Greetings, and welcome to the a.k.a. Brands Holding Corp third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Emily Schwartz. Thank you. You may begin. Good afternoon. Thank you for joining a.k.a. Brands third quarter 2023 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today is Ciaran Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor language. Management may make forward-looking statements which refer to expectations, projections, and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any 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 release furnished to the SEC and available on our website. With that, I'll turn the call over to Ciaran. Thanks, Emily. Good afternoon, everyone, and thanks for joining our third quarter earnings call. Before I discuss our key priorities and review our results, I want to highlight some important takeaways from the quarter. We delivered growth in the U.S. business. Our balance sheet and financial condition is strong. We generated positive operating cash flow in the quarter. We're taking aggressive action to rightsize our inventory position in Australia, and we have been in the market purchasing our shares, which we believe offer tremendous long-term value. As laid out last quarter, we've been laser focused on three priorities for the back half of the year. First, chasing demand and building awareness through increased levels of newness and expanding our omnichannel initiatives. Second, improving our operations by reducing our inventory levels. And third, strengthening our balance sheet by paying down additional debt. I'm pleased to announce that we've made progress against all three priorities and will continue to advance these initiatives throughout the remainder of the year. As evidenced by our in-line sales performance, we continue to chase customer demand. Fashion newness is resonating well with our customers, and we are increasing our total addressable market, particularly in the U.S., by introducing our brands to new channels and customers, including the opening of our first Princess Polly store in September. We continue to strategically reduce our inventory, which is down $37 million year-over-year and down 21% since the beginning of the year. And lastly, we paid off an additional $13 million of debt in the third quarter, which brings us to a year-to-date debt reduction of $37 million or 26%. I'm very proud of our progress against these initiatives, and I want to thank the team for their hard work and commitment to our brands and customers. Net sales for the second quarter were $141 million, which was in line with our expectations. Net sales in the U.S. increased 2% compared to the third quarter last year and grew nearly 10% on a two-year basis. I'm proud of the progress we're making in the U.S., as the region represents our greatest opportunity for growth and brand expansion. In fact, the U.S. now accounts for 60% of total sales. Despite the growth in the U.S., our quarter profitability was impacted by continued consumer macro headwinds in Australia, which led to a lower than expected third quarter adjusted EBITDA of $4.7 million. As I mentioned in my opening comments, we are taking aggressive actions to improve our overall operations in the region, which I will provide more detail on shortly. Importantly, the improvements we have made to our operating model enabled us to generate positive third quarter operating cash flow of $11 million. Turning now to a discussion of our Omnichannel initiatives and our brand highlights. We are pleased with the success we're seeing with increasing our brand's total addressable market through innovative merchandising and marketing initiatives, as well as through our channel expansion initiatives. As of today, all of our brands are now active in at least three channels, including Direct-to-Consumer, wholesale, stores, or marketplaces. Princess Polly is once again ranked as a top 10 shopping website for female teens in the U.S., according to Piper Sandler's Taking Stock with Teens survey that was released last month, further demonstrating the power and popularity of the brand among its core demo. In an effort to accelerate brand awareness, we've officially opened the first Princess Polly store in early September at the Westfield Mall in Century City, Los Angeles. The store has outperformed our expectations, and we're very pleased with the overwhelming positive response from customers. The store is approximately 3,500 sq ft and features new styles arriving weekly. To give you more context on the financials, the current sales run rate for the store is tracking to $5 million in annual sales, with a projected four-wall margin contribution in excess of 20%, paving the way for a tremendous opportunity to scale our physical store footprint. Customers were very enthusiastic for the opening weekend, with lines forming at 4:00 A.M. as hundreds of customers waited to experience Princess Polly in real life for the first time. Complete with next generation digital displays, Instagrammable moments, and personalized product recommendations, the store was strategically designed to engage shoppers while also serving as a hub for content creation. Additionally, bringing to life the sense of community and connection that Princess Polly has grown through social media, the store will hold special events such as product launches, meet and greets with influencers, and styling workshops. We're excited about their upcoming in-store events, which recently kicked off. Yesterday, the brand hosted a USC versus UCLA block party at the store to drive college student traffic. Next week, the store will host an influencer Friendsgiving event. Importantly, in addition to the profitable in-store revenue generation, 30% of in-store customers are new to the Princess Polly brand. We're also seeing the halo effect in our e-commerce business, while