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What changed in A.K.A. BRANDS HOLDING CORP.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of A.K.A. BRANDS HOLDING CORP.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+305 added−323 removedSource: 10-K (2025-03-06) vs 10-K (2024-03-07)

Top changes in A.K.A. BRANDS HOLDING CORP.'s 2024 10-K

305 paragraphs added · 323 removed · 219 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+25 added−19 removed31 unchanged
Biggest changeIn fiscal year 2022, our net revenues in the first, second, third and fourth fiscal quarters represented 24%, 26%, 25% and 24% , respectively, of our total net sales for the year. Intellectual Property We primarily protect our intellectual property through the trademark, copyright and trade secret laws of Australia and the United States.
Biggest changeThe following table presents quarterly net sales as a percentage of total annual net sales: Years Ended December 31, 2024 2023 2022 First quarter 20 % 22 % 24 % Second quarter 26 % 25 % 26 % Third quarter 26 % 26 % 25 % Fourth quarter 28 % 27 % 25 % Total 100 % 100 % 100 % Intellectual Property We primarily protect our intellectual property through the trademark, copyright and trade secret laws of Australia and the United States.
As of December 31, 2023, we had more than 1,300 full- and part-time employees. The majority of our workforce is located in Australia, with the remaining employees located throughout the United States. On a limited basis, we may use temporary personnel to supplement our workforce as business needs arise. Sustainability and Responsible Fashion a.k.a.
As of December 31, 2024, we had more than 1,350 full- and part-time employees. The majority of our workforce is located in Australia, with the remaining employees located throughout the United States. On a limited basis, we may use temporary personnel to supplement our workforce as business needs arise. Sustainability and Responsible Fashion a.k.a.
Sourcing We source our products from a network of international suppliers. Our supplier base included 370 suppliers across 18 different countries as of December 31, 2023. We have strong long-term relationships with our manufacturers, but we do not have any long-term commitments requiring us to purchase minimum volumes from any supplier or manufacturer.
Sourcing We source our products from a network of international suppliers. Our supplier base included 315 suppliers across 31 different countries as of December 31, 2024. We have strong long-term relationships with our manufacturers, but we do not have any long-term commitments requiring us to purchase minimum volumes from any supplier or manufacturer.
Our brands leverage a broad network of third-party service and technology providers, which allows us to implement the latest capabilities with limited upfront investment and quickly adopt innovations in the market.
Operational Excellence Asset Light Technology and Operations Our brands leverage a broad network of third-party service and technology providers, which allows us to implement the latest capabilities with limited upfront investment and quickly adopt innovations in the market.
Princess Polly is aiming to be carbon neutral by 2030 and is making progress towards its 2030 target for 52% Scope 3 emissions intensity reductions as, by mid-2023, they have achieved an intensity reduction of 16.9% on its base year. Competition The online and offline retail markets generally are highly competitive and rapidly evolving.
Princess Polly is aiming to be carbon neutral by 2030 and is making progress towards its 2030 target for 52% Scope 3 emissions intensity reductions, and, by mid-2024, it has achieved an intensity reduction of 16% on its base year. Competition The online and offline retail markets generally are highly competitive and rapidly evolving.
Core to our marketing strategy is the use of social media influencers, and we maintain relationships with approximately 25,000 influencers globally and utilize them to test and launch new products, gather customer feedback, increase brand awareness and acquire new customers in a cost-effective manner. In 2023, across a.k.a.
Core to our marketing strategy is the use of social media influencers, and we maintain relationships with thousands of influencers globally and utilize them to test and launch new products, gather customer feedback, increase brand awareness and acquire new customers in a cost-effective manner.
According to Grand View Research, a market research and consulting company, the global online apparel market was valued at approximately $583 billion in 2022, and was expected to grow at a 8.6% CAGR from 2022 to 2030.
According to Grand View Research, a market research and consulting company, the global online apparel market was valued at approximately $660 billion in 2024, and was expected to grow at an 8.6% CAGR through 2030.
Additionally, we plan to enter into key markets through strategic wholesale and marketplace partnerships. Grow Through Acquisitions We employ a corporate development team dedicated to the identification, evaluation and acquisition of brands, and we maintain a strong pipeline of potential targets, which typically includes multiple acquisition opportunities at differing stages of evaluation.
Grow Through Acquisitions We employ a corporate development team dedicated to the identification, evaluation and acquisition of brands, and we maintain a strong pipeline of potential targets, which typically includes multiple acquisition opportunities at differing stages of evaluation.
According to Statista, the U.S. online apparel, footwear and accessories market was valued at approximately $207 billion in 2023, and could surpass $300 billion by 2027. Digital-Savvy Millennial and Gen Z Consumers Seeking the Next-Generation Shopping Experience According to data from the U.S.
According to Statista, a platform specialized in market and consumer data, the U.S. online apparel, footwear and accessories market was valued at approximately $145 billion in 2024 and could surpass $219 billion by 2029. Digital-Savvy Millennial and Gen Z Consumers Seeking the Next-Generation Shopping Experience According to data from the U.S.
Our women’s brands merchandise is purchased using our agile “test-and-repeat” merchandising model, which enables us to quickly react to customer demand and test product appeal without taking large initial inventory positions, yet still capture in-season demand.
Our women’s brands merchandise is all purchased using our agile test, repeat & clear merchandising model, which enables us to quickly react to customer demand and test product appeal without taking large initial inventory positions.
We compete based on product selection, differentiation, exclusivity, brand quality and strength of customer relationships, relevance, convenience, ease of use and consumer experience, including order fulfillment and shipping timelines. We believe we compete favorably across these factors taken as a whole. Seasonality Historically, we have achieved our largest quarterly revenues in the fourth fiscal quarter.
We compete based on product selection, differentiation, exclusivity, brand quality and strength of customer relationships, relevance, convenience, ease of use and consumer experience, including order fulfillment and shipping timelines. We believe we compete favorably across these factors taken as a whole.
In 2023, net sales to customers outside of the U.S. and Australia was $28.0 million across 151 countries and territories and represented 5% of total sales. We will continue to target markets that demonstrate strong social and digital media usage.
In 2024, net sales to customers outside of the U.S. and Australia/New Zealand was $25.6 million across 183 countries and territories and represented 4% of total sales. We will continue to target markets that demonstrate strong social and digital media usage.
As part of our long-term strategy, we have identified several markets in which we believe we can successfully introduce one or more of our brands in the future, such as expanding Culture Kings in South Korea and Japan and Princess Polly in Canada, Europe and the U.K.
As part of our long-term strategy, we have identified several markets in which we believe we can successfully introduce one or more of our brands in the future, such as expanding Princess Polly in Canada, Europe and the U.K. Additionally, we plan to enter into key markets through strategic wholesale and marketplace partnerships.
Our business is also subject to additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, as well as foreign laws and regulations addressing topics such as advertising and marketing practices, customs duties and taxes and consumer rights, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories. 10 Table of Contents In addition, apparel, shoes and accessories sold by us are also subject to regulation by governmental agencies in Australia, New Zealand and the United States, as well as various other federal, state, local and foreign regulatory authorities.
Our business is also subject to additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, as well as foreign laws and regulations addressing topics such as advertising and marketing practices, customs duties and taxes and consumer rights, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories.
As of December 31, 2023, we owned nearly 550 trademark registrations and 79 Internet domain names.
As of December 31, 2024, we owned over 500 trademark registrations and nearly 150 Internet domain names.
Government Regulation Our business is subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business.
We further control the use of our technology and intellectual property through provisions in both our client terms of use on our website and in our vendor terms and conditions. 10 Table of Contents Government Regulation Our business is subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business.
Brands in October 2021. mnml is a men’s streetwear brand that designs premier, fashion-forward apparel, with an emphasis on bottoms, at affordable prices. As an early mover in the direct-to-consumer streetwear segment, mnml has created powerful brand recognition and is an established destination for modern wardrobe staples, current trends and highly sought-after styles.
As an early mover in the direct-to-consumer streetwear segment, mnml has created powerful brand recognition and is an established destination for modern wardrobe staples, current trends and highly sought-after styles.
Flexible Back-End Operations Our brands operate independently but have access to resources, guidance and vendors at the a.k.a. Brands level. We believe this model balances scale-enabled cost savings with operational flexibility, facilitates low-risk innovation and accommodates the needs of our brands at various stages of growth.
We believe this model balances scale-enabled cost savings with operational flexibility, facilitates low-risk innovation and accommodates the needs of our brands at various stages of growth.
The unique in-store experience generates excitement and anticipation, driving demand and traffic online and offline, and creating customer affiliation with the Culture Kings brands, not just the products sold. mnml Founded in Los Angeles in 2016, mnml joined a.k.a.
The in-store experience generates excitement and anticipation on social media, driving demand and traffic online and offline and creating customer affiliation with the Culture Kings brands, not just the products sold. mnml Founded in Los Angeles in 2016, mnml joined a.k.a. Brands in October 2021. mnml is a men’s streetwear brand that designs premier, fashion-forward apparel at accessible prices.
Though we ship our products globally, we operate primarily in two geographies: the U.S. and Australia. The U.S. has the largest apparel market of any country, and is projected to grow to an estimated $357 billion in 2024 and grow at a 1.9% CAGR from 2023 to 2027.
Though we ship our products globally, we operate primarily in two geographies: the U.S. and Australia. The U.S. has the largest apparel market of any country, which grew to $359 billion in 2024 and is expected to grow at a 2.1% compounded annual growth rate (“CAGR”) from 2024 to 2028.
Our women’s brands sell mostly exclusive styles and the majority of our streetwear styles are either exclusive in-house designed brands or exclusive styles from leading third-party brands.
Our Competitive Strengths Great Product Exclusive High-Quality Fashion Our women’s merchandise is designed in-house and exclusive to our brands, and the majority of our streetwear styles are either exclusive in-house designed brands or exclusive styles from leading third-party brands.
However, to build a next-generation brand, we believe it’s imperative to show up where our customers are shopping. Culture Kings operates nine experiential and immersive concept stores in major cities in Australia and New Zealand, and opened its first U.S. store in Las Vegas in November 2022.
Culture Kings also operates nine experiential and immersive concept stores in major cities in Australia and New Zealand, and opened its first U.S. store in Las Vegas in November 2022. We believe our next-generation stores serve as a powerful customer acquisition tool, and provide customers a unique and immersive brand experience.
In addition to the protections provided by our intellectual property rights, we enter into confidentiality agreements with our employees, consultants, contractors and business partners. We further control the use of our technology and intellectual property through provisions in both our client terms of use on our website and in our vendor terms and conditions.
In addition to the protections provided by our intellectual property rights, we enter into confidentiality agreements with our employees, consultants, contractors and business partners.
ITEM 1. BUSINESS Our Vision To be the global leader in fashion for the next generation of consumers through a portfolio of the most innovative brands. Who We Are a.k.a. Brands Holdings Corp. (“a.k.a.”) was formed as a Delaware corporation on May 19, 2021. a.k.a. is a group of next-generation fashion brands for the next generation of consumers.
ITEM 1. BUSINESS Our Vision To be the global leader in fashion for the next generation of consumers through a portfolio of the most innovative brands. Who We Are a.k.a. Brands Holdings Corp. (“a.k.a.”) maintains a portfolio of global fashion brands, Princess Polly, Culture Kings, Petal and Pup and mnml.
This model provides greater certainty that our merchandise is always on-trend and customer-led, with minimal inventory risk because we only replenish the styles for which there is demonstrated customer demand. Our brands’ compelling merchandising strategy is anchored by a high proportion of exclusive styles that cannot be found elsewhere.
This model provides greater certainty that our merchandise is always on-trend, quick to market and with minimal inventory risk because we only replenish the styles for which there is demonstrated customer demand.
Brands currently consists of four brands: two women’s brands, Princess Polly and Petal & Pup, and two streetwear brands, Culture Kings and mnml. Princess Polly Founded in Australia in 2010, Princess Polly joined a.k.a. Brands in July 2018.
Brands currently consists of four brands: two women’s brands, Princess Polly and Petal & Pup, and two streetwear brands, Culture Kings and mnml. Princess Polly Founded in Australia in 2010, Princess Polly joined a.k.a. Brands in July 2018. Princess Polly is a leading fashion brand loved globally for its trend-driven designs, viral online presence and exclusive influencer collaborations.
The Australian apparel market is expecting to grow to an estimated $21.5 billion in 2024 and grow at a 2.4% CAGR from 2023 to 2027. We believe the key factors driving growth within the global apparel, footwear and accessories industry include favorable demographic trends and desire for constant newness.
According to Market Research Future, a global market research company, the Australian apparel market was expected to grow to over $23.0 billion in 2024 and grow at over a 3.0% CAGR through 2032. We believe the key factors driving growth within the global apparel, footwear and accessories industry include favorable demographic trends and desire for constant newness.
We utilize real-time data and consumer insights to identify the latest trends, and work with our global sourcing network to quickly bring new, high-quality products to market.
Data-Driven Merchandising Drives On-Trend Fashion with Strong Gross Margins Our customers crave newness and excitement and we deliver this by creating and curating on-trend, high-quality and affordable fashion. We utilize real-time data and consumer insights to identify the latest trends, and work with our global sourcing network to quickly bring new, high-quality products to market.
In connection with Princess Polly’s expansion in the U.S., in September of 2023, Princess Polly opened its first brick and mortar store in Century City, Los Angeles, and we plan to open more stores across the U.S. in 2024. Petal & Pup Founded in Australia in 2015, Petal & Pup joined a.k.a. Brands in August 2019.
In connection with Princess Polly’s expansion in the U.S., in September of 2023, Princess Polly opened its first brick and mortar store in Century City, Los Angeles.
Increase Loyalty and Wallet Share We intend to deepen customer relationships to improve customer retention and increase wallet share. We aim to achieve this by enhancing our user experience, improving engagement, refining our customer segmentation, increasing personalization, launching loyalty programs across our brands and constantly introducing new styles, designer collaborations and exclusive items.
We also intend to deepen customer relationships to improve customer retention and increase wallet share. We aim to achieve this by enhancing our user experience, improving engagement, refining our customer segmentation, increasing personalization and testing third party artificial intelligence functions to improve the customer experience.
Princess Polly is the leader on ethical sourcing in our portfolio and amongst their digitally native brand peers, and we will leverage Princess Polly’s best practices and apply them to the rest of our portfolio. We are devoted to making continual progress towards our commitments and being transparent along the way.
Brands team has also been improved, extending e-learning to over 80 Princess Polly and Culture Kings team members. Princess Polly is the leader on ethical sourcing in our portfolio and amongst their digitally native brand peers, and we will leverage Princess Polly’s best practices and apply them to the rest of our portfolio.
Leveraging our industry expertise and operational synergies, we help accelerate our brands so they can grow faster, reach broader audiences, achieve greater scale and enhance their profitability. We believe we are disrupting the status quo and pioneering a new approach to fashion.
Further, we are committed to showing up for customers wherever they shop, whether that’s online, in-stores or through wholesale channels. Leveraging our industry expertise and operational synergies, we help accelerate our brands so they can grow faster, reach broader audiences, achieve greater scale and enhance their profitability.
Additionally, based on the initial success of the Princess Polly store that opened in September 2023, we recently announced that we plan to open three to five additional Princess Polly stores in the U.S. in 2024.
Princess Polly opened its first store in Los Angeles, California, in September 2023 and based on the success of the initial store, the brand opened five more stores across the U.S. in 2024.
Culture Kings engages with customers through a combination of compelling online and offline marketing strategies that leverage the latest in music, fashion, art and celebrities to create brand hype and product excitement. The brand operates nine experiential concept stores in major cities in Australia and New Zealand, and opened its first U.S. store in Las Vegas in November 2022.
Culture Kings operates nine experiential concept stores in major cities in Australia and New Zealand, and opened its first U.S. store in Las Vegas in November 2022.
For example, in 2023, Princess Polly maintained valid ethical manufacturing audits for 100% of final stage production, or tier-one production, and packaging production sites, and 100% visibility of non-functional process suppliers, or tier-two supply chain.
