dtc-20240930

美國

證券和交易委員會

華盛頓特區 20549

表格 10-Q

（標記一）

☒ 根據1934年證券交易法第13或15(d)節的季度報告

截至季度結束日期的財務報告2024年9月30日

☐ 根據1934年證券交易法第13或15(d)節的轉型報告書

過渡期從___________到_____________

委員會文件號 001-40979

Solo Brands，Inc。

（依據其憲章指定的註冊名稱）


特拉華州									87-1360865
註冊或組織所在地或其他司法轄區註冊或組織									I.R.S.僱主識別號碼。

1001馬斯坦德街
格雷普酒莊, TX									76051
主執行辦公室地址									郵政編碼

(817) 900-2664

註冊人電話號碼，包括區號。

不適用

（前名稱、地址及財政年度，如果自上次報告以來有更改）

在法案第12(b)條的規定下注冊的證券：


每個類別的標題	交易標的	在其上註冊的交易所的名稱
每股普通A類股票，面值爲0.001美元	DTC	紐約證券交易所

請勾選適用的選項： (1) 在過去的12個月內（或註冊人要求提交這些報告的較短期間內），已按照證券交易法第13或第15(d)條的規定提交了所有要求提交的報告；並 (2) 在過去90天內一直履行了這些提交要求。是 ☒沒有☐

請按複選標記指示是否在過去的12個月內（或註冊人需要提交此類文件的較短期間）每次提交自Rule 405條款和Regulation S-t（本章第232.405條）規定的互動數據文件。是 ☒無☐

請勾選標記以說明註冊人是大型快速申報人、加速申報人、非加速申報人、較小的報告公司還是新興成長型公司。請查看《交易所法》第120億.2條中「大型快速申報人」、「加速申報人」、「較小的報告公司」和「新興成長型公司」的定義。


大型加速文件申報人	☐	更小的報告公司	☐
加速文件提交人	☒	新興成長公司	☒
非加速文件提交人	☐

如果是新興成長型公司，請通過勾選表示公司選擇放棄使用依據《證券交易法》第13(a)節規定提供的任何新的或修改後的財務會計準則的延長過渡期來符合該規定的計劃。☐

請在檢查標記中勾選指示註冊商是否爲殼公司（定義見交易所法令第12b-2條）。是的☐無☒

截至2024年11月4日， 58,582,296 公司A類普通股股份0.001美元每股，已發行外在 33,089,314 公司B類普通股股份0.001美元每股，已發行外在。


目錄
			頁面
關於前瞻性聲明的特別說明			i
Where You Can Find More Information			i

第一部分：財務信息			1
項目1. 財務報表			1
合併資產負債表（未經審計）			1
合併利潤表和綜合收益（損失）表（未經審計）			2
合併現金流量表（未經審計）			3
資產負債表（未經審計）			4

合併財務報表附註（未經審計）			6
項目2. 管理層對財務狀況和業績的討論與分析			16
項目3.有關市場風險的定量和定性披露			23
項目4.控制和程序			23
第二部分.其他信息			25
項目1.法律訴訟			25
Item 1A. Risk Factors			25
項目2. 未註冊的股權銷售和款項使用			25
項目3. 面對高級證券的違約情況			25
項目4.礦山安全披露			25
項目5.其他信息			25
項目6.附件			26
簽名			27

關於前瞻性聲明的特別說明

Solo Brands, Inc.（以下簡稱「公司」，「我們」，「我們的」或「我們」）的這份第10-Q表格季度報告（以下簡稱「季度報告」）包含根據1995年《私人證券訴訟改革法》的意義而進行的前瞻性聲明。我們希望這些前瞻性聲明處於1933年證券法的第27A條修訂版（以下簡稱「證券法」）和1934年證券交易法的第21E條修訂版（以下簡稱「交易法」）關於前瞻性聲明的安全港規定之下。本季度報告中除了歷史事實陳述之外的所有陳述可能均爲前瞻性聲明。在某些情況下，您可以通過「可能」，「將」，「應該」，「期望」，「計劃」，「預期」，「可能」，「打算」，「目標」，「項目」，「考慮」，「相信」，「估計」，「預測」，「潛在」或「繼續」等詞語來識別前瞻性聲明，或這些詞語的否定形式或其他類似表達。在本季度報告中包含的前瞻性聲明包括但不限於，就我們未來的運營結果和財務狀況，宏觀經濟條件，行業和業務趨勢，業務策略，我們的IcyBreeze業務的減少計劃，市場增長和我們未來運營目標的陳述。

本季度報告中的前瞻性陳述僅爲預測。我們在很大程度上基於我們對未來事件和金融趨勢的當前期望和預測，我們認爲這些事件可能會影響我們的業務、財務狀況和運營成果。前瞻性陳述涉及已知和未知的風險、不確定性和其他重要因素，這些因素可能導致我們的實際成果、績效或成就與前瞻性陳述所暗示或表達的任何未來成果、績效或成就大不相同，包括但不限於，我們維護和增強品牌以產生和維持對我們產品的持續需求的能力，我們成功設計和開發新產品的能力，我們有效管理增長並準確預測對我們產品或運營成果的需求的能力，我們與現有和未來客戶保持成功的營銷策略的能力，我們對第三方製造商的依賴以及供應商的合作，我們以成本效率吸引新客戶並保留現有客戶的能力，我們未能以可接受的成本維持產品質量和產品性能，原材料、設備、勞動力和運輸成本的波動可能導致製造延遲或增加我們的成本，我們對個人信息的收集、使用、存儲、披露、傳輸和其他處理可能會帶來重大成本和責任，產品責任和保修索賠以及產品召回的影響，我們所處極具競爭性的市場，地緣政治衝突對全球經濟、能源供應和原材料產生的業務中斷，供應商問題或失去供應商或無法獲得原材料所帶來的額外成本和風險，我們股東影響公司事務的能力，與我們採納環保、社會和公司治理（esg）倡議和框架相關的額外成本和風險，我們維護有效內部財務報告制度的能力，以及2023年12月31日結束的年度報告第10-k表第1A項「風險因素」中，在2024年3月14日向證券交易委員會提交的年度報告第10-k的修正版本和2024年5月9日向該委員會提交的第1號10-k/A修正版本（修正後稱爲「2023第10-k」），以及在本季度報告第二部分第1A項「風險因素」中討論的重要因素，以及可能在向證券交易委員會提交的其他文件中不時更新的這些因素。本季度報告中的前瞻性陳述基於我們在本季度報告日期可獲得的信息，並且雖然我們相信這些信息爲這些陳述提供了一個合理的依據，但這些信息可能是有限或不完整的，我們的陳述不應被解讀爲表明我們已對所有可能可得的相關信息進行了徹底調查或審查。這些陳述本質上是不確定的，投資者被告誡不要過分依賴這些陳述。

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

WHERE YOU CAN FIND MORE INFORMATION

We may use our website as a distribution channel of material information about the Company, including through press releases, investor presentations, and notices of upcoming events. We intend to utilize the investor relations section of our website at https://investors.solobrands.com as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD. We also intend to use certain social media channels, including, but not limited to, X (formerly Twitter), Facebook, Instagram, TikTok and LinkedIn, as a means of communicating with the public, our customers and investors about our Company, our products, and other matters. While not all the information that the Company posts to its website and brand-related social media channels may be deemed to be of a material nature, some information may be, and we therefore encourage investors, the media, and others interested in our Company to review the information we make public in these locations.

All periodic and current reports, registration statements and other filings that we have filed or furnished to the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, are available free of charge from the SEC’s website (www.sec.gov) and on our website at https://investors.solobrands.com. Such documents are available as soon as reasonably practicable after electronic filing of the material with the SEC.

Any reference to our website or social media channels does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of the periodic and current reports, registration statements or other filings that we file or furnish with the SEC from time to time.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SOLO BRANDS, INC.

Consolidated Balance Sheets

(Unaudited)


(In thousands, except par value and per unit data)	September 30, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	12,494	$	19,842
Accounts receivable, net of allowance for credit losses of $1.1 million and $1.3 million as of September 30, 2024 and December 31, 2023, respectively	38,270		42,725
Inventory	106,800		111,613
Prepaid expenses and other current assets	14,923		21,893
Total current assets	172,487		196,073
Non-current assets
Property and equipment, net	24,227		26,159
Intangible assets, net	193,905		221,010
Goodwill	124,796		169,648
Operating lease right-of-use assets	30,361		30,788
Other non-current assets	7,450		15,640
Total non-current assets	380,739		463,245
Total assets	$	553,226	$	659,318

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	61,047	$	21,846
Accrued expenses and other current liabilities	36,904		55,155

Deferred revenue	1,744		5,310
Current portion of long-term debt	10,000		6,250
Total current liabilities	109,695		88,561
Non-current liabilities
Long-term debt, net	151,138		142,993
Deferred tax liability	8,149		17,319
Operating lease liabilities	24,831		24,648
Other non-current liabilities	9,393		13,534
Total non-current liabilities	193,511		198,494

Commitments and contingencies (Note 1)

Shareholders’ equity
Class A common stock, par value $0.001 per share; 468,767,205 shares authorized, 58,558,959 shares issued and outstanding as of September 30, 2024; 468,767,205 shares authorized, 57,947,711 issued and outstanding as of December 31, 2023	59		58
Class B common stock, par value $0.001 per share; 50,000,000 shares authorized, 33,087,636 shares issued and outstanding as of September 30, 2024; 50,000,000 shares authorized, 33,047,780 issued and outstanding as of December 31, 2023	33		33
Additional paid-in capital	360,690		357,385
Retained earnings (accumulated deficit)	(191,835)		(115,458)
Accumulated other comprehensive income (loss)	(224)		(230)
Treasury stock	(714)		(526)
Equity attributable to the controlling interest	168,009		241,262
Equity attributable to non-controlling interests	82,011		131,001
Total equity	250,020		372,263
Total liabilities and equity	$	553,226	$	659,318

