Earnings call transcript Q4 2022

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Operator

Hello everyone. And welcome to the Solo Brands' Fourth Quarter Fiscal 2022 Financial Results. My name is Bruno, and I will be operating your call today. [Operator Instructions]

I will now hand over to your host, Bruce Williams. ahead. go Please

Bruce Williams

Relations And discuss everyone. released for the the joining morning investors.solobrands.com. website Good Brands thank fourth to Investor on found Solo can we of quarter call our and at morning, be you section results, this which

Officer be Financial Webb. call and will Officer, Merris, by hosted Today's Executive Chief John Chief Somer

Private those Act Before started, our I future and of also within objectives or management's business XXXX statements actual call this implied by actual on uncertainties, forward-looking mentioned. based we involve from and substantial management performance, statements. want differ risks from statements, that on Reform that predictions, including get expressed expectations. of include may control developments. meaning targets results the outside Securities These that events are the be These regarding plans to of which may remarks materially estimates, and financial or forward-looking of without to results and remind Litigation cause expectations, And contain current could anticipated some our everyone materially could limitation, may such differ those

and uncertainties with SEC. these are on Investors Report Annual investors.solobrands.com. encourage and be discussed among in XX-K will the including review of portion our available at filings the to you filings to these discussion website filed be others We for of risks, risks soon These our on our Form

any undue except only update undertake required place to new these not no These made we for law. as revise as should You and are looking information them by or reliance today on forward statements. of statements obligation

the measures earnings EBITDA share our results are core comparability useful also gross as to measures as per to and adjusted, income adjusted supplemental margin, will as in net earnings companies. contain operating of believe period of comparisons our that and with including This adjusted, provide we consistency our period certain evaluating EBITDA adjusted, performance results past margin non-GAAP adjusted generate assist which and and ability financial peer call diluted facilitate

the and of GAAP will our measures these of website, to of portion investors at earnings non-GAAP indicators measures to included Reconciliation investors.solobrands.com. these most in our release, our which be are comparable available definitions

like call over to would turn to I Now, the John.

John Merris

shared And XXXX with environment. long-term digits difficult for year the EBITDA results our positive with outlook. adjusted incredibly Thank a confidence you, Bruce. as joining and increasing we investment full well to strategy beginning fourth make flow. our model fourth our allow pleased profits investments XXXX, we would discuss begin, double despite that you along strong without macro results sacrificing our and of thank our call To and as cash XXXX with quarter were to growth business in At sales free the quarter us

paying investments to QX happy began during to season. selling of strong share in X I'm the culminated the also our back our the at Day call but Thanksgiving the saw rate Cyber off results. which response the high period shoppers response is our or through Monday, not customers. remainder holiday positive through the in most This and half these products and we number key stores in selling the only of that year evident to Cyber come through online continued we converted customer of was shoppers Customer

while all to a reinvesting business. strength on and we our settled testament had the EBITDA, strong drive top-line strong growth, generating our us business solid we into just dust are the while When had results planned. model the free as flow cash adjusted the to of Overall, which delivered quarter, allows growth

only around customers double to them to continue number. through XX nearly It creates and heart years It to our us about took been and differentiates at at million competitive acquire took of have years our the will business the maintain relationships X Customer moat be our business. we we and rate that a with acquiring are direct which it. The relationship customers two website.

them so end on base delivering But here. finds customer the our loyal relentlessly a does customers our customer focused doesn't the new to frequently, delight placed innovating enhancing remain ways regularly. story wow grows We moat. an and experience orders the shipping few shopping ways and our new As are team websites they products, exceptional experience our day surprise on online are and same our we just

obsessing well, to just a exceptionally at as Solo you Brands, good can your for because good customer isn't it focusing to experience It's and core create on team out, just good treating value us that our know for continue customers. turns of But do. simply and for too. by customer Create expect thing customers over lot it's good right a shareholders the the

incredible rate we fueled and Solo with experiences company. with is had and desire of, by share Brands extremely proud referral the their friends is something they've are to our family customer's

all business. found around is our Innovation

One that of Last a growing degree airflow cook category than leverages list, products. new can homemade In, our too products less quickly than Pi, our by we and many and the I'll in launching couple. pizza an but new minutes. highlight we spring other in launched fast the new entered is more and became the places XXXX, history, products Signature two portable exciting favorites. customer oven pizzas oven to XXX obvious year are in any There

in we as Customer feedback out last in year Pi has when peaked and inventory exceptional sold of QX been demand Pi December. for

an hope pit fire to as and to while how fire our but in spaces. shows is business, we larger whelming small solar long-term This same is yards popular new faster, backyard I late access Mesa us core too $XXX. is that stove it's Early pit. generates and was more and small be more believe it attracting our faster data me can secondary even to burn our but fire important cost Mesa, launched how it may stoves, our patios in innovation a used obvious tabletop mighty easier to was than less customers to the success. response be that is and summer, product that a for for giving bonfire asked and pit customers outdoor use

