a.k.a. Brands Holding Corp. (AKA) Q2 2024 Earnings Report, Transcript and Summary

Greetings, and welcome to a.k.a. Brands Holding Corp. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, K.C. White. Thank you, you may begin.

Good afternoon. Thank you for joining a.k.a. Brands' second quarter fiscal 2024 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 Ciaran 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 a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any 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 release furnished to the SEC and available on our website. With that, I'll turn the call over to Ciaran.

Thanks, K.C. Good afternoon, everyone, and thanks for joining our second quarter earnings call. Before I review a few key highlights from the quarter, I would like to again take a moment to thank our team for their continued commitment to building on our portfolio of next-generation brands for the next generation of consumers. This was another quarter in which the team's agility and flexibility in executing our strategic priorities while keeping our customers at the center of every decision we make enabled us to deliver strong quarter top line and operating results that exceeded our expectations. I continue to be very confident in our team's ability to execute and in the many profitable future growth opportunities we see for a.k.a. Brands to expand our brand portfolio reach and total addressable market. Before I go through the results in more detail, let me share a few highlights from the second quarter. Net sales far exceeded the high end of our guidance as we achieved year-over-year growth of more than 9%. Momentum in our US business meaningfully accelerated with year-over-year net sales growth of more than 19%. We delivered a strong gross margin of 57.7%, up 80 basis points from the prior year, which combined with marketing expense leverage of 120 basis points contributed to adjusted EBITDA of $8 million, a year-over-year increase of 44%, exceeding the high end of our guidance. Despite a late in the quarter build of inventory as we chased into demand, we generated $3.5 million of operating cash flow. We registered another strong quarter of active customer growth, up 11.7% on a trailing 12-month basis. We ended the quarter with net debt down 13% from the prior year and down 20% on a two-year stack. In addition to planned new Princess Polly store openings in Scottsdale, Fashion Square and Ann Street in Boston and in the Fashion Valley Mall in San Diego, we signed two new leases for additional locations in Irvine and Santa Clara, California, which we expect will bring the Princess Polly physical presence to six locations by year-end, and more expected to come in 2025 and beyond. Petal & Pup's expanded omni-channel presence has exceeded expectations, setting the stage for continued growth and brand expansion. Leveraging the successful experience of Petal & Pup, our streetwear brand, Minimal, launched a small test on Nordstrom.com. And lastly, Culture Kings US delivered another strong quarter of double-digit net sales growth on top of strong results last year. Turning now to more details on the second quarter, we generated $149 million of net sales, a 10% constant currency increase over last year, far exceeding our expectations. The momentum in the U.S. business accelerated, with net sales growing 19.3% over the prior year period, reaching $95 million and accounting for 64% of net sales for the quarter, up from 54% last year. We remain very pleased by the accelerated strength we are seeing in the U.S. region, which remains our fastest-growing and most profitable growth region. Our success remains broad-based, with strong product acceptance across our brands, coupled with growing brand awareness and attracting many new customers. Our Australia and New Zealand region results sequentially improved, ending the period with a net sales year-over-year contraction of only 5%. With a combination of reduced inventories in the region and our shift to a test-and-repeat merchandising strategy, we expect to experience second half year-over-year gross margin expansion. And as I mentioned, our operating performance well exceeded the high end of our expectations as we registered adjusted EBITDA of $8 million, a year-over-year increase of 44%. Looking at our first-half performance, our momentum is accelerating, and our results are being fueled by the transformational work we started in 2023. We registered first-half year-over-year net sales growth of 3.6% with strong flow-through, resulting in EBITDA growth of 15%. Although there is much work ahead of us, with our strong first-half results, I'm even more confident in the opportunity we see in the U.S. to expand our brand portfolio and total addressable market. We are committed to our strategic priorities as we continue to build on our portfolio of next-generation brands for the next generation of consumers. Just as in our first-quarter call, I will take a moment to reiterate our strategic operating framework for 2024, including our three key strategic priorities. Priority number one: retain existing and attract new customers. Over the last 12 months, we added 420,000 new customers, which included the addition of 180,000 new customers during the second quarter, resulting in our active customers for the quarter increasing by nearly 12% over the prior year. As our teams remain disciplined in adhering to our test-and-repeat merchandising approach and staying close to our customers, our level of product newness has never been higher. Our assortments are strongly resonating, enabling a greater level of full-price selling, which is fueling expanded gross margin results. We're very pleased with the quality and composition of our inventory, and marketing efforts are yielding strong return on investments, positioning us well for continued active customer growth across our brand portfolio. Priority number two: we remain committed to showing up for our customers wherever they choose to shop with us. In addition to enhancing our online channels, we continue to test and expand our omni-channel strategies, including