Q1 2024 a.k.a. Brands Holding Corp Earnings Call
Operator: Greetings. Welcome to AKA Brands and Holdings Corporation's first quarter 2024 earnings conference call. This time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. At this time, I'll now turn the conference over to Ciaran Long, Interim CEO and CFO. So, long, you may now begin.
Greetings and welcome to AK brands Holdings Corporation's first quarter 'twenty 'twenty four earnings conference call.
Operator: At this time, all participants are in listen only mode.
Ciaran Joseph Long: And answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Operator: Please note that this conference is being recorded.
Ciaran Joseph Long: At this time I'll now turn the conference over to Karen <unk> interim CEO and CFO.
Ciaran Joseph Long: Mr. Wang you may now begin.
Operator: Good afternoon. Thank you for joining AKA Brands' first quarter fiscal 2024 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call is Ciaran Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor. Management may make forward-looking statements, which refer to expectations, projections, and other characterizations of future events, including guidance and underlying assumptions.
Ciaran Joseph Long: Good afternoon. Thank you for joining AK brands first quarter fiscal 2024 conference call to discuss the results released this afternoon, which can be found on our website at IR Dot AK, a dash brand dotcom.
Ciaran Joseph Long: With me on the call here on law interim Chief Executive Officer, and Chief Financial Officer.
Operator: Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with that. Please note that 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 margins. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and are available on our website. With that, I'll turn the call over to Ciaran.
Operator: Before we get started I'd like to remind you of the company's Safe Harbor language management may make forward looking statements, which refers to expectations projections and other characterizations of future events, including guidance and the underlying assumptions forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed.
Ciaran: For further discussion of risks related to our business. Please see our filings with the FCC.
Ciaran: 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.
Ciaran: A reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website with that I'll turn the call over to Ken.
Operator: Yeah.
Ciaran Joseph Long: Jesse, good afternoon everyone, and thanks for joining our first quarter earnings call. Before I review a few key highlights from the quarter, I would like to thank our teams for their unwavering dedication and continued commitment to building on our portfolio of next-generation brands for the next generation of consumers. Our teams remain steadfast in executing our strategic priorities and operating with tremendous agility and flexibility every step of the way. It is their hard work and dedication that gives me great confidence in the many profitable future growth opportunities we see for AKA Brown. Before I go through the results in more detail, let me share a few first quarter highlights.
Ciaran: Thanks, Casey good afternoon, everyone and thanks for joining our first quarter earnings call.
Ciaran Joseph Long: Before I review a few key highlights from the quarter I would like to thank our teams for their unwavering dedication and continued commitment to building on our portfolio of next generation brands for the next generation of consumers.
Ciaran Joseph Long: Our teams remain steadfast in executing our strategic priorities and operating with tremendous agility and flexibility every step of the way.
Ciaran Joseph Long: It is their hard work and dedication that gives me great confidence and then many profitable future growth opportunities, we see for AK brands.
Ciaran Joseph Long: Before I go through the results in more detail, let me share a few first quarter highlights.
Ciaran Joseph Long: Net sales exceeded the high end of our guidance, fueled by U.S. growth of more than 6%. We registered a strong gross margin of 56.2% and delivered positive adjusted EBITDA of $874,000, also exceeding the high end of our guidance. We saw trailing 12-month active customer growth of 5.5. We continue to leverage our test and repeat merchandising approach with inventories down 19% compared to last year and newness representing a meaningfully higher penetration of our mix of goods on hand. We ended the quarter with a significant 22% reduction in debt compared to last year.
Ciaran Joseph Long: Net sales exceeded the high end of our guidance fueled by U S growth of more than 6%.
Ciaran Joseph Long: We registered a strong gross margin of 56, 2% and delivered positive adjusted EBITDA of 874000 also exceeding the high end of our guidance.
Ciaran Joseph Long: We saw trailing 12 month active customer growth of five 5%.
Ciaran Joseph Long: We continue to leverage our test and repeat merchandising approach with inventories down 19% compared to last year, and newness, representing a meaningfully higher penetration or mix of goods on hand.
Ciaran Joseph Long: We ended the quarter with a significant 22% reduction in death compared to last year.
Ciaran Joseph Long: Princess Polly successfully launched in Activewear collection, which has been well received by both existing and new customers.
Ciaran Joseph Long: Princess Polly successfully launched an active work collection which has been well received by both existing and new customers. We expanded our omnichannel marketplace presence through the launch of PetalumpUp on Nordstrom's website with strong initial results, and lastly, the Culture King U.S. business delivered another quarter of strong double-digit net sales growth. Turning now to the first quarter.
Ciaran Joseph Long: We expanded our omni channel marketplace presence through the launch of patent on pulp on Nordstrom's website with strong initial results and lastly, the culture Kings U S business delivered another quarter of strong double digit net sales growth.
Ciaran Joseph Long: Turning now to the first quarter.
Ciaran Joseph Long: We delivered $117 million in net sales, which was stronger than expected, down 3% compared to last year and down only 1% on a constant currency basis. We were again pleased to register another quarter of solid growth in the U.S. at 6.2%. The growth in the U.S. region is further validation that we are expanding our reach. Our products are responding, and we are capturing new customers in what remains our most profitable growth region.
Ciaran Joseph Long: We delivered 117 million of net sales, which is stronger than expected.
Ciaran Joseph Long: The one 3% compared to last year and down only 1% on a constant currency basis.
Ciaran Joseph Long: We were again pleased to register another quarter of solid growth in the U S at six 2%.
Ciaran Joseph Long: The growth in the U S region as further validation that we are expanding our reach.
Ciaran Joseph Long: Our products are resonating and we are capturing new customers and what remains our most profitable region.
Ciaran Joseph Long: For the quarter, our U.S. business accounted for 66% of total AKA Brands net sales, a penetration increase of 10%. As expected, our Australia and New Zealand results were below the prior year, but we remain confident we will begin to experience gross margin expansion in the region in the back half of this year. On the bottom line, as I mentioned, we delivered adjusted EBITDA of $874,000, exceeding the high end of our expectations.
Ciaran Joseph Long: For the quarter, our U S business accounted for 66% of total AK eight brands net sales.
Ciaran Joseph Long: Penetration increase of 10%.