All-in-all future. new in them and business Solo last Brands impact meaningful the expect products on we have our year, to launched over XX a

area ingest, Another and at innovation is data digital first of Solo big Brands party Last of and in infrastructure. in made our we we utilize Brands. third-party year, Solo data how and improvements digest

potential far a find long convert had into and impacts data and to we profitably scalability. prospects focus digital because and barely proprietary on on customers. digital investments penetration, our runway to we has new have Our and And unique surface them data efficiencies marketing market and the scratched believe reaching

again additional In new, come purchases. more efficient addition, ways get for we are to to again finding and back customers existing

is XXXX working are about into things leaning well. the all that

And infrastructure; management Data priorities this them wholesale second, the and broaden are to paying year, so expect our and growth of investments partnerships. for last in and to internationally; third, and deepen and expanding we our year. digital this year back first half drive data continue our in continue off began investing

drive party retention data this customers data to referral improves meaningful and first with to interactions ability rates. use engagement, and Our our

growth of strong in our the QX seeing internationally profitable international momentum in continue half pushing started and second XXXX. in want to We markets

international existing our the additional that We new in U.S. to significant has our still to size have this plan vision. will markets realizing markets in same and become us countries, launch believe our stores opportunities get business. and this long-term, the business we the as growth e-commerce And year. We our potential to closer localized new

is a retail our partners finally, in key with And expansion XXXX. of opportunity area

to want be partners. closely As shields, Costco we them to need on can focus great outdoors, working and where Ace, participate and be. be SKUs with to to solid customer our been strategically our and we have are Disk, customers we to customers more And expand promotions, and continue where with delivering coordinate want experience, others company. us a Academy exposed

mentioned because for we're is this and penetration Brands. our accelerate earlier, brand shift believe we stronger I exposure strategic while market early Solo in with As significantly retailers, alignment story,

expect a and strengthen one and Of course, our to between this generating business mix our profit will initiate wholesale, but that model. shift DTC we plan

are an environment. in We operating interesting

backs. On one wind we tremendous the at our hand, have

year investments from Our last paid off.

on stand provide initiatives wind focused on only confident additional sales. that we feel a to while exciting We we're which have our strong new to built foundation and some

hand, other It's spending. environment discretionary macro is to our tossed consumer business easy footing. remains to risks the obvious uncertain. with the On there's so Inflation solid remains around high, factors, get but and on conflicting many

team I our healthy profits, I'm of We say and can for we're resilient free future. growth, excited and proud have produced are cash positive the flow. strong honestly

playbook our company. our you we oriented. this is interest hear is accounts environment, The is consumer I'm future can team the that we for can't that the the thankful or predict that in for macro but one and long-term rates, of uncertainties backbone will truly so will and Somer execute inflation outlook, the profit from which

over I'll the turn now Somer on discuss And call our financials and the XXXX. outlook to to

Somer Webb

Thanks, through results John, XXXX you XXXX. then provide and our will everyone. walk quarter outlook year commentary full good some morning, and our for fourth for Today, I and on

trends. results core were and revised we year into our expectations both consumer behavior quarter international we quarter, coming in our by fourth we those in products driven on a penetration and came Our ahead through call, of new based from of mentioned direct-to-consumer growth last On wholesale our our channels. continued change and guidance seeing products, stronger that prior the

of strong behavior As we in the consumers shopping year back resulting revert and and the unfolded, December see late-November rest pre-pandemic to pleased were timing to growth.

managed and doubled the XXXX. cash momentum our gained the year ourselves nearly with of as also we prudently quarter the brands We for inventory positioned wholesale well retail our in at in our Our end channel. partners

prior results, for driven demand compared XX.X% penetration. by across at million Net full to by increase Diving finished we the XXXX of million increase into fourth strong $XXX.X wholesale year our million, in channel $XXX.X driven $XXX.X increased market XX.X% period. all sales channels. quarter sales as strong in Sales year an to net results versus continue the the to the were

million quarter increased presence retail from $XX.X XXX.X% the in expanded compared year to the fourth partners. million Wholesale $XX.X prior we net as our with sales to

sales performance, net million $XXX.X over fourth direct-to-consumer pleased in we decreased growth the period as year. to We were to the our comping same $XXX.X in for the the with were quarter, Our overall million year. from compared XXX% prior X.X% prior

a remains and meeting double strategy expansion through both part wholesale channels our where full of are As John mentioned channel year for growth and the digits. direct-to-consumer long-term XXXX our they grew customers

