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solo stove(DTC) - 2025 Q1 - Quarterly Report

FORWARD-LOOKING STATEMENTS This section outlines forward-looking statements regarding the Company's going concern status, liquidity, debt refinancing, and potential stock delisting - The report contains forward-looking statements covered by safe harbor provisions, including those related to the Company's ability to continue as a going concern, improve liquidity, refinance debt, and the impacts of stock delisting10 - Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially, such as going concern risks, non-compliance with debt covenants, limited liquidity, reliance on third-party manufacturers, and market competition11 WHERE YOU CAN FIND MORE INFORMATION This section details where to find company information, including investor relations website, social media, and SEC filings - The Company uses its investor relations website (https://investors.solobrands.com) and social media channels (X, Facebook, Instagram, TikTok, LinkedIn) as distribution channels for material information, including press releases, investor presentations, and notices14 - All periodic and current reports filed with the SEC (10-K, 10-Q, 8-K) are available free of charge on the SEC's website (www.sec.gov) and the Company's investor relations website15 PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Solo Brands, Inc.'s unaudited consolidated financial statements and notes, highlighting significant accounting policies, debt, equity, and segment information, alongside substantial doubt about the Company's ability to continue as a going concern - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, and include all necessary adjustments for a fair statement of results29 - The Company's ability to continue as a going concern is in substantial doubt due to a net loss of $18.6 million for the quarter, an accumulated deficit of $241.0 million, and non-compliance with interest coverage and total net leverage ratio financial covenants as of March 31, 20253031 - As a result of covenant non-compliance, the entire outstanding debt balance of $427.9 million has been reclassified from non-current to current liability as of March 31, 202531 Consolidated Balance Sheets (Unaudited) This section presents the unaudited consolidated balance sheets, detailing assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (March 31, 2025 vs. December 31, 2024): | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $206,394 | $11,980 | | Total current assets | $372,610 | $172,218 | | Total assets | $692,399 | $495,060 | | Total current liabilities | $486,970 | $121,713 | | Long-term debt, net | $— | $142,060 | | Total liabilities and equity | $692,399 | $495,060 | | Retained earnings (accumulated deficit) | $(241,006) | $(228,814) | | Total equity | $174,622 | $193,357 | - The significant increase in cash and cash equivalents is primarily due to proceeds from the credit facility1822 - The reclassification of long-term debt to current debt significantly increased total current liabilities1831 Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) This section presents the unaudited consolidated statements of operations and comprehensive income (loss), detailing revenue, expenses, and net income (loss) for the three months ended March 31, 2025 and 2024 Consolidated Statements of Operations Highlights (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Net sales | $77,252 | $85,324 | $(8,072) | -9.5% | | Gross profit | $42,605 | $50,544 | $(7,939) | -15.7% | | Operating expenses | $53,248 | $56,896 | $(3,648) | -6.4% | | Income (loss) from operations | $(10,643) | $(6,352) | $(4,291) | -67.6% | | Interest expense, net | $5,570 | $3,106 | $2,464 | +79.3% | | Net income (loss) | $(18,577) | $(6,484) | $(12,093) | -186.5% | | Net income (loss) attributable to Solo Brands, Inc. | $(12,192) | $(3,402) | $(8,790) | -258.4% | | Basic and diluted EPS | $(0.21) | $(0.06) | $(0.15) | -250.0% | - Net sales decreased by 9.5% YoY, primarily due to declines in the Solo Stove segment's DTC channel, partially offset by growth in Chubbies' retail and DTC channels2093102 - Net loss significantly widened from $(6.5) million in Q1 2024 to $(18.6) million in Q1 2025, driven by lower sales, increased interest expense, and higher restructuring charges20109112 Consolidated Statements of Cash Flows (Unaudited) This section presents the unaudited consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Net cash (used in) provided by operating activities | $(75,188) | $(18,527) | $(56,661) | +305.8% | | Net cash (used in) provided by