simultaneously gathering key customer shopping behavior insights, which will help us to further expand our reach. The store opening solidifies Princess Polly's unique opportunity to take a strong digital brand physical, and it's clear that further enhancing Princess Polly's connections with customers through various touch points will create long-lasting brand affinity and loyalty. To that end, I'm excited to announce that Princess Polly has hired its first senior vice president of retail in the U.S. Sarah Davis, who recently joined from Lululemon, where she was the VP of Retail and was responsible for over 400 stores in the U.S. Sarah will spearhead Princess Polly's store expansion plans, beginning with the addition of three to five stores in 2024, with upcoming stores in San Diego and Boston. We also remain pleased with the success of Princess Polly's other Omnichannel initiatives, including wholesale and marketplace expansion. Princess Polly has a great relationship with PacSun, which, as a reminder, was the brand's first wholesale partnership ever. Additionally, Princess Polly is testing wholesale agreements in Mexico and Canada in the upcoming quarters as they look to increase Princess Polly's international footprint. Petal & Pup, our women's brand, targeting customers aged 25-34, also continues to test different Omnichannel growth opportunities and is now live on Macy's Marketplace, adding to the brand's marketplace presence with Target. We're seeing strong assortment acceptance, setting the stage for meaningful growth entering the holiday season and beyond. In addition to enhancing Petal & Pup's brand awareness, our marketplace presence is enabling us to reach new customers. In fact, 96% of customers who purchase Petal & Pup's products on the Target or Macy's marketplace site are new to file customers, which is a powerful Omnichannel test proof point. We are further expanding Petal & Pup's reach into two wholesale tests launching in the fourth quarter, one with Victoria's Secret and another with Mexican retailer, Liverpool. As we think about the early success of our Omnichannel initiatives at our brands, it gives me great confidence that we will increase our total addressable market and that our brands will resonate with new customers across multiple channels and formats. Turning now to our streetwear brands. It has officially been one year since Culture Kings entered the U.S. with the anniversary of its store opening this past weekend. The store surpassed its annual revenue growth, and first-party brands comprise the majority of the revenue this year, further proving the relevance and demand for the international streetwear brand is strong. As Culture Kings continues to grow in exposure and popularity in the U.S., they're attracting top-tier partners in marketing events. We're excited about upcoming events at the store with Formula One and the UFC. Beginning next week, in partnership with McLaren Racing and Mitchell & Ness, Culture Kings will debut a week-long activation to celebrate the Las Vegas Formula One Grand Prix. Exclusive to Culture Kings, the brand will host immersive elements in store in line with the brand's retailtainment ethos, including an in-store replica of McLaren Racing car, an appearance by Lando Norris, official McLaren Racing simulators, heritage Formula One pieces, and limited edition McLaren, Mitchell & Ness, and Culture Kings products that we launched last week. We're equally pleased with the U.S. digital business's growth over the past year, with active customer growth over 40% year-over-year. In addition, Culture Kings is also picking up steam among celebrities, athletes, and influencer musicians. Jay-Z, Rick Ross, and J Balvin have all been spotted wearing Culture Kings first-party brands recently, including Loiter and Carré. We will remain very bullish on the brand's long-term growth potential. mnml, our other streetwear brand and a dominant player in denim and bottoms for men aged 25-34, continues to be a top seller at Culture Kings, Las Vegas, and is now the top-selling first-party brand in the store. The brand is highly sought after among athletes and celebrities, with top NFL and NBA players purchasing and wearing mnml before and after games. mnml is also exploring Omnichannel initiatives and has wholesale agreements with approximately 50 regional streetwear stores as it continues to build brand awareness across the country. Before I give more detail on the P&L, I want to provide an update on the environment in Australia. As I alluded to earlier, we are facing continued macro pressure across our brands in Australia and New Zealand. However, we are taking clear and decisive action in the region to set up our brands for a strong 2024. Towards the end of the third quarter, we made several changes to the Culture Kings Australia operating model. Under the leadership of Wez Bryett, the co-founder and co-CEO of Princess Polly, we've appointed Ian Everest as the leader of Culture Kings in Australia. Over the last few years, Ian served as general manager of Princess Polly Australia and is a seasoned merchandising and marketing professional. Beginning in the third quarter, Ian and team began rapidly converting the Culture Kings merchandising model to test and repeat, which allows for speed and flexibility during dynamic consumer cycles. Ian and team have already started to transform the Culture Kings supply chain, and by the second half of next year, all of Culture Kings' first party brands will be operating on the test and repeat short lead time merchandising cycle. Additionally, as a result of the increased pressure on the consumer in the region, towards the end of the third quarter, we began reducing inventory at Culture Kings, which is reflected in our lower gross margin and profitability for the quarter. We will continue to work through the inventory at Culture