Digital Brands (DBGI) 14 Nov 232023 Q3 Earnings call transcript

Thank you for standing by, and welcome to the Digital Brands Group, Inc. Q3 2023 Earnings Call. I would now like to welcome John McNamara, Investor Relations to begin the call.

John, over to you.

Good afternoon, everyone, and thank you again for joining us on the Digital Brands 2023 Third Quarter Financial Results Conference Call. line Brands the Chief Hill on Officer. Executive us from is Digital Davis, With the a lines call the begin will Hill with then open quarter, brief we'll up questions. the for and of overview

forward-looking of business would things we such among XXA this may in you As strategy amended, strategy. statements Securities including usual, defined Act remind as the other company's and as earnings growth as that call the contain XXXX of regarding Section statements

of identify the some based number the on control. are forward-looking made. statements or forward-looking which the and and of as These only Expressions be company's predicted is date quantified speak expectations uncertainties, of cannot risks a statement are statements and largely the which subject are to company's beyond

could the from by materially prove and information Future and those In of results that developments underlying to the accurate. there these actual assurance forward-looking forth uncertainties, no light risks statements. forward-looking will be be set can differ

turn to With like call Hill Hill. ahead, that, to Davis. Go I'd the over

Thanks, afternoon, good everyone. and John,

now quarter, closed XXXX and quarter first we've bookings. are halfway fourth our wholesale through also We our

that in Given have Sundry been fourth trends of announce our Sundry increase then. and quarter turned on bookings, August, every bottom and current steady we it pleased set a to quarter their wholesale around. are since the first the we has month

XXXX again ever versus the seen bookings And XXXX which we've significant first Brand's wholesale and revenue, bottom saw the For a quarter example, for Sundry's then, have we quarter wholesale both since tripled increase. August. third July

of fall first but versus year. exclusive wholesale Anthropologie so sweater wholesale not will increase significantly results an our has this our fourth for sweater only and fall Additionally, which sold that out at quarter and bookings, our holiday, Sundry's program third quarter for next revenues asked quickly

other within for stated out their given for wholesale holiday floor on accounts they weeks. are Sundry and fact, products have order fall under the selling In

year. and They one our through largest holiday major to one correct, retail want in of along just in go next also Sundry's resulted in with other that learned synergies, buy cost operating has chain sweaters our week. our deeper XX% sold the now leverage. brands, in wholesale is we turnaround the their meaningful with Today, coupled another in account That week. revenue increase The from Sundry,

In to fact, based environment expect revenue we and trends that in DTC than our to the as macro expenses, other these and trends reported. softer on first trends be the EBITDA-neutral the assumes soft This have decline the have increasing quarter. current been expected retailers due operating and e-commerce is, we the in companies

with of and In than we fact, ever starting past. periods at we have experienced the earlier have this is much one higher promotions promotional in most discounts the seen much

well generated which private internal my died. earnings down internal to have Depot Target, these we based trends, used payable free as used Despite e-commerce sorry, retailers cash October the reported still companies, EarPods flow And this, we other in debt. Levi's, which that is softer -- my cetera. we accounts flow on et with seen free and October, cash in we old these generated trends, everyone still softer including and today, Despite Nike, e-commerce Home experiencing discussion as even -- pay

sheet We us have to as continue flow they to investors value up most. told is we cash clean expect internal will private generate and forward, that what going free the this balance the

no no due center increase COVID from rent. again over catch-up a monthly include internal increase alone and where we the landlord fact, rent paid longer month, in to office October. fact our the due April XX,XXX is In October in The should payments just in flow the years to cash distribution free will and the the

we will plus alone, COVID. Let free in me rent rent old repeat a flow an normalized from due pick that, additional a versus $XX,XXX cash rent paying of up October from just starting just

lease will flow, revenues add are the which a we lot to $X.X in products would store cost We which do from X. a month. $XXX,XXX operate. dropped This to should an store it approximately $XX,XXX a a goods expect, million since minimum over a of for The an finalizing outlet open does existing this cash It our conservative cash scenario. also Sundry of old approximately have is outlet sold. March assuming a we currently acquisition, $XXX,XXX the a have of take month cost for $XX,XXX Brand that year, costs And is month, not location but no a monthly that would to we

our then cash revenue achieve we EBITDA wholesale expect licensing month in the Based $XXX,XXX revenue, reorders income neutral wholesale should e-commerce the a maintain the amount. first from same plus store plus to additional an $X.X we our plus approximate on the current in quarter. flow bookings, our licensing to deal, top monthly on of positive plus revenue million If

other revenue feedback the the be based Anthropologie mention fourth quarters. and third wholesalers, threshold not program alone, for on And meaningfully that exclusive over should from we to sweater the $X million

to are and plus So that purchase revenue trends we the the again, a minimum which our neutral. is in and binding from positive. $X plus plus based our million the booked on plus neutral our second third in expect orders e-commerce QX, wholesale EBITDA are are wholesale and we income system current EBITDA quarterly and nicely reorders first get, our licensing bookings in be again, quarters And the EBITDA revenue outlet at quarter, for fourth for and store

accelerating in third in and plus XXX% to and first which close revenue have, the should and In in short, second XX% result quarters. the of quarters revenues, growth we fourth one,

investors these are we getting is as we and cash the in clearly three, who today in metrics Secondly, and fundamentals the these internal believe second also the also the matter, private our public find is will internal half, do and half not that neutral to EBITDA for first cash free flow and March September We and EBITDA them come any trends when why which free value markets. we increases. or in increasing public credit flow positive

