Q4 2023 Solo Brands Inc Earnings Call

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Operator: Hello everyone, and welcome to Solo Brands Incorporated's fourth quarter and fiscal 2023 financial results. My name is Emily, and I'll be facilitating your call today. After the presentation, there will be the opportunity for you to ask any questions, which you can do by pressing start followed by the number one on your telephone keypads. I'll now turn the call over to our host, Bruce Williams, Managing Director at ICR. Please go ahead, Bruce.

Hello, everyone and welcome to silo brands incorporated fourth quarter and fiscal 'twenty two 'twenty three financial results. My name is Emily and I'll be facilitating Yoko today.

After the presentation, there will be the opportunity for you should ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad.

Now I'll turn the call over to Al Hoist, Bruce Williams, managing director of ICR. Please go ahead Grace.

Bruce Williams: Good morning, everyone. And thank you for joining the call to discuss Solo Brands' fourth quarter results, which we released this morning and can be found on the investor relations section of our website at investors.solobrands.com. Today's call will be hosted by Chief Executive Officer, that. Chief Financial Officer, Laura.

Everyone and thank you for joining the call to discuss celebrated its fourth quarter results, which we released this morning and can be found on the Investor Relations section of our website at investors got solo grant cycle.

Today's call will be hosted by Chief Executive Officer, Chris Matt.

<unk> financial Officer, Laura Coffey.

Bruce Williams: Before we get started, I want to remind everyone that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current management expectations. These may include, without limitation, predictions, expectations, targets, or estimates, including regarding our anticipated financial performance, business plans, and objectives. Future events and developments and actual results could differ materially from those mentioned. These forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control, and which could cause actual results to differ materially from those expressed or implied by such statements.

Where we get started I want to remind everyone that management's remarks on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act 1995.

Based on current management expectations.

These may include without limitation predictions expectations targets, where estimates, including regarding our anticipated financial performance business plans and objectives.

<unk> events and developments and actual results could differ materially from those metrics.

These forward looking statements also involve substantial risks and uncertainties some of which may be outside of our control that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties. Among others are discussed in our filings with the SEC.

Bruce Williams: These risks and uncertainties, among others, are discussed in our filings with the FDA. We encourage you to review these filings for a discussion of these risks, including our soon-to-be-filed annual report or Form 10-K, which will be available on the Investors portion of our website at Investors.org. Call

We encourage you to review these filings for a discussion of these risks, including our soon to be filed annual report on Form 10-K and will be available on the investors portion of our website at investors <unk> Dot com.

Bruce Williams: You should not place undue reliance on these forward-looking statements. These statements are made only as of today, and we undertake no obligation to update or revise them for any new information except as required by law. This call will also contain certain nine GAAP financial measures, including net income as adjusted, diluted earnings per share as adjusted, gross margin as adjusted, adjusted EBITDA, and adjusted EBITDA margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance, and facilitate period-to-period comparisons of our core operating results and the results of peer comparisons. Reconciliation of these Now, I'd like to turn the call over to you.

Should not place undue reliance on these forward looking statements.

Statements are made only as of today and we undertake no obligation to update or revise them for any new information, except as required by law. This call will also contain certain non-GAAP financial measures, including net income as adjusted diluted earnings per share as adjusted gross margin as adjusted adjusted EBITDA and adjusted EBITDA.

<unk> margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings provide consistency and comparability with our past performance and facilitate period to period comparisons of our core operating results and the results of peer companies reconciliation of these non-GAAP measures to the most comparable GAAP.

Measures and definitions of these indicators are included in our earnings release, which will be available to our investors portion of our website at investors got so low brands Dot com.

Now I'd like to turn the call over to Chris.

John Merris: Thank you for joining us today. I'm very excited to be the new CEO of Solo Brands, and I couldn't think of a better time to join the company. My first 60 days here have only confirmed my belief in the upside and opportunities that lie ahead of us. Many of you may be wondering, what attracted me to the role, and why was I the right choice.

Thank you for joining us today I am very excited to be the new CEO of solo brands and I couldn't think of a better time to join the company. My first 60 days Inn has only confirmed my belief in the upside and opportunities that lie ahead of us.

Many of you may be thinking what attracted me to the role and why was the right choice for the role.

John Merris: First, let me share a bit about my background. Early in my career, I joined one of the world's premier consumer durable goods companies in black, and over the next 13 years, I rose from assistant product manager to president. During that time, I was also part of a team that launched DeWalt Power Tools, giving me the opportunity to lead the European Professional Power Tools Group based in Germany.

First let me share a bit about my background early in my career I joined one of the world's premier consumer durable goods companies and black and Decker.

Over the next 13 years I rose from assistant product manager to President <unk>.

During that time I was also part of a team that launched a wall power tools, giving me the opportunity to lead the European professional power tools group based in Germany.

John Merris: Black & Decker was my training ground for how to develop innovative products, compelling marketing campaigns, and build Aspirational Brands. From there, I spent a decade in private equity, honing my leadership skills in many different consumer branded companies for a leading PE firm. I then spent time as CEO of public company Articat, building an iconic power sports brand and selling it to Fortune 500. And most recently, I was CEO of public company Vista Outdoor, a multibillion-dollar collection of 41 leading consumer durables brands. During my tenure at Vista, we nearly doubled sales and I was attracted to Solo Brands because of my passion for the outdoors, the strength of the core brand, and the loyal following consumers have for the brands and products.

Black and Decker was my training ground for how to develop innovative products compelling marketing campaigns and build aspirational brands.

From there I spent a decade in private equity honing my leadership skills and many different consumer branded companies for a leading P. E. R. I then spend time as CEO of public company Arctic Cat building, an iconic power sports brand and selling it to a fortune 500 company.

And most recently I was CEO of public company Vista outdoor a multibillion dollar collection of 41, leading consumer durables brands. During my tenure at Vista, we nearly doubled sales and drove incredible returns for shareholders.

I was attracted to solar brands because of my passion for the outdoors the strength of the core brands and a loyal following consumers have for the brands and products.

John Merris: However, frankly speaking, some areas need to be strengthened. I believe there is enormous upside in a company that generates high margins and strong free cash flow with low leverage. I believe the company provides a strong platform for growth and is a perfect fit with my past experiences of leading multi-branded public companies. Developing the right strategies, attracting a talented team, and instilling a performance-based culture that executes relentlessly is what I enjoy and where I excel. In the two months since I joined Solo Brands, I've spent my time diving into the business, meeting our teams, assessing our brands, and understanding our Today, I will share my initial observations and thoughts on areas of focus and the actions we are taking. However, before I jump into that, I'd like to introduce our new Chief Financial Officer, Laura Coffey. I couldn't be more excited to have Laura play a part.

However, frankly speaking some areas need to be strengthened I.

I believe there is enormous upside at a company that generates high margins and strong free cash flow with low leverage.

I believe the company provides a strong platform for growth and is a perfect fit with my past experiences of leading multi branded public companies.

Well being the right strategies, attracting a talented team and instilling a performance based culture that executes relentlessly is what I enjoy and where I excel.

And the two months since I joined solo brands I've spent my time diving into the business meeting our teams assessing our brands and understanding our strengths and opportunities.

Today, I will share my initial observations and thoughts on areas of focus and the actions we are taking however.

However, before I jump into this I'd like to introduce our new Chief Financial Officer, Laura Coffey.

I couldnt be more excited to have Laura's a partner she has extensive financial experience working with public companies and has worked in consumer centric companies most of her career.

John Merris: She has extensive financial experience working with public companies and has worked in consumer-centric companies for most of her career. We're excited to welcome her to the team. After my prepared remarks, I will turn the call over to Laura to take you through our financials and provide our initial outlook for fiscal 2024. Our brands were founded by entrepreneurs whose creativity and drive to innovate and disrupt created entirely new categories and opportunities. I see tremendous potential in our brands, which is supported by the company's strong financial position. However, I recognize that there is work to be done to fix our issues and improve the performance of our company. I will frame this at a high level in terms of what we need to return to growth.

