Solo Brands (DTC) 7 Nov 242024 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Solo Brands, Inc., Third Quarter Fiscal 2024 Financial Results Conference Call. At this time, I would like to hand things over to our speakers for today.

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

Before we get started, I wanted to remind everyone that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on current management expectations. limitation, financial targets objectives, performance, and without regarding estimates, future include, developments. anticipated our business may predictions, or expectations, including events, These plans, and also from results expressed which of or from statements. actual outside and such mentioned. These differ results future control be risks materially implied our could Actual forward-looking uncertainties, by could may statements those that involve of some to substantial and materially those cause differ SEC. We encourage risks risks, our website the on These our quarterly at of uncertainties filings for XX-Q filings available are among including Form Investors will and filed these to in discussed you investors.solobrands.com. a and others, soon-to-be report of these on portion the be review with discussion our

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

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

and vision third on discussing our you brands. then I you, begin performance us Thank today. quarter for you our joining all our strategic will for thank and Mark, by update

Then and sheet detail to flexibility to outlook strong our for call our our year. the invest how in building highlight cash turn more balance business, discuss results to growth. the over flow I'll in and Next, I'll long-term the provide financial for our the Laura foundation

a backdrop our during with big unseasonably Our third our XX%, ticket direct-to-consumer of despite declined consumer the results for in challenging weather We lack delivered revenues newness macroeconomic were durable quarter. and line channel expectations $X.X $XX.X of adjusted of product impacted and continued in million. Sales items. quarter traffic as the total EBITDA warmer million

healthy from and retail retail positions that the However, Despite we our margins. leading challenges, $X.X barter continue excitement our did we excluding and I brands share am with our line segment top partners. Sales increased XXXX in a to onetime market million anniversary. XX% see not strong, momentum strong of in that remain pleased agreement gross

strong exhibit Our loyalty affinity our and customers to brands. continue for a

As of quarter, our by year, we encouraged into move our early fourth the trends. we largest sales volume quarter are

Solo, at identified business While, to our would arrived how we in strategic us us key we full positioned the clean front and about on us, X growth. was and return majority up priorities We feel return good imperative winning to to our year my guidance. When season recognize we that put a of the reaffirming of path the ways. to are our I

on sustainable enable remove to the focused to order was long-term that plan on Our strategic foundation new now a against plan, XXXX priority and develop friction executing embarked for are first growth. key to and comprehensive and strategic plan. obstacles We lay in

campaigns, where channel and through to capital, to determining full-funnel of across our implementing portfolio, baseline driven are invest innovation, in, integrated performance we of focused such, part organization. A brands As the allocate distribution this evaluating marketing and product systems processes. operating our and our the the optimizing transform the was fixing to discipline which on closer our that company to will and new built be customers getting and

lift, While relatively it time. heavy has period a our teams pleased made short have I been of am with progress in a the

recruit entirely priority and talented level We capabilities. to down build second team Our team done been next now place, leadership there, have new a comes experience. the with, our that key was and in an

a Additionally, marketing with which growth XXXX. our in expect return will now partners I'm confident and we us performing significantly we have product plan. to place have strategic our we agencies the have to execute jettisoned innovation, and brand in partners team and contribute them poor replaced firms, leading industry-leading to right and in

develop priority last for third is planned year. the few important and recently successful was We pipeline. innovation we out our quarter. customers, to accessory new that an We a a version product innovative launches fourth small Our rolled introduced is to Lite, portable Surround our Surround of key know that have

griddle began have your our NFL response our has to addition, rolled rolled out firepits a In a Chubbies team unique a the go, Chubbies favorite tailgating at to spin team. At team logo Solo the the and offer and Stove, whether picnics. We're the the with football NFL or rollout, on or At new cookout ability We Lite apparel. customize game partnership that XX also we transforms with products. initial and into NFL with you logo to having and the enables Chubbies, to grill for Stove been of fantastic. new the an Solo proud out branded grill NFL Surround kit to your of we cookout firepit portable it's a customer introduce

the of shipment In of hours within fact, XX first out sold launching online. initial we our product

teams out by the to over Chubbies be quarters. XX will to logo all NFL coming apparel We rolling

from and that love approach more and we and much believe partners development they the our brands will our want retail in the more marketplace. retail Our Solo told that are to well have a innovation in we collaborative taking cases, partners us be some with product strategic, received

and our exciting filling we're expand development core. and product our and new with enhance into actively that look As will pipeline XXXX, we products

customers, enter a study research categories plan our new year, to I near of adjacent inform significantly expand this us opportunity. categories to us innovative new of surveyed permission TAM. When features. consumer products have these and be We with to We we we given unique into that started believe thorough very XXXXs enter will with X this earlier that will they into also our began

priority a Our omni-channel comprehensive more to fourth key is strategy. develop and balanced

see strong continue our to We momentum retail channel. in

plan retailers. open forward, are in key new doors several with discussions with Moving and to we up