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per unit data)	2024		2023		2024		2023
Net sales	$	94,139	$	110,324	$	311,013	$	329,458
Cost of goods sold	54,820		42,065		138,513		123,725

Gross profit	39,319		68,259		172,500		205,733
Operating expenses
Selling, general & administrative expenses	61,119		57,016		180,337		165,162

Restructuring, contract termination and impairment charges	83,618		4,317		83,618		4,317
Depreciation and amortization expenses	6,574		7,052		19,255		19,579
Other operating expenses	3,294		1,199		8,688		3,736
Total operating expenses	154,605		69,584		291,898		192,794
Income (loss) from operations	(115,286)		(1,325)		(119,398)		12,939
Non-operating (income) expense
Interest expense, net	3,683		2,766		10,352		7,542
Other non-operating (income) expense	(619)		(983)		(378)		(6,861)
Total non-operating (income) expense	3,064		1,783		9,974		681
Income (loss) before income taxes	(118,350)		(3,108)		(129,372)		12,258
Income tax expense (benefit)	(6,897)		(6,191)		(7,398)		(3,272)
Net income (loss)	(111,453)		3,083		(121,974)		15,530
Less: net income (loss) attributable to noncontrolling interests	(41,589)		(1,045)		(45,597)		3,054
Net income (loss) attributable to Solo Brands, Inc.	$	(69,864)	$	4,128	$	(76,377)	$	12,476

Other comprehensive income (loss)
Foreign currency translation, net of tax	$	82	$	(593)	$	6	$	(472)
Comprehensive income (loss)	(111,371)		2,490		(121,968)		15,058
Less: other comprehensive income (loss) attributable to noncontrolling interests	(24)		(214)		3		(171)
Less: net income (loss) attributable to noncontrolling interests	(41,589)		(1,045)		(45,597)		3,054
Comprehensive income (loss) attributable to Solo Brands, Inc.	$	(69,758)	$	3,749	$	(76,374)	$	12,175

Net income (loss) per Class A common stock
Basic	$	(1.19)	$	0.07	$	(1.31)	$	0.20
Diluted	$	(1.19)	$	0.07	$	(1.31)	$	0.20

Weighted-average Class A common stock outstanding
Basic	58,545		57,883		58,303		61,370
Diluted	58,545		58,368		58,303		61,581

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(In thousands)	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(121,974)	$	15,530
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Restructuring, contract termination and impairment charges	83,618		4,317
Depreciation and amortization	19,942		20,125
Inventory charges associated with restructuring and consolidation activities	18,742		—
Operating lease right-of-use assets	6,517		4,704
Equity-based compensation	4,408		14,714
Change in fair value of contingent consideration	4,721		(2,242)
Prepaid marketing charges	1,871		—
Amortization of debt issuance costs	645		645

Changes in accounts receivable reserves	401		1,312
Deferred income taxes	(9,631)		(10,924)
Other	26		186





Changes in assets and liabilities
Accounts receivable	4,058		(5,472)
Inventory	(12,434)		24,607
Prepaid expenses and other current assets	(807)		(4,995)
Accounts payable	29,608		(891)
Accrued expenses and other current liabilities	(20,282)		(8,713)
Deferred revenue	(3,566)		(2,878)
Operating lease liabilities	(4,176)		(5,442)
Other non-current assets and liabilities	(1,157)		(5,419)
Payments of contingent consideration	(3,000)		—


Net cash (used in) provided by operating activities	(2,470)		39,164
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(11,512)		(6,943)

Payments of contingent consideration	—		(9,386)
Acquisitions, net of cash acquired	—		(34,620)
Net cash (used in) provided by investing activities	(11,512)		(50,949)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt	40,000		60,000
Repayments of long-term debt	(28,750)		(8,750)

Finance lease liability principal paid	(144)		—




Common stock repurchases	—		(36,957)
Distributions to non-controlling interests	(4,284)		(8,944)

Surrender of stock to settle taxes on restricted stock awards	(188)		(42)
Stock issued under employee stock purchase plan	178		106

Net cash (used in) provided by financing activities	6,812		5,413
Effect of exchange rate changes on cash	(178)		(370)
Net change in cash and cash equivalents	(7,348)		(6,742)
Cash and cash equivalents balance, beginning of period	19,842		23,293
Cash and cash equivalents balance, end of period	$	12,494	$	16,551

SUPPLEMENTAL NONCASH INVESTING AND FINANCING DISCLOSURES:
Operating lease right of use assets obtained in exchange for lease obligations	6,109		2,532
Financing lease right of use assets obtained in exchange for lease obligations	—		899
Treasury stock retirements	—		31,164
Re-issuance of treasury stock	—		5,342

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Equity

(Unaudited)


	Class A Common Stock			Class B Common Stock
(In thousands)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Non-controlling Interest		Total Shareholders’ Equity
Balance at December 31, 2023	57,948	$	58	33,048	$	33	$	357,385	$	(115,458)	$	(230)	$	(526)	$	131,001	$	372,263
Net income (loss)	—	—		—	—		—		(3,402)		—		—		(3,082)		(6,484)
Equity-based compensation, net of income tax expense (benefit)	—	—		—	—		1,109		—		—		—		—		1,109

Other comprehensive income (loss)	—	—		—	—		—		—		(43)		—		—		(43)
Tax distributions to non-controlling interests	—	—		—	—		—		—		—		—		(4,284)		(4,284)




Surrender of stock to settle taxes on equity awards	—	—		—	—		—		—		—		(122)		—		(122)

Vested equity-based compensation and re-allocation of ownership percentage	213	—		20	—		(349)		—		—		—		349		—
Balance at March 31, 2024	58,161	$	58	33,068	$	33	$	358,145	$	(118,860)	$	(273)	$	(648)	$	123,984	$	362,439
Net income (loss)	—	—		—	—		—		(3,111)		—		—		(926)		(4,037)
Equity-based compensation, net of income tax expense (benefit)	—	—		—	—		1,230		—		—		—		—		1,230

Other comprehensive income (loss)	—	—		—	—		—		—		(33)		—		—		(33)

Employee stock purchase plan	54	1		—	—		178		—		—		—		—		179



Surrender of stock to settle taxes on equity awards	—	—		—	—		—		—		—		(31)		—		(31)

Vested equity-based compensation and re-allocation of ownership percentage	298	—		3	—		41		—		—		—		(41)		—
Balance at June 30, 2024	58,513	$	59	33,071	$	33	$	359,594	$	(121,971)	$	(306)	$	(679)	$	123,017	$	359,747
Net income (loss)	—	—		—	—		—		(69,864)		—		—		(41,589)		(111,453)
Equity-based compensation, net of income tax expense (benefit)	—	—		—	—		1,542		—		—		—		—		1,542
Equity-based compensation for non-employees	—	—		—	—		137		—		—		—		—		137
Other comprehensive income (loss)	—	—		—	—		—		—		82		—		—		82





Surrender of stock to settle taxes on equity awards	—	—		—	—		—		—		—		(35)		—		(35)

Vested equity-based compensation and re-allocation of ownership percentage	46	—		17	—		(583)		—		—		—		583		—
Balance at September 30, 2024	58,559	$	59	33,088	$	33	$	360,690	$	(191,835)	$	(224)	$	(714)	$	82,011	$	250,020

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Equity

(Unaudited)


	Class A Common Stock			Class B Common Stock
(In thousands)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Non-controlling Interest		Total Equity
Balance at December 31, 2022	63,651	$	64	32,158	$	32	$	358,118	$	5,746	$	(499)	$	(35)		$	211,571	$	574,997
Net income (loss)	—	—		—	—		—		924		—		—			9		933
Equity-based compensation, net of income tax expense (benefit)	—	—		—	—		3,703		—		—		—			1,061		4,764
Other comprehensive income (loss)	—	—		—	—		—		—		70		—			34		104
Tax distributions to non-controlling interests	—	—		—	—		—		—		—		—			(6,178)		(6,178)

Vested equity-based compensation and re-allocation of ownership percentage	38	—		227	—		(829)		—		—		—			829		—
Balance at March 31, 2023	63,689	$	64	32,385	$	32	$	360,992	$	6,670	$	(429)	$	(35)		$	207,326	$	574,620
Net income (loss)	—	—		—	—		—		7,424		—		—			4,090		11,514
Equity-based compensation, net of income tax expense (benefit)	—	—		—	—		5,345		—		—		—			1,155		6,500
Other comprehensive income (loss)	—	—		—	—		—		—		117		—			50		167
Tax distributions to non-controlling interests	—	—		—	—		—		—		—		—			(1,225)		(1,225)
Employee stock purchase plan	36	—		—	—		106		—		—		—			—		106
Common stock repurchase	(5,639)	—		—	—		—		19,888		—		(28,479)			—		(8,591)
Treasury stock retirement	—	(6)		—	—		—		(28,022)		—		28,028			—		—
Surrender of stock to settle taxes on equity awards	—	—		—	—		52		—		—		—			—		52
Vested equity-based compensation and re-allocation of ownership percentage	216	—		225	1		(13,115)		—		—		—			13,116		2
Balance at June 30, 2023	58,302	$	58	32,610	$	33	$	353,380	$	5,960	$	(312)	$	(486)		$	224,512	$	583,145
Net income (loss)	—	—		—	—		—		4,128		—		—			(1,045)		3,083
Equity-based compensation, net of income tax expense (benefit)	—	—		—	—		1,083		—		—		—			1,141		2,224
Other comprehensive income (loss)	—	—		—	—		—		—		(429)		—			(284)		(713)
Tax distributions to non-controlling interests	—	—		—	—		—		—		—		—			(1,540)		(1,540)

Common stock repurchase	(1,696)	—		—	—		—		1,783		—		(8,213)			—		(6,430)
Re-issuance of treasury stock	1,068	—		—	—		545		—		—		5,342			—		5,887
Treasury stock retirement	—	—		—	—		—		(3,136)		—		3,136			—		—
Surrender of stock to settle taxes on equity awards	—	—		—	—		—		—		—		(94)			—		(94)
Vested equity-based compensation and re-allocation of ownership percentage	77	—		223	—		(2,250)		—		—		—			2,248		(2)
Balance at September 30, 2023	57,751	$	58	32,833	$	33	$	352,758	$	8,735	$	(741)	$	(315)	—	$	225,032	$	585,560

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands)

(Unaudited)

NOTE 1 – Significant Accounting Policies

Included below are selected significant accounting policies. Refer to Note 2 - Significant Accounting Policies, within the annual consolidated financial statements in the Company’s 2023 Form 10-K for the full list of significant accounting policies.

