Raises Full Year 2023 Adjusted EBITDA Margin
Guidance
Solo Brands, Inc. (NYSE: DTC) (“Solo Brands” or “the Company”)
today announced its financial results for the three and six month
periods ended June 30, 2023.
Second Quarter 2023 Highlights Compared to Second Quarter
2022
- Net sales of $130.9 million, down $5.1 million or 3.7%
- Net income of $11.5 million, up $31.4 million or 157.9%
- Income (loss) per Class A common stock - basic and diluted of
$0.12, up $0.31
- Adjusted net income(1) of $17.9 million, up $0.5 million or
3.0%
- Adjusted EBITDA(1) of $25.0 million, up $1.3 million or
5.6%
- Adjusted EPS(1) of $0.22 per diluted share, down $0.18
First Six Months 2023 Highlights Compared to First Six Months
2022
- Net sales of $219.1 million, up $0.9 million or 0.4%
- Net income of $12.4 million, up $35.6 million or 153.9%
- Income (loss) per Class A common stock - basic and diluted of
$0.13, up 14.7%
- Net cash provided by operating activities of $51.8 million, up
$63.7 million or 534.8%
- Free cash flow(1) of $48.3 million, up $64.8 million or
393.0%
- Adjusted net income(1) of $28.2 million, down $0.2 million or
0.7%
- Adjusted EBITDA(1) of $40.4 million, up $2.7 million or
7.2%
- Adjusted EPS(1) of $0.38 per diluted share, down $0.21
“Our second quarter results reflect our focus on profitability,
which resulted in an expansion of our adjusted EBITDA margin to
19.1%. Our omni-channel approach to our business enabled us to lean
into the strong momentum we were seeing through our wholesale
channel as our brand awareness continues to grow,” said John
Merris, CEO of Solo Brands. “Although consumers continue to be
selective in choosing which brands they shop, we remain focused on
the customer experience and product innovation to help us deliver
in this environment.”
Operating Results for the Three Months
Ended June 30, 2023
Net sales decreased 3.7% to $130.9 million compared to
$136.0 million in the second quarter of 2022. Continued expansion
of the wholesale network led to an increase in wholesale channel
revenue, offset by a decrease in our direct-to-consumer channel
revenue driven by a product mix shift, including products and
accessories launched in the second half of 2022 and increased
volume for apparel products, along with decreased digital marketing
spend.
- Wholesale revenues increased 57.0% to $31.3 million compared to
$19.9 million in the second quarter of 2022.
- Direct-to-consumer revenues decreased 14.2% to $99.7 million
compared to $116.1 million in the second quarter of 2022.
Gross profit decreased 4.2% to $83.1 million compared to
$86.7 million in the second quarter of 2022 primarily due to the
decrease in net sales, without a corresponding decrease in cost of
goods sold. Adjusted gross profit(1) decreased 6.0% to $83.1
million compared to $88.4 million in the same period of the prior
year, reflecting the impact of purchase accounting adjustments
related to acquired businesses. Gross margin decreased 0.3% to
63.4% when compared to the same period of the prior year.
Selling, general and administrative (SG&A) expenses
decreased 8.2% to $63.5 million compared to $69.2 million in the
second quarter of 2022. The decrease was driven by a $6.8 million
decrease in variable costs, partially offset by $1.2 million of
higher fixed costs. The variable cost decrease was primarily due to
lower marketing and distribution expenses. The fixed cost increase
was primarily due to increases in rent as a result of the addition
of new store fronts and warehouse locations.
Impairment charges fully decreased from $30.6 million in
the second quarter of 2022, of which $27.9 million related to
goodwill for the Company’s ISLE reporting unit and $2.7 million
related to the ISLE trademark intangible. No impairment charges
were recorded during the second quarter of 2023.
Other operating expenses increased $1.3 million primarily
due to increases in transaction-related and acquisition expenses of
$1.0 million and $0.8 million, respectively, as a result of a
secondary offering completed in May 2023 and increased acquisition
activity, compared to a nominal amount of transaction-related and
acquisition expenses in the same period of the prior year. These
increases were partially offset by a $0.5 million decrease in
management transition costs.
Income (loss) per Class A common stock basic and diluted
per share was $0.12 for the second quarter of 2023 compared to
$(0.19) for the second quarter of 2022.
