A.K.A. BRANDS HOLDING CORP. Q1 FY2025 earnings call

• Ciaran Long mentioned strong first quarter performance, fourth consecutive quarter of growth, and thanked the team. • Highlighted net sales growth, strength in U.S. and Australia/New Zealand regions, active customer base growth. • Omni-channel expansion plans on track, Princess Polly opened seventh store, early reads from Nordstrom debuts are encouraging. • Addressed tariff environment, leveraging relationships, diversifying supply chain, strategic price increases. • 2025 priorities: attract/retain customers on direct consumer channels, expand brand awareness through physical retail and wholesale partnerships, streamline operations and strengthen financial foundation. • Princess Polly's performance, including fashion forward approach, lifestyle category expansion, marketing success, store openings. • Petal & Pup's performance, including resonance with core customer, assortment expansion, marketing initiatives, Nordstrom rollout and new wholesale partnerships. • Culture Kings and mnml's growth in Australia/New Zealand, in house brands' success, collaborations, and store events.

Net sales grew approximately 12% on a constant currency basis to $129 million. The U.S. grew 14%. The Australia and New Zealand region registered first quarter revenue growth of more than 6%. Princess Polly, the largest brand in the portfolio, accounts for approximately half of the portfolio’s revenue. Petal & Pup delivered solid performance in the quarter. The Australia and New Zealand region for streetwear brands Culture Kings and mnml is back to growth. Active customer base grew nearly 8% over the trailing 12 months. Gross margin expanded 100 basis points to 57.2% in the first quarter. Adjusted EBITDA was $2.7 million, up from $0.9 million in the same period last year.

• Full year net sales outlook: between $600 million to $610 million, growth in 4% to 6% range. • Adjusted EBITDA outlook adjusted to between $24 million to $27.5 million due to tariff uncertainty. • Full year gross margin outlook: between 56.4% and 56.7%. • Second quarter net sales expected between $154 million and $158 million, adjusted EBITDA between $7 million to $8 million. • Anticipates fiscal 2025 stock-based compensation of approximately $8 million to $10 million, depreciation and amortization expense of roughly $19 million to $21 million, interest and other expense of approximately $15 million to $17 million, effective tax rate of negative 40%, CapEx between $12 million to $14 million, and weighted average diluted share count of approximately 10.8 million. • Second quarter stock-based compensation anticipated to be approximately $1.5 million to $2.5 million, depreciation and amortization $4.5 million to $5.5 million, interest and other expense of $4.5 million to $5.5 million, effective tax rate of negative 40%, CapEx between $3 million to $5 million, and weighted average diluted shares of 10.7 million.

• Tariffs pose a near-term challenge, impact on gross margin and EBITDA. • Diversifying supply chain may face cost and quality profile challenges as new vendors are involved. • Uncertainty surrounding trade negotiations and tariff rates.

Q: Can you give puts and takes on margins as we go through and how much is a headwind from tariffs, how you’re mitigating the tariffs and what’s different in this 2.0 tariff environment from 1.0 and also thoughts on price increases. And then just the other topic on average order value active customers, what are you seeing there in terms of customer behavior and how is the cadence of the quarter?

A: Ciaran Long mentioned intensively working to diversify outside of China over the last six months, finding vendors for test and repeat model and quality, expecting to be predominantly out of China by Q4, working with existing China vendors for discounts, and selectively taking pricing actions. Kevin Grant added gross margin up 100 basis points in Q1 due to test and repeat strategy and inventory position, and AOV was relatively flat with sales growth driven by order growth.

Q: As you think about the guidance provided the revenues and the adjusted EBITDA, what sort of demand trends are you thinking in as we roll into the second half of the year and what’s kind of incorporated in the guidance obviously still I would assume continued double-digit growth in the U.S. but is there any areas of upside if we see positive traction in those two regions and maybe a return to growth in the rest of the world?

A: Ciaran Long said Australia is back to growth at 6%, expects Australia to be positive for full year but Q2 may be slightly negative, U.S. has 14% growth, confident in continued growth across brands and wholesale partnerships, and feel good about the guidance.

Q: The U.S. business is lapsing some more difficult compares as we move through the balance of the year. How sustainable is that growth? And also on selling expenses, you mentioned these were up due to the additional store openings. Just wanting to double check if this is something we should still expect to see some modest leverage in this year. And with the new partners you’re moving to as you diversify away from China, any color on the margin profiles there versus what we were seeing in China?

A: Ciaran Long felt confident about overall guidance, U.S. has good performance with customer growth and wholesale relationships, Kevin Grant said they made progress on supply chain optimization with lower outbound freight and fulfillment costs, excluding one-time costs they leveraged selling expenses in Q1, and Ciaran Long mentioned they've been working to find partners with right attributes for test and repeat model and quality, seeing some slight differences in cost profile but confident in getting to equivalency.

Q: What should we be thinking about as a potential longer-term for the amount of stores? Are you still seeing the stores ability to drive new customers A to the stores and B to online? And talk about Dillard’s here. Is there the opportunity to have Petal & Pup kind of penetrate that chain as well as they’ve done here with Nordstrom’s going forward. And what is the longer-term thought process in wholesale in terms of where else you can go after this?

A: Ciaran Long said about 30% of store customers are new to the brand, stores are ahead of sales plan and profitable, pacing for next year will be considered, Petal & Pup team has done well with Dillard's, and the team is actively looking at other wholesale opportunities to expand brand awareness