a.k.a. Brands Holding Corp.

Greetings and welcome to the AKA Brands Holding Corp. 3rd Quarter 2022 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like the opportunity to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Emily Schwartz. Thank you. Please go ahead.

Good afternoon. Thank you for joining AKA Brands' third quarter 2022 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 today are Bill Ramsey, Chief Executive Officer, and Kiran Long, Chief Financial Officer. Before we get started, I'd like to remind you of the company's Safe Harbor language. Management may make forward-looking statements, which refer to expectations, projections, and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements. This call will contain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. With that, I'll turn the call over to Jill.

Thank you, Emily, and thanks, everyone, for joining our call this afternoon. I'd like to start by congratulating the Culture Kings team on the grand opening of their first U.S. store this past weekend and appreciating all of our teams for their ongoing hard work, agility, and grit in what continues to be a dynamic and challenging macro environment. As we discussed last quarter, during this time of less predictable demand, we are focused on improving profitability while building great brands for the long term. Demand remains impacted by inflationary pressures on consumers, shifts in customer spending, and a competitive marketing landscape. Despite these headwinds, I'm pleased that the U.S. region, our largest, had solid net sales growth of 8% in the quarter, on top of very strong 84% growth last year. However, net sales overall decreased 4% to $156 million, or were flat when adjusted for foreign exchange impact. Australia declined 9% or negative 2% in constant currency. Like the U.S., Australia is experiencing macro effects from consumer inflationary pressure and a shift back to stores post-pandemic. Additionally, we were impacted by significant FX headwinds, which Kiran will discuss further when he takes you through our financials and revised outlook. Thanks to the agility and swift work of our teams, we increased our gross margin rate 50 bits and improved EBITDA margin 220 bits on a sequential basis, while continuing to make progress on our inventory position. We took a number of actions during the quarter, marketing spend reallocations, inventory optimizations, and team and resource right-sizing, We anticipate another challenging quarter and will be prudent about identifying efficiencies in our operation and managing inventory while balancing our long-term focus on growth. AKA Brands is the next generation of fashion, and our flexible asset-light model enables us to adapt quickly during dynamic market conditions. Our data-driven approach to merchandising combines test and repeat buying with short lead times and a high mix of exclusives. This allows us to efficiently manage our inventory and deliver strong gross margins while navigating shifts in consumer demand and supply chain dynamics. We have a modern approach to marketing, combining a social first strategy with performance and in-house channels to attract and retain customers at low cost. And our ability to quickly shift spend across channels and geographies ensures we optimize our marketing yield during dynamic times. We have a unique mix of talent with veteran e-commerce leaders and operators who have experienced multiple economic cycles combined with innovative next-gen talent. Importantly, we continue to build our brand's awareness and expand our customer base as evidenced by 23% growth in active customers compared to the same period last year, led by growth in the U.S. We are still in the early days of our U.S. market awareness and have significant opportunity ahead of us We made great progress on our growth initiatives this quarter, and I'm pleased to share some highlights. While I usually start with the women's brands, what I'm most excited to talk about today is the Culture Kings Grand Opening. Our first Culture Kings U.S. flagship store opened on Saturday, November 5th in the iconic foreign shops at Caesars Las Vegas. It's an unrivaled retail experience unlike any store out there. With 14,000 square feet of selling space, an LED staircase, the largest hat wall in the world, live in-store DJs spinning daily, a half-bath to ball court, a bar, a secret room with rare and exclusive merchandise, an on-site customizer for sneakers and apparel, a recording studio, and more. In addition to some Vegas-only features, the flagship store includes the best of Culture King's signature in-store activities and games, including the legendary Sharpshooter Basketball Challenge, the Holy Grail Arcades, and one-of-a-kind giveaways that all add to the excitement and unforgettable atmosphere in-store. Similar to Culture King's other stores, the U.S. flagship serves as a powerful marketing engine and is a key accelerator of brand awareness in the U.S. Known for their experiential stores and unique retail payment model, Culture Kings frequently hosts athletes, DJs, and music artists for in-store appearances. DJ drama was spinning, Ferg stopped by, and a number of other streetwear influencers attended the opening. All of this creates great buzz, brand association, and awareness for Culture Kings. On top of the immersive experience, the flagship officially introduces the U.S. consumer to Culture Kings' 18 exclusive in-house fashion brands, including Carre, St. Morta, Goat Crew, and Loiter. These in-house design brands make up approximately half of the Culture Kings business today and are a key focus area for the U.S. expansion. No one brings together the elements of streetwear lifestyle quite like Culture Kings. In addition to the popular in-house fashion brands, the store sells thousands of styles from 60 leading third-party brands, including fan gear, footwear, and hats. and online the customer can find even more great selection. We're confident that Culture Kings will become the new authority in streetwear and capture significant white space in the U.S. market. As Culture Kings expands in the U.S., they continue to build their penetration of exclusive products with an emphasis on the fast-growing printed tees and hoodies segment. As a reminder, our print-on-demand capability allows Culture Kings to quickly jump on trends and print licensed properties at attractive gross margins. This quarter, Culture Kings had a successful collaboration with Netflix, licensing their Stranger Things property, which exceeded expectations. They continue to ramp the print and licensing business and will deliver 30 new collaborations, including Playboy, J. Cole's label Dreamville, and a series of world-exclusive USC events and talent in the fourth quarter. While Culture King's current priority is U.S. expansion, we're pleased that the Australian stores rebounded in the third quarter with the return of live events and in-store activations. Turning to Minimal, our streetwear brand specializing in denim and