'XX mix channel, approximately year direct-to-consumer as Hardware sales XX-XX strategic our in wholesale partnerships Costco. XXXX was for wholesale DICK's Ace the notably between channel Sporting Goods, full versus XX-XX and in for Our expanded we

continued the year for mix, XX.X% the were in direct-to-consumer the year Despite up sales their shift compared net our high XXXX. sales channel pattern, to and growth full

sales up net were XXXX. wholesale from Additionally, XX%

for the XX.X% both margins XX.X% in quarter, inbound was fourth to rate XXXX. Gross quarter for of year full compared the to fourth the gross for XXXX. XX.X% the margin full the freight. Moving XX.X% quarter for our our and to and margins Gross were margin, gross acquisition by year impacted the of XXXX gross margin the year higher were profile compared

rate by margin was wholesale a through which has margins. lower contribution channel, gross affected gross EBITDA Our also carries although sales higher similar our margin

headcount related The administrative a higher XX% in costs was and as expense or million primarily fourth for of by to the same or employee $X.X sales company. investments. costs. decrease variable costs net fixed $X.X was from associated general expenses Selling, driven and the increase million our quarter costs with increased becoming $XX.X was The public sales, of driven million increased by year. last costs cost $XX.X due offset to benefits variable period marketing compared data The XX.X% million to lower due related variance partially of to net in to decrease fixed the by increased

initiatives. related the increased a increases SG&A costs net becoming to XXXX. The included sales, public expense businesses related increased $XXX.X resulted long-term for of in increase million year. to increase in or million $XX.X associated with full of remaining in for and in company, investments to from million The or costs, SG&A, employee XX% strategic marketing acquired prior increased in SG&A the year of compared XX.X% net the year $XXX sales

million Our fourth Full with per and $XX.X million quarter net share goodwill quarter loss $X.X of non-cash net was charges which year and adjusted EPS Fourth net income XXXX of was adjusted a share. $XX income our $X.XX net in Full and or income $X.XX net a diluted of adjusted loss million diluted $X.XX. included recognized ended was $X.XX. or EPS per of was per impairment intangible million, of income share. $XX million QX $XX adjusted roughly share year was

to invest $XX.X international EBITDA XX.X% continue EBITDA EBITDA and of delivered Full at year million year, long-term adjusted product During and adjusted the XX.X%. and in data, and strategic sales. the of million, $X.X innovation quarter margin or we of adjusted was initiatives net in expansion

period, to turning million and equivalents. sheet. the $XX.X end the At cash balance cash in we Now of the had

of had $XX as $XX.X of and in loan facility, As credit leaving the XX, borrowings million $XXX capacity the facility December of we million term revolving million agreement. credit The the XX, December borrowing availability. $XXX million outstanding under of was under revolving

position, We have a are advantage times. leverage able X.X take and strong of believe than strategic that liquidity we with a to opportunities we remains less net

prior business due at the into level decrease the was pleased are $XXX year $XX.X XXXX versus the of we expansion versus growth quarter on and end markets a of with our launches. Inventory with product inventory we international of Inventory made to new progress million, million increase the QX. during fourth

outlook to for Turning our XXXX.

about be tremendous from our strategy in and growth opportunity We see and long-term both excited category continue business. to channel our expansion incredibly

However, unknowns. the the not uncertain creating and spending economy, we environment are inflation and many state are consumer to The on mindful discretionary the immune of spending. current consumers' of pressures

spending expect to in which entering through continue in the to softness seen have term. consumer consumer direct channel We near we our XXXX,

our However, continue XXXX customer John success wholesale relationships those and to mentioned to reach. our lean with we've into broaden will more even we continue in to seen partners,

in in will the backdrop for EBITDA through forecasting on strong investments, to range margin. to revenue believe drive resulting XX.X% this million XXXX, efficiency, Given of our be forecasted marketing fiscal of we full EBITDA able returns million a margins driving are XXXX $XXX year. for We for to data in we the XX.X% $XXX range adjusted

comments we While will guidance, cadence. we some are regarding provide not general providing earnings quarterly quarterly

XX% We represents seasonality in that due the of years QX, brands expect QX. our our QX, to in in revenue QX, and consistent XX% XX% portfolio come XX% in of to with roughly prior for

we sales direct-to-consumer by channel line end that in to wholesale to total wholesale As to from the our of continue our potential the seeing year. XX% has believe strong We with up profitability be our the business. of

As a and margin. lower wholesale a reminder, wholesale our DXC are overall the contribution gross similar, carries although channels from

was first freight continue to a As the second of 'XX, a many a year prior we should will We've XXXX investment, in QX on which discussed in calls, be that tailwind of were be headwind of the half however, half. for noted initiated 'XX.

those and QX increases So in SG&A when we additions. forecasting from QX expected year-over-year earnings,

view current forecasted performance that headwinds the of Our macro environment on throughout remainder anticipates continue the year.

to will prepared long-term we consumer to we turbulence short to growth are market Although shareholders. short in for we and face make feel in eager in necessary deliver our profitability. the our that long-term remain results growth adjustments and sustained changes term, best With to said, potential and behavior monitor for continue continue strong and financial the confident

you Solo appreciate a Brands successful. moment opening Before team up all and like We for to work that dedication. the I'd take hard our to do their for to call questions, thank make

can what for While unpredictable, and to environment is us we controlling long-term on strategic executing the control position growth. plans we our focused remain micro

turn to the the now beginning to will call I operator over Q&A.

