A.K.A. BRANDS HOLDING CORP.

Previous wording

1 Non-routine items include severance from headcount reductions for the three months ended March 31, 2025, and severance from headcount reductions, sales tax penalties and insured losses, net of recoveries for the three months ended March 31, 2024.

Current wording

1 Non-routine items include severance from headcount reductions, one time supply chain sourcing costs and sales tax penalties for the three and six months ended June 30, 2025. Non-routine items include severance from headcount reductions, sales tax penalties and insured losses, net of recoveries for the three and six months ended June 30, 2024.

Previous wording

The following table presents a reconciliation of Free Cash Flow to net cash used in operating activities, the most directly comparable financial measure prepared in accordance with GAAP:

Current wording

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:

Previous wording

For the three months ended March 31, 2025, net cash used in operating activities decreased by $5.8 million compared to net cash used in operating activities for the three months ended March 31, 2024. This was attributable primarily to more sell through of inventory in the current period, as compared to the prior period, as net sales grew by 10%.

Current wording

For the six months ended June 30, 2025, net cash used in operating activities decreased by $14.2 million compared to net cash used in operating activities for the six months ended June 30, 2024. This was attributable primarily to more sell through of inventory in the current period, as compared to the prior period, as net sales grew by 9%.

Previous wording

For the three months ended March 31, 2025, Free Cash Flow increased by $3.1 million compared to Free Cash Flow for the three months ended March 31, 2024. This was attributable primarily to more sell through of inventory in the current period, as compared to the prior period, partially offset by additional capital expenditures related to new stores, to support growth in the U.S.

Current wording

For the six months ended June 30, 2025, Free Cash Flow increased by $9.0 million compared to Free Cash Flow for the six months ended June 30, 2024. This was attributable primarily to more sell through of inventory in the current period, as compared to the prior period, partially offset by additional capital expenditures related to new stores, to support growth in the U.S.

