Solo Brands, Inc. (NYSE:DTC) Q3 2023 Earnings Conference Call November 7, 2023 8:30 AM ET Company Participants Bruce Williams - IR John Merris - CEO Somer Webb - CFO Conference Call Participants Peter Keith - Piper Sandler Chasen Bender - Citi Sabrina Baxamusa - William Blair Ryan Sigdahl - Craig-Hallum Capital Group Brian McNamara - Canaccord Genuity Operator Ladies and gentlemen, hello, and welcome to the Solo Brands Inc. Third Quarter Fiscal 2023 Financial Results. My name is Maxine, and I'll be coordina ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number 001-40979 Solo Brands, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 87-1360865 I ...

Solo Brands, Inc. (NYSE:DTC) Q2 2023 Earnings Conference Call August 3, 2023 8:30 AM ET Company Participants Bruce Williams - IR John Merris - CEO Somer Webb - CFO Conference Call Participants Chasen Bender - Citi Peter Keith - Piper Sandler Phillip Blee - William Blair Madison Callinan - Canaccord Genuity, Inc. Operator Good morning, and welcome to the Solo Brands, Incorporated Second Quarter Fiscal 2023 Financial Results Call. [Operator Instructions] I would now like to turn the conference call over to ou ...

[SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) [Forward-Looking Statements Disclosure](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The company's forward-looking statements are predictions based on current expectations, subject to risks, and will not be publicly updated unless legally required - Forward-looking statements are based on current expectations and projections, but involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[10](index=10&type=chunk)[11](index=11&type=chunk) - Key risks include managing future growth, market expansion, brand strength, customer acquisition/retention, product quality, competitive market, business interruptions, international operations, supplier issues, and stockholder influence[11](index=11&type=chunk) - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law[12](index=12&type=chunk) [WHERE YOU CAN FIND MORE INFORMATION](index=3&type=section&id=WHERE%20YOU%20CAN%20FIND%20MORE%20INFORMATION) [Availability of Company Information](index=3&type=section&id=WHERE%20YOU%20CAN%20FIND%20MORE%20INFORMATION) The company uses its investor relations website and social media for material information, with SEC filings available online - The company utilizes its investor relations website (https://investors.solobrands.com) and certain social media channels (Twitter, Facebook, LinkedIn) for distributing material information and complying with Regulation FD[14](index=14&type=chunk) - All SEC filings, including 10-K, 10-Q, and 8-K reports, are available free of charge on the SEC's website (www.sec.gov) and the company's investor relations website[15](index=15&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Unaudited consolidated financial statements, including balance sheets, income, cash flows, and equity, are presented with detailed accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20and%20December%2031%2C%202022) Total assets increased to **$881.2 million** by June 30, 2023, driven by cash, with liabilities and equity also rising Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $60,603 | $23,293 | $37,310 | 160.2% | | Total current assets | $211,697 | $195,098 | $16,599 | 8.5% | | Total assets | $881,166 | $862,347 | $18,819 | 2.2% | | Total current liabilities | $68,238 | $67,008 | $1,230 | 1.8% | | Long-term debt, net | $136,313 | $108,383 | $27,930 | 25.8% | | Total liabilities and equity | $881,166 | $862,347 | $18,819 | 2.2% | | Total equity | $583,145 | $574,997 | $8,148 | 1.4% | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20for%20the%20Three%20and%20Six%20Month%20Periods%20Ended%20June%2030%2C%202023%20and%202022) Net sales decreased by **3.7%** for Q2 2023, but net income significantly improved to **$11.5 million** due to no impairment charges Consolidated Statements of Operations Highlights (in thousands, except per unit data) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net sales | $130,927 | $136,019 | $219,134 | $218,222 | | Gross Profit | $83,071 | $86,676 | $137,474 | $135,529 | | Income (loss) from operations | $11,066 | $(19,942) | $14,264 | $(23,168) | | Net income (loss) | $11,514 | $(19,873) | $12,447 | $(23,108) | | Net income (loss) attributable to Solo Brands, Inc. | $7,424 | $(12,039) | $8,348 | $(14,074) | | Basic EPS (Class A common stock) | $0.12 | $(0.19) | $0.13 | $(0.22) | | Diluted EPS (Class A common stock) | $0.12 | $(0.19) | $0.13 | $(0.22) | - Net income significantly improved for both the three and six months ended June 30, 2023, primarily due to the absence of **$30.6 million** in impairment charges incurred in the prior year[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Month%20Periods%20Ended%20June%2030%2C%202023%20and%202022) Operating cash flow significantly improved to **$51.8 million** for H1 2023, driven by net income and reduced inventory Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $51,795 | $(11,912) | | Investing activities | $(8,887) | $(5,356) | | Financing activities | $(5,785) | $19,012 | | Net change in cash and cash equivalents | $37,310 | $1,627 | | Cash and cash equivalents, end of period | $60,603 | $26,728 | - Operating cash flows increased by **$63.7 million** year-over-year, primarily due to a **$50.9 million** decline in cash usage from working capital changes (e.g., reduced inventory purchases) and a **$12.8 million** decline in cash usage from changes in net income[118](index=118&type=chunk)[122](index=122&type=chunk) - Cash used in financing activities increased by **$24.8 million**, mainly due to a **$28.5 million** increase in Class A common stock repurchases, partially offset by a **$3.8 million** decrease in net debt repayments[119](index=119&type=chunk) [Consolidated Statement of Equity (June 30, 2023)](index=7&type=section&id=Consolidated%20Statement%20of%20Equity%20for%20the%20Three%20and%20Six%20Month%20Periods%20Ended%20June%2030%2C%202023) Total equity increased to **$583.1 million** by June 30, 2023, influenced by net income and equity compensation, offset by repurchases Equity Changes (Six