Q2 2025 Solo Brands Inc Earnings Call
Good morning everyone. Welcome to the solo brand second quarter, 2025 Financial results conference call.
All participants will be in the listen. Only mode. Should you need assistance? Please signal the conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions.
to ask a question, you may press star then 1 on your telephone keypad,
To withdraw your question, please press star, then 2.
Please note this event is being recorded.
I will now turn the call over to Mark Anderson, senior director Treasury and investor relations.
Please go ahead.
Thank you and good morning everyone. We appreciate your joining us for the solo Branch conference call to review. The second quarter, 2025 results. Joining me on the call today are the company's president and chief executive officer John Larson and Chief Financial Officer. Laura coffee.
this call is being webcast and can be accessed through the investors portion of our website at investors solo brands.com
today's conference call will be recorded
Please be advised that any time-sensitive information May no longer be accurate as of any replay or transcript reading date.
I would also like to remind you that the statements in today's discussion that are not historical facts, including statements about expectations, future events, financial performance liquidity. Turnaround efforts, strategic transformation, goals and future growth are forward-looking statements and are made pursuant to the safe harbor, provisions of the private Securities. Litigation Reform, Act of 1995.
When we're looking statements by their nature are uncertain and outside of the company's control.
Actual results May differ materially from those expressed or implied. Please refer to today's earnings press release for our disclosures on forward-looking statements.
These factors and other risks and uncertainties are described in detail and the company's filings with the SEC.
Solo Brands assumes, no obligation to publicly update or revise any forward-looking statements.
Management will refer to non-gaap measures and reconciliations to the nearest Gap measures are included at the end of our earnings release.
Finally, the earnings release has been furnished to the SEC on form AK.
Now, I would like to turn the call over to the company CEO. John Larson.
Thank you, Mark, and good morning. All. Thank you for your interest in the solo brands.
Today, we'll provide updates on significant Milestones cover. The second quarter results.
And share the continued progress on our strategic initiatives, before opening the call for questions from institutional investors or analysts.
Starting with our executive leadership updates. I am very excited to eliminate the interim tag and take on the role as president and CEO as previously announced in June. And to lead this great team as we write the next chapter for solo brands.
We also named Liz vanzura to the permanent role of solos. Chief marketing officer with Liz focusing, her initial efforts on solo stoves significant marketing spend,
Is a key component of our profit focused transformation plan.
In the recent quarter, we achieved several significant Milestones worth highlighting.
these include the completion of our debt refinancing removal of the going concerned, disclaimer in the New York, stock exchanges, reinstatement of active trading on our class A stock
On a related note, we also opted to change our New York Stock Exchange, ticker symbol to sbds, which we believe better communicates today's strategy as solo brands.
Turning to the second quarter.
in our chubby segment, the team delivered, another excellent quarter with sales of 13% and segment Eva up 48% in the quarter due to efficiency gains and improved operating Leverage
Under our solo stove segment, although sales improved sequentially from q1. Our second quarter sales declined significantly from a year ago, as expected reflecting the continued hangover as our Retail Partners work through their excessive year-end inventory and we better align our promotional strategies with our key Retail Partners.
We have made a concerted effort to move away from the heavy promotional approach in our direct to Consumer Channel with map Integrity, playing a key role, as we set up solo stove. For long-term success,
If you are not familiar with map, it stands for minimum advertised price, which Laura and I will refer to today.
Despite our overall sales. Decline solo Brands generated over 10 million of adjusted Ava and margins over 11% for the quarter.
We are also very pleased to report positive operating cash flow of nearly $11 million in the second quarter.
We are making meaningful strides in our transformation to a more disciplined. Structurally smaller profit driven, business model. Our teams are excited and driven to win our leadership transition in early 2025 for solo Brands. Ushered in fresh, New Perspectives, on products, marketing, and how to restructure our business for profitability and cash flow.
We are focused on 4 core tenants that we believe will position us well for the future.
Number 1 we are fixated on driving bottom line profitability. We are looking at every dollar spent and its Effectiveness right sizing the company as appropriate.
And given our growing portfolio of Lifestyle products. We are creating strong customer connections through relevant product experiences rather than relying. So heavily on discounts.
We have developed a well-coordinated promotional calendar. That is expected to offer exclusive product opportunities to key retailers, which are designed to create excitement and further Drive customer traffic at retail.
We are also measuring the effectiveness of marketing Investments, utilizing a profit-based return on, spend add metric, which drives discipline and our marketing campaigns.