Ciaran Joseph Long: As expected, our Australia, and New Zealand region results were below the prior year, but we remain confident we will begin to experience gross margin expansion in the region in the back half of this year.
Ciaran Joseph Long: On the bottom line as I mentioned, we delivered adjusted EBITDA of 874000 exceeding the high end of our expectations.
Ciaran Joseph Long: On the heels of a transformational 2023, 2024 is off to a great start, and I'm really excited about the tremendous opportunity we see in the U.S. to expand our brand portfolio and the total addressable market. Let me take a moment to reiterate our Strategic Operating Framework for 2024, including our three key strategic priorities. Priority number one, retain existing and attract new customers. During the first quarter, we added 200,000 new customers on a training 12-month basis, benefiting from our test and repeat merchandising approach, combined with delivering meaningfully higher levels of product newness, increased newness frequency, and introducing new product categories.
Ciaran Joseph Long: On the heels of a transformational 2023 'twenty 'twenty four is off to a great start and I'm really excited about the tremendous opportunity we see in the U S to expand our brand portfolio and its total addressable market.
Ciaran Joseph Long: Let me take a moment to reiterate.
Ciaran Joseph Long: Strategic operating framework for 2024, including our three key strategic priorities.
Ciaran Joseph Long: Priority number one retain existing and attract new customers during.
Ciaran Joseph Long: During the first quarter, we added 200000, new customers on a trailing 12 month basis.
Ciaran Joseph Long: Benefiting from our test and repeat merchandising approach combined with delivering meaningfully higher levels of product newness increased newness frequency and introduced new product categories.
Ciaran Joseph Long: The composition and quality of our inventories, particularly in the U.S., are in excellent shape, and we are chasing into many winning styles. We are well positioned to continue our growth in active customers, driving higher full-price selling and expanding our gross market. Fire No.
Ciaran Joseph Long: The composition and quality you have already inventories, particularly in the U S are in excellent shape and we are chasing into many winning styles.
Ciaran Joseph Long: We are well positioned to continue our growth inactive customers driving higher full price selling and expanding our gross margins.
Ciaran Joseph Long: Fire and then number two we.
Ciaran Joseph Long: 2. We remain committed to showing up for our customers wherever they choose to shop. In addition to enhancing our online channels, we will continue to test and expand our omni-channel strategies, including experiential stores, marketplaces, and hotels. I will touch on each of our omni-channel strategies with a brand-level review short. Priority number three, continuing to streamline our operations to deliver financial benefits across the company. We've created a culture anchored on finding additional operating improvements across P&I.
Ciaran Joseph Long: We remain committed to showing up for our customers wherever they choose to shop with us.
Ciaran Joseph Long: In addition to enhancing our online channels, we will continue to test and expand our omni channel strategies.
Ciaran Joseph Long: Leading experiential stores marketplaces and wholesale.
Ciaran Joseph Long: I'll touch on each of our omni channel strategies with the brand level with you shortly.
Ciaran Joseph Long: Priority number three continuing to streamline our operations to deliver financial benefits across the company.
Ciaran Joseph Long: We've created a culture anchored on finding additional operating improvements across the P&L.
Ciaran Joseph Long: This is less about simply removing costs and more about driving efficiencies, sharing best practices, and leveraging scale. For example, we are achieving improved inbound freight rates through a combination of lower rates and a better mix of air versus ocean shipping.
Ciaran Joseph Long: This is the last about simply removing costs and more about driving efficiencies sharing best practices and leveraging scale.
Ciaran Joseph Long: For example, we are achieving improved inbound freight rates through a combination of lower rates and a better mix of air versus ocean shipping.
Ciaran Joseph Long: We've also begun to action store operational opportunities at Princess Poly, which we will roll out to our planned 2024 opening. Now, let me share some highlights from our largest brand, Princess Polly. Our mission is to make on-trend fashion sustainable and accessible for everyone. Targeting Gen Z and Millennia women, Princess Polly entered a new fiscal year with more than 5.3 million global email subscribers and approximately 2.3 million global SMS subscribers, representing growth of 4% and 7% respectively. We launched the Princess Polly brand into the physical world in December 2023 with the opening of the brand's first store in Century City, LA.
Ciaran Joseph Long: We've also begun to action store operational opportunities at Princess Polly, which we will rollout to our planned 2024 openings.
Ciaran Joseph Long: Now, let me share some highlights from our brands.
Ciaran Joseph Long: Our largest brand Princess Polly, whose mission is to make on trend fashion sustainable and accessible for everyone.
Ciaran Joseph Long: Targeting Gen Z and millennial women Princess Polly entered the new fiscal year with more than $5 3 million global email subscribers and approximately $2 3 million global S. M S subscribers, representing growth of 4% and 7% respectively.
Ciaran Joseph Long: We launched the Princess Polly brands into the physical World December timber 2023 opening up the brand's first store in century City L E.
Ciaran Joseph Long: The store continues to perform exceedingly well, attracting both existing and new customers, while also creating a halo effect for our online customers. The team is doing an excellent job of crafting unique and personalized experiences to engage influencers, college ambassadors, and customers alike. Q1 showcased a variety of immersive brand moments, from influencer events like exclusive in-store sip-and-shop gatherings and the Princess Poly Activewear launch event to a spring break Jeep tour in Florida tailored for students, along with curated influencer edits to boost strategic brand awareness and cultivate further trend-driven content.
Ciaran Joseph Long: The store continues to perform exceedingly well, attracting both existing and new customers, while also creating a halo effect for our online business.
Ciaran Joseph Long: The team is doing an excellent job of crafting unique and personalized experience to engage Influencers college ambassadors and customers alike.
Ciaran Joseph Long: Q1 showcased a variety of immersive brand buildings from Influencer events like exclusive in store Sip and shelf gatherings.
Ciaran Joseph Long: And the Princess Polly Activewear launch event to a spring break Jeep turned Florida tailored for students.
Ciaran Joseph Long: Along with curated Influencer edits to boost strategic brand awareness and cultivate further trend driven content.
Ciaran Joseph Long: We remain on track to open three Princess Polly stores in the third quarter, one in Scottsdale Fashion Square, one on Newbury Street in Boston, and another in Fashion Valley Mall in San Diego. From a product perspective, a key pillar of Princess Polly's merchandising strategy is a continued focus on product innovation. Following the January launches of Sleepwear and Loungewear, we launched an activewear election that garnered a significant positive customer response. Leveraging our test and repeat model and the early success we have seen, we will continue to build out sleepwear, loungewear, and activewear, as well as test additional categories throughout 2024.
