Solo Brands (NYSE:SBDS) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Solo Brands reported a 17.6% decline in consolidated net sales to $43.7 million for the third quarter of 2026, with a net loss of $20.8 million and improved adjusted EBITDA of negative $2.1 million.
Key strategic initiatives included launching new products such as the Chiminea Topper and Teaksteel Infinity Flame Fire Pit, which became top sellers, while focusing on product innovation, cost reduction and international expansion.
The company revised its future outlook, decreasing guidance for 2026 net sales to between $270 million and $290 million and adjusted EBITDA to between $21 million and $25 million.
Operational highlights included reducing inventory by $22 million and consolidating U.S. distribution to a single facility, resulting in significant cost savings.
Management emphasized a leaner organizational structure, disciplined pricing and focused marketing strategies, while acknowledging the need for continued efforts to drive top-line growth.
Full Transcript
OPERATOR
Good morning everyone. Welcome to the Solo Brands third quarter fiscal 2026 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two.
Please note this event is being recorded. I will now turn the call to Mr. Mark Anderson, Senior Director, Treasury and Investor Relations. Mr. Anderson, the floor is yours.
Mark Anderson (Senior Director, Treasury and Investor Relations)
Thank you and good morning everyone. We appreciate you joining us for the Solo Brands conference call to review the 2026 third quarter results. Joining me on the call today are the Company’s President and Chief Executive Officer John Larson and Chief Financial Officer Laura Coffey. This call is being webcast and can be accessed through the Investors portion of our website at investors.solobrands.com. Today’s conference call will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of any replay or transcript reading date.
After our prepared remarks, we will open the call for analysts and investor questions. I would also like to remind you that the statements in today’s discussion that are not historical facts, including statements about future financial and operating performance including guidance, liquidity and cash flows, covenant compliance, business strategy including product innovation, marketing tactics, introduction of new products, cost savings, benefits of technological advances, trends in seasonality, expected savings in connection with our consolidated U.S. distribution model, anticipated benefits from new leadership and international expansion are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements by their nature are uncertain and outside of the Company’s control. Actual results may differ materially from those expressed or implied. Please refer to today’s earnings press release for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the Company’s filings with the Securities and Exchange Commission. Solo Brands assumes no obligation to publicly update or revise any forward-looking statements except as required by law.
Management will refer to non-GAAP measures and reconciliations to the nearest GAAP measures are included at the end of our earnings release. Finally, the earnings release has been furnished to the SEC on Form 8-K. Now I’d like to turn the call over to John Larson.
John Larson (President and CEO)
Thanks, Mark, and thank you all for joining us today. Let me start with the key takeaway from the quarter. While we are not satisfied with our top line performance, we have continued to make meaningful progress on our profitability and cash generation priorities. Third quarter is typically our smallest sales quarter due to seasonal factors. Consolidated net sales were 43.7 million, down 17.6% from last year. We reported a net loss of 20.8 million and adjusted EBITDA of negative 2.1 million, which represents a 3 million EBITDA improvement over last year despite lower sales due to our much leaner cost structure.
All three segments were profitable on a segment adjusted EBITDA basis, with Stove and Chubbies improving and Water Sports roughly flat without corporate costs allocated. These results reflect deliberate choices, a leaner cost structure, tighter inventory and being less promotional. Overall, our philosophy has been to strengthen the foundation first, then accelerate growth, and we believe our actions have strengthened that foundation. Through nine months, adjusted EBITDA was 13 million, up from 8.9 million last year, and operating cash flow was 26 million compared with the use of cash a year ago. Our job now is to turn that foundation into profitable growth. At Stove, products launched over the past year accounted for approximately 50% of our website sales this quarter.
Since its launch on September 23, the Chiminea Topper has become our number two selling product for the dot com business, while the Teaksteel Infinity Flame Fire Pit, also launched during Q3, was our top seller. Our product videos drew more than 200,000 views this fall and we earned recognition including The Wall Street Journal’s positive review of our griddle, Esquire’s 2026 Gadget Awards for our propane Teaksteel Infinity Flame Fire Pit, and Men’s Health recognition for top portable fire pits.
As we continue to innovate, protecting our innovations through patent filings remains a standard part of our process. Finally, of note, our WindChill 47 cooler with misting fan was featured at the recent U.S. Open and select NFL tailgate events with Stove introducing the brand to a broader audience and reinforcing our innovation-led strategy. To be clear, these launches have not yet completely offset the softness in legacy core fire pit volumes at the Solo Stove division, but they are the clearest sign that customers respond to something new and differentiated within our brand.
At Chubbies, we are now featuring collections built on two seasonal fabric patterns, the CloudTen Sweater Fleece and grid cord layering spanning both tops and bottoms. These collections were added to extend our traditional spring and summer foundation into a year-round offering for our customers and to complement our incoming holiday collections. As you know, Water Sports also added an assortment of new products for Costco this year and continues to develop additional products for future launches.