We're excited to welcome her to the team after my prepared remarks, I will turn the call over to Laura to take you through our financials and provide our initial outlook for fiscal 2024.

Our brands were founded by entrepreneurs, whose creativity and drive to innovate and disrupt created entirely new categories and opportunities.

I see tremendous potential of our brands, which is supported by the company's strong financial position. However.

However, I recognize that there is work to be done to fix our issues and improve the performance of our company.

I will frame this up at a high level in terms of what we need to return to growth.

John Merris: First, we need to develop and execute against a well-defined company strategy, a plan that allows us to double down on our core businesses, SoloStow and Chubby. Secondly, we need to fix our D2C, or direct-to-consumer, business and return this channel to growth. Third, we need to develop a more comprehensive omni-channel strategy that will not be dilutive to our overall EBITDA margin. Fourth, we need to develop an innovative product pipeline for our core solo stove business and identify near adjacencies that will expand our reach. And fifth, we need to recruit a talented leadership team that has, what I call, been there, done that experience. A leadership team with a proven track record for both results and attracting other talented people to strengthen our team. These high-level issues we need to address are my initial observations. However, we need to, and will, dig deep.

First we need to develop and execute against a well defined company's strategic plan a plan that allows us to double down on our core businesses solo Stow and chubby.

Secondly, we need to fix our D to C or direct to consumer business and return this channel to growth.

Third we need to develop a more comprehensive omnichannel strategy that will not be dilutive to our overall EBITDA margins.

Fourth we need to develop an innovative product pipeline for our core solo stove business and identified near Adjacencies that will expand our Tam.

And fifth we need to recruit talented leadership team a team that has what I call been there done that experience a leadership team with a proven track record for both results and attracting other talented people to strengthen our team.

These high level issues, we need to address or my initial observations. However, we need to and we'll dig deeper in fact, we are currently undergoing a full strategic review of every key facet of our company and have engaged a leading strategic firm to help us in this work.

John Merris: In fact, we are currently undergoing a full strategic review of every key facet of our company and have engaged a leading strategic firm to help us in this work. I've been in this seat for 60 days, and although I may not have all the answers to questions you may have today, I will in time as we formulate our strategic priorities. Let me now speak more specifically to our two largest and critical brands and where much of my focus will be. Turning to Solo Stoves.

I've been in the seat for 60 days and although I may not have all the answers to questions. You may have today I will in time as we formulate our strategic priorities.

Let me now speak more specifically to our two largest and critical brands and where much of my focus will be.

Turning to solar stove.

John Merris: I have complete admiration for what the founders and team have built at Solo Stove. However, like many entrepreneur-founded businesses, the appropriate processes and capabilities necessary to scale the business have not been built out. From my initial observations, everything I have seen can be fixed.

I have complete admiration for what the founders and team have built as solo stove. However, like many entrepreneur founded businesses, the appropriate processes and capabilities necessary to scale the business have not been built out.

For my initial observations everything I have seen can be fixed.

John Merris: As I mentioned, we are currently undergoing a full strategic review that will result in a clear long-term plan. As part of this, we are conducting a deep assessment of our consumers. These insights will lead to a better understanding of TAMs, profit pools, and channels where our products are purchased. These insights will also inform our product roadmap, our brand strategy, and how best to utilize our marketing knowledge. In parallel with doing this strategic work, we're focused on three key priorities: revenue growth, product innovation, and talent acquisition.

As I mentioned, we are currently undergoing a full strategic review that will result in a clear long term plan as.

As part of this we are conducting a deep assessment of our consumers and these insights will lead to a better understanding of pam's profit pools and channels, where our products are purchased these insights will also inform our product roadmap our brand strategy and how best to utilize our marketing dollars.

In parallel with doing the strategic work, we're focused on three key priorities revenue growth product innovation and talent acquisition.

John Merris: Within our top priority, revenue growth, our first immediate focus area is the need to address the decline in sales of our solo stove business. We have high gross margins, but we are not spending our marketing dollars effectively. And therefore, we are not achieving the return on ad spend or ROAS we expect to help drive our growth.

Within our top priority revenue growth.

Our first immediate focus area is the need to address the decline in sales of our solo stove business. We have high gross margins, but we are not spending our marketing dollars effectively and therefore, we are not achieving the return on AD spend or ROE as we expect to help drive our growth.

John Merris: To that end, in the past 30 days, we have hired a new chief growth officer and a new leader of brand marketing and consumer insights to address this issue. We have also taken immediate action to restructure our marketing department. First, we're ending our marketing contract with an outside firm that has placed much of our media. Second, we're also replacing our current marketing agent. We have moved our business to a new marketing agency that has strong, full-funnel performance and digital marketing capability. Our new partner has deep experience working with D2C firms that also have an omnichannel footprint, such as Nike, Athleta, Kohler, Beats by Dre, and Therabody.

To that end in the past 30 days, we have hired a new chief growth officer, and a new leader of brand marketing and consumer insights to address this issue.

We've also taken immediate action to restructure our marketing partnerships first we're ending our marketing contract with an outside firm that is place much of our media spend.

Second we're also replacing our current marketing agency, we have moved our business to a new marketing agency that has strong full funnel performance in digital marketing capabilities.

Our new partner has deep experience working with D to C firms that also have an omnichannel footprint, such as Nike Athleta Koehler beats by Dre and thorough body.

John Merris: We are excited about the potential to partner with a leading firm to assist us with our marketing strategy. Importantly, though, we've also started to upgrade our internal marketing team so that we can develop more of these capabilities in-house, to augment our partnerships with outside agencies. Another critical area of focus for us will be developing a more cohesive product innovation pipeline. We'll be hiring a new leader of product development, and we'll begin building a compelling three to five-year product roadmap that will enable us to bring newness to our core category while also expanding upon our core. All of our new products will be developed with our key channel partners in mind, and we'll have an integrated go-to-market plan that will optimize our product launch. More to come on this in the future.

We are excited about the potential to partner with a leading firm to assist us with our marketing strategies.

Importantly, though we have also started to upgrade our internal marketing team. So that we can develop more of these capabilities in house to augment our partnerships with outside agencies.

Another critical area of focus for us will be developing a more cohesive product innovation pipeline will be hiring a new leader of product development and will begin building a compelling three to five year product roadmap that will enable us to bring newness to our core category, while also expanding upon our core.

All of our new products will be developed with our key channel partners in mind, and we'll have an integrated go to market plan that will optimize our product launches and more to come on this in the future.

John Merris: Our third area of focus is building out the talent and capabilities within Solo Stove. We are fortunate to have a highly enthusiastic and energized team at Solo. However, we need to augment this team in key areas with deeper experience and skills. I previously mentioned the recent hiring of a chief growth officer and a leader of brand marketing and consumer insights for Solo Stove. We have also recently added a chief people officer to help us across all of our brands as we continue to upgrade our town. All of these investments are built into our guidance and will be factored into our strategy. I'm very excited and confident that we will get Solo Stove back to winning ways. I acknowledge that it will take some time, but I haven't seen anything yet that leads me to believe we can't win in a big way.

A third area of focus is building out the talent and capabilities within solo stove.

We are fortunate to have a highly enthusiastic and energized team within solo however, we need to augment this team in key areas with deeper experience and skill sets.

I previously mentioned the recent hiring of a chief growth officer, and a leader in brand marketing and consumer insights for solo stope.

We have also recently added a chief people officer to help us across all of our brands as we continue to upgrade our talent.

All of these investments are built into our guidance and will be factored into our strategic plan.

I'm very excited and confident that we will get solo stove back to its winning ways I acknowledge it will take some time, but I haven't seen anything yet that leads me to believe we can't win in a big way.

John Merris: Turning now to our Chubbies. Chubbies is coming off one of its best years in history in 2023 and starting the new year with strong momentum. It is one of the most exciting up-and-coming apparel brands in America today, with a very focused business plan that continues to execute at a high level. Chubby's core customer is the young male, and the business has a balanced channel strategy of direct and wholesale with an emerging retail-owned footprint. I do believe we can create tremendous value by supporting these two great brands and allowing them to grow in distinct ways. Personally, I have a lot of experience in multi-brand platforms and creating a culture that allows entrepreneurial, high-growth brands like Solo Stove and Chubbies to flourish. We believe that both Solo Stove and Chubbies are still relatively early in their growth cycles and have significant room to grow, both through direct and retail channels. We know we need to improve the performance of our Solo Stove director.