For example, in 2024, Princess Polly maintained valid ethical manufacturing audits for 100% of final stage production, or tier-one production, and made progress towards auditing all production sites with a direct relationship, including packaging, branded hardware and fabric.
Our authentic content and steady stream of new styles encourages deep connections with new and existing customers, resulting in an attractive customer lifetime value. Grow Internationally We intend to leverage the strength of our brands and our ability to connect with customers to expand into new international markets beyond our core U.S. and Australian markets.
Culture Kings and mnml will also continue testing wholesale and marketplace opportunities in 2025 to expand their reach and attract new customers to the brand. Grow Internationally We intend to leverage the strength of our brands and our ability to connect with customers to expand into new international markets beyond our core U.S. and Australian markets.
Our customers’ satisfaction with the fit, quality, affordability and exclusivity of our styles is further reflected in our sales return rates across our brands, which was well below industry average in 2023 at approximately 18.5% of net sales. 5 Table of Contents We Efficiently Acquire Customers Through Authentic Content and Innovative, Measurable Marketing Our brands engage with customers by releasing a stream of inspiring digital content at high frequency across multiple channels where we know our customers are.
Our customers’ satisfaction with the fit, quality, affordability and exclusivity of our styles is further reflected in our sales return rates across our brands, which was well below industry average in 2024 at approximately 17.7%. Customers are proud to wear and name our brands.
According to Statista, a platform specialized in market and consumer data, the global apparel market grew to $1.7 trillion in 2023 and the global footwear market was valued at $400 billion in 2023. The global apparel and footwear market is expected to grow to almost $2.0 trillion by 2027.
According to UniformMarket, the operator of industry trade journals and news websites, the global apparel market grew to $1.8 trillion in 2024 and the global footwear market was expected to reach a value of almost $500 billion in 2024. The global apparel market is expected to grow to $2.0 trillion by 2028.
Meet Our Customers Anywhere Nimble by design, our brands meet our customers with a great experience whether online or in person. Our brands greatly value the direct relationship with customers and the primary channel for all of our brands is direct-to-consumer and online.
Our brands greatly value the direct relationship with customers and the primary channel for all of our brands is direct-to-consumer and online. However, to build a next-generation brand, we believe it’s imperative to show up where our customers are shopping.
We believe our content-rich narrative and authentic brand messaging drives organic traffic to our websites, efficiently generating demand, enhancing connectivity with customers and amplifying our brand communities. Our brands constantly innovate their marketing strategies and reach their customers organically across all channels including social media, paid performance and innovative in-house channels.
Our brands engage with customers by releasing a stream of inspiring digital content at high frequency across multiple platforms where we know our customers are. We believe our content-rich narrative and authentic brand messaging drives organic traffic to our websites, efficiently generating demand, enhancing connectivity with customers and amplifying our brand communities.
We intend to execute the following strategies to expand our business and gain market share: Grow Our Brands Organically in Our Existing Markets Through Direct-to-Consumer Growth and Omni-channel Expansion We believe our brands are underpenetrated in the markets in which they operate.
Our Growth Strategies We believe our global next-generation fashion brands are disrupting categories with strong fundamental growth and capitalizing on long-term global secular tailwinds. We intend to execute the following strategies to expand our business and gain market share: 6 Table of Contents Attract and Retain Customers We believe our brands are underpenetrated in the markets in which they operate.
Through our portfolio of next-generation global brands, we reach a broad audience across accessible price points and varied styles. Our current brands share a common focus on Millennial and Gen Z consumers who seek fashion inspiration on social media and primarily shop online.
Through these brands we reach a broad audience of next-generation consumers who seek fashion inspiration on social media and primarily shop online. Our brands are hyper-focused on the customer and serving them newness and a seamless experience throughout the entire shopping journey.
The brand offers its customers a curated assortment from over 100 leading third-party streetwear brands, as well as a large and growing portfolio of in-house designed brands and exclusive products that embody the relationship between music, sports, art and fashion.
Culture Kings offers its customers a curated assortment of 20 in-house designed brands, such as Loiter, Carre and Saint Morta, and exclusive products from over 100 leading third-party streetwear brands, including Nike, New Era, Mitchell and Ness and more.
With global travel reopening, Princess Polly achieved 150 site visits in India, the U.S. and China, while also expanding to two on-ground ethical sourcing resources in China. The suite of tools to support factory managers and empower workers has also been improved, piloting e-learning for managers and grievance hotlines accessible to workers.
The Princess Polly Social Responsibility team, with the support of two on-ground ethical sourcing resources in China, achieved 250 site visits in India, the U.S. and China.
Through continued investment in these initiatives, we believe we will be able to further appeal to our core demographic of Millennial and Gen Z consumers and increase our market share. 6 Table of Contents While our brands primarily operate in the direct-to-consumer channel, and we expect that to continue in 2024, based on the success of our omnichannel tests in 2023, we intend to further expand our omnichannel initiatives in 2024 to further build brand awareness.
Expand our Omnichannel Reach Through Additional Stores and Wholesale Partnerships Our brands primarily operate direct-to-consumer, and we expect that they will continue to operate in that manner as we continue to grow. Based on the strong success of our omnichannel initiatives in 2024, we plan to accelerate our omnichannel expansion in 2025 to further build brand awareness.
Sustainability We are making on-trend fashion more sustainable and accessible to everyone by transitioning our products to be made with lower environmental impact. Presently, 30% of Princess Polly’s product range is made from verified lower-impact materials, including organic, recycled, water-based or forest-friendly alternatives to conventional materials.
We are devoted to making continual progress towards our commitments and being transparent along the way. 9 Table of Contents Sustainability We are making on-trend fashion more sustainable and accessible to everyone by transitioning our products to be made with lower environmental impact.
Our brands aim to identify trends and evaluate opportunities leveraging digital capabilities, data-driven insights and a test-and-repeat merchandising model. We believe our brands have a significant opportunity to expand product ranges, increase average order value and broaden customer reach.
We also intend to continue to refine our test, repeat & clear merchandising approach and convert all of Culture Kings owned-brands to this approach, which we believe will unlock revenue and gross margin growth. We believe that our brands have a significant opportunity to expand product ranges, increase average order value and broaden customer reach.
We think there is a significant opportunity to grow awareness of our brands due to the continued secular shift to eCommerce, as well as the strength of our data-driven marketing and merchandising model.
We think there is a significant opportunity to grow awareness of our brands through the strength of our innovative and authentic marketing approach and successful test, repeat & clear merchandising model. We intend to efficiently acquire new customers through continued investment in our content creation, brand marketing and social media capabilities.
Princess Polly has also introduced recycled nylon basics and recycled sequin party styles and is aiming to have 60% of its products made with lower-impact materials by the end of 2025. 9 Table of Contents Environment We are committed to protecting the planet by addressing climate change, promoting circularity and improving the environmental impact of our packaging, business operations and factories.
This fabric market makes the ‘Core 40’ lower-impact materials available to all Princess Polly suppliers, overcoming lead time and order quantity barriers while maintaining high product quality. Environment We are committed to protecting the planet by addressing climate change, promoting circularity and improving the environmental impact of our packaging, business operations and factories.
We engage with Princess Polly customers through the brand’s constant stream of inspirational social media content, and the Princess Polly brand provides fresh, new and affordable merchandise arriving daily. Since joining a.k.a. Brands, Princess Polly has experienced rapid growth and increasing brand awareness in the United States.
The brand operates predominantly online and targets female customers between the ages of 15 and 25, who value the brand’s high-quality, fresh and exclusive fashion styles at accessible price points. Since joining a.k.a. Brands, Princess Polly has experienced rapid growth and increasing brand awareness in the United States.
We believe these stores serve as a powerful customer acquisition tool, and provide customers a unique and immersive brand experience. In 2023, we began piloting wholesale and marketplace initiatives and opened a store for Princess Polly to build brand awareness and increase brand touchpoints for our customers.
In 2023, we also began piloting wholesale and marketplace initiatives across our brands to build brand awareness and increase brand touchpoints for our customers. In 2024, Petal & Pup and Princess Polly successfully launched in 42 and 20 Nordstrom stores, respectively, and on Nordstrom.com with plans to expand to all stores in 2025.
Brands, we had nearly 13 million followers on social media and served more than 3.7 million active customers. In addition to social media marketing, we also leverage our stores and off-site locations to host both influencer marketing events as well as events open to customers to deepen our engagement.
In addition to social media marketing, we also leverage our stores and off-site locations to host both influencer marketing events as well as marketing activations to expand brand awareness. For example, in 2024 Culture Kings held unique and exciting activations and collaborations with WWE, ComplexCon, UFC, Formula1, Summer Smash and more.
Additionally, given our scale, we negotiate favorable rates with our vendors, providing our brands with attractive terms and enhancing overall profitability. Our Growth Strategies We believe our global next-generation fashion brands are disrupting categories with strong fundamental growth and capitalizing on long-term global secular tailwinds.
Additionally, given our scale, we negotiate favorable rates with our vendors, providing our brands with attractive terms and enhancing overall profitability. Robust and Flexible Platform to Support Growth Our brands operate independently but have access to resources, guidance and vendors at the a.k.a. Brands level.
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Nimble by design, our innovative brands are customer-centric and have authentic and engaging relationships with their target audiences through highly relevant social content and other marketing strategies. Leveraging innovative, data-driven insights, our brands introduce fresh content and high-quality merchandise daily. Our operating model accelerates the growth and profitability of our existing brands, and we aim to continue expanding our portfolio.
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We leverage a data-driven ‘test, repeat & clear’ merchandising model that allows us to introduce new and exclusive fashion weekly, so our customers are always on-trend. We leverage innovative data-driven insights to authentically connect and engage with customers across the latest marketing platforms.
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Simply put, our brands are better together. We believe we are differentiated by our ability to attract and retain a wide range of Millennial and Gen Z consumers through authentic brand messaging and curated, on-trend fashion. In 2023, we achieved $546.3 million in net sales and adjusted EBITDA of $13.8 million. Our Brands a.k.a.
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We believe we are disrupting the status quo and pioneering a new approach to fashion.
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With a tagline of “Wear It This Weekend,” Princess Polly focuses on providing fun dresses, tops, shoes and accessories with body-confident and trendy fashion designs. The brand operates predominantly online and targets female customers between the ages of 15 and 25, who value the brand’s high-quality assortment, compelling price points and free and fast shipping.
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In 2024 as compared to 2023, we: • Increased net sales to $574.7 million from $546.3 million , representing 5% year-over-year growth • Increased U.S. net sales to $368.8 million from $315.5 million , representing 17% year-over-year growth • Expanded gross margin by 200 basis points to 57% from 55% • Reduced our net loss to $26.0 million from $98.9 million • Increased Adjusted EBITDA to $23.3 million from $13.8 million , representing 69% year-over-year growth • Attracted 4.1 million active customers, an increase of 9% from the prior year • Received approximately 7.3 million orders, an increase of 7% from the prior year Our Brands a.k.a.
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The brand operates exclusively online and offers an assortment of trendy, flattering, feminine styles and dresses for special occasions. The brand targets female customers typically in their 20s or 30s, with more than 70% of customers between the ages of 25 and 34.
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At the forefront of hybrid retail, Princess Polly connects with customers worldwide through an unmatched online experience, engaging retail stores and coveted wholesale partners. With a focus on making the latest trends accessible and ethically sourced, Princess Polly continues to drive connection with its ever-growing community of loyal next-generation customers.
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In 2019, Petal & Pup expanded to the United States, which is now its fastest growing geography. 4 Table of Contents Culture Kings Founded in Australia in 2008, Culture Kings joined a.k.a. Brands in March 2021. Culture Kings is a premium multi-channel retailer of streetwear apparel, footwear, headwear and accessories.
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Based on the customer feedback and success of the first store, Princess Polly opened five more stores across the U.S. in 2024 in San Diego, CA; Scottsdale, AZ; Irvine, CA; Santa Clara, CA; and Boston, MA.
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The brand targets male consumers between the ages of 18 and 35 who are fashion conscious, highly social and digitally focused. More than 40% of Culture Kings’ products are exclusive and approximately 75% of its sales are made online.
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The brand plans to open more locations across the U.S. in 2025, including an 8,000 square foot store in the SoHo neighborhood of New York City. 4 Table of Contents Petal & Pup Petal & Pup, founded in Australia in 2014 and expanded into the U.S. via its acquisition by a.k.a.
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We believe these stores serve as a powerful customer acquisition tool, and provide customers a unique and immersive brand experience. The stores feature engaging in-store designs and product displays, storefronts designed by best-in-class graffiti artists, exclusive product releases, including promotional products only available in-store and event-driven in-store activations.
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Brands in 2019, is a rapidly growing global feminine lifestyle brand, targeting women in their 20s and 30s. Petal & Pup’s collections embody a vibrant, confident femininity, inspired by its Australian roots and designed to encourage women to celebrate life's moments.
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The stores host a variety of public events and creative activities designed to instill feelings and emotions of excitement such as sneaker vending machines, basketball shooting competitions, live DJ sessions and appearances by global celebrities and tastemakers, including athletes and on-trend musicians.
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What started as an online brand, Petal & Pup has experienced significant expansion, particularly in the United States, and can now be found in major U.S. retailers including Nordstrom, Target, Macy’s, Victoria’s Secret and Amazon. Culture Kings Founded in Australia in 2008, Culture Kings joined a.k.a. Brands in March 2021.
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The brand creates digital content based on the events and activities in-store and publishes them online, generating further hype on social media.
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Culture Kings is a premier international streetwear retail destination, standing at the intersection of fashion, art, sports and music, and a leader in the worldwide streetwear phenomenon.
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The brand has developed a data-driven merchandising model to bring quality, on-trend fashion to customers faster and at an accessible price point. mnml’s authentic social media marketing strategy, highlighted by its more than one million followers across social platforms, drives efficient customer acquisition and strong brand loyalty.
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The brand has become internationally recognized for its immersive shopping experiences, both online and in-stores, that offer customers top brands and exclusive products, event-driven store activations, live DJs, Holy Grail arcades, basketball courts and music performances in store.
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In 2023, mnml apparel was spotted on over 100 professional athletes who shared their outfits across social media, and became a top selling brand for Culture Kings in the U.S. Next Generation Retail Data-Driven Merchandising with High Penetration of Exclusive High-Quality Fashion Our brands aim to deliver constant newness and excitement by creating and curating on-trend and affordable fashion.
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In addition to its powerful direct-to-consumer channels, mnml is a top-seller at Culture Kings, both online and in stores, and began testing marketplace and wholesale initiatives in 2024 to expand brand awareness.
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For example, while we maintain a network of proven vendors across the portfolio, we allow our brands to take a custom approach to which vendors they use. Therefore, there is minimal operational disruption when we acquire new brands given our flexible operations approach.
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Culture Kings designs and creates fashion apparel styles under approximately 20 owned brands and sells hundreds of styles of third-party brands primarily in headwear and footwear to complete the streetwear outfit.
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We intend to efficiently acquire new customers through continued investment in our content creation and social media capabilities, as well as through our network of approximately 25,000 influencers.
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We buy small quantities of new styles, release them on social media and our sites weekly, quickly read customer data to analyze the demand and replenish best-selling product in 30-60 days.
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For example, in 2023, our women’s brands partnered with top-tier influencers, including Alix Earle, Delaney Childs, Georgie Stevenson, and our men’s brands partnered with athletes and celebrities such as Caleb Plant, Lando Norris, Chito Vera and more.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example: • we may have difficulty growing our brands as demand falls in a challenging macroeconomic environment; 17 Table of Contents • we may have difficulty completing acquisitions to expand our platform, and we may not be able to successfully integrate a newly acquired business or achieve the expected growth, cost savings or synergies from such integration, or it may disrupt our current business; • we may not be able to continue to evolve to meet our customers’ changing needs and expectations, and our existing customers may reduce their purchases of our products; • we may not successfully expand our market share by winning new customers; • our brands may not be widely accepted in new countries or regions; • we may have difficulty recruiting, developing or retaining qualified employees; • we may not be able to manage our growth effectively, adapt our business model or develop relationships with customers or successfully operate our Culture Kings and Princess Polly brick-and-mortar stores, including our first flagship U.S.
