately impacted due to the current penetration in Australia and their physical store flow.

As expected culture Kings was disproportionately impacted due to the current penetration in Australia and their physical store footprint.

I'll briefly share some highlights from our brands in the first quarter before turning it over to Kira.

I'll briefly share some highlights from our brands in the first quarter before turning it over to Kieran.

Across our brands, we saw a strong start to spring and summer in the US, which is when our brands truly shine.

Across our brands, we saw a strong start to spring and summer in the U S, which is when our brands truly shine.

First, Princess Polly had another great quarter of momentum and growth, particularly in the US, where we continue to gain awareness and market share as demonstrated by the recent Piper Sandler taking stock of team surveys.

Princess Polly had another great quarter of momentum and growth, particularly in the U S, where we continue to gain awareness and market share as demonstrated by the recent paper Sandler taking stock of Teen survey.

Jill Ramsey: Princess Polly has remained in the top 10 teen online shopping destinations in the US for the last three years and has now steadily climbed the ranks to reach third favorite e-commerce site among upper-income female teens in this year's survey. Princess Polly continues to excite customers with their high-quality on-trend merchandise. Dresses, matching sets, and festival wear drove outsized growth in the quarter as Coachella and other festivals and parties came roaring back for the first time in two years. We are particularly pleased with the expansion of Princess Polly's sustainable Earth Club assortment, and we remain on track to meet our target of converting 40% of their assortment to more sustainable fabrics by the end of the year.

Princess Polly has remained in the top 10 teen online shopping destinations in the U.S. for the last three years and has now steadily climbed the ranks to reach third favorite e-commerce site among other income female teens in this year's survey.

Princess Polly has remained in the top 10 tier online shopping destinations in the U S. For the last three years and has now steadily climbed the ranks to reach third favorite E. Commerce site among upper income female teens in this in this year survey.

Princess Polly continues to excite customers with their high-quality, on-trend merchandise. Dresses, matching sets, and festival wear drove outside growth in the quarter, as Coachella and other festivals and parties came roaring back for the first time in two years.

Princess Polly continues to excite customers with our high quality on trend merchandise dress is matching sats and festival wear drove outsized growth in the quarter as Coachella and other festivals and parties came roaring back for the first time in two years.

We are particularly pleased with the expansion of Princess Polly's Sustainable Earth Club assortment, and we remain on track to meet our target of converting 40% of their assortment to more sustainable fabric by the end of the year.

We are particularly pleased with the expansion of Princess Polly sustainable Earth's club assortment and we remain on track to meet our target of converting 40% of their assortment to more sustainable fabric by the end of the year.

Jill Ramsey: Our recently launched extended size collection, Curve, also continues to perform well, and we are excited about the many new customers we are attracting with this assortment. Princess Polly remains an industry leader in marketing efficiency due to their expertise optimizing across social media, paid performance, in-house, and emerging marketing channels. Our micro-influencer strategy continues to be a differentiator and a critical part of our growth. We execute more than 1,000 collaborations a month across a vast and dynamic network of influencers. We are excited by the level of engagement and growth we saw on TikTok in Q1, with 16% growth in followers or 50,000 new followers since the start of the year. TikTok is a top priority for our brands, and we will continue to improve efficiency on the platform by optimizing content and balancing across organic and paid.

And our recently launched extended sides collection curve also continues to perform well and we are excited about the many new customers. We are tracking with this assortment.

And our recently launched extended size collection curve also continues to perform well and we are excited about the many new customers we are tracking with this assortment.

Princess Polly remains an industry leader in marketing efficiency due to their expertise optimizing across social media, paid performance, in-house, and emerging marketing channels.

Princess Polly remains an industry leader in marketing efficiency due to their expertise optimizing across social media paid performance in house and emerging marketing channels.

Our micro-influencer strategy continues to be a differentiator and a critical part of our growth.

Our micro Influencer strategy continues to be a differentiator and a critical part of our growth.

We execute more than a thousand collaborations a month across a vast and dynamic network of insulin.

We execute more than a thousand collaborations a month across a vast and dynamic network of Influencers.

We are excited by the level of engagement and growth we saw on TikTok in the first quarter with 16% growth in followers or 50,000 new followers since the start of the year.

We are excited by the level of engagement and growth we saw on pick pack in the first quarter with 16% growth in followers or 50000, new followers since the start of the year.

TikTok is a top priority for our brand, and we will continue to improve efficiency on the platform by optimizing content and balancing across organic and paid.

Hitchcock is a top priority for our brands and we will continue to improve efficiency on the platform by optimizing content and balancing across organic and paid.

Jill Ramsey: Princess Polly's College Ambassador program also continues to exceed our expectations with over 1,000 new weekly ambassador sign-ups. We held several successful campus events at top universities in Q1, which drew large crowds and further bolsters our confidence in this strategy. Princess Polly is constantly testing new platforms and new tactics to ensure we are always in front of customers wherever they go, whether on dating apps, streaming services, gaming platforms, or elsewhere. Today's Gen Z and Millennial audience is constantly shifting between platforms and migrating to new ones, and we are committed to staying ahead of them. As we discussed on last quarter's call, reaching customers via text message marketing also continues to be a key priority. This important in-house marketing channel delivers a 16x return on spend, and we grew our text message subscribers by approximately 20% since last quarter.

Plymouth College Ambassador Program also continues to exceed our expectations with over a thousand new weekly Ambassador Signals.

But it took colleagues college Ambassador program also continues to exceed our expectations with over 1000, New weekly ambassador sign ups.

We held several successful campus events at top universities in the first quarter, which drew large crowds and further vultures are confident in this strategy.

We held several successful campus events, a top universities in the first quarter, which drew large crowds and further bolsters our confidence in this strategy.

Princess Polly is constantly testing new platforms and new tactics to ensure we are always in front of customers wherever they go whether on dating apps streaming services gaming platforms or elsewhere today's gen Z and millennial audience is constantly shifting between platforms and migrating to new ones and we.

Princess Polly is constantly testing new platforms and new tactics to ensure we are always in front of customers wherever they go, whether on dating apps, streaming services, gaming platforms, or elsewhere. Today's Gen Z and Millennial audience is constantly shifting between platforms and migrating to new ones, and we are committed to staying ahead of them.

We're committed to staying ahead of them.

As we discussed on last quarter's call, reaching customers via text message marketing also continues to be a key priority.

This important in-house marketing channel delivers a 16x return on spend, and we grew our text message subscribers by approximately 20% since last quarter.

This important in house marketing channel delivers a 16 X return on spend and we grew our text message subscribers by approximately 20% since last quarter.

Jill Ramsey: Across social media, paid performance, and in-house channels, we actively manage over 20 marketing platforms, which allows us to be flexible, gain new customers, and optimize our marketing efficiency. On the customer experience front, Princess Polly's loyalty program continues to outperform expectations, with the average spend for loyalty customers being 45% higher than non-loyalty customers. We're excited to add a new base tier to opt in all customers to the rewards program later this year and anticipate this will drive further engagement in this segment. Princess Polly is also developing personalization capabilities to enhance customer relevance even further. For example, in Q1, Princess Polly pilot tested a dedicated Curve homepage, which targets shoppers who engage with extended size content. We saw conversion rates more than triple when prospective Curve customers were redirected to the Curve landing page.

Across social media, paid performance, and in-house channels, we actively manage over 20 marketing platforms, which allows us to be flexible, gain new customers, and optimize our marketing efficiency.

Across social media paid performance and in house channels, we actively manage over 20 marketing platforms, which allows us to be flexible gain new customers and optimize our marketing efficiency.

On the customer experience front, Princess Polly's loyalty program continues to outperform expectations, with the average spend for loyalty customers being 45% higher than non-loyalty customers.

On the customer experience front Princess Poly's loyalty program continues to outperform expectations with the average spend for loyalty customers being 45% higher than non loyalty customers.

And we're excited to add a new base tier to opt in all customers to the rewards program later this year. And anticipate this will drive further engagement in this segment.

And we're excited to add a new base tier to opt in all customers to the rewards program. Later this year and anticipate this will drive further engagement in this segment.

Princess Polly is also developing personalization capabilities to enhance customer relevance even further. For example, in the first quarter, Princess Polly pilot tested a dedicated curve homepage which targets shoppers who engage with extended-sized content.

Princess Polly is also developing personalization capabilities to enhance customer relevance even further.

For example, in the first quarter Princess Polly pilot tested a dedicated curve homepage, which targets shoppers, who engage with extended size content.

we saw conversion rates more than triple when prospective curve customers were redirected to the curve landing page.

We saw conversion rates more than triple win perspective, curb customers were redirected to the curb landing page.

Jill Ramsey: We are just scratching the surface with personalization and are excited to expand this capability in the coming quarters. We also continue to execute on our international plans, primarily in the UK. We're very excited by the continued momentum and potential for Princess Polly worldwide. Moving to Culture Kings, the brand performed as expected given the impact of Omicron, and supply chain cancellations that we discussed last quarter. We were very pleased to see traffic sequentially improve throughout the quarter, especially in stores, as COVID cases have come down from peak levels. Unique amongst our brands, Culture Kings has eight stores that put on incredible live events, many with celebrity appearances. These live events are key to the Culture Kings business model because they drive engagement, energy, and hype in our stores and generate great content that we amplify out on our digital properties and social media.

We are just scratching the surface with personalization and are excited to expand this capability in the coming quarters.

We are just scratching the surface with personalization are now are excited to expand this capability in the coming quarters.

We also continue to execute on our international plans, primarily in the U.K. We're very excited by the continued momentum and potential for Princess Polly worldwide.

We also continued to execute on our international plans, primarily in the U K. We're very excited by the continued momentum and potential for Princess Polly worldwide.

Moving to Culture Kings, the brand performed as expected given the impact of Omicron and supply chain cancellations that we discussed last quarter.

Moving to culture King the brand performed as expected given the impact of omicron in supply chain cancellations that we discussed last quarter.

We were very pleased to see traffic sequentially improve throughout the quarter, especially in stores as COVID cases have come down from peak levels.

We were very pleased to see traffic sequentially improved throughout the quarter, especially in stores as Covid cases have come down from peak levels.

Unique amongst our brands, Culture Kings has eight stores that put on incredible live events. Many with celebrity experience appeared.

Unique amongst our brands cultural King has eight stores that put an incredible live events, many with celebrity appearances.

These live events are key to the Culture King's business model because they drive engagement, energy, and hype in our stores and generate great content that we amplify out on our digital properties and social media.

These live events are key to the culture change business models, because they drive engagement energy and height in our stores and generate great content that we amplify out on our digital properties and social media.

Jill Ramsey: After nearly a two-year pause on live in-store events, we were thrilled to welcome back events and celebrities in our stores, starting with an appearance by DJ Steve Aoki during Q1. We look forward to welcoming Shaq and other iconic celebrities to our Culture Kings stores in Australia in the coming months. We are particularly excited to be opening our first US flagship store in a premier location in Las Vegas, which is on track to open by year-end. Culture Kings will leverage their unique and highly experiential store format, live in-store events, and an assortment of global brands and Culture Kings world exclusive streetwear brands to drive traffic to the Vegas store. We believe this incredible flagship concept will generate buzz on social media and be a key building block to drive growth in the US.

and after nearly a two-year pause on live in-store events, we were thrilled to welcome back events and celebrities in our stores.

And after nearly a two year pause on live in store events, we were thrilled to welcome back events and celebrities in our stores starting with an appearance by DJ Steve Aoki during the first quarter.

starting with an appearance by DJ Steve Ioki during the first quarter.

And we look forward to welcoming Shaq and other iconic celebrities to our culture king stores in Australia in the coming months.

