solo stove(DTC) - 2025 Q2 - Quarterly Report

FORWARD-LOOKING STATEMENTS Identifies forward-looking statements and associated risks, including going concern, strategic benefits, liquidity, and NYSE compliance - This section identifies forward-looking statements in the 10-Q, emphasizing that actual results may differ due to known and unknown risks, including the company's ability to continue as a going concern, realize strategic benefits, manage liquidity, and comply with NYSE listing standards[9][10][11] WHERE YOU CAN FIND MORE INFORMATION Details official channels for company information, including investor relations website, SEC filings, and social media - The company uses its investor relations website (https://investors.solobrands.com) as a distribution channel for material information, including press releases, investor presentations, and event notices[13][14] - SEC filings (10-K, 10-Q, 8-K) are available free of charge on the SEC's website (www.sec.gov) and the company's website[14] - Social media channels (X, Facebook, Instagram, TikTok, LinkedIn) are also used for communication, and some information posted there may be material[13] PART I. FINANCIAL INFORMATION Presents unaudited consolidated financial statements, management's discussion, market risk, and controls for Q2 2025 Item 1. Financial Statements Contains unaudited consolidated financial statements and notes, detailing the company's financial health and performance Consolidated Balance Sheets (Unaudited) Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $459,700 | $495,060 | $(35,360) | (7.14)% | | Current Assets | $148,612 | $172,218 | $(23,606) | (13.71)% | | Non-Current Assets | $311,088 | $322,842 | $(11,754) | (3.64)% | | Total Liabilities | $303,840 | $301,703 | $2,137 | 0.71% | | Current Liabilities | $41,095 | $121,713 | $(80,618) | (66.23)% | | Non-Current Liabilities | $262,745 | $179,990 | $82,755 | 45.98% | | Total Equity | $155,860 | $193,357 | $(37,497) | (19.39)% | Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) Consolidated Statements of Operations Highlights (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net sales | $92,257 | $131,550 | $(39,293) | (29.9)% | | Gross profit | $56,599 | $82,637 | $(26,038) | (31.5)% | | Income (loss) from operations | $(9,835) | $2,240 | $(12,075) | (539.1)% | | Net income (loss) | $(20,767) | $(4,037) | $(16,730) | (414.4)% | | Net income (loss) attributable to Solo Brands, Inc. | $(13,468) | $(3,111) | $(10,357) | (332.9)% | | Basic and diluted EPS | $(8.93) | $(2.14) | $(6.79) | (317.3)% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net sales | $169,509 | $216,874 | $(47,365) | (21.8)% | | Gross profit | $99,204 | $133,181 | $(33,977) | (25.5)% | | Income (loss) from operations | $(20,478) | $(4,112) | $(16,366) | (398.0)% | | Net income (loss) | $(39,344) | $(10,521) | $(28,823) | (273.9)% | | Net income (loss) attributable to Solo Brands, Inc. | $(25,660) | $(6,513) | $(19,147) | (293.9)% | | Basic and diluted EPS | $(17.06) | $(4.48) | $(12.58) | (280.8)% | Consolidated Statements of Cash Flows (Unaudited) Consolidated Statements of Cash Flows Highlights (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash (used in) provided by operating activities | $(64,256) | $(2,848) | $(61,408) | 2156.2% | | Net cash (used in) provided by investing activities | $(6,414) | $(5,225) | $(1,189) | (22.8)% | | Net cash (used in) provided by financing activities | $76,627 | $8,241 | $68,386 | 829.8% | | Net change in cash and cash equivalents | $6,138 | $258 | $5,880 | 2279.1% | | Cash and cash equivalents, end of period | $18,118 | $20,100 | $(1,982) | (9.9)% | Consolidated Statements of Equity (Unaudited) Consolidated Statements of Equity Highlights (in thousands) | Item | December 31, 2024 | June 30, 2025 | Change ($) | Change (%) | | :-------------------------------------- | :---------------- | :------------ | :--------- | :--------- | | Total Shareholders' Equity | $193,357 | $155,860 | $(37,497) | (19.39)% | | Retained Earnings (Accumulated Deficit) | $(228,814) | $(254,303) | $(25,489) | 11.14% | | Additional Paid-in Capital | $363,691 | $368,686 | $4,995 | 1.37% | | Equity attributable to non-controlling interests | $59,645 | $42,676 | $(16,969) | (28.45)% | - Net income (loss) attributable to Solo Brands, Inc. for the six months ended June 30, 2025, was $(25,660) thousand[24] - Issuance of 122 thousand Class A common stock shares in lieu of cash lender consent fee, valued at $750 thousand[24] Notes to the Consolidated Financial Statements (Unaudited) Provides detailed explanations for financial statements, covering accounting