Digital Brands (DBGI) 20 May 242024 Q1 Earnings call transcript

Greetings. Welcome to the Digital Brands Group Q1 2024 Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, John McNamara.

You may begin.

]. Holly [ you, Thank Good morning, Group Webcast. the Brands again and First Quarter welcome XXXX and to Earnings Digital everyone, Conference Call With Officer. this Hil us call Digital on is Brands morning Davis, from Executive Chief the quarter, Hil will with for we call begin lines open the and of up an will questions. then overview the the

of company's in be as In in the the forward-looking and largely which Securities forth those of forward-looking beyond the on the mind the may uncertainties, there number of in actual can strategy amended, developments are statements Please other and from by risks predicted These the XXA statements business earnings these statements to keep quantified company's among could or some contain are cannot no prove expectations forward-looking the is statement strategy. statements. control. that identify the of Future XXXX assurance set growth light Section call this be will accurate. and statements including regarding, based made. contemplated results only date of as Expressions and be defined statements uncertainties, forward-looking and subject risks to Act as materially things, which are or differ of a company's speak and underlying

I'll turn Go Davis. that, With Hil. the call Hil over ahead, to

a Despite expense quarter wholesale our operating in Good shipments, revenue shift a John. second the to first timing quarter, from shifted you, the morning. we Thank leverage. significant which experienced

to the throughout year. continue We operating leverage expect this

our with flow-through operating income. higher net this revenues fact, result to coupled In higher leverage and operating in

in port shipment our our other an had check due container [indiscernible] fabrics we at wholesale, get a fabrics, in L.A. shift majority the products. X-ray of to the of a stuck Regarding

we majority kind pay take middle really and is and what period, we divide you based of of February, into to sell-through X. the rates March think will wholesalers customs middle have we of unkind if shipped to X as and And June revenue, of -- It not there, U.S. their was stores, in one-off end to a shift the the which should we expect of weeks the impacted at on just happen this April in do pick again. which where could up, and which lost revenue majority February it then. its attention flagged wait the we lost we then by pretty significant do. There is need in March on to that's container through I of was we because X January was people ship just current went something weeks middle everything behind were we shipped that and which process, meant until in. had by nothing So We X-ray the that

not we as do we'll shift from -- our our from we second the way, mid-April. benefit the into quarter, April, shift that benefit By store, only also into opened move in which of from March

as and that down we see we're healthy week-to-week sending have. excited goes as And continues to where since revenue we first it that are said we're store, product experiencing the opened We already to there grow. we increases before, just

we're cost no the basically side. is making for that which So not store, on just product

of to strategic in additional of plan decisions the on half from also We benefit top e-commerce second year that. the

the strong, bookings through with then year, the move you of are to -- you're April. shift our benefit as So going of have we've the second in half also to store And strategic March e-commerce coupled decisions going fall some you're as of made. QX, into the well the as

Again, of to million gross this by as benefit million into negatively compared net for $X.X shipments and margin slipping the increased to a second XX.X% ago. profit the we expect year Net quarter year. a April, discuss results. let's that ago. The the then compared impacted March year wholesale revenues from XX.X% first in quarter $X.X So mentioned, were we revenues to were

makers, that pick-pack costs or costs in to fulfillment expect pattern fixed gross of center, our We cost margin number built solar, ship sold. be are are there all as the gross as such higher profit goods significant

So are revenues the are as gross higher, profit the so margins.

ago, into decreased, to to since to too, $X flipped versus to G&A of continue compared part a ago, expenses these synergies benefit ago. and $X.X year million orders that, well. XX% a also March marketing million we ago. the million XX.X% e-commerce year $X acquisition. expenses a And Sales the that was expect April to year year XXX.X% from compared compared This the XX.X% Sundry as were $XXX,XXX been was a fact and

QX X only in the really numbers. months of e-commerce So

Net per or (sic) operating significant ago. loss share we interesting million $X.X to slipped million share diluted operating reported was what into look is period, What's $X.X $XXX,XXX diluted a positive a ago, you loss a if loss compared year $XX.XX those loss per is on a $X.XX April of to which of would a based Net compared results. of actually ] or net $XXX,XXX a at revenues year was have income improvement. $XX.X [ the loss

