Solo Brands, Inc.

Hello, and welcome to the Solo Brands Inc. Third Quarter 2021 Earnings Conference Call. My name is Robin, and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing Start followed by 1 on your telephone keypad. I will now hand you over to your host, Bruce Williams from ICR. Bruce, please go ahead.

Good morning, everyone. And thank you for joining the call to discuss Solo Brands' third 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 John Marris and Chief Financial Officer Sam Simmons. 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 limitations, predictions, expectations, targets, or estimates, including regarding our anticipated financial performance, business plans, and objectives in 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 in 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 quarterly report on Form 10-Q which will be filed today and will be available on the investor 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 units per share as 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 comparison 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 quarterly report, performed 10Q, and in our earnings release, both of which are available on the investor portion of our website at investors.solobrands.com. Now, I would like to turn the call over to John.

Thank you, Bruce, and thank you, everyone, for joining us for our first earnings call as a public company. I'm excited to be here today to share our story and talk about the tremendous opportunity ahead of us. First, I'd like to say how proud I am of our accomplishments to date and driving extensive growth across the platform, but also acquiring and integrating three exciting brands and moving into a new global headquarters, all while launching a successful IPO. Thank you to our hardworking and dedicated team for all the hard work over the last year. Later, Sam will discuss the details of our third quarter financial performance and provide our outlook for 2021. We are very excited about the continued growth and momentum in our business. We are very pleased to report strong third quarter results that were ahead of our expectations as revenue grew 138.3%, driven by strength across all our businesses. Adjusted net income increased 39.7%, and adjusted EBITDA increased 56.7%. For those of you who may not be familiar with our company, Solo Brands is a direct-to-consumer e-commerce platform comprised of four disruptive and rapidly growing lifestyle brands. Our premium, authentic lifestyle brands develop innovative products that create good moments that leave the lasting memories for our customers. We believe that we have an amazing family of brands that are uniquely positioned within their respective categories. The brands on our platform deliver significant and predictable growth and are fundamentally better together than they are apart. Starting with our largest brand, Solo Stove is a disruptive outdoor lifestyle brand comprised of fire pits, camping stoves, grills, and accessories that make lighting fires simple. Our secondary combustion produces a cleaner, hotter burn that creates a roaring, yet virtually smokeless flame, resulting in a better customer experience around the fire with friends and family. And all this from a portable wood-burning stove that can be enjoyed while camping, at the beach, or in the backyard. We have a culture of innovation as evidenced by over 25 new products being introduced over the last two years. In fact, I'm excited to announce our latest innovation and the pre-sale launch of a new Solo Stove product in a totally new category for us, the Solo Stove Pie. Pie is a backyard pizza oven which bakes delicious pizza in a way that is easy and offers another way to connect with family and friends, which is what we are all about. We are excited about this new product offering to our customers and believe that we can disrupt this category and continue to be a key player in the growing outdoor lifestyle space. The continuous product development cycle across our product lines leads to high repurchase rates and drives increasing customer lifetime value. I'm very pleased that we have been able to generate tremendous growth over the last several years with lower customer acquisition costs as 45% of sales are generated through word of mouth. Oru kayak is a revolutionary brand of origami folding kayaks that can be easily stored and assembled in minutes. The Oru journey started with a transformative idea. What if a kayak could fold up like a piece of paper? Our team figured out a way to make it a reality. Today, we have five different kayak models that fit every major use case, and we see a massive opportunity to continue introducing first-time kayakers to the sport. Simply put, we make the world's best, most innovative kayaks, and we are well on our way to being one of the most recognizable kayak brands in the world. We invented this category, and we are on a mission to transform how people connect to the outdoors. Isle Paddleboards is one of the original stand-up paddleboard brands, and it has a history of continuous innovation and evolution. Isle was founded in 2004, 17 years ago, and was one of the first brands to sell surfboards on the Internet. Today, Aisle has evolved to sell both hard and inflatable stand-up paddle boards that can fold up into a backpack, making it easier to transport but still maintaining quality and performance. We love that Aisle continues to respect its heritage and Southern California ethos. Chubby's is our authentic premium casual and activewear brand that was built for the modern