Turning now to our Chinese business Chubby is coming off one of its best years in history in 2023 and started the new year with strong momentum. It is one of the most exciting up and coming apparel brands in America today with a very focused business plan and continues to execute at a high level.

<unk> core customer is the young male and the business has a balanced channel strategy of direct and wholesale with an emerging retail owned footprint.

I do believe we can create tremendous value by supporting these two great brands and allowing them to grow in distinct ways personally I have a lot of experience in multi brand platforms and creating a culture that allows entrepreneurial high growth brands like solo stove and chubby to flourish.

We believe that both solar stove and chubby are still relatively early in their growth cycles and have significant room to grow both through direct and retail channels.

We know we need to improve the performance of our solar stove direct business. However, as I mentioned previously we will continue to meet our consumer where they shop through our balanced omni channel distribution strategy.

Somer Webb: However, as I mentioned previously, we will continue to meet our customers where they shop through a balanced omni-channel distribution strategy. As part of our strategic work, we will confirm the TAM and the full potential for each channel of distribution without diluting profitability. In closing, I'm incredibly excited to be here leading this company and believe we have tremendous upside in front of us. In my early days, I've been impressed by the strength of our core brands, Solo Stove and Chubby. These are great businesses that have an entrepreneurial spirit with tremendous followings and are loved by our customers. However, I do recognize that there's a lot of work to be done, and it will take some time. We're working to build the infrastructure in terms of people, capabilities, and processes to lay the foundation for us to deliver consistent growth over the long term. Now we'll turn the call over to Laura. Thank you, Chris, and good morning, everyone.

As part of our strategic work, we will confirm the Tam and the full potential for each channel of distribution without diluting profitability.

In closing I'm incredibly excited to be here, leading this company and believe we have tremendous upside in front of us and my early days I have been impressed by the strength of our core brands solar stove and chevy's. These are great businesses that have an entrepreneurial spirit with tremendous followings and our loved by our customers. However.

We do recognize that there's a lot of work to be done and it will take some time, we are working to build the infrastructure in terms of people capabilities and processes to lay the foundation for us to deliver consistent growth over the long term.

Now I will turn the call over to Laura.

You, Chris and good morning, everyone.

Somer Webb: Let me start by saying I'm thrilled to be a part of the team here at Solo Brands with Chris. I was initially drawn to the company because of its unique digital-first business model, but in my short time with the company, I quickly came to understand why its customers have such incredible excitement and passion for these brands. Once I learned about the Solo story, I knew I wanted to be a part of the next phase of the company's growth. Today, I will discuss our fourth-quarter results and provide our outlook for fiscal 2024. For the quarter, we sold for $165.3 million, a 16.2% decline compared to a year ago. The decline in sales was due to the weakness in our direct consumer channel that was partially offset by growth in wholesale.

Let me start by saying I'm thrilled to be a part of the team here at <unk> brands with Craig.

I was initially drawn to the company because its unique digital first business model, but in my short time with the company I quickly came to understand why customers have such incredible excitement and passion for these brands.

Once I learned about the solo story I knew I wanted to be a part of the next phase of the company's scrap.

Today, I will discuss our fourth quarter results and provide our outlook for fiscal 2024.

For the quarter sales were $165 3 million.

A 16, 2% decline compared to a year ago.

The decline in sales was due to the weakness in our direct consumer channel that was partially offset by growth in wholesale.

Somer Webb: For the year, sales were $494.8 million compared to $517.6 million, and revenues declined 20.8% to $127.3 million in the fourth quarter, compared to $160.8 million a year ago, due to the lack of significant new product launches compared to the prior year. Total orders declined 28.6%, and AOV increased marginally at 1%. For the year, direct channel revenues declined 15.4% to $358.1 million compared to $423.4 million. The decline was attributable to decreases in average order value in total orders of 8.1% and 12.4%, respectively.

For the year sales were $494 8 million compared to $517 6 million.

In the direct channel.

Revenues declined 28% to $127 $3 million in the fourth quarter compared to $168 million a year ago due to the lack of significant new product launches compared to the prior year.

Total orders declined 28, 6% and the increased marginally at 1%.

For the year direct channel revenues declined 15, 4% to $358 1 million compared to.

$423 $4 million the decline was attributable to decreases in average order value and total orders of eight 1% and 12, 4% respectively.

Somer Webb: Wholesale revenues increased 4.2% to $38 million compared to $36.5 million, driven by continued growth with our strategic partners. We are pleased to see the year over year growth as we are lapping 196% growth in the comparable period. For the full year, wholesale revenues were $136.7 million compared to $94.2 million in the prior year and grew 45.1%. Turning to growth margins, Fourth quarter gross margin decreased 150 basis points to 58.3% due to a channel mix shift partially offset by lower freight costs. Adjusted gross margin declined 90 basis points to 58.9%.

Wholesale revenues increased four 2% to $38 million compared to $36 $5 million driven by continued growth with our strategic partners.

We are pleased to see the year over year growth as we are lapping a 196% growth in the comparable period.

For the full year wholesale revenues were $136 7 million.

<unk> to $94 2 million in the prior year and grew 45, 1%.

Turning to gross margin.

Fourth quarter gross margin decreased 150 basis point to 58, 3% due to channel mix shift, partially offset by lower freight costs.

Adjusted gross margin declined 90 basis points to 58, 9%.

Somer Webb: For the year, gross margins declined 40 basis points to 61.1% compared to 61.5% and reflect the purchase accounting adjustments related to acquired businesses along with the channel mix shift from direct to customer to wholesale. Adjusted gross margins declined 170 basis points to 61.3%, which relates to the channel mix shift. Selling general and administrative expenses for the quarter decreased to $80 million compared to $84.7 million a year ago.

For the year gross margins declined 40 basis points to 61, 1% compared to 61, 5% and reflect the purchase accounting adjustment related to acquired businesses along with the channel mix shift from direct to customer to wholesale.

Adjusted gross margins declined 170 basis points to 61, 3%, which relates to the channel mix shift.

Selling general and administrative expenses for the quarter decreased to $80 million compared to $84 $7 million a year ago.

Somer Webb: The decrease was due to lower fixed costs related mostly to a reduction in performance-based bonuses partially offset by a $1.9 million increase in variable costs. As a percentage of sales, SG&A expense increased 48.4% of sales compared to 43% a year ago due primarily to increased advertising and marketing costs during the quarter. For the year, SG&A was $249.4 million compared to $259.1 million.

The decrease was due to lower fixed cost related mostly to a reduction in performance based bonuses, partially offset by a $1 9 million increase in variable cost.

As a percentage of sales SG&A expense increased 48, 4% of sales compared to 43% a year ago.

Primarily to increased advertising and marketing costs during the quarter.

For the year, SG&A was $249 $4 million compared to $259 1 million.

The decrease in SG&A was due to lower shipping and distribution costs, partially offset by higher advertising and marketing expense.

Somer Webb: The decrease in SG&A was due to lower shipping and distribution costs, partially offset by higher advertising and marketing. As a percentage of sales, SG&A increased 40 basis points to 50.4%. We recorded an impairment charge of $249 million during the quarter, of which $234.8 million related to goodwill for Solo Stove, Oru, and Isle reporting units, and $14.2 million related to the Oru and Isle intangible assets.

As a percentage of sales SG&A increased 40 basis points to 54%.

We recorded an impairment charge of $249 million during the quarter of which $234 8 million related to goodwill for solo stone Oulu in IL reporting unit and $14 2 million related to the owner of an aisle intangible assets.

Fourth quarter net loss was $211 million or.

Our adjusted net income was $11 $3 million and adjusted EBITDA was $14 9 million.

