Solo Brands (DTC) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales increased 0.5% year-over-year to $131.6 million, driven by 4.8% retail growth offsetting a 0.9% decline in direct-to-consumer sales.

• EBITDA margins remained in the low double digits despite higher SG&A and ongoing investments in people, processes, and infrastructure.

• Net loss for Q2 was $4 million, with adjusted net income at $6.1 million and adjusted EBITDA at $15.5 million (11.7% margin).

• Strategic plan focuses on leveraging strong brands, expanding into adjacent categories, and building scalable infrastructure for long-term growth.

• Consumer insights reveal high Net Promoter Scores and premium customer bases for key brands, supporting expansion opportunities.

Financial highlights

• Q2 2024 gross margin decreased 60 basis points to 62.8%, mainly due to inventory fair value impact from 2023 acquisitions; adjusted gross margin was flat at 63.6%.

• SG&A expenses rose to $70.8 million (53.8% of sales), reflecting higher marketing, distribution, and IT costs.

• Cash and cash equivalents at June 30, 2024 were $20.1 million; inventory ended at $100.8 million, down 11.3% year-over-year.

• Q2 2024 interest expense was $3.6 million, up 43.1% year-over-year.

• Free cash flow for first half 2024 was $(8.1) million, down from $48.3 million in prior year.

Outlook and guidance

• Fiscal 2024 revenue expected between $470 million and $490 million, with adjusted EBITDA margin forecasted at 9%-10%.

• Third quarter anticipated to be the most challenging due to tough retail comparisons and softer direct channel trends.

• Fourth quarter expected to be strongest, supported by a new marketing campaign and product launches.

• Management aims to stabilize business in 2024 and return to growth in 2025.

• Liquidity is expected to be sufficient for at least the next twelve months, with potential for increased expenses from international expansion and acquisitions.