a.k.a. Brands Holding Corp. Reports Fourth Quarter and Full Year 2021 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)-- a.k.a. Brands Holding Corp. (NYSE: AKA), a brand accelerator of direct-to-consumer (DTC) fashion brands for the next-generation, today announced financial results for the fourth quarter and full year ended December 31, 2021.

Results for the Fourth Quarter

• Net sales increased 157.7% to $182.4 million, compared to $70.8 million in the fourth quarter of 2020 or 43.2%¹ pro-forma adjusting for the acquisition of Culture Kings, which contributed $75.4 million to net sales during the quarter.
• Net income attributable to a.k.a. Brands Holding Corp. was $0.0 million or $0.00 per share in the fourth quarter of 2021, compared to net income attributable to a.k.a. Brands Holding Corp. of $5.1 million or $0.07 per share in the fourth quarter of 2020.
• Net income attributable to a.k.a. Brands Holding Corp., as adjusted¹ was $4.3 million, or $0.03 per share in the fourth quarter of 2021, compared to $5.1 million or $0.07 per share in the fourth quarter of 2020.
• Adjusted EBITDA¹ was $16.1 million, or 8.8% of net sales, compared to $10.3 million, or 14.6% of net sales in the fourth quarter of 2020.

Results for Fiscal 2021

• Net sales increased 160.4% to $562.2 million, compared to $215.9 million in 2020 or 59.3%¹ pro-forma adjusting for the acquisition of Culture Kings, which contributed $196.5 million to net sales during the year.
• Net loss attributable to a.k.a. Brands Holding Corp. was $(6.0) million or $(0.06) per share in 2021, compared to net income attributable to a.k.a. Brands Holding Corp. of $14.3 million or $0.21 per share in 2020.
• Net income attributable to a.k.a. Brands Holding Corp., as adjusted¹ was $14.1 million, or $0.15 per share in 2021, compared to $14.3 million or $0.21 per share in 2020.
• Adjusted EBITDA¹ was $62.4 million, or 11.1% of net sales, compared to $30.3 million, or 14.0% of net sales in 2020.

“2021 was a monumental year for a.k.a. brands, and our fourth quarter results exceeded expectations,” said Jill Ramsey, Chief Executive Officer, a.k.a. Brands. “I am incredibly proud of our team’s accomplishments last year. We delivered 101% growth in the U.S., our largest market, and 59% total growth on a pro-forma basis¹, while doubling our profitability at an 11% EBITDA margin in 2021. We continue to drive global brand awareness. We grew active customers by 61% to more than 3.7 million and our social media following to over 8.7 million followers. We added two world class brands to our portfolio, diversifying us into men’s and streetwear. Our strong performance demonstrates the power of our platform as we continue to grow our brands through next generation merchandising and marketing. I want to thank our teams for these outstanding achievements while navigating complex supply chain and Covid-19 challenges. I am confident that we have a long runway of growth ahead and can continue to deliver profitable growth in 2022 and beyond.”

Recent Business Highlights

• Strong momentum at Princess Polly, a.k.a.’s largest brand, led by robust growth in the U.S.; successfully launched two new collections: Curve and Earth Club.
• Petal & Pup, a.k.a.’s fastest growing brand in 2021, significantly accelerated in the U.S., which now makes up the majority of its revenue.
• Culture Kings’ growth was led by the U.S.; acquired print-on-demand facility to capture latest pop culture collaborations in real time.
• Signed lease for Culture Kings’ first U.S. experiential flagship store; set to open by the end of this year in Las Vegas, Nevada.
• mnml performing ahead of expectations and already benefiting from the a.k.a. platform during the peak holiday season.

