INTERPARFUMS INC (IPAR) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrances and fragrance related products. We manage our business in two segments, European based operations and United States based operations. Certain prestige fragrance products are produced and marketed by our European based operations through our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext.

We produce and distribute fragrance products through our European based operations primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 65%, 65% and 68% of net sales for 2024, 2023 and 2022, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lacoste, Lanvin, Moncler, Montblanc, Rochas and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world. Our exclusive and worldwide license for the production and distribution of Lacoste brand perfumes and cosmetics became effective in January 2024.

Through our United States based operations, we also produce and distribute fragrances and fragrance related products. United States based operations represented 35%, 35% and 32% of net sales in 2024, 2023 and 2022, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan/DKNY, Emanual Ungaro, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta, and Roberto Cavalli brands.

Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Jimmy Choo, Montblanc, Coach, GUESS, Donna Karan/DKNY, Lacoste and Ferragamo brand names. This diversified portfolio of top brands represented 76%, 73% and 71% of total sales in 2024, 2023, and 2022, respectively.

As a percentage of net sales, product sales for the Company’s largest brands were as follows:

Quarterly sales fluctuations are influenced by the timing of new product launches as well as the third and fourth quarter holiday season. In certain markets where we sell directly to retailers, seasonality is more evident. We primarily sell directly to retailers in France, the United States, and Italy.

We grow our business in two distinct ways. First, we grow by adding new brands to our portfolio, through new licenses, or other arrangements or outright acquisitions of brands. Second, we grow through the introduction of new products and by supporting new and established products through advertising, merchandising and sampling, as well as by phasing out underperforming products, so we can devote greater resources to those products with greater potential. The economics of developing, producing, launching and supporting products influence our sales and operating performance each year. The introduction of new products may have some cannibalizing effect on sales of existing products, which we take into account in our business planning.

Our business is not capital intensive, and it is important to note that we do not own manufacturing facilities. We act as a general contractor and source our needed components from our suppliers. These components are received and stored directly at our third party fillers or received at one of our distribution centers. For those components received at one of our distribution centers, based upon production needs, the components are subsequently sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers.

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As with any global business, many aspects of our operations are subject to influences outside our control. We believe we have a strong brand portfolio with global reach and potential. As part of our strategy, we plan to continue to make investments behind fast-growing markets and channels to grow market share.

Our reported net sales are impacted by changes in foreign currency exchange rates as greater than 50% of net sales of our European based operations are denominated in U.S. dollars, while almost all costs of our European based operations are incurred in euro. We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments and primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.

Recent Important Events

Please see our discussion of Recent Important Events, which is incorporated by reference to Note 2 to the Consolidated Financial Statements contained in this 2024 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) for the year ended December 31, 2024.

Discussion of Critical Accounting Policies

We make estimates and assumptions in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations. These accounting policies generally require our management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management of the Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Board of Directors.

Long-Lived Assets

We evaluate indefinite-lived intangible assets for impairment at least annually during the fourth quarter, or more frequently when events occur or circumstances change, such as an unexpected decline in sales, that would more likely than not indicate that the carrying value of an indefinite-lived intangible asset may not be recoverable. When testing indefinite-lived intangible assets for impairment, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 9.47%. The cash flow projections are based upon a number of assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded.

We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable. However, if future actual results do not meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results of operations.

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At December 31, 2024 indefinite-lived intangible assets aggregated $116.2 million. The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2024 assuming all other assumptions remained constant:

Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is recorded. If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment charge would be recorded to reduce the intangible asset to its fair value. The cash flow projections are based upon a number of assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. In those cases where we determine that the useful life of long-lived assets should be shortened, we would amortize the net book value in excess of the salvage value (after testing for impairment as described above), over the revised remaining useful life of such asset thereby increasing amortization expense. We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable.

