Solo Brands Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

There are 8 speakers on the call.

Operator

Hello, everyone, and welcome to Solar Brands First Quarter Fiscal 2023 Financial Results. My name is Bruno, and I'll be the operator of today. During this presentation, you can register to ask a question by pressing star followed by 1 on the telephone keypad. I will now hand over to your host, Bruce Williams. Please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining the call to discuss SOLO Brands' Q1 results, which we released this morning and can be found on the Investor Relations Today's call will be hosted by Chief Executive Officer, John Maris and Chief Financial Officer, Summer Webb. Before we get started, I want to remind everyone that management's remarks on this call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current management expectation. These may include, without limitation, predictions, expectations, targets or estimates, including regarding our anticipated financial performance, Business plans and objectives, future events and developments and actual results could differ materially from those mentioned. These forward looking statements also involve substantial risks and uncertainties, some of which may be outside of our control and that could cause Actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties, among others, are discussed in our filings with the SEC.

Speaker 1

We encourage you to review these filings for a discussion of these risks, including our soon to be filed quarterly report on Form Thank you and will be available on the Investors portion of our website at investors. Solobrands.com. You should not place undue reliance on these forward looking statements. These statements are made only as of today and we undertake no obligation to update or revise them for any new information except as required by law. This call will also contain certain non GAAP financial measures, Including net income as adjusted, diluted earnings per share as adjusted, gross margin as adjusted, adjusted EBITDA and adjusted EBITDA margin, which we believe are useful supplemental measures that assist evaluating our ability to generate earnings, provide consistency and comparability with our past performance We'll facilitate period to period comparisons of our core operating results and the results of peer companies.

Speaker 1

Reconciliation of these non GAAP measures to the most Comparable GAAP measures and definitions of these indicators are included in our earnings release, which will be available to our investors portion of our website at investors. Solobrands.com. Now, I'd like to turn the call over to John.

Speaker 2

Thank you, Bruce, and thank you for joining the call to discuss our Q1 results. I will begin by reviewing our Q1 performance, Then provide an update on our key operational strategies. Palmer will review our Q1 financial results and provide an update to our outlook. We are extremely pleased with our performance this quarter. Despite a volatile macro environment, we managed our business prudently and generated solid gross profit and healthy EBITDA margins.

Speaker 2

These results are a reflection of our disciplined focus on profitable growth and positive free cash flow generation. We are still in the early stages of our story Our household penetration remains low and we believe we have significant white space ahead. As such, even in a tougher economic environment, We believe that a renewed focus on customer experience and continued investment into product innovation, wholesale penetration and international expansion Our good strategic uses of capital that position us for long term growth. During the Q1, our sales grew 7.3 So it's $88,200,000 driven by strength in the wholesale channel. As we stated during our Q4 call, we expected to experience strong momentum during the quarter We were encouraged to see larger replenishment orders than we expected, reflecting earlier sell through at retail.

Speaker 2

Even so, our first high season of the year is just kicking off We will know more about full sell through as we get through the rest of Q2. Moving on to the direct to consumer, our DTC sales were $54,800,000 in line with our expectations for the Q1. The strength in our wholesale channel allowed us to be less promotional than the same period in the prior year Without negatively impacting overall new customer acquisition, our new products and innovation continue to be a draw for both new and existing customers, Which is reflected in our consistently high referral and repeat purchase rates. In addition to new products, our team also continues to delight customers with differentiated experience and outstanding customer service that reinforces the great experiences customers have with our products and strengthens the referral and repeat purchase behaviors Previously mentioned. Said differently, our unique ability to connect with and retain customers allows our business To better navigate through periods when consumers are making trade offs.

Speaker 2

We delivered significant newness in 2022 and our new products have quickly become fan favorites. However, I want to highlight that our legacy products continue to provide a solid foundation for our company. They are the engine that creates a dynamic for strong repeat purchases and We will build on this momentum in 2023 as we execute on the playbook we laid out last quarter, elevate and innovate our products, Broaden and deepen our wholesale partnerships and grow our business internationally. Starting with innovation, we are proud of the newness delivered over Past few months and we look to build on this success going forward. We have a history of continuous product innovation focused on delivering high quality products for our customers.