Biggest changeFor example: • we may have difficulty growing our brands as demand falls in a challenging macroeconomic environment; • we may have difficulty completing acquisitions to expand our platform, and we may not be able to successfully integrate a newly acquired business or achieve the expected growth, cost savings or synergies from such integration, or it may disrupt our current business; 17 Table of Contents • we may not be able to continue to evolve to meet our customers’ changing needs and expectations, and our existing customers may reduce their purchases of our products; • we may not successfully expand our market share by winning new customers; • our brands may not be widely accepted in new countries or regions; • we may have difficulty recruiting, developing or retaining qualified employees; • we may not be able to manage our growth effectively, adapt our business model or develop relationships with customers or successfully operate our Culture Kings and Princess Polly brick-and-mortar stores, which exposes us to premises liability, such as slip and falls, and may subject us to greater potential labor union activity; • we may not be successful in opening new brick-and-mortar stores, including the additional planned Princess Polly locations in the U.S.; • we may not be successful in securing wholesale partnerships or securing favorable terms; • we may not successfully identify the correct markets in which to open retail stores for our brands; • we may not be able to scale the abilities of our supply chain operations to meet increased consumer demand, and we may not be able to offset rising materials, procurement and shipping costs with pricing actions or efficiency improvements; • any new brands we acquire might cannibalize our existing brands and cause a decrease in sales of our existing brands; and • we may not be able to complete dispositions of nonstrategic assets in the future.
Our failure to successfully respond to these risks might adversely affect our sales, as well as damage our reputation and brands. 19 Table of Contents Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties. We use third-party social media platforms as, among other things, marketing tools.
Our failure to successfully respond to these risks might materially adversely affect our sales, as well as damage our reputation and brands. 19 Table of Contents Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties. We use third-party social media platforms as, among other things, marketing tools.
We entered into a Director Nomination Agreement with Summit that provides Summit the right to designate the following number of nominees for election to our Board: (i) all of the nominees for election to our Board for so long as Summit beneficially owns at least 40% of the total number of shares of our common stock outstanding upon completion of this offering, as adjusted for any reorganization, recapitalization, stock dividend, stock split, reverse stock split, or similar changes in the Company’s capitalization (the “Original Amount”); (ii) a majority of the nominees for election to our Board for so long as Summit beneficially owns less than 40% but at least 30% of the Original Amount; (iii) 30% of the nominees for election to our Board for so long as Summit beneficially owns less than 30% but at least 20% of the Original Amount; (iv) 20% of the nominees for election to our Board for so long as Summit beneficially owns less than 20% but at least 10% of the Original Amount; and (v) one of the nominees for election to our Board for so long as Summit beneficially owns at least 5% of the Original Amount, which could result in representation on our Board that is disproportionate to Summit’s beneficial ownership. 39 Table of Contents Summit and its affiliates engage in a broad spectrum of activities, including investments in the services industry generally.
We entered into a Director Nomination Agreement with Summit that provides Summit the right to designate the following number of nominees for election to our Board: (i) all of the nominees for election to our Board for so long as Summit beneficially owns at least 40% of the total number of shares of our common stock outstanding upon completion of this offering, as adjusted for any reorganization, recapitalization, stock dividend, stock split, reverse stock split, or similar changes in the Company’s capitalization (the “Original Amount”); (ii) a majority of the nominees for election to our Board for so long as Summit beneficially owns less than 40% but at least 30% of the Original Amount; (iii) 30% of the nominees for election to our Board for so long as Summit beneficially owns less than 30% but at least 20% of the Original Amount; (iv) 20% of the nominees for election to our Board for so long as Summit beneficially owns less than 20% but at least 10% of the Original Amount; and (v) one of the nominees for election to our Board for so long as Summit beneficially owns at least 5% of the Original Amount, which could result in representation on our Board that is disproportionate to Summit’s beneficial ownership. 40 Table of Contents Summit and its affiliates engage in a broad spectrum of activities, including investments in the services industry generally.
See “—Risks Relating to Laws and Regulation—Changes in laws or regulations relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could lead to government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.” 15 Table of Contents Merchandise returns could harm our business.
See “—Risks Relating to Laws and Regulation—Changes in laws or regulations relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could lead to government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.” 15 Table of Contents Merchandise returns could materially harm our business.
If our performance metrics are not accurate representations of the reach or monetization of our brand, if we discover material inaccuracies in our metrics or the data on which such metrics are based, or if we can no longer calculate any of our key performance metrics with a sufficient degree of accuracy and cannot find an adequate replacement for the metric, our business, financial condition and operating results could be adversely affected.
If our performance metrics are not accurate representations of the reach or monetization of our brand, if we discover material inaccuracies in our metrics or the data on which such metrics are based, or if we can no longer calculate any of our key performance metrics with a sufficient degree of accuracy and cannot find an adequate replacement for the metric, our business, financial condition and operating results could be materially adversely affected.
Some of the factors that may negatively influence consumer spending include inflationary pressure; high levels of unemployment; higher consumer debt levels; reductions in net worth; declines in asset values and related market uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; fluctuating fuel and other energy costs; fluctuating commodity prices; and general uncertainty regarding the overall future political and economic environment.
Some of the factors that may negatively influence consumer spending include inflationary pressure; high levels of unemployment; higher consumer debt levels; reductions in net worth; declines in asset values and related market uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; fluctuating fuel and other energy costs; fluctuating commodity prices; fluctuating tariffs; and general uncertainty regarding the overall future political and economic environment.
Any challenges that we encounter as we expand internationally may divert financial, operational and managerial resources from our existing operations, which could adversely impact our financial condition and results of operations. Shipping is a critical part of our business and any interruptions in, or increased costs of, shipping could adversely affect our operating results.
Any challenges that we encounter as we expand internationally may divert financial, operational and managerial resources from our existing operations, which could adversely impact our financial condition and results of operations. Shipping is a critical part of our business and any interruptions in, or increased costs of, shipping could materially adversely affect our operating results.
It is possible that we could have another impairment charge for goodwill or intangible assets in future periods if (i) overall economic conditions in fiscal 2024 or future years vary from our current assumptions (including changes in discount rates), (ii) business conditions or our strategies for a specific business unit change from our current assumptions, (iii) investors require higher rates of return on equity investments in the marketplace, or (iv) enterprise values of comparable publicly traded companies, or of actual sales transactions of comparable companies, were to decline, resulting in lower comparable multiples of revenues and earnings before interest, taxes, depreciation and amortization and, accordingly, lower implied values of goodwill and intangible assets.
It is possible that we could have another impairment charge for goodwill or intangible assets in future periods if (i) overall economic conditions in fiscal 2025 or future years vary from our current assumptions (including changes in discount rates), (ii) business conditions or our strategies for a specific business unit change from our current assumptions, (iii) investors require higher rates of return on equity investments in the marketplace, or (iv) enterprise values of comparable publicly traded companies, or of actual sales transactions of comparable companies, were to decline, resulting in lower comparable multiples of revenues and earnings before interest, taxes, depreciation and amortization and, accordingly, lower implied values of goodwill and intangible assets.
We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected. Our business requires us to manage a large volume of inventory, including precise quantities across a large number of different products, effectively.
We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be materially adversely affected. Our business requires us to manage a large volume of inventory, including precise quantities across a large number of different products, effectively.
Our business and the success of our products could be harmed if we are unable to maintain our corporate integrity or the images and reputation of our brands. Our success to date has been due in large part to the growth of our brands’ images and our customers’ connection to our brands.
Our business and the success of our products could be materially harmed if we are unable to maintain our corporate integrity or the images and reputation of our brands. Our success to date has been due in large part to the growth of our brands’ images and our customers’ connection to our brands.
Increases in labor costs, fluctuations in wage rates and the price, availability and quality of raw materials and finished goods could increase costs and could adversely affect our business, financial condition and results of operations.
Increases in labor costs, fluctuations in wage rates and the price, availability and quality of raw materials and finished goods could increase costs and could materially adversely affect our business, financial condition and results of operations.
There can be no assurance that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all. 38 Table of Contents Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in the future could reduce our ability to compete successfully and harm our results of operations.
There can be no assurance that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all. 39 Table of Contents Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in the future could reduce our ability to compete successfully and harm our results of operations.
We were in compliance with all debt covenants as of December 31, 2023, and expect to be in compliance beyond 12 months, although our ability to meet those financial ratios and tests can be affected by the interpretation of certain provisions in the financing documents, macro-economic conditions and the seasonality of our business, which is more concentrated in the third and fourth fiscal quarters.
We were in compliance with all debt covenants as of December 31, 2024, and expect to be in compliance beyond 12 months, although our ability to meet those financial ratios and tests can be affected by the interpretation of certain provisions in the financing documents, macro-economic conditions and the seasonality of our business, which is more concentrated in the third and fourth fiscal quarters.
Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation. 40 Table of Contents If we fail to maintain compliance with the NYSE’s continued listing standards, the NYSE may delist our common stock, which could materially and adversely affect our company, the market price of our common stock and your ability to sell your shares of our common stock.
Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation. 41 Table of Contents If we fail to maintain compliance with the NYSE’s continued listing standards, the NYSE may delist our common stock, which could materially and adversely affect our company, the market price of our common stock and your ability to sell your shares of our common stock.
Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. 45 Table of Contents Our certificate of incorporation further provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above.
Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. 46 Table of Contents Our certificate of incorporation further provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above.
In such an event, we may not have sufficient assets to repay all of our indebtedness. 37 Table of Contents The terms of the financing documents that govern our credit facility restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
In such an event, we may not have sufficient assets to repay all of our indebtedness. 38 Table of Contents The terms of the financing documents that govern our credit facility restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
This summary should be read together with the more detailed description of each risk factor below. • Economic downturns and market conditions could materially adversely affect our business, operating results, financial condition and growth prospects; • Changes in the political and economic policies of the Chinese government or in relations between China and the United States may materially and adversely affect our business, financial condition, results of operations and the market price of our common stock; • Rapidly-changing consumer preferences in the apparel, footwear and accessories industries expose us to the risk of lost sales, harmed customer relationships and diminished brand loyalty if we are unable to anticipate such changes; • Our future revenues and operating results will be harmed if we fail to acquire new customers, retain existing customers, and maintain average order value levels; • We face risks related to our growth strategy if we are unsuccessful in identifying brands to acquire, integrate and manage on our platform; • Our business and the success of our products could be harmed if we are unable to maintain our corporate integrity or the images and reputations of our brands; • Our use of third-party suppliers and manufacturers that are primarily based in China exposes us to risks inherent in doing business there; • We face risks to our operating results if we fail to manage our inventory effectively; • Increases in labor costs, including wages, and fluctuations in the price, availability and quality of raw materials and finished goods could adversely affect our business, financial condition and results of operations; • Changes in laws or regulations relating to data privacy and security that are applied adversely to us may have a material adverse effect on our reputation, results of operations, financial condition and cash flows; • Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition; and • We face risks related to our debt covenants if we fail to generate sufficient cash flow to service our debt which could arise from changes in our results of operations or general economic conditions. • If we fail to maintain compliance with the New York Stock Exchange’s (“NYSE”) continued listing standards, the NYSE may delist our common stock. 12 Table of Contents Risks Relating to Our Business and Strategy Economic downturns and market conditions beyond our control, including periods of inflation, could materially adversely affect our business, operating results, financial condition and prospects.
This summary should be read together with the more detailed description of each risk factor below. • Economic downturns and market conditions could materially adversely affect our business, operating results, financial condition and growth prospects; • Changes in the political and economic policies of the Chinese government or in relations between China and the United States may materially and adversely affect our business, financial condition, results of operations and the market price of our common stock; • Rapidly-changing consumer preferences in the apparel, footwear and accessories industries expose us to the risk of lost sales, harmed customer relationships and diminished brand loyalty if we are unable to anticipate such changes; • Our future revenues and operating results will be harmed if we fail to acquire new customers, retain existing customers, and maintain average order value levels; • We face risks related to our growth strategy if we are unsuccessful in identifying brands to acquire, integrate and manage on our platform; • Our business and the success of our products could be harmed if we are unable to maintain our corporate integrity or the images and reputations of our brands; • Our use of third-party suppliers and manufacturers that are primarily based in China exposes us to risks inherent in doing business there; • Changes to U.S., Australian or international trade policy, tariff or import/export regulations or our failure to comply with such regulations may have a material adverse effect on our reputation, business, financial condition and results of operations. • We face risks to our operating results if we fail to manage our inventory effectively; • Increases in labor costs, including wages, and fluctuations in the price, availability and quality of raw materials and finished goods could adversely affect our business, financial condition and results of operations; • Changes in laws or regulations relating to data privacy and security that are applied adversely to us may have a material adverse effect on our reputation, results of operations, financial condition and cash flows; • Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition; and • We face risks related to our debt covenants if we fail to generate sufficient cash flow to service our debt which could arise from changes in our results of operations or general economic conditions. • If we fail to maintain compliance with the New York Stock Exchange’s (“NYSE”) continued listing standards, the NYSE may delist our common stock. 12 Table of Contents Risks Relating to Our Business and Strategy Economic downturns and market conditions beyond our control, including periods of inflation, could materially adversely affect our business, operating results, financial condition and prospects.
We depend upon third-party suppliers and manufacturers, making us vulnerable to supply disruptions and price fluctuations. We rely on a number of third-party suppliers and manufacturers to provide our products, including one supplier that represents approximately 14% of our purchase orders.
We depend upon third-party suppliers and manufacturers, making us vulnerable to supply disruptions and price fluctuations. We rely on a number of third-party suppliers and manufacturers to provide our products, including one supplier that represents approximately 8% of our purchase orders.
If our merchandise is not delivered in a timely manner or is damaged or lost during the delivery process, our consumers could become dissatisfied and cease purchasing our products, which would adversely affect our business and operating results. Our direct-to-consumer business model is subject to risks that could have an adverse effect on our results of operations.
If our merchandise is not delivered in a timely manner or is damaged or lost during the delivery process, our consumers could become dissatisfied and cease purchasing our products, which would materially adversely affect our business and operating results. Our direct-to-consumer business model is subject to risks that could have a material adverse effect on our results of operations.
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our consumers would have to pay for our offering and adversely affect our operating results.
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our consumers would have to pay for our offerings and adversely affect our operating results.
We may have to develop alternative systems to determine our consumers’ behavior, customize their online experience or efficiently market to them if consumers block cookies or regulations introduce additional barriers to collecting cookie data. 32 Table of Contents Third parties may claim that we are infringing, misappropriating or otherwise violating their intellectual property rights or those of others.
We may have to develop alternative systems to determine our consumers’ behavior, customize their online experience or efficiently market to them if consumers block cookies or regulations introduce additional barriers to collecting cookie data. Third parties may claim that we are infringing, misappropriating or otherwise violating their intellectual property rights or those of others.
The back-up facilities may not process effectively during time of higher traffic to our sites, may process transactions more slowly and may not support all of our sites’ functionality. We rely on our partners who use complex custom-built proprietary software in our technology infrastructure, which they seek to continually update and improve.
The back-up facilities may not process effectively during time of higher traffic to our sites, may process transactions more slowly and may not support all of our sites’ functionality. 36 Table of Contents We rely on our partners who use complex custom-built proprietary software in our technology infrastructure, which they seek to continually update and improve.
In addition, any intellectual property lawsuits in which we are involved could cost a significant amount of time and money and distract management’s attention from operating our business, which may negatively impact our business and results of operations. 34 Table of Contents The success of our brands has also made us the target of counterfeiting and product imitation strategies.
In addition, any intellectual property lawsuits in which we are involved could cost a significant amount of time and money and distract management’s attention from operating our business, which may negatively impact our business and results of operations. The success of our brands has also made us the target of counterfeiting and product imitation strategies.