In company of significant as acquisition. Sundry concluding, as we leverage stated, year lap the our would the achieve operating we first

and the increase the net to on We the continue revenues, expect year will higher income. leverage flow operating this through operating to which throughout

given expect performance. given Digital given Board value between the and markets alternatives public results continued intrinsic the strategic achieve and we the to QX, in QX, QX to underlying and Group company's Brands continue dislocation what of the Additionally, achieve operating our will and assets

significant. that can we -- And based what know shell meaningfully. which We demand is we have several Nasdaq are value of is worth, our inbound which on that not should shareholder pursue, all increase options

be continue So to store, orders QX are, cetera. what we et strategic as we QX I said, alternatives, is will especially, in this, the pursue to what like shaping up know wholesale the

quarter our earnings look concludes time. momentum, thanks, everyone, So call. for first We XXXX their continued to the this forward and

it Q&A, open let's please. up So to

Mike Travlos from first Your Instructions] [Operator a investor. private today question ], for is [

question, big what's but say, but opening company's and and the you our market? that one obviously, approach so angle or from what here to fragmented, with broad retail is the on forth? and so this competitive advantage we're retailing pivoting store playing I mean, General e-commerce, is

Yes.

Regarding store e-commerce. a look is pivoting that, don't at wouldn't I one from -- I

I is touch, unlikely then those think need a stores. it's about fit see, where have seeing you of those need glass things also to one stores what matters. need or book fill, have you we're And something wholesale, work, thing physical lines that it or to have One apparel, a is you e-commerce. along is to if

keep of So I would mind. in just kind that

to work. channels the channels if all the more it's need be you think in I

With over. e-commerce, unlimited of ad just the out days rolling spend is

just and that to as you're just to the store, And so more we And feet ROAs as then of, Sundry wholesale And said, the was had to products continues closely right like then instead meter of sitting watching us. running there. a we far based campaign lot campaign. ROAS be for a open alone strong you're from

in a location. -- if We'll store. see call monitor if an so, we'll it. outlet sense full it's open pursue and they what continue And that what full to So retail to a And make then it makes does sense.

there. we're just learning So

over took at we it's short then least, a lease. And so

X it's only years. So

there. or of lot a liability obligation not there's So

The to lapping of year last just point quarter over. I and big with kind and be in easy comparisons their QX. Sundry. of brand So before QX, what really was price QX in And us, differentiates would the design say the of things terms we're last going rolled good are QX it's incredibly

design we And expect there so a what new that did see to and nicely. sharpened we we improve And point team. the price brought in is

Stateside, we grow best continue at slow that just driven year, and women's point contemporary the basically where the and steady, XX% to a that's market. on price

more brand then is we licensing and to and awareness and still Bailey's more is that so continues build. just now. gets e-commerce predominantly only And And

the so best good sharpening and designer the best in at for year. basically We it's last brands, product price points, fall design. So then of price new the really a you're brought both where

to and starting hit product sell-through. see floors store her we're the So

So that benefit. will

chasing -- line Does significantly really flow you've by majority focusing it, being I top in March store then as little the line we growth, was It's of winded just And long top plus growth growth. And one answer are as things. given then cash impacted driver. on kind it's in plus much get that's again, that the basically some benefit think the other of so that got smart of shipping question? about overview. just you big just a QX And not April. I know the for

the it hear kind to did something extensive. new to want of story, so No, does I

come don't you some release a Second with recent in equity if question, XXXX, somewhat out no I raises you a about past call it raise. the in know had but had you equity activity. press

situation? the what's So

Yes.

we of that is go sending Nasdaq the at by mostly the have to notice driven auditors -- not our accounting end all a was and year, -- now the and because that So actual based based. us theoretical delisting the predominantly through

As have take all these noncash an example, charges. to you

year now, of future, GAAP a brands can the could a now. they this is our As in decade for from be accounting, any for at charge, now. one that sell unknown, we it take example a point be income from was, No what had could be tax because $XXX,XXX But it we say. noncash an knows. It millennial could of to potentially any a

silly, tax wrong, number that, to they say, thing is that one the and to which be going based to right? assigned is I guarantee when don't it, consequence because a kind they And so need on is of you that, they take for can know

noncash we're and two X then they quarter, But now. your And amount it it. can you -- is ongoing of see lot the so charges, looks is below, above number at we Nasdaq maintain us One of And a what one. things. what net which as number -- perceive had that's burn you'll they if their dipped at the

XX-XX QX how it comments these know coming maintain if on up. you're have that additional out of be to show it's in and lower based just we burn with basically, I compliance when don't And if conversations equity. and to they're in would -- second all to will capital, hearing because shareholder going be they -- is we they those in they reviewing to Nasdaq, subjective, so knew burn their that the it's your that said we us that things completely reported take or XX% So felt able if will everyone be compliance risk, our weight, that of this our the based we is we're and deem we continue things a that with deem where on but one our needed

driving So that's what's that.

driven the listed wasn't being it on by NASDAQ. So staying

and need safe then it, need just played don't you don't it So you just you and then? if additional raised capital it

thing last same same unfortunately, because Yes, sir. -- that's we of And right. this went year the That's Exactly. That's right. to issue.

