Q2 2023 Digital Brands Group Inc Earnings Call
Speaker 2: Greetings and welcome to Digital Brand Group's second quarter of the 2023 earnings conference call. At this time all participants are required operator assistance during the conference. Please press star 0 on your telephone keypad.
Speaker 2: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John McNamara. Thank you, you may begin.
Speaker 3: Thank you. Good morning everybody and welcome again to the Digital Brands Group 2nd Quarter of the year 2023 Ernie's Copper Skull and Lead Gas.
Speaker 3: With us on the call this morning is Hill Davis, Chief Executive Officer of Digital Brands.
Speaker 3: So we'll begin to call it a brief overview of the quarter, and then we'll open up the line for questions. Please pause two and Cay CONTR ind the line for processor won the entire show and panel
Speaker 3: This call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date a statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth in contemplated by or underlying forward-look statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. Company will be hosting a Q&A session at the conclusion, as I mentioned. And with that, I will turn the call over to Hill Davis. Go ahead, Hill.
Speaker 3: This call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date a statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth in contemplated by or underlying forward-look statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. Company will be hosting a Q&A session at the conclusion, as I mentioned. And with that, I will turn the call over to Hill Davis. Go ahead, Hill. Thanks, John . And good morning, everyone.
Speaker 2: As we stated during our fourth quarter fiscal year 2022 conference call, which was in mid-April, we would experience meaningful revenue growth and significant operating leverage with the acquisition of Sundry, which was completed December 30 of last year. As you can see from our second quarter results, we did experience significant revenue growth, and we also experienced operating leverage on every line item. In fact, based on our current wholesale bookings and our current e-commerce trends, our third quarter and fourth quarter revenues will be meaningfully higher than this quarter. Again, we have visibility into our wholesale bookings. These are orders that we're already shipping and that are placed. Based on that, we are finding more TRUMP tabpec involvements.
Speaker 2: our revenues for the third and fourth quarter will be meaningfully higher than this quarter. Additionally, we'll continue to show a higher level of cost savings in our third and fourth quarters as well versus this quarter driven by combination of layoffs and redundancies that no longer have severance attached to them or just natural
Speaker 2: leak as people left after we acquired Sundry. So we are only in the first inning of this structural shift in our business.
Speaker 2: As I stated earlier, we already know what wholesale bookings are for our third and fourth quarters and we're already selling spring now and getting very strong feedback.
Speaker 2: In addition to that, we have the additional cost synergies we will experience, and then you layer on our e-commerce trends, and it is very exciting to see how this is playing out.
Speaker 2: And none of the above that I just mentioned includes the benefits from our two new revenue channels that we will launch this fall Which are one our proprietary affiliate program and two our multi-brand retail store.
Speaker 2: In fact, we've had to place a limit on the number of reps in the affiliate program and are now already building a waiting list. Keep in mind, I was able to double the revenue for Jay Hilburn every year using this affiliate program, which took revenues from zero to $55 million in six years.
Speaker 2: So as you can imagine, we are extremely excited about the virality at reach of this program, given that we are already on a wait list.
Speaker 2: Additionally, we are backing the wholesale market with Bailey 44, and we've added several new reps that are showing the product for spring deliveries and are already receiving wholesale orders.
Speaker 2: We had no benefit from wholesale last year from Bailey 44.
Speaker 2: We also will receive our first license income check for Bailey 44 next week, which throws directly to the bottom line at almost 100%.
Speaker 2: and we're in discussions regarding another license deal with one of our other brands.
Speaker 2: As you can see, the second quarter is proof of the revenue growth and the operating leverage we are achieving post-disundry acquisition.
Speaker 2: And as a reminder, we will generate internal free cash flow on a weekly basis in October . All this will be incredibly transformative to us.
Speaker 2: So let's dive into the second quarter results.
Speaker 2: Net revenue increased 69.6% in the second quarter of 2023 to $4.5 million compared to $2.6 million a year ago.
Speaker 2: Please note that these results exclude the revenue from our disposition of Harper & Jones for both the second quarter in 2022 and in 2023.