Previous wording

The macroeconomic environment in which we operate impacts consumer behavior and may have a significant impact on our business. While positive conditions in the economy generally promote customer spending on our sites and in our stores, any economic weakness can result in a reduction of customer spending and have a significant negative impact on our results of operations. Specifically, many of our products may be viewed as discretionary items rather than necessities. Consequently, our results of operations tend to be sensitive to changes in the macroeconomic environment that impact consumer discretionary spending. Macroeconomic factors that could cause significant negative impacts on our results of operations include, but are not limited to: inflationary pressures on consumers globally and on our supply chain; elevated interest rates; employment rates; business conditions; changes in the housing market; changes in stock markets; adverse developments affecting the financial services industry; the availability of credit, both for us and for our customers; foreign currency exchange rates; fuel, energy and raw materials costs; supply chain challenges; wars and geopolitical tensions; and the effects of tariffs and other trade policies. For example, since February 2025, the U.S. administration has increased the aggregate tariff and duty levels for imported Chinese goods to greater than 150%, subject to certain exceptions, and additional tariff and/or duty increases could be imposed as trade tensions between the two countries continue to heighten. Tariffs on Chinese goods have an acute effect on our cost of goods sold, as a substantial majority of our products are imported from China. While we are currently evaluating measures to mitigate the effect of the tariffs and duties on our results of operations, including sourcing products from sources located outside of China and proportional increases to the prices of our products, there are countervailing considerations that may prevent us from mitigating the effects, such as the cost of goods from sources located outside of China and customer attraction and retention considerations. Further, sourcing products from new suppliers will result in significant expenses, including brokerage fees, the purchase prices for designs owned by our existing suppliers and termination fees for our arrangements with our existing suppliers, and may result in higher costs of goods, all of which could reduce our gross margin and otherwise materially and adversely affect our results of operations. Additionally, the products we purchase from our new suppliers may be of lesser quality as compared to the products we purchase from our current suppliers and shipping times may be longer, each of which may have a material and adverse effect on our operations and, therefore, our results of operations. We may experience inventory shortages while we identify, transition to and onboard new suppliers, which may lead to decreased sales and ma…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The macroeconomic environment in which we operate impacts consumer behavior and may have a significant impact on our business. While positive conditions in the economy generally promote customer spending on our sites and in our stores, any economic weakness can result in a reduction of customer spending and have a significant negative impact on our results of operations. Specifically, many of our products may be viewed as discretionary items rather than necessities. Consequently, our results of operations tend to be sensitive to changes in the macroeconomic environment that impact consumer discretionary spending. Macroeconomic factors that could cause significant negative impacts on our results of operations include, but are not limited to: inflationary pressures on consumers globally and on our supply chain; elevated interest rates; employment rates; business conditions; changes in the housing market; changes in stock markets; adverse developments affecting the financial services industry; the availability of credit, both for us and for our customers; foreign currency exchange rates; fuel, energy and raw materials costs; supply chain challenges; wars and geopolitical tensions; and the effects of tariffs and other trade policies. For example, in the first half of 2025, the U.S. administration increased, at times, the aggregate tariff and duty levels for imported Chinese goods to greater than 150%, but have come down to the range of 50-60%. As of June 30, 2025, the U.S. administration and Chinese officials continue to work towards a trade deal, but additional tariff and/or duty increases could be imposed as trade tensions between the two countries evolve. Tariffs on Chinese goods have an acute effect on our cost of goods sold, as a substantial majority of our products are imported from China. While we are in the process of evaluating and enacting measures to mitigate the effect of the tariffs and duties on our results of operations, including sourcing products from sources located outside of China and proportional increases to the prices of our products, there are countervailing considerations that may prevent us from fully mitigating the effects, such as the cost of goods from sources located outside of China and customer attraction and retention considerations. Further, sourcing products from new suppliers might result in significant expenses, including brokerage fees, the purchase prices for designs owned by our existing suppliers and termination fees for our arrangements with our existing suppliers, and may result in higher costs of goods, all of which could reduce our gross margin and otherwise materially and adversely affect our results of operations. Additionally, the products we purchase from our new suppliers may be of lesser quality as compared to the products we purchase from our current suppliers and shipping times may be longer, each of which may have a material and adverse effect on our operations and, therefore, our results of opera…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Net sales increased by $11.8 million, or 10%, for the three months ended March 31, 2025 as compared to the same period in 2024. The increase in net sales was primarily driven by a 9% increase in the number of orders we processed in the three months ended March 31, 2025 compared to the same period in 2024, which was primarily driven by growth in the U.S. across all sales channels, and a 1% increase in average order value in the three months ended March 31, 2025 compared to the same period in 2024. On a constant currency basis, net sales and average order value for the three months ended March 31, 2025 would have increased 12% and 3%, respectively, compared to the same period in 2024.

Current wording

Net sales increased by $11.6 million, or 8%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in net sales was primarily driven by a 7% increase in the number of orders we processed in the three months ended June 30, 2025 compared to the same period in 2024, which was driven by demand growth in the U.S. On a constant currency basis, net sales and average order value for the three months ended June 30, 2025 would have increased 9% and 3%, respectively, compared to the same period in 2024.

Previous wording

Marketing expenses increased by 2% for the three months ended March 31, 2025, as compared to the same period in 2024, due to increased marketing spend compared to the same period in 2024. Marketing expenses as a percentage of net sales decreased due to higher net sales compared to last year.

Current wording

Marketing expenses increased by$1.6 million, or 9%, for the three months ended June 30, 2025, as compared to the same period in 2024. Marketing expenses as a percentage of net sales was flat for the three months ended June 30, 2025, as compared to the same period in 2024.

Previous wording

General and administrative expenses increased by $3.0 million, or 13%, for the three months ended March 31, 2025, as compared to the same period in 2024. This increase, as well as the increase in general and administrative expenses as a percentage of net sales, was primarily due to a $1.8 million increase in wages and incentive compensation expense, a $0.5 million increase in non-routine legal matters and a $0.4 million increase in professional fees.

