Digital Brands Group, Inc. Q2 FY2024 earnings call

• Paid off over $5 million in debt and other liabilities in the first half of 2024, driven by strategic partner feedback to clean up the balance sheet.
• Received offers for the NASDAQ shell ranging from $3.5 million to $5 million plus a percentage of an incoming company.
• Lowered G&A expenses by $4.5 million in the first six months through synergies from the Sundry acquisition.
• Shifted direct-to-consumer marketing spend to debt paydown, now ramping it back up with a 2.6 to 2.9 ROAS.
• Experienced success in the wholesale market with major department stores, including one increasing doors and another wanting to onboard brands.
• Tested the Build Your Own Bundle with DSTLD, achieving 150% growth, and launching a women's version with high beta test success.
• Launched the licensed brand Sunnyside by Sundry with the first order received.

Net revenues for the second quarter of 2024 were $3.4 million, down from $4.5 million the previous year. Gross profit margins were 45.9% compared to 52% year-over-year, with gross profit dollars at $1.6 million versus $2.3 million. G&A expenses decreased to $2.9 million from $4.1 million, with $1.8 million being non-cash expenses. Sales and marketing expenses were $615,000 compared to $1.1 million prior year. Net loss was $3.5 million, compared to a net income of $5 million (excluding a one-time benefit) the previous year.

• Plan to continue ramping up digital marketing spend as the balance sheet is cleaned up, aiming for growth.
• Expect continued G&A savings in the back half of the year.
• Anticipate growth in wholesale and DTC with new brand launches, leveraging existing infrastructure and low incremental costs.

• Soft consumer environment that could impact revenue potential.
• Uncertainty in private market valuations and outcomes of strategic review.
• Dependence on successful execution of new brand launches and wholesale partnerships.

Q: How was the $5 million debt paid off?

A: It was a combination of working capital from the business and a warrant exchange in May, which contributed approximately $2.8 million after fees.

Q: Concern about capital for growth; do you need to raise more?

A: Taking it week by week, reviewing options including private investors, debt, etc., and evaluating what makes the most sense for the business.

Q: Concern about reverse splitting; plan to prevent?

A: Focus on fundamentals, executing the business to drive top line towards profitability, expecting post-election and rate cut to help in achieving profitability soon.