policies, restructuring, revenue, inventory, debt, equity, taxes, and segments NOTE 1 – Significant Accounting Policies - Unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, including normal recurring adjustments[29] - A 1-for-40 reverse stock split of common stock became effective on July 8, 2025, with retroactive effect on financial statements[30] - Substantial doubt about the company's ability to continue as a going concern, previously identified, has been alleviated as of August 6, 2025, due to the 2025 Refinancing Amendment and ongoing cost-saving and operational improvements[31][34] - The 2025 Refinancing Amendment extended maturities, lowered short-term cash requirements (interest payments in-kind), and deferred compliance with certain financial covenants, providing financial flexibility[33] NOTE 2 - Restructuring, Contract Termination and Impairment Charges Restructuring, Contract Termination and Impairment Charges (in thousands) | Charge Type | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------------- | :------------------------------- | :----------------------------- | | Restructuring charges | $9,023 | $14,231 | | Impairment charges | $— | $471 | | Contract termination | $1,228 | $1,388 | | Total Charges | $10,251 | $16,090 | - Key cost-saving initiatives included retention payments to key personnel ($5.7 million), reduction in force ($0.9 million), expenses for strategic consulting firms ($6.5 million), termination of an underperforming licensing agreement ($2.5 million), and closure of two distribution centers ($1.2 million)[50] - The company anticipates continued strategic consulting activities and further cost-saving initiatives, with potential upfront costs[49] NOTE 3 – Revenue Net Sales by Channel (in thousands) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Direct-to-consumer | $59,666 | $98,770 | $(39,104) | (39.6)% | | Retail | $32,591 | $32,780 | $(189) | (0.6)% | | Total Net Sales | $92,257 | $131,550 | $(39,293) | (29.9)% | | Channel | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Direct-to-consumer | $93,466 | $149,813 | $(56,347) | (37.6)% | | Retail | $76,043 | $67,061 | $8,982 | 13.4% | | Total Net Sales | $169,509 | $216,874 | $(47,365) | (21.8)% | NOTE 4 – Inventory Inventory Composition (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Finished products on hand, net | $77,862 | $80,098 | $(2,236) | (2.79)% | | Finished products in transit | $4,283 | $21,756 | $(17,473) | (80.32)% | | Raw materials | $1,985 | $6,721 | $(4,736) | (70.47)% | | Total Inventory | $84,130 | $108,575 | $(24,445) | (22.52)% | - Inventory obsolescence reserve decreased from $15.2 million at December 31, 2024, to $2.1 million at June 30, 2025[54] NOTE 5 – Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Inventory deposits | $2,739 | $2,066 | $673 | 32.58% | | Retainers | $2,460 | $— | $2,460 | N/A | | Prepaid marketing | $1,564 | $535 | $1,029 | 192.34% | | Insurance | $1,271 | $2,556 | $(1,285) | (50.27)% | | Total Prepaid expenses and other current assets | $14,188 | $12,223 | $1,965 | 16.08% | - The increase in retainers reflects advance payments required by certain vendors in 2025[55] NOTE 6 – Property and Equipment, Net Property and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Property and equipment, gross | $36,069 | $39,738 | $(3,669) | (9.23)% | | Accumulated depreciation | $(18,988) | $(15,543) | $(3,445) | 22.16% | | Property and equipment, net | $17,081 | $24,195 | $(7,114) | (29.40)% | - Buildings decreased from $4.24 million to $1.14 million, and land decreased from $1.09 million to $0.09 million, primarily due to the disposition of TerraFlame manufacturing operations[56] - Depreciation expense for the six months ended June 30, 2025, was $3.4 million, up from $2.4 million in the prior year[56] NOTE 7 – Intangible Assets, Net Intangible Assets, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- |\ | Intangible assets, gross | $278,685 | $277,667 | $1,018 | 0.37% | | Accumulated amortization and impairments | $(97,300) | $(87,966) | $(9,334) | 10.61% | | Intangible assets, net | $181,385 | $189,701 | $(8,316) | (4.38)% | - In Q1 2025, a sustained decline in Class A common stock share price and potential tariff impacts were identified as triggering events for long-lived asset impairment[59] - A recoverability test indicated that the carrying amounts for the long-lived asset groups were expected to be recoverable[60] NOTE 8 – Goodwill - Goodwill balance for the Chubbies reporting unit was $73.119 million as of June 30, 2025, and December 31, 2024[61] - In Q1 2025, indications of impairment (sustained decline in share price, potential tariff impact) led to a qualitative