Operator

from first from Our is Randy, line go Jefferies. Instructions] open. Konik your [Operator is now Please question ahead, Randy

Randy Konik

their the terms buying versus Chubbies to Greg. everyone. some taking moment? about Just perspective Thanks John, questions. guess tendency to on morning, some buy in behavior feeling my there. or you're of first perspective Good across differences how similarities maybe perhaps the want us give customer, Solo get or I for at for

John Merris

that's a we say of attention talked paying than Yeah, that happening speaking, we've of in the directions. good been everybody. think both one we've that customer, the look see brand, And purchasing customers general, thanks, generally just behavior been number metric from about to. I at the more I'd are we morning, if Randy. Yeah, and conversion

Solo So customers. we customers Chubbies see coming becoming and over

We over and also customers. see wholesale Solo becoming converting customers Chubbies

call, on efficient is what efforts year, in the our more That gains we around just focusing data emphasized data themselves. within her becoming that actually the last in invested found more being said, are brands we seeing as we Somer into that better work

just some and driving, the or repeat instance, hasn't stove a and it efficiency and we're been Solo for we've better purchase within repeat within Chubbies. marketing highest ultimately the priority, brands seeing within lift, on because gains, purchase while driving some seen So crossover focusing

maybe put been than time would we the less So brand there's be kind emphasis marketing. I'd on anticipated, we or it of this say, year cross around putting last shopping,

Randy Konik

more the And that, if a you at you little Solo? they Are about more there's say Just little Understood. the would talk Solo Chubbies customer, Chubbies bit just any over clarify -- when or cautious over cautious.

John Merris

entry been no consumer stronger of being pretty it another, say with consumer now. way for Stove, Solo than But lower Solo right really had be much, Chubbies it's Mesa between and that lower at seen Mesa If and over seen kind and lean resilient a to point price that in saw a bit one the like different not come new slightly point, I'd rate -- are drastically that of pretty consistent. price to that seems we one Stove, another, Chubbies it's consumer. out the be conversion able product. level for or price entry being Solo obviously I customers strong the participate lead the And and point. really price we've think with point, I little if to we would Chubbies launch AOBs the

Randy Konik

if seen et My you the can gotten Got going see, product, to is, floor of last you've more Goods Chubbies winds, Sporting you I've space, more cetera. it. clearly question the DICK's will.

here give XX changed what's through in we in just So your in example some from some DICK's they're to that. talk brands you committing other helpful. would the sell where thoughts brands kind on, us Goods And box last Sporting your guess maybe us clearly, because to go perspective using I and in? maybe portfolio. about to Thanks. your your color any XX of months , they more give mean, of give sell then there I just an with relative around And your super be as do

John Merris

is you portfolio, way been historically the Yeah, the retail And to rest opportunity has done their of in got the with think excellent brands partnerships. the it. built our an great had that what's they've Chubbies I've efforts. job, the I from learn that

Solo starting the is to approached the a been last you've visibility the of at DICK's over they've course, with all How of as work closely was to Stove those deep big and Solo has partnerships. already wholesale wide a seen one teams So getting months not partner ISLE, and and with changes and Chubbies. XX but Oru Stove, as understand. that partner as we saw phenomenal Chubbies not just to Chubbies to

on to what been those to led and things, that with retailers leaning then done, what has learning conversations So is and we've doing better what were the to watching that's doors. stronger especially partnerships most Stove. pretty side door already what And in to much Solo count matters with to Chubbies importantly, from the is also less the and wide and because we broaden doors a the than and DICK's and willingness

as to consistent kind SKUs really that's out in just almost and not just store store product being what And was type we're like store retailers more mentioned, with well. you've seen lean more it footprint the of DICK's other But getting but you carrying with is starting into. approach so there a going more deeper

stronger of really want now better with go especially deeper to that for stronger and Stove a has level and promotions at visibility we coordination build like to really coordinating with to product So of earlier retailers brands. this new job visibility things are that partnerships all giving saying that and us with the this Solo helped gosh launches level doing

Randy Konik

guys. Thanks, helpful. Super

John Merris

Randy. Thanks,

Operator

[Operator Bank now question is is from Robby, go Instructions] open. Robby Our Please of from ahead. Ohmes America. next line your

Unidentified Analyst

our It's Maddie Hi. on question. for Robby. for taking Thanks

channel Just Was reason customer in throughout revenue acquisition? brick-and-mortar it XQ? by to DXC new driven the for compared revenue slower first, growth yourself key what does was DXC retail? decline the And the growth how in