Months Ended June 30, 2023, in thousands) | Item | Amount | | :-------------------------------- | :----- | | Balance at December 31, 2022 | $574,997 | | Net income (loss) | $12,447 | | Equity-based compensation | $11,264 | | Common stock repurchase | $(8,591) | | Treasury stock retirement | $0 | | Balance at June 30, 2023 | $583,145 | [Consolidated Statement of Equity (June 30, 2022)](index=9&type=section&id=Consolidated%20Statement%20of%20Equity%20for%20the%20Three%20and%20Six%20Month%20Periods%20Ended%20June%2030%2C%202022) Total equity decreased to **$554.7 million** by June 30, 2022, primarily due to a net loss and tax distributions Equity Changes (Six Months Ended June 30, 2022, in thousands) | Item | Amount | | :-------------------------------- | :----- | | Balance at December 31, 2021 | $574,171 | | Net income (loss) | $(23,108) | | Equity-based compensation | $7,864 | | Tax distributions to non-controlling interests | $(4,541) | | Balance at June 30, 2022 | $554,702 | [Notes to the Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) Detailed notes provide context for financial statements, covering accounting policies, revenue, acquisitions, inventory, debt, and equity compensation [NOTE 1 – Significant Accounting Policies](index=10&type=section&id=NOTE%201%20%E2%80%93%20Significant%20Accounting%20Policies) This note details accounting policies, estimates, and the adoption of new pronouncements, with no material financial impact - The company adopted ASU 2016-13 (Credit Losses) on January 1, 2023, using a modified retrospective approach, with no material impact on consolidated financial statements[38](index=38&type=chunk) - ASU 2020-04 (Reference Rate Reform) adoption and related modification of credit facilities (replacing LIBOR with SOFR) did not have a significant impact[39](index=39&type=chunk) - ASU 2021-08 (Business Combinations) is effective for annual periods beginning after December 15, 2023, and its impact will depend on future acquisitions[40](index=40&type=chunk) [NOTE 2 – Revenue](index=11&type=section&id=NOTE%202%20%E2%80%93%20Revenue) Net sales show a **14.2%** decrease in DTC but a **57.0%** increase in wholesale for Q2 2023, indicating a channel shift Net Sales by Channel (in thousands) | Channel | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :---------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Direct-to-consumer | $99,650 | $116,096 | (14.2)% | $154,400 | $176,326 | (12.4)% | | Wholesale | $31,277 | $19,923 | 57.0% | $64,734 | $41,896 | 54.5% | | Total Net Sales | $130,927 | $136,019 | (3.7)% | $219,134 | $218,222 | 0.4% | [NOTE 3 – Acquisitions](index=12&type=section&id=NOTE%203%20%E2%80%93%20Acquisitions) Acquired Sconberg LLC (TerraFlame) for **$13.2 million** on May 1, 2023, expanding brand and market share - Acquired Sconberg LLC (TerraFlame) on May 1, 2023, for **$13.2 million**, consisting of **$5.5 million** cash and **$7.7 million** in contingent consideration[45](index=45&type=chunk) - The acquisition was made to increase brand and market share in the outdoor activities industry and penetrate the indoor fire and scent industry[45](index=45&type=chunk) - Purchase consideration was allocated to **$5.5 million** intangible assets, **$4.5 million** property, plant and equipment, and **$2.2 million** goodwill[45](index=45&type=chunk) [NOTE 4 – Inventory](index=12&type=section&id=NOTE%204%20%E2%80%93%20Inventory) Inventory decreased to **$113.7 million** by June 30, 2023, mainly due to reduced finished products Inventory Composition (in thousands) | Inventory Type | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Finished products on hand | $95,456 | $112,126 | | Finished products in transit | $14,792 | $16,589 | | Raw materials | $3,409 | $4,275 | | Total Inventory | $113,657 | $132,990 | [NOTE 5 – Property and Equipment, net](index=12&type=section&id=NOTE%205%20%E2%80%93%20Property%20and%20Equipment%2C%20net) Property and equipment, net, increased to **$20.7 million** by June 30, 2023, driven by machinery and new assets Property and Equipment, Net (in thousands) | Asset Category | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Machinery | $12,235 | $8,940 | | Leasehold improvements | $7,960 | $6,959 | | Buildings | $1,494 | $0 | | Land | $996 | $0 | | Total Property and equipment, net | $20,704 | $15,166 | - Depreciation expense for the six months ended June 30, 2023, was **$2.4 million**, up from **$1.5 million** in the prior year[49](index=49&type=chunk) [NOTE 6 – Goodwill and Intangible Assets, net](index=13&type=section&id=NOTE%206%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets%2C%20net) Goodwill increased to **$384.9 million** due to acquisitions, while intangible assets slightly decreased Goodwill and Intangible Assets (in thousands) | Asset Category | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Goodwill | $384,896 | $382,658 | | Intangible assets, net | $229,979 | $234,632 | - Goodwill increased by **$2.2 million** due to acquisitions during the period[50](index=50&type=chunk) - Amortization expense for intangible assets was **$10.5 million** for both the six months ended June 30, 2023, and 2022[51](index=51&type=chunk) [NOTE 7 – Accrued Expenses and Other Current Liabilities](index=13&type=section&id=NOTE%207%20%E2%80%93%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities increased to **$45.6 million**, driven by marketing accruals and contingent consideration Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--------- | :------------ | :---------------- | | Inventory | $8,970 | $7,543 | | Leases | $7,507 | $6,889 | | Payroll | $4,353 | $6,999 | | Marketing | $3,676 | $451 | | Contingent consideration | $2,617 | $0 | | Total Accrued expenses and other current liabilities | $45,643 | $43,377 | [NOTE 8 – Long-Term Debt, Net](index=14&type=section&id=NOTE%208%20%E2%80%93%20Long-Term%20Debt%2C%20Net) Long-term debt, net, increased to **$136.3 million** due to higher revolving credit facility borrowings, with compliance maintained Long-Term Debt, Net (in thousands) | Debt Type | Weighted-Average Interest Rate (June 30, 2023) | June 30, 2023 | December 31, 2022 | | :---------- | :--------------------------------------------- | :------------ | :---------------- | | Term loan | 6.37% | $93,750 | $96,250 | | Revolving credit facility | 6.41% | $50,000 | $20,000 | | Total long-term debt, net | | $136,313 | $108,383 | - The company was in compliance with all covenants under all credit arrangements as of June 30, 2023[54](index=54&type=chunk) [NOTE 9 – Leases](index=14&type=section&id=NOTE%209%20%E2%80%93%20Leases) Lease assets and liabilities remained stable, but total lease expense increased to **$5.3 million** for H1 2023 Lease Components (in thousands) | Lease Component | June 30, 2023 | December 31, 2022 | | :---------------- | :------------ | :---------------- | | Operating lease right-of-use assets, net | $33,329 | $34,259 | | Total operating lease liabilities | $35,133 | $36,022 | Lease Expense (in thousands) | Expense Type | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease right-of-use expense | $2,021 | $1,709 | $3,982 | $3,030 | | Variable and short-term lease expense | $691 | $130 | $1,300 | $611 | | Total lease expense | $2,712 | $1,839 | $5,282 | $3,641 | [NOTE 10 – Equity-Based Compensation](index=15&type=section&id=NOTE%2010%20%E2%80%93%20Equity-Based%20Compensation) Equity-based compensation expense increased to **$9.8 million** for H1 2023, driven by performance stock units Equity-Based Compensation Expense (in thousands) | Award Type | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Common units | $3,221 | $3,428 | $6,373 | $6,873 | | Restricted stock units | $966 | $794 | $1,928 | $1,608 | | Performance stock units | $592 | $0 | $1,201 | $0 | | Stock options | $177 | $198 | $248 | $376 | | Employee stock purchase plan | $52 | $30 | $52 | $30 | | Total equity-based compensation | $5,008 | $4,450 | $9,802 | $8,887 | [NOTE 11 – Income Taxes](index=16&type=section&id=NOTE%2011%20%E2%80%93%20Income%20Taxes) Effective income tax rate significantly increased to **19.4%** for H1 2023 due to the absence of prior year's impairment-related tax benefit - Effective income tax rate for the three months ended June 30, 2023, was **18.9%**, up from **8.4%** in 2022[63](index=63&type=chunk) - Effective income tax rate for the six months ended June 30, 2023, was **19.4%**, up from **10.5%** in 2022[63](index=63&type=chunk) - The increase in tax rate and expense was primarily due to a discrete tax benefit related to **$30.6 million** impairment charges in 2022 that did not recur in 2023[63](index=63&type=chunk)[64](index=64&type=chunk) - The company received a one-time refund payment of **$5.1 million** related to COVID-19 era employment tax benefits during the three months ended June 30, 2023[70](index=70&type=chunk) [NOTE 12 – Net Income (Loss) Per Share](index=18&type=section&id=NOTE%2012%20%E2%80%93%20Net%20Income%20(Loss)%20Per%20Share) Basic and diluted net income per Class A common stock significantly improved, turning positive for H1 2023 Net Income (Loss) Per Class A Common Stock | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) attributable to Solo Brands, Inc. | $7,424 | $(12,039) | $8,348 | $(14,074) | | Basic EPS | $0.12 | $(0.19) | $0.13 | $(0.22) | | Diluted EPS | $0.12 | $(0.19) | $0.13 | $(0.22) | [NOTE 13 – Equity](index=19&type=section&id=NOTE%2013%20%E2%80%93%20Equity) The company repurchased and retired **5,605,509** Class A common shares for **$28.0 million** in Q2 2023 - The Board of Directors approved and completed the repurchase of **5,605,509** shares of Class A common stock for **$28.0 million** during the three months ended June 30, 2023[73](index=73&type=chunk) - These repurchased shares were subsequently retired, decreasing the authorized Class A common stock from 475,000,000 to 469,394,491 shares[73](index=73&type=chunk)[74](index=74&type=chunk) [NOTE 14 – Subsequent Events](index=19&type=section&id=NOTE%2014%20%E2%80%93%20Subsequent%20Events) Post-period, the company acquired IcyBreeze Cooling for **$30.0 million** and repurchased **627,286** Class A common shares - Acquired IcyBreeze Cooling LLC for **$30.0 million** cash on July 1, 2023, with purchase accounting incomplete but not anticipated to have a material impact on 2023 results[76](index=76&type=chunk) - Repurchased and retired an additional **627,286** shares of Class A common stock for **$3.1 million** in July 2023[77](index=77&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, operational drivers, strategic outlook, and macroeconomic impacts, detailing changes in sales, profit, and liquidity [Overview](index=20&type=section&id=Overview) Solo Brands operates premium brands via an omni-channel model, monitoring customer metrics to drive long-term value - Solo Brands operates premium brands through an omni-channel distribution model (e-commerce, wholesale, physical retail)[80](index=80&type=chunk) Key Performance Indicators (as of June 30, 2023) | Indicator | Value | YoY Growth | | :---------------------- | :------ | :--------- | | Total customers | 4.1 million | 27.2% | | Total email subscribers | 5.9 million | 24.9% | | Repeat purchase rate (Q2 2023) | 45.2% | N/A | - Net sales decreased by **3.7%** for Q2 2023, driven by lower DTC sales (higher demand for lower-priced items) offset by strong wholesale growth[82](index=82&type=chunk) - Net income improved significantly to **$11.5 million** (Q2 2023) and **$12.4 million** (YTD 2023) from losses in the prior year, primarily due to the absence of **$30.6 million** impairment charges in Q2 2022[83](index=83&type=chunk) [Outlook](index=20&type=section&id=Outlook) The company focuses on long-term growth through innovation and expansion, prepared to mitigate macroeconomic uncertainties - Long-term growth strategies include product innovation, channel and category expansion, strategic acquisitions, and IT investments[84](index=84&type=chunk) - The company acknowledges macroeconomic uncertainties (inflation, rising interest rates) and potential impacts on discretionary spending but is prepared to mitigate pressures[84](index=84&type=chunk) [Key Factors Affecting Our Financial Condition and Results of Operations](index=20&type=section&id=Key%20Factors%20Affecting%20Our%20Financial%20Condition%20and%20Results%20of%20Operations) Product demand remained healthy, especially in wholesale, with