goodwill analysis (Step 0) for the Chubbies reporting unit[63] - The analysis concluded that the fair value of the Chubbies reporting unit was more likely than not to exceed its carrying value as of March 31, 2025[63] NOTE 9 – Other Non-Current Assets Other Non-Current Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Capitalized Software | $8,477 | $5,388 | $3,089 | 57.33% | | Debt Issuance Costs | $6,312 | $— | $6,312 | N/A | | Other | $1,794 | $2,756 | $(962) | (34.91)% | | Total Other non-current assets | $16,583 | $8,144 | $8,439 | 103.63% | - Debt issuance costs increased by $6.3 million due to the 2025 Refinancing Amendment[64] - Capitalized software increased by $3.1 million due to ongoing ERP and web platform development for the Solo Stove segment[64] NOTE 10 – Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Leases | $8,005 | $9,370 | $(1,365) | (14.57)% | | Inventory | $4,963 | $14,812 | $(9,849) | (66.49)% | | Allowance for sales returns | $3,516 | $4,264 | $(748) | (17.54)% | | Non-income taxes | $2,128 | $3,602 | $(1,474) | (40.92)% | | Income taxes | $3,819 | $56 | $3,763 | 6719.64% | | Allowance for sales rebates | $1,777 | $3,434 | $(1,657) | (48.25)% | | Payroll | $1,324 | $1,834 | $(510) | (27.81)% | | Warranty | $1,232 | $844 | $388 | 45.97% | | Other | $2,339 | $3,445 | $(1,106) | (32.10)% | | Total Accrued expenses and other current liabilities | $29,103 | $41,661 | $(12,578) | (30.19)% | - Inventory line item decreased by $9.8 million due to timing and invoices received after December 31, 2024[65] - Income taxes line item increased by $3.8 million[65] NOTE 11 – Debt, Net Debt, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Term loans | $240,580 | $74,375 | $166,205 | 223.48% | | Revolving credit facilities | $10,000 | $69,000 | $(59,000) | (85.51)% | | Unamortized debt issuance costs - Term loans | $(12,821) | $(1,315) | $(11,506) | 875.00% | | Long-term debt, net | $237,759 | $142,060 | $95,699 | 67.37% | | Current portion of long-term debt | $600 | $8,625 | $(8,025) | (93.04)% | | Total debt, net of debt issuance costs | $238,359 | $150,685 | $87,674 | 58.18% | - The 2025 Refinancing Amendment established a $240 million 2025 Term Loan and a $90 million 2025 Revolving Credit Facility, maturing on June 30, 2028[70][72] - Interest on the 2025 Term Loan and Revolving Credit Facility is payable in kind (PIK) quarterly through March 31, 2026, and potentially longer under certain conditions[73] - The company was in compliance with all covenants under the Amended Credit Agreement as of June 30, 2025[81] - Interest expense for the six months ended June 30, 2025, increased by 73.3% to $11.56 million, due to a higher average debt balance and higher interest rates under the new agreement[80][149] NOTE 12 – Other Non-Current Liabilities Other Non-Current Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Contingent consideration | $— | $7,232 | $(7,232) | (100.00)% | | Long-term non-income taxes | $1,210 | $1,130 | $80 | 7.08% | | Finance lease liability | $172 | $694 | $(522) | (75.22)% | | Total Other non-current liabilities | $1,382 | $9,056 | $(7,674) | (84.74)% | - Contingent consideration of $7.2 million was alleviated due to the disposition of TerraFlame manufacturing operations[82] NOTE 13 – Equity-Based Compensation - Equity-based compensation expense was $0.9 million for Q2 2025, down from $1.7 million in Q2 2024[83] - For the six months ended June 30, 2025, the expense was nominal, with Q1 2025 showing a net benefit due to forfeitures from the departure of the former CEO and other key management[83] - Awards granted during the six months ended June 30, 2025, included 92 thousand RSUs, while 37 thousand EPSUs and 9 thousand SPSUs were forfeited[85] NOTE 14 – Income Taxes Income Tax Expense (Benefit) (in thousands) | Period | Income Tax Expense (Benefit) | | :------------------------------- | :--------------------------- | | Three Months Ended June 30, 2025 | $1,676 | | Three Months Ended June 30, 2024 | $2,694 | | Six Months Ended June 30, 2025 | $4,620 | | Six Months Ended June 30, 2024 | $(501) | - The effective income tax rate was (8.7)% for Q2 2025 and (13.3)% for H1 2025, primarily due to valuation allowances on Solo Brands, Inc. deferred tax assets[87] - A full valuation allowance remains in place against Oru's deferred tax assets[92] NOTE 15 – Fair Value Measurements - Contingent consideration of $7.23 million as of December 31, 2024, was a Level 3 fair value measurement related to the TerraFlame acquisition[94][95] - This contingent consideration was fully relieved as of June 30, 2025, due to the disposition of TerraFlame manufacturing