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00:04 Ladies and gentlemen, welcome to the a.k.a. Brands Holding Corp’s Third Quarter Twenty Twenty One Earnings Conference Call. All phones are in a listen-only mode. We will provide instructions at the end of the call on how to ask your questions. At this time I will turn the call over to Emily Goldberg, head of corporate communications.

Go ahead, Emily..

00:19 Good afternoon, everyone. Thank you for joining a.k.a. Brands’ third quarter conference call to discuss the results we released this afternoon, which can be found on our website at ir.akabrands.com. With me on the call are, Jill Ramsey, chief executive officer and Ciaran Long, chief financial officer.

Before we get started I would like to remind you of the company Safe Harbor language. Management may makes forward-looking statements which refer to expectations, projections or other characterizations of future events including guidance and underlying assumption.

Forward looking statements involve risks and uncertainties that could cause actual results to differ materially than those expressed. 01:00 For a further discussion of the risks related to our business, please see our filings with the SEC. Please note we assume no obligation to update any such forward looking statements.

This call will contain Non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these Non-GAAP measures to the most comparable GAAP measures are included in the earnings release, furnished to the SEC available on our website. 01:23 Now, I would like to turn the call over to Jill..

01:27 Good afternoon, everyone, and thanks for joining us. We're excited to be hosting our first earnings call as a public company and even more excited to discuss our strong third quarter performance. I'll begin with an overview of our results and highlights from our brands, and then outline our growth strategies.

Ciaran will then take you through the details of our financials and provide our full year outlook, and then we'll open it up for questions. 01:52 I'm proud of the strong performance our brands delivered in the third quarter, demonstrating the power of our platform and the talent of our teams.

We drove strong growth across our brands while navigating COVID-19 and global supply chain dynamics.

For the third quarter, net sales grew by one hundred and fifty five percent to one hundred and sixty one point eight million dollars and proforma for the acquisition of Culture Kings, net sales increased forty four percent from the third quarter last year and active customers grew fifty four percent across our brands.

02:25 Our brands achieved growth across all regions, particularly in the U. S. Where net sales increased eighty four percent on a proforma basis. Making the U. S. Our largest market, and momentum has continued into the fourth quarter. As many of you know, Australia was in strict lockdown for most of the quarter, due to a rise in COVID-19.

Despite lockdowns, curfews and store closures, our Australian business grew seven percent on top of very strong growth last year, further proving our agility resiliency and the strength of our brands and teams. 03:01 We are also encouraged by the vaccination rollout and reopening trends we see in Australia.

Eighty nine percent of their population has received at least one vaccine dose and almost all lockdown restrictions have been lifted. All of our Culture Kings stores are now open, and traffic is rebounding, while digital sales also continue to grow. Ciaran will provide more details on COVID-19 impacts in the region.

03:28 Turning to rest of world, on a proforma basis, our brands grew one hundred and one percent largely driven by Culture Kings expansion into New Zealand and growing demand for Princess Poly and Culture Kings in Europe and Asia.

Over the past few months, we have discussed our mission and strategy with many of you, which is to accelerate the growth of direct to consumer fashion brands for the next generation. We have a compelling group of high growth brands that customers love.

Princes Polly, Culture Kings, Petal and Pup, Rebdolls, and our most recent acquisition minimum, All of them are digital first and masters at connection with customers on social media through a constant stream of great content and new facts. 04:15 At a.k.a. We accelerate the growth of our brands through our next generation retail platform.

Providing expertise to achieve greater scale and profitability. We know we are better together. Across our brands, we share best practices like data driven merchandising and efficient social led marketing as well as share vendors for cost leverage and synergies.

And through our network of best in class third party tech partners, we get early access to the latest digital capabilities and innovation. Our unique model positions us to achieve our vision to become the global leader in direct to consumer fashion for the next generation. 04:57 Our strong performance demonstrates that our strategy is working.

I'll share some highlights from our brands this quarter beginning with Princess Polly. Our largest and first brand on the platform. They have pioneered effective Nextgen strategies such as test and repeat buying and micro influencer led marketing, both of which we are sharing across our brands, creating powerful network effects.

05:22 Princess Polly outperformed expectations this quarter across all regions, led by strong growth in the U. S. As the U. S. Reopened and consumer fashion needs changed, Princess Polly quickly adjusted merchandise from stay at home to going addresses and party wear.

As a reminder, their test and repeat approach to buying gives them agility to react quickly to trends and get new fashion to customers in just thirty to forty five days. 05:50 This quarter, they increased the number of new weekly styles introduced by thirteen percent over the prior quarter.

And they also expanded the penetration of exclusive merchandise, which drives higher gross margins. They also launched a sustainable fashion line, converting five percent of their assortment to products made from lower impact materials and saw strong customer response, exceeding expectations.

These merchandising strategies were supported by a marketing campaign celebrating the U. S. Reopening and summer holidays. 06:23 With seventy five percent of their customers in either high school or college, Princess Polly continues to focus their marketing strategy on students.

Their back to school campaign powered by influencers produced strong week over week growth. They also rolled out a new university based influencer program and received twenty thousand ambassador applicants. We're pleased with Princess Polly acceleration in the U. S. And confident about their continued growth ahead.

06:52 Turning to culture kings, a leading Australian street wear retailer with a cult like following and unique blend of music sport and fashion. We acquired culture Kings in March of this year, doubling a.k.a. in size, While they are a digital first retailer, culture kings is notably our only brand with stores.

