Solo Brands Announces First Quarter Results
Solo Brands, Inc. (NYSE: DTC) (“Solo Brands” or “the Company”) today announced its financial results for the three month period ended March 31, 2024. “We are pleased with our first quarter r...
Reaffirms Full Year 2024 Guidance
GRAPEVINE, Texas: Solo Brands, Inc. (NYSE: DTC) (“Solo Brands” or “the Company”) today announced its financial results for the three month period ended March 31, 2024.
“We are pleased with our first quarter results as sales and adjusted EBITDA came in ahead of our expectations driven by strong performance in our wholesale channel. We were encouraged to see sales trends accelerate as we moved through the quarter,” said Chris Metz, Chief Executive Officer of Solo Brands. “During the quarter we made considerable progress on developing our strategic plan for our core brands, while continuing to focus on putting the right people and processes in place to position us to generate consistent long-term growth.”
Consolidated First Quarter 2024 Highlights Compared to First Quarter 2023
- Net sales of $85.3 million, down $2.9 million or 3.3%
- Net loss of $6.5 million, down $7.4 million
- Net loss per Class A common stock - basic and diluted of $0.06, down $0.07
- Adjusted net income(1)(2) of $1.7 million, down $8.7 million or 83.8%
- Adjusted EBITDA(1) of $4.3 million, down $11.1 million or 72.1%
- Adjusted net income per Class A common stock(1)(2) of $0.03 per diluted share, down $0.07
Operating Results for the Three Months Ended March 31, 2024
Net sales decreased to $85.3 million, or 3.3%, compared to $88.2 million in the first quarter of 2023. Lower net sales resulted from less effective marketing and thereby lower site traffic within the direct-to-consumer net sales channel in the first quarter of 2024 when compared to the first quarter of 2023. While net sales within the direct-to-consumer net sales channel declined, wholesale net sales increased, period over period, resulting from a continuation of the growth experienced with our strategic partnerships.
- Direct-to-consumer revenues decreased to $51.0 million, or 6.8%, compared to $54.8 million in the first quarter of 2023.
- Wholesale revenues increased to $34.3 million, or 2.5%, compared to $33.5 million in the first quarter of 2023.
Gross profit decreased to $50.5 million, or 7.1%, compared to $54.4 million in the first quarter of 2023 primarily driven by the decrease in net sales, coupled with a shift in channel mix to more wholesale when compared to the prior year. Gross margin decreased to 59.2%, or 250 basis points, when compared to the same period of the prior year due to a shift in channel mix to wholesale from direct-to-consumer as compared to the same quarter in the prior year, as the wholesale channel typically has lower gross margins compared to that of the direct-to-consumer channel.
Selling, general and administrative expenses increased to $48.4 million, or 8.5%, compared to $44.6 million in the first quarter of 2023. The increase was driven by increases of $5.5 million in variable costs, including marketing and distribution expenses. Partially offsetting these increases, fixed costs declined $1.7 million, stemming from reductions in employee related expenses.
Other operating expenses increased to $2.2 million compared to $0.4 million in the first quarter of 2023. The increase was primarily driven by management transition costs, associated with expenses related to additional senior leadership positions, and strategic consulting engagements.
Interest expense, net increased to $3.1 million, or 35.9%, compared to $2.3 million in the first quarter of 2023, as a result of an increase in the weighted average interest rate on our total debt balance, as well as a higher average debt balance when compared to the same period of the prior year.
Net (loss) income per Class A common stock basic and diluted per share was $(0.06) for the first quarter of 2024 compared to $0.01 for the first quarter of 2023.
Adjusted net income per Class A common stock(1)(2) was $0.03 per diluted share for the first quarter of 2024 compared to $0.10 for the first quarter of 2023.
Consolidated Balance Sheet
Cash and cash equivalents were $15.4 million at March 31, 2024 compared to $19.8 million at December 31, 2023.
Inventory was $112.3 million at March 31, 2024 compared to $111.6 million at December 31, 2023.
Outstanding borrowings were $82.0 million under the Revolving Credit Facility, and $90.0 million under the Term Loan Agreement as of March 31, 2024 compared to $60.0 million and $91.3 million at December 31, 2023, respectively. The borrowing capacity on the Revolving Credit Facility was $350.0 million as of March 31, 2024, leaving $267.4 million of availability, net of issued and outstanding letters of credit.
