Solo Brands, Inc. (OTC:SBDS) Q1 2026 Earnings Call Transcript

Solo Brands, Inc. (OTC:SBDS) Q1 2026 Earnings Call Transcript May 14, 2026

Solo Brands, Inc. misses on earnings expectations. Reported EPS is $-2.98 EPS, expectations were $0.896.

Operator: Good morning, everyone. Welcome to the Solo Brands First Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I will now turn the call to Mark Anderson, Senior Director, Treasury and Investor Relations. Please go ahead.

Mark Anderson: Thank you, and good morning, everyone. We appreciate you joining us for the Solo Brands conference call to review the 2026 first quarter results. Joining me on the call today are the company’s President and Chief Executive Officer, John Larson; and Chief Financial Officer, Laura Coffey. This call is being webcast and can be accessed through the Investors portion of our website at investors.solobrands.com. Today’s conference call will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of any replay or transcript reading date. I would also like to remind you that the statements in today’s discussion that are not historical facts, including statements about future financial and operating performance, including guidance, liquidity and cash flows, covenant compliance, business strategy, including product innovation, cost savings, benefits of technological advances, receipt of tariff refunds, trends and seasonality, international expansion and our delisting appeal with the NYSE are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements, by their nature, are uncertain and outside of the company’s control. Actual results may differ materially from those expressed or implied. Please refer to today’s earnings press release for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company’s filings with the Securities and Exchange Commission. Solo Brands assumes no obligation to publicly update or revise any forward-looking statements, except as required by law. Management will refer to non-GAAP measures and reconciliations to the nearest GAAP measures are included at the end of our earnings release. Finally, the earnings release has been furnished to the SEC on Form 8-K. Now I would like to turn the call over to John Larson.

John Larson: Thanks, Mark, and thank you all for joining us today. After our prepared remarks, we will open the call to analysts and investor questions. Our first quarter reflects continued measurable progress in our transformation. We intend to continue to build a more focused, higher-quality business supported by a leaner cost structure, disciplined cash management and a clear path towards sustainable profitability. Let me highlight a few drivers in the quarter and the momentum we saw exiting Q1 that is continuing into the second quarter. The macro environment remains dynamic with uneven consumer demand. We navigated difficult Q1 comparisons in Chubbies, driven partially by some retail order timing versus the prior year. Most importantly, underlying sales trends strengthened as we exited the quarter.

Late in the quarter, we saw improving trends with that momentum continuing into April, where we delivered year-over-year sales growth for Solo brands. Our March product launches have performed well at Stove division with the all-new Steelfire 22 Griddle and Summit 27 fire pit now in the top 5 selling products for DTC, while also improving our average order values. We have also received very positive sell-through reports for Chubbies this spring and the new significantly expanded water sports assortments at Costco are off to a good start. Based on this momentum, we are reaffirming our full year 2026 outlook. We continue to invest selectively, prioritizing innovation and differentiation where we can drive durable margin-accretive growth. At the same time, we made a deliberate decision last year to realign pricing and promotional activity at Solo Stove.

Q&A Session

While this impacted near-term sales, we believe it positioned the business for more sustainable profitable growth. In addition, we have been making strides focusing on high-opportunity international markets, which I’ll cover in detail in a moment. From a financial perspective, we generated positive adjusted EBITDA in a seasonally smaller quarter, further demonstrating the operating leverage embedded in our model. Stepping back, our focus is very straightforward: build differentiated product-led brands, strengthen retail and customer partnerships, operate with speed, accountability and capital efficiency and ultimately drive profitable growth and cash generation. Every product we launch is held at a high bar. It must offer unique, innovative features aligned with our partners and drive long-term value, not just short-term gains.

Simply put, we are focused on building a stronger business with improving margins, disciplined execution and sustainable cash flow generation. Finally, we began trading on the OTCQB in early April under the same ticker SBDS, following the New York Stock Exchange delisting notice, which we are currently appealing. Importantly, this does not change our strategy. Our focus remains on execution, operational improvement and maintaining transparency. Overall, we believe we are building a business with improving momentum, expanding operating leverage and increasing visibility into long-term value creation. With that, I’ll hand it to Laura for the financials.

Laura Coffey: Thank you, John, and good morning, everyone. Before turning to first quarter results, I want to briefly highlight actions we’ve taken to better align our cost structure with current demand, improve efficiency and mitigate tariff-related impacts. In March, we completed a meaningful reduction in force and implemented compensation adjustments across the company. These actions are expected to generate approximately $8 million in annualized payroll savings or closer to $10 million on a fully burdened basis. We also completed our strategic distribution and fulfillment review and are moving forward with a series of operational changes expected to generate approximately $3.5 million in annual savings once fully implemented later this year.

Across the organization, we have begun deploying AI-enabled tools to help improve productivity, sharpen decision-making and drive operational efficiency, and we are encouraged by the early results. On tariffs, following the U.S. Supreme Court ruling and validating tariff imposed under IEEPA, the International Emergency Economic Powers Act, we identified an opportunity to recover previously incurred costs. Approximately $2 million of the IEFA tariff-related inventory flowed through cost of goods sold in quarter 1 versus none in the prior year. We have filed our refund claims, received confirmation from Customs and Border Protection that all but a minor number have been accepted, and this week began receiving cash refunds with $1.5 million received to date and expect a total refund of approximately $10 million for the year.

Consistent with our gain contingency accounting policy, refunds are recorded as a reduction to COGS or inventory upon cash receipt. Accordingly, amounts received this week will be reflected in our second quarter results. Finally, as a reminder, our simplified capital structure is reflected in the first quarter. Solo Brands now has a single class of common stock with 2.5 million weighted average shares outstanding as of March 31, 2026. As a result of our corporate simplification, we have also substantially reduced our future obligations under the tax receivable agreement associated with our prior capital structure. Turning to our results. Consolidated net sales were $62.9 million, down 18.6% year-over-year, driven by declines in the direct-to-consumer and retail channel sales, particularly within Solo Stove and to a lesser extent, Chubbies.

