DTC - Earnings call transcript Q2 2024

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Operator

Hello, everyone, and welcome to today's Solo Brands, Inc.

Second Quarter Fiscal 2024 Financial Results Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions]

I will now hand the floor to Bruce Williams to begin the call. ahead. go Please

Bruce Williams

Relations and Executive discuss everyone, released for the Financial be Coffey. the joining morning investors.solabrands.com. Laura website Good call Officer, Chris Today's Brands' thank Metz; second to will Investor on found Solo can by we of quarter call our and at Chief morning, hosted be you section Officer, results, this Chief which and

results statements call within remind to meaning management including Before differ mentioned. those without we our may regarding include, limitation, that materially remarks Securities contain plans on I forward-looking of These financial estimates, are Private anticipated get Actual or the business performance, everyone targets this events could Act XXXX the current our future management's expectations. and from of want predictions, Reform may based objectives, started, expectations, Litigation and on developments. and

some of in filed risks, on discussed with We discussion SEC. you including review portion of will of uncertainties, cause These Investors filings and implied risks are forward-looking may uncertainties, the expressed and investors.solabrands.com. these those Form statements. a for our at to that the by to soon-to-be XX-Q on quarterly filings could available which others, report also and encourage or such outside and These involve statements our actual materially from control risks of among these be differ results substantial our be website our

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

and of and useful period-to-period adjusted, net earnings will margin non-GAAP earnings, portion the investors.solowbrands.com. operating measures certain comparisons adjusted, that website included in generate the measures non-GAAP Reconciliation our are call of share earnings our be results EBITDA of indicators our our margin, to believe adjusted as evaluating assist and companies. results This income EBITDA in as definitions of comparability and these as these core are with to we diluted our at adjusted, which which consistency peer of also financial ability available measures, GAAP provide supplemental per and contain including the Investor gross adjusted measures performance, facilitate release, in past comparable most will

like Now the call I'd to to over Chris. turn

Chris Metz

an you Thank all today. for plan Brands' us second will you, our strategic Solo our I priorities. discussing thank and provide and begin update joining Bruce, quarter performance by on and

discuss financial Lastly, detail I will to our turn more fiscal results XXXX. and Laura our in outlook the to for call over

are improvement sequential modestly results We the pleased for total increased over X channel as continues prior the to direct-to-consumer with quarter. X.X% quarters. our quarter By declined second channel, revenues this as year-over-year generate

X.X% our as difficult despite increased We comparisons. results are revenues pleased particularly with wholesale continued

low generated growth people, and we margins foundation EBITDA that will sustainable the the capabilities planned drive double-digit that addition, quarter processes the needed In to for despite is term. healthy investments long over in provide

that in and we with consumers large demand opportunities Brands, traffic through headwinds, seeing and are durables long-term growth direct Solo pleased we are While recognize softer-than-expected channel. our second a Quarter-to-date, are for challenging. near-term results we consumer confident our of remains facing number quarter ticket the for

color will year is reflect it Laura As such, you guidance. trends. our with current full we share on believe prudent our update guidance more to the to shortly

significant their runway growth to gain a of the to Solo give our upon on an to strategic the that allowed current embarked business. full joined Brands' that us update like evaluate would we after The of potential the opportunities company and I of market I Now ahead shortly long our results analysis of conviction my within to this share have that confirm that in-depth categories us. have respective strategic we continue brands plan

the one, of incredibly our by, highlighted premium company, base. segments strong passionate, the the are long-term scalable and with three, on that margins a brands of a brands create opportunity building And with Two, a to in strengths expand several capital. we into their loyal to markets, long-term customer infrastructure model leaders grow identified have our will additional drive clearly have categories high-value highly and are we and returns We TAM.