Somer Webb: Fourth quarter net loss was $211 million. Our adjusted net income was $11.3 million, and adjusted EBITDA was $14.9 million. Full year net loss was $195.3 million.

Full year net loss was $195 3 million adjusted net income was $54 8 million with adjusted EBITDA of $70 2 million.

Turning to our balance sheet at the end of the period, we had $19 $8 million in cash and cash equivalents, we had $60 million in outstanding borrowings under the revolving credit facility and $91 $3 million under the term loan agreement.

Somer Webb: Adjusted net income was $54.8 million, with adjusted EBITDA at $70.2 million. Turning to our balance sheet, at the end of the period, we had $19.8 million in cash and cash equivalents. We had $60 million in outstanding borrowings under the revolving credit facility and $91.3 million under the term loan agreement. The borrowing capacity on the revolving credit facility was $350 million as of December 31st, leaving $289 million of

The borrowing capacity on our revolving credit facility was $350 million as of December 31st, leaving $289 million of availability.

We continue to have strong liquidity position and our net leverage at two times for the year.

Inventory at the end of 2023 with $111 6 million.

Down 16, 1% compared to a year ago.

We are pleased with the level and quality of inventory and we'll remain focused on disciplined inventory management.

Somer Webb: We continue to have a strong liquidity position, and our net leverage is at two times for the year. Inventory at the end of 2023 was $111.6 million, down 16.1% compared to a year ago. We are pleased with the level and quality of inventory and will remain focused on disciplined inventory management. Moving to our outlook, while we are excited about the tremendous opportunity in front of us, we recognize we need to invest in people and processes to position us for long-term growth. Over the upcoming year, we will build out the architecture of the company and the management team to enable us to execute our vision. For fiscal 2024, we expect revenue to be in the range of $490 million to $510 million.

Moving to our outlook, while we are excited about the tremendous opportunity in front of US we recognize we need to invest in people and processes to position us for the long term growth.

Over the upcoming year, we will build out the architecture of the company and the management team to enable us to execute our vision.

For fiscal 2024, we expect revenue to be in the range of <unk>.

$490 million to $510 million we.

We expect adjusted EBITDA to be in the range of 10% to 12% for the full year as we make the necessary investments to support our business for the long term.

While we are not providing quarterly guidance I would like to provide some additional color on the quarterly cadence for the year.

For the first quarter, we expect sales trends to be similar to the fourth quarter.

And for the full year, we expect the revenue cadence for the first half and the second half of the year to be similar to historical patterns, primarily due to new initiatives that will benefit us in the second quarter.

Somer Webb: We expect adjusted EBITDA to be in the range of 10% to 12% for the full year, as we make the necessary investments to support our business for the long term. While we are not providing quarterly guidance, I would like to provide some additional color on the quarterly cadence for the year. For the first quarter, we expect sales trends to be similar to the fourth quarter.

As Chris mentioned, we are restructuring our marketing partnerships and while we believe that we will begin to realize the benefits of our new partnerships in the second half of the year. We will continue to experience expense deleverage in the first half due to continuation of inefficient marketing spend as we exit our existing contracts.

Somer Webb: And for the full year, we expect the revenue cadence for the first half and the second half of the year to be similar to historical patterns, primarily due to new initiatives that will benefit us in the second quarter. As Chris mentioned, we are restructuring our marketing partnerships. And while we believe that we will begin to realize the benefits of our new partnerships in the second half of the year, we will continue to experience expense deleverage in the first half due to the continuation of inefficient marketing spend as we exit our existing contract. In addition, we are investing in people to help support our long-term growth. As such, first quarter EBITDA margins will be meaningfully lower than fourth quarter margins, given the increased investment spend that will occur in our seasonally smallest revenue quarter.

Okay.

In addition, we are investing in people to help support our long term growth as such first quarter EBITDA margins will be meaningfully lower than fourth quarter margins given the increased investment spend that will occur in our seasonally smallest revenue quarter.

With that I will now turn the call over to the operator to begin Q&A.

Okay.

Thank you.

As a reminder, if you would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad.

In your mind I would like to be removed from the queue. Please press star and then K when preparing to ask a question. Please ensure that your device Andrew microphone on mute it lately.

Okay.

Operator: With that, I will now turn the call over to the operator to begin the Q&A. Thank you. As a reminder, if you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally.

Our first question today comes from Brian <unk> with Jefferies. Randy. Please go ahead.

Yes, Thank you and good morning, everybody.

I guess my first question.

This is when you think about the distribution model of the business.

Maybe give us your preliminary perspectives on what you think.

Optimal.

Distributions should be between direct and wholesale again understanding youre going to go through a strategic review, but I just wanted to get your perspective on how you think about.

Randal J. Konik: Our first question today comes from Randy Konik with Jeffreys. Randy, please go ahead. Yeah, thank you. And good morning, everybody. I guess my first question, Chris, is when you think about the distribution Model of the business, maybe give us your preliminary perspectives on what you think the optimal distribution should be between direct and wholesale. Again, I understand you're going to go through a strategic review, but I just want to get your perspective on where distribution should be between the channels. Absolutely, Randy, and thank you for the question.

Where where distributions should be shortening the channels, yes, absolutely Randy and thank you for the question. So.

First of all we were born as a digitally native company and the majority of our sales have been frankly will continue to come from online efforts.

I should start off by saying I don't believe the direct to consumer and retail are an either or we need to be able to grow in both channels. Because we believe both channels are growing.

John Merris: First of all, we were born as a digitally native company, and the majority of our sales have been, and frankly, will continue to come from online efforts. I should start off by saying I don't believe that direct-to-consumer and retail are an either-or. We need to be able to grow in both channels because we believe both channels are growing. We need to do a better job of developing what I call a tailored go-to-market approach for each channel. And they also need to be harmonized so that we aren't competing against ourselves on both channels.

We need to do a better job in developing what I call a tailored go to market approach for each channel.

And they also need to be harmonized. So do we arent competing against ourselves in both channels. So a part of the strategic work that.

As I discussed in my prepared remarks will be about defining the terms of both channels. So that we can build capabilities and resources appropriately against each of these channels.

In the retail channel I think its important that you pick the right strategic partners that represent your products well and although there is still a lot of room for growth in retail, we don't want to or need to be everywhere. That's not good for our brand and it's not good for our channel partners. So it can be very strategic though will continue to growth.

John Merris: So a part of the strategic work that I discussed in my prepared remarks will be about defining the TAMs of both channels so that we can build capabilities and resources appropriately for each of these channels. In the retail channel, I think it's important that you pick the right strategic partners that represent your products well. And although there's still a lot of room for growth in retail, we don't want to or need to be everywhere.

Okay understood and then.

The other question would be the last question is when you look at the differential in the growth profile right now.

John Merris: That's not good for our brand and it's not good for our channel partners. So it's going to be very strategic that we'll continue to grow. Understood. And then the other question would be, the last question, is when you look at the differential in the growth profile right now, you know, out of the fourth quarter and a year between Chubbies and Solo, you know, how much of Solo's difficulties truly are, you know, lack of marketing or lower marketing efficacy versus just some digestion of some perked up demand, you know, during COVID and we're still kind of digesting some of that, maybe kind of give us your impressions of, you know, where we are with, you know, any type of digestion in the cycle from COVID gains versus, you know, a lack of effective or need for more effective marketing, particularly for the Solo brand. Sure.

Out of the fourth quarter and the year between Chubby.

Solo.

How much of solos difficulties truly are.

Lack of marketing or lower marketing efficacy versus just some digestion.

Some perked up demand.

During COVID-19 and we're still kind of digesting some of that maybe kind of give us your impressions of.

Where we are with any type of digestion in the cycle from Colby gains versus.

A lack of that.

Active or need for more effective marketing, particularly for the solar Bryan.

Sure So Randy I think it would.

Yeah, it'd be less than truthful, if I didn't say that there is a COVID-19 hangover for just about every consumer durable goods product that.

John Merris: So Randy, I think it would be less than truthful if I didn't say that there's a COVID hangover for just about every consumer durable goods product that succeeded during those COVID years. So there was a high that many consumer durable goods companies came off of. We were certainly one of those, and we're two years into coming off of that.