experiential stores, wholesale, and marketplaces. I will touch on each of our omni-channel strategies by brand momentarily, but I'm pleased to report that we are seeing success across all channels of distribution, another clear signal that our brands are meaningfully underpenetrated in the US market. As our awareness increases, we continue to expand our total addressable market. Priority number three, continue to streamline our operations to deliver financial benefits. The strong second quarter flow-through in which our net sales growth of 9.5% contributed to adjusted EBITDA growth of 44% as compared to the same period in the prior year, showcases our ability to drive outsized profitability. This is a direct result of the transformational work we started in 2023 as well as the instilled culture to always look for ways to improve overall efficiencies, share best practices and leverage the AKA platform to drive additional improvements in our results. Now let me share some highlights from our brands. Our largest brand, Princess Polly, which focuses on trend-based fashion targeting Gen Z and millennial women posted another strong quarter of growth. Princess Polly strong second quarter performance was broad-based with particular strength in dresses. We're also very pleased with the brand's category expansion efforts, including our newest product launches in sleepwear, loungewear and active work. And just in time for back to college, Prince Polly is now offering an assortment of everyday vents such as fleets, quarters of sweatshirts, shorts and more. I am also pleased to report that approximately 35% of the brand's new styles were made with lower environmental impact materials, which is up from 30% a year ago. Same close to our customers focusing on product innovation and leveraging our test and repeat model to provide fresh, new and affordable merchandise daily remain key brand tenets of the Princess Polly DNA which continues to fuel a high level of product newness and a higher hit rate on winners. Shifting to physical stores. We believe stores serve as a powerful customer acquisition tool and provide customers unique and immersive brand experience, creating a halo effect beyond each store, expanding our surrounding digital reach. Princess Polly's first store opening in Century City, LA, back in September 2023 continues to perform strongly. We're excited for the five new Princess Polly store openings expected to occur in the second half of 2024 and with two schedules in the third quarter and three in the fourth quarter, all in time for the holiday season. The team remains focused on developing and executing unique in-store immersive brand experiences, engaging influencers, college ambassadors and customers all designed to expand Princess Polly's brand awareness and attract new to file customers to the brand. Headlands our other women's fashion brand focused on elevated trends and event-based fashion for all of the little and big moments in her life with more than 70% of the customers between the age of 25 to 34. Petal & Pup second quarter performance was outstanding, with particular acceleration and strength across the brand's omnichannel efforts. Petal & Pup is now being offered on nordstrom.com, macys.com, and target.com, and the brand saw a significant uptake in new default customers in the second quarter, in part fueled by the fact that a high percentage of their omnichannel customers or first-time branch shoppers, which bodes well for continued brand growth. We remain very pleased with Petal's launch as a modern romance or wedding collection and the May launch of Eurodiaries collection, with many styles selling out in the first few weeks. Although dresses represent the dominant portion of the category mix, the growing appeal of Petal & Pup is a lifestyle brand sets the stage for expanded product tests in the near future that could further accelerate the brand reach widening the total addressable market. Turning now to our streetwear brands. As I mentioned earlier, Culture Kings US delivered another quarter of strong double-digit net sales growth on top of strong results last year. We remain thrilled with the consistent strong sales performance and forward profitability in the US flagship Las Vegas location as well as the growth in the online business. Culture Kings is disrupting the streetwear market. There is simply nothing like the immersive experience of our Culture Kings store and our offerings across channel span a curated assortment from over 100 leading third party streetwear brands as well as a large and growing portfolio of in-house design brands and exclusive products that embody the relationship between music, sports, arts and fashion. Our first-party brands such as Lauder, American Thrift and Minimal continue to be top performers with first-party brands accounting for more than 50% of total Culture Kings US sales. On the engagement front, Culture King has developed and hosted another phenomenal lineup of events in the second quarter. Ahead of EDC weekend, one of the largest electronic music festivals in the world, CK teams up with heat DJ, Metrola [ph] and Insomniac records for an incredible live DJ set on the ground floor of the Las Vegas flagship store. For the Milestone USC300 event, CK launched an exclusive capsule collection in collaboration with USC and also created a one-of-a-kind varsity jacket with celebrity designer, Jeff Hamilton. Culture King is also teamed up again with Lyrical Lemonade Summer Smash festival in Chicago with another limited edition merchandise collaboration. Going deeper on Minimal, Minimal spring collection achieved record-breaking seasonal sales highlighting Minimal’s ability to swiftly identify and deliver on emerging customer demand and bring fresh ideas to market faster than traditional brands. Following a successful spring and summer test phase with retailer DTLR, minimal effect to expand to all of their locations in August, representing a major step for minimal wholesale strategy. As I mentioned, minimal launched on Nordstrom.com in July with a limited number of SKUs. Initial selling is strong, and we