aka-20220630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________________________________________

FORM 10-Q

__________________________________________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40828

__________________________________________________________________________________________________

a.k.a. Brands Holding Corp.

(Exact name of registrant as specified in its charter)

__________________________________________________________________________________________________


Delaware						87-0970919
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Montgomery Street, Suite 1600

San Francisco, California 94104

(Address of principal executive offices, including zip code)

415-295-6085

(Registrant’s Telephone Number, Including Area Code)

__________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

AKA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated Filer

Non-accelerated filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of August 5, 2022, the registrant had 128,674,678 shares of common stock outstanding.

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a.k.a. BRANDS HOLDING CORP.

FORM 10-Q

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Income	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Stockholders’ Equity, Partners' Capital and Redeemable Noncontrolling Interest	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signatures

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FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, or that describe our plans, goals, intentions, objectives, strategies, expectations, beliefs and assumptions, are forward-looking statements. The words “believe,” “may,” “might,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “project,” “plan,” “objective,” “could,” “would,” “should” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. We caution that the forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of known and unknown risks, uncertainties and assumptions that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Factors that could contribute to these differences include, among other things:

•the effects of the COVID-19 pandemic on our operations, customer demand, and our suppliers’ ability to meet our needs;

•rapidly-changing consumer preferences in the apparel, footwear and accessories industries;

•our failure to acquire new customers, retain existing customers, or maintain average order value levels;

•the effectiveness of our marketing and our level of customer traffic;

•merchandise return rates;

•our success in identifying brands to acquire, integrate and manage on our platform, and expansion into new markets;

•the global nature of our business;

•our use of social media platforms and influencer sponsorship initiatives;

•inherent challenges in measurement to which certain of our key operating metrics are subject;

•tax liabilities that may increase the costs our consumers would have to pay for our offerings;

•global geopolitical (such as the outbreak of hostilities between Russia and Ukraine), economic and market conditions beyond our control;

•fluctuations between non-U.S. currencies and the U.S. dollar;

•our ability to attract and retain highly qualified personnel;

•fluctuations in wage rates and the price, availability and quality of raw materials and finished goods;

•interruptions in or increased costs of shipping and distribution; and

•the other risk factors set forth elsewhere in this report and under Item 1A of Part I of the Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022 (the “2021 Form 10-K”).

Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or changes in our expectations, unless otherwise required by law.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

a.k.a. BRANDS HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)


	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	29,109	$	38,832
Restricted cash	1,666		2,186
Accounts receivable	3,030		2,663
Inventory, net	143,853		115,783
Prepaid income taxes	11,050		4,059
Prepaid expenses and other current assets	20,092		20,809
Total current assets	208,800		184,332
Property and equipment, net	18,450		14,657
Operating lease right-of-use assets	38,991		26,415
Intangible assets, net	85,548		98,287
Goodwill	346,337		363,305
Other assets	945		850
Total assets	$	699,071	$	687,846
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	28,457	$	25,088
Accrued liabilities	55,728		53,375
Sales returns reserve	5,166		6,887
Deferred revenue	7,643		11,344

Operating lease liabilities, current	6,338		5,721
Current portion of long-term debt	5,600		5,600
Total current liabilities	108,932		108,015
Long-term debt	125,618		103,182
Operating lease liabilities	34,415		21,370
Other long-term liabilities	1,338		1,333
Deferred income taxes, net	2,225		2,920
Total liabilities	272,528		236,820
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.001 par value; 50,000,000 shares authorized; zero shares issued or outstanding	—		—
Common stock, $0.001 par value; 500,000,000 shares authorized; 128,669,181 and 128,647,836 shares issued and outstanding	129		129
Additional paid-in capital	456,637		453,807
Accumulated other comprehensive loss	(35,706)		(11,080)
Retained earnings	5,483		8,170

Total stockholders’ equity	426,543		451,026
Total liabilities and stockholders’ equity	$	699,071	$	687,846

The accompanying notes are an integral part of these condensed consolidated financial statements.

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a.k.a. BRANDS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	158,471	$	149,227	$	306,790	$	218,006
Cost of sales	71,024		67,793		135,147		95,984
Gross profit	87,447		81,434		171,643		122,022
Operating expenses:
Selling	45,254		40,023		85,618		58,277
Marketing	19,064		14,908		34,769		21,132
General and administrative	25,703		19,220		50,481		32,650
Total operating expenses	90,021		74,151		170,868		112,059
Income (loss) from operations	(2,574)		7,283		775		9,963
Other expense, net:
Interest expense	(1,393)		(4,113)		(2,652)		(4,217)

Other expense	(1,200)		(42)		(1,112)		(61)
Total other expense, net	(2,593)		(4,155)		(3,764)		(4,278)
Income (loss) before income taxes	(5,167)		3,128		(2,989)		5,685
Benefit from (provision for) income taxes	955		(939)		302		(1,706)
Net income (loss)	(4,212)		2,189		(2,687)		3,979
Net loss (income) attributable to noncontrolling interests	—		242		—		(76)
Net income (loss) attributable to a.k.a. Brands Holding Corp.	$	(4,212)	$	2,431	$	(2,687)	$	3,903
Net income (loss) per share:
Basic	$	(0.03)	$	0.03	$	(0.02)	$	0.05
Diluted	$	(0.03)	$	0.03	$	(0.02)	$	0.05
Weighted average shares outstanding:
Basic	128,657,271		85,702,097		128,652,580		77,860,431
Diluted	128,657,271		85,702,097		128,652,580		77,860,431

The accompanying notes are an integral part of these condensed consolidated financial statements.

