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spk03: Greetings. Welcome to AKA Brands Holdings Corp's first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Emily Schwartz. Emily, you may now begin.
spk00: Good afternoon. Thank you for joining AKA Brands' first quarter 2023 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 is Kiran Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor 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. The call will also contain certain numbers presented on a pro forma basis, which includes the impact of Culture Kings as if we had owned it for all periods and comparable periods described. With that, I'll turn the call over to Kieran.
spk04: Thanks, Emily. Good afternoon, everyone, and thanks for joining the call today. Our first quarter results exceeded our expectations on both the top and bottom lines, driven by solid execution across the brands and our continued focus on managing the business prudently. We delivered net sales of $120 million compared to our original expectations of between $113 million and $116 million. Importantly, we continue to balance growth and profit, and I'm proud that we delivered $2.2 million of adjusted EBITDA, which also exceeded our original expectations. We made great progress against our strategic initiatives in the quarter, and I'm also really proud of the efficiency improvements we made to our operations. A key highlight for the quarter was our diligent approach to managing our inventory. Notably, we ended the quarter with $112 million in inventory, which is down 11% since the end of December 2022 and down 7% from the same period last year. Another highlight was that we continued to reduce our debt levels. We paid off over $11 million of debt in the first quarter and paid off another $10 million subsequent to quarter end. This brings our current debt levels down to $122 million, down from $144 million from the end of fiscal 2022. We remain focused on strengthening our balance sheet and plan to continue to pay down our debt through the remainder of the year. I want to thank our teams for their hard work and execution to deliver a strong start to the year with first quarter performance that exceeded our expectations on both the top and bottom lines. We are laser focused on growing awareness with Gen Z and millennium customers. On a trailing 12 month basis, we serve 3.6 million customers and we're confident that there is great potential for our brands to gain market share in the US and globally. We believe the key to building durable next generation brands is to be everywhere our customers are. Our brands have mastered building authentic relationships directly with customers and providing great experiences. While direct-to-consumer remains our priority and the main source of our growth, as announced last quarter, we are testing new ways to broaden our reach through select wholesale partnerships, marketplaces and physical stores. So let me share some updates on our strategic initiatives and omnichannel tests, and then I'll go into greater detail on our financials. Starting with Princess Polly, our largest brand. Princess Polly continues to be a top teen fashion website in the US, according to Piper Sandler's Taking Stock with Teens survey, and we're confident in the global potential for this brand. As mentioned, the newness is back at our brands, and we're particularly excited by the newness of Princess Polly. As a reminder, Princess Polly uses a test and reorder merchandise approach, and they're able to get hundreds of new styles on their site and socials within a matter of weeks. In the first quarter, they launched nearly 3,000 new styles and are seeing strong demand for newness, particularly in dresses, swim, and more casual festival attire as spring is in full swing in the U.S. The brand also continues to expand their sustainable, low-impact swim and inclusive sizing collections. As part of the inclusive sizing collections, they're seeing high demand for petite styles, which is already outperforming expectations, and more importantly, attracting new customers to the brand. As we mentioned last quarter, Princess Polly also launched a Princess Polly logo branded collection, which nearly sold out in the first few weeks, underscoring that brand affinity and loyalty is strong. On the marketing front, Princess Polly's priority is connecting with their customers in an authentic way and showing up wherever their customers are. They continue to refine their TikTok marketing strategy and saw a lift in follower count engagement, and ROI in the first quarter. Additionally, as part of their efforts to build brand awareness, they held a large spring break event in Miami, which was their first in-person event since 2019. During the day, the Princess Polly team drove around in a branded Jeep, giving out Princess Polly merchandise and gathering social media content. And at night, they held a private rooftop event for their top-tier customers, influencers, and college ambassadors. Feedback from customers and influencers was overwhelmingly positive, with nearly 400 influencer posts and over 55,000 social media engagements during the event. As mentioned, we are testing omnichannel initiatives across all of our brands to create more touchpoints and broaden our reach. Through surveys and focus groups, we received feedback from Princess Polly customers that they wanted to physically experience the brand in person. to be able to touch and feel the fabric, try on items in a store, and interact with Princess Polly associates. I'm excited to