Ciaran Joseph Long: We remain on track to open three Princess Polly stores in the third quarter, one in Scottsdale fashion square, one on Newbury Street in Boston and another in fashion Valley Mall in San Diego.
Ciaran Joseph Long: From a product perspective, a key pillar of prints as part of these merchandising strategy is continued focus on product innovation.
Ciaran Joseph Long: Following January launches of sleepwear and loungewear.
Ciaran Joseph Long: Interesting and active wear collection that garnered a significant positive customer response.
Ciaran Joseph Long: Leveraging our test of repeat model and the early success. We've seen we will continue to build out sleep wear lounge wear and activewear as well as test additional categories throughout 2024.
Ciaran Joseph Long: Moving to our other women's brand, Petalumpup. Petalumpup entered 2024 with over 1.7 million social media followers around the globe and continues to experience great success in the U.S. Targeting a slightly older customer base than Princess Polly, Petal and Pop is best known for its impeccably designed and forward-trending collection. We're seeing nice strength in dresses, which is a dominant portion of Petal and Pop's category mix. And we're very pleased with the March launch of our wedding guest collection. Doug DeMarco and Wilma.
Ciaran Joseph Long: Moving to our other women's Brian Purcell and pop patent in pulp entered 'twenty 'twenty four with over $1 7 million social media followers around the globe and continues to experience great success in the U S.
Ciaran Joseph Long: Targeting a slightly older customer base and Princess Polly Persimmon pop is best known for its impact to be designed and four were trending collections.
Ciaran Joseph Long: Offering more elevated event based iOS.
Ciaran Joseph Long: We're seeing nice strength in dresses, which is the dominant portion of pack of impulse category mix and we're very pleased with the March launch of a wedding gift collection dumped Martin romance.
Ciaran Joseph Long: The collection comprises 75 styles, reimagined bestsellers, and new styles available on the Petal and Pop site. And to showcase the collection launch, the brand hosted a successful influencer and media event in New York City. The success we are seeing across the Petal and Pop assortments sets the brand up for expansion into additional lifestyle categories in the future, shifting to a marketplace omnichannel test.
Ciaran Joseph Long: The collection comprises 75 styles, we imagined bestsellers and new site is available on the patent on pulp space.
Ciaran Joseph Long: Now the showcase the collection launched the brand hosted a successful Influencer and media event in New York City.
Ciaran Joseph Long: The success, we're seeing across the pet and then pop assortment affects the brand up for expansion into additional lifestyle categories in the future.
Ciaran Joseph Long: Shifting to a marketplace that omnichannel tests following successful launches on both Macy's and target sites passionate pulp expanded its distribution in March a nordstrom's website, which has exceeded our initial expectations setting the stage for accelerated growth in the future.
Ciaran Joseph Long: Following successful launches on both Macy's and Target sites, Petalumpup expanded its distribution in March on Nordstrom's website, which has exceeded our initial expectations, setting the stage for accelerated growth in the future. Across Petalumpop's marketplace presence, we continue to see a high percentage of customers who are new to the brand. And finally, our successful wholesale tests with Victoria's Secret and Liverpool have resulted in follow-on orders. Turning now to our street work... As I mentioned earlier, in the U.S., our Culture Kings business saw another quarter of strong double-digit net sales growth. As a premier global streetwear brand and retail destination, Culture Kings offers a unique blend of music, sports, and fashion found across the globe.
Ciaran Joseph Long: Across the patent on pumps marketplace presence, we continue to see a high percentage of customers who are new to the brand.
Ciaran Joseph Long: And finally, our success in wholesale tests with Victorias secret and Liverpool have resulted in follow on orders.
Ciaran Joseph Long: Turning now to our streetwear brands.
Ciaran Joseph Long: As I mentioned earlier in the U S. Our Kashi King's business saw another quarter of strong double digit net sales growth.
Ciaran Joseph Long: As a premier Global Street wear brand in retail destination country King's offers a unique blend of music sports and fashion found across the globe.
Ciaran Joseph Long: We remain bullish on Culture King's long-term growth potential in the U.S. as well as globally. Culture King is disrupting the streetwear market, and we are thrilled with the consistently strong sales performance and four-wall profitability in the US flagship Las Vegas location. The Thor Experience is truly unique, with an unforgettable atmosphere and an exclusive buying experience on an international scale.
Ciaran Joseph Long: We remain bullish and closer canes long term growth potential in the U S as well as globally.
Ciaran Joseph Long: Country Kings is disrupting the street, where market and we are thrilled with the consistently strong sales performance and four wall profitability in the U S flagship Las Vegas location.
Ciaran Joseph Long: The store experience is truly unique and won't forget in that atmosphere and an exclusive buying experience on an international stage.
Ciaran Joseph Long: We also remain pleased with the continued strong performance and broadening acceptance of our first party brands, which account for more than 50% of Total Culture King's U.S. sales. Lawyer, American Thrift, and Minimo are top first-party brands which we further complement with exclusive third-party offers. Straight off of the Super Bowl hype, Culture Kings partnered with Rolling Loud for another legendary weekend of music, culture, and collaborations in LA. The brand sponsored the Emerging Artist Stage, had their signature branded basketball court activation, and new to this year's event, Culture Kings had a screen printing station where fans could select from exclusive designs to get custom screen-printed hoodies and t-shirts on the screen. First, we will have Brian Minimal, who also continues to disrupt the stream.
Ciaran Joseph Long: We also remain pleased with continued strong performance and broadening acceptance of our first party brands, which account for more than 50% of total culture Kings U S sales.
Ciaran Joseph Long: Lawyer American Thrift and minimal are taught first party brands, which we further complements what exclusive third party offerings.
Ciaran Joseph Long: Straight off the superbowl height country teams partnered with rolling loud for another legendary weekend of music culture and collaborations in Italy.
Ciaran Joseph Long: The brand sponsored the emerging artist stage have their signature branded basketball court activation.
Ciaran Joseph Long: Due to this year's event closer Kings had a screen print station.
Ciaran Joseph Long: Where fans could select from exclusive designs to get accustomed screen printer at east and T shirts on the spot.