inflation managed through cost control, but volatility is expected - Product demand remained healthy in Q2 2023, with strong growth in the wholesale channel[86](index=86&type=chunk) - The company has mitigated inflationary pressures through cost management and strategic repayments of Revolving Credit Facility borrowings[86](index=86&type=chunk) - Expects continued volatility from macroeconomic pressures (inflation, rising interest rates) for the remainder of 2023[86](index=86&type=chunk) [Components of Our Results of Operations](index=21&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section defines key operational components: Net Sales, Gross Profit, SG&A, Depreciation, Other Operating Expenses, Impairment, Interest, and Income Taxes - Net sales include DTC and wholesale channels, influenced by seasonal demand (DTC highest in Q2/Q4, wholesale in Q1/Q3) and new product launches[88](index=88&type=chunk)[89](index=89&type=chunk) - Cost of goods sold primarily includes purchase cost from manufacturers, inbound freight, duties, and product quality costs[90](index=90&type=chunk) - SG&A expenses cover marketing, wages, equity-based compensation, warehousing, logistics, shipping, and professional fees[91](index=91&type=chunk) - Other operating expenses include IPO, secondary offering, acquisition-related, business optimization, and management transition costs[93](index=93&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section details financial performance comparisons for Q2 and H1 2023 versus 2022, analyzing sales, profit, expenses, and taxes [Net Sales](index=21&type=section&id=Net%20Sales) Net sales decreased **3.7%** for Q2 2023 due to a **14.2%** DTC decline, offset by **57.0%** wholesale growth Net Sales Performance (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net sales | $130,927 | $136,019 | $(5,092) | (3.7)% | | Direct-to-consumer net sales | $99,650 | $116,096 | $(16,446) | (14.2)% | | Wholesale net sales | $31,277 | $19,923 | $11,354 | 57.0% | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net sales | $219,134 | $218,222 | $912 | 0.4% | | Direct-to-consumer net sales | $154,400 | $176,326 | $(21,926) | (12.4)% | | Wholesale net sales | $64,734 | $41,896 | $22,838 | 54.5% | - DTC channel average order value decreased by **23.7%** (3 months) and **21.4%** (6 months) due to higher demand for lower-priced items and apparel[99](index=99&type=chunk)[100](index=100&type=chunk) [Cost of Goods Sold and Gross Profit](index=23&type=section&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) Cost of goods sold decreased due to lower freight, impacting gross profit by **-4.2%** for Q2 but **+1.4%** for H1 Cost of Goods Sold and Gross Profit Performance (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Cost of goods sold | $47,856 | $49,343 | $(1,487) | (3.0)% | | Gross profit | $83,071 | $86,676 | $(3,605) | (4.2)% | | Gross margin | 63.4% | 63.7% | (0.3)% | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Cost of goods sold | $81,660 | $82,693 | $(1,033) | (1.2)% | | Gross profit | $137,474 | $135,529 | $1,945 | 1.4% | | Gross margin | 62.7% | 62.1% | 0.6% | | - Decrease in cost of goods sold was primarily driven by reductions in container costs for inbound freight[101](index=101&type=chunk) [Selling, General & Administrative Expenses](index=23&type=section&id=Selling%20General%20%26%20Administrative%20Expenses) SG&A expenses decreased by **8.2%** for Q2 and **5.8%** for H1 2023, driven by reduced marketing and distribution costs SG&A Expenses Performance (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | SG&A expenses | $63,524 | $69,166 | $(5,642) | (8.2)% | | SG&A as a % of net sales | 48.5% | 50.9% | (2.3)% | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | SG&A expenses | $108,146 | $114,810 | $(6,664) | (5.8)% | | SG&A as a % of net sales | 49.4% | 52.6% | (3.3)% | | - Variable cost decreases for the three months included a **$3.0 million** reduction in marketing spend and **$5.3 million** in distribution costs[103](index=103&type=chunk) - Fixed cost increases for the six months included **$3.4 million** in employee costs (equity-based compensation, bonus, severance) and **$1.8 million** in rent[105](index=105&type=chunk) [Other Operating Expenses](index=24&type=section&id=Other%20Operating%20Expenses) Other operating expenses significantly increased due to higher transaction and acquisition-related costs, partially offset by lower transition costs Other Operating Expenses Performance (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Other operating expenses | $2,132 | $820 | $1,312 | 160.0% | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Other operating expenses | $2,537 | $1,320 | $1,217 | 92.2% | - Increases were driven by **$1.0 million** (3 months) and **$1.1 million** (6 months) in transaction-related and acquisition expenses[106](index=106&type=chunk) - Partially offset by a **$0.5 million** decrease in management transition costs[106](index=106&type=chunk) [Impairment Charges](index=24&type=section&id=Impairment%20Charges) No impairment charges were recorded in Q2 or H1 2023, contrasting with **$30.6 million** in prior year charges - No impairment charges were recorded during the three and six months ended June 30, 2023[107](index=107&type=chunk) - In the prior year (Q2 2022), **$30.6 million** in impairment charges were recorded, including **$27.9 million** for goodwill and **$2.7 million** for trademark intangibles[107](index=107&type=chunk) [Interest Expense](index=24&type=section&id=Interest%20Expense) Net interest expense significantly increased by **101.3%** for Q2 and **134.9%** for H1 2023 due to higher interest rates Interest Expense, Net (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Interest expense, net | $2,490 | $1,237 | $1,253 | 101.3% | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Interest expense, net | $4,776 | $2,033 | $2,743 | 134.9% | - The increase was driven by a higher weighted average interest rate on total debt[107](index=107&type=chunk) [Income Taxes](index=24&type=section&id=Income%20Taxes) Income tax expense significantly increased due to the non-recurrence of a prior year discrete tax benefit from impairment charges