-- what's majority that line, rest you pretty because keep off Now in back. that important, you majority, debt's to interest mind, of too, a into you'll in then at as rolls look is not debt's it's will the end year, it meaningful. majority roll some because of at see of That And paid if move really back. this QX, it expense the the of off our paid QX, that

interest So that line it now. year, when you get of is what XX% probably into QX is a and next then expense

So you look going pretty that, really, that's when significant. we -- to at be

$X,XXX And depreciation side, running books. amortization year, the through quarter a state and also then the longer secondly, we no next in

goodwill we the amortize of acquisitions. our So all to have

year. a the this $XXX,XXX at it's of So end QX year,

starting So $XXX,XXX come QX next will book the to year. back in

as So what's which pick the as just interesting up well look you're you as probably state next noncash that to year, are in going well. just $XXX,XXX expense, QX is at goodwill amortized interest alone, side when is

a both and Then expense interest but So that starting in be in goodwill. -- QX, move side as QX, benefit does QX benefit. in expense QX on will it we also or the forward, fact the interest

So if least you to what you stuff anticipate for that all you're Not being pretty together, cash put guidance, at anticipating. ask positive soon? that's flow you but

my off last I on where cut response. know don't the on -- I Sorry,

amortization finished have would expense. talking about interest the You and

Yes.

you'll in QX QX, then up and QX pick going you'll forward, over pretty year as in well. probably and of much quarter $XXX,XXX next up pick every $XXX,XXX QX QX So

going pretty forward, it's company as G&A the really the think meaningful you about leverage. earning So the given shape of

as So be a that that's to will forward. going benefit everything well

anticipate very flow formal guidance you soon. without cash giving being So positive that

not well just from Yes, perspective, flow we'd they were approaching the we the back that are a pure that's then yes, you you're $X.XX what our is GAAP and coming would never cost, exactly. a And annual were X% That's auditors which right, start were getting invoices know, us of event. problem pure to as they as and product prove zipper a asking internal because is perspective. X,XXX like, when like to not example, doing QX, by PCAOB an cash think even consider all GAAP we reviewed a significant that these the positive. from accounting cost they pull

So -- just also hopefully, being under our we're of a cost. adds auditors done ton PCAOB all because the it with review,

mean we being in $XXX,XXX public I quarter expensive. -- it's alone. So cost the of first pretty

a the... on thing for And

right. exactly that's That's right. Yes, exactly

we that going So it will the move of do and year forward. then And think happen. second we happen will half continue as to the

Chris Werny a ], Your investor. next question from private is [

Okay.

the have a looking have Are based University. or years State probability statistics actively based a, been in model I analyze PhD think any X,XXX X X,XXX% on on there excited revenue I've and And you Moscow probability statistical all like to at. revenue? So a because really increase develop in the could analyzing from I'm data theory I'm in revenue next to the to plans so I

look don't we're because just necessarily know. it drivers. revenue the that don't We -- at side, got you way, wholesale And on you've different

showing buy on wholesalers the based anything the You're emotional than months it so market it's ahead, more is in now, but happening right of couple else. a what's

especially you to difficult figure based as So steady just perform. state of and it's you'll have -- kind how far pretty e-commerce, now got as just and And to -- out predict that. stores, just the ROAS it's they to that then it's

factors probably will lot a guess your it's a higher. be my So is bit I variability because harder think little

next all We're and inputs back. factor off just coming harder. we into the back the expense have year. we second I half deviations, And And wide you which get all lapping your and/or state the move would lowest build -- goodwill in of that, then standard make then that. very Obviously, getting think revenue But So a as variable high last as standard you it will interest business. do continue are lap to side we're the you year, the less and you and repeat, what stick hockey think customer you once not up stair-step you certain is a when I happening you of build as more then But slope -- to stair small start it's customers that build start higher. start get people up, the function those base stair-step guys to the of what to become is starts underestimate space gets often start ends building function step to brands to levels, more a se. higher a and per that

[indiscernible] function.

Okay.

language. my speaking you're Now

Yes.