We are also subject to international laws, regulations and standards in many jurisdictions, which apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information, such as GDPR. 26 Table of Contents Furthermore, in November 2020, California voters passed the California Privacy Rights Act of 2020 (“CPRA”).
We are also subject to international laws, regulations and standards in many jurisdictions, which apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information, such as GDPR. Furthermore, in November 2020, California voters passed the California Privacy Rights Act of 2020 (“CPRA”).
Any loss or interruption to our systems or the services provided by third parties would adversely affect our business, financial condition and results of operations. Customer growth and activity on mobile devices depends upon effective use of mobile operating systems, networks and standards that we do not control.
Any loss or interruption to our systems or the services provided by third parties would adversely affect our business, financial condition and results of operations. 32 Table of Contents Customer growth and activity on mobile devices depends upon effective use of mobile operating systems, networks and standards that we do not control.
Any court decision or settlement that prevents trademark protection of our brands, that allows a third-party to continue to sell products similar to our products, or that allows a manufacturer or distributor to continue to sell counterfeit versions of our products, could lead to intensified competition and a material reduction in our sales. We are subject to payments-related risks.
Any court decision or settlement that prevents trademark protection of our brands, that allows a third-party to continue to sell products similar to our products, or that allows a manufacturer or distributor to continue to sell counterfeit versions of our products, could lead to intensified competition and a material reduction in our sales. 35 Table of Contents We are subject to payments-related risks.
In addition, if we are unable to meet the requirements of Section 404 of SOX, we may not be able to remain listed on the NYSE. The requirements of being a public company with common stock listed on the NYSE will continue to increase certain of our costs and require significant management focus.
In addition, if we are unable to meet the requirements of Section 404 of SOX, we may not be able to remain listed on the NYSE. 43 Table of Contents The requirements of being a public company with common stock listed on the NYSE will continue to increase certain of our costs and require significant management focus.
Since identifying these material weaknesses, we have been, and are currently in the process of, remediating each of them. While progress has been made to remediate both of the material weaknesses above, as of December 31, 2023, we were still in the process of developing and implementing enhanced processes and procedures and testing the operating effectiveness of these enhanced controls.
Since identifying these material weaknesses, we have been, and are currently in the process of, remediating each of them. While progress has been made to remediate the material weaknesses above, as of December 31, 2024, we were still in the process of developing and implementing enhanced processes and procedures and testing the operating effectiveness of these enhanced controls.
Our intellectual property is an essential asset of our business. Our business could be significantly harmed if we are not able to establish, maintain, protect and enforce our intellectual property rights. We believe our competitive position is largely attributable to the value of our trademarks, trade dress, trade names, trade secrets, copyrights and other intellectual property rights.
Our business could be significantly harmed if we are not able to establish, maintain, protect and enforce our intellectual property rights. We believe our competitive position is largely attributable to the value of our trademarks, trade dress, trade names, trade secrets, copyrights and other intellectual property rights.
In addition, we may face difficulties in recovering any losses from our provider and any losses we recover may be lower than we initially expect. 31 Table of Contents We are also reliant on the security practices of our third-party service providers, which may be outside of our direct control.
In addition, we may face difficulties in recovering any losses from our provider and any losses we recover may be lower than we initially expect. We are also reliant on the security practices of our third-party service providers, which may be outside of our direct control.
If we fail to effectively manage our hiring needs or successfully integrate new hires, our efficiency, ability to meet forecasts, and employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results. Our decentralized brand management structure could negatively impact our business.
If we fail to effectively manage our hiring needs or successfully integrate new hires, our efficiency, ability to meet forecasts, and employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results. 23 Table of Contents Our decentralized brand management structure could negatively impact our business.
If we are unable to cost-effectively expand into new countries and regions, then our growth prospects and competitive position may be harmed and our business, results of operations, and financial condition may suffer. 18 Table of Contents A growing portion of our revenue is derived from wholesale and third-party marketplace partners, and the loss of any of these wholesale or third-party marketplace partners could reduce our total revenue.
If we are unable to cost-effectively expand into new countries and regions, then our growth prospects and competitive position may be harmed and our business, results of operations, and financial condition may suffer. 18 Table of Contents A growing portion of our revenue is derived from wholesale and third-party marketplace partners, and the loss of any of these wholesale or third-party marketplace partners could result in a material reduction in our total revenue.
If our future operating results are below the expectations of securities analysts or investors, or below any financial guidance we may provide to the market, our stock price may further decline. 20 Table of Contents Our operating results fluctuate from period to period.
If our future operating results are below the expectations of securities analysts or investors, or below any financial guidance we may provide to the market, our stock price may further decline. Our operating results fluctuate from period to period.
Our business is exposed to the risks of foreign currency exchange rate fluctuations. Our international businesses operate in functional currencies other than the U.S. dollar. A significant percentage of our total revenues (approximately 42% and 49% in 2023 and 2022, respectively) is derived from markets outside the U.S.
Our business is exposed to the risks of foreign currency exchange rate fluctuations. Our international businesses operate in functional currencies other than the U.S. dollar. A significant percentage of our total revenues (approximately 36% and 42% in 2024 and 2023, respectively) is derived from markets outside the U.S.
Global health crises, such as the COVID-19 pandemic or any other actual or threatened epidemic, pandemic, or outbreak and spread of a communicable disease or virus in the countries where we operate or sell products could adversely affect our operations and financial performance.
Global health crises or any other actual or threatened epidemic, pandemic, or outbreak and spread of a communicable disease or virus in the countries where we operate or sell products could adversely affect our operations and financial performance.
As of March 5, 2024, Summit Partners LP (“Summit”) beneficially owned approximately 57.6% of our common stock which means that, based on its percentage voting power, Summit controls the vote of all matters submitted to a vote of our Board or stockholders, which enables it to control the election of the members of the Board and all other corporate decisions.
As of March 4, 2025, Summit Partners LP (“Summit”) beneficially owned approximately 56.6% of our common stock which means that, based on its percentage voting power, Summit controls the vote of all matters submitted to a vote of our Board or stockholders, which enables it to control the election of the members of the Board and all other corporate decisions.
There is no guarantee that the success of a brand in Australia will translate to the success of that brand in other countries, such as the U.S.
There is no guarantee that the success of a brand in Australia will translate to the success of that brand in other countries, such as the U.S., and there is no guarantee that our success in certain locations in the U.S. will translate to success in other locations in the U.S.
In addition to Summit’s beneficial ownership of 57.6% of our common stock as of March 5, 2024, our certificate of incorporation and bylaws contain provisions that may make the acquisition of the Company more difficult without the approval of our board of directors.
In addition to Summit’s beneficial ownership of 56.6% of our common stock as of March 4, 2025, our certificate of incorporation and bylaws contain provisions that may make the acquisition of the Company more difficult without the approval of our board of directors.
Our credit facility, or any future credit facility or other indebtedness we may enter into, may have important consequences, including: • limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt; • limiting our ability to incur additional indebtedness; • limiting our ability to capitalize on significant business opportunities; • making us more vulnerable to rising interest rates; and • making us more vulnerable in the event of a downturn in our business. 36 Table of Contents Our level of indebtedness may place us at a competitive disadvantage to our competitors that are not as highly leveraged.
Our credit facility, or any future credit facility or other indebtedness we may enter into, may have important consequences, including: • limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt; • limiting our ability to incur additional indebtedness; • limiting our ability to capitalize on significant business opportunities; • making us more vulnerable to rising interest rates; and 37 Table of Contents • making us more vulnerable in the event of a downturn in our business.
These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting and special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent at any time when Summit controls, in the aggregate, less than 35% in voting power of our outstanding common stock; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; provided, however, at any time when Summit controls, in the aggregate, at least 10% in voting power of our outstanding common stock entitled to vote generally in the election of directors, such advance notice procedure will not apply to Summit; • establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • provide that, at any time when Summit controls, in the aggregate, less than 40% in voting power of our stock entitled to vote generally in the election of directors, directors may only be removed for cause, and only by the affirmative vote of holders of at least 66 2⁄3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; 44 Table of Contents • prohibit stockholders from calling special meetings of stockholders; provided, however, at any time when Summit controls, in the aggregate, at least 35% in voting power of our outstanding common stock, special meetings of our stockholders shall also be called by our Board or the Chairman of our Board at the written request of Summit; and • require the approval of holders of at least 66 2/3% of the outstanding shares of our voting common stock to amend certain provisions of our certificate of incorporation and for stockholders to amend our bylaws.
These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting and special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent at any time when Summit controls, in the aggregate, less than 35% in voting power of our outstanding common stock; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; provided, however, at any time when Summit controls, in the aggregate, at least 10% in voting power of our outstanding common stock entitled to vote generally in the election of directors, such advance notice procedure will not apply to Summit; • establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • provide that, at any time when Summit controls, in the aggregate, less than 40% in voting power of our stock entitled to vote generally in the election of directors, directors may only be removed for cause, and only by the affirmative vote of holders of at least 66 2⁄3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; • prohibit stockholders from calling special meetings of stockholders; provided, however, at any time when Summit controls, in the aggregate, at least 35% in voting power of our outstanding common stock, special meetings of our stockholders shall also be called by our Board or the Chairman of our Board at the written request of Summit; and • require the approval of holders of at least 66 2/3% of the outstanding shares of our voting common stock to amend certain provisions of our certificate of incorporation and for stockholders to amend our bylaws. 45 Table of Contents Our certificate of incorporation also contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law (the “DGCL”), and prevents us from engaging in a business combination with a person (excluding Summit and its transferees) who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition.
Our ability to conduct business internationally may be adversely impacted by geopolitical (such as the Russian invasion of Ukraine, relations between China and Taiwan, or the ongoing conflict in the Middle East), economic, and public health events, the manner in which governments respond to such events, as well as the global economy.
Our ability to conduct business internationally may be adversely impacted by geopolitical (such as the Russian invasion of Ukraine, relations between China and Taiwan, trade wars, or relations between the U.S. and Mexico), economic, and public health events, the manner in which governments respond to such events, as well as the global economy.
In addition, because most of our U.S. fulfilled products are distributed from three primary fulfillment centers, our operations could also be interrupted by labor difficulties, or by floods, fires or other natural disasters near our fulfillment centers.
In addition, because most of our U.S. and Mexico fulfilled products are distributed from two primary fulfillment centers, our operations could also be interrupted by labor difficulties or changes in the U.S. or Mexican political landscape, or by floods, fires or other natural disasters near our fulfillment centers.
It is possible that, had we and our independent registered public accounting firm performed a formal assessment of the effectiveness of our internal control over financial reporting in accordance with the provisions of SOX, additional material weaknesses may have been identified. 42 Table of Contents If either we are unable to conclude that we have effective internal controls over financial reporting or our independent registered public accounting firm is unable to provide us with an unqualified report on the effectiveness of our internal controls over financial reporting as required by Section 404(b) of SOX, investors may lose confidence in our reported financial information, the price of our common stock could decline and we may be subject to litigation or regulatory enforcement actions.
If either we are unable to conclude that we have effective internal controls over financial reporting or our independent registered public accounting firm is unable to provide us with an unqualified report on the effectiveness of our internal controls over financial reporting as required by Section 404(b) of SOX, investors may lose confidence in our reported financial information, the price of our common stock could decline and we may be subject to litigation or regulatory enforcement actions.
Increased scrutiny and regulation of this practice may adversely affect our business. 28 Table of Contents Additionally, some scientists have concluded that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events.
Additionally, some scientists have concluded that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events.
A cyber-attack or other data security incident could result in the significant and protracted disruption of our business such that: • critical business systems become inoperable or require a significant amount of time or cost to restore; • key personnel are unable to perform their duties, communicate with employees, customers or third- party partners; • it results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of customer, supplier or company information; • we are prevented from accessing information necessary to conduct our business; • we are required to make unanticipated investments in equipment, technology or security measures; • customers cannot access our eCommerce websites, and customer orders may not be received or fulfilled; • we become subject to return fraud schemes, reselling schemes and imposter sites schemes; or • we become subject to other unanticipated liabilities, costs or claims.
Any measures we do take to prevent security breaches, whether caused by employees or third parties, have the potential to limit our ability to complete sales or ship products to our customers, harm relationships with our suppliers or restrict our ability to meet our customers’ expectations with respect to their online or retail shopping experience. 31 Table of Contents A cyber-attack or other data security incident could result in the significant and protracted disruption of our business such that: • critical business systems become inoperable or require a significant amount of time or cost to restore; • key personnel are unable to perform their duties, communicate with employees, customers or third- party partners; • it results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of customer, supplier or company information; • we are prevented from accessing information necessary to conduct our business; • we are required to make unanticipated investments in equipment, technology or security measures; • customers cannot access our eCommerce websites, and customer orders may not be received or fulfilled; • we become subject to return fraud schemes, reselling schemes and imposter sites schemes; or • we become subject to other unanticipated liabilities, costs or claims.
We are also dependent on information technology, including the internet, for our direct-to-consumer sales, including our eCommerce operations and retail business credit card transaction authorization.
We rely heavily on information technology to enable, track and facilitate sales and inventory and manage our supply chain. We are also dependent on information technology, including the internet, for our direct-to-consumer sales, including our eCommerce operations and retail business credit card transaction authorization.
Furthermore, an adverse outcome of a dispute may result in an injunction requiring us to cease the commercialization of our products and could require us to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property rights.
Furthermore, an adverse outcome of a dispute may result in an injunction requiring us to cease the commercialization of our products and could require us to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property rights. 33 Table of Contents Our liability insurance may not cover potential claims of this type adequately or at all.
We selected an enterprise resource planning system, hired an implementation partner and are in the process of implementation which will provide improvements to our IT-dependent and application controls to help prevent and detect errors, enforce segregation of duties and strengthen controls around manual journal entries.
We have made significant progress in the implementation of our new enterprise resource planning (“ERP”) system, which will provide improvements to our IT-dependent and application controls to help prevent and detect errors, enforce segregation of duties and strengthen controls around manual journal entries.
China’s economy differs from the economies of developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Further, with the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future.
China’s economy differs from the economies of developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions and as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. 43 Table of Contents We could remain an “emerging growth company” until 2026 or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenue exceeds $1.07 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (c) the date on which we have issued more than $1 billion in non-convertible debt securities during the preceding three- year period.
We could remain an “emerging growth company” until 2026 or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenue exceeds $1.07 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (c) the date on which we have issued more than $1 billion in non-convertible debt securities during the preceding three- year period. 44 Table of Contents We are a “controlled company” within the meaning of the rules of the NYSE and, as a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements.
We are obligated to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act.
In addition, delisting from the NYSE may negatively impact our reputation and, consequently, our business. We are obligated to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act.
We cannot be sure that we will be able to attract, retain and motivate a sufficient number of qualified personnel in the future, or that the compensation costs of doing so will not adversely affect our operating results. In addition, we may not be able to hire new employees quickly enough to meet our needs.
We may also need to increase our employee compensation levels in response to competition. We cannot be sure that we will be able to attract, retain and motivate a sufficient number of qualified personnel in the future, or that the compensation costs of doing so will not adversely affect our operating results.
Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products.
Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.
Any inadequacy, interruption, integration failure or security failure of this technology could harm our ability to effectively operate our business. Our ability to effectively manage and operate our business depends significantly on information technology systems. We rely heavily on information technology to enable, track and facilitate sales and inventory and manage our supply chain.
Risks Relating to Our Intellectual Property Rights and Our Technology We rely significantly on information technology. Any inadequacy, interruption, integration failure or security failure of this technology could harm our ability to effectively operate our business. Our ability to effectively manage and operate our business depends significantly on information technology systems.
For example, the fashion industry’s process for dying fabrics uses large quantities of water, and the disposition of the waste water directly impacts the environment.
For example, the fashion industry’s process for dying fabrics uses large quantities of water, and the disposition of the waste water directly impacts the environment. Increased scrutiny and regulation of this practice may adversely affect our business.