operations[96] - A gain of $0.7 million (Q2 2025) and $0.8 million (H1 2025) was recognized from the remeasurement of contingent consideration prior to disposition[96] NOTE 16 – Net Income (Loss) Per Share Net Income (Loss) Per Class A Common Stock (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) attributable to Solo Brands, Inc. | $(13,468) | $(3,111) | | Weighted average shares outstanding | 1,509 | 1,457 | | Basic and diluted EPS | $(8.93) | $(2.14) | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Solo Brands, Inc. | $(25,660) | $(6,513) | | Weighted average shares outstanding | 1,504 | 1,455 | | Basic and diluted EPS | $(17.06) | $(4.48) | - The weighted average number of shares has been retrospectively adjusted due to the 1-for-40 reverse stock split effective July 8, 2025[99] NOTE 17 - Variable Interest Entities - Consolidates one VIE (Oru manufacturing) where it is the primary beneficiary, with $2.5 million in assets and $3.1 million in liabilities as of June 30, 2025[102] - Disposed of 100% equity interests in TerraFlame manufacturing operations in June 2025 to Former Sellers, retaining exclusive IP and distribution rights for TerraFlame products[104][105] - The disposition involved a $2.5 million cash payment to Former Sellers and relieved $6.4 million in contingent consideration[104][106] - A loss of $1.4 million was recognized upon deconsolidation of TerraFlame manufacturing operations[106] - The company is not the primary beneficiary of the unconsolidated TerraFlame VIE, with maximum exposure to loss limited to an $0.8 million annual minimum purchase commitment[107][108] NOTE 18 - Segments - Reportable segments are Solo Stove (Solo Stove and TerraFlame brands) and Chubbies (premium casual apparel and activewear)[110] Percentage of Net Sales by Segment | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Solo Stove | 41.5% | 53.7% | 38.0% | 56.3% | | Chubbies | 48.2% | 29.9% | 51.4% | 31.8% | - International net sales decreased from $9.9 million (Q2 2024) to $6.7 million (Q2 2025) and from $15.7 million (H1 2024) to $12.3 million (H1 2025), primarily attributable to the Solo Stove segment[113] - A single customer contributed over 10% of consolidated net sales ($18.0 million) for Q2 2025, involving both Solo Stove and Chubbies segments[112] NOTE 19 - Related Parties - A related party, wholly owned by an employee and their family, purchases merchandise from Solo Brands for resale in a specific geographical market[116] - Amounts receivable from this related party were nominal as of June 30, 2025, compared to $1.1 million as of December 31, 2024[117] - No significant sales, expenses, or liabilities were associated with related parties for the three and six months ended June 30, 2025 or 2024[116][117] NOTE 20 – Subsequent Events - A 1-for-40 reverse stock split for Class A and Class B common stock became effective on July 8, 2025, to regain NYSE listing compliance[118][119] - All disclosures related to common stock and per-share amounts in the Quarterly Report have been retrospectively adjusted for the reverse stock split[120] - "The One Big Beautiful Bill Act of 2025" was enacted on July 4, 2025, introducing changes to the U.S. corporate income tax system, effective in 2026, which the company is evaluating for future impact[121] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial condition, operations, sales decline, cost-saving initiatives, debt refinancing, and macroeconomic impacts Overview - Solo Brands operates premium brands like Solo Stove (firepits, stoves, accessories, including TerraFlame) and Chubbies (casual apparel, activewear), aiming to enhance outdoor experiences and community[123] - Net sales decreased from $131.6 million (Q2 2024) to $92.3 million (Q2 2025) and from $216.9 million (H1 2024) to $169.5 million (H1 2025)[124] - The decline in net sales was primarily driven by the Solo Stove segment, partially offset by increased DTC sales in the Chubbies segment[124] Economic Factors Affecting our Performance - Tariffs on foreign-origin goods, especially from China, continue to pressure input costs[126] - In Q2 2025, the company diversified its supply base to Vietnam and Cambodia, reducing sourcing from China for Solo Stove and almost eliminating it for Chubbies[126] - New or increased tariffs are expected to significantly adversely affect results of operations and margins, and the company may not be able to pass increased costs to customers[128] - The "One Big Beautiful Bill Act of 2025," enacted July 4, 2025, includes corporate income tax changes effective in 2026, which the company is evaluating[129] - Current macroeconomic factors (economic/political