Income Tax Expense (Benefit) (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Income tax expense (benefit) | $2,608 | $(1,819) | $4,427 | (243.4)% | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Income tax expense (benefit) | $2,919 | $(2,697) | $5,616 | (208.2)% | - The increase in tax expense was primarily due to the non-recurrence of a discrete tax benefit from **$30.6 million** impairment charges in the prior year[108](index=108&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by operating cash, **$60.6 million** cash on hand, and **$300.0 million** available credit, sufficient for the next year - Cash requirements are primarily for working capital and acquisitions, funded by operating cash flows, cash on hand, and the Revolving Credit Facility[109](index=109&type=chunk) Liquidity Sources and Facilities (as of June 30, 2023, in thousands) | Source/Facility | Amount | Availability | | :---------------------- | :----- | :----------- | | Cash and cash equivalents | $60,603 | $60,603 | | Working capital (excluding cash) | $82,856 | $82,856 | | Revolving Credit Facility | $50,000 | $300,000 | | Term Loan | $93,750 | — | - Anticipates sufficient liquidity for the next twelve months, but future growth and acquisitions may require additional capital[115](index=115&type=chunk) [Revolving Credit Facility and Term Loan](index=25&type=section&id=Revolving%20Credit%20Facility%20and%20Term%20Loan) The company has a **$350.0 million** Revolving Credit Facility and a **$93.8 million** Term Loan, both SOFR-based and covenant-compliant - Revolving Credit Facility: **$350.0 million** capacity, **$50.0 million** outstanding (June 30, 2023), matures May 2026, interest based on SOFR[112](index=112&type=chunk) - Term Loan: **$100.0 million** initially, **$93.8 million** outstanding (June 30, 2023), matures September 2026, interest based on SOFR, used for Chubbies acquisition[113](index=113&type=chunk) - The company was in compliance with all required financial covenants as of June 30, 2023[114](index=114&type=chunk) [Cash Flows](index=26&type=section&id=Cash%20Flows) Operating cash flow generated **$51.8 million** for H1 2023, a significant improvement, while investing and financing used cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :--------- | :----- | :----- | | Operating activities | $51,795 | $(11,912) | | Investing activities | $(8,887) | $(5,356) | | Financing activities | $(5,785) | $19,012 | - Operating cash flow increase of **$63.7 million** was due to a **$50.9 million** decline in cash usage from working capital (e.g., **$46.9 million** decrease in inventory cash usage) and **$12.8 million** from improved net income[118](index=118&type=chunk)[122](index=122&type=chunk) - Financing activities used **$24.8 million** more cash, primarily due to a **$28.5 million** increase in Class A common stock repurchases[119](index=119&type=chunk) [Contractual Obligations](index=26&type=section&id=Contractual%20Obligations) Contractual obligations are detailed in Notes 1, 8, and 9 of this report and the 2022 Form 10-K [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) No material changes were identified in critical accounting policies and estimates during H1 2023 - No material changes to critical accounting policies and estimates were identified during the six months ended June 30, 2023[122](index=122&type=chunk) [Recent Accounting Pronouncements](index=27&type=section&id=Recent%20Accounting%20Pronouncements) Details on recent accounting pronouncements are provided in Note 1 of the consolidated financial statements [JOBS Act](index=27&type=section&id=JOBS%20Act) As an 'emerging growth company,' Solo Brands adopts accounting guidance like private companies, potentially affecting comparability - The company qualifies as an 'emerging growth company' under the JOBS Act[124](index=124&type=chunk) - Elected to adopt new or revised accounting guidance within the same time periods as private companies, which may impact financial statement comparability[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to interest rate, inflation, commodity price, and foreign currency risks, noting no material impact to date [Interest Rate Risk](index=27&type=section&id=Interest%20Rate%20Risk) The company faces interest rate risk from variable-rate debt; a **100 basis point** SOFR increase would raise annual interest by **$1.4 million** - Indebtedness of **$50.0 million** (Revolving Credit Facility) and **$93.8 million** (Term Loan) bears variable interest rates based on SOFR[126](index=126&type=chunk) - A **100 basis point** increase in SOFR would increase annual interest expense by approximately **$1.4 million**[126](index=126&type=chunk) - No interest rate swap contracts were in place as of June 30, 2023[126](index=126&type=chunk) [Inflation Risk](index=27&type=section&id=Inflation%20Risk) Inflation has not materially impacted financials, but future high rates could adversely affect gross margin and SG&A - Inflation has not had a material impact on financial position or results of operations to date[127](index=127&type=chunk) - Future high inflation could adversely affect gross margin and SG&A if selling prices do not increase with costs[127](index=127&type=chunk) [Commodity Price Risk](index=27&type=section&id=Commodity%20Price%20Risk) The company's primary raw materials, stainless steel and aluminum, are subject to price fluctuations, but commodity price risk is not material - Primary raw materials are stainless steel and aluminum, which are subject to price fluctuations[128](index=128&type=chunk) - No significant direct correlation is believed to exist between petroleum/natural gas prices and product costs[128](index=128&type=chunk) [Foreign Currency Risk](index=27&type=section&id=Foreign%20Currency%20Risk) International sales, **6.8%** of net sales, are USD-denominated; foreign currency risk is not material, but a strong USD could impact costs - International sales accounted for **6.8%** of consolidated net sales for the six months ended June 30, 2023, primarily denominated in U.S. dollars[129](index=129&type=chunk) - Exposure to foreign currency fluctuations from operating expenses is not material at this