<unk> succeeded during those Covid years, so there was.

Our high that many consumer durable goods companies came off of we were certainly one of those and we're two years into coming off of that and it was frankly one of the attractions for me walking into the role there was a number of attractions, but one of them was yes, I think we're seeing a bottoming out of the consumer shift.

John Merris: And it was, frankly, one of the attractions for me walking into the role. There were a number of attractions, but one of them was that I think we're seeing a bottoming out of the consumer shift from durable goods to more service-based goods. As cabin fever reached a high in COVID and people who were starting to get out of their homes, they switched a lot of their spending to hospitality, restaurants, travel, things of that nature.

From durable goods to more service based goods as cabin fever.

Reached a high in Covid and people, who are starting to get out of their homes. They switched a lot of their spend to hospitality restaurants travel.

Things of that nature, I think we will start to gradually see a shift back here as we move through the calendar year 2024, now chumpiest wasn't quite as affected because <unk> is more of a consumable brand. It's a lower price point in many of its.

John Merris: I think we'll start to gradually see a shift back here as we move through the calendar year 2024. Now Chubbies isn't quite as effective because Chubbies is more of a consumable brand. It has a lower price point on many of its core products, and it's easily affordable for many of the consumers that we target. But the second part of your question was around some of the capabilities and what you have you and marketing. And so I think the biggest piece that I see in my first 60 days is the fact that, you know, capabilities or lack thereof in certain areas within SoloStove is a large contributing factor to our declining direct-to-consumer revenue. First, we haven't partnered with marketing firms that I believe have deep experience across what I call the full funnel of marketing spend. And so, as a result, we've not been as effective and as targeted in our digital marketing spend as we need to be.

Core products and it's easily.

Portable for.

Many of the consumers that we target, but the second part of your question was around some of the capabilities and what have you and in marketing and so I think the biggest piece that I see in my first 60 days is the fact that you know.

Capabilities or lack thereof in certain areas within the solo stove as a large contributing factor to our declining direct to consumer revenue.

First we havent partnered with marketing firms that that I believe have deep deep experience across what I call. The full funnel of marketing spend and so as a result, we have not been as effective and as targeted in our digital marketing spend as we need to be now we think we've begun to address this with the recent changes in the firms I discussed in my prepared.

John Merris: Now, we think we've begun to address this with the recent changes in the firms I discussed in my prepared remarks. But secondly, you know, we need to look in the mirror at ourselves and realize that, you know, we have a tremendous opportunity to build talent within SoloStove to augment the partnerships externally that we develop. What this will do is it'll allow us to control our destiny better. So both of them will be done in parallel.

Paired remarks, but.

But secondly, we need to look in the mirror it ourselves and realize that we have a tremendous opportunity to build talent within solo stove to augment the partnerships externally that we develop what this will do will allow us to control our destiny better. So both of them will be done in parallel and I'd also be remiss if I did.

John Merris: I'd also be remiss if I didn't mention the fact that the lack of product innovation over the past 12 to 18 months is a contributing factor as well. You think about it, we were born as a product innovator. And we created entirely new categories like the fire pit.

<unk> mentioned, the fact that the lack of product innovation over the past 12 to 18 months is a contributing factor as well when you think about it we were born as a product innovator and.

And we created entirely new categories like the fire pit now I've spent my entire career driving product innovation of various consumer durable goods companies and I can assure you that we will bring this strength back to our business, it's going to take some time no question about it but it's going to be a big priority for us.

John Merris: Now I've spent my entire career driving product innovation at various consumer durable goods companies, and I can assure you that we will bring this strength back to our business. It's going to take some time, no question about it, but it's going to be a big priority. Very helpful.

Very helpful. Thank you.

Randal J. Konik: Thank you. Our next question comes from Brian Sigfill with Craig Hallam. Please go ahead.

Our next question comes from Brian <unk> with Craig Hallum. Please go ahead.

Brian Christopher McNamara: Hey, good morning, guys. A couple of things on retail. So curious, I guess how the quarter turned out relative to internal expectations, and I realized there was still product on the shelf there, so I guess that slow sell-through or if you earned some permanent shelf space there. Well, first of all, I like our position in retail. I mean, there's elements I like, and frankly, there's elements that I'd like to see us focus on more.

Hey, good morning, guys.

A couple on retail so curious I guess, how the quarter turned out relative to internal expectations and our realized mark necessarily your internal expectations, but our checks indicated there was demand and low inventories. So I guess why not shift more inventory there and then secondly on target.

The feedback following the seasonal test it seems like there is still a product on the shelf. There. So I guess is that just.

Slow sell through or if you earn some permanent shelf space there.

Well first of all I like our position in retail I mean, theres elements I like and frankly, there is elements that I that I would like to see us.

John Merris: And then there are elements that I'd like to see us, you know, frankly, make some improvements on. I think overall, your point on inventory, you know, we're seeing the same thing. And it's encouraging that when you look across the channels, inventory is, frankly, probably at the best point I think we've been at in the last couple of years. And that's evidenced by your inventory checks, but also by the open to buy dollars we see increasing at some of our key retailers. So that's encouraging.

On more and then there's elements that I'd like to see us.

Frankly make some improvements on I think overall your point on inventory.

We're seeing the same thing.

And it's encouraging that when you look across the channels inventory is frankly yet.

Probably the best point I think we've been at in the last couple of years and it's evidenced by your inventory checks, but also open to buy dollars, we see increasing in some of our key retailers. So that's encouraging now youll see us continue to drive retail, but we want to do it strategically we want a partner.

John Merris: Now, you'll see us continue to drive retail, but we want to do it strategically. We want to partner. Our first priority is to take the doors that we're in and increase the performance within those doors. Then, secondly, we want to take those strategic customers that we are already partnered with and expand to other doors that make sense. And then a third priority would be looking at new customers, new doors that we think would attract our core consumer in different ways. Now, you mentioned Target. And so Target was an initial test for us. And, you know, it was.

Our first priority is to take the doors that we're in and increase the performance within those doors.

And then secondly, we want to take those strategic customers that we are already partnered with and expand to other doors that makes sense and then a third priority would be looking at new customers new doors that we think would attract our core consumer in different ways, but you mentioned target and so target was wasn't ines.

Oral test for us and.

<unk>.

John Merris: You know, first of all, when the product was placed into Target, we didn't have a lot of experience within Target. And I think it's one of those strategic accounts for us that if we get the product mix right, for that consumer that shops at Target, I think we can do very, very well. And so I think you're going to be looking at potentially a different SKU assortment as we work with a buying group to make sure that we're really, really targeted to the price point and the consumer that is looking for our product, particularly in holiday periods like Black Friday and Cyber Monday.

It was yes.

First of all the product was placed into target we didn't have a lot of experience within target and I think it's one of those strategic accounts for us that if we get the product mix right.

For that consumer that shops at target I think we can do very very well and so I think youre going to be looking at.

Potentially a different SKU assortment as we as we work with a buying group to make sure that we're really really targeted to the price point and consumer that is looking for our product, particularly in.

Holiday periods like Black Friday, cyber Monday time of year.

Great.

John Merris: Then just as the strategic review that's going on, I guess, is a full sale of the company being considered within that, and then water sports doesn't sound, or at least that's my interpretation, as core to the business. So I guess any specific thoughts there on what your plans are? Well, as you might imagine, we don't comment on things as it relates to sales or whatever. But I can tell you affirmatively, there's no question that this company is not for sale.

And then just the strategic review that.

Going on I guess as a full sale of the company being considered within that and then.

Water sports it doesn't sound or at least that's my interpretation is core to the business. So I guess any specific thoughts there and what your plans are.

Well as you might imagine we don't comment on things of.

Things as it relates to sales or whatever but.

I can tell you affirmatively. There is there is no question that this company is not for sale.

