Solo Brands (DTC) 9 May 242024 Q1 Earnings call transcript

Hello, everyone, and welcome to the Solo Brands, Inc.

First Quarter Fiscal 2024 Financial Results. My name is Emily, and I'll be coordinating your call today.[Operator Instructions]. I will now hand the call over to our host, Bruce Williams. Please go ahead, Bruce.

on thank first joining released investors.solabrands.com. quarter and be and discuss call this everyone, section can Brands Relations Solo results, found morning, you website the for to morning of Good our Investor at the which we call Chief Officer, and hosted Chris by Laura Financial Officer, Coffey. be will Metz; Today's Executive Chief

you outside cause or differ control others, which our and limitation, be our XX-Q encourage our quarterly soon targets Private actual Act statements we substantial started, risks these may future I within our management's of are risks, by predictions, XXXX call discussed this on events such include, those on forward-looking could could based including implied to from be get management without materially want to statements objectives, that and performance, also statements. on Reform Before involve and the developments These from in expectations. that uncertainties, investors.solabrands.com. expectations, some SEC. forward-looking with results may regarding risks meaning Investors the Securities financial our to at discussion among website These of that filings available review those are the results including filings actual These a uncertainties, We for Form on of remarks of anticipated to be remind and Litigation and and of contain current and differ everyone estimates, plans of business materially will report or the mentioned. filed these expressed portion may

believe gross are to non-GAAP GAAP our evaluating comparisons to adjusted past we certain net margin, EBITDA consistency by our share on performance comparability supplemental adjusted, which peer and measures are and of with as information these of to period-to-period revise reliance included for release, the update as earnings in results earnings we measures, contain as including any core This call not of will definitions statements are our undertake facilitate of ability operating at most as place be which the You income provide available margin adjusted, comparable these these as our earnings, measures generate Reconciliation forward-looking investors.solabrands.com. adjusted, of companies. also obligation our diluted measures undue today, and non-GAAP in required financial that statements. indicators useful per law. except investor portion website our results them new or no only should and made to and of assist and will These

to Chris. Now I'd call to turn like the over

I I the Thank call. financial outlook all results for begin in you, then our us quarterly today. performance outlined fiscal Bruce, our provide in XXXX. an Laura priorities detail discuss call thank our you more for first last update discussing over to on will joining quarter strategic our and and by turn to and will our

plan. declined inform we our channel work very our We what in making difficult increased footing our growth. are expectations. X.X% where EBITDA through quarter. a returning By and in the a planned are Again, DXC X me will company. share significant sequential revenues I X.X% for sales QX, our an expected which are to investments, improvement us the I growth first on quarter X.X% profitability margins. adjusted with quarter, declined strategic leading about On company-wide the Revenues future direct-to-consumer fixing I for as high quarter, calls. with of and talked XX%. far, focused and last to a anticipated, experienced Wholesale priorities. results, our a pleased enterprise-wide ahead key I but last like call, and we'll came channel, and am despite business way We comparisons direct-to-consumer was hired we shift progress our more year. rate detail, regain capabilities you the pleased which which strategic high than firm resources declined as ultimately, and the Stove due Solo was see from of run lower people XX% our stream. timing in we and our exercise a normalized to investments that we moment revenue update Chubbies in first, strategic highest let how smallest with about businesses, the EBITDA focus will our so developing help in better on to I or this and than though in our Adjusted work discuss due update pressured our this

Although we still I much very like too in the saw early, way progress QX.

be sequential the in DXC a that a performance, moment. momentum we continue versus and when dilutive As In I talked in EBITDA earlier, minus from a but QX, XX% to to see went year improvement prior last I I will discuss mentioned brands a minus omnichannel more margins. marked I call, importantly, gained in And not progressed. retail as On to improvement. also QX talk we we in developing our which our would not versus our we victory, balanced prior channel, QX year, certainly in about QX X.X% growth more strategy about our saw a

last are acquisition. Now I turning innovation to mentioned talent product our Solo and Stove. revenue top priorities growth, that In X call, our

or QX performance sales talent, On DXC by made our able starting making tactical Led versus acquisition the new year-over-year with changes on a new stabilizing marketing show our stabilization QX. believe the through to to return are Snoop marketing, balanced campaign. we are we we to channel we improvement signs of versus approach retention changes ROA in our revenue customers also more in front, to our in to our marked in the spend, on ad we create capitalize the acquired were

With our our XXX in saw increase channel, count door in retail balanced also increasing creating momentum doors resulted doors. solid XXX supporting Tractor on DICK'S, over We the see door Supply, omnichannel in we of able were initiative XXX count which from to continued to XXX stores in also we strategic QX Importantly, QX to to business. from our X,XXX store stores. with capitalize tests a

see sales our take it the doors, about moving growth time from forward. for Now but channel significant to trajectory retail new will I'm encouraged the

beyond. full with During this the change of that and am move entered plans the a performance I will our capabilities. as I efficiently world-class and funnel agency new highly to we through last agencies. balance marketing call, a this confident discussed has marketing dividends digital pay We relationship year

