Earnings call: Solo Brands reports a net loss of $4 million

Solo Brands , Inc. (NYSE: DTC), a diversified portfolio of consumer brands, reported a modest increase in total revenues for the second quarter of fiscal 2024, with a slight decline in direct-to-consumer sales offset by growth in wholesale revenues. The company, known for its Solo Stove and Chubbies brands, announced a net loss of $4 million but an adjusted net income of $6.1 million and a healthy low double-digit EBITDA margin. Despite the mixed financial performance, Solo Brands remains focused on its strategic plan, expecting a strong fourth quarter bolstered by marketing efforts and product launches.

Key Takeaways

• Total revenues showed a modest year-over-year increase, with wholesale revenues up by 4.8%.
• Direct-to-consumer revenues declined by 0.9%, impacted by softer traffic.
• The company reported a net loss of $4 million, but achieved an adjusted net income of $6.1 million.
• Adjusted EBITDA stood at $15.5 million with margins expected to be between 9% and 10% for fiscal 2024.
• Inventory levels decreased by 11.3% compared to the previous year.
• A strategic focus on leveraging strong brands and expanding into new categories is central to the company's growth plan.
• The company ended the quarter with $20.1 million in cash and cash equivalents.

Company Outlook

• Solo Brands anticipates fiscal 2024 revenue to be in the range of $470 million to $490 million.
• The third quarter is expected to be challenging, but the fourth quarter is projected to be the strongest, supported by marketing campaigns and product launches.
• The company is optimistic about its turnaround plan and long-term growth strategies.

Bearish Highlights

• The company has faced a net loss of $4 million in the second quarter.
• Direct-to-consumer traffic has been weaker than expected, leading to a downward adjustment in guidance.
• Gross margin has decreased due to the inventory fair value impact from acquisitions in 2023.

Bullish Highlights

• Despite a challenging economic environment, the average order value remains strong.
• The company has seen success with its bundling strategy and extended assortment offerings.
• Solo Stove brand maintains a high Net Promoter Score and strong market presence, even in the face of competition from Chinese knock-offs.

Misses

• Solo Brands missed expectations in direct-to-consumer sales with a 0.9% decrease.
• SG&A expenses increased compared to the prior year, contributing to the net loss.

Q&A Highlights

• The potential impact of a macroeconomic downturn was discussed, with the company confident in its ability to succeed in various conditions.
• Expansion into new categories and the strength of the company's brands were key topics.
• The company's ongoing adjustments to its marketing strategies and the anticipated launch of a 360-degree marketing campaign were highlighted.

Solo Brands' CEO, Chris Metz, emphasized the company's commitment to driving value through bundling and new product offerings over the next 12 months. The company's strategic plan includes leveraging its strong brands, expanding into adjacent categories, and enhancing product development. Solo Brands is also investing in its retail sales team to capture growth opportunities in new retail channels. The transition to salesforce.com is expected to improve the online shopping experience, with full implementation slated for the first or second quarter of the next year. Despite the challenges, Solo Brands appears to be navigating a path focused on long-term growth and market reinvention.

InvestingPro Insights

Solo Brands, Inc. (NYSE: DTC) has been navigating a challenging market with a strategy focused on long-term growth. Here are some insights based on real-time data from InvestingPro that may provide additional context to the company's current financial health and stock performance:

• The company's market capitalization stands at $184.36 million, reflecting its valuation in the market.

• Solo Brands has a notable gross profit margin of 60.64% for the last twelve months as of Q1 2024, indicating a strong ability to control the costs of goods sold relative to sales.

• The stock has experienced significant volatility recently, with a price decrease of over 15% in the last week alone, and it is currently trading near its 52-week low, which could indicate a potential buying opportunity for investors looking for undervalued stocks.

InvestingPro Tips highlight that while Solo Brands has not been profitable over the last twelve months, analysts predict the company will be profitable this year. Additionally, the company's liquid assets exceed its short-term obligations, suggesting a solid liquidity position to meet immediate financial needs.