Ciaran Joseph Long: Firstly, Brian minimal also continues to disrupt the streamer market in.
Ciaran Joseph Long: In March, Minimal launched an exclusive capsule collection with NBA star Treshawn Mann, and it has received great fans. Minimal also continues to expand its brand distribution channels for its exclusive products through regional streetwear sales. Now I'll provide more detail on the P&L before taking your questions. For the first quarter, net sales were $117 million, down 3% and 1% on a constant currency basis compared to the first quarter of 2023. A strength in our U.S. sales was offset by softer trends in Australia and New Zealand.
Ciaran Joseph Long: In March minimal launch an exclusive capsule collection with NBA Star trade show in men with great fanfare.
Ciaran Joseph Long: Minimal also continues to expand its Brian distribution channels for their exclusive products through Regent Street wear stores.
Ciaran Joseph Long: Now I'll provide more detail on the P&L before taking your questions.
Ciaran Joseph Long: For the first quarter net sales were $117 million down, 3% and 1% on a constant currency basis compared to the first quarter of 2023 that strengthened our U S sales were offset by softer trends in Australia, and New Zealand.
Ciaran Joseph Long: As I mentioned, net sales in our U.S. business increased 6.2 percent compared to the first quarter of last year. Sales in the Australia and New Zealand region, as expected, were challenging and declined 19.1% for the quarter. Net sales in the rest of the world declined 3.5% for the quarter.
Ciaran Joseph Long: As I mentioned net sales in our U S business increased six 2% compared to the first quarter of last year.
Ciaran Joseph Long: Sales in the Australia, and New Zealand region as expected were challenging and declined $19 one per cent for the quarter.
Ciaran Joseph Long: Net sales in the rest of world declined three 5% for the quarter.
Ciaran Joseph Long: Total orders for the first quarter were $1.5 million, up 1.3% compared to the first quarter of last year, with strength in the U.S. We served 3.8 million active customers in the first quarter, a 5.5% increase compared to the first quarter of 2023. As a reminder, our active customer count is calculated on a trailing 12-month basis. Our first quarter average order value was $77, down 3.8% compared to the first quarter of last year on a reported basis and down 2% in constant currency due primarily to softness in Australia and New Zealand.
Ciaran Joseph Long: Total orders for the first quarter were $1 5 million up one 3% compared to the first quarter of last year with strength in the U S.
Ciaran Joseph Long: We serve $3 8 million active customers in the first quarter at five 5% increase compared to the first quarter of 2023.
Ciaran Joseph Long: As a reminder, our active customer count is calculated on a trailing 12 month basis.
Ciaran Joseph Long: Our first quarter average order value was $77 down three 8% compared to the first quarter of last year on a reported basis and down 2% in constant currency due primarily to softness in Australia and New Zealand.
Ciaran Joseph Long: Turning to profitability, gross margin in the first quarter was 56.2% compared to 56.9% in the same period last year. We were pleased that our direct-to-consumer channel generated gross margin expansion for Princess Polly, Petal and Pulp, and Minimal. During the quarter, we continued to take actions to improve our inventory levels and composition at Culture King, which impacted our overall goals.
Ciaran Joseph Long: Turning to profitability gross margin in the first quarter was 56, 2% compared to 56, 9% in the same period last year.
Ciaran Joseph Long: We were pleased that our direct to consumer channel generated gross margin expansion that Princess Polly petaline pulp and minimal.
Ciaran Joseph Long: During the quarter, we continued to take actions to improve our inventory levels and composition that culture kings, which impacted our overall gross margin.
Ciaran Joseph Long: Selling expenses were $34.2 million compared to $34.4 million in the first quarter of 2020. Selling expenses were 29.3% of net sales, up 70 basis points compared to 28.6% in the first quarter of 2020, due primarily to the effect of growing marketplace initiatives and additional stores. Marketing expenses in the quarter were $14.9 million compared to $14.8 million in the first quarter of 2020. On a rate basis, marketing expenses were 12.7% of net sales compared to 12.3% of net sales in the first quarter of 2020.
Ciaran Joseph Long: Selling expenses were $34 2 million compared to $34 4 million in the first quarter of 2023.
Ciaran Joseph Long: Selling expenses were 29, 3% of net sales up 70 basis points compared to 28, 6% in the first quarter of 2023, due primarily to the effect of growing marketplace initiatives and additional stores.
Ciaran Joseph Long: Marketing expenses in the quarter were $14 9 million compared to $14 8 million in the first quarter of 2023.
Ciaran Joseph Long: On a rate basis marketing expenses were 12, 7% of net sales compared to 12, 3% of net sales in the first quarter of 2023.
Ciaran Joseph Long: Despite the reduced marketing effectiveness of Culture Kings in Australia, we were pleased with the improved marketing effectiveness of Princess Polly and Petalimpup, and importantly, we saw positive growth in active customers. General and administrative expenses decreased 12.4% to $22.7 million, compared to $25.9 million in the first quarter of 2023. On a rate basis, G&A expenses were 19.4% of net sales compared to 21.5% of net sales in the first quarter of last year We delivered adjusted EBITDA of $874,000 compared to $2.2 million in the same period last year, and Heather Brokaw, adjusted EBITDA margin for the first quarter of 2024 was 0.7% compared to 1.8% in the same period last year. Turning now to The Boundaries.
Ciaran Joseph Long: Despite reduced marketing effectiveness culture Kings in Australia, we were pleased with the improved marketing effectiveness Princess Polly and patches in pulp and importantly, we saw positive growth in active customers.
Ciaran Joseph Long: General and administrative expenses decreased 12, 4% to $22 7 million compared to $25 9 million in the first quarter of 2023.
Ciaran Joseph Long: On a rate basis G&A expenses were 19, 4% of net sales compared to 21, 5% of net sales in the first quarter of last year.
Ciaran Joseph Long: We delivered adjusted EBITDA of 874000 compared to $2 2 million in the same period last year ahead of our guidance range.
Ciaran Joseph Long: Adjusted EBITDA margin for the first quarter of 'twenty 'twenty, four with 0.7% compared to one 8% in the same period last year.
Ciaran Joseph Long: Turning now to the balance sheet.