Basis of Presentation

The unaudited consolidated financial statements contained herein have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the rules of the SEC. Accordingly, these unaudited consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results of operations, financial position and cash flows for the periods presented have been reflected. The unaudited consolidated financial statements include those of our wholly-owned and majority-owned subsidiaries and the entity consolidated under the variable interest entity model. Intercompany balances and transactions are eliminated in consolidation. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the 2023 Form 10-K. Certain prior period amounts have been conformed to the current period’s presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates and assumptions about future events and their effects cannot be made with certainty. Estimates may change as new events occur when additional information becomes available and if the operating environment changes. Actual results could differ from estimates.

Restructuring, Contract Termination and Impairment Charges

Restructuring, contract termination and impairment charges are primarily comprised of severance and employee-related benefits, contract termination fees and asset impairment charges. We recognize employee severance costs as a liability at estimated fair value, at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Contract termination fees include costs incurred to terminate a contract and the impacts to related assets or liabilities associated with these contracts. Asset impairment charges include impairments of long-lived assets and goodwill, as addressed in Note 2 - Significant Accounting Policies, in the 2023 Form 10-K. Restructuring, contract termination and asset impairment activities are recognized when they are incurred and included in restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss).

Commitments and Contingencies

From time to time, the Company is involved in various legal proceedings that arise in the normal course of business. While the Company intends to prosecute and defend any lawsuit vigorously, the Company presently believes that the ultimate outcome of any currently pending legal proceeding will not have any material adverse effect on its financial position, cash flows, or results of operations. However, litigation is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact the Company’s business and the results of operations for the period in which the ruling occurs or future periods. Based on the information available, the Company evaluates the likelihood of potential outcomes. The Company records the appropriate liability when the amount is deemed probable and reasonably estimable. In addition, the Company does not accrue for estimated legal fees and other directly related costs because they are expensed as incurred. The Company is not currently a party to any pending litigation that it considers material. Therefore, the consolidated balance sheets do not include a liability for any potential obligations as of September 30, 2024 and December 31, 2023.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) in order to align the recognition of a contract liability with the definition of a performance obligation. We adopted ASU 2021-08 in the first quarter of 2024 and for all periods subsequent to adoption, will recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606, for which recognition and measurement would have occurred under Topic 805 prior to adoption.

Recently Issued Accounting Pronouncements - Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU amended the existing segment reporting requirements by requiring disclosure of the significant segment expenses based on how management internally views segment information and by allowing the disclosure of more than one measure of segment profit or loss, as well as by expanding the

interim period segment requirements. The ASU also requires single-reportable segment entities to report the disclosures required under Topic 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements, but will require certain additional disclosures when adopted in the Company’s 2024 Form 10-K.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that requires presentation of specific categories of reconciling items, as well as reconciling items that meet a quantitative threshold, in the reconciliation between the income tax provision and the income tax provision using statutory tax rates. The ASU also requires disclosure of income taxes paid disaggregated by jurisdiction with separate disclosure of income taxes paid to individual jurisdictions that meet a quantitative threshold. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements, but will require certain additional disclosures.

NOTE 2 - Restructuring, Contract Termination and Impairment Charges

In 2024, the Company underwent a significant change in management and personnel across the organization. The new management team engaged in a detailed review of the business and its brand level components, both internally and through the engagement of external strategic partners. Management developed a strategic plan focused on returning the Company back to growth. This strategic plan involved the following activities:

•termination of underperforming marketing agreements with marketing barter partners that no longer aligned with the Company’s current marketing strategy;

•charges related to the IcyBreeze reporting unit stemming from underperformance and management’s determination to revise product design; and

•reorganization of the Oru and ISLE reporting units to eliminate costs and capitalize on potential synergies, through restructuring under a revised management structure, which resulted in severance and other changes totaling $0.6 million.

As a result of these activities, the Company recognized significant charges for restructuring and contract terminations, in addition to asset impairment charges related to IcyBreeze. The key initiatives of this plan, some of which are ongoing and expected to be completed in the fourth quarter of 2024, are described in further detail in the sections below.

Underperforming Marketing Agreements

During the current quarter, the Company determined to terminate a certain underperforming marketing agreement, for which it was committed to purchase $30.0 million of advertising services in 2024 and $67.5 million thereafter, with a minimum required payment of $10.3 million in 2024 and $16.2 million thereafter. The Company recognized the available advertising platforms and distribution methods did not align to its target customers or business. The Company is required to make a net payment of $9.0 million, recorded within accounts payable. Additionally, a previously recorded receivable, recorded within prepaid expenses and other current assets, due from the marketing barter partner of $5.4 million, was expensed. In addition, trade credits of $7.2 million, to be used for future advertising purchases, were fully impaired as of September 30, 2024. The aggregate expense recognized in relation to the termination of the marketing agreement was $21.6 million in the third quarter of 2024.

Charges Related to the IcyBreeze Reporting Unit

During the current quarter, management performed a strategic review of the IcyBreeze reporting unit, given legacy products driving underperformance of the business. As of September 30, 2024, operations had materially ceased, with sell through of remaining legacy products being the only remaining activity, while employees of IcyBreeze are being repurposed within other areas of the Company. Accordingly, we performed quantitative impairment tests for long-lived assets and goodwill, as discussed in Note 6, Intangible Assets, Net and Note 7, Goodwill. Management also evaluated other IcyBreeze assets and liabilities and recorded certain reserves, where required.

As of September 30, 2024, the Company recognized $19.9 million and $13.3 million of impairment charges as they relate to the goodwill and intangible assets of the reporting unit, respectively. Furthermore, we recorded impairments of $2.9 million for land, buildings and equipment and $0.2 million related to certain marketing contract terminations and $18.7 million of inventory reserves related to the write-down and disposition of inventory (see Note 4, Inventory). These charges were recorded within Restructuring, contract termination and impairment charges, other than the inventory related charges that were recorded to Cost of goods sold. The aggregate loss recognized for charges related to the IcyBreeze reporting unit, was $55.0 million.

The components of the restructuring, contract termination and impairment charges, inclusive of the $25.0 million goodwill impairment charge recognized at the Solo Stove reporting unit as discussed in Note 7, Goodwill, are as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
(in thousands)	2024	2023	2024	2023
Restructuring charges	580	—	580	—
Impairment charges	68,216	—	68,216	—
Contract termination	14,822	4,317	14,822	4,317
Total restructuring, contract termination and impairment charges	83,618	4,317	83,618	4,317

As noted above, the Company expects that certain of the restructuring activities underway could have a potential impact on the fourth quarter of 2024. As of September 30, 2024, the Company estimates that ongoing restructuring activities in the fourth quarter of 2024 will not be material.

NOTE 3 – Revenue

The Company principally engages in (1) direct-to-consumer (“DTC”) transactions, which are primarily comprised of product sales directly from the Company’s websites, and (2) business-to-business transactions, or retail(1), which are comprised of product sales to retailers, including where possession of the Company's products is taken and sold by the retailer in-store or online.

The following table disaggregates net sales by channel:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net sales by channel
Direct-to-consumer	$	64,480	$	76,337	$	214,293	$	230,737



Retail	29,659		33,987		96,720		98,721



Net sales	$	94,139	$	110,324	$	311,013	$	329,458

(1) Retail sales were previously referred to as wholesale sales. Retail sales and associated business results from such retail sales have been reflected as retail in this Quarterly Report and will be reflected as such in subsequent filings of the Company with the SEC.

NOTE 4 – Inventory

Inventory consisted of the following:


	September 30, 2024		December 31, 2023
Finished products on hand	$	72,140	$	83,755
Finished products in transit	27,795		21,488
Raw materials	6,865		6,370


Inventory	$	106,800	$	111,613

Inventory obsolescence is reflected in the applicable balances in the table above, with the related expense recorded to cost of goods sold on the consolidated statements of operations and comprehensive income (loss) and was $18.4 million and $2.0 million as of September 30, 2024 and December 31, 2023, respectively. The increase in inventory obsolescence was related to the $18.7 million write down of inventory associated with the wind-down of the operations of IcyBreeze as noted in Note 2, Restructuring, Contract Termination and Impairment Charges.

NOTE 5 – Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	September 30, 2024		December 31, 2023
Tax receivables	$	6,400	$	2,619
Non-trade receivables(1)	2,385		8,128
Prepaid marketing	3,124		340
Inventory deposits	1,014		4,961
Insurance	326		1,996


Other	1,674		3,849
Prepaid expenses and other current assets	$	14,923	$	21,893

(1) The non-trade receivables line item decreased by $5.4 million as a result of the termination of underperforming agreements with marketing barter partners subsequent to December 31, 2023.

In the third quarter of 2024, the Company expensed $1.9 million of prepaid marketing that was determined to have no future benefit.

