Solo Brands, Inc. Q3 FY2024 earnings call

• Developed a comprehensive strategic plan focusing on product innovation, integrated marketing, channel distribution optimization, and operating discipline.
• Recruited a talented team and replaced poor-performing partners/agencies.
• Developed an innovative new product pipeline with launches like Surround Lite and a cookout kit, and partnerships with NFL for Solo Stove and Chubbies products.
• Working on a more comprehensive omni-channel strategy, with 130 store tests for Solo Stove in Q4 and building retail organization talent.
• Stabilizing DTC channel with product innovation and a new website relaunch planned for 2025.
• Decided to wind down IcyBreeze reporting unit due to new products not meeting standards, taking related charges.
• Consolidated ISLE Paddle Boards and Oru Kayaks into a new water sports division.

Third quarter total revenues were $94.1 million. Direct-to-consumer channel sales declined 16% due to lack of product newness and unseasonably warmer weather. Retail segment sales increased 10% excluding a one-time barter agreement of $7.2 million in 2023. Gross profit was $39.3 million, with gross margin at 41.8%. Adjusted gross profit (excluding charges) decreased 14.8% to $58.3 million and adjusted gross margin was 61.9%. Adjusted EBITDA was $6.5 million.

• Reaffirming fiscal 2024 outlook with revenues expected in the range of $470 million to $490 million.
• Expecting adjusted EBITDA margin to be in the range of 9% to 10% as the company invests for long-term growth.

• Continued challenging macroeconomic backdrop for big ticket consumer durable items.
• Risks related to product innovation not meeting expectations, which led to winding down IcyBreeze.
• Dependence on performance marketing spend and suboptimal web experience in DTC channel.

Q: How should we think about key milestones to get to DTC inflection and timeline?

A: Focus on product innovation pipeline and new website relaunch in early 2025, with retail growth accelerating, DTC stabilization in first half and return to growth in second half.

Q: Satisfaction with team overseeing retail partnerships?

A: Brought in head of sales, built national account manager team, hiring analytics to build capabilities quickly.

Q: Consumer reception to more full price selling approach and impact on gross margin?

A: Moving to less promotional approach, seeing increased traffic, AOVs, and stronger ROAs, with this built into gross margin guidance.

Q: Update on Chubbies performance and size to the business?

A: Chubbies is growing, expanding product assortment, performing well online and through retail, with growth ahead and synergies with other platforms.