investing activities | $(3,207) | $(2,387) | $(820) | +34.4% | | Net cash (used in) provided by financing activities | $272,811 | $16,344 | $256,467 | +1569.2% | | Net change in cash and cash equivalents | $194,414 | $(4,431) | +$198,845 | N/A | | Cash and cash equivalents, end of period | $206,394 | $15,411 | +$190,983 | +1239.3% | - Cash used in operating activities increased significantly by $56.7 million, primarily due to increased cash usage from changes in working capital (accounts payable) and a decline in net income134 - Cash provided by financing activities surged by $256.5 million, mainly driven by $277.3 million in proceeds from the Revolving Credit Facility22136 Consolidated Statements of Equity (Unaudited) This section presents the unaudited consolidated statements of equity, detailing changes in capital and retained earnings for the three months ended March 31, 2025 and 2024 Consolidated Statements of Equity Highlights (March 31, 2025 vs. December 31, 2024): | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Additional paid-in capital | $363,960 | $363,601 | | Retained earnings (accumulated deficit) | $(241,006) | $(228,814) | | Total equity | $174,622 | $193,357 | - The accumulated deficit increased by $12.2 million to $(241.0) million as of March 31, 2025, reflecting the net loss incurred during the quarter2431 - Total equity decreased by $18.7 million, primarily due to the net loss attributable to Solo Brands, Inc24 Notes to the Consolidated Financial Statements (Unaudited) This section provides detailed notes to the unaudited consolidated financial statements, explaining significant accounting policies, debt, equity, and segment information NOTE 1 – Significant Accounting Policies This note details significant accounting policies, emphasizing the Company's going concern doubt due to financial performance and debt covenant non-compliance, and outlining policies for debt, restructuring, and commitments - The Company's ability to continue as a going concern is in substantial doubt due to a net loss of $18.6 million, an accumulated deficit of $241.0 million, and non-compliance with interest coverage and total net leverage ratio covenants as of March 31, 20253031 - Due to covenant non-compliance, the entire $427.9 million outstanding debt has been reclassified as a current liability, and lenders could declare all amounts immediately due and payable31 - Strategies to address the going concern issue include debt refinancing/restructuring, obtaining waivers, issuing new debt, or potentially filing for Chapter 11 bankruptcy, alongside cost savings and operational improvements32 NOTE 2 - Restructuring, Contract Termination and Impairment Charges This note details the $5.8 million in Q1 2025 restructuring, contract termination, and impairment charges, driven by workforce reductions, distribution center closures, and strategic consulting for financial improvement and debt refinancing - In Q1 2025, the Company engaged strategic consulting firms to improve financial results and support potential debt refinancing/restructuring, leading to cost-saving initiatives40 Restructuring, Contract Termination and Impairment Charges (Three Months Ended March 31): | Charge Type (in thousands) | 2025 | 2024 | | :------------------------- | :--- | :--- | | Restructuring charges | $5,208 | $— | | Impairment charges | $471 | $— | | Contract termination | $160 | $— | | Total | $5,839 | $— | - Key initiatives included a reduction in force, closure of two distribution centers, and reduction in marketing spend for the Solo Stove segment45 NOTE 3 – Revenue This note explains the 9.5% net sales decrease to $77.3 million in Q1 2025, primarily due to declining direct-to-consumer sales, partially offset by retail growth Net Sales by Channel (Three Months Ended March 31): | Channel (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :--------------------- | :--- | :--- | :--------- | :--------- | | Direct-to-consumer | $33,800 | $51,043 | $(17,243) | -33.8% | | Retail | $43,452 | $34,281 | $9,171 | +26.8% | | Net sales | $77,252 | $85,324 | $(8,072) | -9.5% | - The decline in DTC sales was primarily due to reduced promotional discounting and marketing spend in the Solo Stove segment, while retail sales increased due to higher demand in the Chubbies segment102 NOTE 4 – Inventory This note details a slight decrease in total inventory to $103.1 million as of March 31, 2025, mainly due to reduced finished products in transit Inventory Composition (in thousands): | Inventory Type | March 31, 2025 | December 31, 2024 | | :------------- | :------------- | :---------------- | | Finished