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a.k.a. BRANDS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss)	$	(4,212)	$	2,189	$	(2,687)	$	3,979
Other comprehensive loss:
Currency translation	(39,031)		(5,681)		(24,626)		(11,099)
Total comprehensive loss	(43,243)		(3,492)		(27,313)		(7,120)
Comprehensive loss attributable to noncontrolling interests	—		2,214		—		3,870
Comprehensive loss attributable to a.k.a. Brands Holding Corp.	$	(43,243)	$	(1,278)	$	(27,313)	$	(3,250)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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a.k.a. BRANDS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, PARTNERS’ CAPITAL(1) AND REDEEMABLE NONCONTROLLING INTEREST

(in thousands, except share and unit data)

(unaudited)


	Common Stock			Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)		Retained Earnings				Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2021	128,647,836	$	129		$	453,807	$	(11,080)	$	8,170		$	451,026


Equity-based compensation	—	—			1,368		—		—			1,368
Cumulative translation adjustment	—	—			—		14,405		—			14,405
Net income	—	—			—		—		1,525			1,525
Balance as of March 31, 2022	128,647,836	129			455,175		3,325		9,695			468,324

Equity-based compensation	—	—			1,494		—		—			1,494
Issuance of common stock upon settlement of equity awards, net of shares withheld	21,345	—			(32)		—		—			(32)
Cumulative translation adjustment	—	—			—		(39,031)		—			(39,031)
Net loss	—	—			—		—		(4,212)			(4,212)
Balance as of June 30, 2022	128,669,181	$	129		$	456,637	$	(35,706)	$	5,483		$	426,543


	Partnership Units(1)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interest		Total Stockholders’ Equity				Redeemable Noncontrolling Interest
		Units			Amount
Balance as of December 31, 2020		114,167,842	$	108,197		$	727	$	5,839	$	14,138	$	9,983	$	138,884		$	—
Issuance of units		25,746,282	82,669			—		—		—		—		82,669			—
Noncontrolling interest from purchase of Culture Kings		—	—			—		—		—		—		—			142,717
Equity-based compensation		—	—			523		—		—		—		523			—
Cumulative translation adjustment		—	—			—		(3,444)		—		(398)		(3,842)			(1,575)
Net income		—	—			—		—		1,472		318		1,790			—
Balance as of March 31, 2021		139,914,124	190,866			1,250		2,395		15,610		9,903		220,024			141,142
Equity-based compensation		—	—			609		—		—		—		609			—
Cumulative translation adjustment		—	—			—		(3,709)		—		(137)		(3,846)			(1,835)
Net income		—	—			—		—		2,431		253		2,684			(495)
Balance as of June 30, 2021		139,914,124	$	190,866		$	1,859	$	(1,314)	$	18,041	$	10,019	$	219,471		$	138,812

_________

(1)Excelerate, L.P. was the predecessor entity to a.k.a. Brands Holding Corp. Refer to Note 1 for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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a.k.a. BRANDS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(2,687)	$	3,979
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation expense	2,728		870
Amortization expense	8,079		6,231
Amortization of inventory fair value adjustment	707		6,266
Amortization of debt issuance costs	326		247
Non-cash interest expense	—		693


Non-cash operating lease expense	3,109		3,064
Equity-based compensation	2,862		1,132
Deferred income taxes, net	(1,078)		(2,109)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(424)		(1,602)
Inventory	(33,183)		(11,490)
Prepaid expenses and other current assets	(67)		(5,755)

Accounts payable	5,304		1,354
Income taxes payable	(7,213)		(8,587)
Accrued liabilities	4,896		13,278
Returns reserve	(1,569)		2
Deferred revenue	(3,434)		2,857
Lease liabilities	(1,943)		(2,950)

Net cash (used in) provided by operating activities	(23,587)		7,480
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	—		(225,744)
Cash paid from holdbacks associated with acquisitions	(2,095)		—

Purchase of intangible assets	(64)		—
Purchases of property and equipment	(5,803)		(3,361)
Net cash used in investing activities	(7,962)		(229,105)
Cash flows from financing activities:
Payments of costs related to initial public offering	(1,142)		—
Proceeds from line of credit, net of issuance costs	25,000		12,045
Repayment of line of credit	—		(6,364)
Proceeds from issuance of debt, net of issuance costs	(121)		144,103
Repayment of debt	(2,800)		(938)
Taxes paid related to net share settlement of equity awards	(32)		—
Proceeds from issuance of units	—		82,669
Net cash provided by financing activities	20,905		231,515
Effect of exchange rate changes on cash, cash equivalents and restricted cash	401		(413)
Net increase (decrease) in cash, cash equivalents and restricted cash	(10,243)		9,477
Cash, cash equivalents and restricted cash at beginning of period	41,018		27,099
Cash, cash equivalents and restricted cash at end of period	$	30,775	$	36,576

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	29,109	$	34,341
Restricted cash	1,666		2,235
Total cash, cash equivalents and restricted cash	$	30,775	$	36,576

The accompanying notes are an integral part of these condensed consolidated financial statements.

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a.k.a. BRANDS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except share, per share data, unit, per unit data, ratios, or as noted)

(unaudited)

Note 1. Organization and Description of Business

a.k.a. Brands Holding Corp. (together with our wholly-owned subsidiaries, collectively, the “Company”), which operates under the name “a.k.a. Brands” or “a.k.a.,” is an online fashion retailer focused on acquiring and accelerating the growth of next-generation, digitally native fashion brands targeting Gen Z and Millennial customers.

