Raises 2021 Guidance
Solo Brands, Inc., (NYSE: DTC) a direct-to-consumer (DTC)
platform for rapidly growing lifestyle brands (the “Company,” “we”
or “our”), today announced its financial results for the three and
nine month periods ended September 30, 2021.
Third Quarter FY 2021 Highlights
- Total revenue grew 138.3% to $69.4 million as compared to $29.1
million in the third quarter last year.
- Net income of $2.1 million, a decrease of (79.4)% compared to
$10.3 million in the third quarter last year.
- Adjusted net income(1) of $15.8 million compared to $11.3
million, an increase of 39.7% over third quarter 2020.
- Adjusted EBITDA(1) increased 56.7% to $18.2 million compared to
$11.6 million in the third quarter last year.
“I am proud that we have created an innovative platform
encompassing four authentic and disruptive DTC brands. Our third
quarter results reflect the strong momentum in our business across
all of our brands with Solo Stove, our primary growth driver,
continuing to deliver solid growth through our compelling product
offerings and distinctive marketing” said John Merris, CEO of Solo
Brands. "The investments we have made to our supply chain position
us well to continue to generate strong revenue and profitability in
2021.”
“Looking longer-term, we continue to see significant
opportunities in front of us and we will further invest our
resources into product innovation, brand awareness, infrastructure,
geographic and channel expansion to drive and sustain our long-term
growth and profitability.”
Operating Results for the Third Quarter
Total revenue increased 138.3% to $69.4 million, compared
to $29.1 million in the third quarter last year driven by strong
results across channels.
- DTC revenues increased 119.6% to $58.1 million as compared to
the previous year.
- Wholesale revenues increased 323.4% to $11.4 million as
compared to the previous year.
The results include the acquisition of Chubbies and ISLE in Q3
of 2021 that was not included in our financial results last
year.
Gross profit increased to $41.0 million, compared to
$20.8 million in the third quarter last year and adjusted gross
profit(1), reflecting the impact of purchase accounting adjustments
related to the transactions, increased to $46.5 million compared to
$20.9 million in the third quarter last year. Gross margin declined
to 59.1% as compared to the previous year and was attributed to
increased freight rates and higher logistics costs. Adjusted gross
margin(1) declined to 67.0%, in line with expectations as compared
to the previous year and was attributed to increased freight rates
and higher logistics costs.
Selling, general and administrative (SG&A) expenses
were $28.6 million, compared to $9.5 million in the third quarter
last year. The increase was primarily due to increased investments
in advertising and marketing to drive brand awareness, investments
in headcount to support growth and higher shipping costs.
Other operating expenses were $3.1 million during the
quarter. The increase in other operating expenses was driven by
acquisition-related and IPO-related expenses.
Net income was $2.1 million as compared to $10.3 million
in the third quarter last year.
Adjusted net income(1) was $15.8 million compared to
$11.3 million.
Adjusted EBITDA(1) increased 56.7% to $18.2 million
compared to $11.6 million in the same period last year.
Balance Sheet
Cash and cash equivalents at the end of the third quarter
totaled $9.5 million, compared to $32.8 million at December 31,
2020.
Inventory at end of the third quarter was $113.6 million,
compared to $14.3 million at December 31, 2020. The increase in
inventory reflects a strong inventory position across brands,
including brands acquired in 2021, that we are confident is
sufficient to meet demand.
Guidance For Full Fiscal Year 2021 Our guidance reflects
our best estimate of the business as we see it today. We are
pleased with the start to the holiday selling season and are
raising our full-year guidance.
Accordingly, we expect the following:
Total revenue is expected to be between $344 million and
$352 million.
Adjusted EBITDA(1)(2) is expected to be between $107
million and $109 million.
Fully Diluted shares outstanding is expected to be 97.8
million as of December 31, 2021.
(1) Please see the reconciliation of non-GAAP financial measures
to the most comparable GAAP financial measure in the sections
titled “Non-GAAP Financial Measures” and “Reconciliation of GAAP to
Non-GAAP Financial Information” below.