products on hand, net | $93,910 | $80,098 | | Finished products in transit | $4,423 | $21,756 | | Raw materials | $4,735 | $6,721 | | Total Inventory | $103,068 | $108,575 | - Inventory obsolescence reserve decreased from $15.2 million to $5.8 million46 NOTE 5 – Prepaid Expenses and Other Current Assets This note details the decrease in prepaid expenses and other current assets to $10.3 million, primarily due to non-trade receivable reclassification and reduced insurance and tax receivables Prepaid Expenses and Other Current Assets (in thousands): | Item | March 31, 2025 | December 31, 2024 | | :--- | :------------- | :---------------- | | Inventory deposits | $2,206 | $2,066 | | Insurance | $1,791 | $2,556 | | Software | $1,318 | $1,016 | | Tax receivables | $1,073 | $2,026 | | Non-trade receivables | $1,038 | $2,953 | | Other | $2,860 | $1,606 | | Total | $10,286 | $12,223 | - Non-trade receivables decreased by $1.9 million due to reclassification to accounts receivable47 NOTE 6 – Intangible Assets, Net This note details the decrease in net intangible assets to $185.4 million due to amortization and prior-year impairment, with recoverability tests indicating no further impairment Intangible Assets, Net (in thousands): | Asset Type | March 31, 2025 | December 31, 2024 | | :--------- | :------------- | :---------------- | | Brand (gross) | $198,514 | $205,614 | | Patents (gross) | $6,699 | $14,211 | | Intangible assets, net | $185,430 | $189,701 | - Triggering events for impairment testing in Q1 2025 included a sustained decline in Class A common stock share price and potential tariff increases, but the recoverability test indicated carrying amounts were recoverable48 NOTE 7 – Goodwill This note confirms goodwill remained at $73.1 million for the Chubbies reporting unit, with a qualitative analysis concluding its fair value exceeded carrying value despite impairment indications Goodwill by Segment (in thousands): | Segment | March 31, 2025 | December 31, 2024 | | :------ | :------------- | :---------------- | | Chubbies | $73,119 | $73,119 | | Consolidated | $73,119 | $73,119 | - A qualitative goodwill analysis for the Chubbies reporting unit determined that its fair value was more likely than not to exceed its carrying value, despite identified impairment indications49 NOTE 8 – Accrued Expenses and Other Current Liabilities This note details the decrease in accrued expenses and other current liabilities to $34.5 million, driven by reduced inventory accruals and sales rebates, partially offset by contingent consideration and interest accruals Accrued Expenses and Other Current Liabilities (in thousands): | Item | March 31, 2025 | December 31, 2024 | | :--- | :------------- | :---------------- | | Leases | $8,657 | $9,370 | | Inventory | $5,092 | $14,812 | | Contingent consideration | $3,505 | $— | | Income taxes | $2,599 | $56 | | Interest | $2,354 | $484 | | Allowance for sales rebates | $1,452 | $3,434 | | Non-income taxes | $1,756 | $3,602 | | Total | $34,509 | $41,661 | - The inventory line item decreased by $9.7 million due to invoices received after December 31, 202450 - Contingent consideration increased by $3.5 million due to reclassification from non-current liabilities50 NOTE 9 – Debt, Net This note details the significant increase in net debt to $427.9 million, reclassified as current due to covenant non-compliance, and a $277.3 million draw from the Revolving Credit Facility Debt, Net (in thousands): | Debt Type | Weighted-Average Interest Rate (Mar 31, 2025) | March 31, 2025 | December 31, 2024 | | :-------- | :-------------------------------------------- | :------------- | :---------------- | | Term loan | 6.43% | $82,500 | $83,000 | | Revolving credit facility | 6.52% | $346,322 | $69,000 | | Unamortized debt issuance costs | N/A | $(932) | $(1,315) | | Total debt, net | N/A | $427,890 | $150,685 | - All outstanding debt was reclassified from non-current to current due to expected non-compliance with interest coverage and total net leverage ratio financial covenants51 - The Company borrowed $277.3 million from the Revolving Credit Facility in Q1 2025, with no availability for future draws as of March 31, 202555 - Interest expense, net, increased by 79.3% to $5.6 million for the three months ended March 31, 2025, compared to $3.1 million in the prior year, due to a higher average debt balance54112 NOTE 10 – Other Non-Current Liabilities This note details the decrease in other non-current liabilities to $5.3 million as of March 31, 2025, primarily due to the reclassification of contingent consideration to current liabilities