Speaker 2

Our deep connection with our customers provides a feedback loop that allows for a shortened product development timeline. As such, We continue to find new ways to innovate and expand our product line and we are excited that we will continue delivering a healthy lineup of new products in the remainder of this year. Continuous product development not only helps attract new customers, but it is also easily marketable to our existing customer database, which drives repeat purchases, Our wholesale partners continue to be very positive. Our focus is on growing our market share with our existing partners by expanding into new doors And increasing shelf space with existing doors. While the wholesale channel is very exciting, we are in the early innings of its growth story.

Speaker 2

To that end, we are disciplined in managing our sell in rate by keeping a close eye on our sell throughs. As I discussed earlier, B2C heritage allows for us to have strong engagement with our customers. We are finding that there are great ways to build direct connections with our customers in the wholesale channel as well. The strongest brands are those that are able to maintain and build upon their connection with their customers by providing a fluid experience presentation with both the direct and wholesale channels. As such, we are excited about what our strategic partners are doing to build brand awareness in store Where we can establish a direct relationship with that customer.

Speaker 2

We believe that working with our retailers to develop greater brand affinity Will lead to stronger sell throughs and increased shelf space and our existing customers all while driving healthy merchandise margins. And finally, we are also pleased with the performance of our international business and believe we are in the beginning stages in our global expansion. We have invested in local leadership in Europe and are enthusiastic about capitalizing on a significant growth opportunity in the EU. Additionally, we are exploring new markets including Asia and will be strategic as we determine the right timing to open these markets. We continue to believe that our international business can grow to be the size of our domestic business.

Speaker 2

We are operating in an uncertain macro environment where Our direct connection to customers combined with strong execution by our team in the three areas mentioned before, Product innovation, channel expansion and international growth create a wide competitive mode around our business and most importantly create a foundation for years to come. Brands that are innovating and creating great products that lead to meaningful experiences will win and that is our focus. Solo Brands is centered on a We will maintain our disciplined approach to financial management, which we believe enables us to generate healthy growth, Positive free cash flow and strong returns on capital over the long term for our shareholders. I will now turn the call over to Summer to discuss the financials. Summer?

Speaker 3

Thanks, John, and good morning, everyone. Today, I will walk you through our Q1 results and then provide our outlook for the remainder of 2023. We are pleased with our strong start to the year as we continue to execute on our growth strategy and deliver profitable results for our shareholders. Our Q1 results came in ahead of our expectations driven by strong demand in our wholesale channel, continued success with new innovation And high referral rates. The strength in our wholesale channel reflects the increasing demand for our products and the deepening relationships with our retail partners.

Speaker 3

During the quarter, we experienced stronger than expected reorder volume from our retail partners as replenishment orders occurred earlier than forecasted. Our wholesale momentum allowed for us to reduce promotions in our direct to consumer channel where we saw inconsistent traffic trends. Furthermore, we are pleased by the flow through of our revenue growth to EBITDA and our free cash flow generation during the quarter. Net sales increased 7.3 percent to $88,200,000 compared to $82,200,000 in the prior year period. Sales were driven by strong demand in the wholesale channel as we continue to increase our market penetration through increased shelf space And higher door count with existing customers.

Speaker 3

Wholesale net sales increased 52.3 percent to 33,500,000 For the Q1 compared to $22,000,000 in the prior year. Our direct to consumer net sales decreased 9.1% To $54,800,000 for the Q1 compared to $60,200,000 in the same period in the prior year as consumer traffic Moving to gross margin. Our adjusted gross margin rate increased to 61.7% Compared to 59.4 percent in the Q1 of 2022. The improvement was driven by lower promotions primarily in our direct Consumer channel. Selling, general and administrative expenses for the Q1 decreased to $44,600,000 or 50.6 percent of net sales as compared to $45,600,000 or 55.5 percent of net sales In the same period last year.

