Solo Brands, Inc.

Good day, ladies and gentlemen, and welcome to the Solo Brands, Inc. Third Quarter Fiscal 2024 Financial Results Conference Call. At this time, I would like to hand things over to our speakers for today.

Good morning, everyone, and thank you for joining the call to discuss Solo Brands' Third Quarter Results, which we released this morning. It can be found on the Investor Relations section of our website at investor.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 wanted 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 and 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. Actual future 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 discussion of these risks, including our soon-to-be-filed quarterly report on Form 10Q, and will be available on the Investors portion of our website at investors.solarbrands.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 peer-to-peer comparisons of our core operating results and the results of peer companies. Reconciliation of these non-GAAP measures to the most comparable GAAP measures and definitions of these indicators are included in our earnings release, which will be available in the investor portion of our website at investors.solobrands.com. Now I'd like to turn the call over to Chris.

Thank you, Mark. And thank you all for joining us today. I will begin by discussing our third quarter performance and then update you on our strategic vision for our brands. Next, I'll highlight how our strong balance sheet and cash flow provide the flexibility to invest in our business, building the foundation for long-term growth. Then I will turn the call over to Laura to discuss our financial results in more detail and our outlook for the year. Our third quarter results were in line with our expectations, despite a continued challenging macroeconomic backdrop for big ticket consumer durable items. We delivered total revenues of $94.1 million and adjusted EBITDA of $6.5 million. Sales in our direct-to-consumer channel declined 16% as a lack of product newness and unseasonably warmer weather impacted traffic during the quarter. However, we continue to see strong momentum and excitement from our retail partners. Sales in our retail segment increased 10%, excluding a one-time barter agreement of $7.2 million in 2023 that we did not anniversary. Despite the top-line challenges, I am pleased that our brands remain strong with leading market share positions and healthy gross margins. Our customers continue to exhibit a strong affinity and loyalty for our brands. As we move into our largest volume quarter of the year, our fourth quarter, we are encouraged by our early sales trends. While we recognize the majority of the season is in front of us, we feel good about how we are positioned in our reaffirming our full year guidance. When I arrived at Solo, my strategic imperative was to clean up the business and put us on a path to return to growth. We identified five key priorities that would return us to our winning ways. Our first key priority for 2024 was to develop a comprehensive strategic plan. We embarked on a new strategic plan and are now focused on executing against that plan in order to remove obstacles and friction and lay the foundation to enable long-term sustainable growth. As such, we are focused and driven to transform the company that will be built on new product innovation, getting closer to our customers through integrated full funnel marketing campaigns, optimizing our channel distribution and implementing operating discipline across the organization. A part of this was evaluating the performance of the portfolio and determining which brands to invest in, where to allocate our capital and fixing our baseline systems and processes. While it has been a heavy lift, I am pleased with the progress our teams have made in a relatively short period of time. Our second key priority was to recruit a talented team and build our capabilities. We now have an entirely new leadership team in place, and the next level down comes with been there, done that experience. Additionally, we have jettisoned poor performing partners and agencies and have replaced them with industry-leading firms, which we expect will contribute significantly to our brand marketing and product innovation, leading to a return in growth in 2025. I'm confident we now have the right team and partners in place to execute our strategic plan. Our third key priority is to develop an innovative new product pipeline. We know that innovation is important to our customers, and we have a few small launches planned for the fourth quarter. We recently rolled out Surround Lite, a portable version of our successful Surround accessory that was introduced last year. In addition, we have also rolled out a new cookout kit that transforms your fire pit into a grill or griddle and enables you to cook out on the go, whether it's tailgating at the football game or having a portable grill for picnics. We're proud of our partnership with the NFL to introduce Solo Stove and Chubby's NFL branded products. At Solo Stove, our fire pits and the new surround light offer the ability to customize with an NFL logo of your favorite team. At Chubby's, we rolled out the Chubby's unique spin to NFL team logoed apparel. We began with a 12-team rollout, and the initial customer response has been fantastic. In fact, we sold out our initial shipment of product within the first 48 hours of launching online. We will be rolling out NFL by Chubby's logoed apparel to all 32 teams over the coming quarters. Our retail partners have told us that they love our brands and want more innovation from Solo. And we are taking a much more strategic and in some cases, collaborative approach to the product development with our retail partners that we believe will be well received in the marketplace. As we look into 2025, we're actively filling our product development pipeline with new and exciting products that will enhance and expand our core. We also plan to enter into three new near adjacent categories that will significantly expand our TAM. When I started earlier this year, we began a thorough consumer research study to inform us of this opportunity. We surveyed thousands of our customers