look forward to potentially expanding the SKU availability over the coming quarters. We remain bullish on our streetwear brand long-term growth potential in the US as well as globally. Now, I'll provide more detail on the P&L before taking your questions. For the second quarter, as I mentioned, net sales increased 9.5% to $149 million and 10.1% on a constant currency basis compared to the same period last year, driven by strength in our US business, in which net sales increased 19.3% compared to the second quarter of last year. We also experienced meaningfully sequential improvements as our brands gained momentum in the US. While we saw softer sales in Australia and New Zealand as compared to the second quarter of 2023, ending down 5% for the period, sales trends generated significant sequential improvement. Net sales in the rest of the world declined 1.5% as compared to the second quarter of last year. Total orders for the second quarter were $1.9 million, increasing 16.4% as opposed to the second quarter last year. In the US, we saw order growth of 31%, driven by the impact of our U.S. stores and omni-channel initiatives, which was offset by lower demand in the Australia and New Zealand region, where orders declined 7%. As I mentioned, our trailing 12-month active customer count rose to $4 million by the end of the second quarter, a 12% increase compared to a year ago. Our second quarter average order value was $78, down 4.9% compared to the second quarter last year due to softer sales in Australia and New Zealand and the actions we've taken to improve our inventory position at Culture Kings in Australia and move them to our test a repeat merchandising model. Turning now to profitability. Gross margin expanded 80 basis points in the second quarter to 57.7% compared to 56.9% in the same period last year, driven by lower airfreight costs and strong full price selling. This was slightly offset by the channel mix shift to wholesale and planned promotions at Culture Kings Australia. Selling expenses were $41.2 million, compared to $35.9 million in the second quarter of 2023. Selling expenses were 27.7% of net sales, compared to 26.4% a year ago due primarily to the impact from growing marketplace initiatives and additional stores. Marketing expenses in the quarter were flat year-over-year. As a percentage of net sales, marketing expenses leveraged 120 basis points to 12.3%, compared to 13.5% in the second quarter of 2023. We experienced enhanced marketing efficiencies driven by strong performance at Petal & Pup, Princess Poly and Culture Kings U.S. as well as leverage from higher sales at wholesale and in stores. General and administrative expenses were $25.9 million, compared to $24.2 million in the second quarter of 2023. As a percentage of net sales, G&A expenses decreased to 17.4% million, from 17.8% in the second quarter of last year due to leverage from higher net sales. We delivered adjusted EBITDA of $8 million compared to $5.6 million in the same period last year, ahead of expectations. Adjusted EBITDA margin for the second quarter of 2024 increased 130 basis points to 5.4% compared to 4.1% in the same period last year. Turning now to the balance sheet. We ended the quarter with $25.5 million in cash and cash equivalents, debt totaling $106.9 million at the end of the quarter compared to $120 million a year ago. On inventory, we ended the quarter with $107 million in inventory, flat with a year ago. During the quarter, we made continued progress reducing our culturing inventory levels and we are comfortable with our inventory levels as our investments are in our strongest trading brands. A quick update on our stock repurchase program. In the second quarter, we repurchased 11,046 shares for a total cost of approximately 100,000. As of the end of the quarter, we have 1.7 million remaining in our share repurchase authorization. Now turning to our outlook for 2024. Given the strength in our first half results, we are adjusting our outlook and now expect to deliver between $560 million to $565 million in net sales for the full year. For the year, we expect gross margin between 56% and 57%, and we anticipate selling expenses to be approximately 27% of net sales and marketing expenses of approximately 12.5%. We expect G&A expense between $100 million and $110 million for the full year 2024. As a reminder, as we continue to expand into other channels, such as wholesale and marketplace, we expect it will impact the composition of our expenses. While the EBITDA contributions are similar to a core business, our wholesale and marketplace initiatives have lower gross margin with a corresponding benefit in selling and marketing expenses. We expect to see more of an impact in the back half of 2024 as these channels grow. For the year, we now expect adjusted EBITDA of between $20 million and $22 million, weighted average diluted share count of $10.6 million, capital expenditures between $12 and $14 million, and an effective tax rate of 10%. For the third quarter, we expect net sales between $141 million and $145 million, and adjusted EBITDA of between $6 million and $7 million. In summary, as you've heard, we delivered a very strong quarter with double-digit constant currency top-line growth with healthy flow-through, resulting in EBITDA growth of 44% over the prior year period. The transformational work we started in 2023, combined with our culture of innovation, is driving meaningful improvement across the business. We remain committed to building our portfolio of next-generation brands for the next generation of consumers, while being relentlessly focused on executing our strategic priorities to enable AKA brands to fuel consistent, long-term, profitable growth, capitalizing on the tremendous opportunity we see to expand our total addressable market. We operate with the mindset of continuous improvement. So while we recognize there is more work ahead of us, we're encouraged and motivated by the momentum in our business, and I'm excited to continue executing our strategies as we head into the back half of the year. Now, I will open up the call to your questions.