Adjusted EPS(1) was $0.22 per diluted share for the
second quarter of 2023 compared to $0.40 for the second quarter of
2022.
Operating Results for the Six Months
Ended June 30, 2023
Net sales increased 0.4% to $219.1 million compared to
$218.2 million in the prior year. The increase was primarily driven
by strength with our key strategic retailers and continued market
penetration within the wholesale channel, offset by a decrease in
our direct-to-consumer channel revenue driven by a product mix
shift, including products and accessories launched in the second
half of 2022 and increased volume for apparel products, along with
decreased digital marketing spend.
- Wholesale revenues increased 54.5% to $64.7 million compared to
$41.9 million in the prior year.
- Direct-to-consumer revenues decreased 12.4% to $154.4 million
compared to $176.3 million in the prior year.
Gross profit increased 1.4% to $137.5 million compared to
$135.5 million in the prior year primarily due to the decrease in
cost of goods sold. Adjusted gross profit(1) decreased 4.1% to
$137.5 million compared to $143.3 million in the prior year,
reflecting the impact of purchase accounting adjustments related to
acquired businesses. Gross margin increased 0.6% to 62.7% when
compared to the same period of the prior year.
Selling, general and administrative (SG&A) expenses
decreased 5.8% to $108.1 million compared to $114.8 million in the
prior year period. The decrease was driven by a $12.2 million
decrease in variable costs, partially offset by $5.5 million of
higher fixed costs. The variable cost decrease was primarily due to
lower marketing and distribution expenses. The fixed cost increase
was due to increases in employee costs as a result of equity-based
compensation, bonus expense and severance, increases in rent as a
result of the addition of new store fronts and warehouse locations
and increases in professional services.
Impairment charges fully decreased from $30.6 million, of
which $27.9 million related to goodwill for the Company’s ISLE
reporting unit and $2.7 million related to the ISLE trademark
intangible. No impairment charges were recorded during the six
months ended June 30, 2023.
Other operating expenses increased $1.2 million primarily
due to increases in transaction-related and acquisition expenses of
$1.1 million and $0.7 million, respectively, as a result of a
secondary offering completed in May 2023 and increased acquisition
activity, compared to a nominal amount of transaction-related and
acquisition expenses in the same period of the prior year. These
increases were partially offset by a $0.5 million decrease in
management transition costs.
Income (loss) per Class A common stock basic and diluted
per share was $0.13 compared to $(0.22) in the prior year.
Adjusted EPS(1) was $0.38 per diluted share compared to
$0.59 in the prior year.
Balance Sheet
Cash and cash equivalents were $60.6 million at June 30,
2023 compared to $23.3 million at December 31, 2022.
Outstanding borrowings were $50.0 million under the
Revolving Credit Facility, and $93.8 million under the Term Loan
Agreement as of June 30, 2023. The borrowing capacity on the
Revolving Credit Facility was $350.0 million as of June 30, 2023,
leaving $300.0 million of availability.
Inventory was $113.7 million at June 30, 2023 compared to
$133.0 million at December 31, 2022. The decrease in inventory is
due to prudent inventory management resulting in lower
replenishments following the peak season in the fourth quarter.
Full Year 2023 Guidance
As demonstrated in our first half results, the focus on driving
profitable growth, along with continued momentum in wholesale, has
enabled us to deliver on revenue while seeing strength on adjusted
EBITDA margin. We reiterate a revenue range of $520 to $540
million with the most likely outcome at the midpoint of the range
at $530 million. While we are reiterating our revenue guidance, we
are raising our adjusted EBITDA margin target from 16.5% to 17.5%
to 17% to 18% for the full year.
The Company’s full year 2023 guidance is based on a number of
assumptions that are subject to change, many of which are outside
the Company’s control. If actual results vary from these
assumptions, the Company’s expectations may change. There can be no
assurance that the Company will achieve these results.
* The Company has not provided a quantitative reconciliation of
forecasted adjusted EBITDA margin to forecasted GAAP net income
(loss) margin as a percent of net sales, respectively, within this
press release because the Company is unable, without making
unreasonable efforts, to calculate certain reconciling items with
confidence. With respect to GAAP net income (loss) margin, these
items include, but are not limited to, equity-based compensation
with respect to future grants and forfeitures, which could
materially affect the computation of forward-looking GAAP net
income, and are inherently uncertain and depend on various factors,
some of which are outside of the Company’s control.