Speaker 3

The variance was driven by $5,400,000 decline in variable costs, Partially offset by $4,300,000 of higher fixed costs. The decline in variable cost Was due to lower marketing expense driven by benefits from our data investment. The fixed cost increase was primarily due to higher employee related expenses, including increased headcount from investments that were made in Q2 of 2022. Our first quarter net income was €900,000 and net income per diluted share was €0.01 1st quarter adjusted net income was $10,300,000 and our adjusted EPS was $0.16 per diluted share. We continue to invest in our long term strategic initiatives in data, product innovation and international expansion, While delivering adjusted EBITDA of CAD 15,400,000 and adjusted EBITDA margin of 17.4%.

Speaker 3

Now turning to the balance sheet. At the end of the period, we had $25,700,000 in cash and cash equivalents. As of March 31, we had $15,000,000 of outstanding borrowings under the revolving credit facility and $95,000,000 under the term loan agreement. The borrowing capacity on the revolving credit facility was €350,000,000 as of March 31, Leaving €335,000,000 of availability. We have a strong liquidity position and we believe we are able to Inventory at the end of the Q1 was $125,000,000 roughly in line with a year ago.

Speaker 3

Turning to our outlook. We are reaffirming our full year guidance of $520,000,000 to $540,000,000 In light of the current environment, we are currently forecasting revenue at the midpoint of our range and EBITDA margin in the range of 16 point Let me provide additional color to our forecast for the rest of the year. As we lean into wholesale, revenue shifts between quarters may occur based on buying and ordering differences between the channels. Q1 showed stronger than we forecasted because we experienced some pull forward from our wholesale channel from Q2 to Q1. We also recognize that the consumer remains selective in their discretionary purchases.

Speaker 3

Taking these items into account, While historically our quarterly revenue breakdowns have been 15%, 25%, 20% and 40%, We now expect it to look more like roughly 17%, 23%, 20% 40% as our innovation pipeline is second half weighted. In summary, I believe we are off to a strong start to 2023. Our growth story is just beginning and I continue to be excited about our long term strategic initiatives and outlook. We will continue to focus on executing and delivering increased value to our shareholders with an emphasis on healthy growth, Increased profitability and strong free cash flow. I will now turn the call over to the operator to begin Q and A.

Operator

Thank you. Our first question comes from Robbie Holmes from Bank of America. Robbie, your line is now open. Please go ahead.

Speaker 4

Hey, good morning guys. Hey, good morning, Rob. Hey, John. So my question is kind of multipart, but I was hoping you could talk a little bit more about You know the wholesale business. So one question would be, can you give us some color on how the opening up of Costco is Contributing to wholesale strength and how we should see that playing out through the year.

Speaker 4

You mentioned that D2C was Less promotional. Can you give us some color on how your partners in wholesale are being with the Solasope product? Are they being promotional Or not promotional. And then maybe the third part of the question is, can you guys talk about, Chubby's and How Chubby's performance was from a wholesale standpoint versus D2C? Thanks.

Speaker 2

So let me just kind of try to do this in order of those questions and it It sounds like there's maybe 3 layered together, but they're all very similar. So just looking at wholesale holistically, again, as we mentioned, Sell in and sell through, 2 obviously very different things. I know you guys pay a lot of attention to and we are as well. We were encouraged to see faster replenishment. Obviously, we don't have full line of sight, but we have pretty good line of sight based on the behaviors What those replenishment orders look like?

Speaker 2

And I'd just say that the early feedback via that behavior, that replenishment behavior is positive For wholesale. So we're encouraged by that. Moving to specific retailers, if you Talk about Costco specifically for Solastove, we continue to have great conversations with them. I'd say We're going to continue to be careful with and strategic with the SKUs specifically that we look at there and we're thinking about Our wholesale business in a full picture as we think about Costco specifically. We're looking at Costco specific bundles, Costco specific exclusives on certain SKUs, Things like that, that don't disrupt the rest of our wholesale business for Stowe.