man's active lifestyle. Chubby's is not a transactional apparel company, but instead a relationship-oriented brand that speaks to its customers as friends. The team at Chubbies has a history of pioneering unique digital experiences and continues to grow its community of loyal fans. Most notably, in the last 12 months, Chubbies has developed a social following on TikTok with over 1.6 million people. Like our other brands, Chubbies has also been built on a culture of continuous product innovation and pushing to drive new trends. For example, the shorter inseam trend was started by Chubbies nearly 10 years ago and today is far more conducive to the young man's active lifestyle. As solo brands, our e-commerce platform serves as our primary sales channel, generating over 92% of our sales, 84% on our own websites, and is a key differentiator in an industry that primarily relies on retail stores. We provide a curated brand experience to our customers and benefit from having direct interactions with them We excel at providing our customers with a world-class customer experience, and we do it better and faster with scale. Solo Brands has driven tremendous growth in sales, margins, and free cash flow given our asset-light operating model. We believe what sets us apart is our D2C execution coupled with our brand offerings that leverage operating synergies across our platform. The key attributes of our platform are one, our direct connection to our community of customers, two, our innovative product development capabilities, and three, our scalable global infrastructure. Our e-commerce platform provides us the opportunity to have a direct relationship with our customers, and we know that our customers are our most impactful brand advocates. As mentioned earlier, word-of-mouth referrals drove 45% of new customers to SoloStove through June 30th, and it has held through Q3. We use our strong customer engagement to leverage our vast first-party consumer data to to improve our marketing efficiency, increase customer engagement, and drive loyalty and repeat purchases. We apply the knowledge and expertise of SoloSo's marketing team and digital ad and email strategies to our other brands, which are utilized to accelerate growth and drive efficiencies. For example, we have aggregated ad spend to reduce advertising costs and avoid agency fees through our in-house marketing team. In addition, our marketing team is able to monitor our ROAS in real time with our proprietary correlation regression model. This gives us a distinct advantage of being able to directly measure our advertising spend and use levers to help drive efficient customer acquisition and conversion without being dependent on third-party marketing and advertising platforms for performance measurement and customer acquisition. Next, I would like to take the opportunity to highlight our product development capabilities. Our innovation feedback loop starts with leveraging our massive consumer data set by increasing customer engagement and improving our marketing efficiency. We take our learnings and incorporate consumer insights into product innovation. Our customers tell us what they like, what they don't like, and what they want us to develop, and we utilize these real-time consumer insights to inform and shorten our product development timelines. As such, approximately 18% of Solo Brand's revenue was generated from new products launched in 2019, and we have a 36% repeat purchase rate with our customers. A good recent example of utilizing our real-time consumer insights to inform product innovation is the launch of Colorways fire pits. Our customers told us that they wanted more color options beyond the natural stainless steel finish. We worked hard to find a coating that did not melt or flake under the heat of a secondary burn, which burns much hotter than a typical campfire. And we launched our Colorways line just a few weeks ago in Q4. The initial response has been extremely positive. Furthermore, we are very excited about the innovation that we are developing across our brands to expand within existing categories or launch into new ones. We have built a product development organization and a supply chain that enables us to design, prototype, and launch products quickly. To that end, in addition to SoloStove Pie and SoloStove Colorways, which I've already mentioned, Oru broadened its assortment by launching a kayak in a black color, which quickly sold out. We have some other exciting new products we plan to launch this coming year at Chubby's and Isle as well. Our product pipeline is strong, and we are very excited about continuing to deliver innovation into the marketplace. The beauty of our brand platform is that it is highly scalable. We have the global infrastructure to support organic growth, but also to integrate D2C acquisitions. We have made significant investments in supply chain infrastructure, fulfillment, and customer service. As a result, we have built a powerful D2C e-commerce platform for our existing and for future brands. I am pleased to say that we are truly a plug-and-play platform that has been able to generate significant leverage in marketing and advertising, shipping and fulfillment, and human capital. We believe we have significant runway ahead of us by executing on the following growth strategies. First, accelerate organic growth. We are a DTC-first platform, and our focus is to protect and accelerate our DTC growth, leveraging our proprietary marketing engine. We have significant room for organic growth within each of our current brands by building brand