These highly experiential and innovative stores are like no other and setting new standard for the future of retail. Their stores serve as powerful marketing engines with the theatrical and celebrity event format that fuel type in demand and provide powerful content for their digital channels.

07:33 While the stores have since reopened, notably five of eight stores were closed for majority of the third quarter due to COVID-19. The team quickly shifted marketing spend and inventory to focus on the digital business and the U. S. Market. Both of which performed well.

We're proud of how the team navigated the COVID related challenges in Australia and the resulting third quarter growth they achieved. 07:57 This quarter, Culture Kings opened their eight and most innovative store yet in Auckland, New Zealand with record performance.

On opening day, there was a six hour line to enter the store demonstrating the power of the brand. But just three weeks after opening store was closed due to lockdowns. During this time, robust growth in New Zealand continued online and accelerated throughout the quarter.

The success of Culture Kings first market expansion outside of Australia further bolster our confidence in our ability to expand this popular brand to other markets. 08:31 Next, I'll touch on Petal and Pup and Rebdolls. We are very pleased with Petal and Pup’s growth this quarter.

It is now our fastest growing brand and following same growth curve as Princess Polly in the U. S. By leveraging best practices from Princess Polly, we have seen Petal and Pup’s growth accelerate, which reinforces the strength of our platform. All of Petal and Pup’s buying is data driven and on the test and repeat model that Princess Polly developed.

And Petal and Pup is now heavily meaning into the micro influencer strategy, also innovative by Princess Polly. 09:08 In July, they launched U. S. Based distribution from a distribution center shared with Princess Polly. This improved the customer experience by reducing shipping time and also provided shared cost leverage and learnings.

Petal and Pup sales in trendy event driven fashion, and we've seen a great rebound in dresses and occasion wear which was the brand's fastest growing category this quarter. 09:34 As we continue to scale the brand in the U. S. we also appointed a new brand president, Victoria Perry, who is based in San Francisco.

Victoria is a seasoned fashion and e-commerce executive, and we are confident that she will continue to accelerate the growth of the brand in the U. S. And globally. Rebdolls which specializes in trendy fashion and extended sizes for ethnic diverse young women also delivered solid growth this quarter.

They launched new collaborations with relevant influencers and increased their brand awareness and credibility through authentic and creative content focused on body positivity and size inclusivity. While small today, we are confident in Rebdolls long term potential as it caters to an attractive and underserved customer.

10:23 Turning now to minimal, the newest brand to join our platform, which we acquired in October. Ciaran will touch more on the financial details surrounding the transaction, but I'll quickly share a few brand highlights and why it is such a good fit for our portfolio. Minimal is a premier men's street brand in the U. S.

which bolster our position in the space. A great strategic fit minimal is a proven Nextgen direct to consumer brand that has mastered modern men's fashion and provides sought after trends at a premium quality and affordable price.

10:57 They have a track record of high growth and profitability and employ a data driven approach to merchandising and marketing. The brand has built a highly loyal following and has a long runway for growth and profitability in the U. S. And globally. We are confident that this already strong brand can accelerate further and benefit from a.k.a.

platform synergies and complements Culture Kings particularly well. 11:21 Minimal sales in denim and bottoms, which perfectly complements Culture Kings core categories enhance hoodie, tees and sneakers. Minimal is well established in the U. S. And we are also confident that we can successfully bring the brand to Australia.

With his strong vision and leadership, founder and CEO, Matt Field has assembled a highly talented team and we're thrilled to welcome them to a.k.a. brands.

11:49 Looking forward to the fourth quarter and beyond, momentum in our brands continues to be strong and we remain focused on growing our brands organically to drive profitable and sustainable long term growth. Before turning to our growth strategies, I would like to comment briefly on our supply chain. A topic on everyone's mind.

We experienced minimal disruption to our supply chain in the third quarter, and our inventory is well positioned for the holiday season in the fourth quarter. There are a couple reasons we have fared better than many during the global supply chain disruption.

12:22 First, as discussed we do test and repeat buying for the majority of our inventory, which provides a rapid thirty to forty five days to market. To achieve this speed, we rely primarily on airfreight, so we do not have a material amount of merchandise delayed FC like many others.

While we've seen airfreight costs increase, the pricing pressure is far less drastic than cost increases related to shifting from [Indiscernible]. 12:50 Second, we have a diversified group of two seventy one suppliers across fourteen countries with no single supplier making up more than thirteen percent of our sales.

And we only have one small supplier in Vietnam, so we were not materially impacted by the closure there and we were able to quickly adjust. Additionally, by operating at scale in two spheres, we are uniquely able to manage inventory and marketing spend across two seasons and regions.

This competitive advantage combined with our flexible business model has allowed us to remain agile during different phases of the pandemic for nearly two years now. 13:28 We are well prepared for the reopening of Australia with the right assortment and strategies in place.

Overall, we believe we are well positioned in the fourth quarter and beyond as we continue to navigate dynamic supply chain and COVID-19 related challenges. Next, I'll turn to our near and long term strategies to drive growth across our brands. 13:51 Beginning with the U. S.

our highest priority market right now, we are energized by the tremendous growth potential we see across our brands. Following the successful expansion of Princess Poly in the U. S. which now represents the majority of their sales. We have applied their U. S.