John Merris

good Yeah, and thanks, morning. Maddy

stat shift buying. were think I and wholesale. we just the in consumers was a grew -- where Certainly XXX% was So, there

think driver. was I that So definitely a

look shopping I behavior earlier. year think you came happened QX, if also, way the previous at XXXX it just

in being they in about for the even -- mid seeing to consumers were shopping, were And get were that holiday So XXXX. Christmas. holiday happening gifts early concerned it's shopping we able looking mid-October

where part you first our as consumers it heard the QX be more to than much a in year, look on it XXXX, looked like type pre-COVID call, last different This behavior, much waiting. seem of buying

is week that during show and rest year. the good the the through did of The of news consumers up Thanksgiving

ton QX And Somer ground. XXX% note of up of ground, would year-over-year we out, And like all make last so that made XXX% lapping something of XXXX, the or that not this I but is we thing a called I something the like just growth. think were of

we just in had addition. laugh a big So

So I'd just year-over-year were those factors say wholesale consumer lap that we overall the behavior buying changing the three the facing. shift and then

this sell I that's at I one. very sell overall partners hearing we're retail from on coming address our positive replenishment the with of retailers, this through orders. back through what feedback terms and to they're and alluded think But reflected kind In didn't Randy in and of

happy been through sell leading and to for not a it's sell with definitely ultimately we're on It's front. wholesale us in that's replenishment seeing the what scenario So we're order. just

continue and far both in breath that DXC and year. So good lean forward looking to to on wholesale this so to

Unidentified Analyst

and And time when work Okay, environment great. question, seeking does promotional an That's a second our you. a in Thank inflationary is the how deal? helpful. strategy your consumer perceived

John Merris

question. it's a Yeah, good

biggest we're I around partners shift with about the thinking moving think forward. way promotions is coordination more the the for in our retail us

is cost the passing And been pricing delivering slightly have our again, year-over-year been focus for We the position part. quarter. in promotional in hold first large in able environment, this less this great rather to actually for the been, customer. inflationary part we've most onto in consumer, in customer because, our than a on We've experience

dollar really like stretch. pinching tight so making every And environment where in of and this, and kind they're it really, an

think, we're it an to because we participate our promotional perspective, them more with we're increasing pricing gouging like our in feel overall and allowing it is with consumers from like versus and brands, position them in and pricing. to We'd versus,

we're to as So pricing hold a margins, and the really regard. strong business. is our again, good us consumer in a to profile increase not ultimately to deliver in allowing And spot that marketing pricing still

Unidentified Analyst

going you. Best of thank luck forward. Great,

John Merris

Thanks.

Operator

Our next Blair. Please is from now question open. from Sundby ahead. your Ryan Ryan, William line go is

Ryan Sundby

Hey, guys. you across here Thanks the the question. mix, more for U.S. that in to internationally, the Can looks what too little what you're a far ramp how similar seeing talk maybe seeing about different markets. Its product you're

And domestic Thanks. more split international today? Or then think based as time? require kind current would even over expansion? you markets the about that a between that and of on further Is

John Merris

Yeah, good definitely include are. thanks, than It Ryan. where will we And more markets morning. currently

that of one quickly. kind just really I'll So address

On certainly you overall out the domestically just launched Last we're Europe, full we with both in the year, product than and XX faster was we're in and early. seeing months our the what as mix, the having of pleased very first when up, it would gate, year strategy, brand. a very and first Canada imagine sites ramp localized call

we're overall, So pleased. really

it From exception our internationally U.S., say generally business. just launch between is and a there's the when our business products, international similar we to new SKU mix domestic a lag very one I'd the standpoint, looks

our in instance, Pizza for we U.S., international until did market. if launched spring we launched last mid-fall and late here Oven, fall the launch in So to it

lag SKUs. carrying then were the see of we general So the but majority otherwise, with products, you'll new in

we is brands, past, the brand the other Solo with of the market maybe the other in on opportunity. based mentioned to new is behind on then is I've in as overall a Stove generally look Solo size And And And just awareness. lead brand. Stove note that follow

Ryan Sundby

it. Got

on just customers like growth question, driver wholesale John forward. more a following next is year. But existing key be it coordinated deepening Maybe Randy's up mentioned seem does with you penetration Okay. moving

should even permanent how and about we or new [ph]? more presence So having partners channels club like think maybe