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opportunities after retail retail. as such can to help box build retail go and to like segment organization of big that specialty, opportunities our by talent in brought maximize have We marketplaces Amazon, should channel out which our club

and are which valuing assortment. in long newness believe is and have bringing retailers our channel, ahead to of We that their a of runway underpenetrated pleased product partnership, we us. are this excitement growth I'm

I consumer of As research purchase XX% shoppers that to products previously, stated store. our in us look has their informed about

such, penetrated reason for in today and is capability. we robust are a As retail building more this under go-to-market out retail a key

and where that want priority is we to selective to with consumers to we continue experience, some innovation retail. We're shop overreliance key to a last stabilize performance due growth our and putting stabilize year of led our on product want when, by how for spend, a omni-channel with, and marketing and website. we suboptimal channel. experience partner newness, in allows challenges want. And retailers they Within be this lack due growth, a we DTC balanced our cannibalization our approach product the DTC to place actively to eventually our the back return DTC, to While pieces our to web of business new

more we us will to a have that with conjunction different consumers. showcase in capabilities to a relevant content our enable to to for us shopping year, world-class completely website Salesforce experience our Solo products Next platform more way curate relaunch our and better will a in deliver

execute strategic against entertainment to plan innovation. be our a the segment, we continue lead outdoor leader will in with to we As

Brands. Having wind have IcyBreeze this down of that that, of quality unit. we our standards brand made reporting reflect product raised attributes the decision the to quarter We the Solo said

believe to and we standards. opportunity write-down to in the outdoor and under portable year goodwill quickly IcyBreeze products a inventory this for decisively we decided charge to take While Therefore, the cooling, did and this intangible launched our related meet non-cash the quarter. have move market new not assets

and the our are of in we own patents performance the disappointed and umbrella Solo plan execution under with we IcyBreeze, starting products While still relaunch cooling XXXX. brand, to

factors are actions, past we next an the the the underperforming write-downs quarter, in decisive to that of legacy and position were and contract you our as better a additional but aggressive also will take measures lot for with marketing a much growth, address over of of a move terminating arrangement. we result these specifics hindering made X months, our a charge Laura including through into the year. as charges, During we took progress and

I to Next decision to water discuss Boards consolidate new and Kayaks a would Oru into division. Paddle like sports ISLE our

divisions developing sports as we and results them water consolidating businesses. platform realize While to the more conclusion keeping will plan, the a that our profitable synergies strategic X in came than standalone

signs long-term reorganization, post has the to traction believe COVID, growth with gaining few that and key, in Bahama right in last Product see out. Oru innovation category been have boards our to our We over beginning drive in kit of team While that growth division. and we're been profitability new this the we're fishing paddle kayaks place has branded are Tommy years soft good this selling under we growth.

marketing. Moving on to

conversion. focus QX is Our top-of-funnel between building balance more bringing and bottom-of-funnel brand in

marketing Our a but action. brand Snoop full-funnel been to campaign approach also great this of has year increasing representation a call that a is for driving awareness,

and marketing next York a benefits started Islanders, balance New seeing You're we year. of additional which the partnership expect this throughout our to in with with QX, continuation realize

rather is less on is leaning full-funnel us, brand of QX promotional year marketing, be building. a of time for marketing and performance strategy a into to promotions Although remaking heavily than and our focus reliant

we share product, more business, with around a stabilize new working up gain developing quarter, and new our we're write-downs our just work is has excited reminder, to product implementing marketing, up stronger this we but and that forward to around retail of will look progress our help to and that open XXXX doors strategic had I'm getting momentum the with closely a in distribution coming heavy shore behind implementing we're clean a and foundation. The grow business. that will and working scenes, we're our DTC strategy long-term and of We're talent. strategies new and marketing shelf. We product organization balanced, marketing believe partners initiatives year roadmap, marketing strategic hard on take our and all to about strategies, our XXXX. This our initiatives up have lift a foundation. the about As started to the entering excited been new be

gross in Our healthy strong the ability to transform the XXXX the hard and position of business This talent to and this turn us not balance sheet board. I culture the call the to and be in the work reinvest give margins, our business will could and effort beyond. growth bringing us possible to people the the Laura? without we're capabilities over now that from organization, contributions on within and Laura. for