(2) The Company has not provided a quantitative reconciliation
of forecasted Adjusted EBITDA to forecasted GAAP net income within
this press release because the Company is unable, without making
unreasonable efforts, to calculate certain reconciling items with
confidence. These items include, but are not limited to,
stock-based compensation with respect to future grants and
forfeitures, could materially affect the computation of
forward-looking GAAP net income, are inherently uncertain and
depend on various factors, some of which are outside of the
Company’s control. For more information regarding the non-GAAP
financial measures discussed in this press release, please see
“Non-GAAP Financial Measures” below.”
Conference Call Details
A conference call to discuss the Company's third quarter results
is scheduled for December 8, 2021, at 8:30 a.m. ET. To participate,
please dial 844-200-6205 or +1 929-526-1599 for international
callers, conference ID 790861. 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 915288. A replay of the
webcast will also be available approximately two hours after the
conclusion of the call on the Company's website as https://investors.solobrands.com.
About Solo Brands, Inc.
Solo Brands, headquartered in Grapevine, TX, develops and
produces ingenious lifestyle products that help customers create
lasting memories. Through a disruptive and scaled DTC platform,
Solo Brands offers innovative products directly to consumers
primarily online through four lifestyle brands – Solo Stove
firepits, stoves, and accessories, Chubbies premium casual apparel
and activewear, Oru Kayak, origami folding kayaks that can be
assembled in minutes, and ISLE paddleboards, one of the fastest
growing online US retailers of paddle boards. Solo Brands is a
direct-to-consumer platform that offers innovative products
directly to consumers primarily through its owned websites.
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 our anticipated full year fiscal 2021 results. 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,” “predicts,” “potential” or
“continue” or the negative of these terms or other similar
expressions. These statements are neither promises nor guarantees,
but 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;
the impacts of the COVID-19 pandemic on certain aspects of our
business; 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 Quarterly Report on Form
10-Q for the period ended September 30, 2021, and our other filings
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. Any such
forward-looking statements represent management's estimates as of
the date of this press release. While we may elect to update such
forward-looking statements at some point in the future, we disclaim
any obligation to do so, even if subsequent events cause our views
to change, except as may be required under applicable securities
laws.
SOLO STOVE HOLDINGS,
LLC
Consolidated Statements of
Operations
(Unaudited)
SUCCESSOR
INTERMEDIATE
SUCCESSOR
SUCCESSOR
INTERMEDIATE
SUCCESSOR
(In thousands, except per unit
data)
Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
Net sales
$
69,433
$
29,135
$
227,249
$
66,592
Cost of goods sold
28,412
8,362
80,064
21,195
Gross profit
41,021
20,773
147,185
45,397
Operating expenses
Selling, general & administrative
expenses
28,584
9,464
76,980
20,405
Depreciation and amortization expenses
5,063
648
12,968
2,172
Other operating expenses
3,063
—
5,673
6
Total operating expenses
36,710
10,112
95,621
22,583
Income (loss) from operations
4,311
10,661
51,564
22,814
Non-operating expenses
Interest expense (income)
2,233
216
7,350
1,084
Other non-operating expenses
7
166
9
244
Total non-operating expenses
2,240
382
7,359
1,328
Income (loss) before income taxes
2,071
10,279
44,205
21,486
Income tax expense (benefit)
(49)
11
123
11
Net income (loss)
2,120
10,268
44,082
21,475
Less: net income (loss) attributable to
noncontrolling interest
937
—
1,166
—
Net income (loss) attributable to Solo
Stove Holdings, LLC
$
1,183
$
10,268
$
42,916
$
21,475
Net income (loss) per unit(1)
Basic
$
0.00
$
0.13
$
0.10
$
0.27
Diluted
$
0.00
$
0.13
$
0.10
$
0.27
Weighted-average units
outstanding
Basic
447,200
78,806
432,427
78,634
Diluted
447,200
78,806
432,427
78,634
(1) In the Successor period, the basic and diluted net income
(loss) per unit amounts for the Class A and Class B units is the
same for each class of unit. In the Intermediate Successor period,
the basic and diluted net income (loss) per unit amounts for the
Class A-1 and Class A-2 units is the same for each class of
unit.