Before I turn the call to Laura, here’s how we are thinking about the path ahead. When I joined the Board and later became interim CEO in early 2025, we moved quickly. We simplified the organization, reduced costs, diversified our supply chain, tightened inventory, adopted disciplined pricing and marketing, and refocused on innovation. In 2026, we have been stabilizing the business from a much leaner base. We have always believed this transformation would be a multi-year effort and our priorities remained unchanged.
To build the top line, we are focused on three areas: delivering product newness, investing in our highest return channels and products, and accelerating international expansion. Every product we launch is held to a high bar. It must earn premium positioning and meet our return thresholds. International remains a compelling long-term opportunity. We intend to keep a disciplined market-by-market approach, partnering with experienced distributors and retailers to extend the reach of our brands while maintaining a capital-efficient operating model.
We have just received our first orders from our newly contracted partners in Europe and Canada. At the same time, we remain focused on becoming a leaner, more efficient company with a strong focus on working capital and cash generation. We continue to streamline fulfillment and simplify operations, having reduced our U.S. distribution footprint from five facilities in 2025 to one and cut third quarter SG&A by 20%. Since year end we have reduced inventory by about 22 million to 59 million dollars and generated more than 26 million of operating cash flow and ended September with 40 million dollars of cash, up from 35 million at the end of June.
We recognize the importance of driving top line growth and know we have more work to do on our capital structure. These priorities are how we intend to achieve consistent profitability and cash generation and create long-term shareholder value. With that, I’ll turn the call to Laura to review the financials.
Laura Coffey (Chief Financial Officer)
Thank you, John, and good morning everyone. As John discussed, we have consolidated our U.S. distribution model into a single warehouse in Texas and this work is expected to generate nearly 3 million dollars in annual savings. These cost actions, together with payroll and compensation related initiatives implemented earlier this year, have contributed to a lower overhead structure with tighter SG&A spending on a run-rate basis. Turning to third quarter results, consolidated net sales were 43.7 million dollars, down 17.6% from the prior year period, primarily due to lower net sales across our reportable segments. Solo Stove generated sales of 24.7 million, down 19.9% year over year. Chubbies reported sales of 13.7 million, down 16.8%, and Water Sports delivered sales of 5.3 million, down 7.4%. Despite this quarter’s sales pressure, each of our segments reported positive segment adjusted EBITDA, and adjusted EBITDA for Solo Stove and Chubbies increased over the prior year period.
Gross profit was 27.7 million dollars or 63.4% of net sales. This 340 basis point improvement was primarily driven by improved pricing discipline on lower promotional activity and tariff impact. SG&A expenses were 31.6 million dollars, down 20% from the prior year, reflecting our ongoing cost reduction initiatives including lower employee-related expenses, reduced marketing spend and lower distribution costs. Restructuring and impairment charges were 6 million dollars, consisting of 3.7 million of cash restructuring expenses and 2.3 million of impairment charges.
Net interest expense was 7.5 million dollars compared to 7.6 million in the prior year. We reported a net loss attributable to Solo Brands of 20.8 million compared to a loss of 15 million a year ago. Quarter adjusted net loss attributable to Solo Brands was 11.6 million compared to 7.1 million in the prior year period. Our year-to-date adjusted EBITDA improved by 46% to 13 million, demonstrating the benefit of a streamlined and more disciplined operation.
For the quarter, we improved the negative adjusted EBITDA from 5.1 million last year to 2.1 million this year. We also generated more than 6 million in operating cash flow for the quarter and 26 million year to date. Compared to the third quarter of 2025, this year’s balance sheet reflects inventories down 26 million, a 30% decrease to under 60 million dollars. We ended the quarter with 40 million dollars in cash and cash equivalents and zero outstanding on the revolver and credit facility. We continue to actively manage inventory and working capital with no material debt maturities until 2028.
On September 30, we remained in compliance with all financial covenants. Capital expenditures for the first nine months of the year totaled 5 million dollars with spending allocated across product innovations, patent-related investments and IT systems. We remain focused on aligning our cost structure with current demand levels to improve profitability, generate cash flow and strengthen our long-term earnings power. Today we are updating our 2026 financial guidance to reflect our nine-month results and current year outlook for net sales. We are moving from a range of 280 million to 310 million to a new range of 270 million to 290 million dollars, a decline of approximately 5% versus our prior guidance midpoint. For our full year adjusted EBITDA, our previous guidance was 24 million to 30 million and today our outlook is 21 million to 25 million. Our updated net sales and adjusted EBITDA ranges include the low end of our prior guidance.
With that, I’ll turn it back to John.
John Larson (President and CEO)
Thanks, Laura, and to everyone on our finance team who is helping us build a more profitable, cash generative and resilient company. Looking ahead to holiday 2026, we believe we are entering the quarter from a stronger position than a year ago. Our inventory is leaner, our operating structure is more efficient and our newest products are gaining traction with customers. While the consumer environment remains competitive and the fourth quarter is critical to our full year results, we believe the work we’ve done over the last two years has positioned us to execute more effectively and capitalize on the opportunities ahead.