For readers interested in more detailed analysis and additional InvestingPro Tips, there are 10 more tips available at https://www.investing.com/pro/DTC, providing further insights into Solo Brands' stock performance and financial metrics.

Full transcript - Solo Brands Inc (NYSE:DTC) Q2 2024:

Operator: Hello everyone and welcome to today's Solo Brands, Inc. Second Quarter Fiscal 2024 Financial Results Call. My name is Seth and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor to Bruce Williams to begin the call. Please go ahead.

Bruce Williams: Good morning everyone and thank you for joining the call to discuss Solo Brands' second quarter results, which we released this morning and can be found on the Investor Relations' section of our website at investors.solabrands.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 and are based on our 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 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 quarterly report on Form 10-Q and will be available on the Investors portion of our website at investors.solabrands.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 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.solowbrands.com. Now, I'd like to turn the call over to Chris.

Chris Metz: Thank you, Bruce and thank you all for joining us today. I will begin by discussing our second quarter performance and provide an update on our Solo Brands' strategic plan and priorities. Lastly, I will turn the call over to Laura to discuss our financial results in more detail and our outlook for fiscal 2024. We are pleased with our second quarter results as total revenues increased modestly year-over-year for the quarter. By channel, direct-to-consumer declined 0.9% as this channel continues to generate sequential improvement over the prior two quarters. We are particularly pleased with our wholesale results as revenues increased 4.8% despite continued difficult comparisons. In addition, we generated healthy low double-digit EBITDA margins for the quarter despite planned investments in people, processes and capabilities that will provide the foundation that is needed to drive sustainable growth over the long-term. While we are pleased with our second quarter results and confident in the long-term growth opportunities for Solo Brands, we recognize that consumers are facing a number of near-term headwinds, and demand for large ticket consumer durables remains challenging. Quarter-to-date, we are seeing softer-than-expected traffic through our direct channel. As such, we believe it is prudent to update our guidance to reflect the current trends. Laura will share with you shortly more color on our full year guidance. Now, I would like to give an update on the Solo Brands' strategic plan that we embarked upon shortly after I joined the company that allowed us to evaluate the full potential of our current business. The results of this in-depth strategic analysis confirm my conviction that our brands have significant opportunities to continue to gain market share within their respective categories and that we have a long runway of growth ahead of us. We have clearly identified several strengths of the company, highlighted by, one, we have incredibly strong brands with a passionate, loyal, and high-value customer base. Two, our brands are leaders in the premium segments of their markets, with a long-term opportunity to grow into additional categories and expand our TAM. And three, we are building the infrastructure to create a highly scalable model that will drive long-term margins and returns on capital. First, I want to provide a summary of the consumer insight work that will guide our strategic plan and will inform our decisions regarding adjacencies and expansion of our TAM. We conducted the most in-depth consumer segmentation analysis that our company has ever done, speaking to over 2,000 consumers. Within Stove, Solo Stove's net Promoter Score was incredibly high, putting us in the top 1 percentile in the outdoor goods market and leads in unaided brand awareness compared to our direct competitors. Walking in, I believe that the Solo Stove brand was strong. But frankly, I was pleasantly surprised to see just how strong it truly is. We have a premium customer base as the average household income of our customers is near $200,000, which is 2 times the outdoor goods market. This consumer insight work will inform our strategic approach to pricing as well as how to leverage our strong brand characteristics to expand our TAM by entering into near-term adjacent categories. Within Chubbies, we know that we play in a larger but highly fragmented market. However, we are pleased with our share position within our core categories, with ample opportunities to grow. Similar to Stove, we have a premium customer that has a household income of approximately $140,000, that is 1.4 times the menswear market. We believe that we have room for growth as we increase our brand awareness and capitalize on our strong Net Promoter Score for the brand. We believe that executing on our long-term strategic pillars will be a multiyear process. This year, 2024 is about stabilizing the business, particularly in the direct channel and investing in capabilities. At Solo Stove, we welcomed in a new Senior Vice President of Direct-to-Consumer E-commerce, who brings a wealth of relevant experience, most recently at SharkNinja. We're also reinvigorating our product innovation engine by laying the groundwork to build out a multiyear product pipeline that will generate innovation across platforms. In Q2, we welcomed in the new Senior Vice President of Product Development for Solo Stove who also brings a wealth of relevant experience, having spent much time at innovative companies such as Helen of Troy, TTI, and Bosch. In fact, this new leader just returned from a very productive trip to Asia with our product development team looking at new product opportunities. Next, we are enhancing our product development ecosystem, which means that each new product introduction will be supplemented by consumer insight research, robust go-to-market marketing, as well as channel distribution strategies. We will have multiple exciting new products in Solo Stove to launch beginning in 2025. In fact, some of these new product introductions will begin to expand our TAM as we innovate into near adjacent categories outside of our core fire pit and pizza oven categories within Solo Stove. We believe that the investments we are making in people and infrastructure will position us to return to revenue growth, expand our margins and begin to introduce multiple new product innovations starting in 2025. As part of our strategic plan, we see substantial opportunities to continue to expand our omnichannel distribution. In fact, our consumer research has informed us that about 50% of consumers are purchasing their products in physical stores and not just online. This leads us to believe that our strategy of partnering with the right retailers to expand our overall revenue line is a smart approach. We don't believe this is an either/or. We need to expand both our DTC and retail business. Our research supports this, and you will see us continue down this path. A smaller but still important part of reaching consumers where they shop is continuing to selectively open our owned retail footprint within Chubbies. During the second quarter, we opened three new Chubbies stores. At our new Woodlands, Texas location, we experienced our largest grand opening weekend to date. Today, we have 10 Chubbies stores and plan to open an additional two stores by year-end. Lastly, as part of our strategic plan, we see opportunities to leverage our scale across our platform to drive EBITDA margin expansion. Specifically, we will leverage our very strong existing fulfillment and procurement capabilities and scale our supply chain network to further reduce delivery and carrying costs. A few operational examples that help support our increasingly higher margins are: one, our fulfillment centers are shipping greater than 99% picking accuracy; two, our procurement team continues to collaborate with our suppliers to drive net productivity offsetting inflationary pressures. And three, our fulfillment team just signed a new contract with a leading packaged goods delivery company that will offer significant improvement in our delivery costs. This leverage will only grow as we expand Solo Stove into categories beyond fire pits and pizza ovens. In summary, despite the more challenging consumer environment, I couldn't be more encouraged with the progress we are making in returning Solo Brands to stronger performance consistent with the best-in-class outdoor companies. We are building out our capabilities, ushering in incredible new talent, investing in much needed systems and adding robust repeatable processes. We believe the work we are doing to improve our capabilities and performance will pay dividends and drive long-term sustainable growth. All of this leads me to believe we continue to march down the path to success as we move through our rebuild year of 2024. I will now turn the call over to Laura.