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

During initiatives. the we strategic on significant made our progress quarter,

part We're company the to cleaning our a for this charges took related in we several the of As improved quarter. actions position taken business profitability primarily this and onetime effort, that XXXX beyond. confident up

results. quarterly our to Turning

quarter, included barter due a million, onetime year growth year. retail were put to lower consumer and $XX.X XX.X% lack were that challenges as the declined experienced $XX product have the $XX.X newness $X.X for the discretionary XX.X% not of agreement revenues decreasing channel, sales durable. In million we pressure revenues of spending $XX.X primarily continued third impacted million, to a XX.X%. was in that sales million Last of traffic million that year. Retail we compared decreasing big did have quarter ago ticket direct by site this to throughout macroeconomic Third sales anniversary year's on a

Excluding increased barter this retail XX%. in sales agreement, to segment our onetime

Turning to gross profit.

$XX.X was the compared million the $XX.X XX.X% quarter ago. was margin profit Gross gross for million compared a Our XX.X% a year to ago. for year to quarter

restructuring, orders charge profit, year decreased ago. Selling, charges, and adjusted compared administrative compared million During quarter, purchase we the these expenses increased part of to related to gross year our to million took activity. Adjusted a to XX.X% $XX.X contract excludes $XX.X and the million our termination wind down as $XX.X of a to impairment of an write-down was margin and reporting million which $XX related unit IcyBreeze inventory quarter the and ago. XX% gross XX.X% general a for

SG&A a certain was in a distribution year SG&A decline as contingent to of primarily sales, acquisitions. due expense value increase of percentage benefits, in change consideration expense bonus and increased the The was to This revenue certain associated XX.X% related XXXX reduced a in to As of compared fair to sales, XX.X% such in of employee-related expense. with offset by costs our performance a reduction ago.

$XX.X is charges with result During impairment with impairment down related contract. recognized the contract and marketing we unit reporting marketing million termination associated million IcyBreeze's charges wind in a credit quarter, and the $XX as of charges. legacy of Approximately the restructuring, the to associated onetime an underperforming impaired

to nearly the a and million million the million price. goodwill Stove our impairment exit are contract also charges, million We to $X approximately charges marketing were sustained charges. $XX restructuring $XX of non-cash. reporting decline charges, related approximately these in at of contract, recorded the legacy Of due charge termination to unit primarily share There $XX

net quarter Adjusted was Adjusted X.X%. margin net and was adjusted million. $XXX.X million. income loss $X.X $X.X million, Third was was EBITDA EBITDA

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

September we term credit $XXX.X revolving borrowing agreement. debt under leaving credit are $XXX and the capacity facility million $XX and million September compliance the our XX, of XX, loan with was availability, in all the outstanding revolving we The of on of million of facility As as borrowing covenants. million under in have $XX.X

$XXX.X Inventory X.X% disciplined the continue million, inventory, of inventory pleased and from was ago. We end our at down composition current the a of with to with our quarter year be levels. are the

Moving to outlook. our

We our reaffirming outlook. are XXXX fiscal

fiscal range of million. to $XXX to XXXX continue million $XXX expect in revenues We be the to

XX%, long-term closing, now sustainable strategic to embarked are the necessary new it We a executing remove to we to establish to focused a also and expect and have as in be growth. In success. adjusted we EBITDA range long-term X% margin for investment the make company the position of obstacles plan on on for foundation

focused company marketing customers and campaign, full-funnel As our innovation, such, our be are distribution and will transform on built we the across network, implementing discipline that integrated organization. to operating the driven getting closer optimizing to through channel

in time. has made been pleased the teams heavy the have it a we're progress of short with a While relatively lift, period

Now the operator over with turn begin to the Q&A. will that, I call to

[Operator to Glaessgen, Instructions] go first We'll Anna B. Riley.