bottoms, I'm excited to share that the synergies between Minimal and Culture King are coming to fruition. Minimal is now the fastest growing brand on Culture King's website, And there is a dedicated section and wide range of Minimal assortment at the Culture King store in Las Vegas. We were pleased with the performance of Minimal during the opening weekend. It was both one of the top performing brands overall and the best selling brand in the bottoms category. We're also pleased with Minimal's ability to quickly leverage shared learnings and resources from the AKA platform. They're shifting their merchandising strategy to align with our proven test and repeat model, enabling them to drop more new styles on a faster production timeline. Turning to our women's brands, Princess Polly, our largest brand, continues to be a top fashion website for female teens, as ranked once again by the most recent Piper Sandler survey. While we have seen macro impacts on demand this fall in line with the broader market, I remain incredibly confident that we're still in the early innings of expanding this brand, and I'm bullish on its growth potential in the U.S. and globally. Given that roughly 70% of Princess Polly's customers are students, a primary focus this quarter was the homecoming and back-to-school season. Their expanded homecoming collection, which featured new, more formal dresses, along with existing favorites, exceeded expectations and gives them confidence to expand their formal wear offerings. Princess Polly also expanded their back-to-school assortment focused on casual apparel, which was further amplified on social media by Princess Polly's growing community of college ambassadors who serve as powerful micro-influencers. Princess Polly continues to make headway on their mission to make on-trend fashion sustainable and accessible. They've made great progress expanding their sustainable range, made with lower-impact materials. and will surpass their goal of converting 40% of their new styles to low-impact fabric by the end of the year. They continue to transform their supply chain to support this and are committed to maintaining the same gross margins and accessible price points for customers. Princess Polly's extended size collection, Curve, also continues to gain traction and grew nearly 20% quarter over quarter while continuing to attract new customers. These initiatives strengthen their position with their Gen Z audience and create a competitive differentiation from other fashion players. As the digital marketing landscape continues to evolve rapidly with the rise of new channels, the popularity of new formats, and privacy updates, Princess Polly is agile and well-positioned to quickly react. They constantly test new social platforms, shift content, and reallocate marketing spend to wherever the customer goes. Growing on TikTok has been a huge priority for Princess Polly as their customer shifts from engaging with still imagery to video content. They grew their TikTok followers by over 40% year over year and are expertly balancing influencer partnerships and paid ads on the platform. Princess Polly is doubling down where they see the highest return on spend and leaning into their in-house channels even further. Subsequent to quarter end, Princess Polly piloted a live video shopping event on their own website and drew thousands of viewers, exceeding expectations. We look forward to them launching Princess Polly Live, a video series that showcases a live shopping experience combined with authentic and interactive conversations between influencers and customers. This is an exciting initiative that they'll expand upon in the coming quarters and share learnings across our group of brands. Text message marketing, which is one of Princess Polly's highest returning channels, continues to be an outstanding marketing engine with over 1.5 million subscribers and growing. Through surveys, Princess Polly has learned the text is a top channel for customers to learn of new style drops, offers, and promotions. Petal & Pup also continues to scale in the U.S. and was once again our fastest growing brand this quarter. They are leveraging the proven text and repeat merchandising strategy to quickly expand their assortment into accessories, jumpsuits, and matching sets, which now account for 10% of sales compared to 4% in the third quarter last year, further diversifying their category mix. As they also follow the AKA Playbook, they're expanding their penetration of in-house designed exclusive items, which come at higher gross margins. Category expansion is a key area of growth as Petal & Pup bolsters their assortment in the U.S., and they recently launched a dropship program for underpinning traded categories such as jewelry, shoes, and accessories. This initiative allows us to easily expand offerings and test new categories with no inventory risk, while still gaining rich consumer insights. Dropship items now account for 20% of sales in these categories, with plans to add highly seasonal categories to the site. Similar to Princess Polly, Petal & Pop is also evolving their marketing approach as the landscape rapidly changes. The brand piloted their first shoppable event in Nashville over three days in July. The event was an incredible brand awareness exercise. Approximately 100 influencers attended, garnering 10 million social media impressions, and 5,000 people passed through the event. Petal & Pop has a large and growing customer base in the south and the middle of the country. and the success of this initial test gives us confidence to roll out more shoppable events in key cities next year. Petal & Pup and RevDolls are both doubling down on video content through Instagram and TikTok, and Petal & Pup is seeing great traction on Instagram Reels, with some Reels generating over 2 million views. Before I turn the call over to Kiran, I want to emphasize that we're laser-focused on growing our current brands profitably. While we're still committed to our M&A strategy, given the state of the market and the macroeconomic environment, we have no plans to acquire any brands in 2022. However, we remain in active conversations with highly talented founders and will continue to shop the world for the best brands, but we'll only transact when the time is right for our business and our shareholders. As we enter the fourth quarter, the macro environment remains dynamic and is rapidly changing. We are anticipating a highly promotional holiday season and a competitive marketing landscape. We will continue to pull all necessary levers to balance growth and profitability for the remainder of the year. We have an exciting quarter ahead with the opening of the Culture Kings US flagship, and our women's brands are well positioned for the holiday season. While we anticipate the macroeconomic backdrop to remain fluid over the next few quarters, The strength of our brands and our flexible platform gives me full confidence that we'll deliver on our long-term goals. With that, I'll turn it over to Gerard.