Laura Coffey: Thank you, Chris and good morning everyone. Today, I will walk you through our second quarter results and provide our outlook for the remainder of fiscal 2024. Despite a tough macro backdrop where the consumer continues to face pressures, we are highly focused on the areas we can control. We are working to stabilize our business, while investing to strengthen our infrastructure. We believe that this ongoing work as well as executing against our Solo Brands' strategic plan will position us to drive long-term shareholder value. Turning to our quarterly results. Second quarter sales were $131.6 million, increasing 0.5% compared to a year ago, as sales growth in retail offset softer sales trends in our direct-to-consumer channel. In the direct channel, revenues declined 0.9% to $98.8 million in the second quarter, primarily due to lower site traffic. Retail revenues increased 4.8% to $32.8 million, driven by an increased order volume which is the result of continued growth with our strategic retail partners. We are particularly pleased that we were able to generate sales growth against a difficult sales comparison of plus 57% during the comparable period last year. Turning to gross margin. Our gross margin decreased 60 basis points to 62.8%, primarily the result of inventory fair value impact from the 2023 acquisitions. Adjusted gross margin, which excludes this impact, was 63.6%, flat to last year. Selling, general, and administrative expenses for the quarter increased to $70.8 million compared to $63.5 million a year ago. As a percentage of sales, SG&A expense increased to 53.8% of sales compared to 48.5% a year ago, primarily due to increased distribution expenses related to elevating shipping costs from higher transaction volumes associated with the SKU mix to more bundles, higher marketing expenses, increases in professional, and information technology investments to support future growth. Second quarter net loss was $4 million, adjusted net income was $6.1 million and adjusted EBITDA was $15.5 million. Adjusted EBITDA margin was 11.7%. Turning to the balance sheet. At the end of the period, we had $20.1 million in cash and cash equivalents. As of June 30th, we had $75 million in outstanding borrowings under the revolving credit facility and $88.8 million under the term loan agreement. The borrowing capacity on the revolving credit facility was $350 million as of June 30th, leaving $274 million of availability. And our net leverage ratio was 3.3 times. We remain focused on disciplined inventory management and are pleased with the composition of our current inventory level. Inventory at the end of the quarter was $100.8 million, down 11.3% from a year ago. Moving to our outlook. We are pleased with our first half performance and the progress we are making on our turnaround plan. However, the macro environment remains challenging. Our quarter-to-date trends have softened, and while approximately 60% of our business will come in the back half of the year, we believe it is prudent to be cautious in our full year guidance given our current run rate. As such, we expect fiscal 2024 revenue to be in the range of $470 million to $490 million. We now expect adjusted EBITDA margin to be in the range of 9% to 10% as we continue to invest in our capabilities and infrastructure that will lay the foundation for long-term success. Turning to the second half, we expect the third quarter to be our most challenging quarter of the year due to very difficult comparisons in our retail channel and current trends in our direct-to-consumer. As a reminder, we are lapping a onetime trade credit agreement in which we recognized $7.2 million in retail revenues during the third quarter of 2023. We continue to believe the fourth quarter will be our strongest quarter in the year, consistent with our typical seasonal pattern. This expectation is bolstered by our first full funnel marketing campaign, which begins in August, as well as several small product launches. In closing, while the macro environment remains challenging in the near term, we are focused on our controllables and we are pleased with the continued strength of our brand. We are making progress on our initiatives and are confident we have the strategies in place to position us for long-term growth. With that, I will now turn the call over to the operator to begin the Q&A.