Fourth Quarter Financial Details

• Net sales increased 157.7% to $182.4 million, compared to $70.8 million in the fourth quarter of 2020 or 43.2%¹ pro-forma adjusting for the acquisition of Culture Kings, which contributed $75.4 million to net sales during the quarter. The increase was driven by a 135% increase in the number of orders processed and 9% growth in the average order value during the quarter. The increase in the number of orders was primarily driven by the growth of Princess Polly in the U.S. and the inclusion of Culture Kings.
• Gross margin was 54.6% in the fourth quarter of 2021, versus 60.3% in the same period last year. The 580 point decline in gross margin rate was largely the result of an approximately $3.7 million, or 200 basis point, non-cash, purchase accounting charge associated with the Culture Kings and mnml acquisitions. In addition, the inclusion of Culture Kings impacted gross margin by 360 basis points. Lastly, higher air freight costs impacted gross margin by 300 basis points which was offset by targeted pricing actions.
• Selling expenses were $45.5 million, compared to $18.6 million in the fourth quarter of 2020. As a percentage of sales, selling expenses leveraged by 130 basis points to 24.9% compared to 26.2% in the fourth quarter of 2020.
• Marketing expenses were $21.5 million, compared to $6.0 million in the fourth quarter of 2020. Marketing expenses were 11.8% of net sales compared to 8.5% of net sales in the fourth quarter of 2020. The higher marketing expense as a percentage of sales was associated with an increased investment in performance marketing and higher advertising rates.
• General and administrative (“G&A”) expenses were $27.3 million, compared to $10.3 million in the fourth quarter of 2020. G&A expenses were 14.9% of net sales compared to 14.5% of net sales in the fourth quarter of 2020. The increase in G&A expenses as a percent of net sales was primarily due to an increase in salaries and related benefits, as well as equity-based compensation expense related to increases in headcount across functions to support business growth, additional professional service fees and transaction costs.
• Adjusted EBITDA¹ was $16.1 million, or 8.8% of net sales, compared to $10.3 million, or 14.6% of net sales in the fourth quarter of 2020.

Full year 2021 financial details are included in the company’s Form 10-K for the twelve months ended December 31, 2021.

Balance Sheet and Cash Flow

• Cash and cash equivalents at the end of the fourth quarter totaled $38.8 million compared to $26.3 million at the end of fiscal year 2020.
• Debt at the end of the fourth quarter totaled $108.8 million, compared to $6.4 million at the end of fiscal year 2020. As part of proceeds raised from its IPO, the Company reduced its debt levels by approximately $69.8 million from the $168.0 million of debt borrowed during 2021, prior to the IPO.
• Cash flow from operations for the twelve months ended December 31, 2021 was $24.0 million, compared to $21.7 million for the twelve months ended December 31, 2020.

Outlook

For the full year fiscal 2022, the Company expects:

• Net sales between $785 million and $805 million
• Adjusted EBITDA² of between $90 million and $100 million
• Weighted average diluted share count of 128.7 million
• Capital expenditures of approximately $18 million to $20 million

For the first quarter of 2022, the Company expects:

• Net sales between $140 million and $145 million
• Adjusted EBITDA² of between $9.5 million and $10.5 million
• Weighted average diluted share count of 128.6 million

The above outlook is based on several assumptions, including, but not limited to, the global supply chain challenges, and air freight prices remaining elevated in 2022, and Australia recovering in the second quarter. See “Forward-Looking Statements” for additional information.

Conference Call

A conference call to discuss the Company’s fourth quarter and full year 2021 results is scheduled for March 1, 2022, at 4:30 p.m. ET. Analysts and investors may also call in on (877) 858-5495 or (201) 689-8853. The conference call will also be webcast live at https://ir.aka-brands.com in the Events and Presentations section. A recording will be available shortly after the conclusion of the call. To access the replay, please dial (877) 660-6853 or (201) 612-7415 for international callers, conference ID 13727137. An archive of the webcast will be available on a.k.a. Brands’ investor relations website.

BofA Securities 2022 Consumer and Retail Technology Conference

a.k.a. Brands is scheduled to participate in the BofA Securities 2022 Consumer and Retail Technology Conference on Tuesday, March 8, 2022, at 1:50 pm Eastern Time in New York, NY. The fireside chat will be webcast live over the internet and can be accessed on the Company’s Investor Relations website, https://ir.aka-brands.com. An online archive will be available on that site following the conference.

Use of Non-GAAP Financial Measures and Other Operating Metrics

In addition to results determined in accordance with accounting principles generally accepted in the United States of America (GAAP), management utilizes certain non-GAAP performance measures such as net income attributable to a.k.a. Brands Holding Corp., as adjusted, net income per share, as adjusted, free cash flow, adjusted EBITDA and adjusted EBITDA margin for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance. See additional information at the end of this release regarding non-GAAP financial measures.

About a.k.a. Brands

a.k.a. Brands is a brand accelerator of direct-to-consumer fashion brands for the next generation. Each brand in the a.k.a. portfolio is customer-led, curates quality exclusive merchandise, creates authentic and inspiring social content and targets a distinct Gen Z and millennial audience. a.k.a. Brands leverages its next-generation retail platform to help each brand accelerate its growth, scale in new markets and enhance its profitability. Current brands in the a.k.a. Brands portfolio include Princess Polly, Culture Kings, mnml, Petal & Pup and Rebdolls.

Forward-Looking Statements

Certain statements made in this release are “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.