The Company is headquartered in San Francisco, California, with buying, studio, marketing, fulfillment and administrative functions primarily in Australia and the United States.

Initial Public Offering

In September 2021, the Company completed an initial public offering (the “IPO”), in which the Company issued and sold 10,000,000 shares of its newly authorized common stock for $11.00 per share for net proceeds of $95.7 million, after deducting underwriting discounts and commissions of $6.6 million, and offering costs of $7.7 million.

Reorganization Transactions

a.k.a. Brands Holding Corp. was formed as a Delaware corporation on May 20, 2021 to be the issuer of common stock in the IPO. Excelerate, L.P. (“Excelerate”), a Cayman limited partnership, and the predecessor entity to a.k.a. Brands Holding Corp., was the holding company of the entities that owned and operated the a.k.a. businesses prior to the IPO. The equity interests of Excelerate, which included the Series A partner units and incentive units, were owned by affiliates of Summit Partners (“Summit”), certain other investors and certain of our executive officers and directors and other members of management.

In connection with the IPO, a reorganization was undertaken to cause Excelerate to become a wholly-owned subsidiary of a.k.a. Brands Holding Corp. Immediately prior to the reorganization, Summit, management and certain other investors exchanged their limited partnership interests in Excelerate for limited partnership interests in New Excelerate, L.P. (“New Excelerate”), and New Excelerate became a limited partner of Excelerate. Immediately prior to the pricing of the IPO, New Excelerate and other Excelerate investors transferred their interests in Excelerate to a.k.a. Brands Holding Corp., in exchange for common stock in a.k.a. Brands Holding Corp (the “New Excelerate Reorganization”). As a result, Excelerate became a wholly-owned subsidiary of a.k.a. Brands Holding Corp.

As a result of the Culture Kings acquisition in March 2021 (refer to Note 3 for additional information), Excelerate indirectly owned 55% of the equity interests in CK Holdings, LP (“CK Holdings”), which owned 100% of the Company’s Culture Kings business prior to the IPO. The remaining 45% of the equity interests in CK Holdings were held by certain minority investors. Immediately following the New Excelerate Reorganization, the Company completed a series of transactions in which the minority investors exchanged their remaining interests in CK Holdings for 21,809,804 newly issued shares of a.k.a. Brands Holding Corp. common stock. The number of shares issued in exchange for the minority interests was determined based on the relative valuations of CK Holdings and consolidated a.k.a. at the time of the IPO.

Excelerate historically owned 66.7% of the equity interests in P&P Holdings, LP (“P&P Holdings”), which operated the Company’s Petal & Pup business prior to the IPO. The remaining 33.3% of the equity interests in P&P Holdings were held by certain minority investors. On August 19, 2021, the Company repurchased approximately 6.0% of the equity held by the P&P minority investors for AUD $5.0 million. In connection with the completion of the IPO, the Company used a portion of the net proceeds from the IPO to fund the acquisition of the remaining 27.3% of the equity interests in P&P Holdings then owned by the P&P minority investors for cash of approximately AUD $22.8 million. Following the completion of this purchase, P&P Holdings became a wholly-owned subsidiary of a.k.a. Brands Holding Corp.

Refinancing Transactions

In March 2021, certain subsidiaries of the Company entered into senior secured credit facilities that provided the Company with a $125.0 million senior secured term loan facility and up to $25.0 million aggregate principal in revolving borrowings (the “Fortress Credit Facilities”), and also issued $25.0 million in senior subordinated notes to an affiliate of Summit (the “Summit Notes”) to provide financing for the Company’s acquisition of Culture Kings (refer to Note 3 for additional information on the Culture Kings acquisition).

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In connection with the IPO, certain subsidiaries of the Company entered into a new senior secured credit facility inclusive of a $100 million term loan and a $50 million revolving line of credit. The Company used borrowings under this new senior secured credit facility’s term loan, together with a portion of the proceeds from the IPO, to repay the Fortress Credit Facilities and Summit Notes in full and subsequently terminated them. Refer to Note 8 for additional information.

Historical Units

Prior to the IPO, incentive units had been issued to certain directors and members of management. These incentive units had a requirement that such shares could not participate in distributions and earnings of Excelerate, L.P. until after the holders of the Series A partner units received their return of capital plus a specified threshold amount per unit. At no time prior to IPO had such threshold been met. In September 2021, in connection with the IPO, all previous ownership interests in Excelerate, L.P., held by New Excelerate and other Excelerate investors were exchanged for shares of common stock in a.k.a. Brands Holdings Corp. in direct proportion to their respective Series A partner units and incentive units, subject to a reverse split factor of 61.25%. All unit, per unit and related information presented in the accompanying consolidated financial statements have been retroactively adjusted, where applicable, to reflect the impact of the split of units held by New Excelerate investors into a proportionate amount of shares of a.k.a. common stock. The terms of the incentive units remained unchanged and individual holders of such units will only be entitled to participate in the distributions and earnings of New Excelerate once the holders of the Series A partner units receive their return of capital plus a specified threshold amount per unit. However, as New Excelerate was issued shares of common stock in direct proportion to its combined Series A partner units and incentive units, New Excelerate will participate in all distributions and returns of the Company in relation to the total amount of shares of a.k.a. common stock that it holds.