We have strengthened our leadership team and established a clear roadmap for growth. Earlier this year we added a SVP of Global Sales with significant international experience to help scale our North American and global expansion, as well as a Chief Digital Officer to lead our DTC business. Under this leadership team, we are broadening customer reach, expanding awareness of our brands, and leveraging premium products and accessories to deepen engagement across digital and social commerce channels.
We are also investing in influencer-led marketing and positioning our brands for the emerging agentic commerce landscape where AI-powered tools increasingly help consumers research, compare and purchase products. We recently launched both Solo Stove and Chubbies on TikTok Shop, creating new opportunities to engage consumers across evolving digital channels. During the holiday season at Chubbies, we are also excited about the upcoming graphic tee and hat launches in the first quarter alongside continued international expansion initiatives.
We believe the transformation work undertaken over the last two years has created a stronger, more resilient platform from which to drive sustainable growth, profitability and cash generation. While there is still work to be done, we believe the actions we have taken to strengthen the business, improve our operating foundation and invest in future growth leave us well positioned for the opportunities ahead. With that, operator, we are ready to take questions.
OPERATOR
Yes, sir. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question we have will come from Mitchell Sachs of Grand Slam Asset Management.
Please go ahead.
Mitchell Sachs (Analyst)
Hey guys, can you just talk a little bit more about the Solo Stove topper, the, I think you call it Chiminea, why it’s selling so well? And then when do products like that and other things you can do as extensions to your Solo Stove start to turn the tide from sales dropping to sales starting to go the other way and increasing?
John Larson (President and CEO)
Hey, good morning, Mitch. John Larson here and appreciate your question. Yeah, we are really excited about the launch of the Chiminea Topper. And as part of our product launch strategy, it became obvious with so many fire pits out there from our previous sales, how do we really leverage that opportunity with our owner base? And so we went through a process. We brought close to 20 ideas. And the challenge I had out to our product team was how do we provide something so unique that those 3 1/2 to 4 million customers out there really want to add it to their portfolio?
And so going through the testing, a research process, talking with customers, we came up with this very unique product called the Chiminea Topper. We thought it was going to be successful, but the success has really exceeded all of our expectations. And we are aggressively increasing production to meet demand. But what it really does is it provides benefit of more heat. It provides a whole different design element. And to all of our current owners out there that own that 19 and a half size, which was our number one selling fire pit, it gives them a way to really change the form, the function, and adds a little more heat and intimacy.
So, yeah, the response has been great. Very excited about it. The genesis behind it—honestly, Mitch, eight months ago, it wasn’t even on the product plan. And we saw the success, we saw how it tested with customers, and we have a very quick turnaround in terms of innovation and new products and brought it into the market as quickly as we could for fourth quarter, which is our biggest quarter. I’d also like to note we launched just prior to that a premium version of our propane fire pit that we call the Teaksteel Infinity Flame. And as I mentioned in my comments earlier, that was not on our product plan at all. But when we saw the initial response when we launched our first propane fire pit last year was really successful, we said, let’s take this up, let’s make it more premium. Let’s add a design element that could really hit the market.
When we launched that product, Mitch, the sales in our propane category went up by 300%. So it became the number one selling product that we had. Now the Chiminea is the number two product. So as we’ve talked before on these calls, innovation is going to be key to offset kind of that core demand decline in the old legacy fire pits. And how can we add on. So very excited about our product team, how quickly we turned it around at the Stove division, added two products that in the spring weren’t necessarily on the plan, and now they’re delivering as our number one and number two selling SKUs on our dot com.
Mitchell Sachs (Analyst)
Okay, and when do you expect that to start to arrest the sales decline? Is it—do you think that’s a ’27 possibility or can you walk me through that?
John Larson (President and CEO)
Yeah, I mean, I think it’s definitely a possibility for sure, Mitch. I mean, we’re pulling all of our ’27 plans together right now. You know, the reality is to have long-term success, we need to be an omnichannel brand. And that means selling through each and every category. It takes a while to get the new product into the retail channel. And quite frankly, the retail channel on the Stove side has had the decline in the legacy pits. They’ve drawn back on how much of their shelf space is dedicated to fire pits.
So we need to bring the new products in. Now, fortunately, we have some tests going in place. The new Infinity Flame Premium we call Teaksteel has gone into a number of stores with tests and seems to be selling through very well. So really relying on these new products and getting them further into our retail channel, which has really been devastated by the reduction in kind of the core business out there, is going to be critical to turning it around in ’27.
But do I think it’s a possibility? Absolutely. We need to turn it around in ’27. Thank you.
OPERATOR
This will conclude our question and answer session. I would now like to turn the conference call back over to Mr. John Larson for any closing remarks.
John Larson (President and CEO)
Thank you for continuing to follow our company and we look forward to providing our fourth quarter and year-end results and updates on strategic initiatives in a few months. Have a great day.
OPERATOR
And we thank you, sir, and to the rest of the management team for your time also. Again, the conference call has now concluded. At this time, you may disconnect your lines. Take care and have a great day, everyone.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.