Growth learnings to Petal and Pup, and we are doing the same with Culture Kings, as they scale their business here. 14:15 We are on track to deliver on our expansion plans for Culture Kings. We have hired ahead of U. S. To build out a team and plan to open a distribution center in the front half of next year in California.

We are also working on plans to open a Culture Kings’ store next year and look forward to sharing more details on that soon. So, all of our brands as we continue to grow in the U. S. we have strategies in place to acquire new customers, deepen loyalty with our existing customers and expand our high quality merchandise assortment.

14:46 First, I'll touch on our customer initiatives. Our brands are masters at content creation, and we will continue to capitalize on our social media strengths by growing our network of micro influencers, which is a highly efficient strategy for acquiring new customers.

We're also leaning in popular platforms like TikTok as we continue to follow customer traffic to new social media platforms as they evolve. We also see an opportunity to further drive customer retention and frequency of visits that will grow lifetime value, such as loyalty programs.

Princess Polly is lapping the one year anniversary of their loyalty program, which launched in October of twenty twenty. 15:28 While it's still early days, the program has exceeded expectations and we seen more than double the spend coming out of our loyalty members.

We'll take the best practices from Princess Polly, to roll out loyalty programs to our other brands. Next, I'll touch on our merchandising initiatives. As part of our model, our brands are constantly introducing new styles, designer collaborations and exclusive items, which keep customer engaged and frequently visiting.

As seen in our customer retention rates of sixty three percent in twenty twenty across a.k.a. brands. 16:03 Additionally, we have opportunities for strategic assortment expansion. We're pleased to share that Princess Polly is launching extended sizing with their new curve collection in the fourth quarter.

Which we know will expand our audience and customer base. In building on the successful launch of their sustainable fashion assortment in the third quarter, Princess Polly plans to expand their sustainable offering in the fourth quarter with a goal to offer twenty percent of new styles made from renewable fabrics by the end of the year.

16:34 And Culture Kings, we are working to expand our print on demand graphic key capabilities, which allow us to real time react to customer trends and scale T-shirt print production to meet demand. While our near term focus is in the U. S. longer term, we will also grow our brands internationally beyond the U. S. And Australia.

16:56 As we've mentioned, we're seeing highly encouraging early demand signals for Princess Polly in the UK and Europe and for culture kings in the U. S. And Asia.

We will continue to test and learn our way into new digitally savvy markets by localizing the customer experience and tailoring marketing spend to expand awareness and grow our brands internationally over the next several years. 17:20 And lastly, while organic growth is our top priority, we view M&A as incremental growth drivers for the future.

We have a highly disciplined approach that has led to successful M&A deals. As a reminder, we're searching the world for the best high growth, digital, direct to consumer and profitable brands to add to our portfolio. We believe we can augment our twenty percent annual long term growth targets with one to two acquisitions per year.

We will continue to be disciplined and very selective in our M&A strategy and only add brands that meaningfully enhance our portfolio. 17:59 Before I pass it to here on, I want to express my gratitude to all of our teams at a.k.a. and across our brands for delivering a great first quarter as a public company.

Our IPO in September was a tremendous milestone, and we could not have done it without all of our teams and partners. The opportunity and runway ahead of us is significant, and we could not be more excited to execute our strategy for the quarters and years to come. I'm confident that a.k.a.

brands is the future of efficient and we're just getting started. With that, I'll turn it over to Ciaran now to discuss our third quarter performance and our guidance in more detail..

18:40 Thank you, Jill, and good afternoon, everyone. Before I provide more details on our third quarter results and outlook for the remainder of the year, I would also like to take a moment to thank our employees for their dedication and commitment throughout the pandemic.

Turning now to our third quarter performance, we are pleased have delivered results ahead of our expectations despite the challenges presented by the COVID related lockdowns in Australia. Our performance this quarter further demonstrates the strength of our business, as well as our operating platform that we believe represents the future of retail.

19:17 For the third quarter, net sales grew one hundred and fifty five percent to one hundred and sixty two million dollars compared to sixty three million dollars last year.

On a constant currency basis, net sales rose one hundred and fifty six percent Adjusting for the inclusion of cost gains in the prior year our pro form a net sales increased forty four percent or forty two percent in constant currency.

Culture Kings net sales grew twenty nine percent as compared to the third quarter last year despite the disproportionate impact of COVID lockdowns in Australia. 19:56 Proforma average order value increased six percent to eighty nine dollars compared to the prior year third quarter in part due to strategic price increases.

The number of orders increased thirty seven percent to one point eight million dollars compared to the prior year, including Culture Kings. With the trailing twelve months, our proforma active customers increased fifty six percent year-over-year to three point one million dollars.

The growth across these performance – key performance metrics reflects the continued momentum in our brands. Now I will provide a few highlights from our three regions on a proforma basis, again, assuming Culture Kings was included in last year's results. 20:40 Third quarter net sales in the U. S.

Increased seventy six million dollars up eighty four percent from the prior year third quarter no making it our largest market at forty seven percent of net sales as compared to thirty seven percent last year. Princess Polly continues to be the primary drive of our growth in the U. S. As brand Awareness and loyalty continue to build.

21:05 Australian net sales of sixty four million dollars grew seven percent from sixty million dollars in the prior year. The softer top line growth is due to the impact of COVID related lockdowns that were in place for the majority of the third quarter.

Despite the lockdown, we continue to outperform our internal expectations, demonstrating the strength of our brands in Australia.