And we look forward to welcoming shack and other iconic celebrities to our culture King stores in Australia in the coming months.

We are particularly excited to be opening our first US flagship store in a premier location in Las Vegas, which is on track to open by year end.

We are particularly excited to be opening our first U S flagship store in a premier location in Las Vegas, which is on track to open by year end.

Culture, Kingsville leverage their unique and highly experiential store format.

Culture Kings will leverage their unique and highly experiential store format, live in-store events, and an assortment of global brands and Culture Kings World exclusive streetwear brands to drive traffic to the Vegas store.

In store events, and an assortment of global brands and culture King's World exclusive Street wear brands to drive traffic to the Vegas store.

We believe this incredible flagship concept will generate buzz on social media and be a key building block to drive growth in the U.S.

We believe this incredible flagship concept will generate buzz on social media and be a key building block to drive growth in the U S.

Jill Ramsey: To date, we are excited to have approximately 40 confirmed, highly recognized brands slated for the Vegas store and are actively lining up in-store celebrity events. I look forward to sharing additional details as we get closer to the opening. We are confident that the store opening will be a key awareness accelerator for Culture Kings in the US. Our Culture Kings in-house brands and print-on-demand merchandise represents the majority of our assortment and growth and continues to exceed our expectations. These exclusive merchandise segments are the fastest growing and are key competitive differentiators in streetwear fashion. As a reminder, the print-on-demand capability enables us to quickly jump on pop culture trends and license designs to print on tees and hoodies to produce new merchandise for customers within days.

To date, we are excited to have approximately 40 confirmed highly recognized brands affiliated for the Vegas store and are actively lining up in-store celebrity events.

To date, we are excited to have approximately 40 confirmed highly recognized brands slated for the Vegas store and are actively lining up in store celebrity events.

I look forward to sharing additional details as we get closer to the opening. We are confident that the store opening will be a key awareness accelerator for culture kings in the US.

I look forward to sharing additional details as we get closer to the opening we are confident that the store opening will be a key awareness accelerator for culture King in the U S.

Our culture teams in-house brands and print-on-demand merchandise represents the majority of our assortment and growth and continues to exceed our expectations.

Our culture teams in house brands and print on demand merchandise represents the majority of our assortment and growth and continues to exceed our expectations.

These exclusive merchandise segments are the fastest growing and are key competitive differentiators in streetwear fashion.

These exclusive merchandise segments are the fastest growing and our key competitive Differentiators and street wear fashion.

As a reminder, the print-on-demand capability enables us to quickly jump on top culture trends and license designs to print on tees and hoodies to produce new merchandise for customers within days.

As a reminder, the print on demand capability enables us to quickly jump on pop culture trends and license designs to print on Ts and hoodie to produce new merchandise for customers within days.

Jill Ramsey: This allows us to quickly test trends and scale printing production only as needed, keeping our inventory efficient and our gross margins high. With the acquisition of our new facility outside of LA, we are doubling down on this capability and have already seen great results. Some recent successful print-on-demand collaborations include popular throwbacks and latest trends such as Squid Game, Dennis Rodman, Naruto, Attack on Titan, and the return of nineties TV hits like Teenage Mutant Ninja Turtles and Bel-Air. While Culture Kings' strategy is focused on exclusive in-house brands, third-party brands help to strategically build credibility within the streetwear category. We have a broad range of over 200 brands, and while third-party brands make up less than half of the Culture Kings volume, as discussed last quarter, we have seen order cancellations and supply chain impacts on some third-party brands, which disproportionately impact the Australian business.

This allows us to quickly test trends and scale preventing production only as needed, keeping our inventory efficient and our gross margins high.

This allows us to quickly test trends and scale printing production only as needed keeping our inventory efficient and our gross margins high.

With the acquisition of our new facility outside of LA, we are doubling down on this capability and have already seen great results.

With the acquisition of our new facility outside of L. A we are doubling down on this capability and have already seen great results.

Some recent successful print-on-demand collaborations include popular throwbacks and latest trends such as Squid Game, Dennis Rodman, Naruto, Attack on Titan, and the return of 90s TV hits like Teenage Mutant Ninja Turtles and Bel Air.

Some recent successful print on demand collaborations include popular throwback and latest trends such as squid games, Dennis Rodman Maroto, a cap on Titan and the return of 90 television hits like teenage mutant Ninja turtles, and Bel Air.

While Culture King's strategy is focused on exclusive in-house brands, third-party brands help to strategically build credibility within the streetwear category. We have a broad range of over 200 brands, and while third-party brands make up less than half of the Culture King's volume, as discussed last quarter, we have seen order cancellation and supply chain impact on some third-party brands, which disproportionately impact the Australian business.

While culture King strategy is focused on exclusive in house brands third party brands helped to strategically build credibility within the street wear category.

We have a broad range of over 200 brands.

And while third party brands make up less than half of the culture King volume as discussed last quarter, we have seen order cancellations and supply chain impact on some third party brands, which disproportionately impacts the Australian business.

Jill Ramsey: As a reminder, we expect this to be a $10 million impact to sales in the H1 and a $10 million impact in the H2. We remain confident in our ability to navigate these challenges, especially as our in-house Culture Kings exclusive brands continue to drive the majority of our growth. We are confident about the long-term and global potential of this incredible brand and are excited to expand Culture Kings' presence in the US and internationally. Culture Kings brings together fashion, music, culture, and lifestyle unlike anyone else in streetwear and combines this with a powerful and unique experiential store format. We can't wait to launch our store and introduce more US customers to this brand and see it grow for years to come. Turning next to Petal & Pup, our fastest growing brand in the US this quarter.

As a reminder, we expect this to be a $10 million impact to sales in the first half and a $10 million impact in the back half.

As a reminder, we expect this to be a $10 million impact of sales in the first half and a $10 million impact in the back half.

We remain confident in our ability to navigate these challenges, especially as our in-house culture kings exclusive brands continue to drive the majority of our growth.

We remain confident in our ability to navigate these challenges, especially as our in house culture Kings exclusive brands continued to drive the majority of our growth.

We are confident about the long-term and global potential of this incredible brand and are excited to expand Culture King's presence in the U.S. and international.

We are confident about the long term and global potential of this incredible brand and are excited to expand culture King's presence in the U S and internationally.

Culture King brings together fashion, music, culture, and lifestyle, unlike anyone else in streetwear, and combines this with a powerful and unique experiential store format.

Culture, King brings together fashion music culture and lifestyle. Unlike anyone else in street wear and combined this with a powerful and unique experiential store format.

We can't wait to launch our store and introduce more US customers to this brand and see it grow for years to come.

We can't wait to launch our store and introduce more U S customers to this brand and see it grow for years to come.

Turning next to Paddling Pup, our fastest-growing brand in the U.S. Mitzcore.

Turning next to pedal and Pup, our fastest growing brand in the U S. This quarter the.

Jill Ramsey: The acceleration and growth curve at Petal & Pup is further proof of our model and gives us complete confidence that we can replicate the same success scaling the brand as we did with Princess Polly. Petal & Pup was well positioned to meet the change in fashion trends in the US as customers returned to social events. As we noted last quarter, 2022 is set to be the largest wedding year in nearly 40 years, and Petal & Pup is well positioned with wedding guest dresses, vacations, and date night collections, which all grew at 2x their overall growth rate in Q1.

The acceleration and growth curve at Petal and Pup is further proof of our model and gives us complete confidence that we can replicate the same success scaling the brand as we did with Princess Polly.

The acceleration in growth curve at Petaline pop is further proof of our model and gives us complete confidence that we can replicate the same success scaling the brand as we did with Princess Polly.

Pedal and pop was well positioned to meet the change in fashion trends in the U.S. as customers returned to social events.

Pedal on top with well positioned to meet the change in fashion trends in the U S as customers returned to social events.

As we noted last quarter, 2022 is set to be the largest wedding year in nearly 40 years, and Petal & Top is well positioned with wedding guest dresses, vacations, and date night collections.

As we noted last quarter 2022 is set to be the largest wedding year in nearly 40 years and paddling top is well positioned with wedding guests dresses vacation date night collection.

which all grew at 2x their overall growth rate in the first quarter.

Which all grew at two <unk> their overall growth rate in the first quarter.

Jill Ramsey: Petal & Pup's strategy of strong seasonal focus, test and repeat buying, and a growing mix of exclusive product is working, as evidenced by an 80% increase in customer repeat rate for Q1 compared to Q1 last year. Petal & Pup is just getting started on increasing the penetration of exclusives, and we're excited to launch six new exclusive capsules in Q2. We continue to see great success with our micro-influencer strategy in terms of new customer acquisition and conversion. During the quarter, Petal & Pup more than doubled the number of influencer collaborations, and we're excited for an upcoming collab with top Australian influencer Georgie Stevenson, which we believe will meaningfully drive engagement and excitement. Petal & Pup is also expanding marketing efforts to new channels with a heavier focus on TikTok and Pinterest.

Petal and Pup's strategy of strong seasonal focus, test and repeat buying, and a growing mix of exclusive product is working, as evidenced by an 80% increase in customer repeat rate for the first quarter compared to the first quarter last year.

Pedal and talk strategy, a strong seasonal focus test and repeat buying and a growing mix of exclusive product is working as evidenced by an 80% increase in customer repeat rate for the first quarter compared to the first quarter last year.

Pedal and Puff is just getting started on increasing the penetration of exclusives. And we're excited to launch six new exclusive capsules in the second quarter.

I don't want topic is just getting started on increasing the penetration of exclusive and.

And we're excited to launch six new exclusive capsules in the second quarter.

We continue to see great success with our micro-influencer strategy in terms of new customer acquisition and conversion.

We continue to see great success with our micro Influencer strategy in terms of new customer acquisition and conversion.

During the quarter, Petal and Puck more than doubled the number of influencer collaborations, and we're excited for an upcoming collab with top Australian influencer, Georgie Stevenson.

During the quarter pedal and put more than doubled the number of influencer collaborations and we're excited for an upcoming collab with top Australian influenced third, Georgia Stevenson, which.

which we believe will meaningfully drive engagement and excitement.

Which we believe will meaningfully drive engagement and excitement.

Petal and Pup is also expanding marketing efforts to new channels with a heavier focus on TikTok and Pinterest.

Pedal and pop is also expanding marketing efforts to new channels with a heavier focus on tick tock and Penn Trust.

Jill Ramsey: We've seen particularly strong growth in TikTok, with followers growing nearly 5x over last year. Turning to mnml. mnml had a solid Q1, driven by sales in denim and bottoms, a strong core competency of the brand. mnml has already benefited from both the AKA platform as well as learning from our other brands in the brief six months post-acquisition. We helped mnml transition to an AKA preferred fulfillment provider in April, which increased operational efficiencies, lowered costs, and importantly, improved experience and the lead time to customers. The team is already leveraging the shared knowledge from the AKA platform to develop new merchandising strategies, recruit and onboard talent, and launch new customer acquisition channels.

We've seen particularly strong growth in tick tock with followers growing nearly buybacks over last year.

We've seen particularly strong growth in TikTok with followers growing nearly 5x over last year.

Turning to minimal, minimal had a solid first quarter driven by sales in denim and bottoms, a strong core competency of the brand.

Turning to minimal minimal had a solid first quarter driven by sales in denim and bottoms are strong strong core competency of the brand.

Minimal has already benefited from both the aka platform as well as learning from our other brands in the brief six months post acquisition.

Minimal has already benefited from both the 8-K a platform as well as learning from our other brands in the brief six months post acquisition.