in-depth us in unaided I of putting First, strategic analysis strong. competitors. Walking incredibly will and consumer in that to insight summary pleasantly done, our was our to how company has that is. a the to Within guide ever want TAM. market Solo the high, adjacencies awareness our compared speaking consumer percentile our to the X Stove's net it that provide truly in, outdoor of We But Score believe our regarding goods Promoter brand I Stove, was X,XXX brand surprised I in the frankly, Solo expansion will top inform and just strong work decisions conducted the leads plan most over see consumers. segmentation was Stove and direct

customer premium as adjacent market. the our consumer how a is have by our XXX,XXX, categories. to our to leverage work as is outdoor of household brand insight inform We will approach as TAM our well strategic characteristics average income strong the goods entering into pricing customers which expand near-term near This base Xx to

larger play highly Within in market. we we but fragmented Chubbies, know that a

the our room menswear opportunities a our have increase position XXX,XXX, for Score that the as capitalize we with Stove, believe categories, strong with growth We X.Xx on we However, of we Similar customer premium market. income within Promoter ample awareness have household core and our Net a brand brand. is that approximately for grow. to that we to are share our pleased has

out will the multiyear across Stove, about groundwork multiyear Vice At a Direct-to-consumer most channel We're innovation laying relevant stabilizing a build product This President Senior executing pipeline our by a who brings business, at to new direct SharkNinja. our that the particularly pillars of investing will also long-term of strategic year, experience, be We in platforms. engine in process. XXXX recently wealth we E-commerce, believe product reinvigorating a innovation capabilities. and in on the is welcomed that generate Solo

Development Vice brings welcomed we Solo QX, TTI of time the innovative Helen who Troy, a much and In having for Stove Product as experience, wealth in new also Bosch. relevant of such spent at companies of President Senior

In fact, Asia very productive our trip product just a at from leader returned development to new this opportunities. looking with product new team

distribution Next, robust we insight that as introduction ecosystem, product development as supplemented by product well go-to-market are our enhancing new consumer which each will channel means research, be strategies. marketing

have to multiple beginning will Solo in exciting XXXX. products launch We in new Stove

begin as expand our near within In of some pit product pizza TAM fact, we introduce the our position making adjacent oven in fire that categories Stove. into introductions multiple will and starting us begin outside to believe of we product innovations Solo return growth, innovate our and new to We to these people investments in are infrastructure core expand to XXXX. new margins and will categories revenue

to strategic see substantial opportunities omnichannel to plan, our of our part we distribution. As continue expand

with either/or. We this both retail purchasing smart fact, not expand DTC in to online. consumer that partnering expand of stores has In approach. need just our informed This us and consumers leads revenue strategy our an their business. research of us We a line is products overall that and our retailers XX% to is don't believe physical to the are right about believe our

and Our research us continue this, supports see down will you this path.

our reaching to selectively of still where but retail part is they owned continuing consumers shop open within smaller A footprint Chubbies. important

stores Chubbies X open our grand we plan Chubbies year-end. weekend quarter, an date. location, additional second to opened the have by Today, stores XX new During experienced we At new opening our Texas to X stores. Woodlands, we and largest

to as drive Lastly, we strategic opportunities part our of margin our EBITDA expansion. leverage our to across plan, platform see scale

leverage and and Specifically, to and very procurement will we supply existing costs. strong network our fulfillment chain scale carrying delivery reduce further capabilities our

suppliers fulfillment that our to margins our are: help This fire shipping a are than Solo procurement company our higher pressures; increasingly we support costs. team will pits examples our and significant offsetting our with just one, picking improvement inflationary a fulfillment Stove collaborate XX% packaged to only new and grow team drive into continues operational productivity in delivery delivery few three, centers net accuracy; two, will expand ovens. greater offer our leverage beyond contract categories that goods pizza leading with signed as A

consumer we Brands to despite are performance in Solo consistent outdoor companies. the environment, challenging progress more the returning couldn't stronger be In making with encouraged best-in-class with I the more summary,

We systems improve long-term to pay needed are much the believe building adding out and in and investing doing our in growth. repeatable performance and incredible dividends capabilities, new talent, robust drive We we sustainable are processes. ushering our work will capabilities

over to me rebuild leads we of this path the to of to XXXX. I turn continue through as to will our we down march Laura. move success believe now All year call the

Laura Coffey

remainder the the macro we through control. the results outlook everyone. of you, Today, a Thank to we Despite and quarter provide XXXX. highly continues and areas our are second backdrop I you face our on for focused Chris, morning, walk fiscal pressures, where consumer can good tough will