21:29 Turning to the rest of the world, net sales of twenty one million dollars increased one hundred and one percent from the third quarter of the prior year on a proforma basis The growth which primarily driven by the expansion of Culture Kings to New Zealand, further supporting the residents of the brand outside of Australia in addition to the traction we're seeing in Princess Polly in Europe and the UK in particular.

21:55 Moving to profitability, our gross profit for the third quarter increased one hundred and twenty four percent to eighty six million dollars. Our gross margin rate was fifty point two percent as compared to sixty point eight percent in the same period last year.

To seven sixty basis points decline in gross margin rates was a result of an approximately six million dollars or three seventy basis points non-cash purchase accounting charge associated with the Culture Kings acquisition.

22:28 The balance of the decline was roughly split between higher airfreight expense and the inclusion of Culture Kings, which carries a lower gross margin rates as compared to our other brands due to the lower mix of exclusive product.

The gross margin decline was partially offset by the implementation of targeted price increases at Princess Polly and Petal and Pup. We continue to generate strong full price sell through and best in class return rates due in part to our proven test repeat strategy and time mix of exclusive product.

23:02 Selling expenses in the quarter were forty one million compared to sixteen million dollars in the prior year. As a percentage of sales, selling expenses increased thirty basis points to twenty point one compared to twenty four point days in the third quarter of twenty twenty.

This increase was driven by an expansion in the number of orders shipped and the inclusion of Culture Kings. Marketing expense increased to fifteen million dollars from five million dollars.

The increase in marketing dollars was driven primarily by the inclusion of Culture Kings, which increased its investments in advertising spend as the brand looks to scale in new geographies and tested new marketing opportunities.

23:45 As a percentage of sales, marketing expense was nine point six percent a two thirty basis point increase compared to the third quarter of twenty twenty, which saw exceptional marketing efficiency.

Our G&A expense of twenty nine million dollars increased, due primarily to an increase in salaries and related equity compensation associated with new talent. The inclusion of Culture Kings, additional professional fees and transaction costs.

Excluding the one point six million dollars of transaction costs, and four point nine million dollars of non-cash stock based compensation expense related to the IPO, G&A expenses were twenty two million dollars. As a percent of sales, G&A was seventeen point nine percent of sales as compared to eleven point five percent in the same period last year.

24:37 In addition to GAAP measures, adjusted EBITDA is an important profitability measure that we use to manage our business internally. For the quarter, adjusted EBITDA was nineteen million dollars versus thirteen million dollars in the prior year and twenty eight million dollars on a proforma basis.

As a result, as a percent of sales, our adjusted EBITDA margin of eleven point five percent compares to twenty point four percent in the prior year third quarter and twenty four point six on a proforma basis. 25:11 Our adjusted EBITDA margin exceeded our expectations largely due to the better than expected results in Australia.

During the quarter, we had an income tax benefit of four million dollars compared to an income tax expense of three million dollars in the prior year. Income benefit was related to the loss extinguishment of debt from the prepayments and termination of our prior desk as well as an increase in interest expense related to the prior desk.

25:41 Our net loss attributable to a.k.a. for the quarter was ten million dollars or a loss of zero point one one dollars per share compared to net attributable to a.k.a. of seven million dollars or zero point one zero dollars per share in the prior year. On an adjusted basis, our net income attributable to a.k.a.

for the quarter was three million dollars or zero point zero four dollars per share compared to seven million dollars or zero point one zero dollars per share in the prior year. Weighted average shares outstanding were approximately eighty eight point four million dollars in the third quarter of twenty twenty one.

26:17 Turning to the balance sheet, we ended the quarter with fifty four million dollars in cash and cash equivalents and ninety eight million dollars in debt.

As part of our IPO, we reduced our debt levels by approximately seventy million dollars from one hundred and sixty eight million dollars of debt forward during the first half of twenty twenty one. At the end of the quarter, we had total liquidity of one hundred and four million dollars including fifty million dollars available on our credit facility.

26:46 Inventory at the end of the quarter was ninety six million dollars compared to thirty three million dollars at the end of third quarter twenty twenty.

If we adjust with the twenty six point nine million dollars in Culture Kings inventory in the prior year, our inventory levels would have increased sixty percent from the third quarter of last year.

We are pleased with the level and composition of our inventory as we head into the important holiday season as we put forward inventory deliveries to ensure we were able to meet demands.

27:15 As Jill noted, subsequent to quarter end, we completed the acquisition of minimal for a total of forty four point nine million dollars including cash of twenty seven point six million dollars, fifteen million dollars of which came from our existing debt facilities and equity of seventeen point three million dollars or two point one million shares.

27:35 The acquisition was immediately accretive, and we see an opportunities to fuel significant growth in twenty twenty two and beyond as we leverage our platform. Additionally, Minimal’s growth rates as well as its gross margin and EBITDA rates are in line with our acquisition guidelines.

27:53 Now, I will share more details on our outlook for the full year. As Jill mentioned, the solid momentum in our third quarter and strong trends that have continued into the fourth quarter even us excited for the remainder of the year. We are pleased with the performance we've achieved so far this year and expect the momentum to continue.

Our guidance assumes no further COVID related lockdowns for the remainder of the year. 28:19 As of today, all eight of our Culture Kings stores are reopened. While we are not anticipating any meaningful supply chain constraints due to product delays. Our guidance assumes higher freight costs we pressure gross margins for the remainder of the year.