In determining the useful life of our Lanvin brand names and trademarks, we applied the provisions of ASC topic 350-30-35-3. The only factor that prevented us from determining that the Lanvin brand names and trademarks were indefinite lived intangible assets was Item c. “Any legal, regulatory, or contractual provisions that may limit the useful life.” The existence of a repurchase option, originally in 2025 and amended to 2027, may limit the useful life of the Lanvin brand names and trademarks to the Company. However, this limitation would only take effect if the repurchase option were to be exercised and the repurchase price was paid. If the repurchase option is not exercised, then the Lanvin brand names and trademarks are expected to continue to contribute directly to the future cash flows of our Company and their useful life would be considered to be indefinite.

With respect to the application of ASC topic 350-30-35-8, the Lanvin brand names and trademarks would only have a finite life to our Company if the repurchase option were exercised, and in applying ASC topic 350-30-35-8, we assumed that the repurchase option is exercised. When exercised, Lanvin has an obligation to pay the exercise price and the Company would be required to convey the Lanvin brand names and trademarks back to Lanvin. The exercise price to be received (residual value) is well in excess of the carrying value of the Lanvin brand names and trademarks, therefore no amortization is required.

Quantitative Analysis

During the three-year period ended December 31, 2024, we have not made any material changes in our assumptions underlying these critical accounting policies or to the related significant estimates. The results of our business underlying these assumptions have not differed significantly from our expectations.

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While we believe the estimates we have made are proper and the related results of operations for the period are presented fairly in all material respects, other assumptions could reasonably be justified that would change the amount of reported net sales, cost of sales, and selling, general and administrative expenses as they relate to the provisions for anticipated sales returns, allowance for doubtful accounts and inventory obsolescence reserves. For 2024, had these estimates been changed simultaneously by 5% in either direction, our reported gross profit would have increased or decreased by approximately $0.2 million and selling, general and administrative expenses would have changed by approximately $0.1 million. The collective impact of these changes on 2024 operating income, net income attributable to Interparfums, Inc., and net income attributable to Interparfums, Inc. per diluted share would be an increase or decrease of approximately $0.2 million, $0.2 million and $0.1, respectively.

Results of Operations

na - not applicable

Net sales in 2024 increased 10% compared to 2023. At comparable foreign currency exchange rates, net sales also increased 10% in 2024, as compared to 2023, of which 9% is related to new brands. The average dollar/euro exchange rate for 2024 was 1.08, in line with 2023.

For European based operations, sales grew by 10% for the full year 2024 driven by the strong performance of Jimmy Choo, the addition of Lacoste, and solid execution of some of our smaller brands. Our largest brand, Jimmy Choo, increased 2024 sales by 7% as compared to 2023, attributable to the ongoing success of the I Want Choo franchise, while our second and third largest brands, Montblanc and Coach, were broadly flat against a high base period in 2023 where sales grew by 15% and 25%, respectively. Lacoste, our newest brand for European based operations, exceeded the Company's expectations in its first year, achieving $85 million in net sales in 2024 thanks to the solid performance of the L.12.12 lines and the successful launch of the Lacoste Original line. There were also gains made by our mid-sized brands, including Karl Lagerfeld, Moncler, Van Cleef & Arpels and Rochas.

For United States based operations, sales grew by 12% in 2024, due to the continued robust performance of legacy scents. GUESS, our largest United States based brand, increased 2024 sales by 13%, due to the initial success of our new pillar, GUESS Iconic (women), extensions for Uomo Intenso (men), as well as a variety of multi-scent collections including Amore, Elements, and Sexy Skin Metallique. For Donna Karan/DKNY, net sales increased by 9% in 2024 compared to 2023 driven by the success of Donna Karan's four-scent Cashmere Collection, and the blockbuster launch of DKNY 24/7. Additionally, the brand exceeded $100 million in sales for the year. Sales of Ferragamo were flat against a high base period in 2023 where sales grew by 21%. Roberto Cavalli, our newest brand for United States based operations, achieved net sales of $31 million in its first year under the Company's management.