Speaker 2

On the promotional front, I'd say that our retailers Are in line with the way that the promotional activity that they would have been had in the past. So if you think about 2022, Probably very similar from a promotional standpoint. I think what's changed for us on the retail front is that we're more calculated and more planned in advance With our retailers than we've been in the past. So do you think historically, Celestev would often be running things on its site That might conflict with what's happening in store. I think what you're seeing more of is us leaning into partnerships with our retailers And giving them better line of sight to what we're running around certain promotional periods, so that we can be consistent in what we're running.

Speaker 2

So I think that that's been very favorably received by our retail partners and something that they're excited to see us continue to do in the future. With regards to Chubbies and Dick's, I'd say this has been a very bright spot for the company. If you've walked through a Dick's Sporting Goods store in the last couple of months and you've probably seen the men's feature swim wall, which is essentially a big Beautiful, chubby display. That has been very successful. The feedback from Dick's has been positive and we're excited and encouraged to see the lean in happening there.

Speaker 2

Again, part of the replenishment activity that we're talking about that came earlier and bigger than expected is through that particular partnership and what's happening with So excited kind of across the board for all of that. But we're encouraged Overall, I'd say and excited for what's to come on the retail front.

Speaker 4

Sounds great. Thanks so much, John.

Speaker 2

Thanks, Robbie.

Operator

Our next question comes from Randy Konik from Jefferies. Randy, your line is now open. Please go ahead.

Speaker 5

Yes. Thanks a lot. I guess, John, maybe give us some perspective on, Let's see where the consumer is now in terms of are they changing behavior on what they're buying within the SOLO So product portfolio, can you give us a little color there if things are changing? Obviously, there's probably a good response to new products Like pizza oven etcetera. So I just want to understand what changes you're seeing around the consumer as it relates specifically more specifically to

Speaker 2

Thanks, Randy. Good to hear your voice. It's been The consumer the state of the consumer overall, you heard us talk about it a little bit, but trade offs seems to be a little bit of the theme. We view that more in people that are looking for experiences and how they're spending with us Seems to be indicative of people wanting to invest in experiences. And so they may be trading off for something more expensive like a vacation and coming to Solostope Or one of our other brands to make purchases.

Speaker 2

But if you look within Solaso specifically, we talked about it at The last couple of calls, we were really excited to launch Mesa last year in September. That's that tabletop fire pit product that has price point under $100 and one of the things that we're really excited about is what that does to our overall addressable market. So We feel that we've attracted now people that have smaller spaces that may not have been able to participate with the larger products. And then as we've expanded and you kind of mentioned this with pie and other products as we've expanded categories within the Cellisto brand, We've also seen an ability to attract customers that aren't coming in necessarily initially through the Firepit ecosystem Or category and that's also been encouraging for us. So we are attracting customers at a nice rate Because of Mesa, so we're getting people to come in at a lower price point and then watching those customers again begin to participate in the Solasoft ecosystem And either upgrade or cross buy into other categories.

Speaker 2

So overall encouraged by that, but the number of customers coming in Looks very consistent and growing. The average order value within Solasto specifically you're seeing come down, but that's Driven by again a new cohort of customers coming in and having a lower price point product in the Mesa to enter in and Start becoming kind of brand fans or brand favorites.

Speaker 5

Super helpful. And then when you think about the expansion of wholesale, Have you seen any, I don't know, meaningful benefit yet from maybe analyzing shipping to certain zip codes where you have A wholesale presence impacting positively impacting the business, have

Speaker 1

you started to see

Speaker 5

the kind of The positivity around wholesale driving up brand awareness and thereby driving your more, I guess, purchase behavior on Yes, the solostlobe.com or chubby's.com website, is there anything there that you're seeing yet?