(1) This release includes references to non-GAAP financial
measures. Refer to “Non-GAAP Financial Measures” later in this
release for the definitions of the non-GAAP financial measures
presented and a reconciliation of these measures to their closest
comparable GAAP measures.
Conference Call Details
A conference call to discuss the Company's second quarter 2023
results is scheduled for August 3, 2023, at 8:30 a.m. ET. To
participate, please dial 833-470-1428 or +1 909-526-1599 for
international callers, conference ID 400642. The conference call
will also be webcast live at https://investors.solobrands.com. A recording will
be available shortly after the conclusion of the call. To access
the replay, please dial 866-813-9403 or +44 204-525-0658 for
international callers, conference ID 323820. A replay of the
webcast will also be available approximately two hours after the
conclusion of the call on the Company's website at https://investors.solobrands.com where it will
remain available for one year.
About Solo Brands, Inc.
Solo Brands, headquartered in Grapevine, TX, develops and
produces ingenious lifestyle products that help customers create
lasting memories. Through an omni-channel distribution model that
leverages e-commerce, strategic wholesale relationships and
physical retail stores, Solo Brands offers innovative products to
consumers through four lifestyle brands – Solo Stove, known for its
firepits, stoves, and accessories, Chubbies, a premium casual
apparel and activewear brand, Oru Kayak, innovator of origami
folding kayaks, ISLE, maker of inflatable and hard paddle boards
and accessories.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release that do not
relate to matters of historical fact should be considered
forward-looking statements, including without limitation statements
regarding expectations of achieving long-term profitability and our
anticipated GAAP and non-GAAP guidance for the fiscal year ending
December 31, 2023. In some cases, you can identify forward-looking
statements by terms such as “may,” “will,” “should,” “expects,”
“plans,” “anticipates,” “could,” “intends,” “targets,” “projects,”
“contemplates,” “believes,” “estimates,” “forecasts,” “guidance,”
“predicts,” “potential” or “continue” or the negative of these
terms or other similar expressions. These statements are neither
promises nor guarantees, and involve known and unknown risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements, including, but not
limited to, the following: our ability to manage our future growth
effectively; our ability to expand into additional markets; our
ability to maintain and strengthen our brand to generate and
maintain ongoing demand for our products; our ability to
cost-effectively attract new customers and retain our existing
customers; our failure to maintain product quality and product
performance at an acceptable cost; the impact of product liability
and warranty claims and product recalls; the highly competitive
market in which we operate; business interruptions resulting from
geopolitical actions, natural disasters, or pandemics; risks
associated with our international operations; and problems with, or
loss of, our suppliers or an inability to obtain raw materials; and
the ability of our stockholders to influence corporate matters.
These and other important factors discussed under the caption "Risk
Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2022, and any subsequent Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, or other filings we make with
the Securities and Exchange Commission could cause actual results
to differ materially from those indicated by the forward-looking
statements made in this press release. Forward-looking statements
speak only as of the date the statements are made and are based on
information available to Solo Brands at the time those statements
are made and/or management's good faith belief as of that time with
respect to future events. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
Availability of Information on Solo Brands’ Website and
Social Media Profiles
Investors and others should note that Solo Brands routinely
announces material information to investors and the marketplace
using SEC filings, press releases, public conference calls,
webcasts and the Solo Brands investors website at https://investors.solobrands.com. We also intend
to use the social media profiles listed below as a means of
disclosing information about us to our customers, investors and the
public. While not all of the information that the Company posts to
the Solo Brands investors website or to social media profiles is of
a material nature, some information could be deemed to be material.
Accordingly, the Company encourages investors, the media, and
others interested in Solo Brands to review the information that it
shares at the “Investors” link located at the top of the page on
https://solobrands.com and to
regularly follow our social media profiles. Users may automatically
receive email alerts and other information about Solo Brands when
enrolling an email address by visiting "Investor Email Alerts" in
the "Resources" section of Solo Brands investor website at
https://investors.solobrands.com.
Social Media Profiles: https://linkedin.com/company/solo-brands/
https://instagram.com/solobrands/
https://www.facebook.com/groups/368095467245044/
SOLO BRANDS, INC.