Other Non-Current Liabilities (in thousands): | Item | March 31, 2025 | December 31, 2024 | | :--- | :------------- | :---------------- | | Contingent consideration | $3,657 | $7,232 | | Long-term non-income taxes | $1,130 | $1,130 | | Finance lease liability | $532 | $694 | | Total | $5,319 | $9,056 | - Contingent consideration declined by $3.5 million due to its reclassification to accrued expenses and other current liabilities56 NOTE 11 – Equity-Based Compensation This note explains the $0.9 million equity-based compensation benefit in Q1 2025, a decrease from a $1.2 million expense in Q1 2024, driven by forfeitures exceeding current quarter expense - Equity-based compensation resulted in a $0.9 million benefit in Q1 2025, compared to a $1.2 million expense in Q1 2024, driven by forfeitures exceeding current quarter compensation expense57 Equity-Based Compensation Awards (Three Months Ended March 31, 2025): | Award Type | Number of Shares Granted (in thousands) | Number of Shares Forfeited (in thousands) | | :--------- | :-------------------------------------- | :---------------------------------------- | | RSUs | 1,307 | (446) | | EPSUs | — | (1,468) | | SPSUs | — | (357) | NOTE 12 – Income Taxes This note details the $2.9 million income tax expense in Q1 2025, a significant increase from a $3.2 million benefit in Q1 2024, primarily due to valuation allowances on deferred tax assets - Income tax expense was $2.9 million in Q1 2025, compared to a $3.2 million benefit in Q1 2024, primarily due to valuation allowances on Solo Brands, Inc. deferred tax assets62114 - The effective income tax rate was (18.9)% for Q1 2025, down from 33.0% in Q1 2024, due to valuation allowances and earnings from foreign operations60 - A full valuation allowance remains in place against Oru's deferred tax assets, and the Company concluded that not all Solo Brands, Inc. deferred tax assets are likely to be realized66 NOTE 13 – Fair Value Measurements This note details fair value measurements, including the $7.2 million contingent consideration and the reclassification of $427.9 million outstanding debt to Level 3 due to covenant non-compliance Financial Liabilities Measured at Fair Value (in thousands): | Item | March 31, 2025 Total Fair Value | December 31, 2024 Total Fair Value | | :--- | :------------------------------ | :--------------------------------- | | Contingent Consideration | $7,162 | $7,232 | - The contingent consideration is a Level 3 estimate, valued using a threshold and cap structure based on forecasted results69 - Outstanding debt was transferred from Level 2 to Level 3 in the fair value hierarchy due to expected non-compliance with financial covenants, with a fair value of $416.3 million compared to a carrying value of $427.9 million as of March 31, 20257374 NOTE 14 – Net Income (Loss) Per Share This note details basic and diluted net loss per Class A common stock, which widened to $(0.21) in Q1 2025 from $(0.06) in Q1 2024, reflecting increased net loss Net Income (Loss) Per Class A Common Stock (Three Months Ended March 31): | Metric (in thousands, except per share) | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Net income (loss) attributable to Solo Brands, Inc. | $(12,192) | $(3,402) | | Weighted average shares outstanding | 58,986 | 58,068 | | Basic and diluted EPS | $(0.21) | $(0.06) | - Approximately 0.1 million options and 1.9 million restricted stock units in 2025 (and 0.1 million options and 1.1 million RSUs in 2024) were anti-dilutive and excluded from diluted EPS calculation76 NOTE 15 - Variable Interest Entities This note describes the consolidation of a Variable Interest Entity (VIE) related to an Oru manufacturing entity, where the Company acts as the primary beneficiary - The Company consolidates a VIE related to an Oru manufacturing entity, acting as the primary beneficiary with decision-making power over its economic performance77 VIE Assets and Liabilities (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :----- | :------------- | :---------------- | | Total assets of VIE | $2,400 | $2,200 | | Total liabilities of VIE | $2,900 | $2,800 | - The VIE's assets are restricted to settling its own obligations, and its liabilities are non-recourse to the Company's other consolidated entities79 NOTE 16 - Segments This note outlines the Company's two reportable segments, Solo Stove and Chubbies, detailing a significant shift in net sales contribution with Solo Stove decreasing and Chubbies increasing in Q1 2025 - The Company's two reportable segments are Solo Stove (firepits, stoves, accessories) and Chubbies (casual apparel and