announce that they have officially signed a lease for the Princess Polly store, which we expect will open in the Century City Mall in Los Angeles in the third quarter. This location is a perfect strategic fit for Princess Polly's first store, given the high volume of Gen Z and millennials shopping the open-air mall daily. We look forward to the store opening and will develop and share a plan for future Princess Polly stores based on the learnings from this initial store. As announced last quarter, Princess Polly also piloted their first wholesale partnership with PacSun. The initial test, which included select Princess Polly styles online and in 15 stores, exceeded expectations with more styles selling out in just a few days. I'm excited to announce that given the success of the partnership, we will roll out select Princess Polly styles to 35 more stores for a total of 50 packs on stores by the end of June. This initial customer excitement gives us great confidence about Princess Polly's potential in the US both through direct and to consumer and omnichannels. Petal & Puck is also exploring ways to increase brand awareness through their own marketing efforts as well as through omni-channel opportunities. Petal & Pup launched on Target Marketplace in March and continues to gain traction. As a reminder, we will carefully choose our wholesale and marketplace partners, focusing on those that can truly amplify our brand awareness and drive new customer acquisition. Additionally, as I mentioned, Nunes is back at our brands and Petal & Pup launched more than 800 new styles on their own website in the first quarter. and launched a new swim collection, which is seeing strong sell-through. Pedal and Pop continues to leverage learnings from Princess Polly and is also leaning into TikTok and in-person influencer events. They've grown their TikTok followers over 140% year over year. And in April, they hosted a three-day influencer trip to Palm Springs, which generated over 18 million social media impressions. Now, turning to our streetwear brands. We continue to be very pleased with the acceleration of Culture Kings in the US since the flagship opened in Las Vegas in November. As many of you saw, the Culture Kings store in Las Vegas elevates the standard for retail with revolutionary in-store events, including a DJ booth, half basketball court, recording studio, secret room, and more. In the first quarter, the Vegas store hosted several large events which not only drove traffic to the store, but also generate viral hype and content for social media. They held an exclusive event with professional UFC fighter John Jones, which was so well attended that the line to enter the store was wrapped around the mall. They also activate the store space in innovative ways, including a media workout with professional boxer Caleb Plant in a custom 18x18 boxing ring, a full recording studio takeover and songwriting workshop with Grammy-winning artist Eric Bellinger, an in-store live performance on the LED staircase by up-and-coming singer and rapper Roy Woods, and recently they partnered with Playboy on an exhibit featuring vintage artifacts from Playboy timed with an exclusive merchandise collaboration. Culture Kings also partnered with Rolling Loud the largest hip-hop festival in the world with a Culture King stage, a limited capsule collection, and in-festival activations. The festival in LA saw over 185,000 attendees and was highly successful. We're just getting started expanding Culture Kings in the US, and we're excited by several innovative partnerships underway that will continue to amplify the brand in the US and globally. Equally noteworthy is the continued success of Culture Kings in-house design brands, which come at a higher gross margin and make up seven of the top ten brands by sales in both the Vegas store and online in the U.S. Culture Kings is also continuing to drive growth through their emphasis on graphic tees and printed license collaboration, capitalizing on pop culture themes, higher gross margins, and swift turnaround times. Some recent examples of successful collaborations with licensed properties include Harry Potter, Lord of the Rings, and Batman, with upcoming releases of Transformers to coincide with the new movie, as well as WWE Classics and UFC athlete printed T-shirts. The Vegas tour marked the official launch of Culture Kings in the US, and I'm pleased with the response from customers, vendors, and potential partners. Since the launch of Culture Kings, we've received numerous inbound vendor requests, and they recently signed on a number of third-party footwear brands, including New Balance and Crocs, and they recently secured Puma, UGG, Clarks, and Salomon. We're also particularly encouraged by the synergies between Minimal and Culture Kings, as Minimal has become a top five brand at Culture Kings in the US, and is leveraging Culture Kings as a distribution platform to further expand their brand. In conjunction with Caleb Plant's Vegas event, Minimal collaborated with Plant on an exclusive capsule collection, which exceeded sales expectations. We're also really excited that Minimal is resonating not only with sports fans, but also with athletes themselves. Minimal was spotted on NBA players over 100 times this year, pre and post games, and their outfits have featured on team, league, and player socials. Now, I'll give you more detail on our financials before taking your questions. As mentioned for the first quarter, net sales were $120 million, a decline of 19% compared to the first quarter last year, which