Consolidated Statements of Operations and Comprehensive Income
(Loss) (Unaudited)
Three Months Ended
Six Months Ended
(In thousands, except per unit
data)
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net sales
$
130,927
$
136,019
$
219,134
$
218,222
Cost of goods sold
47,856
49,343
81,660
82,693
Gross profit
83,071
86,676
137,474
135,529
Operating expenses
Selling, general & administrative
expenses
63,524
69,166
108,146
114,810
Depreciation and amortization expenses
6,349
6,043
12,527
11,978
Impairment charges
—
30,589
—
30,589
Other operating expenses
2,132
820
2,537
1,320
Total operating expenses
72,005
106,618
123,210
158,697
Income (loss) from operations
11,066
(19,942
)
14,264
(23,168
)
Non-operating (income) expense
Interest expense, net
2,490
1,237
4,776
2,033
Other non-operating (income) expense
(5,546
)
513
(5,878
)
604
Total non-operating (income) expense
(3,056
)
1,750
(1,102
)
2,637
Income (loss) before income taxes
14,122
(21,692
)
15,366
(25,805
)
Income tax expense (benefit)
2,608
(1,819
)
2,919
(2,697
)
Net income (loss)
11,514
(19,873
)
12,447
(23,108
)
Less: net income (loss) attributable to
non-controlling interests
4,090
(7,834
)
4,099
(9,034
)
Net income (loss) attributable to Solo
Brands, Inc.
$
7,424
$
(12,039
)
$
8,348
$
(14,074
)
Other comprehensive income
(loss)
Foreign currency translation, net of
tax
$
108
$
46
$
121
$
70
Comprehensive income (loss)
11,622
(19,827
)
12,568
(23,038
)
Less: other comprehensive income (loss)
attributable to non-controlling interests
39
15
43
23
Less: net income (loss) attributable to
non-controlling interests
4,090
(7,834
)
4,099
(9,034
)
Comprehensive income (loss)
attributable to Solo Brands, Inc.
$
7,493
$
(12,008
)
$
8,426
$
(14,027
)
Income (loss) per Class A common
stock
Basic
$
0.12
$
(0.19
)
$
0.13
$
(0.22
)
Diluted
$
0.12
$
(0.19
)
$
0.13
$
(0.22
)
Weighted-average Class A common stock
outstanding
Basic
63,620
$
63,416
63,143
$
63,408
Diluted
64,081
$
63,416
63,291
$
63,408
SOLO BRANDS, INC.
Consolidated Balance Sheets (Unaudited)
(In thousands)
June 30, 2023
December 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$
60,603
$
23,293
Accounts receivable, net of allowance for
doubtful accounts of $1.7 million and $1.5 million
24,072
26,176
Inventory
113,657
132,990
Prepaid expenses and other current
assets
13,365
12,639
Total current assets
211,697
195,098
Non-current assets
Property and equipment, net
20,704
15,166
Intangible assets, net
229,979
234,632
Goodwill
384,896
382,658
Other non-current assets
33,890
34,793
Total non-current assets
669,469
667,249
Total assets
$
881,166
$
862,347
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
$
13,870
$
11,783
Accrued expenses and other current
liabilities
45,643
43,377
Deferred revenue
3,725
6,848
Current portion of long-term debt
5,000
5,000
Total current liabilities
68,238
67,008
Non-current liabilities
Long-term debt, net
136,313
108,383
Deferred tax liability
60,549
82,621
Other non-current liabilities
32,921
29,338
Total non-current liabilities
229,783
220,342
Commitments and contingencies (Note
1)
Equity
Class A common stock, par value $0.001 per
share; 469,394,491 shares authorized, 58,301,929 shares issued and
outstanding; 475,000,000 shares authorized, 63,651,051 issued and
outstanding
58
64
Class B common stock, par value $0.001 per
share; 50,000,000 shares authorized, 32,609,758 shares issued and
outstanding; 50,000,000 shares authorized, 32,157,983 issued and
outstanding
33
32
Additional paid-in capital
353,380
358,118
Retained earnings (accumulated
deficit)
5,960
5,746
Accumulated other comprehensive income
(loss)
(312
)
(499
)
Treasury stock
(486
)
(35
)
Equity attributable to the controlling
interest
358,633
363,426
Equity attributable to non-controlling
interests
224,512
211,571
Total equity
583,145
574,997
Total liabilities and equity
$
881,166
$
862,347
SOLO BRANDS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
(In thousands)
June 30, 2023
June 30, 2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)
$
12,447
$
(23,108
)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities
Amortization of intangible assets
10,518
10,478
Equity-based compensation
9,750
8,887
Operating lease right-of-use assets
expense
3,982
3,030
Depreciation
2,369
1,500
Deferred income taxes
(661
)
(5,497
)
Changes in accounts receivable
reserves