We helped minimal transition to an a.k.a. preferred fulfillment provider in April , which increased operational efficiencies, lowered costs, and importantly improved experience and the lead time to customers.

We helped minimal transition to an 8-K, a preferred fulfillment provider in April which increased operational efficiencies lower cost and importantly improved experience and the lead time to customers.

And the team is already leveraging the shared knowledge from the aka platform to develop new merchandising strategies, recruit and onboard talent, and launch new customer acquisition changes.

And the team is already leveraging the shared knowledge from the 8-K, a platform to develop new merchandising strategies recruit and onboard talent and launched new customer acquisition channels.

Jill Ramsey: As mentioned on our last call, mnml is launching on Culture Kings Australia website in Q2, and we look forward to scaling this great brand both on the mnml site as well as the Culture Kings site and stores. We are also pleased with the Rebdolls Q1 performance and strong sales growth. Rebdolls has an exciting collaboration dropping in June with notable influencer Denise Mercedes, which will be a great brand awareness builder. Rebdolls continues to both benefit from the AKA platform synergies and learnings from our other brands, such as focusing on organic TikTok content, which led to a triple-digit boost in TikTok engagement in Q1. Turning briefly to our operations. The global environment remains challenging with continued elevated air freight costs, supply chain disruption, and inflationary pressures.

As mentioned on our last call, Minimal is launching on Culture King's Australia website in the second quarter and we look forward to scaling this great brand both on the Minimal site as well as the Culture King site and stores.

As mentioned on our last call minimal is launching on culture claims Australia web site in the second quarter and we look forward to scaling this grant great brands both in on the minimal site as well as the culture King site in stores.

We are also pleased with the Repdoll's first quarter performance and strong sales growth. Repdoll has an exciting collaboration dropping in June with notable influencer Denise Mercedes, which will be a great brand awareness builder.

We are also pleased with the <unk> first quarter performance and strong sales growth.

Red Dog has an exciting collaboration dropping in June with notable Influencers, Denise Mercedes, which will be a great brand awareness builder.

Reddolls continues to both benefit from the a.k.a. platform synergies and learning from our other brands, such as focusing on organic TikTok content, which led to a triple-digit boost in TikTok engagement in the first quarter.

<unk> continues to both benefit from the 8-K, a platform synergies and learnings from our other brands such as focusing on organic top content, which led to a triple digit boost and tic toc engagement in the first quarter.

Turning briefly to our operations, the global environment remains challenging with continued elevated air freight costs, supply chain disruption, and inflationary pressure.

Turning briefly to our operations the global environment remains challenging with continued elevated airfreight costs supply chain disruption and inflationary pressures.

Jill Ramsey: We've been able to mitigate these challenges with our strong relationships across a diversified vendor base and our flexible business model. Additionally, we have been able to raise prices without impacting demand, which is a testament to the pricing power of our brands and the importance of our exclusive merchandising strategy. Ciarán will discuss our Q1 performance and guidance in more detail shortly, but we remain confident in our full year outlook. While we anticipate a softer Q2 as we lap monumental growth in the same period last year, we believe the fundamentals of our business remain strong, and we are well positioned for the back half. We are very excited to accelerate the growth of Culture Kings in the US with the opening of the distribution center, which is on track for Q2, and the opening of the Vegas store in Q4.

we've been able to mitigate these challenges with our strong relationships across a diversified vendor base and our flexible business model.

We've been able to mitigate these challenges with our strong relationships across a diversified vendor base and our flexible business model. Additionally.

Additionally, we have been able to raise prices without impacting demand, which is a testament to the pricing power of our brand and the importance of our exclusive merchandising strategy.

Additionally, we have been able to raise prices without impacting demand, which is a testament to the pricing power of our brands and the importance of our exclusive merchandising strategy.

Sharon will discuss our first quarter performance and guidance in more detail shortly but we remain confident in our full year outlook.

Tehran will discuss our first quarter performance and guidance in more detail shortly, but we remain confident in our full year outlook.

While we anticipate a softer second quarter as we last monumental growth in the same period last year, we believe the fundamentals of our business remain strong and we are well positioned for the back half. We are very excited to accelerate the growth of culture teams in the U.S. with the opening of the distribution center which is on track for the second quarter and the opening of the Vegas store in the fourth quarter.

While we anticipate a softer second quarter as we lapped monumental growth in the same period last year. We believe the fundamentals of our business remains strong and we are well positioned for the back half. We are very excited to accelerate the growth of culture teams in the U S. With the opening of the distribution center, which is on track for the second quarter.

And the opening of the Vegas store in the fourth quarter.

Jill Ramsey: Princess Polly continues to build awareness in the US, and we are positioned better than ever for the back to college season with our ambassador program. At the same time, we will continue to execute our scaling playbook for all our other brands. In summary, our Q1 performance exceeded our expectations and reaffirms our confidence in our competitive advantage, our powerful business model, and our strong brands. I recently spent time at several of our brand offices, and I'm more confident than ever that we have the best next gen talent on our teams. They are energized, engaged, and will truly take our brands to the next level of growth.

Princess Polly continues to build awareness in the U.S., and we are positioned better than ever for the back half to the back-to-college season with our ambassador program.

Princess Polly continues to build awareness in the U S and we are positioned better than ever for the back half to the back to college season with our Ambassador program.

And at the same time, we will continue to execute our scaling playbook for all our other brands.

In summary, our first quarter performance exceeded our expectations and reaffirms our confidence in our competitive advantage, our powerful business model, and our strong brand.

In summary, our first quarter performance exceeded our expectations and reaffirms our confidence in our competitive advantage, our powerful business model and our strong brands.

I recently spent time at several of our brand offices and I'm more confident than ever that we have the best next-gen talent on our team. They are energized, engaged, and will truly take our brands to the next level of growth.

I recently spent time at several of our brand offices and I'm more confident than ever that we have the best next Gen talent on our team. They are energized engaged and will truly take our brands to the next level of growth.

Jill Ramsey: Beyond our expansion in the US, we continue to see massive opportunity for organic growth in international markets, and we have a robust pipeline of direct to consumer fashion brands to add to our portfolio when the time is right. I'm excited for the quarters and years ahead and look forward to executing our strategy. With that, I'll turn the call over to Ciarán.

Beyond our expansion in the U.S., we continue to see massive opportunity for organic growth in international markets, and we have a robust pipeline of direct-to-consumer fashion brands to add to our portfolio when the time is right.

Beyond our expansion in the U S. We continue to see massive opportunity for organic growth in international markets and we have a robust pipeline of direct to consumer fashion brands to add to our portfolio. When the time is right.

I'm excited for the quarters and years ahead and look forward to executing our strategy. With that, I'll turn the call over to Kieran.

Im excited for the quarters and years ahead, and look forward to executing our strategy with that I'll turn the call over to Kieran.

Ciarán Long: Thank you, Jill, and good afternoon, everyone. We are pleased to have delivered sales and adjusted EBITDA above our expectations in Q1, despite the ongoing macro challenges. Our strong performance can be attributed to the flexibility of our business model and the strength of our brands. For Q1, net sales grew 116% to $148 million, as compared to $69 million last year. On a constant currency basis, net sales rose 121%. Adjusting for the inclusion of Culture Kings in the prior year, our pro forma net sales increased 24%. Pro forma average order value decreased 6% to $83 compared to the prior year, mostly due to lower FX rates. The total number of orders increased 29% to 1.8 million compared to the prior year on a pro forma basis.

Thank you Jim and good afternoon, everyone. We're pleased to have delivered sales and adjusted EBITDA above our expectations in the first quarter. Despite the ongoing macro challenges.

We are pleased to have delivered sales and adjusted EBITDA above our expectations in the first quarter, despite the ongoing macro challenges. Restaurant performance can be attributed to the flexibility of our business model and the strength of our brand.

Long performance can be attributed to the flexibility of our business model and the strength of our brands.

For the first quarter, net sales grew 116% to 148 million as compared to 69 million last

For the first quarter net sales grew 116% to 148 million as compared to $69 million last year.

on a constant currency basis, net sales rose 121 percent.

On a constant currency basis net sales rose 121%.

adjusting for the inclusion of culture kings in the prior year, or performing that sales increased 24%.

Adjusting for the inclusion of cultural things in the prior year, our pro forma net sales increased 24%.

Pro forma average order value decreased 6% to $83, compared to the prior year, mostly due to lower FX.

Pro forma average order value decreased 6% to $83 compared to the prior year, mostly due to lower FX rates the two.

The total number of orders increased 29% to 1.8 million compared to the prior year on a pro forma basis.

Total number of orders increased 29% to $1 8 million compared to the prior year on a pro forma basis for.

Ciarán Long: For the quarter, active customers during the trailing twelve months grew 46% on a pro forma basis to 3.8 million compared to last year and grew 120,000 on a sequential basis. The strong growth across both orders and active customers reflects the continued momentum in our brands as well as the success of our business model. Now, I will provide a few highlights from our three key regions, including on a pro forma basis, again, assuming Culture Kings within last year's results. Q1 net sales in the US increased $78 million, up 81% from Q1 last year and increased 54% on a pro forma basis. Our largest brand, Princess Polly, continues to be the primary driver of our growth in the US as we continue to build brand awareness.

For the quarter, active customers during the trailing 12 months grew 46% on a pro forma basis to 3.8 million compared to last year and grew 120,000 on a sequential basis.

For the quarter.

With customers during the trailing 12 months grew 46% on a pro forma basis to $3 8 million compared to last year and grew 120000 on a sequential basis.

The strong growth across both orders and active customers reflects the continued momentum in our brands, as well as the success of our business.

The strong growth across both orders and active customers reflects the continued momentum in our brands as well as the success of our business model.

Now I will provide a few highlights from our three key regions, including on a pro-formal basis, again, assuming culture kings within last year's results.

Now I will provide a few highlights from our three key regions, including on a pro forma basis again, assuming closer kings was in last year's results.

First quarter net sales in the US increased 78 million of 81% from the first quarter last year and increased 54% on a pro forma basis.

First quarter net sales in the U S increased $78 million.

1% from the first quarter last year and increased 54% on a pro forma basis.

Our largest brand, Princess Polly, continues to be the primary driver of our growth in the US as we continue to build brand awareness.

Our largest brand Princess Polly continues to be the primary driver of our growth in the U S. As we continue to build brand awareness.

Ciarán Long: As Jill mentioned, we are seeing the benefits of our platform through the continued growth at Princess Polly, and we remain pleased with the performance across all five of our brands. Australian net sales grew 173% to AUD 52 million from AUD 19 million in the prior year. With the inclusion of Culture Kings, net sales decreased 6% on a pro forma basis. The six percent decline was primarily driven by changes to the FX rate. In terms of supply chain cancellations, as discussed in our last call, we anticipated a $10 million impact to sales in H1. We saw $2 million of this impact in Q1, driven primarily by cancellations coming out of Vietnam, impacting Culture Kings in Australia. Overall, we saw effects of the COVID-related sales slowdown with a surge in the Omicron variant, as previously discussed.

As Jill mentioned, we are seeing the benefits of our platform through the continued growth at Princess Polly and we remain pleased with the performance across all five of our brands.

As Jim mentioned, we are seeing the benefits of our platform through the continued growth of Princess Polly and we remain pleased with the performance across all five of our brands.

Australian net sales grew 173% to 52 million from 19 million in the prior year.

Australia net sales grew 173% to $52 million from $19 million in the prior year.

With the inclusion of culture kings, net sales decreased 6% on a pro-former base.

With the inclusion of closer Kings net sales decreased 6% on a pro forma basis.

The 6% decline was primarily driven by changes to the FX.

The 6% decline was primarily driven by changes to the FX rates.