and we believe they have given us permission to enter into these new categories with products that will be very innovative with unique features. Our fourth key priority is to develop a more comprehensive and balanced omnichannel strategy. We continue to see strong momentum in our retail channel. Moving forward, we're in discussions with and plan to open up new doors with several key retailers. In fact, we have 130 store tests with a significant national retailer for Solo Stove that will begin in Q4. We're also bringing a much more strategic go-to-market approach to our retail partners. We have brought in talent to build out our retail organization that can go after opportunities by retail segment, such as marketplaces like Amazon, the Club Channel, and Big Box Specialty, which should help maximize our opportunities in retail. We are underpenetrated in this channel and believe we have a long runway of growth ahead of us. I'm pleased that retailers are valuing our partnership, which is bringing newness and excitement to their product assortment. As I stated previously, our consumer research has informed us that about 50% of shoppers look to purchase their products in store. As such, we are underpenetrated in retail today, and this is a key reason for building out a more robust retail go-to-market capability. While we want to be selective with the retailers we partner with, we want a balanced omni-channel approach that allows for consumers to shop when, where, and how they want. And our last key priority this year is to stabilize our D2C channel. Within D2C, we continue to experience challenges due to our lack of product newness, our over-reliance on performance marketing spend, a suboptimal web experience, and some cannibalization due to our growth at retail. We are actively putting the pieces in place to stabilize and eventually return our D2C business back to growth, led by product innovation and a new website. Next year, we will completely relaunch our solo website in conjunction with a world-class Salesforce platform that will have more capabilities for us to showcase our products in a different way to curate a better shopping experience and enable us to deliver more relevant content to our consumers. As we execute against our strategic plan to be a leader in the outdoor entertainment segment, we will continue to lead with innovation. we have raised the standards of product quality that reflect the brand attributes of Solo Brands. Having said that, we made the decision this quarter to wind down our Icy Breeze reporting unit. While we believe in the market opportunity for outdoor portable cooling, the new products launched under Icy Breeze this year did not meet our standards. Therefore, we have decided to move quickly and decisively to take a non-cash charge to write down the inventory and related goodwill and intangible assets this quarter. While we are disappointed with our performance and execution of Icy Breeze, we still own the patents and plan to relaunch cooling products under the Solo umbrella brand starting in 2025. During the quarter, we also took additional aggressive and decisive measures to address factors that were hindering our growth, including a charge for terminating our contract with an underperforming legacy marketing arrangement. Laura will take you through the specifics of the write downs and charges, but we've made a lot of progress over the past nine months, and as a result of these actions, are in a much better position as we move into next year. Next, I would like to discuss our decision to consolidate Isle Paddle Boards and Oru Kayaks into a new water sports division. While developing our strategic plan, we came to the conclusion that consolidating the divisions will realize synergies and result in a more profitable water sports platform than keeping them as two standalone businesses. While category growth has been soft over the last few years post-COVID, we're beginning to see signs of growth. Product innovation has been key and we're gaining good traction with our new Tommy Bahama branded paddle boards and our Oru fishing kit kayaks that are selling out. We believe that under this reorganization, we have the right team in place to drive long-term growth and profitability in this division. Moving on to marketing, our focus in Q4 is bringing more balance between top of funnel brand building and bottom of funnel conversion. Our Snoop campaign this year is a representation of a full funnel marketing approach that has been great for increasing brand awareness, but also driving a call to action. You're seeing a continuation of this marketing balance with our partnership with the New York Islanders, which started in Q4, and we expect to realize additional benefits throughout next year. Although Q4 is a heavily promotional time of year for us, a focus of remaking our marketing strategy is to be less reliant on promotions and performance marketing and rather leaning into full funnel brand building. As a reminder, we're just getting started on our new marketing strategies, but we're excited about all of the new initiatives that we have coming in 2025. This year has been a heavy lift to clean up the business, and this quarter we had to take write downs to shore up our foundation. I'm excited about our progress and look forward to entering 2025 with momentum and a stronger foundation. The organization is working hard behind the scenes implementing our strategy work around product, marketing, distribution, and talent. We're developing a long-term strategic product roadmap, implementing new marketing strategies that will be more balanced, and we're working closely with our retail partners to open up new doors and gain share of shelf. We believe that our strategic initiatives around product and marketing will help stabilize and grow our D2C business. Our strong balance sheet and healthy gross margins give us the ability to reinvest in the business to position us for growth in 2025 and beyond. This effort to transform the business and our culture could not be possible without the hard work of the people within this organization and the contributions from the talent and capabilities that we're bringing on board. I will now turn the call over to Laura. Laura.