Solo Brands, Inc.

everyone and welcome to Solo Brands Incorporated 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 so 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.

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 Chris Metz and Chief Financial Officer Laura Coffey. 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 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. 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.solobrands.com. 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 non-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 companies. Reconciliation of these nine gap measures to the most comparable gap 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.solobrands.com. Now, I'd like to turn the call over to Chris.

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 in 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 I the right choice for the role? 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 & Decker. 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. 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 a Fortune 500 company. And most recently, I was CEO of public company Vista Outdoor, a multi-billion 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 Solo Brands because of my passion for the outdoors, the strength of the core brands, and the loyal following consumers have for the brands and products. However, frankly speaking, some areas need to be strengthened. 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. 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 strengths and opportunities. Today, I will share my initial observations and thoughts on areas of focus and the actions we are taking. However, before I jump into this, I'd like to introduce our new Chief Financial Officer, Laura Coffey. I couldn't be more excited to have Laura as a partner. She has extensive financial experience working with public companies and has worked in consumer-centric companies 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 up at a high level in terms of what we need to return to growth. First, we need to develop and execute against a well-defined company strategic plan, a plan that allows us to double down on our core businesses, Solo Stove and Chubbies. 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 margins. Fourth, We need to develop an innovative product pipeline for our core solo stove business and identify near adjacencies that will expand our TAM. And fifth, we need to recruit a 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 are my initial observations. However, we need to and will 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. 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 Solo Stove, 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. 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, and 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 dollars. In parallel with doing this strategic work, we're focused on three key priorities, revenue growth, product innovation, and talent acquisition. 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. 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 partnerships. First, we're ending our marketing contract with an outside firm that has placed 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, and digital marketing capabilities. Our new partner has deep experience working with D2C firms that also have an omni-channel footprint, such as Nike, Athleta, Kohler, Beats by Dre, and Therabody. We are excited about the potential to partner with a leading firm to assist us with our marketing strategies. 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 launches. More to come on this in the future. 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 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 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 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 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. Turning now to our chubbies business. Chubby's 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 and 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 the 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 direct business. However, as I've mentioned previously, we will continue to meet our consumer where they shop through a balanced omnichannel 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 have been impressed by the strength of our core brands, Solo Stove and Chubbies. 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. 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, 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. For the year, sales were $494.8 million compared to $517.6 million. In the direct channel, 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. 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 gross margin, 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%. 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. The decrease was due to lower fixed costs related mostly to 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 in SG&A was due to lower shipping and distribution costs partially offset by higher advertising and marketing expense. 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 Stowe, Oru, and Isle reporting units, and $14.2 million related to the Oru and Isle intangible assets. 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. 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 availability. We continue to have strong liquidity position and our net leverage of 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 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 $490 million to $510 million. 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. 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. 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, giving 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.

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 Randy Koenig with Jefferies. 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 optimal distribution should be between direct and wholesale. Again, understanding you're going to go through a strategic review, but I just want to get your perspective on how you think about where distribution should be.

Sure. Yeah, absolutely, Randy. And thank you for the question. So, you know, 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 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 in 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 in both channels. 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 against 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. That's not good for our brand and it's not good for our channel partners. So it's going to be very strategic, though it will 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 the 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, you know, 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. 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 and it was uh frankly one of the attractions for me walking into the role there was a number of attractions but one of them was yeah i think we're seeing a bottoming out of the uh consumer shift from durable goods to more service based goods as cabin fever you know, reached a high in COVID and people were 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'll start to gradually see a shift back here as we move through the calendar year 2024. Now, Chubby's wasn't quite as effective because Chubby's is more of a consumable brand. It's a lower price point in 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 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. You know, 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. 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 Solo Stove to augment the partnerships externally that we developed. What this will do is allow us to control our destiny better. So both of them will be done in parallel. Now 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. 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.

Very helpful. Thank you.

Our next question comes from Brian Sigtel with Craig Hallam. Please go ahead.

Hey, good morning, guys. A couple on retail. So curious, I guess, how the quarter... turned out relative to internal expectations and I realized those weren't necessarily your internal expectations but our checks indicated there was demand and low inventory so I guess why not shift more inventory there and then secondly on target what was the feedback following the seasonal test it seems like there's still product on the shelves there so I guess is that just 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. And then there's 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 at, 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 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 was an initial test for us. And, you know, it was. 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 you're 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 the consumer that is looking for our product, particularly in holiday periods like Black Friday, Cyber Monday time of year.