NOTE 6 – Intangible Assets, Net

Intangible assets consisted of the following:


	September 30, 2024		December 31, 2023
Gross carrying value
Brand(1)	$	198,514	$	205,614
Trademark	26,714		26,714
Customer relationships	31,128		31,128

Patents(1)	5,873		12,761
Intangible assets, gross	262,229		276,217

Accumulated amortization and impairments
Brand(1)	(52,356)		(42,608)
Trademark	(5,510)		(4,171)
Customer relationships	(9,150)		(7,084)

Patents(1)	(1,308)		(1,344)
Accumulated amortization, gross	(68,324)		(55,207)
Intangible assets, net	$	193,905	$	221,010

(1) Includes impacts of the impairment of the tradename and patents intangible assets, respectively, as discussed below.

In the third quarter of 2024, the Company observed the following triggering events for the Company’s held and used long-lived asset groups:

•A sustained decline in the share price of the Company’s Class A common stock as of September 30, 2024; and

•Underperformance of the IcyBreeze reporting unit for the third quarter and year to date period ended September 30, 2024;

As a result of the identified triggering events, the Company performed a recoverability test for the identified long-lived asset groups, and the results of the test indicated that the carrying amounts for the long-lived asset groups of IcyBreeze were not expected to be recovered. The Company estimated the fair value of the asset group of IcyBreeze and wrote down the intangible assets to their estimated fair value, resulting in nominal value assigned to the existing intangible asset(s). See Note 2, Restructuring, Contract Termination and Impairment Charges for impairment considerations as they relate to the property and equipment, net of IcyBreeze.

The Company recorded an aggregate $13.3 million impairment charge to the intangible assets of IcyBreeze as of September 30, 2024. As a result of this impairment charge, the Company also reassessed the useful life of the intangible assets of IcyBreeze. As of September 30, 2024, $0.9 million of value continued to be attributable to the patent intangible asset of IcyBreeze, for which the Company expects to continue to obtain value over its remaining useful life. As such, the remaining useful life of the patent intangible asset was not revised. The impact of the impairment does not have a material impact to amortization expense in any future year.

Amortization expense was $4.9 million and $14.8 million for the three and nine months ended September 30, 2024, compared to $5.7 million and $16.3 million for the three and nine months ended September 30, 2023. Amortization expense is recorded to depreciation and amortization expenses on the consolidated statements of operations and comprehensive income (loss) (unaudited).

NOTE 7 – Goodwill


Balance, December 31, 2023	$	169,648

Impairment losses	(44,852)
Balance, September 30, 2024	$	124,796

In the third quarter of 2024, the Company identified goodwill impairment indicators indicating the fair value of one or more of our reporting units more likely than not did not exceed their carrying values. As a result of the goodwill impairment indicators noted above in Note 6, Intangible Assets, Net, the Company determined it appropriate to perform an interim quantitative goodwill impairment test for all of its reporting units as of September 30, 2024.

For the quantitative goodwill impairment analysis performed as of September 30, 2024, the Company estimated the fair value of the reporting units using a weighting of fair values derived from the income and market approaches, where comparable market data was available. Under the income approach, the Company determined the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections were based on management’s estimates of revenue growth rates and operating margins, EBITDA margins, consideration of industry and market conditions, terminal growth rates and management’s estimates of working capital requirements. The discount rate for each reporting unit was based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of each reporting unit and its estimated cash flows, which ranged from 17.0% to 19.5%. Under the market approach, the Company utilized a combination of methods, including estimates of fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit.

As a result of the quantitative goodwill impairment test performed as of September 30, 2024, the Company determined that the carrying amounts of the IcyBreeze and Solo Stove reporting units exceeded their respective fair values and a goodwill impairment charge was recognized. The Chubbies reporting unit was determined to have a fair value exceeding its book value by more than 5%. Goodwill at the remaining reporting units of the Company were fully impaired as of December 31, 2023. The following table presents the goodwill impairment charges and remaining goodwill by reporting unit, as of September 30, 2024:


Reporting Unit	Impairment Charge ($)	Remaining Goodwill ($)
Solo Stove	25,000	51,677
Chubbies	—	73,119
IcyBreeze	19,852	—

The impairment charge was recorded to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss) (unaudited).

The future occurrence of a potential indicator of impairment could include matters such as: a decrease in expected net earnings, a further decline in equity market conditions, a decline in comparable market multiples, a continued and sustained decline in our common stock price, and a significant downturn in demand for our products. In the event of significant adverse changes of the nature described above, it may be necessary for us to recognize a non-cash impairment of goodwill, which could have a material adverse effect on our consolidated business, results of operations and financial condition. Based on the results of the quantitative interim goodwill impairment test, the calculated fair value of the Chubbies reporting unit exceeded its book value by less than 10%. Therefore, a 150 basis point (“BPS”) increase in the discount rate, a 175 BPS decrease in the EBITDA margin or a 400 BPS decrease in revenue growth would indicate a potential hypothetical impairment charge for this reporting unit for the amounts reflected in the chart below.


	Chubbies
Goodwill as of September 30, 2024	$	73,119
Sensitivity analysis, approximate hypothetical impairment charge:
Discount rate increase of 150 BPS	$	(1,383)
EBITDA margin decrease of 175 BPS	(1,383)
Revenue growth rate decrease of 400 BPS	(383)

The fair value determination of the Company’s reporting units and goodwill is judgmental in nature and requires the use of estimates and assumptions that are sensitive to changes. Assumptions include the estimation of future revenue and projected margins, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and capital spending, and determination of discount rates. Some of the inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.

NOTE 8 – Accrued Expenses and Other Current Liabilities

Significant accrued expenses and other current liabilities were as follows:


	September 30, 2024		December 31, 2023
Inventory(1)	$	9,505	$	14,780
Leases	8,363		7,575
Marketing	5,434		5,936
Payroll	2,856		6,451

Allowance for sales returns	2,734		3,316
Allowance for sales rebates	2,484		3,074
Non-income taxes	2,019		5,374
Shipping costs	515		3,747
Income taxes	395		2,782






Other	2,599		2,120
Accrued expenses and other current liabilities	$	36,904	$	55,155

(1) The inventory line item decreased by $5.3 million as a result of invoices received subsequent to December 31, 2023. The timing differences resulting in the late receipt of invoices as of December 31, 2023 has not recurred in subsequent periods.

NOTE 9 – Long-Term Debt, Net

Long-term debt, net consisted of the following:


	Weighted-Average Interest Rate at September 30, 2024		September 30, 2024		December 31, 2023
Term loan	7.14	%	$	87,500	$	91,250
Revolving credit facility	7.15	%	75,000		60,000
Unamortized debt issuance costs			(1,362)		(2,007)
Total debt, net of debt issuance costs			161,138		149,243
Less: current portion of long-term debt			10,000		6,250
Long-term debt, net			$	151,138	$	142,993

Long-term debt, net approximates fair value and is valued using Level 2 inputs within the fair value hierarchy, as defined in Note 2 - Significant Accounting Policies, in the 2023 Form 10-K. See Note 12, Fair Value Measurements of this Quarterly Report for more information regarding the fair value considerations for long-term debt, net.

Interest expense was $3.7 million and $10.4 million for the three and nine months ended September 30, 2024, respectively, and $2.8 million and $7.5 million for the corresponding periods in 2023, respectively.

During the nine months ended September 30, 2024, the Company made draws of $40.0 million and payments of $25.0 million under the Revolving Credit Facility. Availability for future draws on the Revolving Credit Facility was $274.4 million, net of $0.6 million of letters of credit issued and outstanding, and $289.4 million as of September 30, 2024 and December 31, 2023, respectively.

The Company was in compliance with all covenants under all credit arrangements as of September 30, 2024.

As of September 30, 2024, the future maturities of principal amounts of our total debt obligations, excluding finance lease obligations, through maturity and in total, consists of the following:


Years Ending December 31,	Amount
2024 (remaining three months)	$	2,500
2025	10,625
2026	149,375



Total	$	162,500

NOTE 10 – Equity-Based Compensation

Equity-based compensation expense totaled approximately $1.9 million and $4.7 million for the three and nine months ended September 30, 2024, respectively, and $5.0 million and $14.8 million for the corresponding periods in 2023, respectively. Our stock options have contractual terms of four

to ten years and become exercisable over a three-year period. Expense related to stock options is recognized on a straight-line basis over the vesting period. Expense related to restricted stock units ("RSUs") issued to eligible employees under the Solo Brands, Inc. 2021 Incentive Award Plan (the “Incentive Award Plan”) is recognized over the vesting period, generally between three years and four years. Expense related to RSUs granted to non-employee directors under the Incentive Award Plan is recognized on a straight-line basis over the vesting period, with newly appointed non-employee directors grants and grants to continuing non-employee directors vesting over a one-year period, while historically newly appointed non-employee directors grants vested over a three-year period. Expense related to performance stock units (“PSUs”) is recognized on a straight-line basis from their award date to the end of the performance period, generally two years. Expense related to special performance stock units (“SPSUs”) is recognized on a straight-line basis from their award date to the end of the requisite service period of three years. Expense related to the Executive Performance Stock Units (“EPSUs”) is recognized over the derived service period.

The following table summarizes equity-based compensation awards granted during the nine months ended September 30, 2024:


(In thousands, except per unit data)	Number of Shares Granted	Weighted Average Grant-Date Fair Value per Award
RSUs	2,764	$	2.10
EPSUs	1,468	$	2.36
SPSUs	1,001	$	1.23

Executive Performance Stock Units

In January 2024, the Company granted EPSUs to the Chief Executive Officer (“CEO”) under the Incentive Award Plan. The EPSUs are unfunded, unsecured rights to receive, if the Company achieves certain stock price targets (measured as a volume-weighted stock price over 100 consecutive trading days) at any time until the three and half year anniversary of the grant date and the grantee remains an employee of the Company, shares of our Class A common stock or an amount in cash of equal fair market value of a share on the day immediately preceding the settlement date. As the EPSUs contain a market condition, the Company will recognize the full amount of compensation expense regardless of if the stock price targets are achieved, but only as long as the grantee remains an employee of the Company.