exceeded our expectations. On a constant currency basis, net sales were down 16% compared to last year. Total orders for the first quarter were $1.5 million, up 7% on a two-year stack, and down 17% to last year. Order volume was impacted by lower marketing spend compared to last year, as well as the challenging macro backdrop which impacted conversion. As we increased our marketing efforts throughout the quarter and improved product newness, we saw an improvement in traffic trends. We are pleased with the improvement, but remain cautiously optimistic as the macro background remains uncertain. Average order value of $80 was down 4% compared to the first quarter last year on a reported basis and flat in constant currency. As we accelerate the inflow of newness throughout the quarter, we are encouraged to see improvements in AOVs. We're also pleased with our industry-leading return rate, which was approximately 17% for the first quarter, which was relatively flat compared to last year. Now, I'll provide a few highlights from our three regions. The US, our largest market, continues to be our strongest region. Importantly, in the first quarter, the US accounted for 60% of net sales compared to 52% last year, demonstrating the shift to the US across our portfolio. First quarter net sales were 73 million, up 44% on a two-year stack on a pro forma basis, and down 6% compared to last year, primarily due to macro factors, including softness in demand trends, and the highly promotional macro environment. In Australia, net sales were $36 million, down 31% compared to last year, and down 27% on a constant currency basis. In the first quarter, Australia accounted for 30% of net sales, down from 35% last year. Australia remained challenging due to the macroeconomic environment and inflationary pressures. We also continue to see an exaggerated shift of customers returning to stores post strict COVID lockdowns. Notably, Culture King stores significantly outperformed the online business. We currently operate seven stores in Australia and look forward to opening a new store in Melbourne in the second quarter. Turning to the rest of the world, net sales of 12 million decreased 35% from the first quarter in the prior year. Our strategic decision to shift marketing dollars from the UK and Europe to our main regions, which have higher returns, continues to negatively impact trends in these regions. Moving on to profitability. Close margins in the first quarter were 56.9% compared to 56.8% in the same period last year, or up 10 basis points, driven by improved full-price selling given the increased product newness. Selling expenses were $34 million compared to $40 million in the first quarter of 2022. Selling expenses were 28.6% of net sales compared to 27.2% of net sales in the first quarter of 2022. Although the rates likely increased year over year, we have made productivity improvements in our fulfillment centers and outbound shipping, but the lower sales volume offset these improvements due to the higher fixed cost to leverage. Marketing expenses were $14.8 million compared to $15.7 million in the first quarter of 2022. On a rate basis, marketing expenses were 12.3% of net sales compared to 10.6% of net sales in the first quarter of 2022. Through the first quarter, we ramped up our marketing investments in line with the increased newness in the assortment, which drove more sessions, traffic, and conversions. We are fully leveraging our flexible marketing model to achieve the highest returns in marketing spend. We continue to refine and further develop our marketing muscle across the portfolio to attract new customers and enhance our relationships with existing customers. General and administrative expenses were $25.9 billion compared to $24.8 billion in the first quarter of 2022. On a rate basis, G&A expenses were 21.5% of net sales compared to 16.7% of net sales in the first quarter of 2022. The change on a rate basis was driven by net sales deleverage. We delivered adjusted EBITDA of $2.2 million, which exceeded our expectations when we gave our guidance at the beginning of the year. This compares to $10.7 million in the first quarter last year. Adjusted EBITDA margin for the first quarter of 2023 was 1.8% compared to 7.2% in the same period last year. Net loss was $9.6 million or $0.07 per share in the first quarter of 2023 compared to net income of $1.5 million or $0.01 per share in the same period last year. Turning to the balance sheet, we entered the quarter with $30 million in cash and cash equivalents and $132 million in debt. At the end of the first quarter, we had total liquidity of approximately 50 million. As I mentioned earlier, I'm pleased that we paid down 11.4 million of debt in the first quarter, and subsequent to the quarter end, we made additional payments of 10 million, bringing our total debt pay down to more than 21 million year to date. The teams have been hard at work managing the inventory, and we're very pleased with the improvement. Inventory at the end of the quarter was 112 million, compared to 121 million at the end of the first quarter of 2022. Total inventory dollars were down 7% and units were down 14% compared to last year. We feel confident in the composition, newness and quality of our inventory and we expect to see continued sequential decline in inventory dollars and units in fiscal 2023 on a constant currency basis. Touching on cash flow, in the quarter, we used 3 million of net cash, which compared to 15 million in the first quarter of 2022. The reduction in cash use was primarily