SOLO STOVE HOLDINGS,
LLC
Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September 30, 2021
December 31, 2020
ASSETS
Current assets
Cash and cash equivalents
$
9,529
$
32,753
Accounts receivable, net
15,204
4,166
Inventory
113,634
14,348
Prepaid expenses and other current
assets
6,377
328
Total current assets
144,744
51,595
Non-current assets
Property and equipment, net
6,679
980
Intangible assets, net
267,453
200,587
Goodwill
406,238
289,096
Other non-current assets
388
149
Total non-current assets
680,758
490,812
Total assets
$
825,502
$
542,407
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
Accounts payable
$
9,647
$
1,377
Accrued expenses and other current
liabilities
15,578
15,203
Contingent consideration
—
100,000
Deferred revenue
1,360
20,246
Current portion of long-term debt
2,500
450
Total current liabilities
29,085
137,276
Non-current liabilities
Long-term debt, net
372,558
72,898
Deferred tax liability
18,644
—
Other non-current liabilities
326
133
Total non-current liabilities
391,528
73,031
Commitments and contingencies (Note
14)
Members’ equity
Class A units
205,805
237,309
Class B units
163,754
103,109
Incentive units
732
—
Retained earnings (accumulated
deficit)
34,598
(8,318)
Total members’ equity
404,889
332,100
Total liabilities and members’ equity
$
825,502
$
542,407
SOLO STOVE HOLDINGS,
LLC
Consolidated Statements of
Cash Flows
(Unaudited)
SUCCESSOR
INTERMEDIATE SUCCESSOR
(In thousands)
Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)
$
44,082
$
21,475
Adjustments to reconcile net income (loss)
to net cash and cash equivalents provided by (used in) operating
activities
Depreciation
301
69
Amortization of intangible assets
12,667
2,103
Non-cash interest expense
1,944
114
Equity based compensation
732
—
Deferred income taxes
(944)
—
Bad debt expense
103
(77)
Changes in assets and liabilities
Accounts receivable
(8,715)
(1,249)
Inventory
(62,343)
961
Prepaid expenses and other current
assets
(4,621)
(33)
Other non-current assets
188
(66)
Accounts payable
3,736
305
Accrued expenses and other current
liabilities
(18,833)
(1,899)
Deferred revenue
(20,141)
4,069
Other non-current liabilities
180
49
Net cash provided by (used in)
operating activities
(51,664)
25,821
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment
(5,104)
(663)
Assets and liabilities acquired, Oru
acquisition, net cash paid
(19,135)
—
Assets and liabilities acquired, Isle
acquisition, net cash paid
(21,757)
—
Assets and liabilities acquired, Chubbies
acquisition, net cash paid
(92,416)
—
Net cash provided by (used in)
investing activities
(138,412)
(663)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from revolving line of credit
249,000
—
Proceeds from term loan
100,000
—
Proceeds from line of credit
9,600
10,000
Repayment of senior debt facility
(45,000)
—
Repayment of term loan
—
(14,325)
Repayment of line of credit
(9,600)
(10,000)
Debt issuance costs paid
(4,234)
—
Payment of contingent consideration
(100,000)
(2,080)
Contributions
250
700
Distributions
(33,164)
(3,825)
Net cash provided by (used in)
financing activities
166,852
(19,530)
Net change in cash and cash
equivalents
(23,224)
5,628
Cash and cash equivalents balance,
beginning of period
32,753
5,025
Cash and cash equivalents balance, end of
period
$
9,529
$
10,653
SUPPLEMENTAL DISCLOSURES:
Cash interest paid
$
5,292
$
7,219
SUPPLEMENTAL NONCASH INVESTING AND
FINANCING DISCLOSURES:
Non-cash issuance of Class B units -
noncontrolling interest purchase of Oru
$
16,486
$
—
Non-cash issuance of Class B units -
Isle
$
16,494
$
—
Non-cash issuance of Class B units -
Chubbies
$
29,075
$
—
SOLO STOVE HOLDINGS, LLC SELECTED FINANCIAL
DATA Reconciliation of GAAP to Non-GAAP Financial Information
(Unaudited) (In thousands except per share amounts)
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 EBITDA, Adjusted Net
Income, Adjusted Net Income per unit, Adjusted gross profit, and
Adjusted gross profit 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.