Positive first quarter performance in water sports partially offset these declines. A portion of the Chubbies decline reflects timing as certain retail orders shifted into the second quarter. Historically, our business is strongest in the second and fourth quarters, and we expect that trend to continue. Notably, we narrowed our year-over-year percentage sales declines by nearly 16 points compared to the fourth quarter, reflecting continued progress. Gross margin for the quarter was 52.3% compared to 55.2% in the prior period, primarily due to tariff-related impacts and to a lesser extent, some channel mix shifts. SG&A expenses were $33.2 million, down 14.8%, driven by lower distribution costs, reduced employee-related expenses and disciplined marketing expenses, particularly within Solo Stove.

Restructuring and impairment charges were $0.3 million compared to $5.8 million in the prior year quarter. Net interest expense was $7.5 million, including $5.8 million related to accrued and paid-in-kind interest on the term loan. We reported a net loss attributable to Solo Brands of $5.5 million compared to a net loss of $12.2 million in the prior period. On an adjusted basis, net loss attributed to Solo Brands was $7.5 million compared to $4.7 million in the prior year. The tax line reflects a noncash benefit from a valuation allowance released related to our corporate simplification, which is explained in further detail in our Form 10-Q. Adjusted EBITDA was $1.6 million compared to $3.5 million in the prior year. The year-over-year declines reflect 2 primary factors: tariff impacts in the current period that were absent in the prior year and the timing shift of certain retail orders into the second quarter, resulting in near-term deleveraging.

Excluding the approximately $2 million of tariff-related costs flowing through cost of goods sold, adjusted EBITDA would have essentially been in line with the prior year. We ended the quarter with $16.5 million in cash and cash equivalents and continue to closely monitor both inventory and working capital. Our capital structure includes a $240 million term loan and a $90 million revolving credit facility, both maturing in 2028. At quarter end, we had $15 million outstanding on the revolver, and the weighted average interest rate was 6.99% on the revolver and 9.07% on the term loan. We were in compliance with all financial covenants and have no material debt maturities until 2028, providing stability and flexibility as we execute our strategy.

Our capital allocation strategy remains disciplined and unchanged. We expect to invest approximately $3 million to $4 million in growth capital this year, primarily focused on product innovation across Solo Stove, Chubbies and Water Sports. At the same time, we’re continuing to align our cost structure with revenue levels with a strong focus on profitability, efficiency and cash generation. We believe these actions strengthen our trajectory towards sustained profitability and positive cash generation. With that, I’ll turn it back to John.

John Larson: Thanks, Laura. At a high level, our differentiation is clear. We build products and brands that create meaningful outdoor experiences consumers value and come back to. We believe that connection with the customer shows up clearly in our metrics. First, Solo Stove alone has more than 200,000 5-star reviews. Second, our new products are being recognized as best-in-class, across leading publications from Forbes to Men’s Health to Barbecue Labs and Popular Mechanics. Third, beyond recognition, we differentiate through durability, warranty-back quality and exceptional customer loyalty with Net Promoter Scores above 70 and highly engaged brand communities of over 0.5 million followers. As we navigate a dynamic environment, we remain focused on the fundamentals that matter most: staying close to the customer, continuing to innovate, strengthening our retail partnerships and operating efficiency.

Those are table stakes. Where we differentiate is in how we translate that into profitable growth and cash generation. We are intentionally positioning the business around premium product leadership and higher quality demand generation, not promotional volume. Beyond our North American DTC and retail channels, we are accelerating our international efforts across all 3 divisions: Stove, Chubbies and water sports with a focus on Europe, the U.K. and parts of APAC. We are confident in the global scalability of our brands and encouraged by strong performance reported by peers in key international markets this year. To support this next phase, we recently appointed a Senior Vice President of Sales for all of Solo brands with deep international experience and a proven commercial track record spanning both soft goods and hard goods.

Looking ahead to the late spring season, an important period across fire pits, griddles, coolers, water sports and swim, we believe we are well positioned to capture demand across the portfolio. In addition, Chubbies will leverage the strength of its retail network and partnerships, along with its proven Americana assortment to capture incremental demand tied to American independence this summer. The foundational work completed in 2025 continues to position us for durable long-term growth. Our focus now is consistent execution, scaling the platform, expanding margins and delivering long-term shareholder value. Finally, we look forward to engaging with both new and existing investors. We will be participating in the East Coast IDEAS Conference in New York City on June 11 with a presentation and one-on-one meetings.

Please reach out to our Investor Relations team if you would like to connect with us there. With that operator, we are ready to open the line for questions.

Operator: [Operator Instructions] Showing no questions, this will conclude the question-and-answer session. I would like to turn the conference over to John Larson for any remarks.

John Larson: We did actually receive one question through email. So, I’ll read it out loud and answer. The question was, what specifically drove sales performance in April that you indicated? And is it sustainable? So great question. There’s definitely strength in Chubbies retail. A little bit of it was timing related as we talked about the first quarter having some deferral for Chubbies spring load-in into April. But given the very strong POS results at Chubbies, we feel confident that we can maintain strong retail performance. We also had a nice lift in water sports due to the expanded line at Costco delivered in April, which is very helpful. And importantly, on Solo Stove, the DTC market picked up dramatically in April for us.

So strong performance there is related to the new product launches we did have. Okay. With that, thank you very much for continuing to follow our company. We look forward to providing our second quarter results and updates on strategic initiatives in a few months. Have a great day, everyone.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.