We are confident in our future as 2025 has many exciting developments for the Company, including expansion of e-commerce channels and a strong pipeline of new launches across our prestige portfolio. Lacoste Original and Jimmy Choo I Want Choo Le Parfum will continue their expansion in 2025. New launches are also planned for a new men's blockbuster for GUESS, Iconic, a new Ferragamo blockbuster, Fiamma, an MCM collection in the first quarter and a new Roberto Cavalli blockbuster in the second quarter. Additionally, we have a slate of brand extensions and flankers for Montblanc Explorer, Jimmy Choo Man, Coach Woman and Man, Lacoste L.12.12 and Original, MCM Diamond, Ferragamo Men, and two new scents for the Donna Karan Cashmere Collection.  The upcoming year will also stand out for the creation of the proprietary brand Solférino, a collection of 10 niche fragrances developed by star perfumers and intended for the collector's fragrance market. While the pace of growth in the market is starting to normalize closer to historical levels following massive growth seen over the past few years, the power of our diverse brand portfolio, in combination with our agile operating model, should help us gain market share.

As in the past, we hope to benefit from our strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee. However, we have no certainty that any new license or acquisition agreements will be consummated.

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Net Sales to Customers by Region

Our largest market, North America, achieved sales growth of 6% in 2024 compared to 2023, followed by Western Europe and Asia where sales grew by 21% and 3% in 2024, respectively, compared to 2023. Middle East and Africa, Eastern Europe, and Central and South America also achieved top line growth of 5%, 14% and 17% in 2024, respectively, compared to 2023. Additionally, our travel retail business is continuing to strengthen.

Gross Profit Margin

(a) Amounts do not reflect eliminations of intercompany sales of European based operations products sold to United States based operations.

The Company’s gross margin percentage was 63.9% in 2024 as compared to 63.7% in 2023 and 63.9% in 2022. The slight increase in gross margin percentage was driven by segment mix and the impact of certain one-time expenses related to inventory in 2023.

For European based operations, gross profit margin as a percentage of net sales was 67.0%, 67.2% and 68.2% in 2024, 2023 and 2022, respectively. European based operations were negatively impacted by brand and channel mix. These negative impacts were partially offset by the positive impact of certain one-time expenses related to inventory in 2023. For United States based operations, gross profit margin was 57.9%, 57.0% and 54.7% in 2024, 2023 and 2022, respectively. The year-over-year increase was driven by favorable brand and channel mix.

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Costs relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $61.5 million, $52.3 million and $43.1 million in 2024, 2023 and 2022, respectively, and represented 4.2%, 4.0% and 4.0% of net sales, respectively.

Generally, we do not bill customers for shipping and handling costs and such costs, which are included in selling, general and administrative expenses in the consolidated statements of income. As such, our Company’s gross margins may not be comparable to other companies, which may include these expenses as a component of cost of sales.

Selling, General and Administrative Expenses

The Company’s selling, general and administrative expenses as a percentage of nets sales were 44.7%, 44.6% and 45.3% in 2024, 2023 and 2022, respectively. The percentage of net sales remained flat from the prior year as increased amortization cost from the addition of the Lacoste license, which represented $6 million for the year, were offset due to promotional and advertising activities by our European based operations growing slower than sales growth in 2024.

For European based operations, selling, general and administrative expenses increased 9% and 13% in 2024 and 2023, respectively, as compared to the corresponding prior year period, and represented 46.3%, 47.1% and 48.2% of net sales in 2024, 2023 and 2022, respectively. The increases in expenses are in line with fluctuations in sales for European operations, primarily from increases in employee related costs due to a one-time severance payment of $2.2 million, and higher royalty costs offset by promotion and advertising expenditures growing slower than sales. Furthermore, promotion and advertising activities originally planned for the third and fourth quarter were phased into 2025 resulting in a decrease in selling, general and administrative expenses as a percentage of net sales in 2024 as compared to 2023.