In terms of supply chain cancellations, as discussed in our last call, we anticipated a 10 million impact to sales in the first

In terms of supply chain cancellations.

Most of our last call, we anticipated $10 million impact to sales in the first half we.

We thought 2 million of this impact in the first quarter, from primarily by cancellations coming out of Vietnam, impacting culture kings in Australia.

We saw $2 million of this impact in the first quarter, driven primarily by cancellations coming out of Vietnam impacting culture things in Australia.

And overall, we saw effects of the COVID related sales lowdown with the surge in the omicron variant as previously discussed.

And overall, we saw effects of the Covid related sales slowdown with the surge in the normal corn variance as previously discussed.

Ciarán Long: Turning to Rest of World, net sales of $19 million increased 30% from Q1 in the prior year on a pro forma basis, which was impacted by the Omicron surge in New Zealand, where there was a similar consumer reaction as Australia. Moving to profitability, our gross profit for Q1 increased 107% to $84 million. Our gross margin rate was 56.8% as compared to 59% in the same period last year and was better than expected. The 220 basis point decline in gross margin rate was largely the result of higher air freight, which had a 360 basis point impact, and the inclusion of Culture Kings due to lower margin third-party product assortment, which had a 240 basis point impact.

Turning to the rest of the world, net sales of $90 million increased 30% from the first quarter of the prior year on a pro forma base.

Turning to rest of world.

Sales of $19 million increased 30% from the first quarter of the prior year on a pro forma basis, which was impacted by the omicron surge in New Zealand.

which was impacted by the Omicron Surgeon in New Zealand, where there was a similar consumer reaction as Australia.

Where there was a similar consumer reaction is Australia.

Moving to profitability, our gross profit for the first quarter increased 107% to 84 million.

Moving to profitability, our gross profit for the first quarter increased 107% to $84 million.

A gross margin rate was 56.8% as compared to 59% in the same period last year and was better than expected.

Our gross margin rate was 56, 8% as compared to 59% in the same period last year.

Better than expected.

The 220 basis point decline in gross margin rate was largely the result of higher air freight, which had a 360 basis point impact, and the inclusion of culture kings due to lower margin third party product assortment, which had a 240 basis point impact.

The 220 basis point decline in gross margin rate was largely the result of higher airfreight, which had a 360 basis point impact.

Inclusion of classic things due to lower margin third party product assortment, which had a 240 basis point impact.

Ciarán Long: These factors were partially offset by targeted price increases as we remain committed to maintain our strong gross margins. Selling expenses in the quarter were $40 million, compared to $18 million in the prior year. The increase in selling expenses during the quarter was due to the increase in the number of orders shipped, as well as the inclusion of Culture Kings and mnml. As a percentage of sales, selling expense deleveraged by 70 basis points to 27.2% compared to 26.5% in Q1 2021. Marketing expense increased to $16 million from $6 million. As a percentage of sales, marketing expense was 10.6%, a 160 basis point increase compared to Q1 2021.

These factors were partially offset by targeted price increases as we remain committed to maintain our strong growth market.

These factors were partially offset by targeted price increases as we remain committed to maintain our strong gross margins.

Selling expenses in the quarter were $40 million compared to $18 million in the prior year.

The increase in selling expenses during the quarter was due to the increase in the number of orders shipped as well as the inclusion of culture kings and minors.

The increase in selling expenses during the quarter was due to the increase in the number of orders shipped as well as the inclusion of closer things are minimal.

As a percentage of sales, selling expense delivered by 70 basis points to 27.2% compared to 26.5% in the first quarter of 2021.

As a percentage of sales selling expense deleveraged by 70 basis points to 27, 2% compared to 26, 5% in the first quarter of 2021.

marketing expense increased to $16 million from $6 million.

Marketing expense increased to $16 million from $6 million.

As a percentage of sales, marketing expense was 10.6%, a 160 basis point increase compared to the first quarter of 2021.

As a percentage of sales marketing expense was 10, 6%, a 160 basis point increase compared to the first quarter of 2021.

Ciarán Long: This increase was primarily due to Culture Kings' higher level of advertising spend and an increase in Princess Polly's marketing spend. As Jill mentioned, we continue to balance our investments in performance and influencer marketing to reach our customers in the most efficient way. Our G&A expense of $25 million increased from $13 million in the prior year. The increase in G&A expense was primarily due to the inclusion of Culture Kings and mnml. Additionally, there was an increase in salaries and related benefits, and equity-based compensation expense related to increases in headcount across functions to support business growth, as well as additional insurance and professional service fees. This was partially offset by a decrease in transaction costs. As a result, as a percentage of sales, G&A was 16.7% as compared to 19.5% in the same period last year.

This increase was primarily due to Culture King's higher level of advertising spend and an increase in Princess Polly's marketing.

This increase was primarily due to cultural things higher level of advertising spend and an increase in princess parties marketing spend.

As Jill mentioned, we continue to balance our investments in performance and influencer marketing to reach our customers in the most efficient way.

Jim mentioned, we continued to balance our investments in performance and Influencer marketing to reach our customers in the most efficient way.

Our GNA expense of $25 million increased from $13 million in the prior year.

Our G&A expense of $25 million increased from $13 million in the prior year.

the increase in GNA expense was primarily due to the inclusion of culture kings and members.

The increase in G&A expense was primarily due to the inclusion of closer kings and minerals.

Additionally, there was an increase in salaries and related benefits and equity-based compensation expense related to increases in headcount across functions to support business growth, as well as additional insurance and professional services.

Additionally, there was an increase in salaries and related benefits and equity based compensation expense relates to increases in headcount across functions to support business growth.

As well as additional insurance and professional service fees.

This was partially offset by a decrease in transaction costs.

As a result, as a percentage of sales, GNA was 16.7% as compared to 19.5% in the same period last year.

As a result as a percentage of sales G&A was 16, 7% as compared to 19, 5% in the same period last year.

Ciarán Long: For the quarter, adjusted EBITDA was $11 million versus $8 million in the prior year. As a percentage of sales, our adjusted EBITDA margin of 7.2% compared to 12.1% in the prior year Q1, which exceeded our expectations. Our net income attributable to AKA for the quarter was $1.5 million or $0.01 per share, compared to $1.5 million or $0.02 per share in the prior year. On an adjusted basis, our net income attributable to AKA was $2 million or $0.02 per share. Our weighted average shares outstanding were approximately 128.7 million for Q1 2022. Turning to the balance sheet. We ended the quarter with $41 million in cash and cash equivalents and $133 million in debt.

For the quarter, adjusted EBITDA was $11 million versus $8 million in the prior year.

as a percentage of sales are adjusted even on margin of 7.2% compared to 12.1% in the prior year first quarter, which exceeds their expectation.

As a percentage of sales our adjusted EBITA margin of seven 2% compared to 12, 1% in the prior year first quarter, which exceeded our expectations.

net income attributable to aka for the quarter was 1.5 million or one cents per share compared to 1.5 million or two cents per share in the prior year.

Our net income attributable to <unk> for the quarter was $1 5 million or one per share compared to $1 5 million or <unk> <unk> per share in the prior year.

On an adjusted basis, our net income attributable to Aka was $2 million or $2,000,000 per share.

On an adjusted basis, our net income.

Attributable to <unk> was 2 million or <unk> <unk> per share.

Our weighted average shares of standing were approximately 128.7 million for the first quarter of 2020.

Our weighted average shares outstanding were approximately $128 7 million for the first quarter of 2022.

Turning to the balance sheet, we ended the quarter with $41 million in cash and cash equivalents and $133 million in debt.

Turning to the balance sheet, we ended the quarter with $41 million in cash and cash equivalents.

$133 million index at.

Ciarán Long: At the end of the quarter, we had total liquidity of $66 million, including $25 million available on our credit facility. Inventory at the end of the quarter was $121 million, compared to $87 million at the end of Q1 2021. Turning to our outlook. For the full year, we are reaffirming our guidance with net sales expected to be in the range of $785 to 805 million. We remain pleased with the strong demand for our brands in the US market, as evidenced by our strong sales growth. On the top line, we are coming up against exceptional growth in Q2 of last year in both the US and Australia. Pro forma net sales grew 85% in H1 of last year.

At the end of the quarter, we have total liquidity of $66 million, including $25 million available on our credit card.

At the end of the quarter, we had total liquidity of 66 million, including $25 million available on our credit facility.

inventory at the end of the quarter was 121 million compared to 87 million at the end of the first quarter of 2020.

Inventory at the end of the quarter was $121 million compared to $87 million at the end of the first quarter of 2021.

Turning to our outlook, for the full year we are reaffirming our guidance with net sales expected to be in the range of 785 to 805 million.

Turning to our outlook for the full year, we are reaffirming our guidance with net sales expected to be in the range of $785 million to $805 million.

We remain pleased with the strong demand for our brands in the U.S. market as evidenced by our strong sales growth.

We remain pleased with the strong demand for our brands in the U S market as evidenced by our strong sales growth.

On the top line, we are coming up against exceptional growth in the second quarter of last year in both the U.S. and Australia.

On the top line, we are coming up against the exceptional growth in the second quarter of last year in both the U S and Australia.

perform a net sale to 85% in the first half of last year.

Pro forma net sales grew 85% in the first half of last year.

Ciarán Long: In H2 2021, our net sales growth was 44% on a pro forma basis, so we are lapping less robust growth as we move throughout the year. We continue to anticipate that growth in H2 will be much stronger than H1. In addition to compares easing in H2, we also anticipate improvements in sales trends in Australia. For the year, adjusted EBITDA is expected to be in the range of $90 to 100 million. We expect weighted average diluted share count of 128.8 million for the full year and 128.7 million for Q2.

In the second half of 2021, our net sales growth was 44% on a pro-former basis, so we are lapping less robust growth as we move throughout the year.

In the second half of 2021, our net sales growth was 44% on a pro forma basis.

So we are lapping less robust growth as we move throughout the year.

As a result, we continue to anticipate that growth in the back half of the year will be much stronger than the front half of the year.

In addition to compares easing in the back half, we also anticipate improvements in sales trends in Australia.

In addition to compares easing in the back half we also anticipate improvements in sales trends in Australia.

For the year, adjusted EBITDA is expected to be in the range of 90 to 100 million.

For the year adjusted EBITDA is expected to be in the range of $90 million to $100 million.

We expect weighted average diluted share count of 128.8 million for the full year and 128.7 million for the second quarter.

We expect weighted average diluted share count of $128 8 million for the full year and $128 7 million for the second quarter.

Ciarán Long: Capital expenditures are expected to be between $18 to 20 million for the full year. For Q2, we expect net sales to be in the range of $173 to 177 million. In addition to lapping extremely strong growth in Q2 of last year with the US reopening, we are up against an unfavorable FX impact of 7%, which equates to an additional $3 million headwinds compared to what we saw in Q1. In terms of supply chain cancellations from third-party brands, we continue to anticipate $10 million impact to sales in H1 and $10 million in H2. We saw $2 million of this impact in Q1 and anticipate the balance of $8 million impact in Q2.

capital expenditures are expected to be between 18 to 20 million for the full year.

Capital expenditures are expected to be between $18 million to $20 million for the full year.

For the second quarter, we expect next sales to be in the range of 173 million to 177 million.

For the second quarter, we expect net sales to be in the range of 173 million to $177 million.

In addition to lapping extremely strong growth in the second quarter of last year with the US reopening, we are up against an unfavorable FX impact of 7%, which equates to an additional 3 million headwind compared to what we saw in the first quarter.

In addition to lapping extremely strong growth in the second quarter of last year with the U S reopening.

