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.

• Net loss for Q2 was $4 million, compared to net income in the prior year; adjusted EBITDA margin was 11.7% despite higher SG&A and investments.

• First half 2024 net sales decreased 1.0% to $216.9 million, mainly due to lower DTC sales in Q1, partially offset by retail growth.

• The company is executing a multi-year strategic plan focused on brand strength, product innovation, and omni-channel expansion.

• Management highlighted challenging consumer demand and lowered full-year 2024 guidance.

Financial highlights

• Q2 2024 gross margin decreased 60 basis points to 62.8%, primarily 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), up 11.5% year-over-year, due to higher marketing, distribution, and management transition costs.

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

• 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.

Outlook and guidance

• Fiscal 2024 revenue expected between $470 million and $490 million, with adjusted EBITDA margin guidance lowered to 9%-10% due to continued investments.

• Third quarter anticipated to be the most challenging due to tough retail comparisons and lapping a one-time $7.2 million trade credit in Q3 2023.

• Fourth quarter expected to be strongest, supported by a new full-funnel 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.