Current wording

General and administrative expenses increased by $1.7 million, or 6%, for the three months ended June 30, 2025, as compared to the same period in 2024. This increase was due to a $0.7 million increase in wages and incentive compensation expense, a $0.6 million increase in non-routine legal matters and a $0.4 million increase in professional fees. General and administrative expenses as a percentage of net sales was flat for the three months ended June 30, 2025, as compared to the same period in 2024.

Previous wording

Cost of sales increased by$3.8 million, or 7%, for the three months ended March 31, 2025 compared to the same period in 2024. This increase was primarily due to the 10% increase in net sales for the three months ended March 31, 2025, as compared to the same period in 2024, and the impact of growing wholesale initiatives, partially offset by the impact from incremental full price selling and improved inventory position. The decrease in cost of sales as a percentage of net sales was primarily due to the impact from incremental full price selling and improved inventory position, partially offset by the effect of growing wholesale initiatives.

Current wording

Cost of sales increased by $9.1 million, or 8%, for the six months ended June 30, 2025 compared to the same period in 2024. This increase was primarily driven by the 9% increase in net sales in 2025, as compared to 2024, partially offset by the impact from more full-price selling and improved inventory position. Cost of sales as a percentage of net sales was flat for the six months ended June 30, 2025, as compared to the same period in 2024. There was an increase in tariffs and duties during the current period, as compared to the same period in 2024, but the impact was partially offset by more full-price selling in the current period.

Previous wording

Gross profit increased by $8.0 million, or 12%, for the three months ended March 31, 2025 compared to the same period in 2024. This increase was primarily due to the 10% increase in net sales for the three months ended March 31, 2025, as compared to the same period in 2024, and the impact from incremental full price selling and improved inventory position, partially offset by the effect of growing wholesale initiatives. Gross margin increased due to the impact from incremental full price selling and improved inventory position, partially offset by the effect of growing wholesale initiatives.

Current wording

Gross profit increased by $14.4 million, or 9%, for the six months ended June 30, 2025 compared to the same period in 2024. This increase was primarily driven by the 9% increase in net sales in 2025, as compared to 2024, and the impact from more full-price selling and improved inventory position. Gross margin as a percentage of net sales was flat for the six months ended June 30, 2025, as compared to the same period in 2024. There was an increase in tariffs and duties during the current period, as compared to the same period in 2024, but the impact was partially offset by more full-price selling in the current period.

Previous wording

Selling expenses increased by $4.0 million, or 12%, for the three months ended March 31, 2025, as compared to the same period in 2024. This increase was driven by the opening of additional stores, as well as the 10% increase in net sales for the three months ended March 31, 2025, as compared to the same period in 2024. The increase in selling expenses as a percentage of net sales was primarily due to the opening of additional stores.

Current wording

Selling expenses increased by $8.2 million, or 11%, for the six months ended June 30, 2025 compared to the same period in 2024. This increase was driven by the opening of additional stores, as well as the 9% increase in net sales for the six months ended June 30, 2025. The increase in selling expenses as a percentage of net sales was primarily due to the opening of additional stores.

Previous wording

Total other expense, net increased by $0.1 million, or 5%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to higher interest expense from an increase in our long-term debt balance.

Current wording

Other expense, net increased by $0.8 million, or 16%, for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to higher interest expense from an increase in short term borrowings and losses on disposals of screen print equipment.

Previous wording

As of March 31, 2025, our principal sources of liquidity were cash and cash equivalents totaling $26.7 million, our revolving line of credit and our term loan accordion provision.

Current wording

As of June 30, 2025, our principal sources of liquidity were cash and cash equivalents totaling $23.1 million, our revolving line of credit and our term loan accordion provision.

Previous wording

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. 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 March 31, 2025, we owed a combined $87.0 million in term loan and accordion borrowings, as well as $33.5 million borrowed under the revolving line of credit. 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. 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 revolving line of credit, when used, also accrues interest at Term SOFR plus an applicable margin dependent upon our net leverage ratio. 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%. 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 March 31, 2025, principal payments of our term loan and accordion for the next twelve months are anticipated to total $7.0 million.