activewear)8192 Percentage of Net Sales by Segment (Three Months Ended March 31): | Segment | 2025 | 2024 | | :------ | :--- | :--- | | Solo Stove | 33.8% | 60.3% | | Chubbies | 55.3% | 34.8% | Segment Net Sales and EBITDA (Three Months Ended March 31, 2025): | (in thousands) | Solo Stove | Chubbies | All Other | Consolidated | | :------------- | :--------- | :------- | :-------- | :----------- | | Net sales | $26,128 | $42,689 | $8,435 | $77,252 | | Segment EBITDA | $(1,486) | $11,295 | $380 | $10,189 | Segment Net Sales and EBITDA (Three Months Ended March 31, 2024): | (in thousands) | Solo Stove | Chubbies | All Other | Consolidated | | :------------- | :--------- | :------- | :-------- | :----------- | | Net sales | $51,477 | $29,657 | $4,190 | $85,324 | | Segment EBITDA | $7,645 | $4,932 | $(1,483) | $11,094 | - International sales, primarily from the Solo Stove segment, accounted for 7.2% of consolidated net sales in Q1 202584147 NOTE 17 - Related Parties This note details minor related party transactions, primarily merchandise sales to an employee-owned entity, with accounts receivable of $1.04 million as of March 31, 2025 - The Company engages in occasional transactions with a related party, an entity wholly owned by an employee and their family, for merchandise sales in a specific geographical market87 Accounts Receivable Due From Related Party (in thousands): | Metric | March 31, 2025 | December 31, 2024 | | :----- | :------------- | :---------------- | | Accounts receivable due from related party | $1,041 | $1,074 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the Company's financial condition and results, highlighting Q1 2025 net sales decline, significant net loss, macroeconomic impacts, restructuring efforts, and the critical going concern issue due to debt covenant non-compliance - Net sales decreased from $85.3 million in Q1 2024 to $77.3 million in Q1 2025, primarily due to the Solo Stove segment's decline, partially offset by Chubbies' growth93 - The Company faces substantial doubt about its ability to continue as a going concern due to a net loss of $18.6 million, an accumulated deficit of $241.0 million, and non-compliance with debt covenants, leading to the reclassification of $427.9 million in debt to current liabilities128 - Management is evaluating strategies including debt refinancing, waivers, new financing, or Chapter 11 bankruptcy, alongside cost savings and operational improvements, but there's no assurance of success129 Overview This section provides an overview of Solo Brands, Inc.'s business, including its premium brands and sales channels - Solo Brands, Inc. owns and operates premium brands like Solo Stove (firepits, stoves, accessories) and Chubbies (casual apparel and activewear), focusing on direct-to-consumer and retail partnerships92 - Net sales decreased to $77.3 million in Q1 2025 from $85.3 million in Q1 2024, mainly due to the Solo Stove segment's decline (lack of new products, reduced marketing), partially offset by growth in the Chubbies segment93 Economic Factors Affecting our Performance This section discusses global macroeconomic factors, including tariffs, interest rates, and inflation, and their potential impact on the Company's financial performance - The Company is exposed to global macroeconomic factors, including increased tariffs on goods from China, Vietnam, and Mexico, which are expected to significantly impact inventory and cost of goods sold in future periods9495 - Current macroeconomic factors like economic and political uncertainty, financial market instability, high interest rates, and inflation could further reduce net sales and negatively impact gross margin, net income, and cash flows95 Key Factors Affecting Our Financial Condition and Results of Operations This section outlines key factors influencing the Company's financial condition and results, including strategic consulting engagements and cost-saving initiatives - In Q1 2025, the Company engaged strategic consulting firms to improve financial results and support potential debt refinancing/restructuring, capitalizing related activities as debt issuance costs97 - Cost-saving initiatives executed in Q1 2025 include a reduction in force, closure of two distribution centers, and reduced marketing spend in the Solo Stove segment, with upfront cash outlays of $3.6 million9899103 Consolidated Results for the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024 This section provides a comparative analysis of the Company's consolidated financial results for the three months ended March 31, 2025 and 2024 Consolidated Net Sales This