solo stove(US:DTC)2025-11-06 13:21Sales Performance - For the three months ended September 30, 2025, net sales decreased by 43.7% to $53.0 million from $94.1 million in the same period of 2024[128]. - Direct-to-consumer net sales fell by 34.8% to $42.0 million, while retail net sales dropped by 62.9% to $11.0 million for the same three-month period[145]. - For the nine months ended September 30, 2025, net sales decreased by 28.4% to $222.5 million compared to $311.0 million in the prior year[128]. - Solo Stove net sales decreased by $28,585 (48.1%) to $30,792 for the three months ended September 30, 2025, down from $59,377 in 2024[158]. - Direct-to-consumer net sales for Solo Stove dropped by $13,204 (35.7%) to $23,787 for the three months ended September 30, 2025, compared to $36,991 in 2024[158]. - Chubbies net sales decreased by $3,127 (16.0%) to $16,478 for the three months ended September 30, 2025, down from $19,605 in 2024[163]. - International sales accounted for 7.3% of consolidated net sales for the nine months ended September 30, 2025, compared to 7.5% for the same period in 2024[200]. Profitability and Expenses - Gross profit for the three months ended September 30, 2025, was $31.8 million, a decline of 19.0% from $39.3 million in 2024, with a gross margin of 60.0%[147]. - Operating expenses decreased by $106,582 (68.9%) to $48,023 for the three months ended September 30, 2025, compared to $154,605 in the same period of 2024[151]. - Selling, general and administrative (SG&A) expenses fell by $21,624 (35.4%) to $39,495 for the three months ended September 30, 2025, down from $61,119 in 2024[151]. - Income tax benefit for the three months ended September 30, 2025 was $(552), a decrease of $6,345 (92.0%) compared to $(6,897) in 2024[157]. - Restructuring, contract termination, and impairment charges decreased by $81,678 (97.7%) to $1,940 for the three months ended September 30, 2025, compared to $83,618 in 2024[151]. - Segment operating expenses for the three months ended September 30, 2025, decreased to $11,117,000, a reduction of $1,369,000 or 11.0% compared to $12,486,000 in 2024[169]. - Marketing expenses for the nine months ended September 30, 2025, were $10,453,000, down $2,472,000 or 19.1% from $12,925,000 in 2024[169]. Cost Management and Initiatives - The company implemented cost-saving initiatives in 2025, including a reduction in force costing $914,000 and closure of distribution centers costing $976,000[138]. - The company engaged strategic consulting firms to assist in operational improvements and cost-saving initiatives throughout 2025[136]. - The restructuring activities in 2024 included the closure of distribution centers and termination of underperforming marketing agreements, with cash outlays totaling $9.0 million for marketing terminations[140]. - The company anticipates that macroeconomic factors, including high inflation and interest rates, may further reduce net sales and negatively impact gross margin and cash flows[134]. - The company strategically attempts to mitigate unfavorable impacts from commodity cost changes through collaboration with suppliers and alternative sourcing options[198]. Financial Position and Cash Flow - Cash flows from operating activities for the nine months ended September 30, 2025, were $(53,019,000), an increase in cash usage of $50,549,000 or 2046.5% compared to $(2,470,000) in 2024[184]. - The company had cash and cash equivalents of $16,334,000 and availability under the 2025 Revolving Credit Facility of $60,608,000 as of September 30, 2025[173]. - The 2025 Refinancing Amendment resulted in a decrease in outstanding debt and extended maturities, providing financial flexibility for the company[176]. - The company is required to maintain a minimum Credit Agreement Adjusted EBITDA of $25 million for the twelve months ended December 31, 2025[173]. - Cash provided by financing activities increased by $59,963,000 or 880.3% to $66,775,000 for the nine months ended September 30, 2025, primarily due to net debt activity[184]. - The company settled a $5.4 million obligation to a former vendor for $4.0 million during the nine months ended September 30, 2025[188]. - The company must comply with various financial covenants, including a maximum Total Leverage Ratio and minimum liquidity requirements starting from July 31, 2026[183]. - As of September 30, 2025, the company had indebtedness of $247.1 million with an annualized interest rate of 8.38% under its 2025 Term Loan[195]. - A 100 bps increase in SOFR would increase the company's interest expense by approximately $2.5 million in any given year[195]. Market and Economic Factors - The company expects inventory and costs of goods sold to increase on a per-unit basis due to ongoing tariffs, despite proposed tariff reductions scheduled for November 10, 2025[130]. - Inflationary factors may adversely affect the company's operating results, although no material impact has been observed to date[196]. - The primary cost exposures for the company are with stainless steel and aluminum, which are readily available from multiple vendors[198]. - The company does not currently hedge commodity price risk and may increase product prices to offset cost increases[198]. - The company has not experienced a material impact from foreign currency fluctuations on its net sales[200]. - A 100 bps unfavorable change in foreign currency exchange rates would increase operating expenses and decrease net sales by $0.1 million for the nine months ended September 30, 2025[200].