Ciaran Joseph Long: We ended the quarter with $21.9 million in cash and cash equivalents. That totaled $103.6 million at the end of the quarter, a 22% reduction compared to $132.4 million a year ago. Turning now to inventory, we continue to focus on right sizing our inventory position and end of the quarter with inventory down 19% to 91.5 million compared to 112.5 million a year ago. We are comfortable with the level and composition of our inventory of Princess Polly, Cuddle and Pup, and Mint.
Ciaran Joseph Long: We ended the quarter with $21 9 million in cash and cash equivalents that totaled $103 6 million at the end of the quarter at 22% reduction compared to $132 4 million a year ago.
Ciaran Joseph Long: Turning now to inventory, we continue to focus on right sizing our inventory position and ended the quarter with inventory down 19% to $91 5 million compared to $112 5 million a year ago, we are comfortable with the level and composition of our inventory of Princess Polly patent in pulp and minimal.
Ciaran Joseph Long: And we are pleased with the progress we have made light-sizing Closure King's Australian inventory in preparation for the full transition to the test and repeat model in the back half of 2024. A quick update on our stock repurchase program. In the first quarter, we repurchased 106,153 shares for a total cost of approximately $1.1 million.
Ciaran Joseph Long: And we are pleased with the progress we have made right safety culture, King's Australia inventory in preparation for the full transition to the test for repeat model in the back half of 2024.
Ciaran Joseph Long: As of the end of the quarter, we have $1.8 million remaining in our share repurchase order. Now turning to our outlook for 2024 and beyond. Based on the solid initial start to the year, we are raising the low end of our net sales guidance range and now expect $545 million to $555 million in net sales. We're also slightly erasing our full year adjusted EBITDA outlook range from $17 million to $19 million.
Ciaran Joseph Long: A quick update on our stock repurchase program.
Ciaran Joseph Long: In the first quarter, we repurchased a 106153 shares for a total cost of approximately 1.1 million.
Ciaran Joseph Long: As of the end of the quarter, we have $1.8 million remaining in our share repurchase authorization.
Ciaran Joseph Long: Now turning to our outlook for 2024 and beyond.
Ciaran Joseph Long: Based on this solid initial start to the year, we are raising the low end of our net sales guidance range and now expect.
Ciaran Joseph Long: 545 million to 555 million in net sales for the year.
Ciaran Joseph Long: We're also slightly are raising our full year adjusted EBITDA outlook range to 17 million to $19 million.
Ciaran Joseph Long: As you update your models, I would like to take a moment to help everyone understand that as we expand our total addressable market through omni-channel tests, we would expect a neutral to marginally accretive impact on our overall EBITDA market. However, we anticipate that there will be shifts in the lines of the P&L, including a slight drag on our gross margin, while benefiting marketing. We expect this dynamic will begin to modestly influence our P&L in the back half of the year as these channels grow. Importantly, we see our omnichannel initiatives as drivers of long-term portfolio brand awareness, top line, and Eva Dottauer.
Ciaran Joseph Long: As you update your models I would like to take a moment to help everyone understand that as we expand our total addressable market to omni channel and tests.
Ciaran Joseph Long: Would expect neutral to marginally accretive impact to our overall EBITDA margins.
Ciaran Joseph Long: However, we anticipate that there will be shifts in the lines of the P&L, including a slight drag on our gross margin was benefiting marketing expenses.
Ciaran Joseph Long: We expect this dynamic will begin to modestly influence or paying out in the back half of the year as these channels grew.
Ciaran Joseph Long: Importantly, we see your omnichannel initiatives as drivers of long term portfolio of brand awareness topline and EBITDA dollars.
Ciaran Joseph Long: For the full year, we expect gross margins between 55.5% and 56%. We expect gross margins will increase in the back half of the year as we take the actions we took to move through inventory at Koji King's in 2023, slightly offset by a higher mix of marketplace and wholesales. We anticipate selling expenses to be approximately 26% of net sales and marketing expenses of approximately 12.5% of net sales. Marketing expenses will be slightly higher in the second quarter and leveraged throughout the year as we expand our omni-channel business.
Ciaran Joseph Long: For the full year, we expect gross margins between 50, 545 and 56% we.
Ciaran Joseph Long: We expect gross margins will increase in the back half of the year as we lap the actions we took to move through inventory at Cogent games in 2023, slightly offset by a higher mix of marketplace in wholesale sales.
Ciaran Joseph Long: We anticipate selling expenses to be approximately 26% of net sales and marketing expenses of approximately 12.5% of net sales.
Ciaran Joseph Long: Marketing expenses will be slightly higher in the second quarter and leveraged throughout the year as we expand our omni channel initiatives.
Ciaran Joseph Long: We expect G&A expenses between $100 million and $110 million for the full year of 2025. Additionally, as mentioned, we are raising our adjusted EBITDA expectations to a range of $17 million and $19 million for the year. We expect the weighted average diluted share count of $10.6 million, capital expenditures of $10 to $12 million, and an effective tax rate of $10. For the second quarter, we expect net sales between $133 million and $138 million, and adjusted EBITDA of between 4.5 and 5.5.
Ciaran Joseph Long: We expect G&A expenses between 100 million and 110 billion for the full year of 2024.
Ciaran Joseph Long: And as mentioned, we are raising our adjusted EBITDA expectations to a range of 17 million and 19 million for the year.
Ciaran Joseph Long: We expect the weighted average diluted share count of $10 6 million capital expenditures.
Ciaran Joseph Long: $10 million to $12 million.
Ciaran Joseph Long: And then effective tax rate of 10%.
Ciaran Joseph Long: For the second quarter, we expect net sales between 133 and $138 million.
Ciaran Joseph Long: And adjusted EBITDA of between four five and $5 5 million.
Ciaran Joseph Long: In summary, 2024 is off to a great start, with first quarter results that exceed the high end of our net sales and adjusted EBIT outlay. I'm extremely confident in the many profitable future growth opportunities we see for AK Abrams, particularly the tremendous white space runway we see in the U.S. to expand our broad brand portfolio reach and total addressable market. We remain focused on executing our strategic priorities, which position us to grow our brands and deliver consistent long-term growth. Now, I will open the call to your questions.
Ciaran Joseph Long: In summary, 2024 is off to a great start with first quarter results that exceeded the high end of our net sales and adjusted EBITDA guidance.
Ciaran Joseph Long: I'm extremely confident in the many profitable future growth opportunities, we see for AK brands, particularly the tremendous white space runway, we see in the U S to expand our ball brand portfolio reach and total addressable market.