Speaker 2

Yes, good question. On the geography front, I would say too early to tell for us, not something that we've spent a lot of time on. But I'll say anecdotally what we are seeing and hearing from since we've leaned in and started seeing more momentum in wholesale, it's just a lot more If you just go to social listening and what we're seeing commentary wise by customers online, customers are actively talking about seeing our products In our retail partner stores at a much higher rate than they were previously. So we're encouraged. I think the signal is right.

Speaker 2

But as we continue to build more data and analyze that, I think in the future, we'll have more insights into what, for instance, Dick's or Costco store in a specific region does for our overall online and overall kind of omni channel approach to acquiring new customers.

Speaker 1

Understood. I guess lastly, just

Speaker 5

a question for Summer. I think it's like the 2nd quarter in a row where Obviously, we got the initial guide last quarter. We got a reiteration of the guide this quarter. It feels like you've got some good visibility around or decent visibility around where The top line is going to fall and a step, but more importantly the margin. So maybe just unpack that a little bit more on kind of how you think about Any volatility or variability from that plan around margin or top line?

Speaker 5

Because it does feel like there's a little bit more Kind of visibility there as we kind of think through the rest of the year and we start to build a base on these numbers. Thanks.

Speaker 3

Yes, absolutely. And I'll start with gross margin and I want to make my way down to EBITDA margin. So from a gross margin standpoint, One of the things that I emphasized as we lead into retail partners and kind of go on heavier on an omnichannel approach, The blend of wholesale to D2C is going to have some impact on gross margins. We still believe that we're going to be 60% plus. The one thing I do want to remind and I mentioned last call is the good news about wholesale or DTC is although a little bit of a shift On gross margin, they're consistent on EBITDA margin.

Speaker 3

So I feel good. I still feel good about the 60% plus guidance for the year. Obviously, it will fluctuate in quarters as we lean in either to wholesale or direct direct to consumer. Typically Q1 and Q3 are going to be our higher wholesale quarters and Q2 and Q4 just the seasonality of our business are going to be higher direct Consumer. But overall, again, emphasizing that we should be 60% plus on gross margin.

Speaker 3

So making our way down to EBITDA margins, Obviously, we had a really strong Q1. I mentioned probably several calls ago Because marketing is a variable expense and we have a lot of flexibility to shift that up or shift that down, what we saw in Q1 is the strength Continue to grow on our retail partners and our wholesale channel. We actually pulled back on marketing spend. So if you think about the 17.4 percent EBITDA margins that we were able to generate, about 400 basis points of that came from the fact that we were able to pull back Marketing spend. So the flexibility really showed in the Q1.

Speaker 3

As we make it through the rest of the year, it's still a lever that we plan to use. And so there might be quarters that we actually lean into marketing spend even more, when we want to promote new products, etcetera. And so right now, I'm still feeling confident in the 16.5% to 17.5% range, but we are seeing really strong signs both on the gross Margin side and on the EBITDA margin standpoint.

Speaker 1

Super helpful. Really appreciate it. Thanks guys.

Operator

Our next question comes from Jason Bender from Citi. Jason, your line is now open. Please go ahead.

Speaker 6

Great. Good morning, everyone. Thanks for taking the question. I just want to switch gears to the direct consumer side of the business. I know you said direct to consumer sales came in line with your expectations, but you Also you mentioned that traffic is still a little bit challenged.

Speaker 6

So curious If the expectation is still that channel sales are still flat for this year and implied on that, do we have to see A reacceleration in website traffic to get you there or do current trends kind of enough to get you to that run rate?

Speaker 2

Yes. Thanks, Jason. Good question. So kind of another 3 parter and I'll try to kind of do this in order. So Remember that traffic is heavily influenced by advertising spend.