John Merris: The board brought me in to take this iconic brand that's got terrific consumer affinity and so many strong attributes, and they've given me a mandate to fix what needs to be fixed and put this company back on a growth track. Now part of that early assessment is simply just taking the core businesses of Chubbies and Stove and saying, these are two outstanding brands in themselves that ought to have great growth going forward and ought to contribute meaningful valuation or value creation for our firm. But that's not to say that we're not going to continue to support our water sports brands. I didn't want to make that, I didn't comment on it, because I didn't want to say that that was the track we were on.

The board brought me into take this iconic brand that's got terrific consumer affinity and so many strong attributes and they've given me a mandate to fix.

<unk> fix what needs to be fixed and put this company back on a growth track now part of that in my early assessment is simply just taking the core businesses of <unk> and stove and saying. These are two outstanding brands in of themselves. The audio have great growth growing.

Going forward and audit contribute meaningful valuation or value creation for our firm, it's not to say that we're not going to continue to support our water sports brands I didn't want to make that I didn't comment on it because I didn't want to.

<unk>.

I'd say that that was the track we're on it's just more that we're focusing on the two big businesses, where we think we can give investors.

John Merris: It's just more that we're focusing on the two big businesses where we think we can give investors the greatest return near term. For what it's worth, we agree with that strategy. Thanks, Chris. Good luck, guys. Yeah, thank you. The next question comes from Chasen Bender with City. Please go ahead.

The greatest return near term.

For what it's worth we agree with that strategy. Thanks Cris. Good luck guys. Thank you.

The next question comes from Jason Bender with Stifel. Please go ahead.

Chasen Louis Bender: Good morning, thanks for taking the question, and congrats on the new role, Zal. Laura, maybe to loop you in here, I was hoping you could comment on the EBITDA guidance. Do you mind just unpacking the question?

Good morning, Thanks for taking my question and congrats on the new roles all.

Laura maybe to loop you in here I was hoping you could comment on the EBIT guidance do you mind, just unpacking the margin compression.

Somer Webb: You noted the investment. But could you also talk about how you're thinking about the magnitude of the mark? Here. Sure, thanks for the question.

Investments in people process systems talent, but can you also talk about how youre thinking about the magnitude of marketing spending from here beyond just the way youre spending.

Sure and thanks for the question.

Somer Webb: As we said in our guidance, and to start off with, you know, when Chris and I sat down to do 2024 guidance, we took a very, hard look from bottoms up, tops down, to build out sales, and even to provide for you guys today. With the performance that we had in the fourth quarter, we knew we needed to act quickly and decisively on how to pull things together and look toward the rest of the year. So while we didn't get full guidance for the year, we tried to give a little more color on the first quarter. Thank you, with regard to marketing, as Chris said in his remarks, you know, we do have a contract that we are looking to exit. It's not been efficient in how we've been spending our marketing dollars, and we're spending a lot of time making sure that we can unwrap that.

And as we said in our guidance and let's start off with.

Chris and I sat down to <unk> 2024 guidance, we took a very hard look from bottoms up tops down to build out sales and EBITDA to provide to you guys today.

With the performance that we had in the fourth quarter.

We knew we needed to act quickly and decisively on how to how to pull things together and look towards the rest of the year. So we while we didn't get.

Paul Gait full guidance for the year, we tried to give a little more color on the first quarter.

With regards to marketing, we as Chris we said in our remarks.

We do have a contract that we are looking to.

Exit it has not been inefficient in how we've been spending our marketing dollars and we're spending a lot of time, making sure that we can.

Somer Webb: This year, we hope to be able to get back to a level of marketing that we know is efficient and creating a real ROAS return for us. We want to make sure that we make good investment decisions in marketing. And quite frankly, if I'm honest, in Quarter One, we're still engaged with the firm that we don't have effective marketing for ourselves. And so that's why we're having to act very quickly.

<unk> that this year.

And hope to be able to get back to a level of marketing that we know is efficient and creating a real ROE as return for US we want to make sure that we add.

Make good investment decisions with marketing and quite frankly, if I'm honest.

Quarter, one we're still engaged with a firm that we don't have effective marketing for ourselves and so that's why we're having to act very quickly we've got a new team in place that essence their number one priority to get this back on track.

Somer Webb: We've got a new team in place, and this is their number one priority to get this back on track. And I'll just add to Laura's comments there and emphasize the fact that, you know, we walked into the first quarter here that was, I wouldn't say the first quarter's a bust, because we've been able to impact the quarter that we're in, but not as much as you might expect. And so Laura's point on some of the continual marketing spend, not as effective as we would like to see it, that's an ongoing change here. So your question on marketing spend, I wouldn't look to see a marketing spend change versus historical rates; we're just going to spend it more effectively in different channels and with more help. And then, maybe just dovetailing on the prior question..., for example, of E.T.

And I'll just add to Laura's comments, Aaron emphasizes impacted we walked into the first quarter here.

I wouldn't say the first quarter's base, because we've been able to impact the quarter that we're in but not as much as you might expect and so laura's point on some of the continual marketing spend.

Not as effective as we would like to see it.

That's an ongoing change here. So your question on marketing spend I wouldn't look to see marketing spend change versus historical rates, we're just going to spend it more effectively in different channels and with.

With more help.

Understood I appreciate that color and then maybe just dovetailing on the prior question.

Chasen Louis Bender: Maybe you could just provide some thoughts on Capital Allocation Priorities for the business, you know.., www.larryweaver.com, Sale. But could we see potentially something on the other side of things, whether that be, you know, more Tuckins or M&A, more... transformative M&A, or is the near-term focus... seen the cold. It's a good question.

For Christmas, where both of you can tag team. This.

Maybe you could just provide some thoughts on the capital allocation priorities for the business understand the comment that the watersports businesses might not be for example, could we see potentially something on the up on the other side of things whether that be more tuck ins or M&A.

Transformative M&A or is the near term focus.

More center.

Fixing the core brands from the onset.

John Merris: And so, capital allocation is always front of mind for myself and any business that I lead. You know, we're stewards of the capital that investors have given us, and we take it as a top priority. So you see last year, one of the things that excited me the most when I looked at the final results was the cash generation we drove, which we stated, Laura stated, was at a record level. A lot of it was led by inventory reduction. So think about how hard it is to reduce inventory in a declining sales environment. In my 30 years of experience, I can tell you that it's not easy to do.

It's a good question and so capital allocation is always front of mind for myself in any business that I lead.

We're stewards of the capital that investors have given us and we take it as a top priority.

So you see last year, one of the things that excited me the most when I looked at the final result is the cash generation, we drove which we stated lower stated who is at a record level a lot of it was led by inventory reductions. So think about how hard it is to reduce inventory in a declining sales environment in my 30 years of experience.

<unk> I can tell you that's not easy to do.

John Merris: And that's one of the advantages this organization has; it is a terrific fulfillment organization. We didn't, we never really talk about this that much, but our fulfillment accuracy rates in our facilities are over 95.5% accurate in terms of shipments. And we do a lot of D2C, 1Z, 2Z packages. So it's some of the, it's one of the best assets I've seen in an organization. But as it relates specifically to your company, our focus is squarely on building and strengthening our Now, as a part of that, we're going to continue to, The conversions that we see historically on EBITDA to cash, we're not going to take out of the inventory. We talk about acquisitions and what we call near adjacencies that may make sense. Now, a perfect example is Teraflame.

And that's one of the advantages. This organization has is a terrific fulfillment organization. We didn't we never really talk about this that much but our fulfillment.

Accuracy rates and our facilities are over 95, 5% accurate.

In terms of shipments and we do a lot of D to C. Onesie Twosies packages. So it's some of it is one of the best assets <unk> seen in an organization, but as it relates specifically to Europe.

<unk> location, our focus is squarely on building and strengthening.

Now as a part of that we're going to continue to.

The conversions that we see historically on EBITDA to cash new we're not going to take out inventory.

Tuck in acquisitions in what we call near Adjacencies that May make sense now perfect example is tariff flame. So we bought Terra flame in may of last year and.