Number 2, cash remains came.
During the second quarter we are heartened that our initiative is generated significant operational, cash that aligned with our second quarter adjusted IA.
Watching every dollar spent and every dollar invested in products, people, marketing and distribution against competing, priorities is challenging.
Trust, we are working hard to institutionalize financial and analytic rigor in our decision-making.
Number 3, investing in new products. And what works? We recognize that investing in product Innovation is a strategic imperative. Don't leave today thinking we are not investing in Innovation. We are
Chubbies continues to innovate with new products and product lines, including the launch of our new NFL by Chubbies line, as we speak
Aisle within our water sports division has some exciting new products planned for Q4 and solo stove. After recently, launching the windshield, 47 cooler, and the steel fire 30 griddle, which by the way, are receiving very positive reviews has 2. More notable products planned for launch later this year, with our aggressive new product rollout plan continuing in 20126.
And number 4, keep it simple.
In my experience, great companies emphasize and structure themselves with uncomplicated processes and protocols.
For us at Solo Brands, it all starts with the customer.
Our mission is to provide the best product in every category that we compete in and to Delight our customers with both our Innovative products and exceptional customer service.
Loyal enthusiasts of Our Brands, trust us to Delight them with new Innovative relevant products. And that is exactly what we are focused on delivering,
With that, I will hand the call over to Laura to cover our detailed financials.
Thank you, John. Good morning, everyone.
Take a moment to address the broader environment in which we are operating.
The consumer landscape remains challenging.
We've seen clear evidence this year that discretionary spending remains under pressure with consumer showing heightened sensitivity to price and value especially as the macro uncertainty persists.
As John stated earlier, we made the conscious decision to pull back on promotional activity and better align our promotional strategy with our retail partners.
Hariff impacts were delayed due to expected lower solos. Stow sales. After we adjusted the pricing and promotional strategies allowing our Retail Partners to work through their inventory.
Although tariffs will have some effect in the second half of 2025. The delays allowed us to adjust our cost. Structure ahead of these changes to mitigate the impact.
As shared in our last earnings. Call, we anticipate the challenges of implementing the map pricing strategy.
We took early decisive actions.
Implementing performance Improvement of initiatives intended to drive efficiency reduced cost and strengthen our financial Foundation.
I'm encouraged to report that we are starting to see tangible benefits from our efforts.
We believe that this ongoing work of executing our transformational profit focused business model will position us to drive long-term shareholder value.
The second quarter's Consolidated. Net sales were 92.3 million down, 29.9% from prior year. However, up sequentially by 19.4% compared to the first quarter.
As John mentioned, the chubby segment sales were 44.5 million up. 13.1% through a combination of expansion at retail. And an increase in the direct consumer or DTC Channel sales.
As expected.
Fellow Stoke, segment sales were down 32.4 million primarily driven by a decline in the DTC Channel sales, as a result of the prioritization of map pricing, instead of significant promotional activities in 2024.
Also, we have reduced our marketing expenses to optimize our spend in line with our DTC sales.
This is the second and fourth quarter, our seasonally higher DTC period, we fully expect them to be impacted the most as we work through optimizing our marketing and promotional strategy.
Once we move Beyond 2025, we anticipate a more stable and predictable Revenue, Cadence, especially as we accelerate new product launches
As John mentioned, we also launched the solo stove, 47 cooler and the steel fire 30 griddle, but we are still in the early days of our planned ramp up for the holiday with these products and other new product launches.
Consolidated retail Channel sales were stable compared to the same period in 2024 primarily due to an increase retail demand for Chubbies offset by Les replenishment as discussed for the solo stove segment.
During the second quarter, we generated adjusted gross profit of 56.9 million or 61.7% of net sales.
Compared to 63.6% for the prior year Porter.
Consolidated gross margin was impacted by Channel, mix shifting to more retail this quarter compared to last year.
having said that individual product margin and channel margins have improved year-over-year
For 47.7 million in the quarter down 23.1 million or 33% compared to last year's second quarter.
The execution of our cost cutting initiatives decreased sgna, which primarily consisted of more efficient marketing, spend a reduction in payroll cost and lower variable costs associated with DTC sales.
We also recorded a 10.3 million in 1 time restructuring contract, termination and impairment charges in the quarter. As we made further progress on the Strategic resizing of our operating structure. Including exiting an underperforming licensing agreement,
In addition other operating expenses were down overall, primarily due to a reduction in Severance related costs.