uncertainty, market instability, high interest rates, high inflation) remain dynamic and highly uncertain, posing risks to net sales, gross margin, net income, and cash flows[130] Key Factors Affecting Our Financial Condition and Results of Operations - Strategic consulting firms were engaged in H1 2025 to improve financial results, focusing on operational plans, cost-saving initiatives, and enhanced internal reporting[132] - Key cost-saving initiatives included retention payments to key personnel, reduction in force (RIF), closure of two distribution centers, termination of an underperforming licensing agreement, renegotiation of an advertising services vendor fee, revision of pricing structure, and reduction in marketing spend for Solo Stove[137] - These initiatives required cash outlays in the current period, totaling $13.32 million for RIF, distribution center closures, strategic consulting, and retention payments, funded by cash from operations and credit facilities[133][134] - While these activities are intended for future benefit, short-term realized benefits have been limited, with significant savings anticipated in future periods[133] Consolidated Results for the Three and Six Months Ended June 30, 2025 Compared to the Three and Six Months Ended June 30, 2024 Compares consolidated financial performance for Q2 and H1 2025 vs. 2024, detailing sales, profit, expenses, and tax changes Consolidated Net Sales Consolidated Net Sales by Channel (in thousands) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net sales | $92,257 | $131,550 | $(39,293) | (29.9)% | | Direct-to-consumer | $59,666 | $98,770 | $(39,104) | (39.6)% | | Retail | $32,591 | $32,780 | $(189) | (0.6)% | | Channel | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net sales | $169,509 | $216,874 | $(47,365) | (21.8)% | | Direct-to-consumer | $93,466 | $149,813 | $(56,347) | (37.6)% | | Retail | $76,043 | $67,061 | $8,982 | 13.4% | - The decline was primarily driven by decreased DTC sales in the Solo Stove segment due to prioritization of price integrity over promotional activity and reduced marketing spend[140] - Retail channel net sales were relatively flat in Q2 2025 YoY but showed slight growth in H1 2025, mainly from increased retail demand in the Chubbies segment[140] Consolidated Gross Profit and Gross Margin Consolidated Gross Profit and Gross Margin (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Gross profit | $56,599 | $82,637 | $(26,038) | (31.5)% | | Gross margin | 61.3% | 62.8% | (150 bps) | (1.5)% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Gross profit | $99,204 | $133,181 | $(33,977) | (25.5)% | | Gross margin | 58.5% | 61.4% | (290 bps) | (2.9)% | - The decline in gross margin was primarily due to a channel mix shift towards more retail sales, which typically generate lower gross margins[142] Consolidated Operating Expenses Consolidated Operating Expenses (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Operating expenses | $66,434 | $80,397 | $(13,963) | (17.4)% | | Selling, general & administrative expenses | $47,686 | $70,808 | $(23,122) | (32.7)% | | Restructuring, Contract Termination and Impairment Charges | $10,251 | $— | $10,251 | 100.0% | | Depreciation and amortization expenses | $6,394 | $6,406 | $(12) | (0.2)% | | Other operating expenses | $2,103 | $3,183 | $(1,080) | (33.9)% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Operating expenses | $119,682 | $137,293 | $(17,611) | (12.8)% | | Selling, general & administrative expenses | $86,676 | $119,218 | $(32,542) | (27.3)% | | Restructuring, Contract Termination and Impairment Charges | $16,090 | $— | $16,090 | 100.0% | | Depreciation and amortization expenses | $13,283 | $12,681 | $602 | 4.7% | | Other operating expenses | $3,633 | $5,394 | $(1,761) | (32.6)% | - Decrease in SG&A was due to significant reductions in advertising, marketing, and distribution costs[144] - Decrease in other operating expenses was due to reduced management transition costs, partially offset by a loss from TerraFlame manufacturing operations disposition[145] - Restructuring, contract termination, and impairment charges increased significantly due to cost-saving initiatives (retention payments, RIF, distribution center exits, licensing agreement termination, strategic consulting)[146] Consolidated Interest Expense Consolidated Interest Expense, Net (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Interest expense, net | $5,989 | $3,563 | $2,426 | 68.1% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Interest expense, net | $11,559 | $6,669 | $4,890 | 73.3% | - The increase is attributed to a higher average debt balance and higher