650
433
Other adjustments
476
421
Impairment charges
—
30,589
Changes in assets and liabilities
Accounts receivable
1,901
(1,879
)
Inventory
20,692
(26,244
)
Prepaid expenses and other current
assets
(682
)
(4,487
)
Other non-current assets and
liabilities
(4,118
)
(3,213
)
Accounts payable
1,174
2,059
Deferred revenue
(3,125
)
477
Accrued expenses and other current
liabilities
(3,578
)
(5,358
)
Net cash (used in) provided by
operating activities
51,795
(11,912
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(3,466
)
(4,582
)
Acquisitions, net of cash acquired
(5,421
)
(774
)
Net cash (used in) provided by
investing activities
(8,887
)
(5,356
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt
35,000
25,000
Repayments of long-term debt
(7,500
)
(1,250
)
Common stock repurchase
(28,479
)
—
Distributions to non-controlling
interests
(4,964
)
(4,984
)
Stock issued under employee stock purchase
plan
106
246
Taxes paid related to net share settlement
of equity awards
52
—
Net cash (used in) provided by
financing activities
(5,785
)
19,012
Effect of exchange rate changes on
cash
187
(117
)
Net change in cash and cash
equivalents
37,310
1,627
Cash and cash equivalents balance,
beginning of period
23,293
25,101
Cash and cash equivalents balance, end of
period
$
60,603
$
26,728
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP;
however, management believes that certain non-GAAP financial
measures provide users of our financial information with useful
supplemental information that enables a better comparison of our
performance across periods. We use adjusted gross profit, adjusted
gross profit margin, free cash flow, adjusted net income, adjusted
EPS, adjusted EBITDA and adjusted EBITDA margin non-GAAP financial
measures, because we believe they are useful indicators of our
operating performance. Our management uses these non-GAAP measures
principally as measures of our operating performance and believes
that these non-GAAP measures are useful to our investors because
they are frequently used by securities analysts, investors and
other interested parties in their evaluation of the operating
performance of companies in industries similar to ours. Our
management also uses these non-GAAP measures for planning purposes,
including the preparation of our annual operating budget and
financial projections.
None of these non-GAAP measures is a measurement of financial
performance under GAAP. These non-GAAP measures should not be
considered in isolation or as a substitute for a measure of our
liquidity or operating performance prepared in accordance with GAAP
and are not indicative of net income (loss) from continuing
operations as determined under U.S. GAAP. In addition, the
exclusion of certain gains or losses in the calculation of non-GAAP
financial measures should not be construed as an inference that
these items are unusual or infrequent as they may recur in the
future, nor should it be construed that our future results will be
unaffected by unusual or non-recurring items. These non-GAAP
financial measures have limitations that should be considered
before using these measures to evaluate our liquidity or financial
performance. Some of these limitations are as follows.
These non-GAAP measures exclude certain tax payments that may
require a reduction in cash available to us; do not reflect our
cash expenditures, or future requirements, for capital expenditures
(including capitalized software developmental costs) or contractual
commitments; do not reflect changes in, or cash requirements for,
our working capital needs; do not reflect the cash requirements
necessary to service interest or principal payments on our debt;
exclude certain purchase accounting adjustments related to
acquisitions; and exclude equity-based compensation expense, which
has recently been, and will continue to be for the foreseeable
future, a significant recurring expense for our business and an
important part of our compensation strategy.
In addition, other companies may define and calculate
similarly-titled non-GAAP financial measures differently than us,
thereby limiting the usefulness of these non-GAAP financial
measures as a comparative tool. Because of these and other
limitations, you should consider our non-GAAP measures only as
supplemental to other GAAP-based financial performance
measures.