driven by more prudent inventory management. Turning to our outlook, as we look at the remainder of 2023 and beyond, we're excited by our brand's growth initiatives and the channel expansion opportunities to drive heightened awareness. That said, we continue to manage the business prudently and will balance growth and profitability. We are controlling the controllables and we continue to find efficiencies in our operations, improve our inventory position, reduce our debt and effectively strengthen our balance sheet. Overall, we are adjusting our guidance to reflect our stronger than anticipated first quarter. We now expect to deliver between 575 million and 605 million in net sales, and between 36 and 38 million in EBITDA. We still anticipate that the first half of the year will be more challenging from a sales comparison perspective due to our strong performance in the first half of last year, and we anticipate comps easing in the back half. For the second quarter, we expect to deliver net sales between 137 and 140 million and adjusted EBITDA in the range of 5.5 and 6 million. To give more color on the middle of the P&L, we expect gross margin and marketing rates in the second quarter to be similar to the rates in the second quarter last year. And we anticipate selling expenses to improve on a rate basis due to the operational efficiencies we've been working on in the business. Before I take your questions, I want to let you know that Jill continues to work through her medical issues, but she's doing well and appreciates everyone's well wishes. To conclude, our Go Forward priorities are clear. We're heads down executing on our growth strategies and exploring new ways to broaden our reach. We will continue to operate with flexibility and discipline, taking the necessary steps to strengthen our financial foundation and reinvest in our business. We're optimistic about the future of our brands and business model and remain committed to delivering both growth and profit over the long term. Now, we'll open it up for questions.
spk03: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad and a confirmation tone will indicate that your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, that's star one. Thank you. Thank you. And our first question today is from the line of Oliver Chen with TD Cowan. Please proceed with your questions.
spk07: Thank you. This is Joan Allen for Oliver. Thanks for taking our question. Just curious, you know, what gives you confidence about the second half rebound in terms of sales growth and considering, you know, all regions in the U.S. and Australia, how that would sort of trend. And then also if you can comment on the current promotional environment across regions and if you are sort of happy with your current inventory position as well. Thank you so much.
spk04: Okay, thanks, Joanne. You know, I think first as we kind of, you know, think about the back half, you know, I think really, you know, we're happy that we kind of did a little bit better than we expected in Q1 and particularly happy to see, you know, the U.S. up 44% on a two-year stack and really see, you know, it's good to see customers again really engaging with the brands. I think as we think about the back half, we're very focused on just execution, balancing growth and profit, and making progress on those growth initiatives that we've talked about. Our Q2 guidance and back half guidance. Q2 certainly contemplates what we're seeing going on at the moment with customers. I think looking forward to getting into the back half where comps ease for us slightly relative to last year. And then just on a regional basis, I think we continue to see that both regions are quite different. We're glad now the US is 60% of the overall business. And I think as we went through the quarter, we did see promotional activity there lessen somewhat. And that came as we got into more newness of inventory. And with that, we were able to spend more into marketing and saw more efficiency there. And so it's just kind of good to see the progress there. I think we still did see conversion pressures in the US. I think the consumer is mindful of what they're spending. But look, we are seeing strength in kind of some relevant products, and so kind of looking for that progress to continue. I think in Australia, it's obviously more challenging, and we see that in the results. I think the consumer there is pressured with inflation and interest rates and the kind of dramatic shift back to stores. We do see that we have fairly similar performance to the comp set that we look at in the region, but we're not looking for the comps to change there any time soon.
spk07: Got it. And just on the promotional environment, what are you seeing there and how are you positioned with your inventory?
spk04: Yeah, thanks. For us, I think it's really great to see that inventory is down 7% year over year and 11% in units and really good progress there. Being able to do that and hold margins flat year over year, I think really is a testament to the power of the test and repeat model that we have. I think we still see promotions elevated, certainly elevated from where they were last year. I think they've sequentially had ease since Q4, but we are expecting them to remain elevated as we head into, as we go through Q2. And that's why I think we expect our margins to be pretty, our gross margin to be pretty flat year over year.
spk07: Got it. Thank you so much.
spk03: Our next question is from the line of Edward Daruma with Piper Sandler. Please receive three questions.