We are well strengthen our plan that our position us will working infrastructure. work business, executing stabilize while investing drive Brands' as to shareholder to We as Solo our strategic ongoing this believe against long-term to value.

results. quarterly our to Turning

were increasing $XX.X with is $XX.X site continued volume increased quarter, the million our our lower increased retail in a which by direct to to driven trends the million, In quarter ago, direct-to-consumer revenues year second to channel, primarily retail declined of $XXX.X an million, partners. the Second Retail in X.X% strategic channel. in revenues sales softer X.X% sales compared to offset growth due as X.X% growth traffic. order sales result

generate able period during comparison that particularly a we were are against to year. growth XX% last of We the sales pleased plus comparable sales difficult

gross to Turning margin.

expenses primarily Our XXXX this from year gross to $XX.X XX.X%, compared gross administrative inventory to million the the Selling, fair acquisitions. $XX.X and year. a Adjusted for million XX points quarter was ago. of excludes impact which margin, XX.X%, last flat general margin to to result impact, basis decreased increased value the

of XX.X% year in transaction of to expenses to to SKU volumes related future higher SG&A shipping elevating associated to due XX.X% from more increases investments higher increased costs sales increased As to and a professional primarily compared marketing mix to expenses, growth. ago, the distribution percentage information sales, support with bundles, expense a technology

$X loss was Second $XX.X and XX.X%. adjusted net was EBITDA net was million margin was Adjusted $X.X income adjusted EBITDA million. quarter million,

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

inventory ago. a our was was agreement. The with had XX, as Inventory million $XX.X of the under the of June disciplined pleased in end focused current our $XXX.X And the outstanding XX, of the quarter We borrowing revolving and the are remain facility capacity term XX.X% revolving under $XXX the from we loan of facility million, $XXX million leaving of was level. credit net on and June As year X.Xx. inventory million down at availability. ratio on leverage credit million management composition borrowings $XX

Moving to our outlook.

are we progress We with are the our half on plan. pleased our first turnaround making and performance

However, the macro environment remains challenging.

Our given in to the year, full have of and our business is softened, while come be quarter-to-date will we approximately our our of year believe cautious guidance the XX% trends half prudent in run current rate. back it

As in margin to capabilities success. and the to EBITDA such, We infrastructure X% the XXXX in range that XX% our invest we fiscal to revenue foundation be range we now $XXX continue of million. lay as in $XXX adjusted for million expect long-term to expect be the of to will

Turning to half. the second

We quarter to and of in to our channel due in comparisons challenging very the be our the expect direct-to-consumer. quarter current our third trends year retail most difficult

of onetime XXXX. we retail reminder, agreement recognized a As in lapping $X.X in revenues quarter million credit which a we the during trade third are

will consistent as expectation is August, be We begins our typical quarter well continue year, several marketing pattern. full first launches. product This seasonal quarter funnel by to in as the believe which our bolstered strongest in small our with campaign, fourth the

near the and remains the the in macro our pleased on controllables continued environment strength our while are are brand. closing, term, with In of challenging focused we we

strategies position We our to initiatives are for growth. us the and we are long-term making have progress confident on place in

will the that, I to over now to the With Q&A. the begin turn call operator

Operator

from Chasen first [Operator at Citi. Instructions] Our Bender question comes

Chasen Bender

you think in a macro Great. being in you at standpoint changes? where a drive topical become Chris, U.S., which just in to turndown curious more was of of hard-landing has so, you late, plan what scenario? sharper strategic days can I a in still if the the new long-term if gives portfolio this confidence? you start, you risk And see either thinking the as related scenario, to would and brand that And that, need standpoint, places from to a that make there potentially really are a more hard-landing product or more risk meaningful about parts of

Chris Metz

Yes.