While we recognize the industry global supply chain challenges, we are closely monitoring the situation and feel the confidence in our supply chain network and inventory position as we head into holiday. 28:47 As such for the full year, we expect net sales to be in the range of five fifty million dollars to five sixty million dollars.

Adjusted EBITDA is expected to be in the range of sixty million dollars to sixty two million dollars. We expect the weighted average diluted share count of ninety three point two million dollars for the full year and one hundred and twenty six million dollars for the fourth quarter.

29:11 Capital expenditures are expected to be approximately six million dollars for the full year. As we look beyond twenty twenty one, we are excited about the long term opportunity across our brands, although we recognize we are lapping strong growth in both twenty twenty and twenty twenty one.

And we expect supply chain challenges will persist into twenty twenty two.

We are confident in our ability to live to deliver on our long-term growth targets, which include net sales growth of approximately twenty percent annually, excluding acquisitions, the addition of one to two acquisitions per year and long term adjusted Ebitda margins in the mid-teens.

29:52 In summary, we are excited about our performance this quarter and our outlook for the remainder of the year. We have confidence that our brand accelerator strategy as well as our asset light and flexible operating model, we continue to drive profitable growth and create long-term shareholder value.

With those comments, I will turn the call back to the operator to open it up for questions..

30:22 ladies and gentlemen [Operator Instructions] We would everyone else Our first question is coming from Randy Konik..

30:38 Hey, how care you, can you hear me?.

30:41Yes..

30:41 Great. Thanks guys. So, I guess my first question is we talked about strong retention metrics, and it sounds like full price selling is staying pretty strong.

So just want to get a little bit more granular around repeat purchase behavior a little bit more color on and maybe if you can give us a little more color around full price selling, what is that at? And how has that been changing that be super helpful and then how do you think about merchandise margin opportunity going forward if retention metrics stay strong full price selling and get even better where can these merchandise margins go through here? Just curious.

Thanks, guys..

31:24 Thanks, Randy. I'll start with saying our retention rates are very high because we are very focused on selling high quality, exclusive merchandise and offering a constant stream of newness that really keeps the customers engaged and coming back, as reflected in our sixty three percent repeat in twenty twenty.

As we gone through twenty twenty one and through the third quarter, we have seen retention stay high and actually even take up a bit. 31:54 And our full price sell through has also remained high as we've talked about we see that our full price our sell through is very high percentage of full price based on our test and repeat buying.

We really know what customers want, which is ultimately leading to less mark sounds and that higher full price sell through. We don't have to disclose our brand level full price sell through, but it has remained high and it's part of what's contributed to our high AOV this quarter. Regarding kind of merchandise margins going forward.

We have confident in our gross margin rate. We have competing on quality exclusive merchandise. We do have bit of pricing power and are able to selectively take some price increases, which we've done this quarter to offset some of the expense we've seen related supply chain issues.

So, we're able to really balance that out and are very confident we can continue our current trend of our gross margin rate..

33:03 Right. Our next question is coming from [Indiscernible] last name Adorama..

33:08 Hey, thanks guys taking the questions. I guess first, on Australia, I know you guys posted some really strong results as seven percent growth despite the lockdowns now, I guess, what's the embedded assumption for Australia in the fourth quarter? And then as a follow-up, very interesting acquisition minimal.

Help us understand maybe a little bit their supply chain if you wouldn't mind, is it different than your core brands and how much is minimal expected to contribute for the 4q number? Thank you..

33:37 Yes. I think thanks for Australia, and we don't go specific guidance, I guess our around regions, but we would expect to be back in the double digit growth and kind of range as we go into Q4. We see kind of strength coming out of Q3 and we would expect that to continue into Q4.

For minimal, from the incremental impact on Q4 it's a about eight to million dollars is what we would expect to additionally to add to the quarter..

34:08 And on minimal from a supply chain perspective, first, we're just thrilled to welcome this great brand to our portfolio. It really bolster our position in men's street wear and complements our Culture Kings business quite well.

They are really strong in bottoms and denim and bring a new network of great suppliers in that space that we are excited about leveraging across our group of brands.

Also from a fulfillment center and carrier partner level, we are evaluating and comparing rates and service levels with our current set providers and with all the brands that we acquire over time, we can evaluate if we can get them into our best in class network of partners and get some synergy and leverage with our other operating partners.

So, we're evaluating that as we go..

35:04 Okay. Our next question is coming from Erinn Murphy..

35:07 Great. Thank you. Good afternoon congratulations on your first quarter out of the gate. I guess my first question is just around the fourth quarter momentum that you're seeing.

Are you seeing that happen both in the United States as well as that Australia reopening trying you just referenced and is it broad spread across the portfolio? And then my second question is around the performance of Culture Kings in the quarter.

Can you talk about how exclusive brands versus third party brands? And just how is your inventory availability right now for third party brands within that banner? Thank you so much..

35:41 Great. Thanks, Erinn and thanks for your questions. First, on Q4 I'll comment on that. We are seeing some really nice momentum coming out of Q3 and continuing already as we head into Q4. The early read is strong.

As Australia has really just come back online with the reopening over the past few weeks, we are really seeing business rebound all of our stores now are open in Australia, and we've seen traffic really rebound the stores as well, we've seen the online business continue to be really strong.

36:17 So seeing great momentum in early ready, we are very well prepared as we head into Q4 from an inventory standpoint as well as really strong merchandising and marketing plans and very excited over in Culture Kings Australia to get back to some events in our stores. We have a great line up of events. So just feeling really good as we head into Q4.