Adjusted Gross Profit and Adjusted Gross Profit
Margin
We calculate adjusted gross profit as gross profit excluding the
recognition of the fair value write-ups of inventory as a result of
the Oru, ISLE, and Chubbies acquisitions. We calculate adjusted
gross profit margin as adjusted gross profit divided by net
sales.
Free Cash Flow
We calculate free cash flow as net cash provided by (used in)
operating activities, less capital expenditures.
Adjusted Net Income
We calculate adjusted net income as net income (loss) excluding
amortization of intangible assets; impairment charges; equity-based
compensation expense; the following costs that are expected to be
non-recurring in nature: tax refunds, transaction costs,
acquisition-related costs, implementation costs, management
transition costs, severance expense, inventory fair value
write-ups, business optimization expenses and business expansion
expenses; and the tax impact of these adjusting items.
Adjusted EPS
We calculate adjusted EPS as adjusted net income, as defined
above, divided by weighted average diluted shares as calculated
under U.S. GAAP.
Adjusted EBITDA and Adjusted EBITDA Margin
We calculate adjusted EBITDA as net income (loss) before
interest expense, income taxes, and depreciation and amortization
expenses, impairment charges, equity-based compensation expense,
and the following costs that are expected to be non-recurring in
nature: tax refunds, transaction costs, acquisition-related costs,
implementation costs, management transition costs, severance
expense, inventory fair value write-ups, business optimization
expenses and business expansion expenses. We calculate adjusted
EBITDA margin as adjusted EBITDA divided by net sales.
SOLO BRANDS, INC. Reconciliation of
Non-GAAP Financial Information to GAAP (Unaudited) (In
thousands except per share amounts)
The following table reconciles gross profit to adjusted gross
profit for the periods presented:
Three Months Ended June
30,
Six Months Ended June
30,
(dollars in thousands)
2023
2022
2023
2022
Gross profit
$
83,071
$
86,676
$
137,474
$
135,529
Inventory fair value write-up(1)
—
1,708
—
7,813
Adjusted gross profit
$
83,071
$
88,384
$
137,474
$
143,342
Gross profit margin
(Gross profit as a % of net sales)
63.4
%
63.7
%
62.7
%
62.1
%
Adjusted gross profit margin
(Adjusted gross profit as a % of net
sales)
63.4
%
65.0
%
62.7
%
65.7
%
(1) Represents the fair market value write-ups of inventory
accounted for under ASC 805 related to the 2021 acquisitions.
The following table reconciles net cash (used in) provided by
operating activities to free cash flow for the periods
presented:
Six Months Ended June
30,
(dollars in thousands)
2023
2022
Net cash (used in) provided by
operating activities
$
51,795
$
(11,912
)
Capital expenditures
(3,466
)
(4,582
)
Free cash flow
$
48,329
$
(16,494
)
The following tables reconcile the non-GAAP financial measures
to their most comparable GAAP measure for the periods
presented:
Three Months Ended June
30,
Six Months Ended June
30,
(dollars in thousands)
2023
2022
2023
2022
Net income (loss)
$
11,514
$
(19,873
)
$
12,447
$
(23,108
)
Amortization expense
5,265
5,229
10,519
10,487
Impairment charges(1)
—
30,589
—
30,589
Equity-based compensation expense(2)
5,008
4,450
9,802
8,887
Tax refunds(3)
(5,121
)
—
(5,121
)
—
Transaction costs(4)
998
95
1,281
221
Acquisition-related costs(5)
846
480
846
901
Implementation costs(6)
246
—
246
—
Management transition costs(7)
43
541
166
664
Severance expense
9
—
486
—
Inventory fair value write-ups(8)
—
1,708
—
7,813
Business optimization expense(9))
—
142
—
225
Business expansion expense(10)
—
73
—
148
Tax impact of adjusting items(11)
(932
)
(6,085
)
(2,455
)
(8,424
)
Adjusted net income
$
17,876
$
17,349
$
28,217
$
28,403
Adjusted EPS
$
0.22
$
0.40
$
0.38
$
0.59
(amounts per share)
Income (loss) per Class A common stock
- diluted (GAAP)
$
0.12
$
(0.19
)
$
0.13
$
(0.22
)
Net income per Class A common share earned
by controlling members prior to the Reorganization Transactions