Jones and & quarter trends with that, quarter for $X.X and XX.X% the XXXX. Most from results both let's revenues a quarter the third ago. disposition wholesale revenue point to Harper million represents Sundry's fourth note, $X.X wholesale increased our of exclude So year the this current of based importantly, of Net on XXXX third quarter these our results. compared million lowest Please discuss bookings. first revenue to

the acquired changed actually Sundry to made design we is the and that we when that revenue, We As wholesale the quarter QX also those when are September, wholesale we XXXX nicely. and able to and third triple were pricing reflection impact changed also team bookings our of our play a until we quality. are change and out very now results seeing fabric not changes

to Gross a compared $X to ago. margin million $X.X XX% increased year million

Our second gross significantly quarter. to XX% from ago XX.X% year increased XX% a from profit margins the and also

expenses, discount holding noncash stock associated to expenses a we noncash included to gross with million $X.X to XX.X% million margin. excluding $X.X G&A XX.X% including increased G&A items G&A and loan and expense. So items, million -- million expenses year option amortization ago. including of expenses, noncash are $X.X noncash depreciation in to expenses, decreased item and million year growing amortization, a compared compared ago. $X $X.X

a ago. and million to $X.X to to expense XX.X% was a excluding compared loss expenses million of $X year Sales to the a marketing Net and a million increased marketing Sales $X.X year $X.X ratio operating XX.X% noncash compared charge XX.X% ago. was loss, year compared million ago.

we So our on net cut revenue. loss in half operating very low

excluding just our $X.X $XXX.XX or below attributable million or loss $X.XX loss diluted per wholesale revenue or per loss In stockholders expenses, noncash QX was diluted diluted per alone. million compared per to share Net $X.X million a significantly of fact, to diluted loss share. Net common $X.X that's year share share ago. a a of per bookings was $XX.XX share,

In illustrate believe become. assets stated, given the value XXXX Brands dislocation the internal public Digital closing, market underlying reviewing wholesale value dislocation has the flow how bookings significant free quarter as alternatives between Board and company's the the cash and the continued operating this and first of Group monthly intrinsic performance. We we is strategic

wholesale store XXXX, not our impact that We from revenue, and include revenue does million revenue revenue for or our our own run rate $XX licensing e-commerce any an income.

Finally, we for flow in cash internal than million free should generate XXXX. more $X

serious We have know of We several can that cash in as about flow. pursue, acquisitions free there that that for XXXX extremely internal we fact which of our cash all growth generating we demand value will our be significant free shareholder as options options it the not crystal our on we EBITDA and we clear flow, these getting We're top should or well. meaningfully. significant for NASDAQ and positive sell internal is is are the are increase that revenue credit

third let's as alternative XXXX All do why our momentum. quarter's time, and should internal And forward public for call, free this we noted markets open is our increase continued rent with outlet not the we which earlier. and mentioned, XXXX to cash please. look at move as earnings your flow, we to based concludes are up Q&A, as seem through and moving to these This the path. Thanks to it strategic the payments store time, the forward matter the on I

[Operator Instructions]

social questions media that a have if well. as -- have have or come I across And no of e-mail questions, the I couple

are questions time, no There at sir. this

Yes.

we that. our -- there's there's let our margins One is gross the to a for in margin. me continue cost do. the And yes, of gross couple level. biggest of fixed answer at we we've gotten. few reason lot is reasons And is expect So a a And questions do this

back instance, our rent, when amount. so ] there's distribution high for fixed dollar for samples sowers, there, center wholesale, we a [ the our make makers, the pattern labor So

So on get increase, as revenues that cost. our we fixed leverage

million to as $X.X expect Additionally, also cut another we through. we move cost in

items. is this in line the Now OpEx

forward cut into we to gross potentially at because get to we're million of costs or going we'll an in in that another expect kind do and able gross especially we associated as But this costs $X.X annualized QX are And well. our QX well, as that's those margin. level leverage margins basis. hold increase fixed on So as in

mean it's made, in we've flow. where we built about serious and the in the business, are strategic the just not yes. that kind appreciation way going is, The And clear, cash same said, like the pursuing for turn we're we've with created, yes growth free we we at of And the also and the this point, are getting -- it. in is internal I actively we've are? answer pursuing acquisitions the leverage -- the frustrated the alternatives? I And other Board we are these question both revenue

that need shown And and this best on everyone now cash it does the As and at to intentional, just think call, this as be PR knows just path built from at flow the public continue we well find path. accounts we us is we PR. it has we're what very a issue lot QX free feel like products feedback we're And the selling did for that. and October this don't We on I this And results how not will getting like achieving. as getting shareholders, our in we point bookings not the the well the we've that might markets think pursue time aggressively. to wholesale the that was perfect and of very we're on of example seem issue a and I QX are for through wholesale point credit really

were questions media. major got, that or e-mail either social That's I the -- those

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would presentation, thank now for and our thank to speakers and now concludes I us. you joining all like for disconnect. today's This you today's call, may