Also, I mean, I should call out to our teams are really agile and we'll adjust throughout the quarter. We have a marketing calendar plan for promotionality. But I think there's a lot of uncertainty around the promotional intensity holiday and we've left ourselves room to really be agile there.

37:05 In terms of Culture Kings in the quarter, so Culture Kings was impacted by the Australia Covid lockdowns five of eight of their stores were closed for the majority of the quarter. They have all reopened now.

And so, we're just excited about what we're starting to see there as that business kind of comes back online and the reopening is occurring in Australia. He did ask about the mix of third party versus exclusive. The Culture Kings business, yes as a reminder, is a mix across third party and in house brands. As we expand that brand into the U. S.

We do see a higher mix of in-house brands in the penetration of their business, which we're really excited about and leaning into as we bring this brand into the U. S.

we are looking to lead with and certainly looking to grow the in house penetration of that business those comment a higher gross margin and are also a nice competitive mode for us and a real differentiator as we bring that brand in the U. S. Market..

38:14 And then Erinn just from an inventory position for the third party brands for Culture Kings rushing in a pretty good position with those vendors and really across all of the brands for Q4. We have pulled forward some inventory just to make sure we're everything to meet demand, but we feel in a pretty good position heading into the whole day..

38:38 Our next question is coming from Joseph Skelly. Go ahead..

38:42 Great. Thank you very much. So just two quick questions for me going back to just the performance in the quarter.

Just considering the material outperformance, I was wondering if maybe you can double click on some of the things that actually surprised you between the time when you guys came out with the initial guidance and ultimately what transformed out of the quarter. And then second, as you look at your market efficiencies during the quarter.

Was wondering if you can comment on any impact from ATT or Apples or the IOS [Indiscernible] change on the effectiveness on marketing channels and just kind of remind us again which channels are performing better for best for you guys. Thank you very much..

39:27 Yes. Thank you. I will comment first on what sort of I wouldn't say it surprised us, but we were pleased to see the Australia business rebound faster than anticipated.

Recall that in July, the lockdowns and curfews started occurring throughout Australia, and we did see a big drop off in the business at that time, but then we really saw it start to build back up through the course of August and September and we were really pleased with the performance of the business.

The fact that we delivered seven percent growth in also Australia in the quarter on top of last year's very strong growth, while having five of eight stores closed, we were really pleased with that performance.

And the teams were able to really be agile and adjust across our multiples – across two regions, we were able to pivot and adjust our marketing spend in inventory accordingly and really manage the business very agile. So, we were ultimately pleased and outperformed there from a marketing efficiency standpoint and the impacts on IOS and IVFA.

We've been less impacted there than anticipated, I think this is really thanks to our social first approach in marketing. 40:54 We really rely more on social media and influencers and our great content than we are relying on paid ads, That said, we do spend on paid ads and have performance spend and had some a bit of impact on Facebook.

But we were able to optimize our mix of marketing spend across platforms and really reallocate but longer term, our best approach there is a strong offense on scaling our micro influencer strategy. Okay, all right. Thanks..

41:41 And our next question is coming from Lorraine Hutchinson..

41:44 Thank you. I was curious for an update on the brand awareness of Culture Kings in the U. S. And then if you could offer us any proof points or early indicators that the Princess Polly playbook for U. S.

Expansion is gaining some traction for Culture Kings?.

42:06 Great. Hi Lorraine, thanks so much for your questions. First all, I'll talk about the Culture Kings brand awareness in the U. S.

What excites about Culture Kings, this is a really popular scaled awesome men's street wear brand in Australia and very well-known with strong unaided awareness in the forties over in Australia, while more in the single digits in the U. S. That said, their U. S.

Business is the fastest growing portion of their business, and we're seeing just tremendous growth on their U. S. Online business. We are on track with our Culture Kings expansion plans into the U. S. we have hired a head of U. S. and started to build out our team here.

Our first hires are really focused on building out our micro influencer strategy really learned and adopted from Princess Polly. So as you asked about the playbook of Princess Polly and being able to adapt that we are using that for Culture Kings to scale a similar social led micro influencer strategy.

And we will really grow that brand with a digital first approach in the U. S. 43:23 And looking to add open up their distribution center in the front half of next year as well, the first flagship store in the back half of next year.

Regarding the sort of proof points on the Princess Polly playbook, Princess Polly just continues to really gain share in the U. S. We've had tremendous growth in the U. S. And saw a really strong quarter with the reopening and a shift of the business really back into dresses.

43:55 And they've been leaning in even harder on their social media influencer program as we back to school, they did launch a college ambassador program and just saw incredible demand there with twenty thousand signups for that.

So, really continuing to get a lot of great learnings out of Princess Polly that we're then able to adapt and roll out across the group. We've done that. Adopting those over to Petal and Pup and really seeing that business also now take off in the U. S. Now it's our fastest growing business.

So really pleased with what we're learning out Princess Polly and being able to apply it elsewhere in the portfolio..

44:38 Our next question is coming from Oliver Chen..

44:42 Hi. Thank you. We were curious about the promotional environment and also as you think about pricing, more near and medium term and what you're seeing as we all face inflationary pressures yet, the demand profile remains very strong. And then second question, your technology in a.k.a.

approach to technology is quite unique with that capital light approach? What should investors be focused on in terms of what you're doing there in terms of some of your key partnerships and the biggest needle movers, as you work with different partners across your portfolio? Thank you..