time[129](index=129&type=chunk) - A strengthening U.S. dollar could increase product costs for international customers[129](index=129&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting [Limitations on effectiveness of controls and procedures](index=27&type=section&id=Limitations%20on%20effectiveness%20of%20controls%20and%20procedures) Controls and procedures provide reasonable assurance, acknowledging inherent limitations and resource constraints - Controls and procedures can only provide reasonable assurance due to inherent limitations and resource constraints[130](index=130&type=chunk) [Evaluation of disclosure controls and procedures](index=28&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) Disclosure controls and procedures were deemed effective at a reasonable assurance level as of June 30, 2023 - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023[131](index=131&type=chunk) [Changes in Internal Control over Financial Reporting](index=28&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes occurred in internal control over financial reporting during Q2 2023 - No material changes in internal control over financial reporting during the quarter ended June 30, 2023[132](index=132&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings have occurred since the 2022 Form 10-K - No material changes to legal proceedings since the 2022 Form 10-K[134](index=134&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section highlights existing risk factors and introduces a new risk regarding stock repurchases, including potential volatility and excise tax - No material changes to risk factors identified in the 2022 Form 10-K, except for a new risk concerning stock repurchases[136](index=136&type=chunk) - Stock repurchases could increase stock price volatility, reduce market liquidity, diminish cash reserves, and may not produce hoped-for stockholder value[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - The Inflation Reduction Act of 2022 imposes a non-deductible **1%** excise tax on stock repurchases exceeding **$1 million** annually, making them more expensive[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) No unregistered equity sales occurred; **5,605,509** Class A common shares were repurchased and retired for **$28.0 million** in Q2 2023 [Unregistered Sale of Equity Securities](index=29&type=section&id=Unregistered%20Sale%20of%20Equity%20Securities) No unregistered sales of equity securities occurred during Q2 2023 - No unregistered sales of equity securities occurred during the three months ended June 30, 2023[141](index=141&type=chunk) [Purchase of Equity Securities](index=29&type=section&id=Purchase%20of%20Equity%20Securities) In May 2023, **5,605,509** Class A common shares were repurchased and retired for **$28.0 million** Class A Common Stock Repurchases (May 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :------------------------ | :--------------------- | :--------------------------- | | May 1, 2023 - May 31, 2023 | 5,605,509 | $5.00 | - The repurchase was authorized by the Board of Directors and conducted through a privately negotiated transaction[143](index=143&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[144](index=144&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures are reported - No mine safety disclosures[146](index=146&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No other information is reported, and no Rule 10b5-1 trading arrangements were adopted or terminated - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[147](index=147&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, agreements, and certifications - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws, Stock Purchase Agreements (May 10, 2023, and July 12, 2023), Amendment No. 3 to Credit Agreement, CEO/CFO Certifications (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[149](index=149&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) [Signatures](index=33&type=section&id=SIGNATURES) The report was signed on August 3, 2023, by the President and CEO, and the CFO - The report was signed on August 3, 2023, by John Merris (President and CEO) and Somer Webb (CFO)[154](index=154&type=chunk)

Solo Brands, Inc. (NYSE:DTC) Q1 2023 Results Conference Call May 4, 2023 8:30 AM ET Company Participants Bruce Williams - IR John Merris - CEO Somer Webb - CFO Conference Call Participants Robby Ohmes - Bank of America Randy Konik - Jefferies Chasen Bender - Citi Matt Egger - Piper Sandler Operator Hello, everyone, and welcome to Solo Brands First Quarter Fiscal 2023 Financial Results. My name is Bruno, and I'll be the operator of today. [Operator Instructions] I will now hand over to your host, Bruce Willi ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) In Q1 2023, net sales rose 7.3% to $88.2 million, shifting the company to a net income of $0.9 million with significantly improved operating cash flow [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $840.0 million as of March 31, 2023, driven by lower inventory and accounts receivable, while total equity remained stable Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,693 | $23,293 | | Inventory | $125,009 | $132,990 | | Total current assets | $178,913 | $195,098 | | Total assets | $840,044 | $862,347 | | Total current liabilities | $54,105 | $67,008 | | Long-term debt, net | $102,348 | $108,383 | | Total liabilities | $265,424 | $287,350 | | Total equity | $574,620 | $574,997 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Net sales grew 7.3% to $88.2 million in Q1 2023, resulting in a net income of $0.9 million, a significant turnaround from a loss in the prior-year period Q1 2023 vs. Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net sales | $88,207 | $82,203 | | Gross Profit | $54,403 | $48,853 | | Income (loss) from operations | $3,198 | $(3,226) | | Net income (loss) attributable to Solo Brands, Inc. | $924 | $(2,035) | | Diluted EPS | $0.01 | $(0.03) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was $14.7 million in Q1 2023, a substantial improvement driven by better working capital management Q1 2023 vs. Q1 2022 Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $14,703 | $(25,511) | | Net cash (used in) provided by investing activities | $(1,820) | $(2,470) | | Net cash (used in) provided by financing activities | $(10,554) | $18,747 | | Net change in cash and cash equivalents | $2,400 | $(9,238) | | Cash and cash equivalents, end of period | $25,693 | $15,863 | [Notes to the Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) Key notes highlight a revenue mix shift towards wholesale, total long-term debt of $102.3 million, and the post-quarter acquisition of Terraflame Net Sales by Channel (in thousands) | Channel | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Direct-to-consumer | $54,750 | $60,230 | | Wholesale | $33,457 | $21,973 | | **Total net sales** | **$88,207** | **$82,203** | - Total long-term debt, including the term loan and revolving credit facility, was **$107.3 million** before deducting the current portion and unamortized costs[41](index=41&type=chunk) - On May 1, 2023, the company completed the acquisition of Terraflame, which is **not anticipated to have a material impact** on the 2023 financials[61](index=61&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2023 growth to strong wholesale performance offsetting a DTC decline, with improved gross margins and a focus on long-term strategic initiatives - The company's customer base grew to **3.9 million** as of March 31, 2023, a **31.6% increase** from the prior year[65](index=65&type=chunk) - The company believes it is prepared to mitigate macroeconomic pressures and adjust short-term strategies throughout 2023 to promote financial health without jeopardizing long-term growth[68](index=68&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Net sales increased 7.3% due to a 52.3% surge in wholesale, while gross margin expanded to 61.7% and SG&A expenses decreased by 2.2% Net Sales Change by Channel (Q1 2023 vs Q1 2022) | Channel | Change ($ in thousands) | Change (%) | | :--- | :--- | :--- | | Direct-to-consumer | $(5,480) | (9.1)% | | Wholesale | $11,484 | 52.3% | | **Total Net Sales** | **$6,004** | **7.3%** | - **Gross margin increased to 61.7%** in Q1 2023 from 59.4% in Q1 2022, primarily due to a reduction in promotional pricing[82](index=82&type=chunk)[83](index=83&type=chunk) - The decrease in SG&A was driven by a **$5.4 million reduction in variable costs** (marketing and distribution), partially offset by a $4.3 million increase in fixed costs (employee costs and rent)[84](index=84&type=chunk)[85](index=85&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through cash, working capital, and its revolving credit facility, with operating cash flow improving by $40.2 million YoY Liquidity Sources and Facilities (as of March 31, 2023) | Source | Amount | Availability | | :--- | :--- | :--- | | Cash and cash equivalents | $25,693 | $25,693 | | Revolving Credit Facility | $15,000 (drawn) | $335,000 | | Term Loan | $95,000 (drawn) | — | - The **$40.2 million increase in cash from operating activities** was primarily due to a $32.3 million decrease in cash used for inventory and a $13.3 million decrease in cash used for accounts receivable[97](index=97&type=chunk)[98](index=98&type=chunk) - The company was **in compliance with all debt covenants** as of March 31, 2023[94](index=94&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate fluctuations, inflation, and commodity prices, with foreign currency risk considered not material - A **100 basis point (1%) increase in LIBOR** would increase the company's annual interest expense by approximately **$1.1 million**[106](index=106&type=chunk) - The primary raw materials used are stainless steel and aluminum, and the company is **exposed to price fluctuations**[108](index=108&type=chunk) - International sales accounted for **5.9% of consolidated net sales** in Q1 2023, making foreign currency risk exposure not material at this time[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - Based on an evaluation as of the end of the reporting period, the principal executive officer and principal financial officer concluded that the company's **disclosure controls and procedures were effective**[111](index=111&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the quarter ended March 31, 2023[112](index=112&type=chunk) [PART II. OTHER INFORMATION](index=27&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) There have been no material changes to the legal proceedings as described in the company's 2022 Form 10-K - **No material changes** to legal proceedings have occurred since the filing of the 2022 Form 10-K[114](index=114&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously identified in the company's 2022 Form 10-K - **No material changes** to the risk factors have occurred since the filing of the 2022 Form 10-K[116](index=116&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not engage in any sales of unregistered securities or repurchase any Class A common stock during the first quarter of 2023 - There were **no sales of unregistered securities** during the three months ended March 31, 2023[117](index=117&type=chunk) - The company **did not repurchase any shares** of its Class A common stock during the three months ended March 31, 2023[118](index=118&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) There is no other information to report for this period - None[121](index=121&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) The report includes exhibits such as corporate governance documents, a separation agreement, CEO/CFO certifications, and XBRL data files - Exhibits filed include corporate governance documents, a separation agreement, CEO/CFO certifications (Rule 13a-14(a) and Section 1350), and Inline XBRL documents[123](index=123&type=chunk)

Solo Brands, Inc. (NYSE:DTC) Q4 2022 Earnings Conference Call March 9, 2023 8:30 AM ET Company Participants Bruce Williams - IR John Merris - CEO Somer Webb - CFO Conference Call Participants Randy Konik - Jefferies Ryan Sundby - William Blair Matt Edgar - Piper Sandler Megan Alexander - JPMorgan Brian McNamara - Canaccord Genuity Operator Hello everyone. And welcome to the Solo Brands' Fourth Quarter Fiscal 2022 Financial Results. My name is Bruno, and I will be operating your call today. [Operator Instruc ...