Mike to Stove the on of responsibilities his Growth McGowan take addition role to On Chief President Solo added of the promoted Officer. talent front, in we as

John a We will with our key customers. brings for experience new key John customers growing that retail broad our Junker, also us hired channel. with strategic enable to develop our sales deeper, partnerships leader, more

am After in XXXX, I the to has record-breaking Turning QX. a that to year momentum Chubbies. in pleased continued report

The newborn first old, quarter large. season XXXX, called trunks to we marks who X and sizes the and Trunks brand people swim retail, to a from Triplex Chubbies offered trunk shapes shorts for successful beginning size months very XXX for campaign swim at ran years all. are all of and Starting in

the sets For the initial this began. retail partners critical we break of campaign, floor QX, our the end season shipped we spring at of biggest stores were that so selling most before in

retail important and see shorts trunk This our us Importantly, the height we as to season QX. sell-through enter and partners exceeded is expectations. in of for

the encouraged take As retail by forward, and retail to approach are locations. in growth I'm owned we expect look continued continue and we seeing the we green our an omnichannel DXC business. in shoots

ahead us. turnaround, our continue our have and very opportunities to customers. While us This brands growth in that we we gives are with are our resonate early strong confidence tremendous of

us supported necessary a position, strong our long-term a cash free with call the team sustainable to in is company to thank make Our to us we that to continue Laura? our over financial debt, Laura. generates investments working little for against I with the by portfolio turn turnaround. strong which allows growth. now will urgency as the for flow to of position I execute sense want is

morning, and our quarter remainder Chris, I the everyone. you Today, you, walk and results will outlook good for of Thank XXXX. provide our first through fiscal

sales our robustness the relationships performance high of strengthening in quarter partners. of demand The wholesale We with underscores channel and came our for the driven wholesale we've are retail channel. our our by our of our ahead strong that expectations, the in pleased built first products

As well expected, our contract EBITDA due ineffective distribution marketing spend was an impacted marketing to by as costs. higher legacy a as

increases business, the As also we software cost with and invest we in expense. professional fixed fees associated to experienced continue

the direct year to was during partially by million growth traffic less marketing, direct-to-consumer to ago, first primarily the due million million, were a in site the compared revenues with $XX.X revenue For $XX.X to channel to by Wholesale declined the $XX.X X.X% to decline ago. a lower partners. million increased in the was compared strategic quarter. year driven our wholesale. compared quarter due to The growth in In resulted continued to a retail effective quarter, offset $XX.X in million sales in our software decline that $XX channel, sales which

to Turning gross margins.

shift a to gross wholesale, has to for to $XX.X points general administrative million business. million direct-to-consumer which more Our lower margins expenses margins typically the $XX.X sales decreased compared ago. to increased gross quarter Selling, channel our basis than and XX.X% mix XXX due to year

a year with expense increased sales intend of year, ago, of on exit costs offset due which marketing to to this compensation percentage later XX.X% lower a fees spend professional higher expenses, As to SG&A primarily contract well higher and expense. sales, distribution legacy all was as to by partially XX.X% stock-based as software a compared of that we marketing ineffective coupled

loss EBITDA net was was adjusted adjusted million. was income $X.X and $X.X net quarter First million, million $X.X

at sheet million cash period, Turning the equivalents. and our had of $XX.X in cash to end the balance we

we the credit loan As $XX capacity in revolving million borrowing and of on revolving million facility leaving in our XX, end borrowings $XXX as the $XX was our Inventory $XXX under The of line XX, roughly million availability. million, had agreement. compared credit facility but a ago. $XXX.X March down million under outstanding nearly was $XX of year-end year March with at quarter to million of the term

We we inventory move level year. with the remain focused are will pleased and of quality disciplined inventory, the throughout as management and we on

to outlook. Moving our

revenue we expect the to be $XXX XXXX, million to million. of to fiscal in $XXX continue For range

XX% term. to continue the we expect XX% to for for the in make of the We range EBITDA to to as year business support full our necessary adjusted investments be long

the half be off to summary, excited how second For color, about revenue we historical our XXXX. first we've kicked cadence and half the to In expect for of patterns. I'm year to the the continue similar

all a strategic on Our of our brands. for focus remains developing blueprint robust

the the call to shareholders. setting our that for committed assembling for sustainable Q&A. value With to processes, the stage turn our operator over long-term will are that, I We and growth right refining the now talent begin to enhances

[Operator Instructions].