Ciaran Joseph Long: We remain focused on executing our strategic priorities, which position us to grow our brands and deliver consistent long term growth.
Speaker Change: Now I will open the call up to your questions.
Speaker Change: Thank you.
Operator: At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, you may press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Our first question today comes from the line of Eric Bader with SEC Research. Please receive your question.
Speaker Change: At this time, we'll be conducting a question and answer session.
Operator: If you'd like to ask a question today you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Eric Beder: You May press Star two if you like to withdraw your question from the queue.
Eric Beder: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please poll for questions. Thank you.
Eric Bader: Good afternoon, and congrats on a solid bounce-back quarter. Thanks, Eric.
Eric Beder: Our first question today comes from the line of Eric better with SCC Research. Please proceed with your questions.
Eric Beder: Good afternoon, congrats on a solid bounce back quarter.
Eric Beder: Thanks, Eric.
Ciaran Joseph Long: I want to talk a little bit about Culture Kings. Obviously, that Las Vegas store is an amazing store, and it's probably not replicable, but are there opportunities to have incremental Culture Kings stores in the U.S.?
Eric Beder: I want to talk a little about culture Kings.
Ciaran Joseph Long: Obviously that Las Vegas stores, an amazing store.
Ciaran Joseph Long: There's probably not replicable, but are there opportunities to have more incremental cultural king stores in the U S and I know that you're moving in terms of Australia, and New Zealand to the test mode.
Eric Bader: And I know that you're moving, in terms of Australia and New Zealand, to the test mode. How are the, I guess, preliminaries for that, and how are, you know, the changes happening? And, you know, what's the confidence that you have that that's going to be the next key driver there?
Eric Bader: How have the I guess preliminaries for that.
Eric Bader: How are the changes happening and you know what's the confidence you have that that's going to be the next key driver there.
Ciaran Joseph Long: Yeah, thanks, Eric. And, you know, firstly, on culture kings in Las Vegas, I think there is certainly an opportunity. And I think, look, as we look at the overall portfolio, we certainly feel that the strategy is working. It's great to be up, you know, 6.2% in the US for the quarter, and overall active customer growth of 5.5% is just a great indication of the opportunities we have here across all of the brands.
Speaker Change: Yeah. Thanks, Eric.
Ciaran Joseph Long: You know I think firstly, yeah on Unculture gains in Las Vegas, I think is certainly opportunity and I think look as we look at the overall portfolio and we certainly feel that the strategy is working it's great to be at six 2% in the U S for the quarter and overall active customer growth of five five per se.
Ciaran Joseph Long: And it's just a great indication of our or the opportunities we have here across all of the brands.
Ciaran Joseph Long: As I said in my prepared remarks, Culture Kings is again up to double-digit growth in the US. We feel we will open more stores for Culture Kings, probably not at the level that we had in Las Vegas, but we certainly feel that there are opportunities for them. Right now, we're very focused on opening our three stores for Poly in Q3, but we are certainly looking for store opportunities for Culture Kings. And we do see tremendous runway for that brand.
Ciaran Joseph Long: As I said in the prepared remarks <unk> is again.
Ciaran Joseph Long: Double digit growth in the U S. You know, we we feel we will and we will open more stores for culture Kings and probably not at the level that we have in Las Vegas, but we certainly feel that there's opportunities for them.
Ciaran Joseph Long: Right right now we're very focused on opening you know our three stores for Pauline can in Q3, and but certainly looking for for store opportunities for our culture and we do see tremendous runway for that brand you know at the moment, 50% of the product that we sell in culture Kings are first party brands that we own ourselves.
Ciaran Joseph Long: At the moment, 50% of the products that we sell in Culture Kings are first-party brands that we own ourselves, so we just feel that's really responding to the culture. And as we think about Australia, you know, I think the brand, you know, the macro conditions there are more unfavorable than we've seen in the U.S., but we know that we need to get Culture Kings on to that test and repeat model that we see just being so strong and really underpinning that growth that we're seeing in the U.S. across the other brands.
Ciaran Joseph Long: So we would just say that's really resonating with the customer.
Ciaran Joseph Long: And as we think about Australia, you know I think the brand and you know the macro conditions. There are more unfavorable than we've seen in the U S and but we know that we need to get culture caves answer that test and repeat model that we see just being so strong and really underpinning that growth that we're seeing in the U S across the other brands.
Ciaran Joseph Long: You know, we are seeing some early signs that some of the new products that they've brought in are hitting all of those sales metrics that they would look at and expect, and they're building a model where they can replenish that really fast and leveraging the expertise that we have and the model that we have at the other brands. So, look, I think we feel confident that as we go into the back half, we will see gross margin expansion and growth coming from getting Culture Kings in Australia onto that test.
Ciaran Joseph Long: And we are seeing some early signs and you know some of the new product that they've brought in is is hitting all of those sales metrics that they would look at and expect and and you know they're building a model where they can replenish into that really fast and leveraging the expertise that we have in the mall.
Ciaran Joseph Long: That we have at the other brands. So look I think we feel confident that as we go into the back half, we see gross margin expansion and coming from getting culture Kings in Australia onto that test and repeat model.
Eric Bader: Great, and let me just do a follow-up here. So you've talked. You did a great job of managing inventories here, and you continue to manage them. How should we be thinking about, in the second half, as the business somewhat normalizes in terms of the test model and some of the other changes, how should we be thinking about a more normalized, what should be a more normal rate of change in the inventory going forward?
Speaker Change: Great and let me just sort of.
Speaker Change: Follow up here, so you've talked you've done a great job managing inventories here and you continue to manage them how should we be thinking about in the second half as the business somewhat normalizes in terms of the test model and some of the other changes how should we be thinking about more normal what what should be a more normalized rate of change in the inventory.
Speaker Change: Going forward. Thank you.
Ciaran Joseph Long: Yeah, thanks, Eric. Yeah, really good progress on inventory, you know, down 19% and over $20 million year over year. And doing that, we're able to get the US business growing at that 6.2% rate. You know, as we think about the rest of the year, I would say the US business is certainly in chase mode when it comes to inventory. And, you know, I think there'll be some buildup as we go through the US and continue the growth there.
Ciaran Joseph Long: Thank you. Yeah, thanks, Eric. Yeah.