Our cost initiatives are in full swing and notwithstanding non-recurring. Restructuring charges.
Operating cost compared to Prior year quarter which is a combination of headcount.
And related cuts.
Terminating the Snoop campaign. And right? Sizing our facilities and distribution footprint.
Implementing these initiatives positions us to accelerate and simplify our business which allows us to continue our discipline and prudent focus on profits and cash flow.
The second quarter gaap. Net loss was 20.8 Million.
We are pleased to report that adjusted non-gaap. Net income was essentially break even with adjusted net income of 1 million.
This adjusted net income excludes non-recurring after tax, restructuring refinancing and business optimization costs as well as non-cash items. Such as share, based, compensation, and value allowance adjustments.
We are pleased to report adjusted Eva for the quarter of 10.5 million dollars with margin of 11.4% of net sales compared to last year's second quarter of 15.4 million or 11.7% of net sales.
Despite a nearly 30% decrease in Topline sales, our adjusted Eva margins of 11.4% in the 2025. Second quarter was roughly comparable with last year's margin due to favorable operating leverage as we expected from the execution of our extensive cost reduction initiative during this year.
Please refer to our earnings release for reconciliation tables to the most comparable gaap measures.
Turning to the company's financial position and balance sheet.
In June, we finalized the debt refinancing with amendments to the term loan with an aggregate principal amount of 240 million.
We also committed to a revolving credit facility with an initial committed amount of 90 million and as of June 30th outstanding, borrowings on the revolver were Millions.
The full details of the 2025 refinancing amendments are detailed in our second quarter form, 10 Q.
We continue to monitor working capital closely and ended the quarter with inventories at 84.1 million down 24.5 million from year end.
As of June 30th, cash and cash equivalents were $18 million, and total outstanding debt was $238.4 million, of which $600,000 was classified as current.
as of June 30th, we fully complied with financial covenants, under the newly amended agreement
Consequently our 10q. No longer includes a going concern, disclaimer.
With a solid balance sheet and available liquidity. We believe we are in Good Financial standing to build structurally, smaller profitable company with the flexibility to innovate and grow over the next several years.
John and I attend to allocate Capital conservatively with judicious cash management. As we continue the execution of the company's strategic transformation plan,
With no current plan acquisitions.
That said we remain prepared to invest selectively where we see clear High return opportunities that align with our long-term priorities.
With that. I would like to turn it back to John.
Thank you, Laura.
As the incoming CEO of just a few months on the job, I am grateful for the opportunity to work alongside these great people and Brands. I'm also proud of our accomplishments having tackled major obstacles in a short time, frame with determination and persistence.
We did what we said we would do, which is essential.
Accomplishing the refinancing, which provides us Runway to execute our plan, removing the going concerned, disclaimer, and being reinstated for the trading on the New York Stock, Exchange has put us on the right path.
The reality is that the uncertainly earlier this year, around our ability to continue as a going concern hurt us. It impacted relationships with both suppliers and Retail Partners as you would expect and at our solo stove. Division in particular
There is hard work ahead. For sure, our strategic transformational flywheel is beginning to turn, and you can feel it inside the organization.
People are moving with speed and confidence toward our goals, and we are executing with more purpose and excellence.
We are confident that the pain in these early Innings, lays the groundwork for a structurally smaller more profitable company. Moving forward, which is our goal.
While we're finding strategies based on measured performance.
This is a multi-year, transformational journey.
Similar to this quarter, we plan to share evidence of progress, each quarter. If we don't have progressed to share, we will own that and explain what we intend to change.
As we continue to reshape solo Brands into a more resilient and focused company, we intend to invest in our future to drive growth and generate long-term shareholder value.
We remain confident that our lifestyle brands are well positioned to continue to resonate with consumers, who value authentic outdoor lifestyle, experiences and community.
Finally, investor Outreach is important and we plan to participate in a couple of conferences and non-deal Road shows this year.
Starting with the ideas conference on August 27th in Chicago.
If you would like to see us in person, please reach out to our IR team, after today's call.
With that operator, I would like to open the line for questions.
Thank you. We will now begin the question and answer session.
to ask a question, you may press star then 1 on your telephone keypad,
If you are using a speaker-phone, please pick up your handset before pressing the keys.
if at any time your question has been addressed and you would like to withdraw your question, please press star then 2
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Steve Cole with Mangrove. Please go ahead.