year appreciate DTC about -- I and start through how your fine-tune of be XXXX. around DTC, framing Anna But thinking and understand in and the through expectations. to balance key thinking to the fully I'd and start or Glaessgen. XXXX the the guess, website we line to rough there? time milestones commentary, get get I end relaunch like up wholesale of of a wanting Chris, the as inflection we the kind I to should to DTC

you in we're how that laid our question. focused back we So And Anna, also strategic our continue is at retail stabilize into It's channel. as might growth we when DTC much first we it's seeing on out while do to good the something strategic of lean walked imagine, our I really that, door as plan. simultaneously a plan started the

consumer research XX,XXX we And Stove all X,XXX informed of literally research has so consumers by deep our to across different all particular. our been to market the of X,XXX where brands, talk in brand on over but deep,

is was that, at retail. so And us told XX% market of shopping they the what

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know we the DTC. DTC, for Now is what anecdote

the user to and excitement we of pipeline have and increases First our the new foremost, a that develop innovation interest product base. increases

ago, brand. X the brands in all Promoter As with top a Solo we percentile call of outdoor our mentioned is Score the Net

adjacencies we did move #X the the share inside for So we years from of X we've looking X gone more in to Pizza near know with are into from like we us. When consumers Oven, marketplace.

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the online, we're So online, generating see generate we see and the the we our consumers can can traffic transact. before that friction we sessions that

we areas fixing we and can. quickly we're them as as where lie, the So know problem

all see you of of our think should when of cadence year, retail the business. acceleration you So next an

really a X my have is understand we're started consumer I how coveted level there, products I company. that recruiting impact next talent. half online. And the brand probably our return done got build we in that to even that, in a past folks we have that to bringing From in DTC business the leadership we would first from didn't stabilization half, we've and team mention to normalized look been talent down, should highly as would been online, have as the talent growth should of the the think innovation hope we've this platform frankly, that months. as DTC new in we've with over durables the that with a that capabilities you more second and to the world-class the talent got incredible and

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like there I follow the up to of commentary on guess, your about talent. I'd line last

or of we be charge terms of Where in quarter, referenced I we overseeing think team your to last that's or extent the with that's you -- the retail or the spoke and expanded. department the are satisfaction I needed wholesale in when partnerships? say, of oversight should overseeing retail size

us. such another Anna, for it's because channel growth an great question important

the and back out been I've for Blank Home Bernie late back and on was So Arthur started, and career. when Depot we're Marcus 'XXs. wholesale retail with calling early I my years the XX in stores of rolling 'XXs

understanding the paramount. And capabilities I had entire so door And running when sales in is one here, the there organization, one person. walked person we the

And for gradually who understands brought up selling me worked a environment. account retail sales done built we've what so in is multichannel has he's we of And manager a head now team. national previously,

areas with different got much help account we've now how replenish to stores that these properly. And get those so we're building a we should be able us on hired to sell-through do we the to managers So is, to be framework gentleman, at importantly, merchandise the rate analyze parallel how X has to distribution, this analytics how then the matches. point-of-sale building of in but into that, national able John -- partnerships, calling only be much we're stores, selling, not

with lot selling everything growing, and we're numbers. in the be partners, selling and here and enhance importantly, I And so through. And you from frankly, better. walk our We a as building only internally and new at that, floors the our showroom only really it I the can of product doing key work we -- of not retailers our the into capability and be way. shopping see we're but And mean, through can retail in better experience storytelling in a showcasing curating else merchandising products really, retail our will quickly. we're

excited more this we're with made. where by and I'm we're with where But at encouraged progress So headed I'm team. the we've importantly,

Sigdahl, Ryan Craig-Hallum. to go We'll Instructions] [Operator

Matthew Raab for on Ryan. is This

doors back It up. opening encouraging. that to with kind circle be is to XXX-some the of It QX. to of strength like sounds trends want Just wholesale kind into seems driving

are kind to you Are bundle continuing seeing maybe strength talk on next of into intensity. about trends more what quarter? promo Just you the the see

Yes.

of I'll close of So QX. all, of Matthew, first back the jump to kind

after saw fall. frankly, Day, the the we bit of of height the So us, a end for was the were, start Where warm discouraging Labor QX trends a typically -- of our right. it towards September, our little season