Current wording

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. 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 June 30, 2025, we owed a combined $84.9 million in term loan and accordion borrowings, as well as $24.3 million borrowed under the revolving line of credit. 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. 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 revolving line of credit, when used, also accrues interest at Term SOFR plus an applicable margin dependent upon our net leverage ratio. 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%. 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 June 30, 2025, principal payments of our term loan and accordion for the next twelve months are anticipated to total $7.7 million.

Previous wording

Under the senior secured credit facility, we are subject to certain financial covenant ratios and certain annual mandatory prepayment terms based on excess cash flows, as defined in the Credit Agreement, based on our net leverage ratio. If we are unable to comply with certain financial covenant ratios, which include provisions that are not precisely defined and are subject to interpretation, and terms requiring mandatory prepayment based on a percentage of excess cash flows, our long-term liquidity position may be adversely impacted. Furthermore, the variable interest rates associated with our senior secured credit facility could result in interest payments that are higher than anticipated. We were in compliance with all debt covenants as of March 31, 2025, 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.

Current wording

Under the senior secured credit facility, we are subject to certain financial covenant ratios and certain annual mandatory prepayment terms based on excess cash flows, as defined in the Credit Agreement, based on our net leverage ratio. If we are unable to comply with certain financial covenant ratios, which include provisions that are not precisely defined and are subject to interpretation, and terms requiring mandatory prepayment based on a percentage of excess cash flows, our long-term liquidity position may be adversely impacted. Furthermore, the variable interest rates associated with our senior secured credit facility could result in interest payments that are higher than anticipated. We were in compliance with all debt covenants as of June 30, 2025, 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.

Previous wording

Net cash from 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.

Current wording

Net 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.

Previous wording

During the three months ended March 31, 2025, net cash used in operating activities decreased by $5.8 million as compared to the same period in 2024. This was attributable primarily to more sell through of inventory in the current period, as compared to the prior period, as net sales grew by 10%.

Current wording

During the six months ended June 30, 2025, net cash provided by operating activities increased by $14.2 million as compared to the same period in 2024. This was attributable primarily to more sell through of inventory in the current period, as compared to the prior period, as net sales grew by 9%.

Previous wording

During the three months ended March 31, 2025, net cash used in investing activities increased by $2.7 million, as compared to the same period in 2024. This was attributable to additional capital expenditures related to new stores compared to the prior year.

Current wording

During the six months ended June 30, 2025, net cash used in investing activities increased by $5.2 million, as compared to the same period in 2024. This was attributable to additional capital expenditures related to opening new stores compared to the prior year.

Previous wording

During the three months ended March 31, 2025, net cash provided by financing activities decreased by $1.3 million, as compared to the same period in 2024. This was primarily attributable to additional repayment of amounts owed under our senior secured credit facility in 2025, as compared to the prior period.

Current wording

During the six months ended June 30, 2025, net cash used in financing activities increased by $15.8 million, as compared to the same period in 2024. This was primarily attributable to additional repayment of amounts owed under our senior secured credit facility and line of credit in 2025, as compared to the prior period.

Previous wording

During the three months ended March 31, 2025, we repurchased 15,910 shares of our common stock under the Share Repurchase Program for $0.3 million, at an average price of $16.15 per share.

Current wording

During the three months ended June 30, 2025, we repurchased 12,095 shares of our common stock under the Share Repurchase Program for $0.1 million, at an average price of $9.19 per share. During the six months ended June 30, 2025, we repurchased 28,005 shares of our common stock under the Share Repurchase Program for $0.4 million, at an average price of $13.14 per share.

Previous wording

There have been no significant changes in our critical accounting estimates from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2024 Form 10-K.

Current wording

There have been no other significant changes in our critical accounting estimates from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2024 Form 10-K.