interest rates under the 2025 Refinancing Agreement[149] Consolidated Income Taxes Consolidated Income Tax Expense (Benefit) (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Income tax expense (benefit) | $1,676 | $2,694 | $(1,018) | (37.8)% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Income tax expense (benefit) | $4,620 | $(501) | $5,121 | (1022.2)% | - Changes in income tax expense/benefit were primarily driven by valuation allowances on deferred tax assets generated by losses in the Solo Stove segment[151] Solo Stove Segment Results for the Three and Six Months Ended June 30, 2025 Compared to the Three and Six Months Ended June 30, 2024 Solo Stove segment saw significant sales and profitability decline in Q2 and H1 2025 due to strategic shifts and reduced marketing Solo Stove Net Sales Solo Stove Net Sales by Channel (in thousands) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net sales | $38,298 | $70,660 | $(32,362) | (45.8)% | | Direct-to-consumer | $28,641 | $56,131 | $(27,490) | (49.0)% | | Retail | $9,657 | $14,529 | $(4,872) | (33.5)% | | Channel | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net sales | $64,426 | $122,137 | $(57,711) | (47.3)% | | Direct-to-consumer | $47,153 | $93,550 | $(46,397) | (49.6)% | | Retail | $17,273 | $28,587 | $(11,314) | (39.6)% | - Declines were due to prioritization of price integrity over promotional activity and reduced marketing spend, impacting website traffic and marketplace sales[152] - Retail channel sales were also impacted by a decline in replenishment orders, as strategic retail partners held sufficient inventory[154] Solo Stove Cost of Goods Sold Solo Stove Cost of Goods Sold (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Cost of goods sold | $13,730 | $25,386 | $(11,656) | (45.9)% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Cost of goods sold | $25,200 | $46,134 | $(20,934) | (45.4)% | - The lessened decline in cost of goods sold relative to net sales was driven by a channel mix shift, with retail sales (higher COGS) comprising a larger percentage of net sales[155] Solo Stove Segment Operating Expenses Solo Stove Segment Operating Expenses (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Segment operating expenses | $21,174 | $30,497 | $(9,323) | (30.6)% | | Marketing expenses | $9,088 | $14,057 | $(4,969) | (35.3)% | | Employee related compensation | $2,814 | $2,350 | $464 | 19.7% | | Other segment operating expenses | $9,272 | $14,090 | $(4,818) | (34.2)% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Segment operating expenses | $37,318 | $53,581 | $(16,263) | (30.4)% | | Marketing expenses | $14,800 | $23,922 | $(9,122) | (38.1)% | | Employee related compensation | $6,123 | $4,531 | $1,592 | 35.1% | | Other segment operating expenses | $16,395 | $25,128 | $(8,733) | (34.8)% | - Decreases in marketing expenses and other segment operating expenses (seller fees, shipping) stemmed from the decline in DTC channel net sales[157] Chubbies Segment Results for the Three and Six Months Ended June 30, 2025 Compared to the Three and Six Months Ended June 30, 2024 Chubbies segment showed strong sales growth in Q2 and H1 2025, driven by retail partnerships and DTC demand Chubbies Net Sales Chubbies Net Sales by Channel (in thousands) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net sales | $44,455 | $39,296 | $5,159 | 13.1% | | Direct-to-consumer | $23,451 | $22,939 | $512 | 2.2% | | Retail | $21,004 | $16,357 | $4,647 | 28.4% | | Channel | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net sales | $87,144 | $68,953 | $18,191 | 26.4% | | Direct-to-consumer | $36,934 | $33,569 | $3,365 | 10.0% | | Retail | $50,210 | $35,384 | $14,826 | 41.9% | - Growth was driven by increased retail net sales from strategic partnerships and strong performance in the DTC channel (website and owned retail stores)[159] Chubbies Cost of Goods Sold Chubbies Cost of Goods Sold (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Cost of goods sold | $17,826 | $14,794 | $3,032 | 20.5% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Cost of goods sold | $35,999 | $27,202 | $8,797 | 32.3% | - The greater increase in cost of goods sold compared to net sales was due to the growth in retail channel sales, which typically have higher COGS[160] Chubbies Segment Operating Expenses Chubbies Segment Operating Expenses (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Segment operating expenses | $15,152 | $16,761 | $(1,609) | (9.6)% | | Marketing expenses | $4,211 | $6,139 | $(1,928) | (31.4)% | | Employee related compensation | $3,410 | $3,456 | $(46) | (1.3)% | | Other segment operating expenses | $7,531 | $7,166 | $365 | 5.1% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Segment operating expenses | $28,373 | $29,078 | $(705) | (2.4)% | | Marketing expenses | $7,525 | $9,787 | $(2,262) | (23.1)% | | Employee related compensation | $6,844 | $6,692 | $152 | 2.3% | | Other segment operating expenses | $14,004 | $12,599 | $1,405 | 11.2% | - Reductions in marketing expense were partially offset by increases in seller fees, shipping costs, and fulfillment within other segment operating expenses, driven by increased DTC channel net sales[161] Liquidity and Capital Resources Liquidity is supported by cash, operating flows, and the 2025 Revolving Credit Facility, alleviating going concern doubts Going Concern Evaluation - Substantial doubt about the company's ability to continue as a going concern, previously concluded in 2024 and Q1 2025 filings, has been alleviated as of August 6, 2025[167][169] - The alleviation is due to the 2025 Refinancing Amendment, which restructured loans, extended maturities, lowered short-term cash requirements (PIK interest), and deferred financial covenant compliance[168] - The company's plans focus on improving financial results and liquidity through cost-saving and operational improvements[168] - The first full measurement period for certain financial covenants under the 2025 Refinancing Amendment is Q3 2026, beyond the 12-month look-forward period[169] - The company expects to comply with covenants and believes current cash and operating cash flows will be sufficient for the next twelve months[169] Revolving Credit Facilities and Term Loans - The 2025 Refinancing Amendment, effective June 13, 2025, restructured debt into a $90 million 2025 Revolving Credit Facility and a $240 million 2025 Term Loan[172] - Maturity date for both facilities is June 30, 2028[174] - Interest is payable in kind (PIK) quarterly through March 31, 2026, and potentially longer under certain conditions[175] - New financial covenants include a maximum Total Leverage Ratio and minimum Fixed Charge Coverage Ratio (commencing Q3 2026), a minimum average liquidity covenant (commencing July 2026), and a minimum Credit Agreement Adjusted EBITDA of $25 million for the four fiscal quarters ending December 31, 2025[178] Cash Flows Cash Flows Summary (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Operating activities | $(64,256) | $(2,848) | $(61,408) | 2156.2% | | Investing activities | $(6,414) | $(5,225) | $(1,189) | (22.8)% | | Financing activities | $76,627 | $8,241 | $68,386 | 829.8% | - Increase in cash used in operating activities was due to a $28.0 million increase in cash usage from working capital changes (accounts payable, inventory, marketing) and a $33.4 million increase in cash usage from changes in net income (loss) after non-cash adjustments[180] - Increase in cash used in investing activities was primarily due to increased capital expenditures for software[181] - Increase in cash provided by financing activities was driven by $67.0 million from net debt activity related to the 2025 Refinancing Amendment, partially offset by a $2.5 million payment for TerraFlame disposition[182] Contractual Obligations - A $5.4 million obligation to a former advertising services vendor was settled for $4.0 million during H1 2025, resulting in a recognized gain[183] - Future maturities of principal amounts of total debt obligations (excluding finance leases) are $1.8 million in 2026, $7.8 million in 2027, and $241.58 million in 2028[81] Critical Accounting Estimates - Financial statements are prepared using estimates and judgments that affect reported amounts of assets, liabilities, revenue, and expenses[185] - No material changes to critical accounting policies and estimates occurred during the six months ended June 30, 2025, from those in the 2024 Form 10-K[187] Recent Accounting Pronouncements - Refer to Note 1 for details on recently adopted and recently issued accounting pronouncements[188] JOBS Act - The company qualifies as an "emerging growth company" under the JOBS Act[189] - It has elected to adopt new or revised accounting guidance within the same time periods as private companies, which may impact comparability of financial statements[189] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses market risks from interest rates, inflation, commodity prices, and foreign currency, and their financial impact Interest Rate Risk - As of June 30, 2025, indebtedness included $10.0 million under the 2025 Revolving Credit Facility (5.94% annualized) and $241.2 million under the 2025 Term Loan (6.70% annualized)[191] - A 100 basis point increase in SOFR would increase annual interest expense