Speaker Change: Yeah, Thanks, Eric and yes, really good progress on inventory down, 19% and in over $20 million in year over year and doing that we were able to get that the U S business growing at that six 2%.
Ciaran Joseph Long: As we think about the the rest of the year you know I would say the U S business. It is certainly in chase mode. When it comes to inventory and you know so I think there'll be some buildup and as we go through the U S and continued the growth there and I think theres still some actions we will take in Australia the wear.
Ciaran Joseph Long: I think there's still some actions we will take in Australia; overall inventory will come down sequentially quarter over quarter. And I think as we go through the year, overall, we'll see, you know, small sequential improvements or reductions in inventory dollars. But I think that we have made big progress there overall.
Ciaran Joseph Long: Overall inventory will come down sequentially quarter over quarter, and I think as we go through the year overall, we see a small sequential improvements or reductions in inventory dollars, but I think that we have made the big progress there overall.
Speaker Change: Great. Thank you.
Ciaran Joseph Long: Yeah.
Operator: Our next question is from the line of Ashley Owens with KeyBank Capital Markets. Please proceed with your question.
Ciaran Joseph Long: Our next question is from the line of Ashley Owens with Keybanc capital markets.
Ashley Anne Owens: And with your questions.
Ashley Anne Owens: Hi, thanks for taking my question. I guess I know you talked about some better response and newness within each of the brands, but I was wondering if you could give a little bit of color on the inter-quarter cadence and exit trajectory heading into 2Q. And then also just, you know, the active customer is very solid, even with the sales softness. Could you provide any color on how you're thinking about that piece? I know it's trailing 12 months, but should that continue to trend ahead of sales growth for the year? And, I guess, how are you engaging new buyers on the platform? And if you're seeing most of this growth concentrated in any one region? Thanks. Sure. Thanks, Ashley.
Ashley Anne Owens: Hi, Thanks for taking my question I guess I know you talked about some better response in munis within each of the brands, but I was wondering if you could give a little bit of color on the intra quarter cadence and exit trajectory heading into Q.
Speaker Change: And then also just you know active customer is very solid even if the sales softness could you provide any color on how youre thinking about that piece and that's trailing 12 months, but should that continue to trend ahead of sales growth for the air and I guess, how are you engaging new buyers on our platform.
Speaker Change: And if you see most of this growth concentrated in any one region.
Speaker Change: Sure Thanks, Ashley and.
Ciaran Joseph Long: Yeah, a lot there. So, let me start with the newness and the cadence.
Ashley Anne Owens: Yeah.
Speaker Change: A lot there so let me start with newness.
Ciaran Joseph Long: Look, I think we're just overall very pleased with that Q1 performance, particularly in the US, right? I think overall coming in higher than our sales guidance and then that 6.2% growth in the US. I think as we went through the quarter, we saw momentum build.
Speaker Change: And the cadence look I think we're just overall very pleased with our Q1 performance, particularly in the U S rates, you know I think overall coming in higher than our sales guidance and then that six 2% growth in the U S. I think as we went through the quarter, we saw momentum build in for us.
Ciaran Joseph Long: No.
Ciaran Joseph Long: Builds nicely coming into into Q2, that's that spring summer season. It is certainly a period, where we shine across the four brands and we did see some you know a little bit of impact from weather on some of the categories. Like swim you know the Easter changes, but I would say overall very happy end.
Ciaran Joseph Long: Within that and kind of maybe segue a little bit into active customers I think just really happy with overall growth in active customers, but just seeing real strength across the brands.
Ciaran Joseph Long: And for us, you know, [inaudible] of the Goldstein on Gelt radio podcast. He is a licensed financial professional in both the U.S. and Israel. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-investment-services.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts held by National Financial Services, LLC. Member NYSE®, a Fidelity Investments company.
Ciaran Joseph Long: And we're seeing that growth I would say in all channels direct to consumer in our stores and what we're doing in marketplaces.
Ciaran Joseph Long: His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered. And now, six months in, we're also seeing that the stores have a halo effect on our online sales within that region. And so, kind of, you know, that virtuous model is kind of really helping itself, the online and the stores. And we're also continuing to see, you know, that 95% of the customers or over 95% of the customers on these marketplace channels are new to, particularly, Petal and Pup, which is doing so well on these channels.
Ciaran Joseph Long: It continues we continue to see that over 30% of the customers coming into the Princess Polly store in L. A or are new to the brand and now six months in we're also seeing that store has a halo effect on our online sales within that region and so kind of you know that that virtual virtuous model. This.
Ciaran Joseph Long: Kind of really helping itself the online in stores and we're also continuing to see you know the 95% of the customers are over 95% of the customers on these marketplace channels are new to particularly Petaline pulp, which is which is doing so well in these channels. So really great to see them all working so well.
Ciaran Joseph Long: So really great to see them all working so well, I think, you know, reinforcing that the strategy we have, the models that we have, these brands are working, they're working well. And I think they're all underpinned by that test and repeat model that we have. And, you know, as we think about engagement, I think, look, all of the brands are working really hard across all of the marketing channels. And I think, you know, doing that really in conjunction with feeling really good about the inventory that they have, you know, the newness that they brought in during the quarter.
Ciaran Joseph Long: I think you know we enforcing that the strategy we have the model that we have.
Ciaran Joseph Long: These brands are working they're working well and I think all underpinned by that test and repeat model that we have and you know as we think about engagement I think look all of the brands are working really hard across all all of the marketing channels.
Ciaran Joseph Long: And I think you know doing that really in conjunction with feeling really good about the inventory that they have you know the newness that they brought in during the quarter.
Ciaran Joseph Long: Turned into quickly.
Ciaran Joseph Long: Salaries, and we're able to kind of repeat that product replenishing to those products, which is really core to this model right and it's not just about testing new style. It's finding new studies that become best winters, and and you can kind of replenishing G. I.
Ciaran Joseph Long: So I would say overall, the brands are feeling good about where they are, still feeling like there are lots of opportunities as we think about this overall market that we have, and they're just getting after it.
Ciaran Joseph Long: I would say overall the brands are feeling good about where they are still feeling like there's lots of opportunity as we think about this overall market that we have.
Ciaran Joseph Long: And they're just they're getting after it.
Speaker Change: Great. Thank you.