I sudden that. space, the big And our and start that what see function difference with see that's we're small. happening you're -- J.Hilburn, see because happens are up called function So in up that's of is of think get all the you're to same the higher of goes stair-step amount to and of markets to I virality a starting we're coefficient most that it brands get to there's brands stair-step brand it base. slow a you slope. is that going the just you sort And and went was because But steady like certain It you a all customers still customer here then repeat right, ends and think a time and certain in when that thing. your get brand a through into

moment that based your of just in by, closer So number you on of customers the virality and every closer to goes that get quarter basically base.

in revenue honestly to next I'm increase years to X personal Awesome. increase? X -- price to XX,XXX% Wow. probably I a my going target the

a when lot you out comment on think some think that's or at a ones I grow it look And have to the All can't shrunk normal that's capital. bigger money. revenue. even is a They awareness, dollars basically private that by repeats. in amount lot they all really we had and Allbirds We're base was but market, ton of that is of obviously you're capital. not awareness. that too. built did like I is of of are of it of brand to lot definitely raising of line customer mean, aren't to just They that is. it of built I Yes. it what doing that, ability lot there, hundreds time I you've got millions of raising growth a performing Warby brands the A take And Parker these starting -- they perform. a raised just the

So line isn't our but time their's, as passing same as process. it's the short

their I've really Allbirds. of fan a I definitely like and them, I'm Wow. from shoes. heard

very very I thinking they're think forward unique cool. and and functional

them, it's They where formula Allbirds for haven't. think to Yes, lot that know they've at Warby at know. And And some back a And have, stores. work they've stores, better job. works. the the but all look will this are Parker have done raised And goes money. some a we stores that original The of I working than brands time. we never stores other you nice stores

stores, you those if mix want wholesale e-commerce of You all have you of building a kind business you and because ores in have and you up And all channels. a then end the good water, that's have -- and there. healthy the you have in you're X

about of So we kind how that's think it.

ridiculous you're you what all Now who garbage this say, physical work say blah, stores, "Oh, a blah, digital and would will you're the never what up opening to company blah." haters

something everyone digital they Allbirds have think Well, well, I like company, company. over stores, private. argue Layer, they're XX digital company digital as mean, a also have Warby stores. as XXX would is Marine Parker, I a and They

how can you're drive ignore they digital doing, XX have -- you where I mean also and has born doesn't digital because you Buck you're that's revenue. There's or right? think I what stores. company, them, can naming just keep over Mason over XX a first, stores, you're

I That -- like thinking. you he And basics. e-commerce. say restaurants struggled Bezos is today, fill, forever. fit. have the Citadel at #X was in at Jeff I data they think lowbrow do retail. was always And is to always if you well covered with apparel, too, they covering is touch, the that thinking Amazon J.Hilburn, or category realize, when Group. apparel was is it's I So that low what where pretty in I They they look launched the And I Investment IQ and apparel. And reason well I branded in. struggled do don't see, said

one probably you've who's So business. Jeff people a as the smart seen, Bezos, of run ever

That goes on, the that People have generally brand will brandless. is time coolest clothes in to say, it and future, is. I just methodology. the a want possible, as will cheapest care theory denim what the I don't start become just I

go And online in and to things in I stock trend. you, to digital not and tell buying regret that's the Amazon I more be to think I As a start more the online going future, 'XXs. got

think I stock Yes. Wow. I some music had land

even mean, make revenues But that's go as at you Because Their key, I like that I size, fit this the catalog. and They the continue went that just you're you J.Crew. keep They think quality, you look to this they started in, then and right? through to stores. buy. then online opening right? product, were go roof, product

into what apparel, miss So that simple. you the and you retain acquire people in in digital, think I physical that it's is

engine, trap. come your retention engine, you're too, point acquire in customer where stores a wholesale becomes your as where because whole much right? comes you in. think digital that's acquisition spending and And then not customer. the think And profitability And that's So that's the I a to I is good need

Jeff a read to earnings call, and where go and smart tell I a cues business. his everyone it. or built he think back will apparel. back his Bezos they big report pretty argue, his and case, guy, all his crack that's and retail earnings again, -- think pretty miss I And couldn't you I So people Go

money So smarter time our that you too, crack more And tells probably apparel, lot, all it they in can't all he's than IQs room. and and added this than that, against right? spending he's you a more together, anyone if

you that's why have have think to I X. all So

digital you're can't first as at it doesn't mean you're you because digital only. So look just

be can't be digital you wholesale-only only, can't store You only. can't and be you

ores at just there to the the You during no I consumer as have the shift, the go water stores of all right? in And to mean into. And that's it. will COVID, reality have the once. mixes shift were

So digital was massive.

COVID, of to out come they have people As want shop.

them. principle the is They so you follow wrong." we're need don't in But do we're going And to sadly, say, to success. deviation oftentimes thinkers. follow good but a that not they are people the that than and you digital. one "No, want customer, recipe to That's standard And problem smarter because business we're -- is don't the stores, only for a customer shop online not

like, downstream do Y, to that does So what one and and not need if like you to how happens they think "Oh, what piece X, do." only would you in what that and impact A pull Z

concludes your conference, disconnect you your may at and This time. participation. for Thank lines this today's you