United States securities and exchange commission logo
July 29, 2021
John Merris
Chief Executive Officer
Solo Brands, Inc.
1070 S. Kimball Ave. Ste 121
Southlake, TX 76092
Re: Solo Brands, Inc.
Draft Registration
Statement on Form S-1
Filed July 6, 2021
CIK 0001870600
Dear Mr. Merris:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
General
1. The discussion of the
Tax Receivable Agreement and the redirection of cash flows to the
pre-IPO owners should
be enhanced and given more prominence in your prospectus.
Please include the
discussion of the TRA as a principal topic in the prospectus summary
so that readers do not
have to search for key information about significant financial
arrangements that will
materially impact the company's liquidity. Please ensure that your
revised disclosure
states clearly that you expect the payments to be substantial and that the
arrangement will reduce
the cash provided by the tax savings that would otherwise have
been available to Solo
Brands for other uses. Because the arrangement could be
considered a windfall
for the pre-IPO owners, your disclosure at the top of the prospectus
John Merris
FirstName LastNameJohn Merris
Solo Brands, Inc.
Comapany
July NameSolo Brands, Inc.
29, 2021
July 29,
Page 2 2021 Page 2
FirstName LastName
should adequately address the fact that the agreement confers
significant economic
benefits to the TRA Participants and redirects cash flows to them at
the expense of the rest
of your shareholders. We would expect to see a detailed discussion of
the TRA well
before the single bullet point that currently appears on page 9.
2. Please provide us supplemental copies of all written communications as
defined in Rule
405 under the Securities Act that you or anyone authorized to do so on
your behalf
have presented or expect to present to potential investors in reliance
on Section 5(d) of the
Securities Act, whether or not you retained or intend to retain copies
of these
communications. Please contact legal staff associated with the review
of this filing to
discuss how to submit the materials, if any, to us for review.
3. We note that the prospectus includes market and industry data based on
information from
P.J. Solomon or the International Casual Furnishings Association, as
well as other third-
party sources. If any of these publications, surveys, or reports were
commissioned by you
for use in connection with the registration statement, please file
consents of such third
parties pursuant to Rule 436 of the Securities Act as exhibits to your
registration statement
or tell us why you believe you are not required to do so.
Prospectus Summary
Passionate and Emotional Connection with our Community of Customers, page 4
4. We note your disclosure that your loyalty program consists of over
423,000 members,
which represents over 50% of our installed base. Please expand your
discussion to further
explain the impact of your loyalty program to your operations.
5. Please elaborate on the date behind your NPS. For example, please
disclose the sample
size, time period covered, and score derived. Further, please explain
what you mean by
achieving a "leading" NPS.
Summary Historical and Pro Forma Financial Data, page 19
6. Please note that it is generally inappropriate to combine financial
information for
predecessor and successor periods as the financial statements are
prepared on different
bases of accounting and are therefore not comparable. In this regard,
and consistent with
your financial statement presentation, please separate the financial
results under separate
basis of accounting with a "black line" designation. Additionally,
revise to your summary
data metrics on page 21, and elsewhere throughout your prospectus, to
separately present
metrics and non-GAAP financial measures of your predecessor,
intermediate successor,
and successor. Any graphics presenting this information should be
similarly revised,
including those presenting GAAP and non-GAAP measures. In addition,
refrain from
categorizing non-GAAP measures as metrics, as it appears that certain
of the Other
Financial Metrics presented on page 21 are non-GAAP measures given the
tabular
footnote disclosure provided.
7. Notwithstanding the comment above, we note that you have provided
non-GAAP
John Merris
FirstName LastNameJohn Merris
Solo Brands, Inc.
Comapany
July NameSolo Brands, Inc.