Prior to the IPO, a.k.a. used the two-class method in calculating earnings per unit and had not deemed the incentive units to be potentially dilutive because such shares cannot participate in distributions and earnings of the Company until after the Series A units receive their return of capital plus a specified threshold amount per unit, and such threshold had not been met. Accordingly, basic and diluted earnings per share presented on the condensed consolidated statements of income for all periods prior to the IPO are the same. Post-IPO, the common stock held by New Excelerate includes shares issued in proportion to the ownership interests in respect to the incentive units. Therefore, the impact of the incentive unit ownership is included in the common stock issued and outstanding after the IPO.

Note 2. Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The Company’s unaudited condensed consolidated interim financial statements have been prepared in accordance with Article 10 of the SEC’s Regulation S-X. As permitted under those rules, certain footnotes or other financial information that are normally required by generally accepted accounting principles in the United States (“GAAP”) can be condensed or omitted. These financial statements have been prepared on the same basis as our annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of our financial information. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 which are included in the 2021 Form 10-K. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2022 or for any other interim period or for any other future year. The accompanying condensed consolidated financial statements include the balances of the Company and all of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. On an ongoing basis, the Company evaluates items subject to significant estimates and assumptions.

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Revenue Recognition

Revenue is primarily derived from the sale of apparel merchandise through the Company’s online websites and stores and, when applicable, shipping revenue.

Revenue is recognized in an amount that reflects the consideration expected to be received in exchange for products. To determine revenue recognition for contracts with customers in accordance with Revenue from Contracts with Customers (Topic 606), the Company recognizes revenue from the commercial sales of products and contracts by applying the following five steps: (1) identification of the contract, or contracts, with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, the Company satisfies its performance obligation. A contract is created with the customer at the time the order is placed by the customer, which creates a single performance obligation. The Company recognizes revenue for its single performance obligation at the time control of the product passes to the customer, which is when the goods are transferred to a third-party common carrier, for purchases through the Company’s online websites, or at point of sale, for purchases in its stores. In addition, the Company has elected to treat shipping and handling as fulfillment activities and not a separate performance obligation.

Net sales from product sales includes shipping charged to the customer and is recorded net of taxes collected from customers, which are recorded in accrued liabilities and are remitted to governmental authorities. Cash discounts earned by the customers at the time of purchase and estimates for sales return allowances are deducted from gross revenue in determining net sales.

The Company generally provides refunds for goods returned within 30 to 45 days from the original purchase date. A returns reserve is recorded by the Company based on historical refund experience with a corresponding reduction of sales and cost of sales. The returns reserve was $5.2 million and $6.9 million as of June 30, 2022 and December 31, 2021, respectively.

The following table presents a summary of the Company’s sales return reserve:


Balance as of December 31, 2020	$	3,517
Returns	(80,915)
Allowance	84,285
Balance as of December 31, 2021	6,887
Returns	(53,506)
Allowance	51,785
Balance as of June 30, 2022	$	5,166

The Company also sells gift cards and issues online credits in lieu of cash refunds or exchanges. Proceeds from the issuance of gift cards and online credits issued are recorded as deferred revenue and recognized as revenue when the gift cards or online credit are redeemed or, upon inclusion in gift card and online credit breakage estimates. Breakage estimates are determined based on prior historical experience.

Revenue recognized in net sales on breakage of gift cards and online credit for both the three months ended June 30, 2022 and 2021 was immaterial. Revenue recognized in net sales on breakage of gift cards and online credit for the six months ended June 30, 2022 and 2021 was $0.1 million and immaterial, respectively.

The following table presents the disaggregation of the Company’s net sales by geography, based on customer address:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
U.S.	$	82,277	$	71,205	$	159,945	$	114,035
Australia	56,540		59,317		108,434		78,332
Rest of world	19,654		18,705		38,411		25,639
Total	$	158,471	$	149,227	$	306,790	$	218,006

Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and is regularly reviewed by the Chief Operating Decision Maker in deciding how to allocate resources and in assessing performance. The Company has determined that its five brands are each an operating segment. The Company has aggregated its operating segments into one reportable segment based on the similar nature of products sold, production, merchandising and distribution processes involved, target customers and economic characteristics.

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Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and the allocation of consolidated income taxes to separate financial statements of entities not subject to income tax. The Company adopted this ASU on January 1, 2022, and the adoption did not have a material impact on its condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In March, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The pronouncement and amendments help limit the accounting impact from contract modifications, including hedging relationships, due to the transition from the London Inter-Bank Offered Rate (“LIBOR”) to alternative reference rates that are completed by December 31, 2022. The Company is currently evaluating the impact of this update, but does not expect a significant impact to our financial results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, but will continue to monitor the impact of this transition until it is completed.

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Note 3. Acquisitions

Culture Kings

On March 31, 2021, pursuant to a share sale agreement, the Company, through its subsidiary CK Holdings, acquired a 55% ownership stake in Culture Kings. The previous shareholders of Culture Kings retained a 45% noncontrolling interest in Culture Kings by receipt of an equity interest in CK Holdings. The Company recognized goodwill as the excess of the fair value of the total purchase consideration and noncontrolling interests over the net fair value of the identifiable assets acquired and the liabilities assumed. The purchase price consisted of AUD $307.4 million ($235.9 million) in cash consideration and noncontrolling interest with a fair value of AUD $186.0 million ($142.7 million). In connection with the IPO, the Company completed a series of transactions in which the minority investors exchanged their interests in CK Holdings for newly issued shares of a.k.a. Brands Holding Corp. common stock (refer to Note 1 for additional information).

