Solo Brands, Inc. (SBDS) Earnings

Management highlights

- **Transformation Strategy & Core Focus**: The company continues to deliver measurable progress on its transformation to build a focused, higher-quality business with a leaner cost structure, disciplined cash management, and a clear path to sustainable profitability. Core priorities include product differentiation, profitable margin-accretive growth, and long-term cash generation, rather than short-term promotional volume gains. All new product launches are held to a strict value bar that requires unique innovation, partner alignment, and long-term value creation.\n- **Recent Operational Changes**: In March 2026, the company completed a targeted reduction in force and company-wide compensation adjustments, expected to generate $8 million in annualized payroll savings (~$10 million on a fully burdened basis). A strategic distribution and fulfillment review resulted in planned operational changes that will deliver ~$3.5 million in annual savings once fully implemented by the end of 2026. AI-enabled productivity tools are being deployed across the organization, with encouraging early results.\n- **Product & Sales Momentum**: March 2026 product launches at the Solo Stove segment (the new Steel Fire 22 Griddle and Summit 27 Fire Pit) rank among the top 5 best-selling DTC products and have increased average order values. Chubbies has posted strong spring sell-through results, and its expanded water sport assortment at Costco has gotten off to a strong start. Exiting Q1, underlying sales trends strengthened, with April 2026 delivering year-over-year sales growth for the entire company.\n- **Tariff Refund Progress**: Following a U.S. Supreme Court ruling validating tariffs imposed under the International Emergency Economic Powers Act (IEPA), the company filed for refunds of previously paid tariffs. All but a small portion of refund claims have been accepted by U.S. Customs and Border Protection, $1.5 million in refunds has been received to date, and full-year 2026 total refunds are expected to reach ~$10 million. Under accounting policy, refunds will be recognized as a reduction to cost/inventory when cash is received, so amounts received in early Q2 will be reflected in Q2 2026 results.\n- **International Expansion**: The company is accelerating international growth across all three segments (Solo Stove, Chubbies, Water Sports), with a focus on Europe, the UK, and select APAC markets. A new Senior Vice President of Sales with deep international commercial experience across both hard and soft goods has been appointed to support this expansion.\n- **Capital Structure & Listing Update**: Following a NYSE delisting notice, the company began trading on the OTCQB in early April 2026 under the existing ticker SBDI, and is currently appealing the delisting. The delisting has not changed the company's strategy, which remains focused on execution, operational improvement, and investor transparency. The company completed a corporate simplification resulting in a single class of common stock, with 2.5 million weighted average shares outstanding as of March 31, 2026, and substantially reduced future obligations under its prior tax receivable agreement. The company ended Q1 with $16.5 million in cash, was in compliance with all debt covenants, and has no material debt maturities before 2028, providing financial stability for strategy execution.

Guidance

- Management reaffirmed its full-year fiscal 2026 outlook, based on strengthening sales momentum exiting Q1 and continued momentum into April 2026.\n- Total expected tariff refunds for full-year 2026 are projected to be approximately $10 million.\n- Annualized cost savings from the recent reduction in force are expected to be $8 million (or ~$10 million fully burdened), with an additional $3.5 million in annual savings from distribution/fulfillment changes once fully implemented in 2026.\n- Full-year 2026 growth capital spending is expected to total $3 to $4 million, primarily allocated to product innovation across all three business segments.

Segment performance

Consolidated net sales for Q1 FY2026 were $62.9 million, representing an 18.6% year-over-year decline. Solo Stove recorded the largest sales decline, driven by deliberate pricing and promotional realignment that impacted near-term sales, with lower direct-to-consumer and retail channel sales. Chubbies also posted a year-over-year sales decline, partially due to timing shifts that moved certain retail orders into Q2 2026; the water sports segment delivered positive year-over-year performance that partially offset declines at Solo Stove and Chubbies. Gross margin for the quarter was 52.3%, down from 55.2% in the prior-year period, primarily due to $2 million in tariff-related costs flowing through cost of goods sold (no comparable costs in the prior year) and minor channel mix shifts. SG&A expenses totaled $33.2 million, a 14.8% year-over-year decline driven by lower distribution costs, reduced employee compensation costs, and disciplined marketing spending, particularly at Solo Stove. Adjusted EBITDA was $1.6 million, down from $3.5 million in the prior year; excluding the $2 million in tariff costs, adjusted EBITDA would have been roughly flat with the prior year. The company reported a net loss attributable to Solo Brands of $5.5 million, an improvement from the $12.2 million net loss in Q1 FY2025.

Risks & headwinds

- The macroeconomic environment remains dynamic, with uneven consumer demand that creates uncertainty for sales performance.\n- Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to unforeseen risks and factors outside of the company's control, detailed in SEC filings.\n- The company is appealing a NYSE delisting and currently trades on the OTCQB, which may impact investor access and liquidity.\n- The company carries material debt: a $240 million term loan and $90 million revolving credit facility, with current weighted average interest rates of 9.07% on the term loan and 6.99% on the revolver, creating ongoing interest expense obligations.

Analyst Q&A

• Q: What factors drove the April year-over-year sales growth you highlighted, and is this performance sustainable?

  A: The April growth came from three main sources. First, Chubbies retail sales were strong, partially from Q1 order timing shifts that moved planned spring retail deliveries into April, but management also cites very strong point-of-sale results that support confidence in sustained strong Chubbies retail performance. Second, water sports sales got a lift from the delivery of the expanded Costco assortment in April. Third, Solo Stove's direct-to-consumer sales grew dramatically in April, driven by strong performance from the new March product launches.