Good morning guys. Thank you for taking the question. I guess I would open up by saying, uh, it has not been an easy Road for y'all. So we we certainly appreciate all the effort.
And and putting the company on on more solid footing. I I guess I'd like to touch on a couple of things. Uh 1 is looking at really I'm curious in the evolution of the solo stove customer and what I mean is during the epidemic, you know solo stove. Assembly was a Trailblazer creating a whole new category. And now as we've seen some, uh, other folks, not surprisingly come into that market and obviously we're dealing with spending issues in the macro side. I'm just curious what you've learned about that customer. So in terms of their brand loyalty and willingness to purchase product line, extensions that we might be coming out with that. You guys have mentioned here today.
And kind of what I call uh, the yada fact, right? Where uh I'm sure you've all heard that, you know, just becoming an awesome brand and people are going for quality and almost buying anything that has a Yeti name on it. So, just curious if you could address that and I've got a follow up
Yeah, hi Steve. This is John Larson, nice to meet you, and appreciate your question and interests. Um, it's a great question, right? Because solo stove, took off
You know, during coid obviously filled the market as the lead player and we do have a lot of competition coming, but to your point, we really believe. And we did some market research on this last year and expensive amount of research on where the customer and the evolution of the solo stove, customer could move for us, and that's really highlighted by the new products we're coming out with. So if you look at the success we've had in the pizza oven Market, which is a great product. I was just making pizzas last weekend and spectacular product that we do have, uh, the new griddle, we've launched which were very excited about. And quite frankly, we're not sold out and we're in back order. So we'd like really like the success so far that we've had on griddle and the cooler space that we've moved into. So we believe our our customer, uh, higher-end loves a great product, uh, but we have to be a premium brand in our products will move with us. And so a big part of our strategy is moving in those adjacent categories. And right now, we feel really comfortable with the reviews we've had and the success we've had
With customers, moving out of just the core fire, pit markets into some broader adjacencies.
Chris Don, when you look at those surveys,
You know, so the people that are buying these products, can you tell if it's an existing solar stove? Customer if it's somebody new from your bicycle? Or or what have you seen on that on your, on your work?
Yeah. Yeah, we have all that information available to us, you know, a significant amount of our purchases are from new customers, but our core customers have certainly stepped up in the category with our new products and make a significant part of our sales. It's really a core strength that we have, Steve our customers, very high-end uh, you know, very demographically, very strong. And we have a database of customers because we are largely DTC.
Through our growth. So we have, you know, Coast to 2 and a half to 3 million people in our CRM database and that's a huge asset for us to Market to
Just a quick follow-up. So, you know, again, I've I've seen you guys pop up in a number of places, like, Costco and dicks, and others, what's happened? You know, as we look at the change in pricing and and inventory.
What's happening, are you still targeting those players? You're looking at new players and, and how do we cycle through the, the inventory?
in terms of the Improvement there,
Yeah, there's a couple of questions there, you know. Steve I I have a definite opinion on premium Brands and how you go to markets and you need to be very selective with your retailers, but you need to have a handful of key retailers. That really provide you what you need in terms of exposure and how your product is displayed. Um, so
We're moving that direction. That's why we moved to map integrity.
And promotional calendars that are aligned with Ki retailers and quite frankly. Now our conversation with the retailers are you're now acting like a brand? We would like to work with.
versus before, we are heavily promotional on our DTC website and quite frankly undercutting
uh, other prices in the marketplace, so that retailers that had heavy levels of inventory,
um, the second part of your question is
How are we working through those inventories? We came in to be here with the excessively High inventories across our largest retailers without a doubt. And so that's been the pain. We've really been working through this year. So as we've agreed to align in terms of minimum advertised pricing and promotional calendar timing, and those kind of things, um, we've allowed our retailer system through their heavy amounts of inventory and that's going to continue, you know, through the quarters going ahead. But there's been significant sell through that inventory and we feel much better about the position we're in now. But quite frankly that's the pain. We've seen at solo stuff.
And it's been a hangover. We've had to work through.
Right. Thank you very much. All pop out and let some of the thoughts asking questions, but thank you very much. Thank you, Steve. Nice to meet you.
Thank you again. If you have a question, please press star then 1.
We have no further questions at this time.
To turn the conference back over to John Lawson for any closing remarks.
Thank you for continuing to follow our company and we look forward to providing third quarter results and updates on our strategic transformation in a couple of months. Have a great day everyone.
The conference has now concluded, thank you for attending today's presentation. You may now disconnect