For United States based operations, selling, general and administrative expenses increased 14% and 35% in 2024 and 2023, respectively, as compared to the corresponding prior year period, and represented 40.5%, 39.7% and 39.1% of net sales in 2024, 2023 and 2022, respectively. The increases in selling, general and administrative expenses as a percentage of net sales were largely driven by continued investment in infrastructure and employee headcount to support the growth of the business as well as increased promotional and advertising spending.

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Promotion and advertising included in selling, general and administrative expenses aggregated $280.5 million, $261.3 million and $212.4 million in 2024, 2023 and 2022, respectively. Promotion and advertising represented 19.3%, 19.8% and 19.5% of net sales in 2024, 2023 and 2022, respectively. Promotion and advertising are integral parts of our industry, and we continue to invest heavily to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have had a beneficial effect on sales. Additionally, as 2024 saw a lighter innovation program than in prior years, the Company focused on increasing promotional and advertising spending to support the continued success of our existing brands and to support the initial launches of our new brands, Lacoste and Roberto Cavalli. We also continue to develop and implement omnichannel concepts and compelling content to deliver an integrated consumer experience. As noted above, some promotion and advertising expenses were phased into 2025 for European based operations in order to further strengthen our first half of 2025. Long-term, we continue to anticipate that on a full year basis, promotion and advertising expenditures should aggregate approximately 21% of net sales.

Royalty expense included in selling, general and administrative expenses aggregated $117.8 million, $103.8 million and $87.0 million in 2024, 2023 and 2022, respectively. Royalty expense represented 8.1%, 7.9% and 8.0% of net sales in 2024, 2023 and 2022, respectively, due to changes in brand mix.

Impairment Loss

The Company reviews intangible assets with indefinite lives for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There was an impairment charge for trademarks with indefinite useful lives of $4.0 million and $6.8 million in 2024 and 2022, respectively, relating to our Rochas fashion business and an impairment charge for trademarks with indefinite useful lives of $0.9 million in 2022 relating to our Intimate trademark. There was no impairment charge for trademarks with indefinite useful lives in 2023.

Income from Operations

As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 18.9%, 19.1% and 17.9% for the years ended December 31, 2024, 2023 and 2022, respectively.

Other Income and Expenses

Overall, other income and expense was a loss of $6.4 million, $1.8 million, and $0.1 million in 2024, 2023, and 2022, respectively. The main drivers of the change between 2024 and 2023 are discussed in more detail below. These include an increase in interest expense on borrowings of $0.4 million, a gain on foreign currency of $0.5 million, a gain on interest income related to cash and cash equivalents and short-term investments of $0.5 million, and losses on marketable securities of $2.1 million of which $1.5 million is unrealized. Additionally, there was a one-time gain of $3.1 million recognized in 2023 related to the sale of marketable securities.

Interest expense is primarily related to the financing of brand and licensing acquisitions and the financing of the headquarters of Interparfums SA. The increase in interest expense in 2024 is related to increased borrowings during the year. In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a $51.9 million (€50 million) four-year loan agreement. The loan agreement bears interest at Euribor-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. Additionally, in April 2021, we completed the acquisition of the headquarters of Interparfums SA. The acquisition was financed by a 10-year approximately $124.7 million (€120 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately $83.1 million (€80 million) of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate of 2% per annum. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%. Additionally in July 2024, the Company entered into a $41.6 million (€40 million) three-year loan agreement that bears a fixed interest rate of 4.03%. The loan was used to improve our short-term cash position. Long-term debt including current maturities aggregated $157.3 million, $157.5 million and $180.0 million as of December 31, 2024, 2023 and 2022, respectively.

We enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Greater than 50% of net sales of our European based operations are denominated in U.S. dollars. Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying consolidated income statements. Such gains and losses were immaterial in each 2024, 2023, and 2022.