Kings Australia through the fourth quarter and into the first quarter of next year. I'm confident that the transition to a test and repeat merchandising model and the reduction of inventory sets Culture Kings up for a strong 2024 in Australia, and we're very confident in the brand's long-term success. Now I'll give you more detail on the P&L before taking your questions. For the third quarter, net sales were $141 million, and a decline of 10% compared to the third quarter last year, but a sequential improvement for the second quarter. On a constant currency basis, net sales were down 8% compared to last year. As I mentioned, I'm proud that we delivered growth of 2% in the U.S. compared to the third quarter last year. The Australian, New Zealand region declined 25% and the rest of the world grew by 5%. Total orders for the quarter were 1.7 million, or down 6% compared to the third quarter last year, which was predominantly impacted by lower demand in Australia and New Zealand region, where orders were down 17%. In the U.S., where we see the largest opportunity to expand our reach, we are pleased to see order growth of 6%, driven by higher traffic. We served 3.6 million active customers in the third quarter. On a regional basis, active customers in the U.S. were down 4%, and in Australia and New Zealand, active customers were down 14%. Our active customer count is calculated on a 12-month basis, and as a reminder, we pulled back on marketing spend in the fourth quarter last year, which will impact our active customer growth into the second quarter of 2024. Average order value of $81 decreased 5% compared to the third quarter last year on a reported basis, and was down 2% in constant currency. Gross AOV in local currency was down 8% in Australia and New Zealand region, primarily due to our targeted promotions to clear through inventory. Our third quarter return rate was 18%, which remains one of the lowest among our peers. Moving to profitability. Gross margin in the third quarter was 55.4%, compared to 55.7% in the same period last year. As mentioned, the modest gross margin contraction was entirely due to the strategic discounting in Culture Kings Australia as we successfully moved through inventory, which positions the brand to increase its product newness over the coming quarters. The gross margin was also impacted by a higher return rate, partially offset by lower freight expenses. To give you more perspective, the actions we're taking at Culture Kings Australia negatively impacted our gross margins by approximately 105 basis points in the quarter. Excluding the Australia region, gross margins would have increased, driven by improved full price selling and benefits from lower air freight versus last year. Selling expenses declined 12% to $36 million, compared to $41 million in the third quarter of 2022. Selling expenses were 26% of net sales, down 60 basis points compared to the third quarter of last year. Driven by operational efficiencies and distribution, fulfillment, and outbound shipping, I'm pleased to report that we were once again able to leverage selling expenses. Anchored on the operational efficiencies we have. Marketing expenses in the third quarter were $18.5 million, compared to $16.5 million in the third quarter of 2023. On a rate basis, marketing expenses were 13.1% of net sales, compared to 10.6% of net sales in the third quarter of 2023. In the third quarter, we continued to ramp up our marketing spend in correlation with our newness to drive demand, and we also experienced lower levels of effectiveness, particularly in the Australia region. We are working hard to improve our marketing effectiveness over the coming quarters, and as we further our Omnichannel expansion efforts, we anticipate achieving improved levels of effectiveness and a moderation on their marketing rate. General and administrative expenses declined by 6% to $24.6 million, compared to $26.1 million in the third quarter of 2022. On a rate basis, G&A expenses were 17.5% of net sales, compared to 16.8% of net sales in the third quarter of 2022. The change in the rate basis was primarily driven by lower sales volume compared to the prior year. As I've stated on prior calls, our expense base is largely fixed, and improvements in sales will require nominal incremental G&A expenses, supporting opportunities to leverage this line in the future. Adjusted EBITDA was $4.7 million, compared to $9.2 million in the same period last year. Adjusted EBITDA margin for the third quarter of 2023 was 3.3%, compared to 5.9% in the same period last year. I want to reiterate that our adjusted EBITDA, compared to our earlier expectations, was entirely due to the to the strategic actions we took in Australia to aggressively move through inventory, placing the region's inventory composition with a higher level of newness slated for next year. For the third quarter of 2023, net loss was $70 million, or $6.58 per share, compared to a net loss of $100,000, or $0.01 per share in the same period last year. I also would like to remind everyone that effective September 29th, we implemented a 1-for-12 reverse stock split, which decreased our shares outstanding to approximately 11 million shares. All references to our outstanding common stock, including per share information, have been retrospectively adjusted to reflect the reverse stock split. Turning to the balance sheet. As I mentioned, I'm very pleased with the progress we've made to strengthen our balance sheet. We've taken clear action over the last several quarters to significantly reduce our debt and meaningfully improve our inventory levels and composition, while also benefiting our working capital. We ended the quarter with $21 million in cash and cash equivalents. We reduced our debt by 26%, or $37 million from the beginning of fiscal year, ending the quarter at $107 million. We had