So question, question we've in Jason, and that something lot of of it's scenario an insightful given certainly a thought awful planning. relevant terms to

generating in a business of our within in us part think which first, I and we've guided best the of an our high leverage that of deepest is company X% still and we're and EBITDA returns. So to I increased margins bit, low although sheet to will historically a And that we puts say, have balance group, we are ratio still generate gross to our in we peer to the turnaround, while XXs, margins XX%. a continue the allows amount us has generating pre-availability incredible invest

on innovation to excitement our buy one, and the the strategic compel is create So of to, consumers some team products. focus to plan

if the some us getting has our also that with And shared some price that lean will. of has price will to new haven't newness left table, going features had like on with have research and Part of we price products, are feel in we setting consumer at that these where to be benefits to that we allow date. Jason, people you points and some been

of just strategic our feel is like line, insight that our want margins a better that execution. we've frankly, and lean in So uncovered we it's into not lot also, work just we'll top intents to what our we grow but

rosy So over as we of refreshed. just know campaigns the to this suggest doesn't our we the are business. to website, and fixes we're couple shopper just been putting would marketing that our experience run needs seeing lot to to It as all it down example, online We that we've our hasn't that past as should improvements. of on the give be. down-traffic, an years that need our direct-to-consumer that we although show place know be. in don't better us A the on These need executing is be we're a that the effective growing they environment website

that and is research, Now brand back the was, that in your so consumers. we said, say came strong. that over supported X,XXX the talked I'll mentioned, consumer as thing to other insight And it "Hey, I

brands. on to we of in players adjacencies." all you X% Score be consumers suggested Promoter the outdoor those should into, basis That you puts that Net Your you near that expand into #X categories. adjacencies double-blind #X, and near products a top the in allows Those expand could

expands TAM What to by this does is it X Xx. our

than in bigger we've the a got in we've to which area So playing had much past. we're share grab

we So of the But tools feel big listen, succeed in environment. we've are changes got the the business, we're like us not predicting around we conditions. macro a to regardless preparing and macroeconomic

Chasen Bender

quarter-to-date to into helpful environment? update increasing. That's in trends and the seeing other it. Obviously, you've you And that Got that But the some XQ, you're could heavily more general softer color. us environment in related also we've heard give an promotional from bundling. promotional on is leaned companies the

still retailers destocking. over-inventoried Some are and

second bundling, what for not quarter-to-date that But potential the So drive embedded you're of what breadth informing the backdrop discounting? outlook one. in only to trends, half? given seeing, is looks depth how your and and two, curious your decision macro the but like that And also peer the

Chris Metz

Yes.

we and in this that see promotions can you in discounts help to our the from -- you're have we offset bundling others some seeing space. the gross Jason, of used So maybe margin line,

and mentioned not has we're, increased is our shipping we've opportunity part of the create ways costs, where improve have we've frankly, promotional and discounting. that. everyday an and fulfillment so historically been promotional. But less And we the low us that environment for pretty our bundling And I low, of to think to some

ways by honestly business and But don't So promotional which value factored better as That's guidance. into in can been heightened consumers necessarily environment, usual back in this our margin discount offering we line. an half our that create we improve erosion has a better environment, shopping to factored to our of all have believe kind a from that by year. I a

Operator

B. Our comes Anna next from Glaessgen question from Riley.

Anna Glaessgen

the I'd distribution like at of or big retailers over years, more have brand this fleet expand speak base brand appetite few to a I gains past growth or touch the point? Can believe. of been take into to on Wholesale you on the the Chubbies. driver store to from

Chris Metz

Yes.

men's most that. in by young as of the apparel highlighted exciting calls, customers. you've I believe And key continue me the to one brands Anna, previous Chubbies that So I've the is brands, that's echoed heard U.S. fact earnings today. the in our

out, grown of key retailers. The retailers our our rightly year-to-date supplemented really as door with which from continues brand we've So that pointed some count you've to And obviously, we with be started. the we've gains these with, seen POS direct-to-consumer efforts, strong. how that is

-- expanding we're starting some in. with grown we're the a foremost, like shorts, is really initial Chubbies as retailers. key as categories our now and really, and we swim expanded see where into It's brand. So position trunk to We've other first success into that

our good envy of concept, their you walk with like them DICK's we've see example, lot retailers a a is Chubbies other a got very of is fast-growing of into where And House that Sport way. a you'll key strong which with we being partnered Sporting So wall in Goods the concept, a vendors. if

others, retailers so As to SCHEELS assortment fully to that the starting partnered and well way expect both we see. through a are assortment to the brand, of in extended some our we're through key retailers as success we with given have and Chubbies that other to we the continue initial like specialty core us, as grow important