Culture Kings is focused on street apparel aimed at the young adult age group and has a combination of online sales as well as stores based in Australia and expands the Company’s consumer market to include male consumers and further expansion in the United States.

The following table sets forth the final allocation of the total consideration to the identifiable tangible and intangible assets acquired and liabilities assumed, as of the date of the acquisition, with the excess recorded to goodwill:


Purchase consideration:
Total purchase price, net of cash acquired of $8,831	$	227,053
Fair value of noncontrolling interest	142,717
Total consideration	$	369,770

Identifiable net assets acquired:
Account receivable, net	$	625
Inventory(1)	62,937
Prepaid expenses and other current assets	4,800
Property and equipment, net	8,048
Intangible assets, net(2)	73,209
Operating lease right-of-use assets	24,299
Accounts payable	(13,449)
Deferred revenue	(141)
Income taxes payable	(1,778)
Other current liabilities	(2,533)
Operating lease liabilities	(24,299)
Deferred income taxes, net	(25,439)
Accrued liabilities, non-current	(1,058)
Net assets acquired	105,221
Goodwill	$	264,549

The purchase price allocation includes significant judgments, assumptions and estimates to determine the fair value of assets acquired and liabilities assumed. The valuations involving the most significant assumptions, estimates and judgment are:

(1)Inventory was adjusted by $15.1 million to step up inventory cost to estimated fair value. The fair value of the inventory was determined utilizing the net realizable value method, which was based on the expected selling price of the inventory to customers adjusted for related disposal costs and a profit allowance for the post-acquisition selling effort.

(2)The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:


	Fair Value at Acquisition Date		Annual Amortization Expense		Estimated Useful Life
Brand names	$	68,354	$	6,835	10 years
Customer relationships	4,855		1,214		4 years
Total	$	73,209

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Brand names are valued using a relief from royalty approach, which estimates the license fee that would need to be paid by Culture Kings if it was deprived of the brand names and domain names, and instead had to pay a license fee for their use. The fair value is the present value of the expected future license fee cash flows.

Customer relationship intangible assets are valued using the multi-period excess earnings method, which is the present value of the projected cash flows that are expected to be generated by the existing intangible asset after reduction by an estimated fair rate of return on contributory assets required to generate the customer relationship revenues. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates.

Total acquisition costs incurred by the Company in connection with its purchase of Culture Kings, primarily related to third-party legal, accounting and tax diligence fees, were $3.3 million. These costs are recorded in general and administrative expenses in the condensed consolidated statement of income for the year ended December 31, 2021.

Goodwill of $264.5 million, none of which is deductible for tax purposes, represents the excess purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill arising from the acquisition consists largely of anticipated synergies related to combining Culture Kings with the Company’s existing operations.

The fair value of the noncontrolling interest was determined by measuring the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition, adjusted for a discount to factor the non-marketable, noncontrolling holding.

The noncontrolling interest in Culture Kings contained a put right whereby the minority investors could have caused CK Holdings to purchase all of their units at a per unit price equal to six times the EBITDA of CK Holdings, calculated as of the twelve-month period ending on the end of the most recent fiscal quarter. The put right was only exercisable after December 31, 2023. In accordance with ASC 810, Consolidation, as this put right was redeemable outside of the Company’s control, the noncontrolling interest was classified outside the permanent equity section of the Company’s consolidated balance sheets prior to the IPO. In connection with the IPO, the Company completed a series of transactions in which the CK Holdings minority investors exchanged their interests in CK Holdings for newly issued shares of a.k.a. Brands Holding Corp. common stock, thereby eliminating the noncontrolling interest classified outside of permanent equity.

Since the date of acquisition, March 31, 2021, the results of Culture Kings have been included in the Company’s consolidated results. The following amounts are included in the accompanying condensed consolidated statements of income for the three and six months ended June 30, 2022:


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Net sales	$	53,901	$	102,826
Net loss	(2,366)		(2,459)

The unaudited pro forma financial information below is presented to illustrate the estimated effects of the acquisition of Culture Kings and the associated financing as if they had occurred on January 1, 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	158,471	$	149,227	$	306,790	$	269,205
Net income (loss) attributable to a.k.a. Brands Holding Corp.	(4,212)		4,840		(2,687)		5,576
Net income (loss) per share, basic and diluted	$	(0.03)	$	0.06	$	(0.02)	$	0.07

The pro forma information was prepared using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The unaudited pro forma financial information has been prepared for informational purposes only and is not indicative of what the Company’s results of operations would have been had the transactions occurred on January 1, 2020, nor does it project the results of operations of the combined company following the transaction.

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mnml

On October 14, 2021, the Company acquired all of the equity interests of Third Estate LLC (“mnml”) for total consideration of $46.1 million, including cash consideration of $28.2 million, net of cash acquired of $0.6 million, and subject to working capital adjustments. The remaining consideration of $17.3 million was paid in the form of 2,057,695 shares of a.k.a. common stock. mnml is an LA-based streetwear brand that offers competitively priced on-trend wardrobe staples. This acquisition allows the Company to continue its growth into the U.S. market and provides opportunities for customer cross-sell.