The United States Treasury Department placed sanctions on China’s Xinjiang Production and Construction Corporation (“XPCC”) for serious human rights abuses against ethnic minorities in XUAR. Additionally, the U.S.’s Uyghur Forced Labor Prevention Act (“UFLPA”), empowers the U.S. Customs and Border Protection Agency (the “U.S.
Also, China’s Xinjiang Uyghur Autonomous Region (the “XUAR”) is the source of large amounts of textiles for the global apparel supply chain. The United States Treasury Department placed sanctions on China’s Xinjiang Production and Construction Corporation (“XPCC”) for serious human rights abuses against ethnic minorities in XUAR. Additionally, the U.S.’s Uyghur Forced Labor Prevention Act (“UFLPA”), empowers the U.S.
Our reliance on these third-party suppliers also subjects us to other risks that could harm our business, including: • interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations; • delays in product shipments resulting from errors in manufacturing, defects or reliability issues from suppliers; • inability to obtain adequate supplies in a timely manner or on commercially reasonable terms; • difficulty locating and qualifying alternative suppliers, especially with respect to our 14% supplier; • the failure of our suppliers to comply with regulatory requirements, which could result in disruption of supply or increased expenses; and • inability of suppliers to fulfill orders and meet requirements due to financial hardships. 27 Table of Contents If we are unable to arrange for third-party supply or manufacturing of our products, or to do so on commercially reasonable terms, we may not be able to complete development of, market and sell our current or new products.
Our suppliers may encounter problems for a variety of reasons, including adverse macroeconomic conditions, unanticipated demand from larger customers, equipment malfunction, environmental factors and public health emergencies, any of which could delay or impede their ability to meet our demand. 27 Table of Contents Our reliance on these third-party suppliers also subjects us to other risks that could harm our business, including: • interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations; • delays in product shipments resulting from errors in manufacturing, defects or reliability issues from suppliers; • inability to obtain adequate supplies in a timely manner or on commercially reasonable terms; • difficulty locating and qualifying alternative suppliers, especially with respect to our 8% supplier; • the failure of our suppliers to comply with regulatory requirements, which could result in disruption of supply or increased expenses; and • inability of suppliers to fulfill orders and meet requirements due to financial hardships.
In addition, while we generally enter into confidentiality agreements with our employees and third parties to protect our trade secrets, know-how, business strategy and other proprietary information, such confidentiality agreements could be breached or otherwise may not provide meaningful protection for our trade secrets and know-how related to the design or manufacture of our products.
In addition, while we generally enter into confidentiality agreements with our employees and third parties to protect our trade secrets, know-how, business strategy and other proprietary information, such confidentiality agreements could be breached or otherwise may not provide meaningful protection for our trade secrets and know-how related to the design or manufacture of our products. 34 Table of Contents Similarly, while we seek to enter into agreements with all of our employees who develop intellectual property during their employment to assign the rights in such intellectual property to us, we may fail to enter into such agreements with all relevant employees, such agreements may be breached or may not be self-executing, and we may be subject to claims that such employees misappropriated relevant rights from their previous employers.
Fluctuations in interest rates can increase borrowing costs. Increases in interest rates may directly impact the amount of interest we are required to pay and reduce earnings accordingly.
Our level of indebtedness may place us at a competitive disadvantage to our competitors that are not as highly leveraged. Fluctuations in interest rates can increase borrowing costs. Increases in interest rates may directly impact the amount of interest we are required to pay and reduce earnings accordingly.
Summit controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the NYSE.
You will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements. Summit controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the NYSE.
Consumers often value readily available information and may act on such information without further investigation and without regard to its accuracy. The harm may be immediate, without affording us an opportunity for redress or correction. Our stock price has declined when our operating results have differed from our expectations or the expectations of securities analysts or investors.
The harm may be immediate, without affording us an opportunity for redress or correction. 20 Table of Contents Our stock price has declined when our operating results have differed from our expectations or the expectations of securities analysts or investors.
CBP”) to withhold release of items produced in whole or in part in the XUAR, or produced by companies included on a UFLPA entity list, creating a presumption that such goods were produced using forced labor. XPCC controls much of the textile industry in the region, and many large factories in XUAR produce fabrics and yarn for apparel.
Customs and Border Protection Agency (the “U.S. CBP”) to withhold release of items produced in whole or in part in the XUAR, or produced by companies included on a UFLPA entity list, creating a presumption that such goods were produced using forced labor.
Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation.
Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation. 28 Table of Contents Climate change and increased focus by governmental and non-governmental organizations, customers, consumers and investors on sustainability issues, including those related to climate change, may adversely affect our business and financial results and damage our reputation.
The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems could adversely impact the operations of our business, including our reputation, management of inventory, ordering and replenishment of products, manufacturing and distribution of products, eCommerce operations, retail business credit card transaction authorization and processing, corporate email communications and our interaction with the public on social media.
The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems could adversely impact the operations of our business, including our reputation, management of inventory, ordering and replenishment of products, manufacturing and distribution of products, eCommerce operations, retail business credit card transaction authorization and processing, corporate email communications and our interaction with the public on social media. 30 Table of Contents A security breach or other disruption to our information technology systems could result in the loss, theft, misuse, unauthorized disclosure or unauthorized access of customer, supplier, or sensitive company information or could disrupt our operations, which could damage our relationships with customers, suppliers or employees, expose us to litigation or regulatory proceedings or harm our reputation, any of which could materially adversely affect our business, financial condition or results of operations.
If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the Securities and Exchange Commission (“SEC”). 41 Table of Contents We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“SOX”), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting as of the end of the fiscal year that coincides with the filing of this Annual Report on Form 10-K.
If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the Securities and Exchange Commission (“SEC”).
The satisfactory performance, reliability and availability of our sites, transaction-processing systems and technology infrastructure are critical to our reputation and our ability to acquire and retain customers, as well as maintain adequate customer service levels. 35 Table of Contents If the facilities where the computer and communications hardware are located fail, or if our partners suffer an interruption or degradation of services at our main facility, we could lose customer data and miss order fulfillment deadlines, which could harm our business.
If the facilities where the computer and communications hardware are located fail, or if our partners suffer an interruption or degradation of services at our main facility, we could lose customer data and miss order fulfillment deadlines, which could harm our business.
As previously disclosed, we have two unremediated material weaknesses in the design and operation of our internal control over financial reporting initially identified in connection with the preparation of our financial statements for the fiscal years ended December 31, 2020 and 2019.
As previously disclosed, we have unremediated material weaknesses in the design and operation of our internal control over financial reporting in connection with the preparation of our financial statements, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, that had not been remediated as of December 31, 2024.
We could also be adversely impacted by future legislation and future judicial decisions altering the safe harbors of the DMCA or if international jurisdictions refuse to apply similar protections. 33 Table of Contents Failure to adequately establish, maintain, protect and enforce our intellectual property or proprietary rights, or prevent third parties from making unauthorized use of such rights, such as by counterfeiting of our products, could reduce sales and adversely affect the value of our brands.
Failure to adequately establish, maintain, protect and enforce our intellectual property or proprietary rights, or prevent third parties from making unauthorized use of such rights, such as by counterfeiting of our products, could reduce sales and adversely affect the value of our brands. Our intellectual property is an essential asset of our business.
In addition, we may not obtain or retain the requisite legal permits to continue to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.
In addition, our suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China. 13 Table of Contents In addition, we may not obtain or retain the requisite legal permits to continue to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.
Expanding into new countries and regions involves significant risk, particularly if we have no experience in marketing, selling and engaging with customers in the market. For example, in November 2022, we opened our first U.S. flagship store for our brand, Culture Kings, in Las Vegas, Nevada.
Expanding into new countries and regions involves significant risk, particularly if we have no experience in marketing, selling and engaging with customers in the market. For example, we plan to open our first Princess Polly store in New York City in the first quarter of 2025.
Such changes have the potential to adversely impact the U.S. and Australian economy or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our business, financial condition and results of operations.
Such changes have the potential to adversely impact the U.S. and Australian economy or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our business, financial condition and results of operations. 29 Table of Contents Our reliance on overseas manufacturing and supply partners, including vendors located in jurisdictions presenting an increased risk of bribery and corruption, exposes us to legal, reputational and supply chain risk through the potential for violations of federal and international anti-corruption law.
In addition, the costs we may incur in defending against any anti-corruption investigations stemming from our or our vendors’ actions could be significant.
In addition, the costs we may incur in defending against any anti-corruption investigations stemming from our or our vendors’ actions could be significant. Moreover, any actual or alleged corruption in our supply chain could carry significant reputational harms, including negative publicity, loss of goodwill and decline in share price.
A decline in the fair value of an intangible asset or of a business unit could result in an asset impairment charge, such as the recent goodwill impairment charges related to the Culture Kings and Petal & Pup reporting units.
A decline in the fair value of an intangible asset or of a business unit could result in an asset impairment charge .
In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission (“FTC”), have adopted, or are considering adopting, laws and regulations concerning personal information and data security and have prioritized privacy and information security violations for enforcement actions.
These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows. 26 Table of Contents In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission (“FTC”), have adopted, or are considering adopting, laws and regulations concerning personal information and data security and have prioritized privacy and information security violations for enforcement actions.
We also make certain estimates and assumptions in order to determine purchase price allocation and estimate the fair value of assets acquired and liabilities assumed. If our estimates or assumptions used to value these assets and liabilities are not accurate, we may be exposed to losses that may be material. We may not succeed in our growth strategy.
If our estimates or assumptions used to value these assets and liabilities are not accurate, we may be exposed to losses that may be material. We may not succeed in our growth strategy. One of our key strategic objectives is growth, which we pursue organically and through acquisitions.
Whether or not these measures are ultimately successful, these expenditures could have an adverse impact on our financial condition and results of operations and divert management’s attention from pursuing our strategic objectives. 30 Table of Contents In addition, although we take the security of our information technology systems seriously, there can be no assurance that the security measures we employ will effectively prevent unauthorized persons from obtaining access to our systems and information.
In addition, although we take the security of our information technology systems seriously, there can be no assurance that the security measures we employ will effectively prevent unauthorized persons from obtaining access to our systems and information.
Risks Relating to our Indebtedness Any indebtedness we may incur in the future could adversely affect our business and growth prospects. We entered into a credit facility concurrently with the completion of our initial public offering (“IPO”) in 2021.
Moreover, developing, testing and deploying AI systems may also increase our operating expenses due to the nature of the computing costs involved in such systems. Risks Relating to our Indebtedness Any indebtedness we may incur in the future could adversely affect our business and growth prospects. We entered into a credit facility in September 2021.
To attract top talent, we have had to offer, and believe we will need to continue to offer, competitive compensation and benefits packages before we can validate the productivity of those employees. We may also need to increase our employee compensation levels in response to competition.
We do not currently maintain key-person life insurance policies on any member of our senior management team or other key employees. We also face significant competition for personnel. To attract top talent, we have had to offer, and believe we will need to continue to offer, competitive compensation and benefits packages before we can validate the productivity of those employees.
Our results of operations will be materially and adversely affected if the labor costs of our third-party suppliers increase significantly. In addition, our suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.
Our results of operations will be materially and adversely affected if the labor costs of our third-party suppliers increase significantly.
Growing concerns about climate change and greenhouse gas emissions have led to the adoption of various regulations and policies, including the Paris Agreement negotiated at the 2015 United Nations Conference on Climate Change, which requires participating nations to reduce carbon emissions every five years beginning in 2023. Climate change may impact our business in numerous ways.
Our business and results of operations could be adversely affected by climate change and the adoption of new climate change laws, policies and regulations. Growing concerns about climate change and greenhouse gas emissions have led to the adoption of various regulations and policies. Climate change may impact our business in numerous ways.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk Management and Strategy Consistent with overall ERM policies and practices, the Company’s cybersecurity program focuses on the following areas: • Vigilance: The Company maintains a global presence, with cybersecurity threat operations functioning 24/7 with the specific goal of identifying, preventing and mitigating cybersecurity threats and responding to cybersecurity incidents in accordance with our established incident response and recovery plans. • Systems Safeguards: The Company deploys systems safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through ongoing vulnerability assessments and cybersecurity threat intelligence. • Collaboration: The Company utilizes collaboration mechanisms established with public and private entities, including intelligence and enforcement agencies, industry groups and third-party service providers, to identify, assess and respond to cybersecurity risks. • Third-Party Risk Management: The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of the Company’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. • Training: The Company provides periodic mandatory training for personnel regarding cybersecurity threats, which reinforces the Company’s information security policies, standards and practices, and such training is scaled to reflect the roles, responsibilities and information systems access of such personnel. • Incident Response and Recovery Planning: The Company has established and maintains comprehensive incident response and recovery plans that fully address the Company’s response to a cybersecurity incident and the recovery from a cybersecurity incident, and such plans are tested and evaluated on a regular basis. • Communication, Coordination and Disclosure: The Company utilizes a cross-functional approach to address the risk from cybersecurity threats, involving management personnel from the Company’s technology, operations, legal, risk management, internal audit and other key business functions, as well as the members of the Board and the Audit Committee of the Board in an ongoing dialogue regarding cybersecurity threats and incidents, while also implementing controls and procedures for the escalation of cybersecurity incidents pursuant to established thresholds so that decisions regarding the disclosure and reporting of such incidents can be made by management in a timely manner. • Governance: The Board’s oversight of cybersecurity risk management is supported by the Audit Committee, which regularly interacts with the company’s ERM function and the Company’s Chief Information Security Officer. 47 Table of Contents A key part of the Company’s strategy for managing risks from cybersecurity threats is the ongoing assessment and testing of the Company’s processes and practices through auditing, assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating the effectiveness of our cybersecurity measures.
Biggest changeRisk Management and Strategy Consistent with overall ERM policies and practices, the Company’s cybersecurity program focuses on the following areas: • Vigilance: The Company maintains a global presence, with cybersecurity threat operations functioning 24/7 with the specific goal of identifying, preventing and mitigating cybersecurity threats and responding to cybersecurity incidents in accordance with our established incident response and recovery plans. • Systems Safeguards: The Company deploys safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through ongoing vulnerability assessments, vendor available software updates and cybersecurity threat intelligence. • Collaboration: The Company utilizes collaboration mechanisms and services established with public and private entities, including intelligence and enforcement agencies, industry groups and third-party service providers, to identify, assess and respond to cybersecurity risks. • Third-Party Risk Management: The Company maintains a comprehensive, risk-based approach to vetting, identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of the Company’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. • Training: The Company provides periodic mandatory training for personnel regarding cybersecurity and information technology threats, which reinforces the Company’s information security policies, standards and practices, and such training is scaled to reflect the roles, responsibilities and information systems access of such personnel. • Incident Response and Recovery Planning: The Company has established and maintains comprehensive incident response and recovery plans that fully address the Company’s response to a cybersecurity incident and the recovery from a cybersecurity incident, and such plans are tested, evaluated and updated on a regular basis. • Communication, Coordination and Disclosure: The Company utilizes a cross-functional approach to address the risk from cybersecurity threats, involving management personnel from the Company’s technology, operations, legal, risk management, internal audit and other key business functions, as well as the members of the Board and the Audit Committee of the Board in an ongoing dialogue regarding cybersecurity threats and incidents, while also implementing controls and procedures for the escalation of cybersecurity incidents pursuant to established thresholds so that decisions regarding the disclosure and reporting of such incidents can be made by management in a timely manner.
The Company’s Chief Information Security Officer has served in various roles in information technology and information security for 25 years, including several Fortune 500 companies as a consultant specializing in risk management and security architecture, VP of Engineering for a payment solutions provider and security principal for an international telecommunications company in the Fortune 100, and has held many of the information security industry’s most advanced certifications including ISC2’s CISM (Chief Information Security Manager) and CISSP (Chief Information Security Professional), as well as an early adopter of the Cloud Security Alliance’s CCSK (Certificate of Cloud Security Knowledge).