section analyzes consolidated net sales performance, detailing changes across direct-to-consumer and retail channels Consolidated Net Sales by Channel (Three Months Ended March 31): | Channel (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :--------------------- | :--- | :--- | :--------- | :--------- | | Net sales | $77,252 | $85,324 | $(8,072) | -9.5% | | Direct-to-consumer net sales | $33,800 | $51,043 | $(17,243) | -33.8% | | Retail net sales | $43,452 | $34,281 | $9,171 | +26.8% | - The decrease in net sales was primarily due to a decline in Solo Stove's DTC channel (reduced promotions, marketing, lack of new products), partially offset by increased retail demand and DTC growth in the Chubbies segment102104 Consolidated Gross Profit and Gross Margin This section analyzes consolidated gross profit and gross margin, explaining factors influencing profitability Consolidated Gross Profit and Gross Margin (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Gross profit | $42,605 | $50,544 | $(7,939) | -15.7% | | Gross margin | 55.2% | 59.2% | -400 bps | N/A | - Gross margin declined by 400 basis points, primarily due to a shift in channel mix towards lower-margin retail sales106 Consolidated Operating Expenses This section details consolidated operating expenses, including selling, general and administrative, restructuring, and depreciation and amortization Consolidated Operating Expenses (Three Months Ended March 31): | Expense Type (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :--- | :--- | :--------- | :--------- | | Operating expenses | $53,248 | $56,896 | $(3,648) | -6.4% | | Selling, general and administrative expenses | $38,990 | $48,410 | $(9,420) | -19.5% | | Restructuring, Contract Termination and Impairment Charges | $5,839 | $— | $5,839 | +100.0% | | Depreciation and amortization expenses | $6,889 | $6,275 | $614 | +9.8% | | Other operating expenses | $1,530 | $2,211 | $(681) | -30.8% | - The decrease in total operating expenses was driven by a $9.4 million reduction in SG&A (lower advertising, marketing, and distribution costs), partially offset by a $5.8 million increase in restructuring, contract termination, and impairment charges108109 Consolidated Interest Expense This section analyzes consolidated interest expense, net, and its drivers Consolidated Interest Expense, Net (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Interest expense, net | $5,570 | $3,106 | $2,464 | +79.3% | - Interest expense, net, increased by 79.3% due to a higher average debt balance112 Consolidated Income Taxes This section details consolidated income tax expense (benefit) and its contributing factors Consolidated Income Tax Expense (Benefit) (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Income tax expense (benefit) | $2,944 | $(3,195) | $6,139 | -192.1% | - Income tax expense increased significantly due to valuation allowances recorded on Solo Brands, Inc. deferred tax assets114 Solo Stove Segment Results for the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024 This section provides a comparative analysis of the Solo Stove segment's financial results for the three months ended March 31, 2025 and 2024 Solo Stove Net Sales This section analyzes Solo Stove's net sales performance, detailing changes across direct-to-consumer and retail channels Solo Stove Net Sales by Channel (Three Months Ended March 31): | Channel (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :--------------------- | :--- | :--- | :--------- | :--------- | | Net sales | $26,128 | $51,477 | $(25,349) | -49.2% | | Direct-to-consumer net sales | $18,512 | $37,419 | $(18,907) | -50.5% | | Retail net sales | $7,616 | $14,058 | $(6,442) | -45.8% | - Solo Stove's net sales declined by 49.2% YoY, with both DTC and retail channels significantly impacted by a lack of new product launches, reduced promotional discounting, and lower marketing spend115 Solo Stove Cost of Goods Sold This section analyzes Solo Stove's cost of goods sold and its relationship to net sales Solo Stove Cost of Goods Sold (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Cost of goods sold | $11,470 | $20,748 | $(9,278) | -44.7% | - Cost of goods sold decreased in line with net sales, but the decline was less pronounced due to a channel mix shift towards higher-cost retail sales116 Solo Stove Segment Operating Expenses This section details Solo Stove's segment operating expenses, including marketing and employee-related compensation Solo Stove Segment Operating Expenses (Three Months Ended March 31): | Expense Type (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :--- | :--- | :--------- | :--------- | | Segment