Important factors, among others, that may affect actual results or outcomes include the continuation of the COVID-19 pandemic and the potential related disruptions to our operations, customer demand, and our suppliers’ ability to meet our needs; our ability to anticipate rapidly-changing consumer preferences in the apparel, footwear and accessories industries; our ability to acquire new customers, retain existing customers, or maintain average order value levels; the effectiveness of our marketing and our level of customer traffic; merchandise return rates; our success in identifying brands to acquire, integrate and manage on our platform; our ability to expand into new markets; the global nature of our business; our use of social media platforms and influencer sponsorship initiatives, which could adversely affect our reputation or subject us to fines or other penalties; the inherent challenges in measuring certain of our key operating metrics, and the risk that real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business; the potential for requirements to collect additional sales taxes or to be subject to other tax liabilities that may increase the costs to our consumers; economic downturns and market conditions beyond our control; currency fluctuations; 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, which could increase costs; interruptions in or increased costs of shipping and distribution, which could affect our ability to deliver our products to the market; and other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Forward-Looking Statements” in the Company’s reports filed with the U.S. Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, Quarterly Report on Form 10-Q for the three months ended September 31, 2021 and final prospectus related to its initial public offering, dated September 21, 2021. a.k.a. Brands does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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1} See additional information at the end of this release regarding non-GAAP financial measures.
² The Company has not provided a quantitative reconciliation of our Adjusted EBITDA outlook to a GAAP net income outlook because it is unable, without making unreasonable efforts, to project certain reconciling items. These items include, but are not limited to, future stock-based compensation expense, income taxes, interest expense, and transaction costs. These items are inherently variable and uncertain and depend on various factors, some of which are outside of the Company’s control or ability to predict. See additional information at the end of this release regarding non-GAAP financial measures.

a.k.a. BRANDS HOLDING CORP.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)

Non-GAAP financial measures used by the Company might be calculated differently from other similar-titled measures used by other companies and so may be limited in usefulness as a comparison metric.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and adjusted EBITDA margin are key performance measures that management uses to assess our operating performance. Because adjusted EBITDA and adjusted EBITDA margin facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business. We expect adjusted EBITDA margin to increase over the long-term as we continue to scale our business and achieve greater leverage in our operating expenses.

We calculate adjusted EBITDA as net income (loss) adjusted to exclude: interest and other expense; provision for income taxes; depreciation and amortization expense; stock-based compensation expense; transaction costs; and one-time or non-recurring items. Adjusted EBITDA is considered a non-GAAP financial measure under the SEC’s rules because it excludes certain amounts included in net income (loss), the most directly comparable financial measure calculated in accordance with GAAP. A reconciliation of non-GAAP adjusted EBITDA to net income (loss) for the three and twelve months ended December 31, 2021 and 2020 is as follows:

Net Income Attributable to a.k.a. Brands Holding Corp., As Adjusted and Net Income Per Share, As Adjusted

Net income attributable to a.k.a. Brands Holding Corp., as adjusted and net income per share, as adjusted are considered non-GAAP financial measures under the SEC’s rules because they exclude certain amounts included in net loss attributable to a.k.a. Brands Holding Corp. and net income (loss) per share calculated in accordance with GAAP, the most directly comparable financial measures calculated in accordance with GAAP. Management believes that net income attributable to a.k.a. Brands Holding Corp., as adjusted and net income per share, as adjusted are meaningful measures to share with investors because they better enable comparison of the performance with that of the comparable period. In addition, net income attributable to a.k.a. Brands Holding Corp., as adjusted and net income per share, as adjusted afford investors a view of what management considers a.k.a.’s core earnings performance and the ability to make a more informed assessment of such core earnings performance with that of the prior year.

We have calculated net income attributable to a.k.a. Brands Holding Corp, as adjusted and net income per share, as adjusted for the three and twelve months ended December 31, 2021 by adjusting net income (loss), net loss per share and net loss attributable to noncontrolling interests, as applicable, for the following:

1. Inventory step-up amortization expense resulting from the acquisition of Culture Kings;
2. Equity-based compensation expense related to performance-based awards that vested upon IPO;
3. Loss on extinguishment of debt; and
4. Removal of the tax effect of non-deductible incentive units.

There were no adjustments to net income or net income per share for the three and twelve months ended December 31, 2020. A reconciliation of non-GAAP net income, as adjusted to net income (loss), as well as the resulting calculation of net income per share, as adjusted for the three and twelve months ended December 31, 2021 are as follows:

Pro Forma Net Sales

Pro forma net sales is considered a non-GAAP financial measure under the SEC’s rules. A reconciliation of non-GAAP pro forma net sales to net sales, which is the most directly comparable financial measure calculated in accordance with GAAP, for the three and twelve months ended December 31, 2021, and 2020 is as follows:

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Investor Contact
investors@aka-brands.com

Media Contact
media@aka-brands.com

Source: a.k.a. Brands

Released March 1, 2022