Speaker 2

So we have the ability inside of our engine as we spend To drive traffic to our sites, this is something that we've been very good at really since the beginning. And so as Sommer was just talking about, When we take that variable expense down, whether strategically or because of what we're seeing from a marketing efficiency standpoint, That's going to have impact on traffic. So we did see inconsistent or a drop in traffic on our D2C channel. But when we say in line with expectations, it's not because we were expecting some massive decline in consumer traffic because of the macro, But more because of our own internal behaviors in the way that we were spending in advertising, which ultimately led to the decline in overall traffic on the side in Q1. In terms of what we're seeing now and maybe just good color to add to that, As we look into Q2 and give just a peek into the early part or the front part of Q2, As this is a higher D2C quarter, you've heard us talk about this.

Speaker 2

Q1 and Q3 are generally higher wholesale quarters. Q2 and Q4 are higher direct to consumer quarters from an absolute revenue standpoint. These are the types of timeframes where You'll see us leaning into that variable expense that Sommers was just talking about and spending more on marketing and driving more traffic and we've Seeing that traffic trend reverse in the beginning parts of Q2 and so seeing stronger traffic on our D2C channel, The first part at least of this quarter. In terms of our overall outlook for the channel for the year, I think we're expecting for D2C just based on the strength of our wholesale and the way we're strategically Thinking about balancing our advertising spend, we're actually expecting a slight decline in B2C for the year. But Still again that rolls into the guidance we're providing at that midpoint of the range of $530,000,000 So if you think about You know, some are on our last call talking about the channel split looking like a 75%, 25% and you kind of run the math on that, You'll get to a number that has us slightly down on B2C, as wholesale continues to strengthen.

Speaker 2

We think this is a really healthy thing Our business is allowing us to be more strategic and calculated in our advertising spend, which is ultimately helping strengthen our EBITDA And our line of sight into our profitability. So we like where we're at. It's in line again with our expectations. The variable nature of our ability to drive traffic is really important overall. And so That lever continues to be a big strength for us as we think about, advertising spend.

Speaker 2

I don't know, Somer, you may want to Layer on here a little bit as well, so I'll open it up for you to talk through anything that you have.

Speaker 3

Yes. The only thing that I'd add is as we lean into the omnichannel approach, we're really viewing the business as a whole. And so as we drive traffic from wholesale and as we drive traffic from the direct to consumer, although direct to consumer we're forecasting to be slightly down, We are very intentional about how we are growing the business, with a focus on profitability, with a focus on driving the right Traffic and putting our spend where we think it's most effective in 2023.

Speaker 6

Got it. Super helpful color. So thank you for that. And then just in the press release, you guys called out Lower distribution costs. I was hoping you could just unpack that a little bit more.

Speaker 6

And is the benefit you're getting On outbound distribution, because you're relying more on the spot market versus on the ocean freight side that we talked about Last quarter where those costs were going to be a headwind for you in the first half and then moderating and putting to become a tailwind in the second half, which extensively is because you're still in the contract. Is your expectation that outbound will continue to be a tailwind for you for the year?

Speaker 2

Yes. So there's probably 3 components to this. So actually inbound ocean freight is in our COGS, it's not in our distribution costs. So that one, everything you just described is accurate, but that's actually in a different part of our P and L. But we are seeing the back half of the year some tailwinds on the ocean freight side.

Speaker 2

A couple of things just to remind everybody on is because of our inventory position, the majority of the front half of this year Outside of new products are already on the books on earlier freight costs. So we had higher rates as we inbounded All of that inventory last year and the 1st part of this year, we actually are just kicking off a new carrier contract for ocean freight And those rates are much more favorable than they've been in the past. The spot market is obviously something we continue to use as well. So You can expect tailwinds in the back half of the year with regards to ocean freight. But again, That's something that would show up in distribution costs as much as it will in COGS and that's already kind of baked into our overall gross margin expectations on the year.

Speaker 2

On the distribution, the outbound distribution, it's really a combination of continuing to drive relationships With our small parcel carriers, so FedEx, UPS, DHL, we use all of them. But as we're increasing in volume And continue to negotiate those long term contracts. We're seeing good rates come through. And then just overall, just managing the business More prudently getting better at it. We built an internal essentially an internal 3PL that we call FBS fulfilled by SOLO And it's just a few years ago that we kicked that off and we're finding more and more efficiencies in that.