The estimated fair values of assets acquired and liabilities assumed as of the date of the acquisition, are as follows:


Accounts receivable, net	$	68
Inventory(1)	7,321
Prepaid expenses and other current assets	2,178
Other assets	15
Intangible assets(2)	14,300
Accounts payable	(504)
Deferred income	(164)
Accrued liabilities	(1,794)
Assumed loan	(1,312)
Sales and use tax liability	(1,100)
Deferred income taxes, net	(3,159)
Total net assets acquired	15,849
Goodwill	29,650
Total purchase price, net of cash acquired of $605	$	45,499

The cash purchase consideration is subject to working capital adjustments that will be concluded prior to October 14, 2022. The preliminary purchase price allocation includes significant judgments, assumptions and estimates to determine the fair value of assets acquired and liabilities assumed. The valuations involving the most significant assumptions, estimates and judgment are:

(1)Inventory was adjusted by $1.9 million to step up inventory cost to estimated fair value. The fair value of the inventory was determined utilizing the net realizable value method, which was based on the expected selling price of the inventory to customers adjusted for related disposal costs and a profit allowance for the post-acquisition selling effort.

(2)The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:


	Fair Value at Acquisition Date		Estimated Useful Life
Brand name	$	11,800	10 years
Customer relationships	2,500		3 years
Total	$	14,300

The results of operations of mnml are included in the Company’s consolidated results beginning October 14, 2021. Total net sales of $9.4 million and net loss of $1.0 million of mnml are included in the accompanying condensed consolidated statement of income for the three months ended June 30, 2022. Total net sales of $20.0 million and net loss of $0.2 million of mnml are included in the accompanying condensed consolidated statement of income for the six months ended June 30, 2022. Goodwill of $29.7 million, none of which is deductible for tax purposes, represents the excess purchase price over the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill arising from the acquisition consists largely of anticipated synergies related to combining with the Company’s existing operations.

Total acquisition costs incurred by the Company in connection with the purchase, primarily related to third-party legal, accounting and tax diligence fees, were $1.3 million. These costs are recorded in general and administrative expenses in the condensed consolidated statement of income during the year ended December 31, 2021.

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Purchase of Noncontrolling Interests

Immediately following the New Excelerate Reorganization (as described in Note 1), the Company completed a series of transactions in which the CK Holdings minority investors exchanged their interests in CK Holdings for 21,809,804 newly issued shares of a.k.a. Brands Holding Corp. common stock. The number of shares issued in exchange for the minority interests was determined based on the relative valuations of CK Holdings and the consolidated a.k.a. group at the time of the IPO. This exchange resulted in the elimination of the noncontrolling interest in Culture Kings, with a value of $132.3 million, and an increase in additional paid-in capital with a nominal amount recorded as common stock at a value of $0.001 per issued share in the exchange. Following the completion of this transaction, CK Holdings became a wholly-owned subsidiary of a.k.a. Brands Holding Corp.

The Company had historically owned 66.7% of the equity interests in P&P Holdings, which operated the Company’s Petal & Pup business prior to the IPO. The remaining 33.3% of the equity interests in P&P Holdings were held by certain minority investors. On August 19, 2021, the Company repurchased approximately 6.0% of the equity held by the P&P minority investors for AUD $5.0 million. In connection with the completion of the IPO, the Company used a portion of the net proceeds from the IPO to fund the acquisition of the remaining 27.3% of the equity interests in P&P Holdings then owned by the P&P minority investors for cash of approximately AUD $22.8 million. As a result of the transaction, noncontrolling interest of $9.6 million was eliminated and the $10.6 million paid in excess of the noncontrolling interest was recorded as a reduction to additional paid-in capital. Following the completion of this purchase, P&P Holdings became a wholly-owned subsidiary of a.k.a. Brands Holding Corp.

Note 4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following:


	June 30, 2022		December 31, 2021

Inventory prepayments	$	11,162	$	14,251
Other	8,930		6,558
Total prepaid expenses and other current assets	$	20,092	$	20,809

Note 5. Property and Equipment, Net

Property and equipment, net is comprised of the following:


	June 30, 2022		December 31, 2021
Furniture and fixtures	$	2,305	$	1,305
Machinery and equipment	3,318		1,595
Computer equipment and capitalized software	5,353		2,638
Leasehold improvements	13,545		12,457
Total property and equipment	24,521		17,995
Less accumulated depreciation	(6,071)		(3,338)
Total property and equipment, net	$	18,450	$	14,657

Total depreciation expense was $1.5 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and was $2.7 million and $0.9 million for the six months ended June 30, 2022 and 2021, respectively. Property and equipment that is fully depreciated as of the last day of a fiscal year is written off during the first quarter of the following year. On January 1, 2022, the Company established a policy to classify all capitalized software, website design and software systems as property and equipment, resulting in a reclassification of such assets and related depreciation and amortization from intangible assets, net, to property and equipment, net.

Note 6. Goodwill

The carrying value of goodwill, as of June 30, 2022 and December 31, 2021, was $346.3 million and $363.3 million, respectively. No goodwill impairment was recorded during the six months ended June 30, 2022 or the year ended December 31, 2021.

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The goodwill of the acquired companies is primarily related to expected improvements in technology performance and functionality, as well as sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. The goodwill of acquired companies is generally not deductible for tax purposes.