We were up against an unfavorable FX impact of 7%, which equates to an additional 3 million headwind compared to what we saw in the first quarter.

In terms of supply chain cancellations from third party brands, we continue to anticipate 10 million impact of sales in the front half and 10 million in the back half.

In terms of supply chain cancellations from third party brands, we continue to anticipate 10 million impact to sales in the front half and $10 million in the back half.

We saw 2 million of this impact in the first quarter and anticipate the balance of 8 million impacts in the second quarter.

So 2 million of this impact in the first quarter and anticipate the balance of $8 million impact in the second quarter.

Ciarán Long: We expect gross profit margin in Q2 to be impacted by the continued elevated freight costs and slightly higher promotional activity, partially offset by continued price increases. For Q2, we expect adjusted EBITDA to be in the range of $16 to 17 million. We remain bullish on the continued momentum of our brands and the opportunities to drive market share gains as we managed through the current macro challenges. We expect a much stronger H2 of the year as a result of lapping slower comparable growth in H2 of 2021. Our strong inventory position, Princess Polly's continued momentum in the US, and our team's progress on executing Culture Kings growth strategy.

We expect gross profit margin in the second quarter to be impacted by the continued elevated trade cost.

We expect gross profit margin in the second quarter to be impacted by the continued elevated freight costs.

and slightly higher promotional activity partially offset by continued pricing.

The higher promotional activity, partially offset by continued price increases.

For the second quarter, we expect adjusted EBITDA to be in the range of 16 to 17 million.

For the second quarter, we expect adjusted EBITDA to be in the range of $16 million to $17 million.

We remain bullish on the continued momentum of our brands and the opportunity to drive market share gains as we manage through the current macro challenge.

We remain bullish on the continued momentum of our brands and the opportunities to drive market share gains as we manage through the current macro challenges.

We expect a much stronger back half of the year as a result of lapping slower comparably growth in the second half of 2021. Our strong inventory position, Princess Polly's continued momentum in the U.S. and our team's progress on executing Culture King's growth strategy.

We expect a much stronger back half of the year as a result of lapping slower comparable growth in the second half of 2021, our strong inventory position Princess parties continued momentum in the U S and our team's progress on executing culture <unk> growth strategy.

Ciarán Long: As we look beyond 2022, we remain confident in our ability to deliver on our long-term targets, which include net sales growth of approximately 20% annually, excluding acquisitions, the addition of 1 to 2 acquisitions per year, and long-term adjusted EBITDA margins in the mid-teens. With that, I will turn the call over to the operator for Q&A.

As we look beyond 2022, we remain confident in our ability to deliver on our long-term targets, which include net sales growth of approximately 20% annually, excluding acquisitions, the addition of one to two acquisitions per year, and long-term adjusted EBITDA margins in the mid-term.

As we look beyond 2022, we remain confident in our ability to deliver on our long term targets which include Netsuite.

Net sales growth of approximately 20% annually excluding acquisitions. The addition of one to two acquisitions per year and long term adjusted EBITDA margins in the mid teens.

With that, I will turn the call over to the operator for Q&A.

With that I will turn the call over to the operator for Q&A.

Operator: At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. Please limit yourself to one question and one follow-up. One moment while we poll for questions. Our first question comes from the line of Randy Konik with Jefferies. You may proceed with your question.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

If you would like to ask a question, please press star one on your telephone to the head. A confirmation sum will indicate your line.

A confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment and may be necessary for you to pick up your handset before pressing the star keys.

Please limit yourself to one question and one follow up one moment, while we poll for questions.

yourself to one question and one follow-up. One moment while we pull for questions.

Our first question comes from the line of Randy <unk> with Jefferies. You May proceed with your question.

Randy Konik: Yeah, thanks, guys, and good afternoon. Just wanted to get the commentary around the slight rise in promotional expectations. Is that more of a function of supply chain? Because you talked about, in the other part of the sentence, you talked about pricing power or price increases, if you will. Just wanna kinda clarify what you're saying there, because I think it feels like the demand side across all the brands is pretty firm, and the consumer is still kind of willing to pay up. I just wanted to double check on that first. Thanks.

Yes, Thanks, guys and good afternoon, just wanted to get the commentary around the slight rise in promotional expectation that more of a function of supply chain.

Yeah, thanks guys and good afternoon. I just wanted to get the commentary around the slight rise in promotional expectations. Is that more of a function of supply chain? Because you talked about, in the other part of the sentence, you talked about pricing power, or price increases if you will. So just want to kind of clarify what you're saying there. Because I think it feels like the demand side across all the brands is pretty firm and the consumers still kind of will pay out. So I just want to double check on that first.

Talk about the other part of it something that you talked about pricing power, where price increases if you will so I just wanted to kind of clarify.

Staying there because I think it feels like the demand side across all the brands is pretty firm.

And the consumer still kind of willing to pay up so I just wanted to double check on that first thing.

Jill Ramsey: Yeah. Hey, Randy, thanks for your question. So we have seen just a little bit of increase in promotional activity as everyone is, you know, comping last year's incredible growth and momentum in the H1, up against stimulus, vaccine rollouts, and the reopening. You know, look, we are very committed to being very efficient with our marketing spend and, you know, across 20 different marketing channels, as well, our brands are selling at a really strong full price sell through of over 80%. We have quite a bit of pricing power to really, you know, continue to increase prices as needed to offset any inflationary pressure. You know, we are committed to our strategy of being really efficient with our marketing spend.

Yeah, hey, Randy, thanks for your question. So we have seen just a little bit of increase in promotional activity as everyone is

Yeah, Hey, Randy Thanks for your question.

So we have seen just a little bit of increase in promotional activity as everyone is.

You know, comping last year's incredible growth and momentum in the front half up against stimulus vaccine rollouts and the reopening.

Comping last year's incredible growth and momentum in the front half up against stimulus vaccine rollouts and the reopening.

Look we are very committed to being very efficient with our marketing spend and.

Across 20 different marketing channels as well our brands are selling out a really strong full price sell through of over 80% and we have quite a bit of pricing power to really continue to increase.

different marketing channels as well. Our brands are selling at a really strong full price sell-through of over 80%. And we have quite a bit of pricing power to really continue to increase prices as needed to offset any inflationary pressure. But we are committed to our strategy of being really efficient with our marketing spend. Yeah, and maybe Randy just on close margins. You know, we did a 56 A's for Q1. We would expect it to be pretty close to that for Q2.

Rice's as needed to offset any inflationary pressure, but we are committed to our our strategy.

Being really efficient with our marketing spend.

Ciarán Long: Yeah. Maybe, Randy, just on gross margins. You know, we did a 56%, for Q1. We would expect it to be pretty close to that for Q2. I think we expect gross margins to improve slightly in H2 to get to that kind of overall number for the 57% rate that we did last year. That will really come from continued price increases. We've done some already in Q1, targeted across the brands, and we'll continue to do some more in Q2.

Yeah, and maybe Randy just on gross margins, you know, we kind of, we did a 56A for Q1. We would expect it to be pretty close to that for Q2. I think we expect gross margins to improve slightly in the back half to get to that kind of overall number, but a 57 rate that we did last year. And that will really come from continued price increases. We've done some already in Q1 targeted across the brands and will continue to do some more in Q2.

Randy just on gross margins, we kind of we did a 56 days for Q1, we would expect it to be pretty close to that for Q2, I think we expect gross margins to improve slightly in the back half to get to that kind of overall number 57 rate that we did last year and that will really come from continued price increases.

Leases, we've done some already in Q1.

Targeted across the brands and we'll continue to do some more in Q2.

Randy Konik: Thank you. Then, just my last question is, can we just go back in time a little bit on Australia from last quarter and just kinda rehash, you know, what happened there? I think you talked about COVID stuff at that point in time. Maybe kinda talk to us about where we are today. I think you said that you expect improvements in the H2 of the year, and I'm sure into 2023. I just want you to give us that kinda perspective on that region of the world and, you know, how you see things kinda playing out, how things are changing, you know, from only three months ago today and beyond. Thanks, guys.

Thank you and then just my last question is can we just go back in time, a little bit on Australia from last quarter, and just kind of rehash what happened. There I think you talked about <unk> itself at that point in time, and maybe kind of talk to us about where we are today I think you said that you expect improvements in the back half of the year and I'm sure in 2012.

Can we just go back in time a little bit on Australia from last quarter and just kind of rehash, you know, what happened there? I think you talked about COVID stuff at that point in time and maybe kind of talk to us about where we are today. I think you said that you expect improvements in the back half of the year and I'm sure it's 2023. I just want to give us that kind of perspective on that region of the world and how you see things kind of playing out, how things are changing, you know, from only three months ago today and beyond. Thanks guys.

Three I just wanted to give us some gives us that kind of perspective on that.

That region of the World.

Do you see things kind of playing out how things are changing from only three months ago today and beyond thanks guys.

Jill Ramsey: Yeah. We have had a little bit of noise in Australia in the H1. Let me break that down for you a bit. You know, as we talked about on the last call, as the Australia market got hit with Omicron earlier in the year, they did see some consumer disruption from that. We have seen the consumer really rebound back to stores and back to regular behaviors. Even though case levels still remain a bit high in that market, we are seeing Australia really move into living with Omicron much the same way the US market has. We've moved past that a bit. The market, though, is still a bit noisy from an FX headwind perspective, about 7 points of headwind there.

Yeah, so we have had a little bit of noise in Australia in the front half of the year. Let me break that down for you that, you know, as we talked about on the last call, as the Australian market got hit with Omicron earlier in the year, they did see some consumer disruption from that. We have seen the consumer really rebound back to stores and back to, you know, regular behaviors.

Yes, so we have had a little bit of noise in Australia in the front half of the year, Let me break that down for you that.

As we talked about on the last call as the Australia market got hit with Omicron earlier in the year. They did see some consumer disruption from that.

We have seen the consumer really rebound back to back to stores and back to regular behaviors.

Even though case levels still remain a bit high in that market, we are seeing Australia really move into living with Omicron much the same way the U.S. market has, so we've moved past that a bit.

Even though case levels still remain a bit high in that market. We are seeing Australia really move into living with omicron much the same way the U S market has so we've moved past that bet.

The market, though, is still a bit noisy from an FX headwind perspective, about seven points of headwind there. As well, we've talked about it on the last call, and today the cancellations that we saw have fallen across H1 a little bit in Q1, and more of that anticipated in Q2.

The market, though is still a bit noisy from an FX headwind perspective.

<unk> seven points of headwind there as well we've talked about it on the last call and today the cancellations that we saw.

Jill Ramsey: As well, we've talked about it on the last call and today, the cancellations that we saw have fallen across H1 a little bit in Q1, and more of that anticipated in Q2. When you adjust for, you know, the FX noise and the cancellations, the Australia market is growing mid-single digits. This is up against really high comps from last year, you know, 70 in Q1 and 41 in Q2. As we look to H2, those comps really ease in Australia back to a 7 in Q3 and a 12 in Q4. We anticipate the Australia market really accelerating a bit to high single digits. It is important reminder that the majority of our volume is really coming out of the US now. That is our focus.

I have fallen across each one a little bit in Q1 and more of that anticipated in Q2, when you adjust for the FX noise in the cancellations the Australia market is growing mid single digits and.

When you adjust for the FX noise and the cancellation, the Australian market is growing mid-single digits and this is up against really high comps from last year.

And this is up against really high comps from last year.

70 in Q1 and 41 in Q2. As we look to the back half, we will, those comps really ease in Australia back to a seven in Q3 and a 12 in Q4. And we anticipate the Australia market really accelerating a bit to high single digits.

70 in Q1 and 41 in Q2.