Thank you. We will now conduct a question-and-answer session. [Operator Instructions] One moment while we pull for the first question. Thank you. The first question comes from Randy Konik with Jefferies. Please proceed.

Yeah, thanks a lot, and good evening. Ron, you guys are seeing a lot of success with the multi-channel approach you've been undertaking, whether it's stores, wholesale and obviously DTC with the e-comm. I guess my question is, if you kind of think about over the next few years, let's say the next three to five years, how do you think about the optimal channels kind of mix in the business if we were to think through over those next few years? That would be super helpful. Thanks. : Yeah. Thanks, Randy. I appreciate the question. I think, yeah, we are seeing just really nice success. I think we're really happy to see the progress and the results from the transformation work we really started, I suppose, over the last couple of years, with overall sales up 9.5% and the US up 19%. I think as we think about those different channels, I feel we really look to them. If there are opportunities to elevate our brands and if the economics are at the level we expect them to be, we're happy to lean into those channels. If it's missing one of those two things, we won't. I think we've learned a lot from the tests that we've done over the last 12 or 18 months I think and where did we see just tremendous opportunities across the brands. I think the culturing store in Vegas is doing really well. The Poly store is ahead of expectations on sales and profits and Petlin pop is just a really strong performance as they have leaned into some of these wholesale opportunities. I think, look, we're going to continue to drive into those. I think long term, we certainly feel that we're still going to be predominantly a direct-to-consumer business, but we certainly see opportunities for us to continue with all of the brands kind of expanding into these omnichannel opportunities and just continuing to lean into kind of really strong profitable growth across each of the brands.

Super helpful. My last question is when we look at the landscape out there in apparel, one thing that is starting to kind of become more clear is the fashion-based businesses are almost starting to come back, your business, revolve, et cetera, while we're starting to see continued deceleration in the athleisure athletic type businesses. So it looks like there's a real fashion shift happening in a big way. Are you seeing that? Is that partly why that's kind of coming on a more tailwind to your business in addition to just better product, better execution, et cetera. Just your thoughts on the kind of the fashion environment would be super helpful as well.

Yes. Thanks, Randy. Look, I think we're very fortunate that we've 4 great brands that people love. I think within that -- for each of the brands, pretty much all of the product that they have is proprietary and exclusive to us. So I think one of the big advantages that we have is just our product just being exclusive. I think then just the kind of the power of the test and repeat model, I think we clearly see it in the business. We clearly see the brands. And when you're able to stay so close to being on trend, you can really lean into what you see is just being really resonating with customers and you can do that from a merchant perspective, but also has huge benefits as you look from a marketing perspective as well. And I think, look, we see that resonating with our customers with our active customers are up -- 12% year-over-year, nearly 420,000 customers. I think we've seen broad-based kind of success, really, I would say, across the categories, Randy. Certainly for Princess poly, petal and pulp, they are both very strong in dresses, and we certainly saw a lot of success there in Q2, but also really happy with the new category expansion print it probably has done in the first quarter and is continuing to do into lounge where sleep or other areas, I think we feel there's a lot of opportunities and I think just leveraging on that test and repeat model, really listening to the customer is going to continue to pay advantages in the future.