The Company’s Chief Information Security Officer has served in various roles in information technology and information security for 26 years, including several Fortune 500 companies as a consultant specializing in risk management and security architecture, VP of Engineering for a payment solutions provider and security principal for an international telecommunications company in the Fortune 100, and has held many of the information security industry’s most advanced certifications including ISC2’s CISM (Chief Information Security Manager) and CISSP (Chief Information Security Professional), as well as an early adopter of the Cloud Security Alliance’s CCSK (Certificate of Cloud Security Knowledge).
The Company’s Chief Information Officer has served in various roles in information technology for 21 years. The Company’s Chief Information Security Officer, in coordination with Company management, works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents.
The Company’s Chief Information Officer has served in various roles in information technology for 22 years. The Company’s Chief Information Security Officer, in coordination with Company management, works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents.
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Cybersecurity incidents are assessed for materiality based on potential impacts to operations, financial condition or sensitive data. Material incidents are publicly disclosed within four business days of determining materiality, in compliance with SEC requirements.
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For the reporting period, no material cybersecurity incidents were identified that required disclosure. • Governance: The Board’s oversight of cybersecurity risk management is supported by the Audit Committee, which regularly interacts with the company’s ERM function and the Company’s Chief Information Security Officer. 48 Table of Contents • Artificial Intelligence (“AI”): The Company has established an AI Governance Policy and framework, overseen by the Company’s Chief Information Architect, to ensure that all AI systems utilized or developed follow our data privacy standards, safeguard sensitive information and minimize potential vulnerabilities.
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A key part of the Company’s strategy for managing risks from cybersecurity threats is the ongoing assessment and testing of the Company’s processes and practices through auditing, assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating the effectiveness of our cybersecurity measures.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCulture Kings leases and operates eight physical retail stores in Australia, one in New Zealand and one in the United States. The ten retail stores have lease terms expiring from January 2024 to January 2033. Princess Polly leases and operates one physical retail store in Los Angeles, California, with a lease term expiring in August 2028. 48 Table of Contents
Biggest changeCulture Kings leases and operates eight physical retail stores in Australia, one in New Zealand and one in the United States. The ten retail stores have lease terms expiring from June 2025 to January 2033.
We lease and operate three distribution centers in Australia, but use third parties for distribution in the United States. The three distribution centers have lease terms expiring from September 2024 to December 2026. All of our leased properties have sufficient renewal periods.
We lease and operate three distribution centers in Australia, but use third parties for distribution in the United States. The three distribution centers have lease terms expiring from September 2027 to June 2034. All of our leased properties have sufficient renewal periods.
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Princess Polly leases and operates six physical retail stores in the United States, with lease terms expiring from August 2028 to January 2035. 49 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile we currently believe that the ultimate outcome of such legal proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations, litigation is subject to inherent uncertainties.
Biggest changeWe currently are not certain whether the ultimate outcome of such legal proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
MINE SAFETY DISCLOSURES Not applicable. 49 Table of Contents PART II
MINE SAFETY DISCLOSURES Not applicable. 50 Table of Contents PART II
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ITEM 3. LEGAL PROCEEDINGS We are subject to legal proceedings which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these legal proceedings is not expected to have a material adverse impact on our financial position or results of operations and cash flows.
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ITEM 3. LEGAL PROCEEDINGS In April 2024, we received a cease and desist letter alleging copyright infringement and related claims. This matter has not proceeded to litigation as of the date hereof, and we have accrued $2.0 million to general and administrative expenses for current estimated losses in connection with these claims.
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The accrual for estimated losses is based on currently available information and may change as new information becomes available or circumstances change. In addition, we are subject to legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 49 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 50 Item 6. [Reserved] 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 72 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 50 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 51 Item 6. [Reserved] 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 53 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 70 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAll repurchased shares under the Share Repurchase Program will be retired. 50 Table of Contents The following table sets forth our share repurchase activity, on a settlement date basis, for the three months ended December 31, 2023: Period Total Number of Shares Purchased 1 Average Price Paid per Share Total number of shares purchased as part of a publicly announced plan or program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (millions) 2 October 1, 2023 - October 31, 2023 76,325 $ 5.99 60,913 $ 3.7 November 1, 2023 - November 30, 2023 53,986 7.71 52,852 3.3 December 1, 2023 - December 31, 2023 44,850 9.74 43,005 2.9 Total 175,161 156,770 1 18,391 of these shares represent shares of common stock surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under the 2021 Employee Stock Purchase Plan.
Biggest changeAll repurchased shares under the Share Repurchase Program will be retired. 51 Table of Contents The following table sets forth our share repurchase activity, on a settlement date basis, for the three months ended December 31, 2024: Period Total Number of Shares Purchased 1 Average Price Paid per Share Total number of shares purchased as part of a publicly announced plan or program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (millions) 2 October 1, 2024 - October 31, 2024 9,401 $ 23.04 4,578 $ 1.5 November 1, 2024 - November 30, 2024 9,239 22.88 2,485 1.4 December 1, 2024 - December 31, 2024 5,789 20.67 3,976 1.3 Total 24,429 11,039 1 13,390 of these shares represent shares of common stock surrendered by certain of our employees to satisfy their statutory minimum U.S. federal and state tax obligations associated with the vesting of restricted shares of common stock issued under the 2021 Omnibus Incentive Plan.
Issuer Purchases of Equity Securities On May 25, 2023, the Company’s board of directors approved a share repurchase program (the “Share Repurchase Program”), authorizing the Company to repurchase up to $2 million of shares of the Company’s common stock.
Issuer Purchases of Equity Securities On May 25, 2023, the Company’s board of directors approved a share repurchase program (the “Share Repurchase Program”), authorizing the Company to repurchase up to $2.0 million of shares of the Company’s common stock.
Stockholders of Record American Stock Transfer & Trust Company, LLC is the transfer agent and registrar for our common stock. As of March 5, 2024, there were 11 stockholders of record of our common stock.
Stockholders of Record American Stock Transfer & Trust Company, LLC is the transfer agent and registrar for our common stock. As of March 4, 2025, there were 12 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, (in thousands) 2023 2022 2021 Net sales $ 546,258 $ 611,738 $ 562,191 Cost of sales 245,978 274,491 254,527 Gross profit 300,280 337,247 307,664 Operating expenses: Selling 149,307 166,070 144,345 Marketing 68,907 66,730 58,120 General and administrative 96,951 102,700 88,816 Goodwill impairment 68,524 173,786 — Total operating expenses 383,689 509,286 291,281 (Loss) income from operations (83,409) (172,039) 16,383 Other expense, net: Interest expense (11,165) (7,043) (9,485) Loss on extinguishment of debt — — (10,924) Other expense (2,391) (1,532) (1,213) Total other expense, net (13,556) (8,575) (21,622) Loss before income taxes (96,965) (180,614) (5,239) (Provision for) benefit from income tax (1,921) 3,917 (852) Net loss (98,886) (176,697) (6,091) Net loss attributable to noncontrolling interests — — 123 Net loss attributable to a.k.a.
Biggest changeYear Ended December 31, (in thousands) 2024 2023 2022 Net sales $ 574,697 $ 546,258 $ 611,738 Cost of sales 247,192 245,978 274,491 Gross profit 327,505 300,280 337,247 Operating expenses: Selling 161,852 149,307 166,070 Marketing 74,710 68,907 66,730 General and administrative 101,264 96,951 102,700 Goodwill impairment — 68,524 173,786 Total operating expenses 337,826 383,689 509,286 Loss from operations (10,321) (83,409) (172,039) Other expense, net: Interest expense (10,296) (11,165) (7,043) Other expense (1,044) (2,391) (1,532) Total other expense, net (11,340) (13,556) (8,575) Loss before income taxes (21,661) (96,965) (180,614) (Provision for) benefit from income tax (4,329) (1,921) 3,917 Net loss $ (25,990) $ (98,886) $ (176,697) Year Ended December 31, 2024 2023 2022 Net sales 100 % 100 % 100 % Cost of sales 43 % 45 % 45 % Gross profit 57 % 55 % 55 % Operating expenses: Selling 28 % 27 % 27 % Marketing 13 % 13 % 11 % General and administrative 18 % 18 % 17 % Goodwill impairment — % 13 % 28 % Total operating expenses 59 % 70 % 83 % Loss from operations (2 %) (15 %) (28 %) Other expense, net: Interest expense (2 %) (2%) (1%) Other expense — % —% —% Total other expense, net (2 %) (2%) (1%) Loss before income taxes (4 %) (18 %) (30 %) (Provision for) benefit from income tax (1 %) —% 1% Net loss (5 %) (18 %) (29 %) 59 Table of Contents Comparison of the Years Ended December 31, 2024 and 2023 Net Sales Years Ended December 31, 2024 2023 Net sales $ 574,697 $ 546,258 Net sales increased by $28.4 million, or 5%, in 2024 compared to 2023.
The highest interest rates under the agreement for both the term loan and revolving line of credit occur at a net leverage ratio of greater than 2.75x, yielding an interest rate of a benchmark rate plus 3.25%.
The highest interest rates under the Credit Agreement for both the term loan and the revolving line of credit occur at a net leverage ratio of greater than 2.75x, yielding an interest rate of a benchmark rate plus 3.25%.
Net Cash Used in Investing Activities Our primary investing activities have consisted of acquisitions to support our overall business growth, investments in our fulfillment centers and our internally developed software to support our infrastructure, and investments in stores. Purchases of property and equipment may vary from period to period due to timing of the expansion of our operations.
Net Cash Used in Investing Activities Our primary investing activities have consisted of acquisitions to support our overall business growth, and investments in fulfillment centers, stores and internally developed software to support our infrastructure. Purchases of property and equipment may vary from period to period due to timing of the expansion of our operations.
In order to provide a framework for assessing the performance of our underlying business, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period in this Annual Report on Form 10-K using a constant currency methodology wherein current and comparative prior period results for our operations reporting in currencies other than U.S. dollars are converted into U.S. dollars at constant exchange rates (i.e., the rates in effect on December 31, 2022, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods.
In order to provide a framework for assessing the performance of our underlying business, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period in this Annual Report on Form 10-K using a constant currency methodology wherein current and comparative prior period results for our operations reporting in currencies other than U.S. dollars are converted into U.S. dollars at constant exchange rates (i.e., the rates in effect on December 31, 2023 , which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods.
Average Order Value We define average order value as net sales in a given period divided by the total orders placed in that period. Average order value may fluctuate as we expand into new categories or geographies or as our assortment changes.
Average Order Value We define average order value as net sales in a given period divided by the total orders placed in that period. Average order value may fluctuate as we expand into new categories, geographies or channels, or as our assortment changes.
Such disclosure throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations will be described as “on a constant currency basis.” Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company in the future. 57 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods.
Such disclosure throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations will be described as “on a constant currency basis.” Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company in the future. 58 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods.
If actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur. We have not made any material changes to our assumptions included in our calculations of expected customer refund activity during the year ended December 31, 2023.
If actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur. We have not made any material changes to our assumptions included in our calculations of expected customer refund activity during the year ended December 31, 2024.
Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the Company’s reporting units. The carrying value of definite-lived intangible assets is reviewed whenever events or changes in circumstances indicate the carrying amount of the assets might not be recoverable.
Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of our reporting units. The carrying value of definite-lived intangible assets is reviewed whenever events or changes in circumstances indicate the carrying amount of the assets might not be recoverable.
If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group.
If such facts indicate a potential impairment, we would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group.
Refer to Note 8, “Debt,” in the notes to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our senior secured credit facility. Material Cash Requirements Our material cash requirements include operating lease obligations and inventory purchase commitments.
Refer to Note 7, “Debt,” in the notes to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our senior secured credit facility. Material Cash Requirements Our material cash requirements include operating lease obligations and inventory purchase commitments.
As of December 31, 2023, most of our cash was held for working capital purposes. We have historically financed our operations and capital expenditures primarily through cash flows generated by operations, the incurrence of debt and through the issuance of equity.
As of December 31, 2024, most of our cash was held for working capital purposes. We have historically financed our operations and capital expenditures primarily through cash flows generated by operations, the incurrence of debt and through the issuance of equity.
Forecasts of individual reporting unit cash flows involve management’s estimates and assumptions regarding: • Annual cash flows, on a debt-free basis, arising from future revenues and earnings, changes in working capital, capital spending and income taxes for at least a 10-year forecast period. • A terminal growth rate for years beyond the forecast period.
Forecasts of individual reporting unit cash flows involve management’s estimates and assumptions regarding: • Annual cash flows, on a debt-free basis, arising from future revenues and earnings, changes in working capital, capital spending and income taxes for at least an 8-year forecast period. • A terminal growth rate for years beyond the forecast period.
We were in compliance with all debt covenants as of December 31, 2023, and expect to be in compliance beyond 12 months, although our ability to meet these financial ratios and tests can be affected by the interpretation of certain provisions within our Credit Agreement, macro economic factors and the seasonality of our business, which is more concentrated in the third and fourth fiscal quarters .
We were in compliance with all debt covenants as of December 31, 2024, and expect to be in compliance beyond the next 12 months, although our ability to meet these financial ratios and tests can be affected by the interpretation of certain provisions in our Credit Agreement, macro economic factors and the seasonality of our business, which is more concentrated in the third and fourth fiscal quarters .
We have not made any material changes to our assumptions included in the calculations of the lower of cost or net realizable value reserves during the year ended December 31, 2023. 69 Table of Contents Goodwill and Impairment of Intangible Assets Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets.
We have not made any material changes to our assumptions included in the calculations of the lower of cost or net realizable value reserves during the year ended December 31, 2024. 67 Table of Contents Goodwill and Impairment of Intangible Assets Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets.
Brand Awareness Our ability to promote our brands and maintain brand awareness and loyalty is critical to our success. We have a significant opportunity to continue to grow awareness and loyalty to our brands through word of mouth, brand marketing, performance marketing and increased store openings in key locations.
Brand Awareness Our ability to promote our brands and maintain brand awareness and loyalty is critical to our success. We have a significant opportunity to continue to grow awareness and loyalty to our brands through word of mouth, brand marketing, performance marketing, wholesale and marketplace opportunities, and increased store openings in key locations.
Subsequently, in 2023, the Company’s board of directors approved an additional repurchase capacity under the Share Repurchase Program of $3.0 million of shares of the Company’s common stock.
Subsequently, in 2023, our board of directors approved an additional repurchase capacity under the Share Repurchase Program of $3.0 million of shares of our common stock.
Borrowings under the term loan accrue interest at a benchmark rate (Term SOFR, as defined in the credit agreement for the senior secured credit facility (the “Credit Agreement”)) plus an applicable margin dependent upon our net leverage ratio, as defined in the Credit Agreement.
Borrowings under the term loan accrue interest at Term SOFR, as defined in the credit agreement for the senior secured credit facility (the “Credit Agreement”), plus an applicable margin dependent upon our net leverage ratio, as defined in the Credit Agreement.
The term loan requires us to make amortized annual payments of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year with the balance of the loan due at maturity.
The term loan requires us to make amortized annual payments of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year with the balance of the loan due at maturity in September 2026.
Under the similar transactions method, valuation multiples are calculated utilizing actual transaction prices and revenue/EBITDA data from target companies deemed similar to the reporting unit. Based on the range of estimated fair values developed from the income and market-based methods, the Company determines the estimated fair value for the reporting unit.
Under the similar transactions method, valuation multiples are calculated utilizing actual transaction prices and revenue/EBITDA data from target companies deemed similar to the reporting unit. Based on the range of estimated fair values developed from the income and market-based methods, we determine the estimated fair value for the reporting unit.
Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We have not made any material changes to our assumptions and estimates related to our income tax positions during the year ended December 31, 2023. 71 Table of Contents
Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We have not made any material changes to our assumptions and estimates related to our income tax positions during the year ended December 31, 2024. 69 Table of Contents
We have since built a portfolio of next-generation brands with distinct fashion offerings and consumer followings: • In July 2018, we acquired Princess Polly, a fashion brand focusing on fun, trendy dresses, tops, shoes and accessories with slim fit, body-confident and trendy fashion designs.