In connection with the grant of SPSUs in April 2024, the Company modified the EPSUs previously granted to increase the number of awards granted, lower the stock price targets and change the number of days used for the volume-weighted stock price measure to 30 consecutive trading days.

The EPSUs are divided into four tranches. The fair value of the EPSUs granted in the nine months ended September 30, 2024 was derived using a Monte Carlo simulation. It was determined that mid-points between $1.99 to $2.17 for the pre-modification awards and $2.23 to $2.66 post-modification were the most reasonable estimate of grant date fair value for each of the four tranches. The grant date fair values of the EPSUs are a non-recurring measurement and are considered a level 3 estimate. See Note 2 - Significant Accounting Policies within the annual consolidated financial statements in the Company’s 2023 Form 10-K for additional information about the fair value framework and the levels within. Additionally, due to the full vesting of the awards upon achievement of the stock price target and continued employment, or within 180 days of termination without cause or Good Reason (as defined within the employment agreement filed as Exhibit 10.36 to the 2023 Form 10-K), the period over which compensation expense will be recognized was derived through the same Monte Carlo simulations.

The table below contains the derived service periods over which compensation expense will be recognized for each of the four tranches of EPSUs:


EPSUs’ Vesting Tranche	Pre-Modification Derived Service Period	Post-Modification Derived Service Period
First Vesting Tranche	1.37 years	1.16 years
Second Vesting Tranche	1.43 years	1.48 years
Third Vesting Tranche	1.48 years	1.70 years
Fourth Vesting Tranche	1.58 years	1.79 years

In the event the Company incurs a Change in Control (as defined in the Incentive Award Plan), any previously unvested EPSUs will vest based on the price per share received by or payable with respect to the common stockholders in connection with the transaction, pro-rated to reflect a price per share that falls between two stock price goals. EPSUs that remain unvested as of the expiration date or upon the employee’s termination will be automatically forfeited and terminated without consideration.

Special Performance Stock Units

In April 2024, the Company granted SPSUs under the Incentive Award Plan. The SPSUs are unfunded, unsecured rights to receive, if the Company achieves certain stock price targets (measured as a volume-weighted stock price over 30 consecutive trading days) at any time until the three year anniversary of the grant date and the grantee remains an employee of the Company, shares of our Class A common stock or an amount in cash of equal fair market value of a share on the day immediately preceding the settlement date. As the SPSUs contain a market condition, the Company will recognize the full amount of compensation expense regardless of if the stock price targets are achieved, but only as long as the grantee remains an employee of the Company.

The SPSUs are divided into three tranches. The fair value of the SPSUs granted in the nine months ended September 30, 2024 were derived using a Monte Carlo simulation. It was determined that mid-points between $1.07 to $1.43 were the most reasonable estimate of grant date fair value for each of the three tranches. The grant date fair values of the SPSUs are a non-recurring measurement and are considered a level 3 estimate. The SPSUs have a requisite service period of three years over which compensation expense will be recognized.

NOTE 11 – Income Taxes

Provision for Income Taxes

The Company is subject to U.S. federal, state, and local income taxes on the Company's allocable share of taxable income of Solo Stove Holdings, LLC (“Holdings”). The subsidiaries of Holdings are also subject to income taxes in the foreign jurisdictions in which they operate. We are the sole managing member of Holdings, and as a result, consolidate the financial results of Holdings. Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Holdings is generally not subject to U.S. federal and certain state and local income taxes. Instead, taxable income or loss is allocated to its members on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of Holdings, as well as any stand-alone income or loss generated by Solo Brands, Inc. Correspondingly, our forecasted annual effective tax rate (“AETR”) was 6.4% as of September 30, 2024.

The effective income tax rate was 5.8% and 5.7% for the three and nine months ended September 30, 2024, compared to 199.2% and (26.7)% for the corresponding periods in 2023. The decrease for the three months ended September 30, 2024 was primarily driven by the tax benefits of losses generated from restructuring, contract termination and impairment charges (see Note 2, Restructuring, Contract Termination and Impairment Charges for more information) in the current year period, offset by a partial valuation allowance and the portion of the tax benefit attributable to noncontrolling interest holders. The increase for the nine months ended September 30, 2024 was primarily attributable to the net release of the Company’s valuation allowance in the prior year period.

The weighted-average ownership interest in Holdings was 63.8% for both the three and nine months ended September 30, 2024, respectively, and 63.8% and 64.8% for the three and nine months ended September 30, 2023.

Deferred Tax Assets and Liabilities

As of September 30, 2024, the total deferred tax liability related to the basis difference in the Company's investment in Holdings was nominal. The total net basis difference currently recorded would reverse upon the eventual sale of its interest in Holdings as a capital gain.

During the three and nine months ended September 30, 2024, the Company did not recognize any deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement, as defined in Note 15 - Income Taxes, to the audited consolidated financial statements included in our 2023 Form 10-K.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of its deferred tax assets may not be realized. As of September 30, 2024, the Company concluded, based on the weight of all available positive and negative evidence, that a portion of the deferred tax assets are more likely than not to be realized. During the year ended December 31, 2023, the Company evaluated and concluded that there was significant negative evidence related to the realizability of Oru's deferred tax assets, resulting in the Company recording a full valuation allowance against the deferred tax assets of Oru. As of September 30, 2024, there has been no change in the valuation allowance assessment related to Oru deferred tax assets. During the three months ended September 30, 2024, the Company evaluated and concluded there was significant negative evidence related to the realizability of some of the Company’s net operating losses and deferred interest attributes and recorded a valuation allowance against these deferred tax assets.

NOTE 12 – Fair Value Measurements

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within Note 2 - Significant Accounting Policies, in the 2023 Form 10-K.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis:


			Fair Value Measurements
September 30, 2024	Total Fair Value		Level 1		Level 2		Level 3
Financial liabilities:
Long-term debt, net	$	151,138	$	—	$	151,138	$	—
Contingent Consideration	$	7,515	$	—	$	—	$	7,515


			Fair Value Measurements
December 31, 2023	Total Fair Value		Level 1		Level 2		Level 3
Financial liabilities:
Long-term debt, net	$	142,993	$	—	$	142,993	$	—
Contingent Consideration	$	5,794	$	—	$	—	$	5,794

There were no transfers between the valuation hierarchy Levels 1, 2 and 3 for three and nine months ended September 30, 2024 and year ended December 31, 2023.

Liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


September 30, 2024	Contingent Consideration
Beginning balance (December 31, 2023)	$	5,794
Total change in fair value (gain) loss included in earnings	1,721
Additions	3,000
Payments	(3,000)
Ending Balance	$	7,515

The contingent consideration related to our TerraFlame reporting unit as of September 30, 2024 consists of a post-closing payment, resulting from acquisition activity in 2023 and relies on forecasted results through the expected post-closing payment period. The fair value of the post-closing payment is valued using a threshold and cap (capped call) structure. This contingent considerations represents a stand-alone liability that is measured at fair value on a recurring basis each reporting date using inputs that are unobservable and significant to the overall fair value measurement and are considered a level 3 estimate. The contingent consideration liability is recorded in other non-current liabilities on the consolidated balance sheets. Changes in fair value of contingent consideration are recorded in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss) (unaudited).

On August 22, 2024, the Company and the selling parties of TerraFlame executed an amendment to the Equity Purchase Agreement, as defined in Part I, Item 8. “Financial Statements and Supplementary Data” in the 2023 Form 10-K, modifying specific terms related to the achievement of the contingent consideration thresholds, resulting in an increase in fair value and payment of $3.0 million of the 2023 Earnout, which was paid upon execution of the amendment and recorded in selling, general and administrative expenses. In addition, the post-closing payment terms were amended to provide additional earnout calculation dates to the previously defined post-closing payments. This amendment resulted in the revision of the fair value of the post-closing payment contingent consideration, using the same threshold and cap (capped call) structure as employed for the prior valuations, with the total change in fair value (gain) loss of $1.7 million included in the applicable financial statements as of September 30, 2024.

During the third quarter of 2024, the Company recorded impairment charges of $44.9 million and $13.3 million for goodwill and intangible assets, net, respectively. Indicators of value from income and market approaches, where comparable market data is available, were the basis for the determination of the fair values, which include Level 3 inputs. See Note 6, Intangible Assets, Net and Note 7, Goodwill, for additional discussions of the Company's impairment analyses. There were no other material nonrecurring fair value measurements during the periods ended September 30, 2024 and December 31, 2023.

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, contingent consideration and bank indebtedness. The carrying amount of cash, accounts receivable, and accounts payable, approximates fair value due to the short-term maturity of these instruments.

NOTE 13 - Variable Interest Entities

As of September 30, 2024 and December 31, 2023, we consolidated one entity that is a VIE, that relates to a manufacturing entity for Oru, for which we are the primary beneficiary. Through a management agreement governing the entity, we manage the entity and handle all day-to-day operating decisions. Accordingly, we have the decision-making power over the activities that most significantly impact the economic performance of our VIE and an obligation to absorb losses or receive benefits from the VIE that could potentially be significant to the VIE. These decisions and significant activities include, but are not limited to, manufacturing schedules, production processes, units of production and types of products. The Company is contractually obligated to provide financial support to the VIE.