spk01: Hey, good afternoon. Thanks for taking the question. And Jill, if you're listening, best wishes and we're pulling for you. I guess first, you know, we've had some companies report kind of a better trend kind of quarter to date or current five weeks with March having maybe seen a trough. I guess I know you've talked about some better response and newness, but I was wondering if you could kind of give a little bit of color on the intra-quarter cadence and exit trajectory. And then second, as you kind of explore some of these alternative channels for Princess Polly, if it's wholesale, the store opening, I guess kind of in the medium term, what percent of sales do you think they will account for or are you still at this point really much in test? Thank you.
spk04: Thanks, Ed. Yeah, so as we think about trends going through the quarter, I think, you know, certainly start of the quarter, as we talked about in Alaska, really that heightened promotional activity that was there in Q4 continued in through the first half of the quarter. I think as we saw that easing, we were also making really good progress on just the newness of inventory, particularly across the women's brands. With that, we were able to spend into more marketing. We did see our comps get better as we spent into that additional marketing. And I think really coming from more traffic, we're certainly seeing that conversion is still challenged as we go through the first kind of four months of the year. I would say what we're seeing in the first part of Q2 is pretty similar trends to what we saw towards the end of Q1. We haven't seen a big change in trend over that kind of March, April into early May period. pretty consistent at the moment. And then as we think about these kind of Omni initiatives, I think for us, we're really happy that we are predominantly a direct-to-consumer business, and a direct-to-consumer business that consistently and has always generated EBITDA, We're back now generating cash, which is great, and we're looking for that part of our business to continue to be our main focus and our main growth driver. Having said that, we do understand that it's key to being a next-generation brand. It's just being everywhere our customers are, and so we are looking to introduce our brands to just more and more customers, build brand awareness, and ultimately increase the total addressable market for each of these brands, and that's why we're doing these omni-tests. I think near term, we don't have any set percentage, Ed, on what we're looking to get out of any of these channels. I would say all of the brands are doing tests on different omni-channel opportunities and initiatives. In the last couple of months, we're learning a lot. We're continuing to learn, and I think we'll take those and obviously lean into that first Princess Polly store, which we're looking forward to that opening in Q3, but we'll continue to push on those initiatives as we go through the year.
spk01: Thank you.
spk03: The next question is from the line of Alice Zhao with Bank of America. Please proceed with your question.
spk05: Hi. Thank you for taking my question. Can you please elaborate on just the gross margin puts and takes throughout the year? And just wanted to clarify, was that flat gross margin guidance for 2Q specifically? And then, you know, just wanted to confirm this for the fiscal year, you're still expecting about 100 basis points of improvement as we lap some of the freight cost and product mix impacts. Thank you.
spk04: Great. Yeah. Thanks, Alice. Maybe I'll take those backwards. Yeah, I think over the year, we're expecting it to be about 100 basis points of improvement. And we see that coming in the back half of the year. What we saw in Q1 is that we were flat year over year on gross margin. And look, really pleased that we were able to do that while bringing down our inventory, as I talked about, and doing it in a time when it was a heightened promotional environment year over year. I think we're expecting the same in Q2, that we would be flat in gross margins year over year. And for us, the promotional environment that we're seeing today will continue, but we really continue to lean into that test and repeat model. And with that, continue to bring on product newness, and we feel that will offset some of that promotional activity that we're seeing. We are obviously starting to get the benefit of lower inbound freight costs as well. And that's also helping as we take advantage of the newness.
spk05: That's super helpful. Thank you. And then secondly, I was curious to hear more about the target launch. You talked a bit about the PACS on. I'm just curious what percent of assortment are available on both wholesale partners. And throughout the year, are you planning to make more larger percentages of the assortment available?
spk04: Sure. Thanks, Alice. Yeah, so Petal and Pop has put our junior test on target on their curated marketplace. We're seeing some really nice results there. You know, they have probably 60% of their assortment, which is obviously quite a bit smaller than Poly, on target. It went up in probably mid-February. We are seeing nice progress as we've kind of gone through the last three or four months with it. And we're, as we learn, kind of, you know, improving the experience that customers have there, adding reviews, adding size charts, just kind of, you know, basic block and tackling stuff. I think we are seeing that it is introducing these brands to different customers and we are able to clearly see that. And we also see that different parts of the assortment is doing, you know, has a different share and a different impact on target. So I think at this stage, learning a lot of nice things. We see a lot of opportunity there. We're still very much in test mode, and we'll update you again next quarter as we learn more.