45:23 Thanks, Oliver. I think just regarding kind of the promotional landscape, as we look to Q4 this year, I think just to reiterate, we've seen really strong momentum coming out of Q3 that's already a strong early read as we get into the quarter here.

And we're very well positioned from an inventory standpoint and just have a really strong merchandising and marketing line-up.

A lot of the conjectures will be a less promotional holiday, but we are prepared and ready and have room to be as promotional as needed to compete in the market this holiday and we're quite agile and able to adjust and adapt as needed. So feeling really good there as we head into the big days.

46:11 From a pricing perspective, sort of near and medium term, I think it's important to point out that we really compete on quality and exclusivity. Not really price per se, which means that we actually have quite a bit of pricing power in our brands.

And we have been able to actually increase prices selectively in our brands to offset some of the supply chain expense that we did see in the quarter. And with that, we have been able to still maintain our growth rates even while taking some of those prices up, just really kind of emphasizing that pricing power.

So we are committed to maintaining our gross margin rates as we go forward right where they are mid fifty. And we will reevaluate pricing as needed ongoing. From a technology standpoint, as we talked about, we do run an asset light technology stacks that's really leveraging Shopify and an ecosystem of partners.

We are very pleased with our strategy, it keeps our cost flow our flexibility high and really gives us access to best in class and the latest technology capabilities.

47:27 We are able to really constantly test and learn across our brands and across a network of tech partners and really get to and curate the best in class the best of the best tech partners out there and then really share that across across our brands. This also gives us – this approach also get this really strong group leverage.

We've been able to go back now and renegotiate rates with some of our tech partners and really develop and lean into strategic relationships there that give us early access to features making sure that we're first in line on innovation capabilities, as well as being able to even influence their roadmaps so, we see this as just a real strategic capability that allows us to ask access the best innovation out there.

But I think what we're really most excited about honestly is our data and analytics capabilities.

48:23 If you think about it, we are really sitting on a gold mine of data and insights across our group of brands across demographics and across geographies and all of our brands were very strong at data driven merchandising and harnessing analytics for their everyday decisions but what we've just started to build out is really strong cross brand analytics capabilities that are really going to take off forward and we've made some good strides on that in Q3, but excited to continue to expand on that.

So, that's what people should be watching and waiting to hear more from us about..

49:05 And Oliver, I just add on inflationary, we've had to do some small wage increases at our U. S. Distribution center, but not a really big impact there on the floor or are kind of on the go forward. I guess the other place where we are seeing pricing pressure is obviously on the inbound airfreights.

We've seen a significant increase their year-over-year and even quarter over quarter, we do expect some more increases there in Q4, but we've built that into kind of our expectations and we're kind of expect both increases to continue into next year..

49:44 All right, our next question is coming from Michael [Indiscernible]..

49:48 Hey guys, congrats on nice quarter. It's nice to talk guys here on a live public call. I just want to ask you maybe a couple of things on the model and then I think the revenue guidance for fourth quarter looks like it's about thirty percent to forty one percent a little bit of a deceleration from proforma number in 3Q.

And then if we take out minimal, it's a little bit more of a deceleration. You talked about the lockdowns and reopening in several parts of the business reaccelerate coming out of 3Q.

So, as we're trying to learn to think alongside you guys here and how you build the guidance, maybe would you help us with a couple of the inputs that you're thinking about for fourth quarter? And how much of any kind of a deceleration if I'm right on the math there is just conservatism, or it could be just related to tougher compares a year ago since we don't have a lot of history of the combined business and any inputs there would help.

And the same question on the EBITDA margins it looks like you're planning to about ten dollars to ten point five percent in the fourth quarter a little lower than what we just saw in the third quarter.

Again, don't know much about the changeover in seasonality from 3Q to 4q so any help there? And then finally, I just certainly maybe the AOV is mid-single digit that you had the six percent this quarter. I know we've talked about some price increases across the brands.

Is that as you talk about the twenty percent long term, if we start thinking a little bit now about twenty twenty to is mid-single digit AOV, a place to start thinking for next year is that's sustainable?.

51:16 Yes, thanks and maybe I'll go to AOV first and kind of work backwards. I think we're pretty happy with the increase we saw in AOV year-over-year. It's six percent to three percent on a constant currency basis. And it was like to see up really across all of the brands.

In particular that's coming from price increases and the princess Petal and Pup put into effect. I think go forward, they will continue to be opportunistic and really look at the market and move prices as they see the ability.

So I think as we think about kind of go forward and AOV, it's certainly kind of in that low single digit we think about kind of in FY22. And then as that kind of relates to our guidance and our expectations around Q4, we certainly see seasonality in AOV from Q3 to Q4. So kind of we would expect it to decrease in Q4 versus Q3.

And that's somewhere from the promotion nature of Q4, but also just the different mix and up kind of categories across the brands so we would kind of see it coming down from that perspective. And that's really I would say the bigger driver of our decelerating revenue in Q4 also somewhat bit conservatism.

These are kind of new brands and to some of newer brands to the U. S. when you think of culture gains, so we do want to be conservative there. 52:46 And then really, as it relates to EBITDA, and thank you about EBITDA in Q4.

I would say kind of three bigger drivers, one is just the seasonality, the AOV impacting our gross margins, we would expect those comedown in Q4 with the promotional nature of Q4 with a little bit of increase in selling expenses as it relates to surcharges with carriers and then just the other driver is from the G&A perspective, we are bringing on more public company expenses in Q4 this year.