John Merris

I We're all standpoint. and, from all think exposed the all motion. that that There's guide And what now. the it's putting here. I Yeah, forth reflects hand to retail lean of under but we're a at that we penetrated table now of of that we're recognizing right is would very we're And today, early kind in right us have lot overall exploring and all us think still under for of in opportunity wholesale agree options. an in

or meaning store, lean right more we're again, moving to retail there. stuff the permanent and thing. far we so it's going existing in continue So in are wider doors, future. to that meaning retailers more deeper going more all things that within whether with Those displays wider store pretty sort prominent we're deeper more store of going that in suggests our get conversations And about so to excited partners, our there. definitely to direction the movement into. And There's meaningful excited were in retailers, see

lifting with selective overextend going we just our bring just, on don't aren't we're going that outside to brand very that very base to it's of be current important us. here, partners bring to be terms and definitely us on. new that we partners to the strategic And partners, interest retail of There's In of wrong continue the or to retailers.

going about once, and at their right kind have you liked but that to go conversations we're willingness strategic I've disciplined partnership early now our us be far out all to so deeper. just it. we the here, expect all be to said really we and can base not go before, So And, and of thoughtful like

Ryan Sundby

it. It's to hear. Thanks. good Got

Operator

go open. Peter, your next from is Sandler. Peter is from Piper Please now Our line Keith ahead. question

Matt Edgar

Peter. our Matt on is for for This question. morning. taking Good Edgar Thanks

how speak kind Maybe how wholesale First and just embedded speak off the callback negatively there? us, And you of your we're then And the can the you curious from that impacted in line? outlook. to on Thanks. kind ocean what's ocean the the can freight freight impacts just maybe mix margin in implied outlook? gross have to has much of

Somer Webb

absolutely. Yeah,

on to gross So year, of when to wholesale will the similar though, margins margin. standpoint, I contribution want we that the channel. by it an From continue about although percentage impacted EBITDA direct-to-consumer It our I as targeting has for it pressure note think mix. be still gross puts are XX% plus.

be mentioned up mix that overall can of As to our I XX% year. wholesale this

just from an As where mentioned, level. as freight, ocean far inventory we I from are

XXX kind on points plus a But still can to be XXX to as XXX see bought in points. half XXX we're I think basis it's then second and gross margin, margin. so of still the we basis half you targeting the XX% a tailwind headwind gross on overall, that in first

It quarter. may by vary

they the to for be QX Just QX. standpoint, they're to a instance, our note, wholesale season, holiday and summer are going QX higher in season, stocking the so because stock for typically, quarters, as for from wholesale

winter end typically they're for QX QX. the of the year. For early still stocking a overall, plus again, targeting XX% at But season, the

Matt Edgar

And by around really the that's cash balance expecting kind inventory outlook? we're projected you and from you're any guidance expecting provide curious of of inventory the statement what's what mix you kind Thanks. the the are within Great, Thank maybe year. what and on cash outlook, flow details given And year-end? can if from for I operations you. flow second to the wholesale this us guess, helpful.

Somer Webb

Yeah, those haven't metrics. given we typically

come in we our We in down call levels are expected also QX QX QX. obviously -- we that our to said in inventory

XXX forward. both inventory through work days from and an going inventory on our As as I wholesale from a about expect target. have from direct-to-consumer standpoint, to a of hand we That's

XXX I hand. year year, of look that's days get the to inventory around we as end is end what of to of to expect So the the on

think where this cash from any always be levels. As will we position, as do year position, inventory far this healthy This obviously strong a this believe are different. cash expect generating I our as inventory cash But through cashier We will work flow. year. to be be we that a starting won't we inventory an free have with standpoint,

Matt Edgar

you. next Good thank Great, the with year. luck this with --

Somer Webb

Thank you.

Operator

Our question Megan from next your is open. ahead. go Alexander now from Please is Megan, line JPMorgan.

Megan Alexander

Thanks my Hi, morning. for taking question. good

were if DXC. season Just think there on talked question. differences seems lot the on sense sort you holiday up continued of of a of is DXC it follow like makes clearly John, be pressure versus last wholesale It related I could But, previous down that some year. XX%. this

else take seeing difference Is step demand consumer on? a digestion that had penetration COVID just, that wholesale? of And you 'XX for DXC or in trend? wholesale this around normalization thinking diagnose a going is back something a there would year Or how So is in and then is behavior you DXC? maybe and long-term of think just your versus changed you're trends the

John Merris

Yeah, the question. thanks for

it's think have DXC a a as I year about an And year as alluded So both we that that to. I combination first think versus what thinking maybe is, of an seeing I overall, business kind how you flat this and overall pegged we as we're things of think for DXC. last, more are

able in just make first where, The is a stuck normalized a to now are and environment consumers way -- shopping. they're are choice have obviously home post-COVID at to that the

we're behavior seeing so there. normalized And

an macro DXC right flat a other put that 'XX coupled you've business. like seems hear heavily. year with a have think It well. like expecting you and thing And where business and from our right talking together, as think on to two the I environment to been just overall take. that approach those flat do pretty you about the brands the And that can we've I overall you things

retail bringing surge new our wholesale We this for partners what make from wholesale, to reaching important online growth hadn't are is because seeing customers selling we're in in wholesale we're it's the this And with we're new selling point us that us a online. we're partners what not of of not that is, -- in seeing it's bringing and been and eyeballs. I eyeballs, stores, think sets that also do shifting we is wholesale early new that our to like just it's really that

to And it into really continue reason. we to going that so liked lean that. for we're And

part mind your second question, The my I'm Could part question? your of remind you skipping the now. of you could second me