Adjusted gross profit/Adjusted gross profit margin
Adjusted gross profit reflects gross profit adjusted for fair
value write-up of inventory as a result of change in control
transactions in 2019 and 2020 and the Oru, ISLE and Chubbies
acquisitions.
We define Adjusted gross profit margin as adjusted gross profit
divided by net sales.
Adjusted Net Income
We define Adjusted Net Income as net income (loss), adjusted for
amortization of intangible assets recognized from the change in
control transactions and the Oru, ISLE, and Chubbies acquisitions,
expenses incurred with the initial public offering, one-time
transaction costs related to change in control transactions,
acquisition related costs, inventory fair value write-up,
compensation expense related to the incentive units, business
expansion and optimization expenses, and management fees.
Adjusted EBITDA/Adjusted EBITDA Margin
We define Adjusted EBITDA as net income (loss) before interest
expense, income taxes and depreciation and amortization expenses,
adjusted for one-time transaction costs related to change in
control transactions, the initial public offering, the Oru, ISLE
and Chubbies acquisitions, acquisition related costs, inventory
fair value write-up, compensation expense related to the incentive
units, business expansion and optimization expenses, and management
fees.
We define Adjusted EBITDA margin as Adjusted EBITDA divided by
net sales.
SUCCESSOR
INTERMEDIATE
SUCCESSOR
SUCCESSOR
INTERMEDIATE
SUCCESSOR
(dollars in thousands)
Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
Gross profit
$
41,021
$
20,773
$
147,185
$
45,397
Add: Fair-value write-up of inventory for
transactions accounted for under ASC 805
5,475
147
6,880
1,864
Adjusted gross profit
$
46,496
$
20,920
$
154,065
$
47,261
Adjusted gross profit margin (Adjusted
gross profit as a % of net sales)
67.0
%
71.8
%
67.8
%
71.0
%
SUCCESSOR
INTERMEDIATE
SUCCESSOR
SUCCESSOR
INTERMEDIATE
SUCCESSOR
(dollars in thousands)
Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
Net income (loss)
$
2,120
$
10,268
$
44,082
$
21,475
Amortization expense
4,918
618
12,667
2,103
Transaction costs
636
—
1,783
6
Acquisition related costs
2,271
166
3,574
244
Inventory fair value write-up
5,475
147
6,880
1,864
Management fees
—
125
—
250
Equity based compensation expense
242
—
732
—
Business expansion expense
156
—
316
—
Adjusted net income
$
15,818
$
11,324
$
70,034
$
25,942
SUCCESSOR
INTERMEDIATE
SUCCESSOR
SUCCESSOR
INTERMEDIATE
SUCCESSOR
(dollars in thousands)
Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
Net income (loss)
$
2,120
$
10,268
$
44,082
$
21,475
Interest expense
2,246
225
7,363
1,093
Income tax expense
(49)
11
123
11
Depreciation and amortization expense
5,063
648
12,968
2,172
Transaction costs
636
—
1,783
6
Acquisition related costs
2,271
166
3,574
244
Inventory fair value write-up
5,475
147
6,880
1,864
Management fees
—
125
—
250
Equity based compensation expense
242
—
732
—
Business expansion expense
156
—
316
—
Adjusted EBITDA
$
18,160
$
11,590
$
77,821
$
27,115
Adjusted EBITDA margin (Adjusted EBITDA as
a % of net sales)
26.2
%
39.8
%
34.2
%
40.7
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211208005203/en/
Bruce Williams Investors@solobrands.com 332-242-4303
Calvin Bond Calvin.Bond@backbone.media
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