The following table summarizes goodwill activity:


Balance as of December 31, 2021	$	363,305

Changes in foreign currency translation	(16,968)
Balance as of June 30, 2022	$	346,337

Note 7. Intangible Assets

The gross amounts and accumulated amortization of acquired identifiable intangible assets with finite useful lives as of June 30, 2022 and December 31, 2021, included in intangible assets, net in the accompanying condensed consolidated balance sheets, are as follows:


		June 30, 2022			December 31, 2021
	Useful life	Weighted Average Amortization Period 2022	2022		Weighted Average Amortization Period 2021	2021
Customer relationships	4 years	2.4 years	$	22,923	2.5 years	$	24,516
Brands	10 years	8.4 years	95,865		8.9 years	100,315
Website design and software system	3 years				2.2 years	1,883
Trademarks	5 years	2.8 years	109		3.3 years	114
Total intangible assets			118,897			126,828
Less accumulated amortization			(33,349)			(28,541)
Total intangible assets, net			$	85,548		$	98,287

Amortization of acquired intangible assets with finite useful lives is included in general and administrative expenses and was $4.0 million and $3.8 million for the three months ended June 30, 2022 and 2021, respectively and $8.1 million and $6.2 million for the six months ended June 30, 2022 and 2021, respectively. Intangible assets that are fully depreciated as of the last day of a fiscal year are written off during the first quarter of the following year. On January 1, 2022, the Company established a policy to classify all capitalized software, website design and software systems as property and equipment, resulting in a reclassification of such assets and related depreciation and amortization from intangible assets, net, to property and equipment, net.

Future estimated amortization expense for acquired identifiable intangible assets is as follows:


	Amortization Expense
Year ending December 31:
Remainder of 2022	$	6,399
2023	12,234
2024	11,712
2025	9,970
2026	9,582
Thereafter	35,651
Total amortization expense	$	85,548

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Note 8. Debt

Princess Polly Operating Line of Credit

The Company’s subsidiary Princess Polly had an operating line of credit (the “Polly Facility”) up to a maximum of $15.4 million, which was guaranteed by Polly Bidco Pty Ltd. and Polly Holdco Pty Ltd, each subsidiaries of the Company (“Princess Polly Group”). The assets of the Princess Polly Group were pledged as security under the Polly Facility.

The Polly Facility was available to make cash draws, procure letters of credit instruments and for the provision of ancillary facilities. The Polly Facility was due November 2021, and was therefore classified as a current liability as of December 31, 2020. As of December 31, 2020, the Company had drawn $6.2 million on the Facility and had $0.8 million drawn in letters of credit which were held as collateral under various custom bonds agreements.

The Company repaid the outstanding balances under the Polly Facility in full and terminated it in February 2021.

Rebdolls Revolving Line of Credit

Rebdolls had a revolving line of credit for a maximum of $0.5 million with Bank of America, N.A. The assets of Rebdolls were pledged as security under this line of credit. As of December 31, 2020, Rebdolls had an outstanding balance of $0.2 million on the revolving line of credit.

The Company repaid the outstanding balances under the revolving line of credit in full on February 28, 2021, the date of its maturity, and terminated it.

Debt Financing for the Culture Kings Acquisition

To fund the acquisition of Culture Kings (refer to Note 3 for additional information), on March 31, 2021, Polly Holdco Pty Ltd. (“Polly Holdco”), a wholly-owned subsidiary of the Company, entered into a debt agreement with a syndicated group, with an affiliate of Fortress Credit Corp as administrative agent, consisting of a $125.0 million term-loan facility and a $25.0 million revolving credit facility.

Polly Holdco also issued $25.0 million in senior subordinated notes to certain debt funds of Summit Partners, a related party of the Company (refer to Note 16 for additional information). The combined term loan and senior subordinated notes provided the Company with $144.1 million, net of loan fees of approximately $5.9 million.

The Company incurred debt issuance costs of $6.9 million, of which $1.0 million related to the revolving credit facility, which were capitalized and included in prepaid and other current assets as deferred financing costs and were being amortized over the life of the facility, or 6 years. The remaining $5.9 million of debt issuance costs relating to the term loan and senior subordinated notes were presented net of the outstanding debt and were being amortized over the life of the outstanding debt, using the effective interest rate method. The Company repaid the term loan, revolving credit facility and senior subordinated notes in full and terminated them in September 2021 in connection with the IPO, as described further below.

New Senior Secured Credit Facility

On September 24, 2021, in connection with the closing of the IPO, certain subsidiaries of the Company entered into a new senior secured credit facility inclusive of a $100.0 million term loan and a $50.0 million revolving line of credit, as well as an option for additional term loan of up to $50.0 million through an accordion feature. Key terms and conditions of each facility were as follows:

•The $100.0 million term loan matures five years after closing and requires the Company to make amortized annual payments of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year with the balance of the loan due at maturity. Borrowings under the term loan accrue interest at LIBOR plus an applicable margin dependent upon our net leverage ratio. The highest interest rate under the agreement occurs at a net leverage ratio of greater than 2.75x, yielding an interest rate of LIBOR plus 3.25%.

•The $50.0 million revolving line of credit, which matures five years after closing, accrues interest at LIBOR plus an applicable margin dependent upon our net leverage ratio. The highest interest rate under the agreement occurs at a net leverage ratio of greater than 2.75x, yielding an interest rate of LIBOR plus 3.25%. Additionally, a margin fee of 25-35 basis points is assessed on unused amounts under the revolving line of credit, subject to adjustment based on our net leverage ratio.

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•The $50.0 million accordion feature allows the Company to enter into additional term loan borrowings at terms to be agreed upon at the time of issuance, but on substantially the same basis as the original term loan, which includes the requirement to make amortized annual payments at the same cadence as that of the original term loan.