Total assets of the VIE included on the consolidated balance sheet as of September 30, 2024 and December 31, 2023 were $2.4 million and $3.7 million, respectively. Total liabilities of the VIE included on the consolidated balance sheets as of September 30, 2024 and December 31, 2023 were $2.8 million and $3.9 million, respectively.

The VIE’s assets may only be used to settle the VIE’s obligations and may not be used for other consolidated entities. The VIE’s liabilities are non-recourse to the general credit of the Company’s other consolidated entities.

NOTE 14 – Net Income (Loss) Per Share

Basic net income (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Solo Brands, Inc. by the weighted average number of shares of Class A common stock outstanding during the period. Diluted net income (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Solo Brands, Inc. by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

The following table sets forth the calculation of the basic and diluted net income (loss) per share for the Company’s Class A common stock:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income (loss)	$	(111,453)	$	3,083	$	(121,974)	$	15,530
Less: Net income (loss) attributable to non-controlling interests	(41,589)		(1,045)		(45,597)		3,054
Net income (loss) attributable to Solo Brands, Inc.	$	(69,864)	$	4,128	$	(76,377)	$	12,476







Weighted average shares of Class A common stock outstanding - basic	58,545		57,883		58,303		61,370
Effect of dilutive securities	—		485		—		211
Weighted average shares of Class A common stock outstanding - diluted	58,545		58,368		58,303		61,581

Net income (loss) per share of Class A common stock outstanding - basic	$	(1.19)	$	0.07	$	(1.31)	$	0.20
Net income (loss) per share of Class A common stock outstanding - diluted	$	(1.19)	$	0.07	$	(1.31)	$	0.20

During the three months ended September 30, 2024 and 2023, 0.1 million and 0.2 million options and 1.3 million and 0.4 million restricted stock units, respectively, were not included in the computation of diluted net income (loss) per share because their effect would have been anti-dilutive. During the nine months ended September 30, 2024 and 2023, 0.1 million and 0.3 million options and 2.0 million and 0.3 million restricted stock units, respectively, were not included in the computation of diluted net income (loss) per share because their effect would have been anti-dilutive.

The shares of Class B common stock and the granted PSUs are subject to a contingency that is not based on the Company’s share price or the price of the convertible instrument, as disclosed in Note 14 - Equity-Based Compensation, in the 2023 Form 10-K. As such, contingently convertible shares where conversion is not tied to a market price trigger or price of the convertible instrument are excluded from the calculation of diluted EPS until such time as the contingency has been resolved under the if-converted method. Additionally, the Company has issued EPSUs that contain a market condition and vest immediately upon satisfaction of said market condition. As a result of the immediate vesting feature, the EPSUs will in all cases be neither dilutive nor anti-dilutive. Similar to the EPSUs, the SPSUs contain a market condition. However, the SPSUs do not contain an immediate vesting feature, with vesting achieved over the requisite service period of three years. As such, the SPSUs, upon achievement of the market condition, will be considered for dilution or anti-dilution through the remainder of the vesting period. Until such time that the market condition is achieved, the SPSUs are considered neither dilutive nor anti-dilutive.

As of September 30, 2024, no shares of the Class B common stock, EPSUs or SPSUs were considered dilutive or anti-dilutive.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In the following discussion, references to “we,” “us,” “our,” the “Company,” and similar references mean Solo Brands, Inc. and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report, as well as our audited consolidated financial statements included in our 2023 Form 10-K. Some of the numbers included herein have been rounded for the convenience of the presentation. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Item I, Part 1A, “Risk Factors” of our 2023 Form-K and elsewhere in this Quarterly Report. See further our “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Overview

We own and operate premium brands with ingenious products that we market and deliver through our direct-to-consumer (“DTC”) platform and retail partnerships. We aim to help our customers enjoy good moments that create lasting memories. We consistently deliver innovative, high-quality products that are loved by our customers and revolutionize the outdoor experience, build community and help everyday people reconnect with what matters most.

For the three months ended September 30, 2024, we experienced a decrease in our net sales from $110.3 million for the three months ended September 30, 2023 to $94.1 million for the current period. The decline in net sales was primarily driven by a continued decline within our DTC channel net sales, resulting from softer demand trends as a result of consumers being more selective with their spending. As a result, we’ve experienced weaker traffic in our DTC channel this quarter compared to the same quarter in the prior year. The retail channel net sales1 experienced its first quarter in 2024 of decline when compared to the comparable period in the prior year, primarily as a result of a non-recurring transaction with a marketing barter partner in the third quarter of 2023.

For the nine months ended September 30, 2024, we experienced a decrease in our net sales from $329.5 million for the nine months ended September 30, 2023 to $311.0 million for the current period. The decline in net sales was primarily driven by a decline in DTC channel net sales in the year to date period. This decline is primarily related to softness in demand as a result of consumers being more selective with their spending. as identified in the second quarter of 2024. The retail channel net sales similarly experienced a decline in the current year period when compared to the same period in the prior year, driven entirely by a non-recurring transaction with the marketing barter partner in the third quarter of 2023.

Key Factors Affecting Our Financial Condition and Results of Operations

In 2024, the Company underwent significant changes to its management team, bringing about a change in strategic vision and evaluation of the Company’s current initiatives and brands. The evaluation included analysis of the brand level financials, strengths of each of the brands, product design and customer service metrics, marketing campaign effectiveness and cost, efficiencies of brands on a standalone or aggregated basis, amongst other things. This evaluation, undertaken over the course of the nine months ended September 30, 2024, led the Company to undertake the following activities within the third quarter of 2024:

•termination of underperforming marketing agreements with marketing barter partners that no longer aligned with the Company’s current marketing strategy;

•charges related to the IcyBreeze reporting unit stemming from underperformance and management’s determination to revise product designs; and

•reorganizing the Oru and ISLE reporting units to eliminate costs and capitalize on potential synergies, through restructuring under a revised management structure.

Management undertook these activities with the intent of enhancing the foundation of the Company as part of the strategic initiative to return the Company to growth. The restructuring items noted above are intended to provide future benefit to this return to growth, in the following manner:

•Through the termination of the underperforming marketing agreements, management is able to repurpose the funds previously allocated to these marketing contracts, towards increased investment in direct response marketing. Marketing spend under a certain marketing agreement was $16.9 million in full year 2023 and $3.4 million in the nine months ended September 30, 2024. The redirection of these marketing funds to direct response marketing is anticipated to generate more favorable returns on the marketing dollars spent, as direct response marketing is better aligned to how our target market consumes their media.

•The reorganization of the Oru and ISLE reporting units under a single brand president and leadership team was determined to be strategically beneficial, as both brands operate within the same outdoor watersports space. Through the reorganization under combined leadership, the Company expects to benefit from improved margins through the consolidation of overhead and exploration of manufacturing and logistics synergies. In addition, the Company expects to be able to better leverage the combined scale of the Oru and ISLE reporting units as we seek to scale and achieve growth.

•IcyBreeze was acquired in 2023 and we anticipated it to be a driver of the Company’s key metrics in the period of acquisition and beyond. Through the course of ownership, however, we determined that IcyBreeze underperformed projections. Management made the decision to

1 Retail channel net sales were previously referred to as wholesale channel net sales. Retail channel net sales have been reflected in this Quarterly Report and will be reflected as such in subsequent filings of the Company with the SEC.

wind-down the operations of IcyBreeze in the third quarter of 2024, with run-off operations limited to selling through remaining legacy products and IcyBreeze personnel being repurposed within the Company. While the operations of IcyBreeze are being wound down, the Company anticipates introducing revised product designs in a future period. This wind-down of operations, while resulting in a direct reduction to revenue attributable to the Company, is also anticipated to reduce the expenses of the brand that continued to exceed the revenues, which we expect to benefit net income (loss) in future periods.

While these activities are intended to provide future benefit to the Company, the majority of these activities above required some form of current or future period cash outlay. In order to fund these cash outlays in the current and future periods, the Company leveraged and will continue to leverage income from operations and draws on the Revolving Credit Facility (as defined below). The following table outlines the cash outlays and the period in which they occurred or are anticipated to occur.


Activity	Cash Outlay (dollars in thousands)		Period
Termination of marketing agreements	$	9,000	Q4 2024
Reorganization of the Oru and ISLE Reporting Units	349		Q4 2024
Wind-down of the Operations of the IcyBreeze Reporting Unit	205		Q3 - Q4 2024

Discussion within the relevant comparative periods and sections have been included below.

Results of Operations

Three and Nine Months Ended September 30, 2024 Compared to the Three and Nine Months Ended September 30, 2023

Net Sales

Net sales are comprised of DTC and retail channel net sales to retail partners. Net sales in both channels reflect the impact of partial shipments, product returns, and discounts for certain sales programs or promotions.

Our net sales have historically included a seasonal component. In the DTC net sales channel, our historical net sales tend to be highest in our second and fourth quarters, while our retail net sales channel has historically generated higher sales in the first and third quarters. For 2024, the Company has identified a shift in the trend of the retail net sales channel, and expects higher sales to be generated in the first and fourth quarters. This trend may continue in the future. Additionally, we expect variances in our net sales throughout the year relative to the timing of new product launches.


	Three Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$	%
Net sales	$	94,139	$	110,324	(16,185)	(14.7)	%
DTC net sales	64,480		76,337		(11,857)	(15.5)	%
Retail net sales	29,659		33,987		(4,328)	(12.7)	%


	Nine Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Net sales	$	311,013	$	329,458	$	(18,445)	(5.6)	%
DTC net sales	214,293		230,737		(16,444)		(7.1)	%
Retail net sales	96,720		98,721		(2,001)		(2.0)	%

The decrease in net sales for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was driven by a decline in DTC channel net sales, coupled with a decline in retail channel net sales of lesser magnitude. DTC channel net sales declined, primarily resulting from softer demand trends as a result of consumers being more selective with their spending, while the decline in retail channel net sales is attributable to a non-recurring transaction in the prior year period with a marketing barter partner. The non-recurring transaction with a marketing barter partner in the third quarter of 2023 contributed $7.2 million of retail channel net sales in the 2023 periods.