We have since built a portfolio of next-generation brands with distinct fashion offerings and consumer followings: • Princess Polly, a fashion brand focusing on fun, trendy dresses, tops, shoes and accessories with slim fit, body-confident and trendy fashion designs.
Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. In August 2023, due to elevated interest rates and unfavorable demand in Australia, the Company reduced its forecasts and expectations for the Culture Kings and Petal & Pup reporting units.
Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. 68 Table of Contents In August 2023, due to elevated interest rates and unfavorable demand in Australia, we reduced our forecasts and expectations for the Culture Kings and Petal & Pup reporting units.
We plan to continue to invest in performance marketing and increase our investment in brand awareness across our brands, including wholesale and marketplace opportunities, to drive our future growth. Failure to successfully promote our brands and maintain brand awareness would have an adverse impact to our operating results.
We plan to continue to invest in performance marketing and increase our investment in brand awareness across our brands to drive our future growth. Failure to successfully promote our brands and maintain brand awareness would have an adverse impact to our operating results.
The timing of any repurchases by the Company and the actual number of shares repurchased are at the Company’s discretion, and, in deciding when to repurchase shares and the amount of shares to repurchase, the Company will consider available liquidity, general market and economic conditions, alternate uses for the capital and other factors.
The timing of any of our repurchases and the actual number of shares repurchased are at our discretion, and, in deciding when to repurchase shares and the amount of shares to repurchase, we will consider available liquidity, general market and economic conditions, alternate uses for the capital and other factors.
The income-based fair value methodology requires management’s assumptions and judgments regarding economic conditions in the markets in which the Company operates and conditions in the capital markets, many of which are outside of management’s control.
The income-based fair value methodology requires management’s assumptions and judgments regarding economic conditions in the markets in which we operate and conditions in the capital markets, many of which are outside of management’s control.
The brand targets a female customer between the ages of 15 and 25. • In August 2019, we acquired Petal & Pup, a fashion brand offering an assortment of trendy, flattering and feminine styles and dresses for special occasions.
The brand targets a female customer between the ages of 15 and 25. • Petal & Pup, a fashion brand offering an assortment of trendy, flattering and feminine styles and dresses for special occasions.
However, if the estimated fair value of the reporting unit is less than its carrying value, the Company calculates the impairment loss as the difference between the carrying value of the reporting unit and the estimated fair value.
However, if the estimated fair value of the reporting unit is less than its carrying value, we calculate the impairment loss as the difference between the carrying value of the reporting unit and the estimated fair value.
The following table presents a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most directly comparable financial measure prepared in accordance with GAAP: Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net cash provided by (used in) operating activities $ 33,426 $ (319) $ 23,968 Less: purchases of property and equipment (5,970) (19,746) (7,734) Free Cash Flow $ 27,456 $ (20,065) $ 16,234 Our Free Cash Flow has fluctuated over time primarily as a result of timing of inventory purchases, purchases of property and equipment and fluctuations in earnings.
The following table presents a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most directly comparable financial measure prepared in accordance with GAAP: Year Ended December 31, (dollars in thousands) 2024 2023 2022 Net cash provided by (used in) operating activities $ 669 $ 33,426 $ (319) Less: purchases of property and equipment (11,592) (5,970) (19,746) Free Cash Flow $ (10,923) $ 27,456 $ (20,065) Our Free Cash Flow has fluctuated over time primarily as a result of timing of inventory purchases, purchases of property and equipment and fluctuations in earnings.
Net Cash (Used in) Provided by Financing Activities Our financing activities have historically consisted of cash proceeds received from the issuance of borrowings, cash used to pay down borrowings, cash received from the sale of our common stock in the IPO and cash used to repurchase shares. In 2023, net cash used in financing activities increased $86.1 million.
Net Cash Provided by (Used in) Financing Activities Our financing activities have historically consisted of cash proceeds from borrowings, cash used to pay down borrowings, cash received from the sale of our common stock in the IPO and cash used to repurchase shares of our common stock.
Historical Cash Flows Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 33,426 $ (319) $ 23,968 Net cash used in investing activities (6,031) (25,314) (278,075) Net cash (used in) provided by financing activities (52,829) 33,260 269,850 Net Cash Provided by (Used in) Operating Activities Cash provided by (used in) operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation, amortization, equity-based compensation, the effect of changes in working capital and other activities.
Historical Cash Flows Year Ended December 31, 2024 2023 2022 Net cash provided by (used in) operating activities $ 669 $ 33,426 $ (319) Net cash used in investing activities (11,594) (6,031) (25,314) Net cash provided by (used in) financing activities 15,506 (52,829) 33,260 Net Cash Provided by (Used in) Operating Activities Cash provided by (used in) operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation, amortization, equity-based compensation, the effect of changes in working capital and other activities.
The brand targets female customers typically in their twenties or thirties, with more than 70% of customers between the ages of 25 and 34. • In March 2021, we acquired Culture Kings, an Australia-based premium online retailer of streetwear apparel, footwear, headwear and accessories.
The brand targets female customers typically in their twenties or thirties, with more than 70% of customers between the ages of 25 and 34. • Culture Kings, a premium online retailer of streetwear apparel, footwear, headwear and accessories.
The brand targets male consumers between the ages of 18 and 35 who are fashion conscious, highly social and digitally focused. • In October 2021, we acquired mnml, a Los Angeles-based streetwear brand that offers competitively priced, on-trend wardrobe staples. The brand targets male consumers between the ages of 18 and 35.
The brand targets male consumers between the ages of 18 and 35 who are fashion conscious, highly social and digitally focused. • mnml, a streetwear brand that offers competitively priced, on-trend wardrobe staples. The brand targets male consumers between the ages of 18 and 35.
In 2023, net cash used in investing activities decreased $19.3 million. This was attributable to a reduction in purchases of property and equipment and the cash paid from holdbacks in the prior period related to the mnml acquisition.
In 2024, net cash used in investing activities increased $5.6 million. This was attributable to additional capital expenditures related to new stores. In 2023, net cash used in investing activities decreased $19.3 million. This was attributable to a reduction in purchases of property and equipment and the cash paid from holdbacks in the prior period related to the mnml acquisition.
Senior Secured Credit Facility In connection with the IPO, we entered into a senior secured credit facility comprised of a $100.0 million term loan and a $50.0 million revolving line of credit, with an option of up to $50.0 million in an additional term loan through an accordion provision.
Senior Secured Credit Facility In connection with our initial public offering of common stock in September 2021 (the “IPO”), we entered into a senior secured credit facility comprised of a $100.0 million term loan and a $50.0 million revolving line of credit, with an option of up to $50.0 million in an additional term loan through an accordion provision.
This was attributable primarily to a decrease in inventory compared to the prior period, which was driven by reduced inventory buying and sell-through of aged inventory, and a reduction in purchases of property and equipment, partially offset by lower earnings.
This was attributable primarily to a decrease in inventory compared to 2022, which was driven by reduced inventory buying and sell-through of aged inventory, partially offset by lower earnings .
Brands Holding Corp. (18 %) (29 %) (1 %) 59 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Net Sales Years Ended December 31, 2023 2022 Net sales $ 546,258 $ 611,738 Net sales decreased by $65.5 million, or 11%, in 2023 compared to 2022.
Comparison of the Years Ended December 31, 2023 and 2022 Net Sales Years Ended December 31, 2023 2022 Net sales $ 546,258 $ 611,738 Net sales decreased by $65.5 million, or 11%, in 2023 compared to 2022.
Adjusted EBITDA has other limitations as an analytical tool when compared to the use of net income (loss), which is the most directly comparable GAAP financial measure, including that Adjusted EBITDA does not reflect: • the interest or other expense we incur; • the provision for or benefit from income tax; • any attribution of costs to our operations related to our investments and capital expenditures through depreciation and amortization charges; • any transaction or debt extinguishment costs; • any costs to establish or relocate distribution centers; • any costs related to severance from headcount reductions; • any impairment of goodwill or intangible assets; • any costs related to sales tax penalties; • any insured losses, net of recoveries; • any non-routine legal matters; • any amortization expense associated with fair value adjustments from purchase price accounting, including intangibles or inventory step-up; and • the cost of compensation we provide to our employees in the form of equity awards. 54 Table of Contents The following table reflects a reconciliation of Adjusted EBITDA to net income (loss) and Adjusted EBITDA margin to net income (loss) margin, the most directly comparable financial measure prepared in accordance with GAAP: Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net loss $ (98,886) $ (176,697) $ (6,091) Add (deduct): Total other expense, net 13,556 8,575 21,622 (Benefit from) provision for income tax 1,921 (3,917) 852 Depreciation and amortization expense 19,141 20,348 16,710 Equity-based compensation expense 7,640 6,730 8,043 Inventory step-up amortization expense — 707 15,908 Transaction costs — 140 5,387 Goodwill impairment 68,524 173,786 — Non-routine items* 1,894 2,200 — Adjusted EBITDA $ 13,790 $ 31,872 $ 62,431 Net loss margin (18) % (29) % (1) % Adjusted EBITDA margin 3 % 5 % 11 % *Non-routine items include costs to establish or relocate distribution centers; severance from headcount reductions; sales tax penalties; insured losses, net of recoveries; and non-routine legal matters.
Adjusted EBITDA has other limitations as an analytical tool when compared to the use of net income (loss), which is the most directly comparable GAAP financial measure, including that Adjusted EBITDA does not reflect: • the interest or other expense we incur; • the provision for or benefit from income tax; • any attribution of costs to our operations related to our investments and capital expenditures through depreciation and amortization charges; • any transaction or debt extinguishment costs; • any costs to establish or relocate distribution centers; • any costs related to severance from headcount reductions; • any impairment of goodwill or intangible assets; • any costs related to sales tax penalties; • any insured losses, net of recoveries; • any non-routine legal matters; • any amortization expense associated with fair value adjustments from purchase price accounting, including intangibles or inventory step-up; and • the cost of compensation we provide to our employees in the form of equity awards. 55 Table of Contents The following table reflects a reconciliation of Adjusted EBITDA to net loss and Adjusted EBITDA margin to net loss margin, the most directly comparable financial measures prepared in accordance with GAAP: Year Ended December 31, (dollars in thousands) 2024 2023 2022 Net loss $ (25,990) $ (98,886) $ (176,697) Add (deduct): Total other expense, net 11,340 13,556 8,575 Provision for (benefit from) income tax 4,329 1,921 (3,917) Depreciation and amortization expense 17,597 19,141 20,348 Equity-based compensation expense 7,980 7,640 6,730 Inventory step-up amortization expense — — 707 Distribution center relocation costs 2,101 — 1,302 Transaction costs — — 140 Goodwill impairment — 68,524 173,786 Non-routine legal matters 1 4,498 396 — Non-routine items 2 1,454 1,498 898 Adjusted EBITDA $ 23,309 $ 13,790 $ 31,872 Net loss margin (5 %) (18 %) (29 %) Adjusted EBITDA margin 4 % 3 % 5 % 1 Non-routine legal matters include a $2.0 million accrual in 2024 in connection with the legal matter described in Part I, Item 3, “Legal Proceedings” of this Annual Report on Form 10-K. 2 Non-routine items include severance from headcount reductions; sales tax penalties; and insured losses, net of recoveries.
Benefit from (Provision for) Income Tax Years Ended December 31, 2022 2021 Benefit from (provision for) income tax $ 3,917 $ (852) Percent of net sales 1 % — % Effective tax rate 2 % 16 % Benefit from (provision for) income tax changed by $4.8 million, or 560%, in 2022 compared to 2021.
(Provision for) Benefit from Income Tax Years Ended December 31, 2023 2022 (Provision for) benefit from income tax $ (1,921) $ 3,917 Percent of net sales — % 1 % Effective tax rate 2 % (2 %) Provision for income tax increased by $5.8 million, or 149%, in 2023 compared to 2022.
The increase in marketing expenses was driven by additional marketing spend due to reduced marketing effectiveness, particularly in Australia. The increase in marketing expenses as a percentage of net sales was primarily due to lower net sales in 2023 compared to 2022.
The increase in marketing expenses as a percentage of net sales was primarily due to lower net sales in 2023 compared to 2022.
Key Financial Metrics The following table sets forth our key GAAP and non-GAAP financial metrics for each period presented: Year Ended December 31, (dollars in thousands) 2023 2022 2021 Gross margin 55 % 55 % 55% Net loss $ (98,886) $ (176,697) $ (6,091) Net loss margin (18) % (29) % (1)% Adjusted EBITDA $ 13,790 $ 31,872 $ 62,431 Adjusted EBITDA margin 3 % 5 % 11 % Net cash provided by (used in) operating activities $ 33,426 $ (319) $ 23,968 Free Cash Flow $ 27,456 $ (20,065) $ 16,234 53 Table of Contents Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow are non-GAAP measures.
Key Financial Metrics The following table sets forth our key financial metrics prepared in accordance with GAAP and certain non-GAAP financial metrics for each period presented: Year Ended December 31, (dollars in thousands) 2024 2023 2022 Gross margin 57 % 55 % 55% Net loss $ (25,990) $ (98,886) $ (176,697) Net loss margin (5 %) (18 %) (29%) Adjusted EBITDA $ 23,309 $ 13,790 $ 31,872 Adjusted EBITDA margin 4 % 3 % 5 % Net cash provided by (used in) operating activities $ 669 $ 33,426 $ (319) Free Cash Flow $ (10,923) $ 27,456 $ (20,065) Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow are non-GAAP measures.
We used borrowings under this credit facility, together with a portion of the proceeds from the IPO, to repay our previous debt in full. As of December 31, 2023, we owed a combined $94.5 million in term loan and accordion borrowings. As of December 31, 2023, there were no amounts outstanding under the revolving line of credit.
We used borrowings under this credit facility, together with a portion of the proceeds from the IPO, to repay our previous debt in full. As of December 31, 2024, we owed a combined $89.1 million in term loan and accordion borrowings, as well as $23.3 million borrowed under the revolving line of credit.
The revolving line of credit, when used, also accrues interest at a benchmark rate plus an applicable margin dependent upon our net leverage ratio, as defined in the Credit Agreement.
The revolving line of credit, when used, also accrues interest at Term SOFR plus an applicable margin dependent upon our net leverage ratio.
Customer Retention Our results are driven not only by the ability of our brands to acquire customers, but also by their ability to retain customers and encourage repeat purchases. We monitor retention across our entire customer base. Our brands are at various stages of rolling out and evolving loyalty programs.
Customer Retention Our results are driven not only by the ability of our brands to acquire customers, but also by their ability to retain customers and encourage repeat purchases. We monitor retention across our entire customer base and use loyalty programs to attempt to retain customers. Failure to retain customers would adversely impact our profitability and operating results.
The purchases of property and equipment in the prior year were primarily due to the build-out of the Culture Kings Las Vegas store. In 2022, net cash used in investing activities decreased $252.8 million.
The purchases of property and equipment in the prior year were primarily due to the build-out of the Culture Kings Las Vegas store .
Any impairment would be measured as the difference between the asset group's carrying amount and its estimated fair value. 70 Table of Contents As discussed above, significant judgment and estimates are required in assessing impairment of goodwill and intangible assets, including identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows and determining appropriate discount rates.
As discussed above, significant judgment and estimates are required in assessing impairment of goodwill and intangible assets, including identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows and determining appropriate discount rates.
This was primarily attributable to the combined $50.7 million in principal payments, net of borrowings, on our senior secured credit facility in 2023 and the $34.4 million in borrowings, net of repayments, under our senior secured credit facility in 2022. In 2022, net cash provided by financing activities decreased $236.6 million.
This was primarily attributable to the combined $50.7 million in principal payments, net of borrowings, on our senior secured credit facility in 2023 and the $17.9 million in borrowings, net of repayments, under our senior secured credit facility in 2024.