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Interest and investment income represents interest earned on cash and cash equivalents and short-term investments and realized and unrealized gains and losses on marketable securities. Interest income was $4.4 million in 2024 compared to $3.9 million in 2023. As of December 31, 2024, short-term investments also include approximately $7.7 million of marketable equity securities of other companies in the luxury goods sector. In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million. The Company purchased additional marketable securities throughout 2023 and 2024, resulting in an losses of $2.1 million during 2024, of which $1.5 million was unrealized.

Income Taxes

Our consolidated effective tax rate was 24.2%, 24.8% and 22.2% in 2024, 2023 and 2022, respectively.

The effective tax rate for European based operations was 25.8%, 27.3% and 25.2% in 2024, 2023 and 2022, respectively. Our effective tax rate in 2023 differs from the 25% statutory rate due to a one-time tax assessment of € 2.8 million ($3.1 million) included in tax expense as the result of a tax audit conducted for the 2020 and 2021 tax years.

The effective tax rate for United States based operations was 20.4%, 19.3% and 13.8% in 2024, 2023 and 2022, respectively. Our effective tax rate differs from the 21% statutory rate in the United States as it is a blended rate across multiple jurisdictions, and takes into account benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes. Additionally, in the third quarter of 2022, our United States based operations recognized a one-time tax benefit of $2.5 million associated with the 2021 Salvatore Ferragamo acquisition. At the time of the acquisition, we had not recognized a deferred tax benefit as there were uncertainties concerning its potential recoverability; however, as of September 30, 2022, recoverability was deemed likely. Other than as discussed above, we did not experience any significant changes in tax rates, and none were expected in the jurisdictions where we operate.

The Company estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $2.4 million, $2.4 million and $1.5 million as of December 31, 2024, 2023 and 2022, respectively. Share-based compensation resulted in a discrete tax benefit of $0.7 million, $1.2 million and $0.8 million in 2024, 2023 and 2022, respectively.

Net Income

Net income attributable to Interparfums, Inc. was $164.4 million, $152.7 million and $120.9 million in 2024, 2023 and 2022, respectively.

Net income attributable to European based operations was $140.1 million, $124.0 million and $107.3 million in 2024, 2023 and 2022, respectively, while net income attributable to United States based operations was $68.9 million, $63.8 million and $43.7 million in 2024, 2023 and 2022, respectively. The significant fluctuations in net income for both European and United States based operations are directly related to the previous discussions relating to changes in sales, gross profit margins, selling, general and administrative expenses.

The noncontrolling interest arises from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext. Net income attributable to the noncontrolling interest is directly related to the profitability of our European based operations and aggregated 27.7%, 28.1% and 27.9% of European based operations net income in 2024, 2023 and 2022, respectively. Net profit margins attributable to Interparfums, Inc. aggregated 11.3%, 11.6% and 11.1% in 2024, 2023 and 2022, respectively.

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Liquidity and Capital Resources

Our conservative financial tradition has enabled us to amass significant cash balances. As of December 31, 2024, we had $234.7 million in cash and cash equivalents and short-term investments, most of which are held in euro by our European based operations and is readily convertible into U.S. dollars. We have not had any liquidity issues to date, and do not expect any liquidity issues relating to such cash and cash equivalents and short-term investments.

As of December 31, 2024, working capital aggregated $582 million. Approximately 76% of the Company’s total assets are held by European based operations, and approximately $246 million of trademarks, licenses and other intangible assets are also held by European based operations.

The Company is party to a number of licenses and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2038. In connection with most of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments. See Item 8. Financial Statements and Supplementary Data – Note 11– Commitments in this annual report on Form 10-K. Future advertising commitments are estimated based on planned future sales for the license terms that were in effect at December 31, 2024, without consideration for potential renewal periods and do not reflect the fact that our distributors share our advertising obligations.