by approximately $2.5 million[191] Inflation Risk - High inflation in the future could adversely affect gross margin and SG&A expenses if selling prices do not increase with costs[192] Commodity Price Risk - Primary raw materials include stainless steel and aluminum, which are subject to commodity price fluctuations and tariffs[193] - New or increased tariffs could materially and adversely affect the business if increased costs cannot be recovered[193] - The company does not currently hedge commodity price risk[193] Foreign Currency Risk - International sales accounted for 7.2% of consolidated net sales for H1 2025 and 2024, primarily from the Solo Stove segment[194][195] - A strengthening U.S. dollar may increase the cost of products for international customers[195] - Unfavorable exchange rate movements could lead suppliers to pass on additional costs, impacting gross margins[195] Item 4. Controls and Procedures Evaluates disclosure controls and procedures, noting ineffectiveness due to a material weakness in internal control over financial reporting Limitations on Effectiveness of Controls and Procedures - Controls and procedures can only provide reasonable assurance due to inherent limitations and resource constraints[196] Evaluation of Disclosure Controls and Procedures - Disclosure controls and procedures were not effective at a reasonable assurance level as of June 30, 2025[197] - This ineffectiveness is due to a material weakness in internal control over financial reporting[197] Material Weakness - A material weakness was identified in Q4 2024, stemming from deficiencies in segregation of duties, IT change management, and resource constraints in the accounting function[199] - Individually, these deficiencies did not present a material misstatement risk, but when aggregated, the potential for material misstatement increased to a material weakness[199] Changes in Internal Control over Financial Reporting - Ongoing remediation efforts include identifying key systems/processes/controls for improved documentation, addressing segregation of duties conflicts, developing IT change management policies, increasing staff training, and augmenting resources[200] - The material weakness is not yet remediated as of June 30, 2025, as processes need to be in place for a sufficient period and tested for effectiveness[200] - No other material changes in internal control over financial reporting occurred during Q2 2025, apart from ongoing remediation[201] PART II. OTHER INFORMATION Covers legal proceedings, updated risk factors, equity sales, and exhibits, highlighting ongoing risks and corporate actions Item 1. Legal Proceedings - There have been no material changes to the legal proceedings previously disclosed in the company's 2024 Form 10-K[202] Item 1A. Risk Factors - Previous substantial doubt about the company's ability to continue as a going concern has been alleviated, but recurring losses and uncertainties in realizing benefits from initiatives could raise future doubts[204][205] - The 1-for-40 reverse stock split, effective July 8, 2025, was implemented to regain NYSE listing compliance, but its ultimate effect on market price and liquidity of Class A common stock cannot be predicted with certainty[207][208] - The reverse stock split may lead to reduced trading volumes, more volatile prices, and higher trading costs for "odd lots"[210] - Future declines in stock price could lead to delisting, as the company is restricted from another reverse stock split for one year[212] - Sales of a substantial number of Class A common stock shares, including 121,998 shares issued to a lender in June 2025, could cause the stock price to fall and dilute existing stockholders[213][214][215] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - Information regarding unregistered sales of equity securities during the three months ended June 30, 2025, was previously reported in the company's Current Report on Form 8-K filed on June 16, 2025[216] Item 3. Defaults Upon Senior Securities - There were no defaults upon senior securities during the period[217] Item 4. Mine Safety Disclosures - There were no mine safety disclosures for the period[218] Item 5. Other Information - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025[219] Item 6. Exhibits - Lists various exhibits, including Certificate of Amendment to the Certificate of Incorporation (3.3), Amendment No. 4 to Credit Agreement (10.1), CEO/CFO Certifications (31.1, 31.2, 32.1, 32.2), and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[220] SIGNATURES - Report signed by John P. Larson (President and CEO) and Laura Coffey (CFO) on August 6, 2025[225]