Other Expense, net Years Ended December 31, 2023 2022 Other expense, net: Interest expense $ (11,165) $ (7,043) Other expense (2,391) (1,532) Total other expense, net $ (13,556) $ (8,575) Percent of net sales (2) % (1) % Other expense, net increased by $5.0 million in 2023 compared to 2022 primarily due to $4.1 million in additional interest expense from rising interest rates on our variable rate debt. 61 Table of Contents (Provision for) Benefit from Income Tax Years Ended December 31, 2023 2022 (Provision for) benefit from income tax $ (1,921) $ 3,917 Percent of net sales — % 1 % Effective tax rate 2 % (2 %) Provision for income tax increased by $5.8 million, or 149%, in 2023 compared to 2022.
As of December 31, 2023, the goodwill related to Culture Kings was fully impaired, while $11.3 million of the goodwill related to Petal & Pup remained on our balance sheet. 63 Table of Contents Other Expense, net Years Ended December 31, 2023 2022 Other expense, net Interest expense $ (11,165) $ (7,043) Other expense (2,391) (1,532) Total other expense, net $ (13,556) $ (8,575) Percent of net sales (2 %) (1 %) Other expense, net increased by $5.0 million in 2023 compared to 2022 primarily due to $4.1 million in additional interest expense from rising interest rates on our variable rate debt.
Selling Expenses Years Ended December 31, 2023 2022 Selling $ 149,307 $ 166,070 Percent of net sales 27 % 27 % Selling expenses decreased by $16.8 million, or 10%, in 2023 compared to 2022.
Selling Expenses Years Ended December 31, 2024 2023 Selling $ 161,852 $ 149,307 Percent of net sales 28 % 27 % Selling expenses increased by $12.5 million, or 8%, in 2024 compared to 2023.
The accordion provision allows us to borrow additional amounts of term loan at terms to be agreed upon at the time of issuance, but on substantially the same basis as the original term loan.
The accordion provision allows us to borrow additional amounts of term loan at terms to be agreed upon at the time of issuance, but on substantially the same basis as the original term loan. As of December 31, 2024, principal payments of our term loan and accordion for the next twelve months are anticipated to total $6.3 million.
We seek to leverage our industry expertise and operational synergies to accelerate our brands so they can grow faster, reach broader audiences, achieve greater scale and enhance their profitability.
Our fiscal year ends on December 31. Overview a.k.a. Brands is a portfolio of next-generation fashion brands for the next generation of consumers. We seek to leverage our industry expertise and operational synergies to accelerate our brands so they can grow faster, reach broader audiences, achieve greater scale and enhance their profitability.
Critical Accounting Estimates We believe that the following accounting estimates involve a high degree of judgment and complexity. Refer to Note 2, “Significant Accounting Policies,” in the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a description of our significant accounting policies.
Refer to Note 2, “Significant Accounting Policies,” in the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a description of our significant accounting policies. The preparation of our financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes.
If the recoverability test indicates the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using the discounted cash flow method.
If the recoverability test indicates the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using the discounted cash flow method. Any impairment would be measured as the difference between the asset group's carrying amount and its estimated fair value.
This decrease was driven by the 8% decrease in the number of orders shipped in 2023 compared to 2022, and operational efficiencies in distribution, fulfillment and outbound shipping. 60 Table of Contents Marketing Expenses Years Ended December 31, 2023 2022 Marketing $ 68,907 $ 66,730 Percent of net sales 13 % 11 % Marketing expenses increased by $2.2 million, or 3%, in 2023 compared to 2022.
Marketing Expenses Years Ended December 31, 2023 2022 Marketing $ 68,907 $ 66,730 Percent of net sales 13 % 11 % Marketing expenses increased by $2.2 million, or 3%, in 2023 compared to 2022. The increase in marketing expenses was driven by additional marketing spend due to reduced marketing effectiveness, particularly in Australia.
These impacts were partially offset by lower air freight expense. While gross margin was flat in 2023 compared to 2022, gross margin would have decreased due to targeted discounting in Culture Kings Australia and a higher merchandise return rate, if not offset by lower inbound air freight costs.
While gross margin was flat in 2023 compared to 2022, gross margin would have decreased due to targeted discounting in Culture Kings Australia and a higher merchandise return rate, if not offset by lower inbound air freight costs. 62 Table of Contents Selling Expenses Years Ended December 31, 2023 2022 Selling $ 149,307 $ 166,070 Percent of net sales 27 % 27 % Selling expenses decreased by $16.8 million, or 10%, in 2023 compared to 2022.
See “Non-GAAP Financial Measures” below for information regarding our use of Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow and their reconciliation to net income (loss), net income (loss) margin and net cash provided by (used in) operating activities, respectively.
See “Non-GAAP Financial Measures” below for information regarding our use of Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow and their reconciliation to net income (loss), net income (loss) margin and net cash provided by (used in) operating activities, respectively. 54 Table of Contents Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we monitor the following supplemental non-GAAP financial measures to evaluate our operating performance, identify trends, formulate financial projections and make strategic decisions on a consolidated basis.
We have lease arrangements for certain equipment and facilities, primarily office locations, warehouse facilities and retail stores. Most of our property, equipment and software have been purchased with cash.
We have lease arrangements for certain equipment and facilities, primarily office locations, warehouse facilities and retail stores. Most of our property, equipment and software have been purchased with cash. As of December 31, 2024, our future minimum payments under non-cancelable operating leases totaled $92.9 million, with $13.2 million payable within the next 12 months.
No additional impairment was identified as part of the annual goodwill impairment test conducted in the fourth quarter of 2023. Income Taxes Income taxes are accounted for under the asset and liability method.
Additionally, as of December 31, 2024, the estimated fair value of the mnml reporting unit exceeded the carrying value by 11.2%, and the carrying value of the related goodwill was $30.0 million. No impairment was identified as part of the annual goodwill impairment test conducted in 2024. Income Taxes Income taxes are accounted for under the asset and liability method.
Gross Profit Years Ended December 31, 2022 2021 Gross profit $ 337,247 $ 307,664 Gross margin 55 % 55 % Gross profit increased by $29.6 million, or 10%, in 2022 compared to 2021. This increase was primarily driven by the significant increase in net sales.
Gross Profit Years Ended December 31, 2024 2023 Gross profit $ 327,505 $ 300,280 Gross margin 57 % 55 % Gross profit increased by $27.2 million, or 9%, in 2024 compared to 2023. This increase was primarily driven by the 5% increase in net sales in 2024, as compared to 2023, and an increase in gross margin.
All repurchased shares under the Share Repurchase Program will be retired. During the year ended December 31, 2023, the Company repurchased 319,486 shares of its common stock under the Share Repurchase Program for $2.1 million, at an average price of $6.71 per share.
All repurchased shares under the Share Repurchase Program will be retired. During the year ended December 31, 2024, we repurchased 131,618 shares of our common stock under the Share Repurchase Program for $1.5 million, at an average price of $11.53 per share. Critical Accounting Estimates We believe that the following accounting estimates involve a high degree of judgment and complexity.
The overall increase in net sales was primarily driven by a 14% increase in the number of orders we processed in 2022 compared to 2021, driving an increase in net sales of $76.0 million.
The overall increase in net sales was primarily driven by an 7% increase in the number of orders we processed in 2024 compared to 2023, partially offset by a decrease in our average order value of 1%, from $80 in 2023 to $79 in 2024.
The preparation of our financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.
Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. Revenue Recognition Revenue is primarily derived from the sale of apparel merchandise through our online websites, stores, third-party marketplaces, wholesale partnerships and, when applicable, shipping revenue.
The impact of these proceeds in 2021 was partially offset by proceeds from the line of credit in 2022. 68 Table of Contents Share Repurchase Program On May 25, 2023, the Company’s board of directors approved the Share Repurchase Program, authorizing the Company to repurchase up to $2.0 million of shares of the Company’s common stock.
This was primarily attributable to the combined $50.7 million in principal payments, net of borrowings, on our senior secured credit facility in 2023 and the $34.4 million in borrowings, net of repayments, under our senior secured credit facility in 2022 . 66 Table of Contents Share Repurchase Program On May 25, 2023, our board of directors approved the Share Repurchase Program, authorizing us to repurchase up to $2.0 million of shares of our common stock.
In 2023, net cash provided by operating activities increased $33.7 million. This was attributable primarily to a decrease in inventory compared to the prior period, which was driven by reduced inventory buying and sell-through of aged inventory, partially offset by lower earnings. In 2022, net cash provided by operating activities decreased $24.3 million.
In 2024, net cash provided by operating activities decreased $32.8 million. This was attributable primarily to more cash used to purchase inventory in 2024, as compared to 2023, to support growth in the U.S., partially offset by the timing of payments. In 2023, net cash provided by operating activities increased $33.7 million.
General and Administrative Expenses Years Ended December 31, 2022 2021 General and administrative $ 102,700 $ 88,816 Percent of net sales 17 % 16 % General and administrative expenses increased by $13.9 million, or 16%, in 2022 compared to 2021.
Marketing expenses as a percentage of net sales for 2024 was flat compared to 2023. General and Administrative Expenses Years Ended December 31, 2024 2023 General and administrative $ 101,264 $ 96,951 Percent of net sales 18 % 18 % General and administrative expenses increased by $4.3 million, or 4%, in 2024 compared to 2023.
Our operating model requires a low level of capital expenditures. For the twelve months ended December 31, 2023, net cash provided by operating activities increased by $33.7 million compared to net cash used in operating activities for the twelve months ended December 31, 2022.
For the year ended December 31, 2024 , net cash provided by operating activities decreased by $32.8 million compared to net cash provided by operating activities for the year ended December 31, 2023 .
The increase in general and administrative expenses as a percentage of net sales resulted primarily from additional salaries and related benefits, as well as additional insurance costs. 63 Table of Contents Goodwill Impairment Years Ended December 31, 2022 2021 Goodwill impairment $ 173,786 $ — Percent of net sales 28 % — % Goodwill impairment was $173.8 million in 2022 and recognized on the goodwill recorded from the acquisitions of the Culture Kings and Rebdolls reporting units.
Goodwill Impairment Years Ended December 31, 2024 2023 Goodwill impairment $ — $ 68,524 Percent of net sales — % 13 % There was no goodwill impairment in 2024. Goodwill impairment in 2023 was recognized on the goodwill recorded from the acquisitions of the Culture Kings and Petal & Pup reporting units.
This was attributable primarily to a decrease in inventory compared to the prior period, which was driven by reduced inventory buying and sell-through of aged inventory, partially offset by lower earnings. For the twelve months ended December 31, 2023, Free Cash Flow increased by $47.5 million compared to Free Cash Flow for the twelve months ended December 31, 2022.
This was attributable primarily to more cash used to purchase inventory in 2024, as compared to 2023, to support growth in the U.S., partially offset by the timing of payments. For the year ended December 31, 2024 , Free Cash Flow decreased by $38.4 million compared to Free Cash Flow for the year ended December 31, 2023 .
This increase was primarily due to the increase in the valuation allowance on the net deferred tax assets in Australia. Comparison of the Years Ended December 31, 2022 and 2021 Net Sales Years Ended December 31, 2022 2021 Net sales $ 611,738 $ 562,191 Net sales increased by $49.5 million, or 9%, in 2022 compared to 2021.
This increase was primarily due to limitations in interest expense deduction in Australia and the additional valuation allowance on the net deferred tax assets in the U.S.
We continue to monitor vendor and manufacturer shipping times and other potential disruptions in our supply chain and implement mitigation plans as necessary. 56 Table of Contents Foreign Currency Rate Fluctuations Our international operations have provided and are expected to continue to provide a significant portion of our Company’s net sales and operating income.
While we are disciplined in our capital spending and believe we can generate positive returns on our investments over the long term, we cannot guarantee that increased spending on these investments will be cost effective or result in future growth in our customer base. 57 Table of Contents Foreign Currency Rate Fluctuations Our international operations have provided and are expected to continue to provide a significant portion of our Company’s net sales and operating income.
Year Ended December 31, (in millions, other than dollar figures) 2023 2022 2021 Active customers 3.7 3.8 3.7 Active customers across a.k.a. Brands (1) 3.7 3.8 3.7 Average order value $ 80 $ 82 $ 86 Average order value across a.k.a. Brands (1) $ 80 $ 82 $ 87 Number of orders 6.8 7.4 6.5 Number of orders across a.k.a.
The following table sets forth our key operating metrics for each period presented: Year Ended December 31, (in millions, other than dollar figures) 2024 2023 2022 Active customers 4.07 3.72 3.78 Average order value $ 79 $ 80 $ 82 Number of orders 7.32 6.85 7.42 53 Table of Contents Active Customers We view the number of active customers as a key indicator of our growth, our value proposition, consumer awareness of our brand, and our customer’s desire to purchase our products.
On a constant currency basis, net sales and average order value for 2022 would have increased 13% and been flat, respectively.
The increase in the number of orders was primarily driven by growth in the U.S. across all sales channels. On a constant currency basis, net sales and average order value for 2024 would have increased 7% and decreased 1%, respectively, as compared to 2023.
As of December 31, 2023, our future minimum payments under non-cancelable operating leases totaled $50.3 million, with $9.5 million payable within 12 months. 67 Table of Contents While we routinely contract for the purchase of inventory from vendors, we have no material long-term purchase obligations outstanding with any vendors or third parties.
While we routinely contract for the purchase of inventory from vendors, we have no material purchase obligations outstanding with any vendors or third parties. 65 Table of Contents Additionally, we plan to incur capital expenditures of approximately $12.0 to $14.0 million in 2025. This reflects the planned opening of 6-8 new stores, as well as investments in infrastructure and technology.
Removed
Our fiscal year ends on December 31. On September 29, 2023, we effected a one-for-12 reverse stock split of our common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every twelve shares of our outstanding common stock was consolidated into one share.
Added
In 2024 as compared to 2023, we: • Increased net sales to $574.7 million from $546.3 million , representing 5% year-over-year growth • Increased U.S. net sales to $368.8 million from $315.5 million , representing 17% year-over-year growth • Expanded gross margin by 200 basis points to 57% from 55% • Reduced our net loss to $26.0 million from $98.9 million • Increased Adjusted EBITDA to $23.3 million from $13.8 million , representing 69% year-over-year growth • Attracted 4.1 million active customers, an increase of 9% from the prior year • Received approximately 7.3 million orders, an increase of 7% from the prior year Key Operating and Financial Metrics Operating Metrics We use the following metrics to assess the progress of our business, make decisions on where to allocate capital, time and technology investments and assess the near-term and longer-term performance of our business.
Removed
Accordingly, all per share values have been adjusted as necessary to reflect the Reverse Stock Split for all prior periods presented. Refer to Note 14, "Stockholders’ Equity," in the notes to our consolidated financial statements included in this Annual Report on Form 10-K. Overview a.k.a. Brands is a portfolio of next-generation fashion brands for the next generation of consumers.
Added
Number of Orders We define the number of orders as the total number of orders placed by our customers, prior to product returns, across our platform or in our stores in any given period. An order is counted on the day the customer places the order.
Removed
While we have owned Princess Polly and Petal & Pup from before 2020, information presented hereafter on an “across a.k.a. Brands” basis assumes we also owned Culture Kings for all periods presented. We also owned Rebdolls for all periods shown prior to March 2023, when we sold the brand back to its original owner.
Added
We consider the number of orders to be a key indicator of our ability to attract and retain customers, as well as an indicator of the desirability of our products.
Removed
Our annual financial results discussed below represent the consolidated results of Princess Polly and Petal & Pup for all years shown, the results of Rebdolls for all periods shown prior to March 2023, the results of Culture Kings’ operations from the date of its acquisition on March 31, 2021, and the results of mnml’s operations from the date of its acquisition on October 14, 2021.
Added
This was attributable primarily to more cash used to purchase inventory in 2024 and additional capital expenditures related to new stores, as compared to 2023, to support growth in the U.S., partially offset by the timing of payments. 56 Table of Contents Factors Affecting Our Performance Macroeconomic Environment The macroeconomic environment in which we operate impacts consumer behavior and may have a significant impact on our business.

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