Great. 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, it 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. 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 in my early assessment is simply just taking the core businesses of Chubbies and Stove and saying, these are two outstanding brands in of themselves that ought to have great growth going forward. and ought to 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 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 the greatest return near term.

For what it's worth, we agree with the strategy. Thanks, Chris. Good luck, guys. Yeah, thank you.

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

Good morning. Thanks for taking the question, and congrats on the new role as always. Laura, maybe to loop you in here, I was hoping you could comment on the EBITDA guidance. Do you mind just unpacking the marketing question? You noted the investments and process systems talent, but can you also talk about how you're thinking about the magnitude of marketing spending from here beyond just the ways you're spending?

Sure. Thanks for the question. 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 to you guys today with the performance that we had in the fourth quarter. uh, we, we, 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 give a full, we gave 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, in his remarks, you know, we do have a contract that we are looking to, uh, 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. 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 with marketing. And quite frankly, if I'm honest, 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. We've got a new team in place that 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 we walked into the first quarter here that was, I wouldn't say the first quarter's bait 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 more help.

Understood. Appreciate that color. And then maybe just dovetailing on the prior question, you know, for our guests, Chris and Laura, both of you can tag team this, but maybe you could just provide some thoughts on the capital allocation priorities for the business, you know, understanding the comment that, you know, the water sports businesses might not be for sale, but could we see potentially, you know, something on the other side of things, whether that be, you know, more tuck-ins or M&A, more transformative M&A, or is the near-term focus really more centered on kind of fixing the core brands from the onset?

It's a good question. And so capital allocation is always front of mind for myself and 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 results is the cash generation we drove, which Laura stated it was 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, I can tell you that's not easy to do. 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 in our facilities are over 95 and a half percent accurate in terms of shipments. And we do a lot of D to C onesie twosie 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 allocation, Our focus is squarely on building and strengthening. Now, as a part of that, we're going to continue to win the conversions that we see historically on EBITDA to cash. We're not going to take out as much inventory. talking acquisitions and what we call near adjacencies that may make sense. Now, perfect example is Terraflame. 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 on our website we're able to integrate it into the website itself so the company went from you're kind of having a couple hundred thousand eyeballs looking at their product every day on their website to millions uh looking at it and we're 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 businesses.

Got it. Appreciate that.

Thank you.

Our next question comes from Anna Glaston with B Reilly. Anna, please go ahead.

Hey, good morning. And Chris and Laura, welcome to the team. Nice to hear from you, Chris. Thanks, Anne. My first question is on guidance. What's being assumed in terms of the DTC channel? Should we expect that to return to growth at some point in the year?

Go ahead. Yeah, I mean, so Laura provided some good color on the guidance previously, but Anna, the way, 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 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 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 of sales in the fourth quarter, which was a 12% growth over 2021. So coming off that comp, we didn't perform well. And there's a number of reasons that Laura and I and 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. is 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 one of the hallmarks in my career in developing new products, but I also understand that there's 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 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. That's really helpful. Another one for me, great to hear how strong Tributes did in the year. Would it be possible to put a finer 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 want to 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 want to do that. 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. how they connect with the consumer, the following that they have from the consumer. And when I first walked in, I was thinking, OK, 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 40s and beyond. So it's a it's a big swath of the male audience. And and they're they're They're so excited 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 break out a little bit more and share some of the results that we're seeing in this business going forward.

Great. Looking forward to it. Thanks.

Thanks, Anna.

Our next question comes from Brian McNamara with Canaccord Genuity. Please go ahead, Brian.

Hey, good morning. Thank you for taking our questions. First off, I mean, SoloStove 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 agency?

Well, it's a good it's a very good question is 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 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, 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 season. 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. We didn't have a full product offering that connected back to that campaign. We didn't roll it as much into our email 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 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 helpful. Secondly, Chris, when you took the job, I'm sure you had some expectations regarding the job you were 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? Thank you.

Yeah, so what's excited me the most is, one, we've got a really energized and excited workforce. 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, the brand affinity. 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 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. You know, 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 that I've 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 a head of brand marketing and consumer insights. We've hired a head of people. So we started to really build out the leadership team. Now, each of these great leaders in turn are starting to go build out their organizations as well. Now, what keeps me up at night is just the commitments that we make to you all and that I make to the board. When we give guidance, we never want to miss guidance. There's a lot that I still don't know. I can tell you in 60 days, it hasn't been quite 24-7, 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 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. 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 gonna give us a bit of spike capacity here in the first half to really set the foundation properly.

Great. Best of luck this year.

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 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.