As we look to the back half we will those comps really ease in Australia back to seven in Q3, and a 12 in Q4, and we anticipate the Australia market really accelerating a bit to high single digits.

It is important reminder that the majority of our volume is really coming out of the U.S. now. That is our focus. We see all of our growth coming out of the U.S. and that's really where we're focused. And as we look at our long-term growth algorithms in the 20s, it's going to really be led by the U.S. with Australia more moderate single-digit growth. Super helpful. Thanks, guys.

It is important reminder, that the majority of our volume is really coming out of the U S. Now that is our focus we see all of our growth coming out of U S and that's really where we're focused.

Jill Ramsey: We see all of our growth coming out of the US, and that's really where we're focused. As we look at our long-term growth algorithms in the 20s, it's gonna really be led by the US with Australia, more moderate single-digit growth.

And as we look at our long term growth algorithms in the twenties, it's going to really be led by the U S with Australia more moderate single digit growth.

Randy Konik: Super helpful. Thanks, guys.

Super helpful. Thanks, guys.

Jill Ramsey: Mm-hmm.

Operator: Our next question comes from the line of Lorraine Hutchinson with Bank of America. You may proceed with your question.

Hmm.

Our next question comes from a line of Lorraine Hutchinson with Bank of America. You May proceed with your question.

Lorraine Hutchinson: Thank you. Good afternoon. I just wanted to follow up briefly on the Q2 guidance. Is there any change in this Q2 guidance versus when you initially gave your full year outlook? What gives you the confidence in the H2 acceleration? Are there any signs you can point to aside from easier comparisons in the H2?

Thank you good afternoon.

Thank you. Good afternoon. I just wanted to follow up briefly on the second quarter guidance, if there are any change in this to two guidance versus when you initially gave your full year outlook, and then give you the confidence.

Wanted to follow up briefly on the second quarter guidance.

Any change in the Q2 guidance versus when you initially gave your full year outlook and then.

Gives you the confidence in the back half acceleration.

Are there any signs you can point to aside some easier comparisons in the dark?

There are some signs you can point to aside from easier comparisons in the back half.

Ciarán Long: Sure. Thanks, Lorraine. First, I would say really for us, the changes as we thought about the Q2 guidance compared to where we talked a few months ago really was just the increased headwinds that we have from FX. You know, we talked about that being 350 basis points. It's now moved to about 700 basis points. Then the second one is, you know, we had thought cancellations would be about $5 million in Q1, $5 million in Q2. It's now gonna be $8 million in Q2. So they're really the big changes.

Sure, thanks, Lorraine. First, I would say really for us, the changes as we thought about the Q2 guidance compared to where we talked a few months ago really was just the increase headwinds that we have from FX. We talked about that being 350 basis points.

Sure. Thanks, Thanks, Brian first I would say really for us the changes as we thought about the Q2 guidance compared to where we talked a few months ago really was just the increase in.

Headwinds that we have from FX.

We've talked about that being 350 basis points. It's now moved to about 700 basis points and then the second one is we.

it's now moved to about 700 basis points and then the second one is, you know, we had thought cancellations would be about 5 million in Q1, 5 million in Q2, it's now going to be 8 million in Q2 and so they're really the big changes. You know, when we look at the

I had thought cancellations would be about $5 million in Q1 5 million in Q2, it's now going to be $8 million in Q2, and so they are really the big changes.

Ciarán Long: You know, when we look at the sequential builds that we would normally have from Q1 to Q2, I would say, you know, excluding the kind of impact of those changes in FX and cancellations, we're right where we need to be. Kind of that's where we are there from Q2. As we think about the H2, obviously kind of growth rates are important, the 85% in the H1 versus the 44%.

When we look at the.

you know the sequential bills that we would normally have from Q1 to Q2 I would say you know excluding the kind of impact of those changes and effects and cancellations we're kind of we're right where we need to be and so kind of that's that's where we are there from Q2. As we think about the back half and obviously kind of growth rates are important the 85 in the front half versus the 44 percent and you know

The sequential build that we would normally have from Q1 to Q2 I would say.

Excluding the impact of those changes in the FX and cancellations were kind of right, where we need to be.

And so it kind of.

That's where we are there from Q2.

Think about the back half and obviously kind of growth rates are important to the 84, even the front half versus the 44%.

Ciarán Long: You know, related to that, the FX headwinds that we've been seeing of the 5% in Q1 and 7% in Q2 pretty much go away for us in H2 as we are actualizing right now at the same rate that we were in H2 of the year. You know, they're the big changes from a modeling perspective. I think maybe, Jill will cover some of the things that's going on in the business that give us confidence as well.

related to that the FX headwinds that we've been seeing of the 5% in Q1 and 7 in Q2 pretty much go away for us in the back half as we are kind of we are actualizing right now at the same rate that we were in the back half of the year. You know they're the big changes from the modeling perspective I think maybe Jill will cover some of the things that's going on in the business that give us confidence as well.

Related to that the FX headwinds that we've been seeing of the 5% in Q1 and seven in Q2 pretty much go away for us to in the back half as we are kind of we are actualizing right now with the same rate that we were in the back half of the year.

They are the big changes from a modeling perspective, I think maybe Joe will cover some of the things we have going on in the business that give us confidence as well.

Jill Ramsey: Yeah. Look, we're really excited about H2 as we look across our group of brands. With Culture Kings, we are setting up all of the building blocks for real acceleration in the US. We'll get our distribution center launched in the end of Q2, which really sets us up for H2. As well, we're really excited about the store opening in Q4 and have a great marketing activation plan that'll go along with that, anticipating that to be a big accelerator of awareness and growth in the US. Princess Polly is really better positioned than ever for a great back to college season, with incredible marketing activation and their new college ambassador program, so really well positioned there.

Yeah, look, we're really excited about the back half as we look across our group of brands with culture kings. We are setting up all of the building blocks for real acceleration in the US.

Yes look we're really excited about the back half as we look across our group of brands with culture Kings. We are setting up all of the building blocks for real acceleration in the U S. We will get our distribution center launched in the end of Q2, which really sets us up for the back half as well we are really excited about the shore.

We'll get our distribution center launched in the end of Q2, which really sets us up for the back half.

As well, we're really excited about the store opening in Q4 and have a great marketing activation plan that will go along with that, anticipating that to be a big accelerator of awareness and growth in the U.S.

Opening in Q4 and have a great marketing activation plan that will go along with that anticipating that to be.

A big accelerator of awareness and growth in the U S.

And Princess Polly is really better positioned than ever for a great back to college season.

with incredible marketing activation and their new college ambassador program. So really well positioned there. And Petal and Pop also really well positioned to capitalize on the wedding season that is anticipated to be the biggest wedding season on record and as well, you know, we are making progress and excited to lean further into international growth with Princess Polly, really looking to accelerate that more in the back half.

With incredible marketing activation and their new College Ambassador program, so really well positioned there.

Jill Ramsey: Petal & Pup also really well positioned to capitalize on the wedding season that is anticipated to be the biggest wedding season on record. As well, you know, we are making progress and excited to lean further into international growth with Princess Polly, really looking to accelerate that more in the H2. We've got mnml launching on Culture Kings, so really excited to continue scaling that great brand on its own site, but also through Culture Kings. We'll start to see that goodness in the H2 as well.

And paddling pop also really well positioned to capitalize on the wedding season that is anticipated to be the biggest wedding season on record and as.

As well we are.

We're making progress and excited to lean further into international growth with Princess Polly.

Really looking to accelerate that more in the back half.

And we've got minimal launching on Culture King, so really excited to continue scaling that great brand on its own site, but also through Culture King, so we'll start to see that goodness in the back half as well.

And we've got minimal launching on culture King So really excited to continue scaling that great brand on its own site, but also through culture King. So we'll start to see that goodness in the back half as well.

Lorraine Hutchinson: Thank you. Then, you talked about global supply chain challenges built into your guidance. Understanding there's the $10 million for Culture Kings, is there anything else coming out of the COVID lockdowns in China or any further supply chain disruption that is concerning you about the availability of product?

Thank you. And then, um, you talked about global supply chain challenges built into your guidance, understanding there's the 10 million for culture kings. Is there anything else coming out of the COVID lockdown in China or any further supply chain disruptions like this?

Thank you.

You talked about global supply chain challenges built into your guidance understanding Theres, a 10 million who culture kings.

Coming out of.

The Covid lockdowns in China, or any further supply chain disruptions is concerned.

Got it.

Ciarán Long: Yeah. Lorraine, you know, we certainly haven't seen any other challenges in getting products. I would say the inventory that we have, you know, we've been able to get it. We've been able to get it when we wanted to. I would say we are planning a little bit ahead of where we've normally done, but, you know, we're well used to that kind of, you know, at this stage, 2 years into COVID. From a supply chain perspective, we continue to see the elevated air freight rates that we've seen over the last 6 months, and, you know, that continues to be a headwind of over 300 basis points on gross margin. Although obviously with the pricing increases, we're able to offset that across the brands. You know, we do see, we did see higher outbound air freight.

Yeah, Lorraine, we certainly haven't seen any other challenges in getting products. I would say the inventory that we have, we've been able to get it. We've been able to get it when we wanted to. I would say we are planning a little bit ahead of where we've normally done, but we're well used to that kind of at this stage, two years into COVID.

Yes.

We certainly haven't seen any other challenges in getting products I would say the inventory that we have we've been able together as we've been able to get it when we wanted to I would say we are planning a little bit ahead of where we've normally done but we're used to that kind of at this stage two years into COVID-19.

And from a supply chain perspective, we are continue to see the elevated air freight rates that we've seen over the last six months.

From a supply chain perspective, we are continuing to see elevated airfreight rates that we've seen over the last six months.

and that continues to be a headwind of over 300 basis points on gross margin, although obviously with the pricing increases we're able to offset that across the brands. We do see higher outbound freight costs from just a few of our charges, particularly in the U.S.

That continues to be a headwind of over 300 basis points on gross margin, although obviously with the pricing increases were able to offset us across the brands we do see.

We did see higher open to airfreight, sorry, higher outbound freight costs from just fuel surcharges, particularly in the U S and but I would say all of that is built into the model for guidance for the rest of the year.

Ciarán Long: Sorry, higher outbound freight costs from just fuel surcharges, particularly in the US. I would say all of that is built into the model, for our guidance for the rest of the year.

But I would say all of that is built into the model for our guidance for the rest of the year.

Operator: Our next question comes from the line of Dana Telsey with Telsey Advisory Group. You may proceed with your question.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group you May proceed with your question.

Dana Telsey: Good afternoon, everyone. As you think about inflation, how are you thinking about price increases by brand? Where have you been? Are more price increases being taken? What do you think that will be for each brand? That freight impact of the $360 in Q1, I assume that's Q2 also. How are you planning that for H2? Then just a follow-up.

Good afternoon, everyone. As you think about inflation, how are you thinking about price increases by brand? Where have you been? Is more price increases being taken? And what do you think that that will be for each brand? And that's great impact to the 360 in the first quarter. I think that's the second quarter also. How are you planning that for the back half of the year? And then just the follow up.

Good afternoon, everyone. As you think about inflation, how are you thinking about price increases by brand.

Have you been is more price increases being taken and what do you think that that will be for each brand and thats really the impact of a 360 in the first quarter I assume that the second quarter also how you're planning that for the back half of the year and then just a follow up.

Ciarán Long: Sure. Maybe let me take freight first. You know, that $360 for Q1, we've got that in there for the rest of the year, Dana. You know, at this point, we're not planning any moderation in that. You know, the overall year on year impact decreases as we go through the year, as we did see, you know, at freight, air freights go up pretty significantly in Q3 and Q4 of last year.

