Solo Brands, Inc.

Hello and welcome to the Solo Brands Inc. First Quarter and Fiscal 2022 Financial Results Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I'll now hand over to your host, Bruce Williams, to begin. Over to you, Bruce.

Thank you, Operator. Good morning, everyone, and thank you for joining the call to discuss Solo Brands' First Quarter 2022 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 Maris and Chief Financial Officer Sam Simmons. Before we get started, I want to remind everyone that statements made on this call and the earnings release contain forward-looking statements regarding our financial outlook, business plans and objectives, and other future events and developments. including statements about the market potential of our products, anticipated financial performance, and our goals and strategies. These forward-looking statements now 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 include those described in the company's earnings release and other filings with the SEC speak only as of today's date. In addition, our discussion today includes references to certain supplemental non-GAAP financial measures, including net income as adjusted, diluted earnings per share as adjusted, adjusted EBITDA, and adjusted EBITDA margin, which should be considered in addition to and not as a substitute for our GAAP results. We use these non-GAAP measures 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. Reconciliation of these non-GAAP measures and the most comparable GAAP measures and definitions of the reference non-GAAP measures are included in our earnings release and our filings with the SEC, which are available on the investors 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 for joining us for our first quarter earnings call. I will begin today by reviewing our performance in the first quarter. After, I will provide an update on our strategic initiatives and then turn the call over to Sam to discuss our financial performance and outlook for 2022. Despite a challenging macro environment, we were able to achieve a revenue increase of 19% to $82.2 million over the same period of the prior year, including contributions from acquisitions. During the quarter, we saw a channel shift weighted toward wholesale. Demand among our wholesale customers was strong with growth of 224.2% to 22 million due to increased store growth and strong sell-throughs across retail. Sales in our digital direct-to-consumer channel declined 3.4% due to difficult year-ago comparisons. Despite this channel shift, we were able to achieve gross margins in line with our expectations. We continue to see a tremendous opportunity to leverage the power of our platform, and as noted last quarter, invest behind our growth. We believe these investments will begin to pay off in the back half of this year and over the long term. We are pleased that our indicators of brand health remain strong with our net promoter scores in the high 70s, referral rates above 40%, and repeat purchase rates above 50%. Additionally, of our growing customer base of 3 million, the total number of customers that have purchased from at least two brands has risen from 25,000 to 42,677, an increase of 70% since the end of the year. We remain focused on what we believe is the greatest opportunity for solo brands, which is the organic one with our core products here in the U.S. There is tremendous room to significantly grow our total customers and increase our current estimated market penetration of less than 2% for solo stoves. Chubby's, Oru, and Isle have similar opportunities. We also remain convicted in our five key strategic priorities, which we believe position us for long-term sustainable growth. First, our focus on product innovation across all our brands. Second, building and leveraging our data in order to drive conversion and marketing efficiencies. Third, international expansion to help facilitate good moments and lasting memories all over the world. Fourth, we remain committed to meeting our customers where they want to shop, and we are adapting by strategically growing a retail channel. And finally, we continue to actively pursue opportunities to expand our business through acquisitions. Innovation is the core pillar, and we are tirelessly focused on product newness that will expand the reach of each of our brands. As Solo Soap, our much-anticipated heat deflectors rolled out in the first quarter, and we have sold over 26,000 units, which is well ahead of our internal expectations. We listen to our customers and meet their needs with products that enhance their experience and helps to strengthen our relationship with them. This leads to long-term value creation for customers and shareholders. We are enthusiastic about the strong early response and heat deflectors are becoming a meaningful add-on purchase that will be especially attractive as we move into the key winter selling season. Our pie launch was also well received by our customer base and while it is still very early, we are encouraged by the momentum we are seeing for this product. We introduced Colorways late last year. Colorways is gaining momentum and we are leaning into this opportunity by expanding into retail where there is growing interest for colorways. This is another great example of how our innovation is allowing us to broaden our assortment as well as our appeal to customers. While our corporate channel