And interest the the affected category down the we so in it it sell-through QX. affected closed and as

weather. of QX, as moved heights into Now getting we we seasonal really into We period. more start seeing our the start

So retail. increased and traffic. at increased and seeing category, We're online the we're both is in this interest seeing

no the question of the important that there's days. year for next So is the time most us XX

early are that we focused on we we to days. QX so start like certainly so and it's the far, this seen season, And but we've recognize still

metrics guess of I out, with to just conversion, viewership, came in August, anything the ad then blunt, was intended. maybe share there? Snoop the willing it sales certainly it pun uplift, that was you're And impressions, sort that Any on on

Yes.

the we've So leaning a attack into I media our as against team marketing impressions we alluded just viral built last created it But year. didn't we're Snoop a seeing saw -- it. that we approach that from and have calls, were year, started really really in mean, and got to previous encouraged I've being more full-funnel much we're thoughtful we again, built. This the interest we're what by Snoop. by

Snoop against groups haven't you variety of see that in different followers thoughtfully you'll and see are all of seen we user our if the places, So him him brand. personas already, -- done strong know a you'll very

the And of that early we're the days increase. convert far We're is stronger AOVs our spend also we seeing so in seeing ROAs seeing people so traffic. spending. increase start with as seeing an we're we're And to what we're

And us. encouraged. big it's but our days, XX really again, the I'll like next off saying for setup by for days hold a we're we XX So

and on so the we the to deck deliver hands got QX all guidance that ready given. And we've

remarks. speakers or Anna no just a It's closing get are hand for we Riley. Glaessgen, question. further conference back any questions. this everyone, from B. Actually, to time, And our there I'll did at additional the

kind refining I on the touch about comments to promotional strategy. wanted the of

a As all margin is as from this today to consumer gross the price we lower Solo full were I about contemplate bit a opened website the in well as at Stove, of to shift impacts approach. approach talk the full legacy promotionality firepits as reception selling Can more the period? you on go-forward the price, potential which maybe

Well, Anna, it's a for that. good noticing thanks question, and

issues One that uncovered the in has I And be the on of since is marketing. day. with day no on promotional just a the sale that the been less ours, performance reliant to And we've it's want walked transaction. too marketing only per we've be door brand increased secret we like every cost long-term. that to want performance We less

a in so And potentially years the overnight. of It's that and doesn't happen it making. But is effort ours. concerted quarters big

So attracted from that know what XX the them to curated And make be see you're our is over we're next personas we're to towards going much we promotions the going are days us to special to going promotional. brand. more

time an now heightened of do right So other anything other promotional periods be of interest the want less will don't seeing isn't take year. of you're times be what during We as it one. as as to where during indication than

through So start more get you'll us here, we November move as promotional. to see

in we're you're know discretionary we consumer the high important really, more ours, of anticipate, going back get We time on to Cyber Black items pulling to see Monday year, that Friday as like promotional. promotional. So that to really we've very us seen be be we have to are given ticket in the pinch going that and

margin year. So our built that guidance that's we've into the given full for gross

as need be so like setup And to to need as do drive got the we to sales. as we've we that to we promotional -- be

how more big for one just the on on an quarter in the Chubbies you how performed update to and today? touch business is And Could me. that

Yes.

has mature a continues fantastic. I grow. to pleased It very owning leagues NFL, the still continues in in to Chubbies expand Chubbies piece built is that Stove because assortment. muscles performance in many for But the it team. mean, has we're its generate right, building some product is platform. critical -- we're a is of Stove weekender to Chubbies. respects, been so like smaller the which interest of continues way, much a bigger team. It's the a the It with Chubbies with just So

selling well so They're And they're well selling retail. through online.

And so we ahead where and goods Chubbies this excited building platform with brand Stove apparel see platform fishing and got more hard approach we growth platform an for got a we've about that be business lot our a of our couldn't platform. dual and

we so the platforms our synergies as G&A. have and discovered corporate fulfillment and to some relates distribution And of some between it

prospects couldn't about And business closer getting to honestly business, I be that us. excited so more that the of for

And everyone, there are no further questions.

couple All support. poised us, we've Well, next months everybody's a you listen, got saying of I'll close for down thank ahead continued big by righty. attention and And of and we're to deliver.

thank you. So

for conclude your like thank to participation. does would today's and that We gentlemen, you all Ladies conference.

now You disconnect. may