John Merris: So we bought Terraflame in May of last year, and just in the first quarter, it's a small, small business, but in the first quarter, we were able to generate almost a full year's worth of sales. And that is simply because it was a perfect fit for Solo Stove. If you look at our website, we're able to integrate it into the website itself. So the company went from having a couple hundred thousand eyeballs looking at their product every day on their website to millions looking at it, and we were able to generate sales from core Solo Stove customers. So those are the types of acquisitions that are small, that are tuck-in, that make perfect sense for our brands, and can be highly accretive to our investors. But that would be the only other element of capital allocation that we would look at beyond just building and strengthening the foundation in our core business. I appreciate it.

Just in the first quarter, it's a small small business, but in the first quarter, we were able to generate almost a full year's worth of sales and that is simply because it was a perfect fit for solo stove. If you look on our website, we're able to integrate it into the website itself. So the company went from.

You are kind of having a couple of hundred thousand eyeballs looking at their product everyday on their website. Two millions are looking at it and we were able to generate sales from core solo. So customers. So those are the types of acquisitions that are small that are tuck in that make perfect sense for our brands and can be highly accretive to.

To our investors, but that would be the only other element of capital allocation that we would look at beyond just building and strengthening the foundation of our core businesses.

Got it appreciate that color I'll pass it on.

Chasen Louis Bender: Thank you. Our next question comes from Anna Glaston with Be Riley. Anna, please go ahead.

Thank you.

Our next question comes from Anna <unk> with B Riley.

Anna Glaston: Hey, good morning, and Chris and Laura, welcome to the team. My first question is about guidance. What are we, and what's being assumed in terms of the DTP channel?

Please go ahead.

Hey, good morning.

Chris and Laura welcome to the team.

Great.

Thanks, Dan My first questions on guidance.

<unk>.

What are we.

And then in terms of the DTC channel should we expect that to return to growth at some point in the year.

John Merris: Should we expect it to return to growth at some point in the year? Yeah, I mean, Laura provided some good color on the guidance previously, but Anna, the way, you know, as you can imagine, coming in, it's difficult being new and needing to provide guidance. So it was one of the things the board really pushed on Laura and me to really, really get into the business quickly and make sure that, you know, the guidance that we give is our best, best estimate. Now, historically, we've driven kind of two-thirds, one-third D2C wholesale or what we call retail business. I think that split will continue as we look into 2024 and I think the way I would think about our D2C business is, you know, we came off a very challenging fourth quarter, but I do have to say, in fairness to the team, this past fourth quarter was an extremely hard comp. The previous year, in 2022, we did almost $200 million in sales in the fourth quarter, which was 12% growth over 2021. So coming off that comp, we didn't perform well.

Well Glenn yes.

Yes, let me just I mean, so Laura provided some good color on the guidance previously but and.

The way as you can imagine coming in it's difficult being new and meeting to provide guidance. So it was one of the things the board really pushed on Laura and I is to really really get into the business quickly and make sure that.

The guidance that we give is.

Our best Best estimate.

Now historically, we've driven kind of two thirds one third.

D to C wholesale or what we call retail business I think that split will continue as we.

As we look into 2024.

And I think the way I would think about our D to C business is.

We came off a very challenging fourth quarter, but.

But I do have to say in fairness to the team. This past fourth quarter was an extremely hard comp the previous year in 2022, we did almost $200 million of sales in the fourth quarter, which was a 12% growth over 2021, so coming off that comp, we didn't perform well and theres a number of reasons that Laura and team have dug in.

John Merris: And there's a number of reasons that Laura and I and our team have dug into to understand why, but those trends aren't likely to change anytime soon this quarter or next quarter. And that's our job, to reverse those trends. So I think as you start to see us move through each of the quarters, you're going to see a strengthening D2C business. So as we get into the holiday period in the fourth quarter this year, you're going to see improvements in the D2C business. The only thing I would caution us on is the fact that it's going to take some time to get our product development flywheel going. It's been one of the hallmarks of my career in developing new products, but I also understand that there's some time to take consumer insights, feed those through our product development system, get it into manufacturing, get it into the warehouse, and get it into that marketing flywheel as well. That'll take some time, but I'm highly confident that as we move through the year, you're going to start to see improvements in our results in direct-to-consumer. Great, thanks.

<unk> understand why.

But those trends aren't likely to change anytime soon this quarter or next quarter.

And Thats our job is to reverse those trends. So I think as you start to see us move through each of the quarters youre going to see a strengthening D to C business. So as we get into the holiday period in the fourth quarter. This year youre going to see improvements in the D to C business, the only thing I would caution.

I saw on is the fact that it's going to take some time to get our product development flywheel going.

One of the hallmarks in my career and developing new products, but I also understand that there is some time to take consumer insights to feed those through our product development system to get it into manufacturing to get it into warehouse to get it.

To that marketing flywheel as well that will take some time, but I'm highly confident that as we move through the year youre going to start to see improvements in our results in direct to consumer.

Great. Thanks, that's really helpful.

Anna Glaston: Thanks. That's really helpful. And another one for me; great to hear how strong Chubby's did this year.

Another one for me great to hear.

Long term debt in the year.

John Merris: Would you be would it be possible to put a final point on that, you know, the level of growth they saw? So Anna, it's something that as we look towards the future, one of the things that we wanna do for our analysts and investor community is to try to create some more transparency between our two businesses, Chubbies and Stove. And I think you'll see more of that as we go forward here. We're still getting our minds around reporting and how we wanna do that.

Would it be possible put a finer point on that you know the level of growth.

So Ana it's it's something that as we look towards the future one of the things that we wanted to do for our analysts and Investor community is to try to create some more transparency between our two businesses <unk> and stove and I think youll see more of that as we.

We go forward here, we're still getting our minds around <unk>.

Reporting and how we want to do that.

John Merris: But suffice it to say that this is one of the better performing apparel brands out there. And we're excited about it. I'm excited about what I see. I mean, I like everything from the leadership down through the team, the capabilities, how they connect with the consumer, the following that they have from the consumer. And when I first walked in, I was thinking, okay, this is a young male audience. And what I'm learning is this is an audience that stretches from kinda late teens to late forties and beyond. So it's a big swath of the male audience.

But suffice it to say that.

This is one of the better performing.

Apparel brands out there and we're excited about I'm excited about what I see I mean, I like everything from the leadership down through the team the capabilities.

They connect with the consumer the following that they have from the consumer and when I first walked in I was thinking okay. This is a young male audience and what I'm learning is this is an audience that stretches from kind of late teens to late Forty's and beyond so it's a it's a big swath of the male audience.

<unk>.

John Merris: And they're so excited about the brand, and you can see it in their social media following. I can see it as I walk some of the retail footprint that we're putting in place. I can see it as we go through some of our core strategic retail customers who are merchandisers and showing it in a very, very prominent way. So you'll start to see us break out a little bit more and share some of the results that we're seeing in this business going forward. I am looking forward to it.

And there they are so excited about our about the brand and you can see it.

In social media following I can see it as I walk some of the retail footprint that we're putting in place I can see it as we go through some of our core strategic retail customers, who are merchandising and showing it in a very very prominent way so you'll start to see us breakout a little bit more in.

Sure some of the results that we're seeing in this business going forward.

Great.

Anna Glaston: Thanks. Thanks, Anna. Our next question comes from Brian McNamara with Canicle Genuity. Please go ahead, Brian.

Thanks.

Thanks Anna.

Our next question comes from Brian Mcnamara with Canaccord Genuity. Please.

Go ahead, Brian.

Brian Christopher McNamara: Hey, good morning. Thank you for taking our questions. First off, I mean, Solo Stove had a viral marketing campaign in Q4 that didn't deliver immediate sales results. I'm curious if you took any positives away from it in terms of building brand awareness. And would you expect it to have an impact on sales this year? And, in particular, will that celebrity endorsement continue? Or has that ended with the change in the marketing age? Well, it's a good, it's a very good question.

Yeah.

Hey, good morning, Thank you for taking our questions.

First off I mean, it's also have had a viral marketing campaign in Q4 that didn't deliver immediate sales results I am curious if you took any positives away from it in terms of building brand awareness and would you expect it to have an impact on sales this year and in particular was that celebrity endorsement continue or how is that ended with the change in the marketing.

Agency.