Super helpful. Thanks so much.

The next question comes from Eric Beder with SCC Research. Please proceed.

Good afternoon. Congratulations on the upside for the quarter.

Thanks, Eric.

I want to talk about Culture Kings. So, we are entering the period now where you're going to be shifting that business over to the test and repeat mode. How should we be thinking about the opportunities for that going forward? And how does that work in respect with the exclusive and the first and third-party providers to the brand?

Yes, sure. Thanks, Eric. Yes, I think, look, we're really happy with the progress that Culture Kings continues to make. And as I talked in my prepared remarks, it continues to be up double-digits in the US on top of strong results last year. We see tremendous opportunity for us. You know, it is -- we're making nice progress moving their first-party brands to test and repeat. And just as a reminder, that's about 50% of their revenue comes from those first-party brands and really seeing strong response from customers from Lloyds or [indiscernible] are or what they're doing in their T-shirt printable business is going really strong. I think as we think about that heading into the back half of the year, we are focused on from that change on test and repeat is very much focused on margin expansion in the back half. We do know we're up against strong promotional activity we took last year to rightsize Culture Kings inventory. So that will be somewhat of a headwind, but are expecting to get margin expansion. I think as we see kind of the progress they're making on test to repeats, it's -- we see it working. It is -- for each week you're bringing on new products, you're picking the winners and then repeating into them. So I think it takes time to build that cohort of winners, right? And can take quite a bit of time, but it's just a really powerful flywheel when it gets going. And we see the benefit it has across our three brands and are certainly kind of going to continue to lean into it. And are happy with the progress Culture Kings are making.

Great. And in terms of Princess Polly, I know you added the new stores to the mix. You know, what should we be for people of Century City stores? What is going to change in these other stores. That was a great test. It really continues to do really well. What's going to be the evolution out of the Princess Polly store as we see these new other ones come on?

Yes. I think we're really excited for -- to continue to expand Princess Polly to Princess Polly stores. The LA store has done really well is one of the drivers of -- and kind of one of the drivers and also just helps build awareness for Princess Poly from an online perspective as well. And a key part of the driver of that 9% growth in the US that we saw last quarter. I think, Polly, that's their first store. They've learned a loss just from a merchandising perspective, the studies of the store, the new stores will be bigger than that ALA store and certainly changed from a visual merchandising perspective, expecting to put in more SKUs and really see how do they think that really compelling online experience that they have, leveraging that test repeat model, not just having newness online each week, but also newness in the store each week. They see that customers are coming back each week to see to experience it in real life. So there are some of the changes. Look, I think it's great that the new plans to have. I think there's just huge opportunity for Princess Polly to continue executing and continue to build out their store footprint and really just introduce themselves to more and more new customers and get that halo in their online business as well.

Great. Good luck in the back half. Thank you.

Thanks, Eric.

The next question comes from [indiscernible] Truist Securities. Please proceed.

Thank you. And Ciaran it's nice to see you guys do well. So congrats. A couple of questions. Maybe as you look at your performance this quarter versus Q1 and certainly throughout most of last year, what would you say were the two or three big unlocks this quarter that drove that performance maybe online versus offline, maybe your cross brands, certainly, geos I think the US has been clearly the outperformer. And then as I look at your Q3 guide, it basically implies a pre-maturity slowdown to something like 1% or 2% of the midpoint versus again, 9% or 10% in Q2. So what happened in Q2 that you don't certainly see happening in Q3/

Sure. Thanks, Youssef. Yes, look, I think we're really happy with that Q1 performance and certainly building on the actions we've been taking to over the last number of quarters. And just, I think, certainly, that US growth of 19%, a standout doing that with gross margins up 80% and inventory flat, just a great view of, I think, what this model can do. I think as we think about the drivers, Youssef I would say, direct-to-consumer business was from a channel perspective, that the largest driver across the brands. And the various omni across the different brands coming up after that. From a brand perspective, I think Princess Poly is certainly very, very strong during the quarter, and we saw tremendous growth at Petal & Pup and on the omni-channel initiatives that they really leaned into. I think as we think about the back half of the year really just the change in trend is we've promoted a period where we've been quite promotional in Australia to move through that Culture Kings inventory. I think you see kind of the comps somewhat improving there sequentially anyway in Q2. I think as we think of the back half, we feel like we're kind of -- we're predominantly past that and are more focused now on seeing that kind of gross margin expansion and really looking to -- for that in the back half of the year, certainly continuing to lean into the omnichannel opportunities, but do know it's more gross margin focused and that we do have probably a harder lap in the back half of last year when we were also very, very promotional, particularly in Australia.