is a relatively small part of our business, it is growing at a very fast clip. We continue to innovate and expand our personalization abilities, which we believe will be a large market opportunity for us. We currently offer etching on stainless steel and are introducing personalization on colorways, which we expect will be well-received Personalization has been mostly limited to high-quantity purchases, but we are exploring adding the ability to personalize individual purchases by the end of the year. In preparation for this, we have expanded our collegiate offering over the past year and are now offering collegiate logos of 47 schools. As you can see, we are starting to realize the benefits of the investments we have made in product innovation at SoloStove, and we have a healthy pipeline of new products introduced in the back half of the year. At Chubby's, we see significant room to broaden our assortment. To that end, we recently introduced a new silhouette and fabrication, our Performance Wear T-shirt. While it's still early, the initial response has been good, and we plan to offer more innovation in the back half of 2022 with the introduction of a category-expanding product. At Oru Kayak, the response to our Oru Lake Kayak, our introductory price point kayak, has been very strong. We launched the product on Kickstarter, and it has raised over $2 million during the duration of the campaign. which was 2x the amount raised from our previous Kickstarter campaign, The Inlet, in 2020. The enthusiasm for this new product demonstrates the growth of the Oro brand and the demand for the unique product offerings that Oro is known to produce. At IO, we plan on launching a category differentiating product in the third quarter. More to come on that on our next call. Next, we see a meaningful opportunity to leverage our customer database of 3 million customers to cross-market our brands. As mentioned earlier, today we have 42,677 customers who have purchased from at least two of our brands, and we are focused on increasing this number. While still early, we are encouraged by our data investments that are accelerating awareness across the platform and driving cross-brand purchases. As we lean into this incredible opportunity, we believe that the investments we are making to mobilize our data should yield significant returns this year and for the years ahead. Turning to our channel expansion opportunities, we continue to see strong momentum with our wholesale partners and are leaning into this demand. We are expanding our presence with some of our existing retailers, such as Ace Hardware, Dick's, and Tractor Supply. Our goal remains to move toward an 80-20 balance between direct-to-consumer and wholesale over time. Our international expansion is off to a strong start. We have launched localized sites in Canada and throughout Europe, and we have been pleased with the response and improving marketing efficiencies Customers in Canada and Europe are realizing how amazing it is to sit around a solo stove with friends and family, all while avoiding the typical game of musical chairs, trying to avoid the smoke that comes with a traditional fire pit. We will continue to invest strategically in our international expansion, and we plan to enter the Australian market in the third quarter and are optimistic about the opportunity there. Oru Island Chubbies will soon follow a solo stove into these markets. Finally, we continue to evaluate strategic acquisitions and are enthusiastic about the opportunities we are seeing. Our focus here is unchanged. We look to find unique, disruptive, profitable brands that are founder-led to complement our existing portfolio. Turning to supply chain, we have seen some factory closures in China recently, which has had some adverse impacts on our business, primarily in the delivery timeline of our pie pizza oven. Fortunately, our other products across all brands have been minimally impacted due to the strong inventory position of our existing products. With contracted freight rates secured, we can now confirm that we are expecting freight rates to be higher than last year, which will put some pressure on gross margin this year. We have seen some reprieve though, as spot rates have come down from 2021 highs. We are and will continue to opportunistically use these rates if they are lower than our contract rates. I would like to provide an update on the current trends in our business. The volatility we experienced in the first quarter has continued into the second. We believe it is a combination of laughing strong comparisons from a year ago related to stimulus, as well as to consumers continuing to feel the pressures of higher inflation, which is impacting their spending. In times like these, we believe offering innovation becomes increasingly important. We are focused on what we can control, which is delighting our customers and living amazing products and building a world-class team. We are continuing to listen to our customers and invest in innovation to bring them more products that allow them to share lasting memories and in turn continues to refer us to their friends and neighbors. Before turning the call over to Sam, I would like to thank him for all of his hard work. We announced today that Summer Webb will be taking over as our new CFO starting May 16. I will now turn the call over to Sam to discuss our first quarter results in more detail.