Business Wire | Dec 8, 2021 06:50AM EST

Solo Brands Announces Third Quarter Fiscal 2021 Results

Dec. 08, 2021

GRAPEVINE, Texas--(BUSINESS WIRE)--Dec. 08, 2021--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)

INTERMEDIATE INTERMEDIATE SUCCESSOR SUCCESSOR SUCCESSOR SUCCESSOR

Three Three Months Nine Nine Months Months Ended Months Ended(In thousands, except Ended Ended per unit data) September September September 30, 2020 September 30, 2020 30, 2021 30, 2021

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 28,584 9,464 76,980 20,405 expenses

Depreciation and 5,063 648 12,968 2,172 amortization expenses

Other operating 3,063 - 5,673 6 expenses

Total operating 36,710 10,112 95,621 22,583 expenses

Income (loss) from 4,311 10,661 51,564 22,814 operations

Non-operating expenses

Interest expense 2,233 216 7,350 1,084 (income)

Other non-operating 7 166 9 244 expenses

Total non-operating 2,240 382 7,359 1,328 expenses

Income (loss) before 2,071 10,279 44,205 21,486 income taxes

Income tax expense (49) 11 123 11 (benefit)

Net income (loss) 2,120 10,268 44,082 21,475

Less: net income(loss) attributable 937 - 1,166 - to noncontrollinginterest

Net income (loss)attributable to Solo $ 1,183 $ 10,268 $ 42,916 $ 21,475 Stove Holdings, LLC



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, December 31, 2021 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 15,578 15,203 liabilities

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.

SOLO STOVE HOLDINGS, LLC

Consolidated Statements of Cash Flows

(Unaudited)

SUCCESSOR INTERMEDIATE SUCCESSOR

Nine Months Nine Months Ended Ended(In thousands) September September 30, 30, 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 44,082 $ 21,475

Adjustments to reconcile net income (loss) to netcash 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 (51,664) 25,821 activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment (5,104) (663)

Assets and liabilities acquired, Oru acquisition, (19,135) - net cash paid

Assets and liabilities acquired, Isle acquisition, (21,757) - net cash paid

Assets and liabilities acquired, Chubbies (92,416) - acquisition, net cash paid

Net cash provided by (used in) investing (138,412) (663) activities

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 166,852 (19,530) activities

Net change in cash and cash equivalents (23,224) 5,628

Cash and cash equivalents balance, beginning of 32,753 5,025 period

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 - $ 16,486 $ -noncontrolling interest purchase of Oru

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.

INTERMEDIATE INTERMEDIATE SUCCESSOR SUCCESSOR SUCCESSOR SUCCESSOR

Three Three Months Nine Months Nine Months Months Ended Ended Ended(dollars in Ended thousands) September September September September 30, 2020 30, 2021 30, 2020 30, 2021

Gross profit $ 41,021 $ 20,773 $ 147,185 $ 45,397

Add: Fair-valuewrite-up ofinventory for 5,475 147 6,880 1,864 transactionsaccounted for underASC 805

Adjusted gross $ 46,496 $ 20,920 $ 154,065 $ 47,261 profit

Adjusted grossprofit margin(Adjusted gross 67.0 % 71.8 % 67.8 % 71.0 %profit as a % of netsales)

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

INTERMEDIATE INTERMEDIATE SUCCESSOR SUCCESSOR SUCCESSOR SUCCESSOR

Three Three Months Nine Months Nine Months Months Ended Ended Ended(dollars in Ended thousands) September September September September 30, 2020 30, 2021 30, 2020 30, 2021

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 2,271 166 3,574 244 costs

Inventory fair value 5,475 147 6,880 1,864 write-up

Management fees - 125 - 250

Equity based 242 - 732 - compensation expense

Business expansion 156 - 316 - expense

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/

CONTACT: Bruce Williams Investors@solobrands.com 332-242-4303

CONTACT: Calvin Bond Calvin.Bond@backbone.media