29, 2021
July 29,
Page 3 2021 Page 3
FirstName LastName
Adjusted gross profit margin and non-GAAP Adjusted EBITDA margin
amounts without
providing the most directly comparable GAAP measure. Pending
resolution of the
comment above, to the extent you provide such non-GAAP margin amounts,
please
amend to provide the most directly comparable ratio amount; refer to
footnote 27 to SEC
Release 33-8176. Additionally, update your disclosure to more
prominently provide the
most directly comparable GAAP measure for each non-GAAP financial
measure
presented. Refer to Item 10(e)(1)(i)(A) of Regulation S-K and Question
102.10 of the
Division s Non-GAAP Financial Measures Compliance & Disclosure
Interpretations.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
83
8. You present and discuss aggregated results of operations of the
predecessor, intermediate
successor, and successor periods. Please note that it is generally
inappropriate to
combine financial information for predecessor and successor periods
for purposes of
MD&A discussion as the financial statements are prepared on different
bases of
accounting and are therefore not comparable. In this regard, please
revise your MD&A to
separately present and discuss the historical results of your
predecessor, intermediate
successor, and successor or explain to us how your presentation
complies with Item 303 of
Regulation S-K. To the extent your revised presentation includes a
supplemental
discussion of your results on a pro forma basis for the relevant pro
forma period, it should
reflect all relevant pro forma adjustments in accordance with Article
11 of Regulation S-
X. Please revise your disclosure accordingly, and advise us in regard
to the propriety of
the presentation on a non-GAAP combined basis per page 85.
Year Ended December 31, 2019 Compared to Year Ended December 31, 202, page 90
9. Please clarify the reasons underlying the increase in sales
attributable to an increase
demand for outdoor recreation and leisure lifestyle products during
the period presented.
For example, we note your risk factor disclosure stating that you
experienced positive
factors attributable to the COVID-19 pandemic.
Solo Stove Holdings, LLC Financial Statements, page F-5
10. Please update your financial statements in accordance with Rule 3-12
of Regulation S-X.
Consolidated Statements of Members' Equity, page F-9
11. Please clarify the heading of "Intermediate Successor" on the table at
the bottom of page
F-9. In this regard, it appears as though the period from October 9,
2020 to December 31,
2020 is the Successor, not the Intermediate Successor. Please advise.
Note 1 - Organization and Description of Business
Basis of Presentation, page F-10
John Merris
FirstName LastNameJohn Merris
Solo Brands, Inc.
Comapany
July NameSolo Brands, Inc.
29, 2021
July 29,
Page 4 2021 Page 4
FirstName LastName
12. Your disclosure indicates that the predecessor period reflects the
historical cost basis of
accounting. Please clarify this statement as to whether the
predecessor maintained its
books and records on the cost basis of accounting or whether you are
referring to the
historical cost of the financials prior to changes to fair value upon
the 2019 transaction
and pushdown accounting.
Note 4 - Acquisitions
2019 Agreement, page F-20
13. Please revise to include a table that shows a detailed allocation of
the assets acquired and
liabilities assumed at their fair values pursuant to the election of
push-down accounting as
of the consummation of the acquisition. Your revised disclosure should
clearly indicate
the major classes of assets (rather than just working capital), a
description of the factors
that make up the goodwill considering the significant amounts
recognized, and clarify the
nature of the amount of Class A-1 units considering it appears as
though cash was paid in
the acquisition and units acquired were from selling unitholders
rather than newly issued
units. Refer to ASC 805-50-50-6d through f. The disclosure concerning
the 2020
Agreement should be similarly revised.
2020 Agreement, page F-21
14. We note your statement in the third paragraph that indicates the
"buyer" was required to
pay contingent consideration in the 2020 agreement. We further note
your statement in
the 2019 Agreement section regarding contingent consideration that the
"company" was
required to pay the contingent consideration. As ASC 805-50-30-12
requires that
acquisition related liabilities should only be recognized by the
acquiree if the liability
represents an obligation of the acquiree, please clarify which entity
must pay the
contingent consideration in each agreement/acquisition.
Notes to Consolidated Financial Statements
Note 16 - Subsequent Events
Acquisition, page F-33
15. It appears that the combined historical operations of the company for
the year ended
December 31, 2020 and pro forma net sales of Oru Kayak Inc. totaling
$145.9 million in
part combines the net sales of your successor and intermediate
successor. Consistent with
the comments above noting that it is generally inappropriate to
combine financial
information for predecessor and successor periods, please amend so as
not to combine the
net sales of your successor and intermediate successor periods or tell
us why such
disclosure is appropriate.
John Merris
Solo Brands, Inc.
July 29, 2021
Page 5
You may contact Heather Clark at 202-551-3624 or Mark Rakip at
202-551-3573 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Sergio Chinos at 202-551-7844 or Jay Ingram at 202-551-3397 with any
other questions.
FirstName LastNameJohn Merris Sincerely,
Comapany NameSolo Brands, Inc.
Division of
Corporation Finance
July 29, 2021 Page 5 Office of
Manufacturing
FirstName LastName