As it's with our first full quarter being public, so think of [Indiscernible] Insurance and other public company costs. They're the kind of drivers that bringing decrease in EBITDA over Q3..

53:34 Our next question is coming from [Indiscernible]..

53:39 Hey everyone, Congrats on your first call. I guess, I'll just ask a couple follow ups on minimal. I guess Karen. I think you guys used a little bit of equity in the purchase this time.

Can you remind me is that something that you guys would normally do? Is that kind of new and then does that kind of fit to the future of these one or two deals annually going forward? And then I think you gave me the 4Q revenue number eight percent to ten should we just kind of assume that this business is around thirty million dollars to forty million dollars in annualized run rate revenue and then any kind of gross margin color on minimal that kind of mix out into the next year would be great? Thank you..

54:16 Sure. Thanks. Yes, from the acquisition, was part of the purchase price was about two point one million shares, about seventeen million dollars and folks pretty five percent of the just under thirty five percent of the overall purchase price.

I think in our mind, it's kind of somewhere from twenty percent to thirty five percent is the range of equity that we would expect to do as part of our acquisitions.

And certainly talking to potential acquisitions out there, they're very much interested in having equity in AKA and kind of being prior to the long-term upgrades that we see hundred across all of the brands and the overall business. And then from a revenue perspective, minimal that is kind of their quarterly range is what we expect.

They're not a seasonal business. So they are in that kind of thirty dollars to forty million dollars range from a revenue perspective. And across the drivers AOV gross margins very similar to the overall portfolio that we have so no big changes there from a model perspective.

I think as we think of about EBITDA, we will invest more in that from a headcount perspective in that first year just to support their growth make sure that kind of we can bring them onto the platform. And so that will bring down their EBITDA rate on the first year but come back very quickly..

55:46 Our next question comes from Dana Telsey..

55:49 Good afternoon, everyone, and congratulations on the progress. You mentioned some of the new initiatives at Princess Polly whether expanding the exclusive merchandise or introducing sustainable component to the mix there and also increasing the new weekly styles by thirteen percent.

How does this move going forward? It does it accelerate in terms of whether it's the more weekly styles going forward or extended sizing or sustainable and do some of these initiatives hold for the other brands, whether it's Petal and Pup or Rebdolls?.

56:30 Thanks, Dana. I'll take that. So, on Princess Polly, we have a high mix of exclusive already in Princess Polly, brand really competes quality and exclusive and pleased to increase our penetration that exclusive this past quarter and really committed to continuing to increase that at Princess Polly and across all of our brands.

They did roll out as you mentioned, the sustainable line that quarter with their Earth club line and saw really strong customer response that exceeded expectations. So, about five percent of their assortment is now coming from recyclable renewable fabrics.

And they are very committed to continuing to expand that and looking to get to twenty percent of all their new styles made sourced from recyclable or renewables fabrics by the end of the quarter. 57:28 And we are excited to take the learnings from Princess Polly of doing that and apply that to our other brands.

They have been forcing those fabrics at a mill and are able to use those fabrics across their supplier networks, so they were not needing to go find new suppliers in order to do this, and they were also notably didn't need to incur any cost increases or price increase to the customer to offer this sustainable line.

So, we're really excited about what they're doing in that space. Princess Polly is really a leader inside our group of brands on sustainability and we're going to learn a lot from their expansion plans there and apply that to the rest.

They are also as noted introducing and extended sizing line with their curve collection this quarter and in Q4 that will come out. We're really excited to learn from that and also similarly be able to apply that across the group of brands..

58:31 Okay. We have a follow-up question from Oliver Chen..

58:35 Hi, Jill, I had a question more broadly about your M&A strategy and M&A platform.

And as you look for authenticity and also your experience on really pioneering looking at new social platforms, What are you seeing in the marketplace? What should we know about what might be your key priorities? And how will you more broadly approach value creation within the platform? Thank you..

59:05 Thanks, Oliver. So on M&A, well first, I think it's important to note that our biggest priority focus on growing AKA is focused on organic. We are really committed scaling the group of brands that we have and particularly scaling them in the U. S.

But we are of course, acquisitive and looking to M&A to make future best and our strategy is to really enhance our portfolio and continue to diversify our audiences, our fashion style aesthetics, our gender mix, our geographic mix.

And ultimately, we're looking for just all-star brands, best to the best digital direct to consumer, high growth, profitable brands with great teams.

And we do look for brands that can really complement our portfolio and are not necessarily competitive and we think the five we've assembled so far are just a really great group of diversified balanced brands.

60:12 We have a very disciplined approach to our M&A and a strong pipeline in the mix right now and the IPO has really our visibility, which we're excited about and so we have an opportunity to really be selective as we go and we're also a bit of an acquirer of choice in that we have real e-commerce expertise and a real value add proposition for the brands that they really resonates with the brands when we talk to them.

So, really excited about the potential and what we're seeing out there and we're maintaining a strong pipeline of great brands that we're talking to and we're looking again just as a reminder, probably one to two acquisitions a year..

61:00 Jill, I'm not showing any questions at this time. [Operator Instructions] There are no further questions..

61:21 Thanks, everyone. Really appreciate joining. Thank you..

61:27 Ladies gentlemen, thank you for joining. You may now disconnect..