Anna Glaessgen

Got to it. then Solo helpful back turning from color consumer And Stove, the insights.

premium are color inflation down? end Or performance, shifts headwinds? people quarter-to-date are and gravitate is less consumer you by other naturally the mix? who Are the consumers as the at any lower look there? the you underperforming impacted As seeing within trading towards Just

Chris Metz

reducing, given is being not your because value the which seeing what the interesting day in And in the economy we're seeing what that value, and the about be we're and offering consumer pinched. for that average continues given AOV, reason comments order and we're counterintuitive is Anna, Well, bundles. or question, is it's it's our an strong every to somewhat

drive it you higher value much We see So for a that we're our also discounting as, but average consumers, creates or win-win. margins environment. to don't our promotional value able order as some create say, a a compress

a bundling bundles in to some going from mean us the see that want of enhance you'll to to a to months, over to weakening given We've continue environment. it's something newness forward. value next July I to it's continue these no XX to as we of And question. to newness the So and that anticipate only the create ability go refresh, our beginning products. really in and But consumer the the through bundles there's value. of August, but we newness drive drive yes, of seen it create way I as we

Operator

question is from Sigdahl next Capital Group. Ryan from Craig-Hallum Our

Ryan Sigdahl

start customers want random I Or of they of of existing guess, that you to I past X,XXX Were of are samples or those general with are just an did survey buyers consumers. Solo? Solo people? I tell, is, love guess the is There's pretty product, I it. reason I can what that audience unanimously everyone a that doesn't know ask them. owns a about wide from

guess, I -- curious what was. that's I'm the size So sample

Chris Metz

a question. It's Ryan. really good Yes,

by most who And we our a Score. I'll happy consumers literally sample customer array Solo Score always last out a first had comes that experience Stove to Net Net of to Well, has our XX people Promoter no right? course, the they're saying of measured So been were. across our within who be form team, our of just start demographics. have is has a customer broader days. X,XXX Promoter we've So the high. to of gone time This first idea talking team service always going in the likely, our They bought

consumers, existing consumers brand frankly, even, to weren't talked interested new the we lapsed consumers, consumers that And in itself. category and

was was in strong what a is. over double-blind we door, how that Promoter it strong And back when Score call consumers. I had knew the realize was Net I survey, you brand we if a just number brand came will. walked high. X,XXX incredibly And a So the our I didn't

we're to of the to ask have do or we move into from the us share where we into the in was continue to you categories, So to these research, and not; we're consumers research really were which And as a #X informs very, think that two, or "Hey, be we permission very said, they that discussions, #X either, adjacent near coming questions surprises of player." exciting. out think category one, have already one categories, you -- if those permission get ought in pleasant we

we hired was core We that way we in our us how the it against is, consumer secondary everything into could. that hone of research we to so persona best them to is, the done firms our who how -- best persona. to we make help as insight, really product that the could gather possibly you have know who where a market consumer about And are is, tertiary who sure one that consumer consumer against develop and consumer

Ryan Sigdahl

Helpful. my question. for And follow-up

knock-off, any Just the out you or competition, cheap product. concern of and curious general And year? from guys right with now of if mainly versus as impacting you're see look very much you at macro you China. there back seeing Temu others very, half of is the new how outsized that kind But just

Chris Metz

It's I the of there's Ryan. if you if walk all you mean, I will. market, are mean macro. retail into we more our Yes, -- channels, much

of that market. the as They're or differences portion interest out they're You the go the in and consumer product into products more hurts postings start what with But almost you, to us, an the market. you what than find think getting I going marketplaces. bring helps it product and it I expanding more the reviews a think reviews driving us given aisle, seeing and the we're And online frankly, have in have what some people the market. you. less-expensive the got marketplaces where of online in they're Chinese to of endless will And some clearly, have small you're

the further, will reason their when to new product or fire Much the like going us hit I We newness pizza category. to think is and a in purchase XX continue new you'll a from consumers you. market see pit a But we're or are predominantly the the at years can market going consumers ever we're we a pit for still first market. oven ago. going to companies buy yards Stove Solo reinvent a to beyond XXXX all we give what made give buy in new And the and have a you create reason new to go the we're because our because or to X a what consumers fire time reason driver give to it introduced

or, move need Something that we haven't forward. date, we we done to needed as frankly, but do

Operator

Our Brian next question McNamara at from is Canaccord Genuity.