Speaker 2

We're automating things. We're are able to use less people and more automation and machining and equipment to do some of the fulfillment. So we're seeing some cost savings Across those things, but really it's just a holistic approach that we're using across our business to control costs And to be as efficient as we can and just continue to lean into opportunities to drive profitability.

Speaker 6

Super. Thanks so much.

Operator

Our comes from Peter Keith from Piper Sandler. Peter, your line is now open. Please go ahead.

Speaker 7

Hi, this is Matt Edgar on for Peter. Thanks for taking our questions. First for me, I'm curious, you've already kind of talked I mentioned it on today's call, but you mentioned that you're planning more around your wholesale partners with your promotions. Just curious how you plan to navigate These promotions on your DTC sites now, it seems like it might give a little bit of pressure to your DTC sites. So just curious how you're Thinking about that and any cannibalization you might be expecting.

Speaker 2

Yes. I think we've talked about this on prior calls. Good question and kicks off some important dialogue. One of the things that we're really excited about with our wholesale partners is The attraction of new eyeballs. I think one of the epiphanies or insights that we uncovered last year is that our retail partners are bringing New customers to us that we weren't reaching online.

Speaker 2

So not to say that there's 0 cannibalization as we put more price parity on our Web With our retail partners, but we do believe that we're seeing new sets of customers in retail partners that we're super excited about. Ultimately, there's some level of competition that's created. But again, you know, Somer talked about this just a few minutes ago. We look at the business holistically. You know, at the end of the day, whether it's coming through direct to consumer Channel online or whether it's coming through one of our retail wholesale partners, we believe that it's a healthy balance.

Speaker 2

And remember, we're still forecasting 75% of our business coming through direct to consumer channels. So overall, we still think that's a very healthy place to be. And in addition to that, what we're doing with wholesale partners in terms of our intentionality to drive customers that are buying in store for the first time Back to our site for accessory purchases and other purchases that still allow us to create that direct connection to the customer and capture that first party data. So We like the strategy. We feel very good about that balance between wholesale and retail or sorry, between retail and direct to consumer And the way we're driving that right now.

Speaker 7

Okay, good. That's good to hear. And then second for me, You mentioned some international launches that you're looking at. I think you called out Asia. I mean, would this be a 2024 story?

Speaker 7

Or can you give us any more color on the timing around these New international launches. And then also would there be any difference in margin given like you would think lower ocean freight or no ocean freight. So how would that impact the margins? Appreciate it.

Speaker 2

Yes, good question and good as I'll maybe answer the first the last question first and the first question last. So Yes, obviously, if we were to launch Asia with our locations of manufacturing partners or the Most of our manufacturing partners, there will certainly be a decrease in overall transportation costs. Obviously, those costs have come down. So Not as impactful as it would have been a couple of years ago when people were paying $15,000 a container or whatever it is, but overall that would be an improvement. In terms of the timing of when you might expect, if we just look at our historical international launches, Canada maybe less Of a pertinent one, but Europe in particular and Australia and we think about the timing of ramp, even if we were to launch tomorrow, Which we're not.

Speaker 2

This would be something that would be impactful more into 2024 and 2025. So Not something that we're counting on or expecting anything meaningful from in 2023, but certainly laying the groundwork for the future and we're excited about the opportunity.

Speaker 7

All right. Thank you.

Operator

We currently have no further questions. So I'd like to hand the call back to the management team for closing remarks. Thank you.

Speaker 2

Great. Thank you all for being on the call with us today and for the questions. We always Enjoy the opportunity to talk about the business. We're obviously excited to perform in this environment and to continue to stand out from the crowd. So Appreciate it.

Speaker 2

We'll look forward to being with you guys in a few months and we'll be available for follow ups with some of you. So just feel free to reach out

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.

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Earnings Conference Call
Solo Brands Q1 2023
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