Operator: Thank you. [Operator Instructions] Our first question comes from Chasen Bender at Citi. Please go ahead.

Chasen Bender: Great. Thanks. Good morning everyone. Chris, just to start, thinking about the risk of a sharper macro turndown in the U.S., which has become more topical in days of late, I was curious if you think you can still drive this new long-term strategic plan in a hard-landing scenario? And if so, what really gives you that confidence? And related to that, are there parts of the portfolio in a hard-landing scenario, either from a brand standpoint or a product standpoint, that you see as being more at risk and potentially places where you would need to make more meaningful changes?

Chris Metz: Yes. So, Chasen, it's certainly a relevant question, insightful question and something that we've given an awful lot of thought to in terms of scenario planning. So, I will say, first, we are in the deepest part of our turnaround, and we've guided to a business that is still generating historically high gross margins in the low 60s, which I think puts us in the best company within our peer group, and we're still generating EBITDA margins of 9% to 10%. And although our leverage ratio has increased a bit, we have an incredible amount of pre-availability and a balance sheet that allows us to continue to invest, while we generate returns. So, the focus of our team on the strategic plan is to, one, create some innovation and excitement to compel consumers to buy products. And some of these new products, Chasen, are going to be at price points with features and benefits that will allow people to lean in where we haven't had that newness to-date. Part of our consumer research has also shared with us that we have some price setting and some price getting that we feel like has been left on the table, if you will. So, a lot of what we've uncovered in our insight work is not just strategic intents that we want to lean into that we feel like we'll grow our margins and our top line, but it's also, frankly, just better execution. So, although we're seeing down-traffic, as an example, on our on our online direct-to-consumer website, we know that our website needs to be refreshed. It doesn't give the shopper the experience that we need it to be. We know that the marketing campaigns that we've run over the past couple of years hasn't been as effective as they should be. These are all the fixes we're putting in place that would suggest that we don't need just a rosy environment to show improvements. A lot of this is just down to us executing better and growing our business. Now, the other thing that I'll say that the consumer insight supported was, as I mentioned, we talked to over 2,000 consumers. And in that research, it came back and said, hey, your brand is so strong. Your Net Promoter Score on a double-blind basis puts you in the top 1% of all outdoor products brands. That allows you to expand into near adjacencies. Those near adjacencies that you expand into, consumers suggested that we could and should be the number two, number three players in those categories. What this does is it expands our TAM by 4 times to 5 times. So, we've got a much bigger area in which we're playing to grab share than we've had in the past. So, listen, we're not predicting big changes in the macro environment. But we are preparing a business, and we feel like we've got the tools around us to succeed regardless of the macroeconomic conditions.