Sure maybe let me take freight first.

Sure, maybe let me take freight first, you know, that 360 for Q1, we've got that in there for the rest of the year. Dana, you know, at this point, we're not planning any moderation in that, you know, the overall year on year impact decreases as we go through the year, as we did see, you know, at freight air freight school, all pretty significantly in Q3 and Q4 of last.

The 360 for Q1, we've got that in there for the rest of the year Dana.

At this point, we're not planning any.

The moderation in that.

The overall year on year impact decreases as we go through the year as we did see.

Freight airfreight score pretty significantly in Q3, and Q4 of last year.

Jill Ramsey: From an inflation standpoint, we have been able to offset that through pricing increases across our brands. Our brands have incredible pricing power due to the high mix of exclusives. We've been able to really surgically test and learn our way into prices that can offset that. We have executed those across our group of brands, Culture Kings earlier this year, as well as mnml. Princess Polly and Petal & Pup had done some at the tail end of last year. They are now looking at another wave of those. That is all factored into our outlook already.

And from an inflation standpoint, we have been able to offset that through pricing increases across our brands. Our brands have incredible pricing power due to the high mix of exclusives.

And from a inflation standpoint, we have been able to offset that through pricing increases across our brands. Our brands have incredible pricing power due to the high mix of exclusives.

So, we've been able to really surgically test and learn our way into prices that can offset that. We have executed those across our group of brands, Culture Kings earlier this year as well as Minimal, Princess Polly and Puddle and Pup had done some at the tail end of last year. They are now looking at another wave of those that is all factored into our outlook already. But we're very agile and now very adapt at making these price changes and committed to saying, committed to our mid-50 growth margins and being really agile to offset whatever we need to from an inflation standpoint.

So we've been able to really surgically test and learn our way into prices that can offset that.

We have executed those across our group of brands.

Culture King's earlier, this year as well as minimal Princess Polly and pedal on pulp had done some at the tail end of last year. They are now looking at another wave of those that is all factored into our outlook already.

Jill Ramsey: you know, we're very agile and now very adept at making these price changes and, you know, committed to staying at our mid-fifties gross margins and being really agile to offset whatever we need to from an inflation standpoint.

But we are very agile and now very adept at making these price changes and committed to saying are committed to our mid <unk> gross margins and being really agile to offset whenever we need to from an inflation standpoint.

Dana Telsey: Got it. The active customer number of 3.8 million was better than expected. Any update there in terms of what developed there, how you saw it? With the China lockdowns, Vietnam, inventory levels of nearly $121 million, how do you think about that going forward? Thank you.

Got it. And then the active customer customer number of 2.8 million was set in and expected any update there in terms of what the belt there, how you saw it, and then with the China lockdown Vietnam inventory levels of nearly 121 million, how do you think about that going forward? Thank you.

Got it and then the active customer customer number of $3 8 million was better than expected any update there in terms of what's the balance there of how you slot and then with the tide of Lockdowns Vietnam.

Inventory levels of nearly $121 million, how do you think about that going forward. Thank you.

Ciarán Long: Sure. Let me cover inventory first. You know, I think inventory for us is up about 38% year over year versus the sales growth of 29%. So I would say kind of a little bit ahead from an inventory perspective, and that's really just as we see the kind of volatility in supply chain. We're continuing to make sure we just have the right inventory and have it kind of in place for the customers. So I think we're continuing to pull ahead there a little bit from an inventory perspective. We are also building inventory in the US now for the Culture Kings fulfillment center that will open in Q2 of this year, and that also brings up a little bit.

Sure, let me cover inventory first. You know, I think it's, inventory for us is up about 38% year over year versus the sales growth of 29. So I would say kind of a little bit ahead from an inventory perspective. And that's really just as we see the kind of volatility in supply chain, we're continuing to make sure we just have the right inventory and have it kind of in place for the customer. So I think we're continuing to pull ahead there a little bit from an inventory perspective.

Sure let me cover inventory first.

I think it's inventory for us is up about 38% year over year versus the sales growth of $20 million. So I would say kind of a little bit ahead from an inventory perspective, and thats really just as we as we see the kind of volatility in supply chain. We're continuing to make sure. We just have the right inventory and have it kind of in place.

For the customers. So I think we're continuing to pull pull ahead, there a little bit from an inventory perspective. We are also building inventory in the U S. No for the culture King's fulfillment center that will open in Q2 of this year and that also brings up a little bit I think as we think about inventory, we should see it kind of moderates growth rate.

We're also building inventory in the US now for the culture kings fulfillment center that will open in Q2 of this year. And that also brings up a little bit. I think as we think about inventory, we should see a kind of moderate.

Ciarán Long: I think as we think about inventory, we should see a kind of moderate growth rate versus sales growth rate in the H2 as we kind of balance out from building out that fulfillment center.

growth rate versus sales growth rate in the back half as we kind of balance out from building up that fulfillment centre.

Versus sales growth rates in the back half as we kind of balance out from building.

Fulfillment center.

Jill Ramsey: Dana, let me pick up on a couple other aspects of your question. With regard to any China lockdown impact, not seeing any significant impacts from that. We have had a week delay here or there, but on our business model, that hasn't really caused any net impact to us. We've been actually able to navigate that now for the last couple of years. Those have been sort of ongoing, week or so delay. Vietnam, though, you asked about, that is where we have had some of the footwear cancellations that are factored into the model that Ciarán spoke about earlier. Also, you asked about active customers. We have seen incredible momentum and growth, really led by US awareness expansion, and really largely on Princess Polly.

And, and then let me pick up on a couple other aspects of your question with regard to any China lockdown impacts not not seeing any significant impacts from that we have had a week delay here or there but on our business model week that hasn't really caused any net impact to us.

And Dana let me pick up on a couple of other aspects of your question.

With regards to any China, lockdown impact not not seeing any significant impacts from that we have had a week delay here or there, but on our business model that hasnt really caused any net impact to us.

And we've been actually able to navigate that now for the last couple of years. Those have been sort of ongoing, off-going weeks or so delay. Vietnam, though, you asked about, that is where we have had some of the footwear cancellations that are factored into the model that Ciaran spoke about earlier.

And we've been actually able to navigate that now for the last couple of years that those have been sort of ongoing off going week or so delay Vietnam, though you asked about that is where we have had some of the footwear cancellations that are factored into the model that <unk> spoke about earlier.

Also, you asked about active customers. We have seen incredible momentum and growth really led by U.S.

Also you asked about active customers, we have seen incredible momentum and growth really led by U S awareness expansion and really largely on Princess Polly we were.

awareness expansion and really largely on Princess Polly. We were really proud of the Piper Sandler results and that Princess Polly just continues to be gaining ground and awareness with its young teen audience.

Jill Ramsey: We were really proud of the Piper Sandler results and that Princess Polly just continues to be gaining ground and awareness with its young teen audience, and just have great brands that customers love and continuing to gain market share and awareness as we continue to scale them in the US. Anticipate active customers continuing to grow in the US and then also internationally as we push further along on that as well.

We're really proud of the Piper Sandler results in net Princess Polly just continues to be gaining ground and awareness with its young teen audience.

and just have great brands that customers love and continuing to gain market share and awareness as we continue to scale them in the US. So anticipate active customers continuing to grow in the US and then also internationally as we push further along on that as well.

And just have great brands that customers love and continuing to gain market share and awareness as we continue to scale them in the U S. So anticipate act.

Active customers continuing to grow in the U S. And then also internationally as we push further along on that as well.

Dana Telsey: Thank you.

Thank you.

Operator: Our next question comes from the line of Oliver Chen with Cowen and Co. You may proceed with your question.

Our next question comes from the line of Oliver Chen with Cowen and co. You May proceed with your question.

Oliver Chen: Hi, Jill and Ciarán. Good afternoon. Marketing expenses. They increased due to testing new marketing opportunities. Can you elaborate on what you did there and also what you're seeing ahead with acquisition costs and the IDFA navigation? Second question, dual hemisphere is a unique proposition of your business model. Would love your thoughts on how that's synergizing and what kind of strategies are being employed with respect to that and given all the volatility that we're seeing. Thank you.

Hi, Joe and serum.

good afternoon marketing expenses so they increased

Good afternoon marketing expenses, so they increased due to testing new marketing opportunities can you elaborate on what you did there and also what Youre seeing ahead with acquisition costs and the idea assay navigation.

Due to testing new marketing opportunities, can you elaborate on what you did there and also what you're seeing ahead with acquisition costs and the IDSA navigation? Second question, dual hemisphere is a unique proposition of your business model. We'd love your thoughts on how that's synergizing and what kind of strategies are being employed with respect to that and given all the volatility that we're seeing. Thank you.

Second question dual hemisphere is a unique proposition of your business model would love your thoughts on how synergize and what kind of strategies or are being employed with respect to that given all the volatility that we're seeing thank you.

Jill Ramsey: Yeah. Hey, Oliver. Thanks for the question. We obviously have a very efficient marketing strategy that is optimizing across a number of platforms. The marketing landscape is very dynamic, and it continues to evolve across performance, social media, and the influencer landscape, and we're playing across all of those. We have seen a little bit of shift. On the performance side, we actually saw prices come down a bit from Q4 into Q1. On the opposite side, we've actually seen a little inflationary pressure, or just some pricing increases in the influencer space. We are really committed to our micro-influencer strategy and overall see that as still really a very efficient acquisition channel for us.

Yeah, hey Oliver, thanks for the question. We obviously have a very efficient marketing strategy that is optimizing across a number of platforms. The marketing landscape is very dynamic and it continues to evolve across performance, social media, and the influencer landscape, and we're playing across all of those. We have seen a little bit of.

Yeah, Hey, Oliver Thanks for the question.

We obviously have a very efficient marketing strategy that is optimizing across a number of platforms.

Marketing landscape is very dynamic and it continues to evolve across performance social media and Influencer landscape and we're playing across all of those we have seen a little bit of shift.

shift. On the performance side, we actually saw prices come down a bit from Q4 into Q1. And then on the opposite side, we've actually seen a little inflationary pressure or just some pricing increases in the influencer space.

On the performance side, we actually saw prices come down a bit from Q4 into Q1.

And then on the opposite side, we've actually seen a little inflationary pressure.

Some pricing increases in the Influencer space.

But we are really committed to our micro-influencer strategy and overall see that as still really a very efficient

But we are really committed to our micro influencer strategy and overall see that it's still really a very efficient.

acquisition channel for us, and as we delve further into that and rolling out our college ambassador program, we are continuing to find really great new sources of

Jill Ramsey: As we delve further into that in rolling out our college ambassador program, we are continuing to find really great new sources of influencers to continue to add, and very focused on efficiency there. Overall, it's just a good reminder our brands are just constantly out there innovating across all of the marketing platforms. We really like to get out ahead of others and ahead, you know, before critical mass hits a platform. We've been testing and learning on TikTok for some time now, really tuning our content and getting that balance of organic and paid just right. This is our really diversified marketing strategy, and innovative being out ahead of others really gives us that efficient marketing spend and has insulated a bit from the impacts of iOS changes.

Acquisition channel for Us and as we delve further into that and rolling out Our college Ambassador program. We are continuing to find really great new sources of.

influencers to continue to add and very focused on efficiency there. Overall, it's just a good reminder our brands are just constantly out there innovating across all of the marketing platform.

Influencers to continue to add and very focused on efficiency there.

Overall, it's just a good reminder, our brands are just constantly out there innovating across all of the marketing plants platforms, we really like to get out ahead of others and ahead.

We really like to get out ahead of others and ahead, you know, before critical mass.