awareness and acquiring new customers. We see the total addressable market just for SoloStove in the United States at 76 million households, and SoloStove has only about 1.5% market penetration of this market. In addition, we see a massive TAM and untapped opportunity to gain increased domestic market penetration in our other brands. Our proprietary consumer insights derived from our customer database enables us to increase our brand reach efficiently and inform our marketing and product decisions. Second, utilize scale and platform efficiencies. We have made significant investments in our supply chain infrastructure, customer service, and digital marketing platforms. To that end, we have built a scalable global network of suppliers to support the growth of all our brands. In 2018, we brought our fulfillment in-house, which eliminates the middleman and provides us with greater control over the fulfillment process and allows us to offer the best customer experience possible. We operate three warehouse facilities throughout the United States, enabling two- to three-day delivery via ground shipping almost anywhere in the domestic United States. As such, we have improved shipping times, picking times, and lowered fulfillment costs. By leveraging our expertise in shipping and fulfillment across the Solo Brands portfolio, we have been able to generate platform efficiencies driving material EBITDA leverage and a better customer experience. Third, international expansion. We also see tremendous opportunity to expand our brands internationally by replicating our successful domestic B2C model and by growing and leveraging our global infrastructure. In August, we launched a Solastone Westside in Canada and have been pleased with our performance thus far. Our Canadian launch is a great example of how we lean on other brands' resources and expertise to accelerate growth in the platform. Our Oru kayak brand already had a presence in Canada, and we partnered with Oru's community to build awareness about Solastone. As a result of Oru's support and Solastone's strong brand in the U.S., We generated more revenue in August 2021 in Canada than we generated in any August in the first six years in the US. In October, we opened a new fulfillment center in Rotterdam, Netherlands to service the European market and launched a European website with targeted advertising directly in four countries and had sales in 20 countries. We will continue to replicate our domestic DTC model across the continent. Fourth, strategic acquisitions. We are constantly evaluating opportunities to add other disruptive digital DTC and high growth brands to our platform. However, I cannot emphasize enough that we have significant growth in front of us with our current brands. Nevertheless, we have a clearly defined brand accelerator model and acquisition criteria should we find the right strategic and opportunistic brand partners in the future. As a reminder, we are looking for enthusiast brands with impressive digital communities and strong emotional connections with their customers. We are a founder-friendly acquirer of choice and want to partner with brands who are category creators and who have developed a significant competitive mode in their respective categories. Fifth and final, channel expansion. While our focus is on driving growth on our D2C platform, we recognize the importance of having a retail presence in order to meet customers where they are. We offer our products in selective retailers because we know that some customers prefer an in-person experience. We see an opportunity to continue to selectively expand in this channel with our strategic partners, including REI, ACE, and Dick's Sporting Goods, and expect that strategic retail could be 15% to 20% of our overall business over the next five years. We also have seven owned retail stores across Chubby's, Aisle, and now Solo Brands showroom collectively. I would also like to highlight our rapidly growing opportunity in corporate sales. We are very excited about this channel as it allows for us to access the large and growing promotional products industry. This channel plays into our strengths because we have the ability to provide unique, customizable products that are great for gifting. Before I close, I have two important call-outs. We would not be in our position without our amazing world-class team that has expertise across disciplines. I am proud to say that across our brands, our people are fueled by a common set of key values that position solo brands to continue its category disruption and growth trajectory. Our people are tireless, results-oriented, boldly entrepreneurial, and bring positivity to our culture, and I thank them for their hard work, dedication, and enthusiasm. Second, one aspect of our winning culture that I'm proud of is that we strive to be the good. We aim to be the good by operating with integrity and under stringent ESG targets. To that end, we partner with our suppliers to help them meet and exceed our standards. Furthermore, we contribute to the health of our communities and our planet through our philanthropic partners. As our brands grow, we donate more back to the causes that matter to our community and customers. We think Solar Brands has the opportunity to be the leading direct-to-consumer company in the world. Our collection of brands combined with our focus on delivering best-in-class customer experience positions us to deliver strong results over the long term. Now with that, I'd like to turn the call over to Sam Simmons to discuss our third quarter results in more detail. Sam?