Chasen Bender: Got it. That's helpful color. And related to that and also the softer quarter-to-date trends you're seeing in 3Q, could you give us an update on the promotional environment? Obviously, you've leaned more heavily into bundling. But we've heard from some other companies that the promotional environment in general is increasing. Some retailers are still over-inventoried and destocking. So, curious what you're seeing, one. But two, given the macro backdrop and the quarter-to-date trends, how is that informing your decision not only to drive bundling, but also potential peer discounting? And what the depth and breadth of that looks like embedded in your outlook for the second half? Thanks.

Chris Metz: Yes. So, Chasen, we -- you can see this in our gross margin line, we have used bundling to help offset some of the promotions and discounts that maybe you're seeing from others in the space. And so we've mentioned that the bundling has increased our fulfillment and some of our shipping costs, and we have ways to improve that. But we've historically been pretty promotional. And I think part of the opportunity for us is to create an environment where we're, frankly, less promotional and not everyday low, low discounting. So, we have factored in kind of business as usual from a discount and promotional environment, which has been heightened this year. That's all factored into our back half guidance. But I honestly believe that we can improve by offering a better shopping environment, by a better value to our consumers in ways that don't necessarily create an erosion to our margin line.

Chasen Bender: Got it. Appreciate that detail. I'll pass it on from here.

Chris Metz: Thanks Chasen.

Operator: Our next question comes from Anna Glaessgen from B. Riley. Anna, please go ahead.

Anna Glaessgen: Hey good morning. Thanks for taking my questions. I'd like to touch base on Chubbies. Wholesale or distribution gains have been a big driver of growth over the past few years, I believe. Can you speak to appetite from retailers to take on the brand or expand the brand into more of the store fleet at this point?

Chris Metz: Yes. So, Anna, as you've heard me in the previous earnings calls, I've highlighted the fact that Chubbies is one of the most exciting young men's brands, apparel brands in the U.S. today. I continue to believe that. And that's echoed by our key customers. So, as you've rightly pointed out, we've grown with door count gains with some of our key retailers. The POS that we've seen from these retailers year-to-date continues to be strong. And we supplemented that with, obviously, our direct-to-consumer efforts, which is really how the brand started. So, we really, really like the position that Chubbies is in. It's grown as -- first and foremost, as a swim trunk brand. We've expanded into shorts, and now we're expanding into other categories where we're starting to see some initial success with our key retailers. So, you'll see our key retailers like DICK's Sporting Goods being a good example, where if you walk into their House of Sport concept, which is a fast-growing concept, we've got a wall with Chubbies that is the envy of a lot of other vendors. And we partnered with them in a very strong way. As we have with other key retailers like SCHEELS and others, and some of the specialty retailers that are so important to us, we partnered in a way that we fully expect to continue to grow the Chubbies brand, both through our core assortment as well as through extended assortment given the initial success we're starting to see.

Anna Glaessgen: Got it. Thank you, Chris And then turning back to Solo Stove, helpful color from the consumer insights. As you look at the quarter-to-date performance, are you seeing shifts within the mix? Are people trading down? Or is the lower end underperforming as consumers who gravitate towards the premium are naturally less impacted by inflation and other consumer headwinds? Just any color there?