spk05: That's great to hear. Thank you.
spk03: Thank you. As a reminder, if you'd like to ask a question today, you may press star 1 from your telephone keypad. The next question is from the line of Dana Telsey at Telsey Group. Let's proceed with your question.
spk06: Hi, good afternoon. And also, please extend our thoughts of getting well quickly to Jill. As you think about the active customer account, it looks like the active customer account from the fourth quarter to the first quarter changed to the negative. What did you see there? What did you see by brand? How did it differ? And then also, in terms of Petal and Pop and Princess Polly and Culture Kings, Any difference in level of promotions by brand in what you're seeing or what you're doing in the environment? Thank you.
spk04: Thanks, Lena. Yeah, on active customers, you know, we saw decline of about 5% year over year and sequentially from Q4. And just as a reminder, that's a trailing 12-month number. And, you know, as we expected, I think, you know, pulling back by 25% on volume of marketing dollars in Q4 certainly impacted our active customer count. And we saw that as we kind of went through the Q1 as well. It was certainly more impacted early in the quarter. I think as we saw newness return into the brands, marketing effectiveness improved and we're able to increase our marketing dollars We did see the count improve. I would say we've seen it more on repeat customers and the older cohorts coming back first. I think some nice improvement there as we've gone through the year and starting to see them return to the historic repeat rates that we have seen. We're still down on new customer count. I think that's you know, based on kind of what we're seeing on CACs and in the market, that's very much understandable. I think we expect to be down on active customers probably as we go through Q2 and Q3 of this year and would expect to be back kind of positive in Q4. But look, I think that's partly why we are looking at these other omnichannel initiatives as well. We want to get these brands, you know, introduce them to continue to introduce new customers to the brand, build awareness and ultimately increase that time. And then, Dana, on promotions, or sorry, just on active by brand, I would say we pretty much saw the same percentage impact across the brands, so no huge difference, and that was on a regional basis as well as in the U.S., although I would say Culture Kings in the U.S. did see positive active customer growth, and that really coming from us opening the store in Vegas in November, and just that really is having a positive impact for us in the US. And then just promotions by region, really similar across the regions. I would say just that heightened promotional activity was certainly there in the quarter, easing as we went through the quarter. I would say we probably saw, we see customers reacting more to promotions in Australia than we see in the US. They're a little bit more sensitive to those.
spk06: Thank you. Just one follow-up. Debt paydown. How are you thinking of debt paydown for the balance of the year?
spk04: Yeah, thanks, Dana. You know, I'm glad to be talking about that we're paying down the debt and that we've paid down $21 million so far year-to-date. Look, we're going to continue to manage the business prudently, strengthen the balance sheets, and, you know, bringing down our inventory dollars sequentially and bringing down our debt dollars sequentially. Quarter over quarter as we go through the year is a focus for us and important for us. We don't have any set number there, but we're just going to keep making progress as we go through the year.
spk06: Thank you.
spk03: Our next question is from the line of Ike Borchow with Wells Fargo. Please proceed with your question.
spk02: Hello, everyone. This is Jesse Sobelston on for Ike. Can you just refresh us on the composition of the $120 million or so in current outstanding debt and what covenants, if any, are associated with the trenches? Thank you.
spk04: Sure. Thanks, Jesse. Yeah, so within that debt, and it was $130 million at the end of the quarter. Within there, there's $30 million of revolver. We've paid down an additional $10 million, and that will revolve over post-end of quarter. And then there's $104 million of term debt. Covenants are, we've got a 3.5x from a leverage perspective and about 1.25 from a fixed charge coverage, with obviously some add-backs for one-off stuff. We're well within all of our debt compliance covenants. you know, feeling good shape overall about the debt, and we'll look to continue to bring that down as we go through the year.
spk03: Great. Thank you very much. Thank you. At this time, we've reached the end of the question and answer session, and I'll turn the call back over to Karen Long for closing remarks.
spk04: Thank you all for joining. We really appreciate your participation. Thank you for the well wishes for Jill. I know she's on the call listening today, and we talk to her quite often. Yeah, thank you. Good to hear from you all, and thanks.
spk03: This will conclude today's conference. We disconnect your lines at this time. Thank you for your participation.
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