solo stove(DTC) - 2024 Q4 - Annual Report

Financial Performance - Net sales decreased to $454.55 million in 2024 from $494.78 million in 2023, representing a decline of approximately 8.1%[369] - Gross profit fell to $260.26 million in 2024, down from $302.15 million in 2023, a decrease of about 13.9%[369] - Total operating expenses were $434.88 million in 2024, compared to $530.00 million in 2023, reflecting a reduction of approximately 17.9%[369] - The net loss attributable to Solo Brands, Inc. was $113.36 million in 2024, slightly higher than the loss of $111.35 million in 2023[369] - Cash and cash equivalents decreased to $11.98 million at the end of 2024 from $19.84 million at the end of 2023, a decline of about 39.8%[371] - Total assets decreased to $495.06 million in 2024 from $659.32 million in 2023, a reduction of approximately 25%[367] - Total current liabilities increased to $121.71 million in 2024 from $88.56 million in 2023, an increase of about 37.4%[367] - Long-term debt remained relatively stable at $142.06 million in 2024 compared to $142.99 million in 2023[367] - The company reported cash flows from operating activities of $10.52 million in 2024, down from $62.42 million in 2023[371] - The basic and diluted net income (loss) per Class A common stock was $(1.94) in 2024, compared to $(1.84) in 2023[369] Debt and Interest Rates - The company had indebtedness of $69.0 million and $83.0 million under its Revolving Credit Facility and Term Loan, respectively, with annualized interest rates of 7.03% and 7.08% as of December 31, 2024[350] - A 100 basis points increase in SOFR would increase the company's interest expense by approximately $1.5 million in any given year[350] - The company has not entered into any interest rate swap contracts to mitigate interest rate fluctuations as of December 31, 2024[350] - The Company is evaluating strategies to refinance its existing debt, which may include restructuring or issuing new debt[389] Compliance and ESG - The company expects to incur significant additional costs for compliance with new ESG regulations, including the California Climate Corporate Data Accountability Act and the European Union Corporate Sustainability Reporting Directive, which will require expansive disclosures on sustainability topics[247][248] - The company may face reputational damage and financial impacts if it fails to meet evolving stakeholder expectations regarding ESG practices[246] International Operations - International sales accounted for 6.9% of consolidated revenues in 2024, up from 6.0% in 2023[353] - The company is exposed to risks from international geopolitical conflicts, which may negatively impact its operations and supply chain[250] - A 100 basis points unfavorable change in foreign currency exchange rates would increase operating expenses by approximately $0.3 million and decrease net sales by approximately $0.3 million for the year ended December 31, 2024[353] Acquisitions and Market Strategy - The acquisition of TerraFlame on May 1, 2023, was for a total purchase consideration of $13.2 million, aimed at increasing brand and market share in the outdoor activities industry[468] - The acquisition of IcyBreeze on July 1, 2023, totaled $52.1 million, with cash paid at closing amounting to $29.4 million, intended to complement the Company's product portfolio[473] - IcyBreeze generated net sales of $14.8 million in 2024, but incurred a net loss of $61.7 million for the same period[477] Impairments and Restructuring - The Company recognized total impairment charges of $136.1 million in 2024, including $76.0 million related to goodwill impairment within the Solo Stove reporting unit[464] - The Company underwent significant restructuring and contract termination charges in 2024 due to management changes[460] - The Company identified goodwill impairment indicators as of September 30, 2024, leading to impairment charges of $19.9 million and $25.0 million for the IcyBreeze and Solo Stove reporting units, respectively[498] Inventory and Expenses - Inventory obsolescence expense increased to $18.0 million in 2024 from $2.0 million in 2023, primarily due to a write-down of inventory associated with IcyBreeze[478] - Total sales returns and allowances were $19.3 million and $14.7 million for the years ended December 31, 2024 and 2023, respectively[434] - Total sales rebates were $6.3 million and $5.8 million for the years ended December 31, 2024 and 2023, respectively[434] - Research and development expense was $1.7 million and $0.7 million for the years ended December 31, 2024 and 2023, respectively[441] - Advertising expense was $96.0 million and $96.9 million for the years ended December 31, 2024 and 2023, respectively[439] Stock and Compensation - The total unrecognized equity-based compensation as of December 31, 2024, was $11,944,000, down from $15,118,000 in 2023[514] - The total weighted average grant date fair value of restricted stock units vested in 2024 was $4.1 million, compared to $4.4 million in 2023[522] - The Company granted 3,017,000 restricted stock units in 2024 at a weighted average grant date fair value of $2.02[522] - The Company granted 1,468 Executive Performance Stock Units (EPSUs) in 2024, with a weighted-average grant date fair value of $2.36[526] Tax and Income - The Company recognized a total income tax benefit of $8.96 million for the year ended December 31, 2024, compared to a benefit of $36.23 million in 2023, resulting in effective tax rates of 4.7% and 15.6%, respectively[540] - The total income (loss) before income taxes for 2024 was $(189.15) million, an improvement from $(231.56) million in 2023[539]