Chris Metz: Well, it's an interesting question, Anna, and what we're seeing every day is that our average order value, or AOV, continues to be strong and it's not reducing, which is somewhat counterintuitive given what we're seeing in the economy and given your comments about the consumer being pinched. And the reason for that is because we're offering value in the bundles. So, it creates a win-win. We create some value for our consumers, but we're also able to drive a higher average order value that you don't see compress our margins as much as, say, a discounting or promotional environment. So, it's something that we want to continue to refresh, to create newness in these bundles as we go forward. And I really anticipate that given some of the newness you'll see from us over the next 12 months, it's only going to enhance our ability to drive value to the consumer through bundling and newness of products. But yes, no question. I mean there's a weakening of the environment. We've seen it in July and the beginning of August, but we continue to drive bundles as a way to create value.

Anna Glaessgen: Great. That’s it from me. Thanks.

Chris Metz: Thanks Anna.

Operator: Our next question is from Ryan Sigdahl from Craig-Hallum Capital Group. Please go ahead Ryan.

Ryan Sigdahl: Hey, good morning guys. I want to start with that survey you did of 2,000 consumers. Were those past buyers or of an existing customers of Solo? Or I guess, are they are random samples of just general people? I guess the reason I ask is, from what I can tell, is everyone that owns a Solo product, pretty unanimously love them. There's a wide audience that doesn't know about it. So, that's -- I guess, I'm curious what the sample size was?

Chris Metz: Yes, Ryan. It's a really good question. So, I'll start first by saying our customer service team, our customer experience team has always measured our Net Promoter Score. And that comes in the form of talking to our people who have just literally bought a Solo Stove within the last 60 days. Well, of course, they're going to be happy most likely, right? So, our Net Promoter Score has always been high. This is the first time we've gone out to a sample of 2,000 consumers across a broader array of demographics. They had no idea who we were. And we talked to existing consumers, lapsed consumers, brand new consumers, and consumers that weren't even, frankly, interested in the category itself. So, we call it a double-blind survey, if you will. And the number was over 2,200 consumers. And what came back was a Net Promoter Score that was incredibly high. I knew we had a strong brand when I walked in the door, I just didn't realize how strong our brand is. And that was one of the pleasant surprises coming out of the research, which really informs us that we do have permission -- as we continue to ask questions in these research discussions, we have permission from consumers to move into near adjacent categories, where either, one, they already think we're in the category and we're not; or two, said, hey, if you were to get into those categories, we think you ought to be a number two or number three share player. So very, very exciting. And it was done in the best way you possibly could. We hired one of the best consumer research firms to help us make sure that as we gather the consumer insight, we could really hone into who our core consumer is, who are secondary consumer is, who our tertiary consumer is, where -- everything about them so that we have a persona that we know how to develop product against and how to market against that persona.

Ryan Sigdahl: Helpful. And for my follow-up question. Just curious if you're seeing any new or outsized competition, mainly from China. And you see Temu and others out there with kind of knock-off, very, very cheap product. But how much of that is impacting you guys right now versus just general macro concern as you look at the back half of the year?

Chris Metz: Yes, Ryan. It's much more macro. I mean if you walk into all of our retail channels, there's -- I mean, we are the market, if you will. You go online where you're going to have an endless aisle, you got some of the marketplaces that will bring in some of the less-expensive Chinese product or what have you. And clearly, they're getting a small portion of the market. But frankly, they're expanding the market. They're driving more consumer interest into the market. And I think as people start to find out the differences in the products with online reviews and postings and product reviews and what have you, I think it almost helps us more than it hurts us, given what we're seeing in the marketplaces. But we still predominantly are the market. We made the market when we introduced the product at Solo Stove years ago. And I think what you'll see from us in 2025 and beyond is we're going to continue to reinvent the market and give consumers a reason to purchase a new fire pit or a new pizza oven or what have you. Much like all companies will give their consumers a reason to go buy a new driver because you can hit it five or 10 yards further, we're going to give our consumers for the first time ever a reason to buy a new fire pit because we're going to create newness in the category. Something that we haven't done or, frankly, needed to date, but we do need as we move forward.

Ryan Sigdahl: Thanks Chris. Good luck guys.

Chris Metz: Thanks Ryan.