Cost of Goods Sold and Gross Profit

Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party manufacturers, inbound freight and duties, costs related to manufacturing of certain of our products, product quality testing and inspection costs and depreciation on molds and equipment that we own.


	Three Months Ended September 30,						Change
(dollars in thousands)	2024			2023			$		%
Cost of goods sold	$	54,820		$	42,065		$	12,755	30.3	%

Gross profit	39,319			68,259			(28,940)		(42.4)	%
Gross margin (Gross profit as a % of net sales)	41.8		%	61.9		%			(20.10)


	Nine Months Ended September 30,						Change
(dollars in thousands)	2024			2023			$		%
Cost of goods sold	$	138,513		$	123,725		$	14,788	12.0	%

Gross profit	172,500			205,733			(33,233)		(16.2)	%
Gross margin (Gross profit as a % of net sales)	55.5		%	62.4		%			(6.90)

In the third quarter of 2024, the Company wrote down $18.7 million of inventory and related purchase orders of the IcyBreeze reporting unit as part of the restructuring, contract termination and impairment charge activity. This write down was reflected in cost of goods sold, resulting in both the three months and nine months ended September 30, 2024 exceeding the respective prior year periods amounts and negatively impacting the gross margins of each respective period in the current year period.

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

When excluding the write down of inventory and purchase orders described above, cost of goods sold decreased for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, in line with the decrease in net sales in the current year period. Gross profit decreased in the current year period when compared to the same period in the prior year and was negatively impacted by the decline in revenue.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

When excluding the write down of inventory and purchase orders described above, cost of goods sold decreased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, in line with the decline in net sales. Gross profit for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 also declined in line with the decline recognized within net sales.

Selling, General & Administrative Expenses

Selling, general and administrative (“SG&A”) expenses consist primarily of marketing costs, wages, equity-based compensation expense, benefits costs, costs of our warehousing and logistics operations, costs of operating on third-party DTC marketplaces, professional fees and services, costs of shipping product to our customers and general corporate expenses.


	Three Months Ended September 30,						Change
(dollars in thousands)	2024			2023			$		%
Selling, general, and administrative expenses	$	61,119		$	57,016		$	4,103	7.2	%
SG&A as a % of net sales	64.9		%	51.7		%			13.2	%


	Nine Months Ended September 30,						Change
(dollars in thousands)	2024			2023			$		%
Selling, general, and administrative expenses	$	180,337		$	165,162		$	15,175	9.2	%
SG&A as a % of net sales	58.0		%	50.1		%			7.9	%

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

The increase in SG&A for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was driven by a $6.8 million increase in the fair market value changes in contingent consideration related to certain of our 2023 acquisitions and $1.1 million of variable cost increases, partially offset by $3.8 million of fixed cost decreases.

The variable cost increases for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 were primarily the result of a $1.9 million increase in write-offs of prepaid marketing related to marketing campaigns that management determined did not align with the current marketing strategy.

The fixed cost decreases for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 were primarily the result of a decrease in employee-related costs primarily driven by a significant reduction in equity based compensation expense and bonus expense, offset in part by costs associated with the separation of certain management personnel and addition of senior leadership positions. Partially offsetting the net decrease in employee-related costs were increases in professional services and information technology expenditures, each of which were incurred to support future growth plans.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

The increase in SG&A for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was driven by a $7.0 million increase in fair market value changes in contingent consideration related to certain of our 2023 acquisitions and $11.0 million of variable cost increases, partially offset by $2.7 million of fixed cost decreases.

The variable cost increases for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 were primarily the result of a $6.3 million increase in marketing spend, of which $3.4 million was spent in 2024 under a marketing contract terminated in the third quarter of 2024, and a $1.9 million increase in write-offs of prepaid marketing related to marketing campaigns that management determined did not align with the current marketing strategy.

The fixed cost decreases for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 were primarily the result of a $7.5 million decrease in employee-related costs primarily driven by a significant reduction in equity based compensation expense and bonus expense, offset in part by separation of certain management personnel and addition of senior leadership positions. Partially offsetting this decrease were increases of $1.7 million in professional services costs, $1.8 million in software expenses and $1.2 million in rent expense.

Restructuring, Contract Termination and Impairment Charges

Restructuring, contract termination and impairment charges consist of the activities as described above.


	Three and Nine Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Restructuring charges	$	580	$	—	$	580	100.0	%
Impairment charges	68,216		—		68,216		100.0	%
Contract termination	14,822		4,317		10,505		243.3	%
Total restructuring, contract termination and impairment charges	$	83,618	$	4,317	79,301		1836.9	%

The increase in restructuring charges for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was the result of management undertaking the strategic activities noted above, resulting in $0.6 million of restructuring charges, $14.8 million of charges related to contract terminations and $43.2 million of impairment charges at the IcyBreeze reporting unit, as well as a $25.0 million goodwill impairment charge at the Solo Stove reporting unit driven by the sustained decline in share price, compared to a $4.3 million one-time contact termination fee, with offsetting benefits that were fully realized by the end of 2023, in the prior year period.

Other Operating Expenses

Other operating expenses include certain costs incurred as a public company, acquisition-related expenses, business optimization and expansion expenses and management transition costs.


	Three Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Other operating expenses	$	3,294	$	1,199	$	2,095	174.7	%


	Nine Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Other operating expenses	$	8,688	$	3,736	$	4,952	132.5	%

Other operating expenses increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, primarily as a result of increases to management transition costs, including additional cost associated with onboarding senior leadership positions and strategic consulting engagements. These strategic consulting arrangements consisted primarily of engagements for brand strategy, product roadmap development, information technology, accounting and finance transformation and brand marketing strategy.

Interest Expense, Net

Interest expense, net consists primarily of interest on our Revolving Credit Facility and Term Loan.


	Three Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Interest expense, net	$	3,683	$	2,766	$	917	33.2	%


	Nine Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Interest expense, net	$	10,352	$	7,542	$	2,810	37.3	%

Interest expense, net increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 due to an increase in the weighted average interest rate on our total debt balance, as well as a higher average debt balance in the current year when compared to the prior year.

Income Taxes


	Three Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Income tax expense (benefit)	$	(6,897)	$	(6,191)	$	(706)	11.4	%


	Nine Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Income tax expense (benefit)	$	(7,398)	$	(3,272)	$	(4,126)	126.1	%

Income tax benefit increased for the three and nine months ended September 30, 2024 when compared to the three and nine months ended September 30, 2023, primarily driven by the book losses due to the restructuring, contract termination and impairment charges (see Note 2, Restructuring, Contract Termination and Impairment Charges for more information), offset in part by the increase in the Company’s valuation allowance, as compared to the prior year period which included a net release of the Company’s valuation allowance.

Liquidity and Capital Resources

Historically, our cash requirements have principally been for working capital purposes and acquisitions. We expect these needs to continue as we develop and grow our business. We fund our working capital, primarily comprised of inventory, and acquisitions from cash flows from operating activities, cash on hand, and borrowings under our Revolving Credit Facility. We maintain the majority of our cash and cash equivalents in accounts with major highly rated multi-national and local financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions, and any inability to access or delay in accessing these funds could adversely affect our business and financial position.

The table below reflects our sources, facilities and availability of liquidity as of September 30, 2024. See Note 9, Long-Term Debt, Net, to the unaudited consolidated financial statements included elsewhere in this Quarterly Report.


	Liquidity Sources and Facilities		Availability
Cash and cash equivalents	$	12,494	$	12,494
Working capital (excluding cash and cash equivalents)	50,298		50,298
Revolving Credit Facility	75,000		274,400
Term Loan	87,500		—

Revolving Credit Facility and Term Loan

On May 12, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., the Lenders and L/C Issuers party thereto (each as defined therein) and the other parties thereto (as subsequently amended on June 2, 2021, and September 1, 2021, the “Revolving Credit Facility”). As so amended, the Revolving Credit Facility allows us to borrow up to $350.0 million of revolving loans, including the ability to issue up to $20.0 million in letters of credit, with $0.6 million of letters of credit issued and outstanding as of September 30, 2024. While our issuance of letters of credit does not increase our borrowings outstanding under the Revolving Credit Facility, it does reduce the amounts available under the Revolving Credit Facility. The Revolving Credit Facility matures on May 12, 2026 and bears interest at a rate equal to the base rate as defined in the agreement plus an applicable margin, which as of September 30, 2024, was based on SOFR. Interest is due on the last business day of each March, June, September and December.

In addition to the above, the amendment on September 1, 2021 included a provision to borrow up to $100.0 million under a term loan (the “Term Loan”). The proceeds from the Term Loan were used to fund the Chubbies acquisition. The Term Loan matures on May 12, 2026 and bears interest at a rate equal to the base rate as defined in the agreement plus an applicable margin, which as of September 30, 2024, was based on SOFR. We were required to make quarterly principal payments on the Term Loan beginning on December 31, 2021. All outstanding principal and interest due on the Term Loan are due at maturity. All required principal payments were made on time and with available cash through the nine months ended September 30, 2024. Interest payments are due on a quarterly basis under the Term Loan, with the same due dates as noted for the Revolving Credit Facility above.

The Revolving Credit Facility and Term Loan are subject to certain financial and non-financial covenants as described in our 2023 Form 10-K in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” As of September 30, 2024, we were in compliance with all required covenants.

As of September 30, 2024, there are no material changes to our primary short-term and long-term requirements for liquidity and capital as disclosed in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2023 Form 10-K.