And then on the debt management, can you talk about any upcoming debt maturities and how you're planning on servicing them

Yes, sure. Our debt matures in September 2026. I think mid really, nice part was last year when we paid down $50 million of debt, about 35% there was some builds in the first half of this year as we leaned into some inventory at the stronger performing brands. It's also build there. We do expect to pay down -- to continue to pay down or pay down more debt in the back half of this year. And certainly, we'll continue to do that going forward. We certainly don't want to be -- or look to be a highly leveraged business. And I think, look, with the progress we've made now with EBITDA growing much faster than sales growth, up 44% year-over-year. And we certainly feel that the model is there where we can continue to pay down debt and bring our leverage.

That's great, Thank you very much.

The next question comes from Ashley Owens with KeyBanc. Please proceed. Q – Ashley Owens: Hi. Good afternoon. So just first, I want to talk about Australia and some of the choppiness there. Can you just talk about what's embedded in the forecast a bit and then based on the pressure, I guess, when are you kind of expecting that geography to return to growth? And how has that shifted at all? And then also just curious in terms of quarter-to-date trends, what you're seeing by region and by category as well.

Sure. Thanks, Ashley. Yes. Look, I think certainly making progress in Australia. It was really nice to see the sequential improvement there. I think underneath that as well, we kind of see on just the day-to-day business, the progress Culture Kings are making moving on to that test and repeat model and how the newer product that they're bringing in is really resonating with customers, right? And so for us, I think as we go into the back half of the year, we feel that should drive margin expansion and are certainly going to look to execute against that. And I think from a growth perspective, overall, look, we're really happy that the US is now 65% of the business, growing 19% in Q2. So I think really great progress there, which we will continue to lean into. We do expect the comps in the back half to get worse from an Australian perspective, but really just because we're going to be more -- we've got a tougher lap and are more focused on margin expansion. And feel good about the guidance, and that is all contemplated in the guidance we've given for the back half of the year. Q – Ashley Owens: Okay. Great. And then I guess just on the Princess Polly stores again, as we look out to next year, how aggressive do you plan or want to in your rollout strategy for the brand I guess, just in general, too, how many stores do you think you could see it growing over time. And then with that, anything if and when we should be expecting to see some more marketing to support these new stores?

Sure. Yes, I think, look, we feel that there's just tremendous opportunity for Princess Polly and for all the brands in the US, clearly on the Fannie Mae being up 19% in the US and such strong active customer growth of 12%, really looking forward to having these five new stores opened this year. I think that's somewhat the pacing we would look to going forward and we certainly want to be very selective in the store locations. We really lean into the customer data that we already have and also talk to our customers just to make sure we're picking great locations that we feel we can be very successful with these stores, and for Princess Polly, that’s pretty much what I think from a pacing perspective. And certainly, I think huge opportunity from a direct-to-consumer perspective, but also just across all of I suppose the omnichannel opportunities. Q – Ashley Owens: Okay, great. Thanks so much.

The next question comes from Andrea Bonello with Robotti [ph]. Please proceed.

Hi, there. Thanks for taking my question. I was wondering, looking ahead to upcoming elections and potential concerns around tariffs on goods from China, how will you manage rises in tariffs, given that the majority of your third-party suppliers and manufacturers are based in China? Will we see this in changes in prices or shifting manufacturing to other countries? Thank you.

Yeah. Thanks, Andrea. Look, I think we're very focused on the strategy we have and really leaning into the opportunity we have to grow these brands in the US. And I think with clear indication of just the opportunity we have across all of these brands and these omni opportunities. As it comes to our supply chain, we're certainly very focused on this and we have some actions in test at the moment, looking to diversify our supply chain. They're progressing as we go through the quarter. And I think we can share more next quarter on the results of those and any changes we're making to our supply chain.

Thank you.

Thank you. At this time, I would like to turn the call back over to Mr. Long for closing comments.

Yeah. Thank you all. Really appreciate your engagement with a.k.a. Brands. We feel we'll make many great progress on executing against our strategies and really demonstrating the progress we've made it at each of our brands and also the enormous opportunity we have to scale these brands in a profitable way. Thank you for your time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. You may now disconnect.