Operator: Thank you. As a reminder to ask a question today, you may press star 1. Our next question is from the line of Youssef Squali with Truth Securities. Please answer your question.
Ciaran Joseph Long: Thank you as a reminder to ask a question, saying you May press Star one.
Operator: Our next question is from the line of Youssef Squali with Trust Securities. Please proceed with your questions.
Nick Cronin: Yeah, this is Nick Cronin on for Youssef. So on the prior call, I think it was called out that you had expected Australia to show a mid 20% decline versus the 19% decline that was reported. So just curious if there's anything that drove the upside there and then as we go throughout the rest of the year, just what's baked into the 2024 guide between the relative geographies? Thanks.
Operator: Yeah, Hi, this is Nick Kannan on for yourself.
Nicholas Harrison Cronin: On the prior call I think it was called out that you would expect that Australia at the show.
Nicholas Harrison Cronin: Mid 20% decline versus the 19% decline that was recorded so just curious if there's anything that drove the upside there and then as we go throughout the rest of the year just what's what's baked into the 2024 guide between the relative geographies. Thanks.
Ciaran Joseph Long: Thanks, Nick. Yeah, you know, as we, I think, as we went through the quarter, we're certainly pushing really hard to get Culture Kings on that test and repeat model that we see, look, we obviously talk about a lot because we see how strong it is and how well it is working across the other brands. You know, we did see some, we are seeing the early signs that the new product that they're bringing in is working well, customers are reacting to it. So, kind of, you know, pushing hard on that.
Speaker Change: Thanks, Nick Yeah, you know it's as we.
Ciaran Joseph Long: I think as we went through the quarter, we're certainly pushing really hard to get culture kings on that test and repeat model that we see look we obviously talked about a lot because we see how strong it is until when it is working across the other brands.
Ciaran Joseph Long: We did see some we are seeing the early signs of the new products that they're bringing in is working well customers are reacting to it. So it kind of you know.
Nick Cronin: And so, you know, that does give us confidence that we'll see, you know, the benefits of getting them on test and repeat and some gross margin expansion in the back half of the year. But, you know, we still feel we've plenty of work to do there in Q2 and beyond. And sorry, Nick, I missed the second part of your question. Yeah, let's make this a guide to CrossFit for each yard.
Ciaran Joseph Long: Pushing hard on that and so you know that those give us confidence that we can see.
Nick Cronin: The benefits of getting them on test and repeat and some gross margin expansion in the back half of the year, we still feel we've plenty of work to do there and in Q2 and beyond.
Nick Cronin:
Nicholas Harrison Cronin: Sorry, I missed the second part of your question.
Nicholas Harrison Cronin: Yeah, that's a good place.
Nicholas Harrison Cronin: Yeah, what's baked into the guide across the three geographies.
Ciaran Joseph Long: Yeah, look, I think, as we think about the guide, you know, very much thinking that the trends that we saw and the regional trends that we saw in Q1 will continue through the year. I think, look, we're over 66% of the business now in the US. And so certainly, by far our largest market, you know, it's where we're furthest along in, you know, developing the different channels. And we're going to continue to lean into that strategy.
Nicholas Harrison Cronin: Yeah look I think and as we think about the guide.
Ciaran Joseph Long: Much thinking the trends that we saw and the regional trends that we saw in Q1 will continue through the year I think look the you know were over 66% of the business now is in the U S and so certainly by far our largest market.
Ciaran Joseph Long: We're refer this along in developing the different channels and we're going to continue to lean into that strategy. You know we've got three stores opening for poly probably late Q3, and so we'll see some benefit there you know really in that Q4 period and and that's really how we've built the.
Ciaran Joseph Long: You know, we've got three stores opening probably, probably, you know, late Q3. And so we'll see some benefit there, you know, really in that Q4 period. And that's really how we've built the kind of model as we think about the revenue for the rest.
Ciaran Joseph Long: The kind of model as we think about the revenue for the rest of the year.
Nick Cronin: Got it. And then could I just ask one follow-up on capital allocation? How are you thinking about balancing the debt paydown versus stock repurchases versus investing organically behind the business? Can you just kind of give us an updated framework there? Yeah, thanks.
Speaker Change: Got it and then can I just ask one follow up on capital allocation I'm. Just how are you thinking about balancing debt paydown versus stock repurchases versus investing organically behind it. There's what's can you just can you give us an updated framework there.
Ciaran Joseph Long: Yeah, thanks. I think we felt really good last year when we paid down $50 million of debt, down 35%, and just strengthened the overall business. And as we sit here today, I think, you know, it's very much going after growth first. And, you know, we've got four great brands, they're responding with customers.
Speaker Change: Yeah. Thanks, you know I think and look we feel really good last year, when we paid down $50 million of debt down 35% in just strengthened the deal for all business.
Ciaran Joseph Long: And as we sit here today I think it's very much going after the grilled first and you know we've got four great brands that are resonating with customers. So I think as it pertains to capital allocation, it's really going after the growth opportunity. There you know as we've talked about new spend 10 to 12 million.
Ciaran Joseph Long: So I think as it pertains to capital allocation, it's really going after the growth opportunity there. You know, as we've talked about, we'll spend 10 to 12 million dollars on CapEx this year. And, you know, I think that and is the key focus for us, but we will continue to pay down the debt. We'll continue to look to strengthen our balance sheet. We're not looking for this to be a highly leveraged business going forward.
Ciaran Joseph Long: Capex this year and I think that.
Ciaran Joseph Long: It's a key focus for us and but we will continue to pay down the debt as we've continued to look to strengthen our balance sheet. You know we're not looking for this to be a highly leveraged business going forward.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Operator: Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the call over to Mr. Long for closing remarks.
Ciaran Joseph Long: At this time, if we send over a question answer session I'll turn the call over to Mr. Long for closing remarks.
Ciaran Joseph Long: Thank you. Thank you all for joining us on the call. It's always good to talk to you and give you updates on where we are and the progress that all of the teams across the US and Australia are making on, you know, bringing great products to customers and really showing off what these brands can do.
Ciaran Joseph Long: Thank you. Thank you all for joining us on the call and always good to talk to you and give you updates on where we are in the progress and all of the teams across the U S and Australia are making on and bringing great product to customers and really showing off what these brands can do.
Speaker Change: Thank you all.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.