total liquidity of approximately $63 million at the end of the third quarter. Moving to inventory. I'm proud of the progress our teams across all of our brands have made on inventory levels, which at the end of the quarter totaled $100 million, compared to $136.9 million at the end of third quarter of 2022. Total inventory dollars were down 27%, and units were down 15% compared to last year. As I mentioned, with continued macro pressure in Australia, we are taking aggressive actions to rightsize the Culture Kings inventory in the region. For our other brands, Princess Polly, Petal & Pup, and mnml, we're confident in the overall inventory composition, newness, and quality across all regions. We expect to see a continued decrease in inventory dollars and units through the end of the fiscal year. In the third quarter, we generated $8.9 million of free cash flow and $11 million of operating cash, which compared to $12 million in the third quarter of 2022. For the first nine months of the year, we generated $18 million in operating cash, which compared to an operating cash usage of $11 million in the comparable period of 2022. I'm very pleased that our positive EBITDA, coupled with prudent working capital management, enables us to have stable, positive operating cash flow profile. In the third quarter, we repurchased 106,566 shares for a total cost of approximately $600,000. As of the end of the third quarter, we have approximately $1 million remaining in our share repurchase authorization. Finally, I want to touch on the $68.5 million non-cash goodwill impairment charge that you saw in our filings. In the quarter, we updated valuations for our current businesses and macro trends and took an impairment charge to reflect this updated valuation. We remain encouraged by the performance in the U.S., and we expect the actions we're taking in Australia to position us well for 2024. We will continue to generate cash flow, and we expect to pay down between $10 million and $15 million more of debt in the fourth quarter to further strengthen our balance sheet and set us up for a strong 2024. In light of the macroeconomic conditions in the Australia region and the actions we're taking to clear through inventory in the region, we now expect to deliver between $550 million and $555 million in net sales and between $13.5 million and $15.5 million in EBITDA for the year. Lastly, I want to let you know that while Jill is doing really well, she has made the personal decision to step into a strategic advisory role effective immediately. She will remain on a.k.a.'s board of directors, and the board has begun a search for a Chief Executive Officer. Jill is a retail industry veteran and has championed a.k.a. brands over the past three and a half years. We're immensely grateful for Jill's leadership and her continued commitment to the company she has helped build. Before I take your questions, I want to remind you that our priorities for the remainder of the year are clear. We continue to reach new customers and expand our total addressable market through our Direct-to-Consumer initiatives and Omnichannel expansion. We remain diligently focused on finding even more operational efficiencies by reducing our inventory and managing our expenses. We aim to further strengthen our balance sheet and pay down more debt in the fourth quarter. I am confident that these actions we are taking in the remainder of the year set our brands up for a strong and successful 2024, and we remain committed to driving long-term growth and profitability next year and beyond. Now, we'll open it up for questions. Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Edward Yruma with Piper Sandler. Please proceed with your question. Hey, guys. Thanks for taking my question, and Jill, best of luck in the future. I guess just wanna click down a little bit on the Princess Polly store. Obviously, good to hear it's off to a good start. I guess, is this the start of a broader retail strategy? I know you have some Culture Kings. Do you foresee opening additional doors in either of those concepts? And then as a follow-up, just want to understand a little bit more on Australia. I guess, is this basically the end of kind of restructuring that business? Or do you think if volumes fall further, that there may need to be additional expense action? Thank you. Thanks, Ed. Yeah, I think, look, we're really pleased with the opening of the Princess Polly store and really all the Omnichannel initiatives that we have going across all four brands are in at least three channels at this point. You know, the Princess Polly store is off to a great start, you know, really solid run rate, and we expect it to be over 20% from an EBITDA perspective. Look, it's also great to see that 30% of the customers coming into the store are new to Princess Polly, and all of that gives us, you know, a great feeling to kind of invest, to continue with investing in the long term of that brand. We're delighted that a couple of weeks ago, Sarah joined us as head of retail for Princess Polly and brings her background from Lululemon, where she managed 400 stores in the U.S. We feel with that, you know, we will expand our retail footprint for Princess Polly. Next year, we're looking to do 3-5 doors and update you as we go. You know, specifically on Culture Kings, I think, you know, we feel really good with Ian and Wes in place there now, and you know, them bringing their expertise from Princess Polly's and the deep understanding of the test and repeat model into Culture Kings. You know, we've seen across the other three brands the benefits from that test and repeat model, and I think it's really core to us being back to growth, that 2% growth we saw in the U.S. in Q3. You know, they're already taking actions and making progress. We feel we've seen more progress as we go through the first half of next