Solo Brands, Inc. significantly narrowed its loss in the first quarter ended March 31 as sales grew 19.1 percent.

Solo Brands’ businesses include Solo Stove firepits, stoves and accessories; Chubbies casual apparel and activewear; Oru Kayak, origami folding kayaks; and Isle inflatable paddleboards.

First Quarter 2022 Highlights Compared to First Quarter 20211

  • Net sales of $82.2 million, up $13.1 million or 19.0 percent;
  • Net loss of $3.2 million, down $25.5 million;
  • EPS, basic and diluted, of $(0.03) for the first quarter of 2022;
  • Adjusted net income of $11.1 million, down $15.7 million, or 58.7 percent;
  • Adjusted EBITDA of $14.0 million, down $14.6 million, or 51.1 percent; and
  • Adjusted EPS of $0.19 for the first quarter of 2022.

“Despite a challenging macro environment and difficult year-ago comparisons, we generated a 19 percent increase in sales during the first quarter, including the effect of acquisitions. We were pleased with the strong momentum in our wholesale channel and are leaning into this demand,” said John Merris, CEO, Solo Brands. “Looking ahead, we are excited about the continued opportunity for organic growth and strong pipeline of innovative products we plan to roll out in the second half of the year.”

Operating Results for the Three Months Ended March 31, 20221

  • Net sales increased 19.0 percent to $82.2 million, compared to $69.1 million in the first quarter of 2021. The increase was driven by the acquisitions and strong wholesale results as the direct-to-consumer channel completed its most difficult comparisons for the year. These increases were partially offset by year-on-year changes in deferred revenue. The first quarter of 2021 reflected an increase in revenue recognized related to an inflated deferred revenue balance at the end of 2020 due to supply chain disruptions.
  • Direct-to-consumer revenues decreased 3.3 percent to $60.2 million compared to $62.3 million in the first quarter of 2021.
  • Wholesale revenues increased 223.6 percent to $22.0 million compared to $6.8 million in the first quarter of 2021.
  • Gross profit increased 5.1 percent to $48.9 million, compared to $46.5 million in the first quarter of 2021. Adjusted gross profit2 increased 16.6 percent to $55.0 million compared to $47.1 million in the same period of the prior year, reflecting the impact of purchase accounting adjustments related to the transactions. Gross margin decreased 7.9 percent to 59.4 percent. Adjusted gross margin2 decreased to 66.9 percent compared to 68.2 percent in the same period in 2021 due to increased freight rates and higher logistics costs.
  • Selling, general and administrative (SG&A) expenses increased to $45.6 million, compared to $18.7 million in the first quarter of 2021. $12.4 million of the increase was due to the acquisitions. Additionally, SG&A increased by $6.7 million in employee costs as a result of equity-based compensation and increased headcount and a $3.4 million increase in advertising and marketing spend. The remaining increase in SG&A was primarily related to smaller increases including the following: professional services primarily as a result of the audit of the 2021 Form 10-K, rent as a result of a new global headquarters facility, insurance as a result of becoming a public company, and seller fees.
  • Depreciation and amortization expenses increased to $5.9 million compared to $3.6 million in the first quarter of 2021. The increase was primarily due to an increase in amortization expense of $1.6 million to $5.3 million driven by increases indefinite-lived intangible assets as a result of the acquisitions.
  • Loss per Class A common stock basic and diluted is $(0.03). A comparison to the same period last year is not meaningful or comparable due to the reorganization transactions which occurred in 2021. Refer to the footnote in the unaudited consolidated statements of operations for more information.
  • Adjusted EPS2  weighted average basic and diluted shares were 63,400,772. Its adjusted EPS for the first quarter of 2022 was $0.19.

Balance Sheet

  • Cash and cash equivalents at the end of the first quarter totaled $15.9 million, compared to $25.1 million at December 31, 2021.
  • Outstanding borrowings were $52.5 million under the Revolving Credit Facility, and $98.8 million under the Term Loan Agreement as of March 31, 2022. The borrowing capacity on the Revolving Credit Facility was $350 million as of March 31, 2022, leaving $297.5 million of availability.
  • Inventory at the end of the first quarter was $126.5 million, compared to $102.3 million at December 31, 2021. We are pleased with the level and quality of our inventory as we move into our historical second-largest selling season of the year in the second quarter. In addition, in light of global pressures on supply chain, including rising freight costs, our increase in inventory reflects a strong inventory position across brands that we are confident is sufficient to meet demand and position us to deliver on our goal of amazing customer experiences.

Guidance
Solo Brands reiterated its guidance for the year.

Guidance for Full Fiscal Year 2022

  • Total revenue is expected to be between $540 million to $570 million.
  • Adjusted EBITDA is expected to be between $121 million to $132 million.

Photo courtesy Solo Brands/Oru Kayaks