Well, it's a good it's a very good question, it's something that we studied very deeply and what I can tell you about the fourth quarter.

John Merris: It's something that we studied very deeply. And what I can tell you about the fourth quarter is that the efforts that you're talking about, the marketing efforts, did go viral, and we got a lot of brand awareness. And that's what I would call top of the funnel marketing, right? So we're really showing our brand to new consumers for the first time. What happens is that in key selling seasons like Q4, you want to be spending more of your marketing dollars on the bottom of the funnel. So think of the top of the funnel as brand awareness. The middle of the funnel is kind of brand consideration, and as you work down to the bottom of the funnel, it's brand conversion. And so you want to be spending across the full funnel throughout the entire year, but you really want to be converting, so in key selling seasons. So although we created brand awareness with that campaign, it wasn't linked in any way to our website. So if you went to our website, you wouldn't see any connection to it.

Is that.

The efforts that you're talking about the marketing efforts.

Did go viral and we got a lot of brand awareness and it's what I would call top of the funnel marketing right. So we're really.

Showing our brand to new consumers for the first time.

What happens is in key selling seasons like Q4, you want to be spending more of your marketing dollars towards the bottom of the funnel. So think of the top of the funnel as brand awareness. The middle of the funnel is kind of brand consideration and as you work down to the bottom of the funnel.

Brand conversion.

And so you want to be spending across the full funnel throughout the entire year, but you really want to be converting so and in key selling season. So although we created brand awareness with that campaign. It wasn't linked in any way to our website. So if you are if you went to our website you wouldn't see any connection to it.

John Merris: We didn't have a full product offering that connected back to that campaign, so we didn't roll it out as much into our email and remarketing efforts. So I think the lesson is that great creativity and great brand awareness. Now we need to take a step back and say, okay, where do we go from here? There are a lot of great ideas that the team is thinking about, but we're not going to do a ready fire aim.

We didn't have a full product offering that connected back to that campaign we.

We didn't roll it as much into our email and <unk>.

And remarketing efforts. So I think the learning is that great creative great brand awareness now we need to take a step back and say, okay, where do we go from here. There's a lot of great ideas that the team is thinking about but we're not going to do a ready fire aim we're going to do it at the right time, we're going to take.

John Merris: We're going to do it at the right time. We're going to take advantage of who we think is a terrific spokesperson that has a wonderful following that fits well with the Solo Stove brand. And we just need to partner in a better way, and we need to be more effective in the way that we communicate and convert that consumer. But the brand awareness was outstanding, which will help us long-term. Great, that's very helpful.

Vantage of who we think is a terrific spokesperson that has a wonderful following that fits well with the <unk>.

Solar stove brand and we just need a partner in a better way and we need to be more effective in the way that we communicate and convert that consumer but the brand awareness was outstanding which will help us long term.

Great. That's helpful. Secondly, Chris when you took the job I am sure you had some expectations regarding the job you're undertaking the work required to right. The ship now two months and I am curious what has surprised you both good and bad relative to your initial expectations. What are you most excited about and what <unk>.

Brian Christopher McNamara: Secondly, Chris, when you took the job, I'm sure you had some expectations regarding the job you're undertaking and the work required to right the ship. Now, two months in, I'm curious what has surprised you, both good and bad, relative to your initial expectations. What are you most excited about, and what keeps you up at night?

You up at night. Thank you.

John Merris: Thank you. Yeah, so what excites me the most is one, we've got a really energized and excited workforce. You know, we've got great facilities that attract great people and attract a lot of our customers to visit. So we have a great showcase brand and a workforce that is really, really engaged in the product that we market and sell. I would say, secondly, brand affinity.

Yeah. So so what whats excited me. The most is is one we've got a really energized and excited work for US we've got great facilities that attract great people and attract a lot of our customers to visit so we have a great showcase brand and a and a workforce that is really really engaged.

The product that.

That we market and sell I would say secondly, the.

The brand affinity. So when you think about the net promoter score and you think about the following of our brand is one of the best brands out there people people love our brand they want to buy our brand and so that is confirmed to me that this is the right foundation to strengthen and build upon.

John Merris: So when you think about the Net Promoter Score and you think about the following of our brand, it's one of the best brands out there. People love our brand. They want to buy our brand. And so, it's confirmed to me that this is the right foundation to strengthen and build upon. Now, what surprised me a bit is that, you know, one is that we didn't have good partners from a marketing standpoint that helped us early on. I mean, they've got great capabilities, but as we start to grow and we start to expand our audience through different channels and different means, we really need to partner with people that understand full funnel marketing. We also need to strengthen our bench. You know, we need to bring in talent. And it starts at the top.

<unk>.

Now whats, which surprised me a bit is that.

One is we didn't have.

We had good partners.

From a marketing standpoint that helped us early on I mean, they've got great capabilities, but as we start to grow and we start to expand our audience through different channels and different means we really need to partner with people that understand full funnel marketing.

We also need to strengthen our bench, we need to bring in talent and it starts at the top great people attract great people. So if you look at the team that they have begun to assemble in my first 60 days, we've hired a chief financial Officer, We've hired a chief growth Officer. We've hired ahead of brand marketing and consumer insights we've hired.

John Merris: Great people attract great people. So if you look at the team that I've begun to assemble in my first 60 days, we hired a chief financial officer. We've hired a chief growth officer. We've hired a head of brand marketing and consumer insights. We hired a head of people, so we started to really build out the leadership team. Now each of these great leaders, in turn, is starting to build out their organizations as well.

Head of people. So we started to really build out the leadership team and now each of these great leaders in turn are starting to go build out their organizations as well.

John Merris: So now, what keeps me up at night is just the commitments that we make to you all and that I make to the board. So when we give guidance, we never want to miss a guidance. And there's a lot that I still don't know.

So now what keeps me up at night is just the commitments that we make to you all in that I make to the board. So when we give guidance, we never want to Miss guidance.

And there's a lot that I still don't know I can tell you in 60 days.

John Merris: I can tell you that in 60 days, it hasn't been quite 24-7, but I've been full on getting, you know, underneath every aspect of the business that I can to make sure that we're doing and focused on the right things. Because I've got a saying that I share with the team that we can do anything, but we can't do everything. And so we need to be very, very clear in the areas that we focus on. Now, I've also had success in the past in bringing in what I call spike capacity. So areas that you need quick-hitting insights and quick-hitting arms and legs, but really quick-hitting thought leadership as well.

It hasn't been quite 24, seven but I've been full on getting underneath every aspect of the business that I can to make sure that.

We're doing and focused on the right things because they've got a saying that I share with the team that we can do anything, but we can't do everything and so we need to be very very clear in the areas that we focus on now.

Now I have also had success in the past and bringing in what I call spite capacity. So areas. It unique quick hitting insights and quick hitting arms and legs, but really quick hitting thought leadership as well and that's why we partnered with a strategic firm to help us with that we've got a couple of other smaller firms in areas of need that we think.

John Merris: And that's why we've partnered with a strategic firm to help us with that. We've got a couple of other smaller firms in areas of need that we think are really going to give us a bit of spike capacity here in the first half to really set the foundation properly. Great. Best of luck, Mr. Chair.

We're really going to give us a bit of a spike capacity here in the first half to really set the foundation properly.

Great Best of luck this year, yes. Thank you.

John Merris: Yeah, thank you. We have no further questions, so I'll hand the call back to Chief Executive Officer Chris Metz to conclude. Thank you, operator. And thank you, everyone, for attending our fourth quarter earnings call and our 2024 guidance call. We appreciate the continued support, and just know that you've got a dedicated team here that is focused on delivering for you. Thank you so much. Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines. We have a dedicated team here that is focused on delivering for you. Thank you so much.

We have no further questions. So I'll hand, the call back to Chief Executive Officer, Chris Metz to conclude.

Thank you operator, and thank you everyone for attending our fourth quarter earnings call and our 2024 guidance call. We appreciate the continued support and just know that you've got a dedicated team here that is focused on delivering for you. Thank you so much.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your line.

A dedicated team here that is focused on delivering for you. Thank you so much.