The new senior secured credit facility requires that the Company maintain a maximum total net leverage ratio of 3.50 to 1.00 as of the last day of any fiscal quarter, beginning with the fiscal quarter ended December 31, 2021 through maturity. The new senior secured credit facility also requires that the Company maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 as of the last day of any fiscal quarter, beginning with the fiscal quarter ended December 31, 2021 through maturity. In the event that the Company fails to comply with the financial covenant, the Company will have the option to make certain equity contributions, directly or indirectly, to cure any non-compliance with such covenant, subject to certain other conditions and limitations. Beginning with the fiscal year ending December 31, 2022, and continuing annually thereafter, the Company is required to make a mandatory prepayment as a percentage of excess cash flows, as defined by the credit agreement, in the period based on the Company triggering certain net debt leverage ratios. Specifically, a mandatory prepayment of 50% of excess cash flows is required if the Company’s net leverage ratio exceeds 2.75x, and a mandatory prepayment of 25% of excess cash flows is required if the Company’s net leverage ratio is greater than or equal to 2.25x. As of June 30, 2022, the Company was in compliance with all debt covenants.

The Company incurred $2.7 million of debt issuance costs in relation to the new senior secured credit facility. Of this, $0.9 million relates to the revolving credit facility and is capitalized and included in prepaid and other current assets as deferred financing costs to be amortized over the life of the facility, or five years. The remaining $1.8 million of debt issuance costs relates to the term loan and is presented net of our outstanding debt in long-term debt on our balance sheet. Debt issuance costs are amortized over the life of the outstanding debt, using the effective interest rate method.

In September 2021, the Company used borrowings from the term loan under this new senior secured credit facility, together with a portion of the proceeds from the IPO, to repay in full and terminate the previous term loan, revolving credit facility and senior subordinated notes entered into in March 2021 in relation to the Culture Kings acquisition.

In October 2021, the Company borrowed $15.0 million under the revolving line of credit at an applicable interest rate of 3.37% and final payoff due on September 24, 2026. The borrowings on the revolving line of credit were used in the acquisition of mnml. See Note 3 for additional details. In November 2021, subsequent to the draw on the revolver, the Company borrowed $12.0 million of additional term loan under the accordion feature at substantially the same terms as the original term loan. In December 2021, the borrowings from the accordion feature, along with cash on hand, were used to completely repay the borrowings from the revolving line of credit. In connection with the borrowings under the accordion feature, additional debt issuance costs of $0.3 million were incurred and presented net of our outstanding debt in long-term debt on our balance sheet, to be amortized over the life of the accordion, using the effective interest rate method.

In January 2022, the Company borrowed $15.0 million under the revolving line of credit at an applicable interest rate of 3.52% and final payoff due on September 24, 2026. Additionally, in March 2022, the Company borrowed $10.0 million under the revolving line of credit at an applicable interest rate of 3.60% and final payoff due on September 24, 2026.

Beginning on June 30, 2022, the all-in rate (LIBOR plus the applicable margin) for the Company’s term loan and borrowings under the revolving line of credit was repriced under the governing terms of the senior secured credit facility to an applicable interest rate of 4.75%.

Total Debt and Interest

Outstanding debt consisted of the following:


	June 30, 2022		December 31, 2021

Term loan	$	107,950	$	110,750
Revolving credit facility	25,000		—
Capitalized debt issuance costs	(1,732)		(1,968)
Total debt	131,218		108,782
Less current portion	(5,600)		(5,600)
Total long-term debt	$	125,618	$	103,182

Interest expense, which included the amortization of debt issuance costs, totaled $1.4 million and $4.1 million for the three months ended June 30, 2022 and 2021, respectively, and $2.7 million and $4.2 million for the six months ended June 30, 2022 and 2021, respectively.

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Note 9. Leases

The Company leases office locations, warehouse facilities and stores under various non-cancellable operating lease agreements. The Company’s leases have remaining lease terms of approximately 1 year to 10 years, which represent the non-cancellable periods of the leases and include extension options that the Company determined are reasonably certain to be exercised. The Company excludes from the lease terms any extension options that are not reasonably certain to be exercised, ranging from approximately 6 months to 3 years. Lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms as well as payments for common area maintenance and administrative services. The Company often receives customary incentives from landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. The Company does not have any material financing leases.

Operating lease right-of-use assets and liabilities on the condensed consolidated balance sheets represent the present value of the remaining lease payments over the remaining lease terms. The Company uses its incremental borrowing rate to calculate the present value of the lease payments, as the implicit rates in the leases are not readily determinable. Operating lease costs consist primarily of the fixed lease payments included in the operating lease liabilities and are recorded on a straight-line basis over the lease terms.

The Company’s operating lease costs were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating lease costs	$	2,347	$	1,794	$	4,512	$	2,146
Variable lease costs	170		130		318		177
Short-term lease costs	90		50		219		50
Total lease costs	$	2,607	$	1,974	$	5,049	$	2,373

The Company does not have any sublease income and the Company’s lease agreements do not contain any residual value guarantees or material restrictive covenants.

Supplemental cash flow information relating to the Company’s operating leases was as follows:


	Six Months Ended June 30,
	2022		2021
Cash paid for operating lease liabilities	$	3,709	$	2,015
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	17,758		70

Other information relating to the Company’s operating leases was as follows:


	June 30, 2022	December 31, 2021
Weighted-average remaining lease term	7.6 years	6.1 years
Weighted-average discount rate	4.3%	3.9%