Full Year 2024 Outlook
While first quarter results exceeded our expectations, we will continue to monitor the uncertainty of the macroeconomic environment for the remainder of the year. As such, we are reaffirming guidance for 2024 as follows:
Total revenue is expected to be between $490 million to $510 million for 2024.
Adjusted EBITDA margin* is expected to be between 10% to 12% for 2024.
The Company’s full year 2024 guidance is based on a number of assumptions that are subject to change, many of which are outside the Company’s control. If actual results vary from these assumptions, the Company’s expectations may change. There can be no assurance that the Company will achieve these results.
* | The Company has not provided a quantitative reconciliation of forecasted adjusted EBITDA margin to forecasted GAAP net income (loss) margin as a percent of net sales, respectively, within this press release because the Company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. With respect to GAAP net income (loss) margin, these items include, but are not limited to, equity-based compensation with respect to future grants and forfeitures, which could materially affect the computation of forward-looking GAAP net income, and are inherently uncertain and depend on various factors, some of which are outside of the Company’s control. | |
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(1) | This release includes references to non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” later in this release for the definitions of the non-GAAP financial measures presented and a reconciliation of these measures to their closest comparable GAAP measures. | |
(2) | This release reflects a change to the presentation of the adjusted net income (loss) per Class A common stock from previous periods in order to provide a more concise view. Prior periods are presented on this new basis for comparability purposes. Please see the definition of “Adjusted Net Income (Loss) per Class A Common Stock” below for more information. |
Conference Call Details
A conference call to discuss the Company's first quarter 2024 results is scheduled for May 9, 2024, at 8:30 a.m. ET. Investors and analysts who wish to participate in the call are invited to dial +1 833 470 1428 (international callers, please dial +1 929 526 1599) approximately 10 minutes prior to the start of the call. Please reference Conference ID 803756 when prompted. A live webcast of the conference call will be available in the investor relations section of DTC’s website, https://investors.solobrands.com.
A recorded replay of the call will be available shortly after the conclusion of the call and remain available until May 16, 2024. To access the telephone replay, dial 866 813 9403 (international callers, please dial +44 204 525 0658). The access code for the replay is 635136. A replay of the webcast will also be available within two hours of the conclusion of the call and will remain available on the website, https://investors.solobrands.com, for one year.
About Solo Brands, Inc.
Solo Brands, headquartered in Grapevine, TX, develops and produces ingenious lifestyle products that help customers create lasting memories. Through an omni-channel distribution model that leverages e-commerce, strategic wholesale relationships and physical retail stores, Solo Brands offers innovative products to consumers through six lifestyle brands – Solo Stove and TerraFlame, known for firepits, stoves, and accessories; Chubbies, a premium casual apparel and activewear brand; Oru Kayak, innovator of origami folding kayaks; ISLE, maker of inflatable and hard paddle boards and accessories; and IcyBreeze, maker of portable air conditioning coolers.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding expectations of achieving long-term growth and profitability and our anticipated GAAP and non-GAAP guidance for the fiscal year ending December 31, 2024. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “guidance,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These statements are neither promises nor guarantees, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: our ability to manage our future growth effectively; our ability to expand into additional markets; our ability to maintain and strengthen our brand to generate and maintain ongoing demand for our products; our ability to cost-effectively attract new customers and retain our existing customers; our failure to maintain product quality and product performance at an acceptable cost; the impact of product liability and warranty claims and product recalls; the highly competitive market in which we operate; business interruptions resulting from geopolitical actions, natural disasters, or pandemics; risks associated with our international operations; problems with, or loss of, our suppliers or an inability to obtain raw materials; and the ability of our stockholders to influence corporate matters. These and other important factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, and any subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other filings we make with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Forward-looking statements speak only as of the date the statements are made and are based on information available to Solo Brands at the time those statements are made and/or management's good faith belief as of that time with respect to future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Availability of Information on Solo Brands’ Website and Social Media Profiles
Investors and others should note that Solo Brands routinely announces material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the Solo Brands investors website at https://investors.solobrands.com. We also intend to use the social media profiles listed below as a means of disclosing information about us to our customers, investors and the public. While not all of the information that the Company posts to the Solo Brands investors website or to social media profiles is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in Solo Brands to review the information that it shares at the “Investors” link located at the top of the page on https://solobrands.com and to regularly follow our social media profiles. Users may automatically receive email alerts and other information about Solo Brands when enrolling an email address by visiting "Investor Email Alerts" in the "Resources" section of Solo Brands investor website at https://investors.solobrands.com.