Operator: Our next question is from Brian McNamara at Canaccord Genuity. Please go ahead Brian.

Madison Callinan: Good morning. This is Madison Callinan on for Brian. Thanks for taking our questions. I know we already talked about Chubbies in wholesale, but do you have any additional color on Solo Stove in wholesale? Are you losing any partners or partner doors? Or are retailers being hesitant with orders? Thanks.

Chris Metz: Sure. No, we still have a lot of runway in front of us, Madison, in wholesale and what we call our retail channel. So, the retail channel has been a lot about partnering with retailers and expanding those doors. But if you think hard about some of the retail channels we're not in today, like the home ware or hardware improvement center channel, we're not even in that channel today. So, there's channels that we don't participate in. There's doors of some of our key customers that we don't participate in. And so there's a clear runway for continued growth. Now, I mentioned in my prepared remarks that the consumer insight research informed us that about half the market products are purchased in retail stores. So, we know we're over-indexed. We know we need to continue to expand into the retail format. But again, as I've said before, we don't think this is an either/or. We think we can stabilize our D2C business, and you've seen it with the sequential improvements quarter-by-quarter that we've made. And we think as we move into 2025, we should be able to grow both simultaneously. Now, one of the things that we've made, I've talked a lot about talent, capabilities, processes, systems that we're investing in. One of the areas that we've invested in, frankly, is our retail sales team. We didn't have that. But we grew so fast over the last 18 months in retail, we didn't have the support network to sit down with our big retail customers and be planful with the products that we bring in, making sure that we bring in maybe channel-specific products to avoid channel conflicts. We tie together sell-through marketing campaigns with those products and those customers. And we're just -- just much more thoughtful and planful. It's hurt us a little bit this year because we didn't have that plan walking into the year. And as soon as I discovered it, we started building against that. So, I think what you'll see from us on the retail wholesale side is better plans, better execution. And I think as we move into 2025, even better results.

Madison Callinan: All right. That's super helpful. And then any additional color on -- I know you talked a little bit about like marketing being ineffective, but any color on the new marketing agency or things you're excited about to get DTC sales stronger outside of the macro? Thanks.

Chris Metz: Sure Madison. Yes, so we started to make adjustments to our marketing mix to spend on a broader set of channels and with a different set of tactics to drive better efficiency of our media spend. I mean this new approach is enabling us to be more nimble in managing our marketing spend as the external environment continues to be more challenging to navigate. Now, I mentioned the Snoop campaign that we're starting. I mean this campaign is what I would call a true 360-degree marketing campaign. It will fuel activation plans across different creative communications. It will feed into our website, our marketplaces, our retail stores. And so there's dramatic differences between this year's approach and last year's approach. So, last year, we began in kind of that November timeframe. This year, we're beginning in August. So, August 20yj, you'll see us start to feed the top of the tunnel -- or funnel, rather. And as we start to move into September, our key selling seasons into October, November, you'll see us start to migrate down that funnel and create more of a conversion-focused plan during our key selling season in Q4. So, we made a lot of changes, and you'll start to see this come to fruition here as we move into the fourth quarter. Now, one of the key changes, and I mentioned it before, is our consumer shopping experience online is not where it needs to be, particularly with our website. We said when I first walked in that we've made a choice to change platforms to salesforce.com, and we're working very, very hard to bring that online next year in the first -- hopefully, in the first to second quarter, it will be fully online and will create a much, much easier, much more exciting shopping experience for our consumers. So, continued improvements in the marketing area. We brought in a cadre of just wonderful people with great talent, great experience that are just starting to come up to speed, and they'll be hitting stride as we move through the end of this year. So, excited about some of the green shoots that I'm seeing in that area.

Madison Callinan: Great. Thanks so much.

Operator: [Operator Instructions] We have no further questions on the call. So, I'll hand the floor back to management.

Chris Metz: Well, thank you everyone for attending this morning's call. We appreciate the time, we appreciate the questions, and of course, we appreciate the continued interest and support and we'll look forward to talking to you on our next earnings call. Take care.

Operator: This concludes the conference. Thank you all very much for joining.

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