year, but kind of expect that it'll be the back half of next year before we see the full impact of that. But certainly believe, look, there's still a, you know, a lot of value in that brand and long-term growth in that brand, and, you know, we're already seeing that in the U.S.. Great, thanks so much. Our next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hi, this is Juliana on for Ike. Thank you, everyone, for the question. A quick one here. I was just wondering if maybe there's any additional commentary on the monthly sequential performance this past quarter, and if maybe there's any notes on what we've seen in the current months and expectations for holiday. Thank you. Thanks, Juliana. Yeah, I would just, you know, touch on. I think we've seen continued improvements as we've improved the quality of the inventory across the brands. You know, I think with the test and repeat model at three of the brands, you know, we really made progress on those. You know, in January, those three brands got to a situation where their inventory growth was lower than their sales growth, and we've seen that continue as we've gone through the year. So just really happy to be back at growth in the U.S. and that 2% growth. You know, I think as we think about Q4, you know, we feel like we've really, you know, we've got great quality of inventory, we've got the right product. We feel we're set up for a strong holiday and are just gonna lean into and execute against that. Great. Thank you so much. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Hi. Good afternoon, and best regards to Jill. As you think about the growth margin, Ciaran, how do you unpack it, the discounting in Culture Kings? How do you think that moves going forward, the high return rates and some of the offsets to that? And then on the Adjusted EBITDA side and the guidance that you provided, as you think about this fourth quarter, how promotional do you need to be? And with third quarter inventory down 21%, how are you thinking about inventory for the balance of the year? Thank you. Sure. Thanks, Dana. Yeah, I think, you know, as we head into the fourth quarter, I, you know, I would say we are clearly looking at the trends we've seen in the third quarter. And, you know, really great to be back to growth in the U.S. with that 2% and seeing strength across all of the brands and with all of the omni-channel initiatives that we have in place now in the U.S. and more coming internationally. I think in Australia, kind of expecting the same trends that we've seen. You know, as I mentioned in my remarks, we invested about 105 basis points of gross margin with the actions we took to move through inventory at Culture Kings in Australia in Q3. I think as we head into Q4, you know, we certainly feel that it won't be as promotional as last year. You know, with the test and repeat model we have, the inventory of three of the brands is just really, really strong. But we're modeling that we'll be down about 100 basis points versus last year for Q4 this year. And that's really the big driver of the changing guidance for us as we think about Q4. You know, I think, you know, really happy in the other areas of the P&L to see that we're leveraging now on selling expenses, you know, down year-over-year on G&A. Certainly up a little bit these days in marketing, like others. But I think as we continue to lean into the Omnichannel initiatives, you know, that will balance out over time. Thank you. Our next question comes from the line of Ashley Owens with KeyBanc. Please proceed with your question. Hi, thanks for taking the question. Just overlapping the year opening of Culture Kings in Vegas, is there anything you attribute the strength in the U.S. to? And then maybe any insights you've identified that you could implement as you look to rework your strategy in Australia? Thanks. Yeah, thanks, Ashley. You know, I think. Look, I think it's great to see the brands are resonating with our customers, and I think that's really a testament to having just great quality, on-trend product at an accessible price point. And I think that's where we're just, w e've always leaned in, and we're gonna continue to lean in. I think, you know, as we look across the brands, I think they're all just doing some really great work. You see, you know, Princess Polly continues to be in the top 10 for Piper Sandler's Teens Survey. You know, we continue to see NBA, NFL players and more every day wearing mnml products. You've people like Victoria's Secret looking to work with Petal & Pup. You know, and then you've got Culture Kings. You know, I think what they're doing with McLaren at the moment is just a great example of how differentiated our brands are from a merchandise perspective and also from a marketing perspective. I think all of the brands are gonna continue to lean into their differentiation, and they're going to do that, and it really has a big opportunity for these brands. I think we see that with the growth in the U.S., but also with the partners that we're working with now and that we're looking to work with. I think, you know, we're still a little bit behind from an active customer perspective, but, you know, it's great that we see that, you know, at marketplace between Target and Macy's, 96% of those customers are new to Petal & Pup. You know, we see 30%, as I said, of the customers coming into Princess Polly stores are new to Princess Polly. I think, you know, there's a lot of opportunities for these brands, and we're gonna continue to lean in and execute against it. Appreciate the color. Thanks. As a reminder, ladies and gentlemen, it is star one to ask your question. We do have a follow-up question from the line of Dana Telsey. Please proceed with your question. Oh, I must have pressed incorrectly. I apologize. Well, there are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.