—
—
—
—
Income (loss) per Class A common share
- adjusted
0.12
(0.19
)
0.13
(0.22
)
Amortization expense
0.08
0.08
0.17
0.17
Impairment charges(1)
—
0.48
—
0.48
Equity-based compensation expense(2)
0.08
0.07
0.16
0.14
Tax refunds(3)
(0.08
)
—
(0.08
)
—
Transaction costs(4)
0.02
—
0.02
—
Acquisition-related costs(5)
0.01
0.01
0.01
0.01
Implementation costs(6)
—
—
—
—
Management transition costs(7)
—
0.01
—
0.01
Severance expense
—
—
0.01
—
Inventory fair value write-ups(8)
—
0.03
—
0.12
Business optimization expense(9)
—
—
—
—
Business expansion expense(10)
—
—
—
—
Tax impact of adjusting items(11)
(0.01
)
(0.10
)
(0.04
)
(0.13
)
Adjusted EPS(12)
$
0.22
$
0.40
$
0.38
$
0.59
Weighted-average Class A common stock
outstanding - basic
63,620
63,416
63,143
63,408
Weighted-average Class A common stock
outstanding - diluted
64,081
63,416
63,291
63,408
Net income (loss)
$
11,514
$
(19,873
)
$
12,447
$
(23,108
)
Interest expense
2,490
1,237
4,776
2,033
Income tax (benefit) expense
2,608
(1,819
)
2,919
(2,697
)
Depreciation and amortization expense
6,349
6,043
12,527
11,978
Impairment charges(1)
—
30,589
—
30,589
Equity-based compensation expense(2)
5,008
4,450
9,802
8,887
Tax refunds(3)
(5,121
)
—
(5,121
)
—
Transaction costs(4)
998
95
1,281
221
Acquisition-related costs(5)
846
480
846
901
Implementation costs(6)
246
—
246
—
Management transition costs(7)
43
541
166
664
Severance expense
9
—
486
—
Inventory fair value write-ups(8)
—
1,708
—
7,813
Business optimization expense(9)
—
142
—
225
Business expansion expense(10)
—
73
—
148
Adjusted EBITDA
$
24,990
$
23,666
$
40,375
$
37,654
Net income (loss) margin
(Net income (loss) as a % of net
sales)
8.8
%
(14.6
)%
5.7
%
(10.6
)%
Adjusted EBITDA margin
(Adjusted EBITDA as a % of net sales)
19.1
%
17.4
%
18.4
%
17.3
%
(1)
Represents trademark and goodwill
impairments recorded during the three months ended June 30,
2022.
(2)
Represents employee compensation expense
associated with equity-based awards. This includes expense
associated with the incentive unit awards as well as awards issued
on and subsequent to the IPO including options, restricted stock
units and performance stock units.
(3)
Represents a one-time tax refund related
to COVID-19 era benefits.
(4)
Represents transaction costs primarily
related to professional service fees incurred in connection with
the secondary offering and S-3 registration statement in the
current periods and in connection with the IPO in the comparative
periods.
(5)
Represents expenses that are associated
with acquisition activities, including financial diligence and
legal fees.
(6)
Represents consulting fees related to the
Company’s preparation for compliance with Section 404(b) of the
Sarbanes-Oxley Act and enterprise performance management software
implementation.
(7)
Represents costs primarily related to
recruiting senior level management, including a new CFO.
(8)
Represents the recognition of fair market
value write-ups of inventory accounted for under ASC 805 related to
the 2021 acquisitions.
(9)
Represents various start-up and transition
costs, including warehouse optimization charges associated with our
new global headquarters infrastructure and with new and expanded
distribution facilities in Texas, Pennsylvania, and the
Netherlands.
(10)
Represents costs for expansion into new
international and domestic markets.
(11)
Represents the tax impact of adjustments
calculated at the federal statutory rate of 21% less the portion of
the tax impact of the adjustments attributable to noncontrolling
interests.
(12)
Adjusted earnings per share (“Adjusted
EPS”) is calculated independently for each component and, as such,
the total of such components may not sum to adjusted EPS due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803734028/en/
Bruce Williams Investors@solobrands.com 332-242-4303
Solo Brands (NYSE:DTC)
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Solo Brands (NYSE:DTC)
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