Megan Alexander

expect be -- Yeah, just wholesale does to that it long-term like or XX% more go should penetration we

John Merris

could Yeah, see good we up going sight saying to based question. that now, it we're the that's Right XX%. on we're, we 'XX, just a have. line in That of

know I it think if as for I be term, it's don't longer I to sure. expect continue -- we should don't look to XX%. we know

I from to from is the whether similar. think we that that or very DXC emphasize the coming wholesale is EBITDA overall what's it's adjusted profit, see important to continue

of XX% we And a forward But is future it business. to from The of business roll what to. or what we're is it's for line you as dynamic overall I'd right profit wholesale years, unchanged. whether whether XX%, the it So say was sight profit and now, that's perspective. XX% say, outlook in have I'd the forecasting

Megan Alexander

follow or full And It you'll changed around Has into that beyond back for like How Somer. helpful. the thinking then your acquisition that's Okay, stabilized, get to timing benefit getting there margins? 'XX. customer seems EBITDA XX% have a components at the all? costs think wraps freight should up maybe about we

period? about think still XX% time we should 'XX the kind So and that to 'XX of and

Somer Webb

yeah. Yes,

I on think we're track.

We 'XX see going two three you're going the 'XX. and make years. think expect three to we still us was steps. years. in you're two line to and sight going the see do And But we that have to take it to within XX% of steps to said I in

peak two kind XX% easing, to standpoint, midyear there line the back get going a half the as but that normalized. to So also we hit you really year, to even of yeah, spend raw started we I expect think gross from getting year, and But see years. that leverage, we've where we three as to mentioned a to at of of from the the getting yeah, that marketing we goods, last in leverage sight see be of its the and we're from margin look cost of freight from materials standpoint back

Megan Alexander

very Awesome. much. Thank you

Operator

next open. Please from Brian, Our now line question Brian ahead. is go Canaccord your from McNamara Genuity. is

Brian McNamara

implies guidance role with expanding of partners, Costco at with Does new more in decline about on results. you both? QX? your strength we think proportion some here? you Congrats on guys. Are growth midpoint a provide should a partners a hit getting strong And much of wholesale the the or play in deeper morning, If XXXX? XX% you the bigger sales pretty color growth. current Can how Good wholesale significant

John Merris

good morning. Good Brian. questions. Thanks, Good,

I'd partner. overall, So going existing say is that partners. it's Costco around deeper more an existing emphasis of with an

the definitely be looks. in exciting So with is way an that But Costco and thoughtful for continue that to going we're careful us. opportunity going deeper to

are not single, includes our just not a eggs certainly that Costco. in is a and all single partner's of -- So basket a

to sight as So we're with line with that Costco tail. forecasting as healthy and growth of we well specifically, the partners have already rest the of have in the

across So us excited about of ahead the all opportunities wholesale.

year-over-year we just line relatively our for nice mentioned, round partners. us. growth say again, but healthy And side, right some the really with again, nice, out yes, on DXC the But healthy, in wholesale with that flat overall international nice growth are business and growth in 'XX of based now sight of I then we'll the kind retail forecast on for business expecting our

Brian McNamara

clearly, two Great. is the Can separate whole Thanks. penetration of had higher than the build years helping profile? Is Is profitability the And then motion else? drove mean, increase you awareness? us lot many it Is to envisioned one I about secondly, the further? what ago. decision it similar talk a there even it to brand something

John Merris

things. two really it's Yeah,

leaning really liked sets this that our in is started were the last just bringing work I clear that. as were one first through very in data think we slight think we new of we retail ways, partners. I eyeballs as it our we doing became And year, even

that customer we weren't with business. base liked DXC a we our So attract that reaching online able we were to

the be DXC happened and has how marketing new And that's or it saying leaning at, sets if bringing same they're and of , definitely business of and in overall the level secondly, new financial standpoint, a new easy cost into made the then customers is eyeballs profits wholesale if online. assumed and profile wholesale through customer especially basically that of what's to can for that through especially reaching profit this a from not do the profile then DXC, should become us we looking same compared drive generate with us to we just start we're general, something digital of our we

And and those also we But, the you good pretty, with strategy, continue things So a put in you've a I say relationship value the really pretty together. that think I'd got customer. believe two to sound a strategy. directly

have a a message back on accessory follow us additional variety a to that item to be may wholesale the very one with partner, drives to customer an a through customer us or of and with or and of So direct relationship well. site a through with new purchase our a things the wholesale that come as you'll allows them make acquisition strategy differentiated see then as still encourages intentional that deliberate but a that

strategy like here. we our So really

I abilities think more initially thought. we that there than are

us that partners in the back were because wholesale customer customers with comfort. learned ways I lot excited so were think drive to have given that we've our on focused site retail to find we together we less And about also more work to relationship. our past a and

that of are have focus to business willingness between are have our in really DXC things this those back and So comes wholesale. our overall that it's probably to us shift new getting the all ability of to this three to of customers bringing us profit eyeballs kind caused excited our to drive a and the retailers the our site that on bigger portion

Brian McNamara

year. of luck this Great, best

John Merris

Thanks, Brian.