Madison Callinan

This wholesale, orders? is you Madison Callinan on on hesitant for with any talked color partner have retailers additional Stove in wholesale? Or Brian. partners I about know any Solo we are Chubbies in you being losing do already but Are doors? or

Chris Metz

in No, still runway a channel. wholesale in we and front us, of call Sure. our have Madison, of what we lot retail

improvement a has and if like not doors. hardware center even some ware in in lot of But partnering you channel the expanding today. retail about hard with or that channel, today, think home we're the So channels retailers about the we're been those channel retail not

in. we customers that don't of some don't in. that participate There's channels doors there's So key participate we our of

And growth. for so a continued clear there's runway

in consumer remarks in us the prepared market the research that Now stores. about purchased retail I products that mentioned informed half are my insight

made. we've can simultaneously. this we we're to be both we and said able into know We again, XXXX, should to retail We to quarter-by-quarter the before, think I've an business, move DXC improvements And our we think think continue don't it grow the know as So you've we either/or. format. we stabilize we need over-indexed. we seen into that But with sequential expand is as

talked one Now the of in. we're capabilities, that investing made, we've about lot processes, a I've things systems talent, that

be But we've team. areas frankly, the we over in didn't And customers that so of retail, retail making We maybe with marketing channel much XX big didn't we're and those sit down products planful bring last products just in customers. tie network grew sell-through is in, sales we and campaigns thoughtful retail to those have the We that. support with our we sure channel-specific just products that fast the our in, with conflicts. months bring more the One invested to we together and planful. have -- avoid that

plan little us bit into because hurt I that as soon as the a we against have started it, It's didn't walking that. this year. discovered we And building year

see think better from results. on So think is move as you'll I And what better plans, even better us retail we into side the execution. I wholesale XXXX,

Madison Callinan

All super color about to little helpful. or -- of things know color right. marketing stronger then macro? the talked on new about but I like And on sales excited bit being you get agency additional any That's the DTC marketing ineffective, you're outside a any

Chris Metz

navigate. environment is our nimble to our we better be challenging new Yes, continues of I approach set more started enabling be set external spend. us this so our to make media to different a with mix of to Madison. mean the more on Sure, to in managing marketing to and as spend tactics drive adjustments marketing a channels spend efficiency broader of to

different that retail stores. fuel what our our our I starting. call into will campaign. marketplaces, It will Now I marketing across campaign activation would true It a this feed I the website, XXX-degree communications. creative Snoop we're is mean mentioned campaign plans

And and last so year's this approach year's there's differences approach. between dramatic

year, of we began beginning time So in last we're year, kind frame. that in August. November This

in to August migrate our the season down October, of during So into to see of feed into November, we selling or to start that September, And XX, you'll seasons and key tunnel start plan us more start funnel, create selling conversion-focused rather. see you'll key our a top QX. funnel the us move as --

and fruition fourth made a quarter. of you'll to changes, see the we into start lot here this to So come move as we

hard bring -- with needs first I before, a change I not shopping in to easier, where mentioned more hopefully, be very our we're exciting quarter, a online much, second first the choice and experience is that said when it walked to it changes, the and our much the to made to key will in consumer year experience of is for Now much online that working will salesforce.com, very, we've website. one consumers. be, online platforms next in our create and it We shopping fully first to particularly

improvements brought are So they'll the great experience as with people cadre in end move of area. just through that speed, we stride a the come marketing up this We starting talent, be and to just to in of wonderful continued year. great hitting

of green seeing some in area. about excited that the I'm shoots that So

Operator

We questions no call. Instructions] [Operator have on the further

floor hand management. I'll to So back the

Chris Metz

morning's and call. to next support, this continued Well, thank appreciate and appreciate And questions. care. you, we'll everyone, to course, forward for Take We we appreciate the our look time. the attending on earnings the We of call. you interest talking

Solo Brands (DTC) 7 Aug 242024 Q2 Earnings call transcript