Social Media Profiles:
https://linkedin.com/company/solo-brands/
https://instagram.com/solobrands/
https://www.facebook.com/groups/368095467245044/
SOLO BRANDS, INC. | |||||||
Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||
| Three Months Ended March 31, | ||||||
(In thousands, except per share data) |
| 2024 |
|
|
| 2023 |
|
Net sales | $ | 85,324 |
|
| $ | 88,207 |
|
Cost of goods sold |
| 34,780 |
|
|
| 33,804 |
|
Gross profit |
| 50,544 |
|
|
| 54,403 |
|
Operating expenses |
|
|
| ||||
Selling, general & administrative expenses |
| 48,410 |
|
|
| 44,622 |
|
Depreciation and amortization expenses |
| 6,275 |
|
|
| 6,178 |
|
Other operating expenses |
| 2,211 |
|
|
| 405 |
|
Total operating expenses |
| 56,896 |
|
|
| 51,205 |
|
Income (loss) from operations |
| (6,352 | ) |
|
| 3,198 |
|
Non-operating (income) expense |
|
|
| ||||
Interest expense, net |
| 3,106 |
|
|
| 2,286 |
|
Other non-operating (income) expense |
| 221 |
|
|
| (332 | ) |
Total non-operating (income) expense |
| 3,327 |
|
|
| 1,954 |
|
Income (loss) before income taxes |
| (9,679 | ) |
|
| 1,244 |
|
Income tax expense (benefit) |
| (3,195 | ) |
|
| 311 |
|
Net income (loss) |
| (6,484 | ) |
|
| 933 |
|
Less: net income (loss) attributable to noncontrolling interests |
| (3,082 | ) |
|
| 9 |
|
Net income (loss) attributable to Solo Brands, Inc. | $ | (3,402 | ) |
| $ | 924 |
|
|
|
|
| ||||
Other comprehensive income (loss) |
|
|
| ||||
Foreign currency translation, net of tax |
| 43 |
|
|
| 13 |
|
Comprehensive income (loss) |
| (6,441 | ) |
|
| 946 |
|
Less: other comprehensive income (loss) attributable to noncontrolling interests |
| 15 |
|
|
| 4 |
|
Less: net income (loss) attributable to noncontrolling interests |
| (3,082 | ) |
|
| 9 |
|
Comprehensive income (loss) attributable to Solo Brands, Inc. | $ | (3,374 | ) |
| $ | 933 |
|
|
|
|
| ||||
Net income (loss) per Class A common stock |
|
|
| ||||
Basic | $ | (0.06 | ) |
| $ | 0.01 |
|
Diluted | $ | (0.06 | ) |
| $ | 0.01 |
|
|
|
|
| ||||
Weighted-average Class A common stock outstanding |
|
|
| ||||
Basic |
| 58,068 |
|
|
| 63,670 |
|
Diluted |
| 58,068 |
|
|
| 63,890 |
|
SOLO BRANDS, INC. | |||||||
Consolidated Balance Sheets | |||||||
(In thousands, except par value and per unit data) | March 31, 2024 |
| December 31, 2023 | ||||
ASSETS |
|
|
| ||||
Current assets |
|
|
| ||||
Cash and cash equivalents | $ | 15,411 |
|
| $ | 19,842 |
|
Accounts receivable, net of allowance for credit losses of $1.1 million and $1.5 million |
| 39,033 |
|
|
| 42,725 |
|
Inventory |
| 112,333 |
|
|
| 111,613 |
|
Prepaid expenses and other current assets |
| 24,869 |
|
|
| 21,893 |
|
Total current assets |
| 191,646 |
|
|
| 196,073 |
|
Non-current assets |
|
|
| ||||
Property and equipment, net |
| 26,480 |
|
|
| 26,159 |
|
Intangible assets, net |
| 216,414 |
|
|
| 221,010 |
|
Goodwill |
| 169,648 |
|
|
| 169,648 |
|
Operating lease right-of-use assets |
| 33,924 |
|
|
| 30,788 |
|
Other non-current assets |
| 10,162 |
|
|
| 15,640 |
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