Ryan Our Group. with question Capital comes first Sigdhal from Craig-Hallum

Curious you summer, see what into portfolio? you can how maybe on across or buy think about brand promo to the and the environment a going the that

Chris, more knowing that have seen That and in QX. than QX, take it's is more environment said, question. results This seeing very in think, consumers through the their discretion reacted, certainly to with purchases, which I'll business predominantly We've I been. more regards bit show of continuing a a promotional. manner, that into is it's we're far in we've The our And they bundling. they're being effective stretched so

So we're job. nice doing a

job with Mother's what more around customer where margin with that create not effective team dilutive. timely marketing, would creates creates a better for retention and it better also creating AOVs our a doing promotions this and us, I base key like for more promotions win-win, Day weekend. bundles also value current mining marketing we're We're is higher but holidays it's consumers, Our call a

that a one that's still that the way. same from and talent so more more using they're taking days we've in, brought have in you're of early because compelling effective, And contributions the the we where seeing content it's content

And our brands, across of so that's predominantly all Stove. Solo but

started very key a this on dozen last Chubbies promotions their side, has they year. of And Chubbies really around. effective. It half a the Now was marketing that plan gone to on from day quietly they build the year promotion every

was it QX, very continued effective. campaign Their and was We it Trunks for QX called into all. in

his at and got Rainer a So Chubbies the head team of swimsuit season.

break and well. spring were we of ahead remarkably worked it So

had So a wholesale big load-in we QX our POS. in and big, we in channel, great had

a good in position move standpoint that selling warmer from inventory as we So importantly, the in season. into an business we're healthy

a our see stronger you'll I our I'm approaching very the us are we're our our with mean, cadence, little So for QX keeping happy versus in margins still in margin obviously, promotional in compression of way wholesale is And quarter results with here bit the line DXC. typically gross that plan. strong. a but

anticipate move as to in quarters be see the strong I of we we cadence spite expect. couple So promotional continuing of that through the next margins, you'll our gross

a how good I Regarding of brings on base the how balancing Chubbies to brand, do X. Eris really Opening performance, stand-alone But metrics that And in and see? store so store that. with and think job, strong think stand-alone nice do of you direct-to-consumer wholesale think store to business you seen to America think a have the Mall what that see own stores? that about then as kind you about about stores, you level your total expect

Chubbies of ago. we're you first And opening as years our in seventh to So X opened store our store. interestingly, we X throes the about say, just

time I concept. doing the a proving So the has team of good amount out what call spent really

changed merchandising We've and feel We've our in that the a that of lot changed dialed a like made we locations footage. We've we've last products we square X the years, our changed our changed think work. set. We've we've into changes over will store. our and adjacencies. are So concept

locations have gives which nicely. is would got is And experience our leg direct-to-consumer, accounts that our to pie. very is opening third got call got Personally, And that because the been very, seen very it there And strategy. retail But own it done front the And they does I put importantly, store in shop stool. and robust. that What additive. I've tremendous which in what mind. awareness grows stores. we've of it got of we're your We've So growing upside in are has some stool. We third now brand brand. leg the it lot of I've want the a of it key wholesale, always embraced just brings really us the to correctly, adding a people whenever want is it increases places it to brand we that typically

So I a wholesale as would going well. result as are grow anticipate customers to that of this our retail

to think areas to going for not climates. add stores we're just create locations we're So that to stretch continue And going us. into awareness that warm strategically to great are brand we

gets where great opportunity as our for over Sunbelt in super-hot the apparel And but people because the beyond America, regardless You course, states. and mentioned West see Midwest the of stretch country Mall us Coast upper we're the Chubbies summer we of well, our location. brand the seeing of for all just the just affinity

as One can going this But quick reverse? that if jumped clarification. Accrued think, of debt, should expenses that. And and other on liabilities I with up clarify what's quarter sequentially you there? as well any associated

down an the see bringing anticipate in we be did those we accounts, that increase We that over and will summertime.

is it, direct-to-consumer, we've our you our upon season now, season As up about QX. us think for if our best QX built and

$XX sizably manageable that seeing always anticipate way. our work to inventory same proud the that continue inventory we at that's by we're where going time So some year to down from about last our of to the down that start time, to periods. but more increases levels. million, We're But along of some you're inventory those build for those we is

At this no time, to [Operator call we turn questions Instructions]. the registered.I'll team. have the further management back

move that our root. want I Thank turnaround. you, realize it's able it's early in We doing fully time to operator. questions to for forward. here And all of we're to are just to take we as the as reiterate willing that we're we we to to digest take know answer that going innings take And the time some always, and results. going that But

people making. personally, We're great in capabilities. attracting we investing with progress are very and happy However, I'm the

continues our quarter quarter, business, and we're second our stabilized DXC it first high the into financial seen through leveraging cash model You've with free flow. strong strong we us gross and and the margins

on we progress our So and next quarter. you look Thank forward updating to you. our results

everyone, you, for and today. your lines. us now concludes joining This you Thank call, disconnect our may