Financial Performance - Net sales for the year ended December 31, 2022, reached $517.6 million, a 28.2% increase from $403.7 million in 2021[348]. - Gross profit for 2022 was $318.2 million, compared to $258.9 million in 2021, reflecting a gross margin of 61.4%[348]. - The company reported a net loss of $7.6 million for 2022, a significant decline from a net income of $56.5 million in 2021[348]. - Operating expenses increased to $317.8 million in 2022, up from $190.0 million in 2021, primarily due to higher selling, general, and administrative expenses[348]. - Cash flows from operating activities generated $32.4 million in 2022, contrasting with a cash outflow of $10.2 million in 2021[350]. - The company reported a net loss of $20.5 million for the year ended December 31, 2022, compared to a pro-forma net loss of $20.3 million for 2021[442]. - The total income (loss) before income taxes for 2022 was $(6,619) thousand, compared to $58,520 thousand in 2021[489]. - The basic and diluted net income (loss) per share of Class A common stock for 2022 was $(0.08), down from $0.17 in 2021[515]. Assets and Liabilities - As of December 31, 2022, the company reported total assets of $862.3 million, an increase from $837.7 million in 2021, reflecting a growth of approximately 2.3%[345]. - The company's inventory increased to $133.0 million in 2022 from $102.3 million in 2021, representing a rise of about 30.8%[345]. - Long-term debt decreased to $108.4 million in 2022 from $125.0 million in 2021, a reduction of approximately 13.3%[345]. - The company had total current liabilities of $67.0 million in 2022, compared to $46.6 million in 2021, marking an increase of approximately 43.7%[345]. - Accounts receivable increased to $26.2 million in 2022 from $21.5 million in 2021, reflecting a growth of about 21.9%[345]. - The cash and cash equivalents balance at the end of 2022 was $23.3 million, down from $25.1 million at the end of 2021[351]. - The total fair value of long-term debt, net, was $108.383 million as of December 31, 2022, down from $128.148 million in 2021[504]. Equity and Capital - The company reported a retained earnings (accumulated deficit) of $5.7 million in 2022, down from $10.7 million in 2021, indicating an improvement in financial health[345]. - The company has authorized 475 million shares of Class A common stock and 50 million shares of Class B common stock[506][507]. - Equity-based compensation expense for 2022 was $18.598 million, significantly up from $7.329 million in 2021[470]. - Unrecognized equity-based compensation as of December 31, 2022, totals $35.405 million[470]. Taxation - The total current income tax expense for 2022 was $11,502 thousand, significantly higher than $5,164 thousand in 2021[490]. - The company's effective income tax rate for 2022 was (15.11)%, a decrease from 3.44% in 2021[490]. - As of December 31, 2022, the company recorded valuation allowances of $26.9 million for deferred tax assets, a net increase of $0.4 million from $26.5 million in 2021[495]. Acquisitions - The acquisition of Oru Kayak, Inc. was completed for a total cash consideration of $25.4 million, with net sales of Oru contributing $28.2 million to consolidated revenues in 2022[431][433]. - The acquisition of International Surf Ventures, LLC was finalized for total consideration of $41.3 million, with net sales of ISLE amounting to $17.8 million in 2022[434][437]. - Chubbies, Inc. was acquired for a total consideration of $100.4 million in cash and $29.1 million in Class B units, aimed at expanding market share in casual and active wear[438]. Manufacturing and Operations - The majority of the camp stoves and fire pits are currently made in China by one manufacturer, with additional manufacturing capacity between two separate manufacturers in China[379]. - The Company organizes its operations as a single reportable segment focused on outdoor consumer products[380]. - The Company primarily engages in direct-to-consumer transactions and business-to-business transactions, with performance obligations satisfied at the point of shipment[400][401]. Research and Development - Research and development expenses for the Successor years ended December 31, 2022, and December 31, 2021, were $1.1 million and $0.3 million, respectively, indicating a significant increase of 266.67%[411]. Goodwill and Impairment - The company recorded a goodwill impairment charge of $27.9 million in 2022, reducing the carrying value of goodwill to $382.7 million[451]. - Goodwill recognized from the acquisition of Oru Kayak was $18.8 million, reflecting expected future revenue growth and synergies[432]. - Goodwill recognized from the acquisition of ISLE was $29.6 million, also reflecting anticipated future revenue growth and synergies[435]. - The total identifiable net assets acquired from Chubbies amounted to $56.9 million, with goodwill recorded at $73.1 million, resulting in a total acquisition value of $130.1 million[440].

Solo Brands, Inc. (NYSE:DTC) Q3 2022 Earnings Conference Call November 10, 2022 9:00 AM ET Company Participants Bruce Williams - ICR, IR John Merris - Chief Executive Officer Somer Webb - Chief Financial Officer Conference Call Participants Robby Ohmes - Bank of America Peter Keith - Piper Sandler Randy Konik - Jefferies Chris Horvers - JPMorgan Ryan Sundby - William Blair Chasen Bender - Citi Operator Good morning. Welcome to the Solo Brands, Inc. Third Quarter Fiscal 2022 Financial Results Call. My name i ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number 001-40979 Solo Brands, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 87-1360865 | ...