Before critical mass hits, a platform, we've been testing and learning on kick talked for some time now really tuning our content and getting that balance of organic and paid just right.

hits a platform. We've been testing and learning on TikTok for some time now, really tuning our content and getting that balance of organic and paid just right. So this is our really diversified marketing strategy and innovative being out ahead of others really gives us that efficient marketing spend and has insulated a bit from the impacts of

So this is really diversified marketing strategy and innovative being out ahead of others really gives us that efficient marketing spend and has insulated a bit from the impacts of iOS changes.

IOS changes. We saw a little bit of impact from it, but a lot less than others because of our marketing strategy.

Jill Ramsey: We saw a little bit of impact from it, but a lot less than others because of our marketing strategy. On our dual hemisphere, you know, we really saw a lot of advantage of that, as we, you know, were moving through the impacts of COVID. We've been able to shift marketing spend between the hemispheres as we saw one market stronger than another, let's say, during Omicron. We've also been able to use our dual hemisphere advantage with inventory optimization, shipping between the hemispheres. As well, we're able to monitor and leverage trends and seasonal, being out ahead of season, six months ahead on the seasonal curve. We are using those every day in our business model, and that just continues to be a really unique competitive advantage that we have.

We saw a little bit of impact from it but a lot less than others because of our marketing strategy.

On our dual hemisphere, we really saw a lot of advantage of that as we were moving through the impacts of COVID. We've been able to shift marketing spend between the hemispheres as we saw one market stronger than another, let's say during Omicron. We've also been able to use our dual hemisphere advantage with inventory optimization, shipping between the hemispheres and as well, we're able to monitor and leverage trends and seasonal, being out ahead of six months ahead on the seasonal curve.

On our dual hemisphere, we really saw a lot of advantage of that.

We were moving through the impacts of Covid, we've been able to shift marketing spend between the hemispheres as we saw one market stronger than another let's say during omicron. We've also been able to use our dual hemisphere advantage with inventory optimization.

Imitation shipping between the hemispheres.

And as well, we're able to monitor and.

Leverage trends and seasonal being out ahead of season six months ahead on the seasonal curve. So we are using those everyday in our business model and that just continues to read a really unique competitive advantage that we have.

So we are using those every day in our business model and that just continues to be a really unique competitive advantage that we have.

Oliver Chen: Thank you. Last question, return rates. What's incorporated in your guidance in terms of what you're seeing? Has that stabilized and/or, which we know about with the banners and/or product mix, as that, you know, is quite contingent upon how that manifests overall. Thank you.

Thank you. Last question, return rates. What's incorporated in your guidance in terms of what you're seeing? Has that stabilized?

Thank you last question return rates and whats incorporated in your guidance in terms of what you're seeing has that stabilized.

and or which we know about with the banners and or product mix as that, you know, is quite contingent upon how that manifests overall. Thank you.

<unk>, which we know about with the banners number of product mix.

That is quite.

Contingent upon how that manifest overall thank you.

Ciarán Long: Yeah. From a guidance perspective, we have mid-teens in there through the rest of the year. Oliver, you know, we did see our return rate at 16% in Q1, and that's a little bit just our women's brands growing a bit faster than Culture Kings in particular. We would expect that to kind of stabilize back below or kind of at 15% in Q2, and as we go through the rest of the year. You know, I think we have seen across the brands that we still have kind of best-in-class return rates across all of the brands. You know, the brands continue to make customer improvements to the product, to the experience to lower our return rate and keep it down at that level.

Yeah, so from a guidance perspective, we have mid teams in there through the rest of the year, Oliver, you know, we did see it or return rate at 16% in Q1. And that's a little bit just our women's brands growing a bit faster than culture kings in particular. So we would expect that to kind of

Yes, so from a guidance perspective, we have mid teens in there through the rest of the year Oliver We did see it return rate at 16% in Q1, and that's a little bit just.

Women's brands growing a bit faster than cultural things that in particular, so we would expect that to kind of stabilize back below or kind of 15% in Q2 and as we go through the rest of the year.

stabilize back below or kind of at 15% in Q2 and as we go through the rest of the year.

You know, I think we have seen across the brands that we still have kind of best in class return rates across all of the brands.

I think we have seen across across the brands that we still have kind of best in class return rates across all of the brands.

You know, the brands continue to make customer improvements to the product, to the experience, to the lower return rate and keep it down at that level. And, you know, we have seen some changes just kind of as we go through from the seasonal aspect with mixed changes, but overall, we're committed to being at that mid-teams return rate. Thank you.

<unk> continued to make customer improvements to the product to the experience to lower return rates and keep it at that level.

Ciarán Long: You know, we have seen some changes just kind of as we go through from a seasonal aspect with mix changes, but overall, we're committed to being at that mid-teens return rate.

We have seen some changes just kind of as we go through from a seasonal aspect with mix changes, but overall, we're committed to being at that mid teens return rates.

Oliver Chen: Thank you. Best regards.

Thank you best regards.

Operator: Our next question comes from the line of Ike Boruchow with Wells Fargo. You may proceed with your question.

Our next question comes from the line of Ike.

Barbara.

Wells Fargo you May proceed with your question.

Jesse Sobelson: Thanks. Hi, everyone. This is Jesse Sobelson on for Ike Boruchow. First, we did some math on pro forma growth, including Culture Kings versus organic. We were estimating the mnml contributed about $14.5 million in revenue in the quarter. Is that correct? Adding on to that, what should we expect from this brand going forward, for the rest of the year?

Thanks. Hi, everyone. This is Jesse Sobelsen on for Ike first. We just, we did some math on pro forma growth, including culture King versus archaic. We were estimating the minimal contributed about fortune half million and revenue in the quarter is that correct? And then adding on to that, what should we expect from this brand going forward for us?

Thanks, Hi, everyone. This is Jesse so Wilson on for Eric.

First we just did some math on pro forma growth, including cultural changes versus organic we were estimating the minimal contributed about fortunately have more dollars in revenue in the quarter is that correct and then adding onto what should we expect from the spreads going forward for the rest of the year.

Ciarán Long: Hey, Jesse. We actually disclosed in our 10-Q that the revenue for mnml was about $10 million for the quarter. We will be disclosing that through the rest of the year, the mnml and Culture Kings revenue, so you'll be able to model that more accurately. We would expect it to be kind of at that volume or a little bit higher as we go through the year. They are seasonally strong in Q3 and Q4. That will continue to build through the year.

Hey, Jesse, we actually disclosed in our 10Q that the revenue for minimal was about $10 million for the quarter, so and we will be disclosing that through the rest of the year as the minimal and the culture gains revenue, so you'd be able to model that more accurately. We would expect it to be kind of at that volume or a little bit higher as we go through the year and they are seasonally strong in Q3 and Q4 and that will continue to build through the year.

Hey, Jesse.

We actually disclosed in our 10-Q that the revenue for minimum is about $10 million for the quarter. So.

We will be disclosing that through the rest of the year has been minimal and the culture is revenue so you'd be able to model that more accurately we would expect it to be kind of at that volume or a little bit higher as we go through the year and they are seasonally strong in Q3, and Q4 and that we've continued to build through the year.

Jesse Sobelson: Mm-hmm. Thank you.

Thank you.

Operator: Our next question comes from the line of Youssef Squali with Truist. You may proceed with your question.

Our next question comes from the line of Joseph Squali with Truth. You May proceed with your question.

[Analyst] (Truist Securities): Hey, this is Daniel in for Youssef. Just wondering if you could comment on the capital allocation strategy and M&A pipeline, just if it's changed at all in the last few months given the market environment. Thanks.

Daniel Moore: Hey, this is Daniel in for Youssef. Just wondering if you could comment on the capital allocation strategy and M&A pipeline, just if it's changed at all in the last few months given the market environment. Thanks.

Okay.

Hey, this is Daniel and for you to just wondering if you could comment on the capital allocation strategy and M&A pipeline, just if it's changed at all in the last few months given the market environment. Thanks.

Hey, this is Daniel on for Youssef just.

Just wondering if you could comment on the capital allocation strategy and M&A pipeline, just if it's changed at all in the last few months given the.

Market environment. Thanks.

Ciarán Long: Jill.

Jill Ramsey: Yeah. From a M&A perspective, we're just, I'd say broadly speaking, we are constantly shopping for great brands with great potential to add to the portfolio. You know, M&A is an opportunistic game and a long game. You've got to build relationships. It's not something you can kind of start and stop. We are really excited about some of the brands we've been talking to in our pipeline. That said, valuations are coming down a bit and moderating, you know, the private markets are following a bit the public markets. You know, we are excited and committed to adding a high potential brand when the timing is right. I'll let Ciarán comment on the capital allocation.

Yes.

Yeah, so from an M&A perspective, we're just, I'd say broadly speaking, we are constantly shopping for great brands with great potential to add to the portfolio. You know, M&A is an opportunistic game and a long game. You've got to build relationships. It's not something you can kind of start and stop. We are really excited about some of the brands we've been talking to in our pipeline. That said, valuations are coming down a bit and moderating, you know, the private markets or following a bit the public markets.

Yes, so from a M&A perspective, we're just I'd say broadly speaking we are constantly shopping for great brands with great potential to add to the portfolio.

M&A is an opportunistic game and along a long game you've got to build relationships. It's not something you can kind of start and stop we are really excited about some of the brands, we've been talking to and in our pipeline.

That said valuations are coming down a bit and moderating the private markets are following a bet the public markets.

And, you know, we are excited and committed to adding a high potential brand when the timing is right. And I'll let Kiron comment on the capital allocation. Yeah. So, you know, at the moment, our leverage is about 1.4 at the end of March, I think, as we talked about, we would be happy for it to be higher than that if we see the opportunity to get the right acquisition as Jill talked about. So, you know, there is more than enough potential there to take on more debt and leverage up using the existing.

And we are excited and committed to adding adding a high potential brand when the timing is right and I'll, let Karen comment on the capital allocation, yes. So at the moment or leverage is about one four at the end of March I think as we've talked about we would be happy for it to be higher than that if we see the ARPA.

Ciarán Long: Yeah. At the moment, our leverage is about 1.4 at the end of March. I think as we've talked about, we would be happy for it to be, you know, higher than that if we see the opportunity to get the right acquisition as Jill talked about. You know, there is more than enough potential there to take on more debt and leverage up using the existing EBITDA that we have. Obviously, that will go first to the continued growth of the brands that we have. And we're obviously spending some capital this year on the store in Vegas for Culture Kings. But after that, acquisitions are a key part of our strategy.

Changes to get the right acquisition as Joe talked about so.

There is more than enough potential there to take on more debt and leverage opiates in the existing.

even though that we have obviously that we go first to the continued growth of the brands that we have and we're obviously spending some capital this year on the store in Vegas for culture kings and but after that acquisitions are a key part of our strategy.

EBITDA that we have obviously that will go first to the continued growth of the brands that we have.

Obviously spending some capital this year on the store in Vegas, where culture kings, but after that acquisitions are a key part of our strategy.

[Analyst] (Truist Securities): Thanks.

Daniel Moore: Thanks.

Thanks.

Operator: Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Ms. Jill Ramsey for closing remarks.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to MS. Jill Ramsey for closing remarks.

I would like to turn this call back over to Ms. Jill Ramsey for closing remarks.

Jill Ramsey: Yeah. Hey, thanks everyone so much for joining our call today, and have a great rest of your evening.

Yeah, hey, thanks everyone so much for joining our call today, and have a great rest of your evening. This concludes today's conference. You may disconnect your lines at this time.

Yeah, Hey, thanks, everyone. So much for joining our call today and have a great rest of your evening.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation or the rest of your day.

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