Although we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash requirements, we believe that our available cash on hand, along with amounts available under our Revolving Credit Facility will be sufficient to satisfy our liquidity requirements for at least the next twelve months. However, growth opportunities, such as continued expansion into international markets, may significantly increase our expenses (including our capital expenditures) and cash requirements. Furthermore, we will continue to seek possible brand and mission consistent acquisition opportunities that would require additional capital. In addition, the amount of our future product sales is difficult to predict, and actual sales may not be in line with our forecasts. As a result, we may be required to seek additional funds in the future from issuances of equity or debt, obtaining additional credit facilities, or loans from other sources.

Cash Flows


	Nine Months Ended September 30,				Change
(dollars in thousands)	2024		2023		$		%
Cash flows provided by (used in):
Operating activities	$	(2,470)	$	39,164	$	(41,634)	106.3	%
Investing activities	(11,512)		(50,949)		39,437		(77.4)	%
Financing activities	6,812		5,413		1,399		25.8	%

Operating activities

The $41.6 million increase in cash used in operating activities period over period, as shown in the table above, was due to a $2.6 million increase in cash usage from changes in operating assets and liabilities (“working capital”) and a $39.1 million increase in cash usage from changes in net income (loss) after non-cash adjustments, primarily due to the decline in gross profit coupled with the increase in selling, general and administrative expenses driven by increases in marketing spend and distribution costs in the nine month period of 2024. The decrease in cash provided by working capital was primarily due to:

•a $37.0 million decrease in cash provided by changes in inventory due to increased inventory replenishment for the nine months ended September 30, 2024, as a result of a lower ending inventory balance upon exiting the fourth quarter of the year ended 2023 when compared to the prior year period, whereas the prior year period benefited from a higher ending inventory balance upon exiting the fourth quarter of the year ended 2022;

•a $11.6 million increase in cash used in changes in accrued expenses and other current liabilities primarily due to reductions in accrued bonus and larger cash outflows in the nine months ended September 30, 2024 when compared to the same period in the prior year for accrued inventory purchases; partially offset by

•a $30.5 million decrease in cash used in changes in accounts payable as a result of the timing of payments for the nine months ended September 30, 2024 when compared to the prior year period; and

•a $9.5 million decrease in cash used in changes in accounts receivable as a result of a larger volume of retail sales through our key strategic retailers and our retail network at period end in the third quarter of 2024 compared to the same period in the prior year; with

•the remaining changes to working capital were deemed immaterial to disclose separately.

Investing activities

The $39.4 million decrease in cash used in investing activities in the current period when compared to the prior period was due to non-recurring acquisition activity in the prior period.

Financing activities

The $1.4 million increase in cash provided by financing activities in the current period when compared to the prior period was primarily the result of non-recurring common stock repurchases in the prior period of $37.0 million, which were offset by net draws on the Revolving Credit Facility and payments on the Term Loan.

Contractual Obligations

As of December 31, 2023, we had a commitment to purchase $30.0 million of advertising services in 2024 and $67.5 million thereafter, with a minimum required payment of $10.3 million in 2024 and $16.2 million thereafter. As of September 30, 2024, we executed a termination agreement for advertising services, resulting in a remaining commitment of $9.0 million due in the fourth quarter of 2024 and $5.4 million in the first quarter of 2025. These purchase obligations include all enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the duration of the agreement, and exclude agreements with variable terms for which we are unable to estimate the minimum amounts.

For information regarding our other contractual obligations, see Note 9 - Long-Term Debt, Net, Note 10 - Leases, and Note 1 - Significant Accounting Policies in this Quarterly Report and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2023 Form 10-K.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

See Note 2 - Significant Accounting Policies, to the audited consolidated financial statements included in our 2023 Form 10-K for more information about our significant accounting policies, including our critical accounting policies. The critical accounting estimates that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements are described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2023 Form 10-K. During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies and estimates from those discussed in our 2023 Form 10-K. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see “Recently Adopted Accounting Pronouncements” and “Recently Issued Accounting Pronouncements—Not Yet Adopted” in Note 1 - Significant Accounting Policies, to the unaudited consolidated financial statements included elsewhere in this Quarterly Report.

JOBS Act

We currently qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, we are provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We have elected to adopt new or revised accounting guidance within the same time period as private companies, unless management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. Our utilization of these transition periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.

Interest Rate Risk

In order to maintain liquidity and fund business operations, we have a long-term credit facility and separate term loan that bear variable interest rates based on prime, federal funds, or SOFR plus an applicable margin based on our total net leverage ratio. As of September 30, 2024, we had indebtedness of $75.0 million and $87.5 million, with annualized rates of interest of 7.15% and 7.14%, under our Revolving Credit Facility and Term Loan, respectively. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions, and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations, but as of September 30, 2024, we have not entered into any such contracts. A 100 bps increase in SOFR would increase our interest expense by approximately $1.6 million in any given year.

Inflation Risk

Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and SG&A expenses as a percentage of net sales, if the selling prices of our products do not increase with these increased costs.

Commodity Price Risk

The primary raw materials and components used by our contract manufacturing partners include stainless steel and aluminum. We believe these materials are readily available from multiple vendors. We have, and may continue to, negotiate prices with suppliers of these products on behalf of our third-party contract manufacturers in order to leverage the cumulative impact of our volume; however, prices have fluctuated and may continue to do so. Certain of these products use petroleum or natural gas as inputs. However, we do not believe there is a significant direct correlation between petroleum or natural gas prices and the costs of our products.

Foreign Currency Risk

Our international sales are primarily denominated in our international subsidiaries local currency. During the nine months ended September 30, 2024 and 2023, net sales in international markets accounted for 7.5% and 6.2% of our consolidated net sales, respectively. We do not believe exposure to foreign currency fluctuations had a material impact on our net sales. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. In addition, our suppliers may incur many costs, including labor costs, in other currencies. To the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margin. In addition, a strengthening of the U.S. dollar may increase the cost of our products to our customers outside of the United States. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuations from operating expenses is not material at this time. A 100 bps unfavorable change in foreign currency exchange rates to which we are exposed would increase our operating expenses by approximately $0.2 million for the nine months ended September 30, 2024.

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation and because of the material weakness remediation measures described below, our principal executive officer and principal financial officer concluded that, as of September 30, 2024, our disclosure controls and procedures were effective at a reasonable assurance level.

Material Weakness and Remediation Measures

During the fourth quarter of 2023, a material weakness in our internal control over financial reporting was identified related to the lack of timely execution of controls within the financial statement close process and the lack of sufficient resources within the Company’s accounting function. As of December 31, 2023, we finalized the design and implementation of the controls to remediate the material weakness. During the quarter ended

June 30, 2024, we completed our testing of the operating effectiveness of the relevant controls. Specifically, the Company took the following steps to remediate this material weakness and concluded that the material weakness was remediated as of June 30, 2024:

•hired experienced C-Suite personnel to fill vacated positions, including a Chief Accounting Officer and Chief Financial Officer with extensive public company and financial reporting experience; and

•implemented an enhanced control environment over the financial statement close process and certain areas deemed likely to be at higher risk for the potential of misstatement.

We believe the applicable measures have been implemented for a sufficient period of time and management has concluded, through our own testing, that the enhanced controls continued to operate effectively through the quarter ended September 30, 2024.

Changes in Internal Control over Financial Reporting

Other than as described in “Material Weakness and Remediation Measures” above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Information on the Company’s legal proceedings is set forth under Part I, Item 3. "Legal Proceedings” in our 2023 Form 10-K. There have been no material changes to the legal proceedings as described in the 2023 Form 10-K.

Item 1A. Risk Factors

You should carefully consider the risk factors set forth under Part I, Item 1A. "Risk Factors" in our 2023 Form 10-K, which risk factors are incorporated herein by reference. Such risks could materially affect our business, financial condition, and future results and are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results. There have been no material changes to the risk factors found in the 2023 Form 10-K, other than the following:

We may be unable to realize expected benefits from our strategic plans and restructuring and cost reduction efforts and our business might be adversely affected.

In order to operate more efficiently and control costs, from time to time, we recently announced and in the future may announce restructuring plans and other cost savings initiatives, which include re-balancing of products to align with our business strategy and workforce reductions. These plans are intended to generate, among other things, operating expense savings and improved margins and profitability. For example, in the third quarter of 2024, we implemented a strategic plan that involved activities related to restructuring, contract termination and related impairments.

We may undertake further restructuring actions or workforce reductions in the future. These types of restructuring and cost reduction activities are complex and may result in unintended consequences and costs, such as unforeseen delays in the implementation of our strategic initiatives, business and operational disruptions, decreased employee morale, loss of institutional knowledge and expertise, and potential impacts on financial reporting. Any reduction in workforce could also make it difficult for us to pursue, or prevent us from pursuing, new opportunities and initiatives due to insufficient personnel, or require us to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. If we do not successfully manage our current initiatives and restructuring activities or any other similar activities that we may undertake in the future, expected efficiencies and benefits might be delayed or not realized, and our business, financial condition, and results of operations may be materially adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sale of Equity Securities

There were no sales of unregistered securities during the three months ended September 30, 2024.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

(a) None.

(b) None.

(c) During the three months ended September 30, 2024, no director or “officer” (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

Incorporated by Reference

Filed / Furnished Herewith

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of Solo Brands, Inc.

S-8

333-260826

4.1

11/5/2021

3.2

Amended and Restated Bylaws of Solo Brands, Inc.

S-8

333-260826

4.2

11/5/2021

10.1#

Amended and Re st ated N on-Employee Director Compensation Policy

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith.

Furnished herewith.

Indicates management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Solo Brands, Inc.

Date:	November 7, 2024	By:	/s/ Chris Metz
			Chris Metz
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	November 7, 2024	By:	/s/ Laura Coffey
			Laura Coffey
			Chief Financial Officer
			(Principal Financial Officer)