operating expenses | $16,144 | $23,084 | $(6,940) | -30.1% | | Marketing expenses | $5,712 | $9,865 | $(4,153) | -42.1% | | Employee related compensation | $3,309 | $2,181 | $1,128 | +51.7% | | Other segment operating expenses | $7,123 | $11,038 | $(3,915) | -35.5% | - Segment operating expenses decreased by 30.1% due to lower marketing expenses, seller fees, and shipping costs, stemming from the decline in DTC net sales118 Chubbies Segment Results for the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024 This section provides a comparative analysis of the Chubbies segment's financial results for the three months ended March 31, 2025 and 2024 Chubbies Net Sales This section analyzes Chubbies' net sales performance, detailing changes across direct-to-consumer and retail channels Chubbies Net Sales by Channel (Three Months Ended March 31): | Channel (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :--------------------- | :--- | :--- | :--------- | :--------- | | Net sales | $42,689 | $29,657 | $13,032 | +43.9% | | Direct-to-consumer net sales | $13,483 | $10,630 | $2,853 | +26.8% | | Retail net sales | $29,206 | $19,027 | $10,179 | +53.5% | - Chubbies' net sales increased by 43.9% YoY, driven by strong growth in both retail (53.5%) and DTC (26.8%) channels, reflecting successful strategic partnerships and meeting consumer demand119 Chubbies Cost of Goods Sold This section analyzes Chubbies' cost of goods sold and its relationship to net sales Chubbies Cost of Goods Sold (Three Months Ended March 31): | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Cost of goods sold | $18,173 | $12,408 | $5,765 | +46.5% | - Cost of goods sold increased by 46.5%, slightly more than net sales, due to the growth in higher-cost retail channel sales120 Chubbies Segment Operating Expenses This section details Chubbies' segment operating expenses, including marketing and employee-related compensation Chubbies Segment Operating Expenses (Three Months Ended March 31): | Expense Type (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :--- | :--- | :--------- | :--------- | | Segment operating expenses | $13,221 | $12,317 | $904 | +7.3% | | Marketing expenses | $3,314 | $3,648 | $(334) | -9.2% | | Employee related compensation | $3,434 | $3,236 | $198 | +6.1% | | Other segment operating expenses | $6,473 | $5,433 | $1,040 | +19.1% | - Segment operating expenses increased by 7.3%, primarily driven by higher seller fees, shipping, and fulfillment costs due to increased DTC net sales121 Liquidity and Capital Resources This section discusses the Company's liquidity position and capital resources, including debt facilities and cash flow activities Going Concern This section addresses the Company's going concern status, outlining the financial challenges and management's mitigation strategies - Substantial doubt exists about the Company's ability to continue as a going concern due to a $18.6 million net loss, $241.0 million accumulated deficit, and non-compliance with debt covenants, leading to $427.9 million debt reclassification to current128 - The Company is actively negotiating with lenders for debt refinancing/restructuring, waivers, or new financing, and implementing cost savings, but success is not assured129 - Without an agreement or waiver, the Company will be unable to meet cash obligations for the next twelve months130 Revolving Credit Facility and Term Loan This section details the Company's Revolving Credit Facility and Term Loan, including outstanding balances, interest rates, and covenant compliance - The Revolving Credit Facility allows borrowing up to $350.0 million, maturing May 12, 2026, with $346.3 million outstanding and no further availability as of March 31, 2025131 - The Term Loan, used for the Chubbies acquisition, allows borrowing up to $100.0 million, maturing May 12, 2026, with $82.5 million outstanding as of March 31, 2025132 - Both facilities bear variable interest rates based on SOFR plus an applicable margin and are subject to financial and non-financial covenants, with the Company currently in non-compliance131132133 Cash Flows This section summarizes the Company's cash flow activities from operations, investing, and financing Cash Flow Summary (Three Months Ended March 31): | Activity (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :---------------------- | :--- | :--- | :--------- | :--------- | | Operating activities | $(75,188) | $(18,527) | $(56,661) | +305.8% | | Investing activities | $(3,207) | $(2,387) | $(820) | +34.4% | | Financing activities | $272,811 | $16,344 | $256,467 | +15