Operator

your ahead. question Bender next now [ph] Jason Our open. Instructions] Please is is Jason, [Operator from line go from Citi.

Unidentified Analyst

you. taking Solo you it. ton for you've Can between flesh the Clearly, Thanks and how core of a us, these year like where growth well, brand new question. for kind from? this they Stove sounds it and maybe of the for name Mesa products do really Good John, Solo which in innovation unpack, during versus is kind Pi, products Tower, maybe Brands of really coming out firepits business the one morning. had you

John Merris

from especially talking and rate having Stove, counting customers our about, we penetration now as the our We Solo at products. XX we're of think opportunity domestically having as well million But Pizza and Pizza business. our Solo not million international particularly Ovens Stove healthy We of well with business at saw households, by majority just north that, of Yeah, came a in X market from a standpoint, north roughly Mesa reached new that is sure, still last the year. overall what core take I'll vast far believe, shot from a come products a amount XXXX definitely. at from most business,

Chubbies say there's where us are of terms But other to continuing to continue. tons there's XXXX, across at going particularly saw Stove we we specifically year. for and the Solo similar a we of momentum and and what the of it still room I'd market Solo lots well. that grow lifecycle in is, are think brands year into addressable Their our had and do innovation phenomenal So brand, They're our last other of that's innovation Stove, brands. to just a amount a while decent overall. as

calls styles is it Long's variety brand, from Chubbies of the Chubbies the about and with Switch, colors launching down a out converts or which we've prior to the ISLE, which paddleboard, talked saw launched came Pants, you that new And that sit Kayak.

an so standpoint, opportunities across brands. And all the lot innovation from a there's of just

You'll see more this of year. that

it so takes something a I XX I'd or, just months ramp I launch well new about or realize over But product. a or of cycle to in past us to as products And products, reiterate new new said the lifecycle generally, think the really timeline. of up for XX

haven't year September, again, on a so Mesa last yet And Pi. even we launched

be a to that. us momentous. XXXX standpoint continue to newness launch Products continual continued of growth So on we the of for as from top those are going

our stores. overall, very adopters, core of The continuing product front for our So core and us firepit solid. business And early is in the runway strong. is we're to very see in still we're

Unidentified Analyst

perhaps just I you thinking at that is here. source. that how open your And to as update But a acquisitions bit just an exploring then the think that, side. M&A has you've The in color. obviously, if the sounded stock given past a have funding all? the borrowing evolved, you for on, and about you where and on thanks And how little about Great, is. capacity wanted it more talked

John Merris

appreciate really question. the I Yeah,

an bit conversations and this When be may in optionality to a there's I'd expected great And say it harder least and where off, to great have First there. of a little that are they in be than at us I are peeled. have have year with want some to a continue conversations we were our maybe in for we out expecting front looking ago. think position environment, we've to have continued opportunity, and brands eyes brands keep and they

into we coming nicely so there be acquisitions or Brands. in that are great months really And four that years, Solo going fit potential the think opportunities to for

Somer we're reiterate, just And to that XXXX, particularly to just inventory how what about I inventory cash around viewing and was with cash. our position, talking turn generation ability our

our to to or alluded credit our line access You cash through facility.

and a using where So position we're to the cash be a liquidity we're opportunistic standpoint, seizing not stock in right is acquisition. position, stock from position we where or take advantage brands. of considered equity a with strong to I'd in potentially a acquire great reiterate for now

really be So a at how just question case probably to is the marks the think where place going standpoint around debt this on our a we many are facility environment strong super our any to clear, companies access market. be there's business on But with in to we're and overall that. our available to in again, be from in position cash

Unidentified Analyst

Super, so thanks much.

Operator

Merris final to no over currently further will go for Please John hand I have questions. We ahead. back remarks. now

John Merris

to look Great. with everyone all with being obviously QX forward completing months on for here first us you a And to we Well, this our report and back being morning. thank in couple quarter. of

week. you all great have and a So thank

Operator

and gentleman, this Thank concludes joining. call. Ladies today's you for

now Thank your You lines. disconnect may you.

Solo Brands (DTC) 9 Mar 232022 Q4 Earnings call transcript