The Company hopes to continue to benefit from its strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee. In December 2024, our 72% owned French subsidiary, Interparfums SA, obtained all Off-White brand names and registered trademarks for Class 3 fragrance and cosmetic products, subject to an existing license that expires on December 31, 2025, when Interparfums SA will begin commercial use of the fragrance brands. Additionally in December 2024, we renewed the Van Cleef & Arpels license agreement for an additional nine-year term, beginning January 1, 2025. In July 2023, we entered into a global licensing agreement for the creation, development and distribution of fragrances and fragrance related products under the Roberto Cavalli brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. This license took effect in July 2023, and began shipping products in February 2024.

In December 2022, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance related products under the Lacoste brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. This new license took effect and products started to ship in January 2024.

In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we gained several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. The exclusive license became effective on July 1, 2022.

Cash provided by operating activities aggregated $187.6 million, $105.8 million, and $73.0 million in 2024, 2023 and 2022, respectively. In 2024, working capital items used $49.7 million in cash from operating activities, as compared to $102.0 million in 2023 and $107.7 million in 2022. Although, from a cash flow perspective, accounts receivable is up 17% from year-end 2023, the balance is reasonable based upon 2024 record sales levels. While days sales outstanding was 66 days, up from 62 days and 60 days in 2023 and 2022, respectively, driven by changes in our channel mix, we are still seeing strong collection activity and do not anticipate any issues with collections of accounts receivable. From a cash flow perspective, inventory levels are up 5% in support of our overall sales growth. Inventory days on hand increased slightly to 259 days in 2024, as compared to 252 days in 2023, and 227 days in 2022, as we have built up inventory related to the inclusion of the Lacoste and Roberto Cavalli licenses, which require large inventory needs to support the launches of these brands. Additionally, as we are working to manage down our inventory levels, we have seen increased conversion of raw materials into finished goods resulting in finished goods making up 63% of our inventory levels at December 31, 2024 as compared to 57% and 49% at December 31, 2023 and 2022, respectively. Due to past supply constraints, we had strived to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. These constraints have largely abated and we are gradually reversing some of these previous interventions. We are beginning to see the impacts of these recent inventory management efforts and will continue to work to optimize inventory levels.

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Cash flows used in investing activities in 2024 reflect the purchases and sales of short-term investments. These investments consist of certificates of deposit with maturities greater than three months, marketable equity securities and other contracts. At December 31, 2024, approximately $2.1 million of certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.

Further, in December 2024, the Company paid approximately $16 million for the purchase of the Off-White Trademark, with an additional $2 million payable over two years.

Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we typically spend approximately $5 million on tools and molds, depending on our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers.

Cash flows used in financing activities in 2024 reflect issuances and repayment of debt and payment of dividends to stockholders.

In July 2024, the Company entered into a $41.6 million (€40 million) three-year loan agreement that bears a fixed interest rate of 4.03%. Additionally, in December 2022, to finance Interparfums SA’s acquisition of the Lacoste trademark, Interparfums SA entered into an approximately $51.9 million (€50 million) four-year loan agreement. The loan agreement bears interest at Euribor-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum.

Our short-term financing requirements are expected to be met by available cash on hand at December 31, 2024, and by short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2024 consist of a $70 million unsecured revolving lines of credit provided by a consortium of domestic commercial banks and approximately $8.3 million in credit lines provided by a consortium of international financial institutions. Balances due from short-term borrowings totaled $8.3 million and $4.4 million as of December 31, 2024 and 2023, respectively.

In February 2022, our Board of Directors authorized an annual dividend of $2.00 per share, payable quarterly. In February 2023, our Board of Directors authorized an increase in the annual dividend to $2.50 per share and in February 2024, our Board of Directors increased the annual dividend to $3.00 per share. In February 2025, our Board of Directors further increased the annual dividend to $3.20 per share. The next quarterly cash dividend of $0.80 per share is payable on March 28, 2025 to shareholders of record on March 14, 2025.

We believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facilities, so that they will provide us with sufficient resources to meet all present and reasonably foreseeable future operating needs.

Inflation rates in the U.S. and foreign countries in which we operate did not have a significant impact on operating results for the year ended December 31, 2024 .

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