Form 10-Q - Quarterly report [Sections 13 or 15(d)] (2024)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-40979

Solo Brands, Inc.

(Exact Name of Registrant as Specified in its Charter)

(817) 900-2664

Registrant’s Telephone Number, Including Area Code

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90days.Yes☒No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of RegulationS-T (§232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submit such files).Yes☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).Yes☐No☒

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements regarding our future results of operations and financial position, macroeconomic conditions, industry and business trends, business strategy, plans, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, our ability to maintain and strengthen our brand to generate and maintain ongoing demand for our products, our ability to successfully design and develop new products, our ability to effectively manage our growth and accurately forecast demand for our products or our results of operations, our ability to maintain a successful marketing strategy with existing and future customers, our reliance on third-party manufacturers and the cooperation of our suppliers, our ability to cost-effectively attract new customers and retain our existing customers; our failure to maintain product quality and product performance at an acceptable cost, fluctuations in the cost and availability of raw materials, equipment, labor, and transportation, which could cause manufacturing delays or increase our costs, our collection, use, storage, disclosure, transfer and other processing of personal information, which could give rise to significant costs and liabilities, the impact of product liability and warranty claims and product recalls; the highly competitive market in which we operate, business interruptions resulting from geopolitical-conflict on the global economy, energy supplies and raw materials, problems with, or loss of, our suppliers or an inability to obtain raw materials, the ability of our stockholders to influence corporate matters, additional costs and risks associated with our adoption of environmental, social and governance (“ESG”) initiatives and frameworks, our ability to remediate the material weakness we have identified and the timing thereof, and the important factors discussed in Part I, Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2024, as amended by Amendment No. 1 on Form 10-K/A that was filed with the SEC on May 9, 2024 (as amended, the “2023 Form 10-K”), and in Part II, Item 1A. “Risk Factors” in this Quarterly Report, as any such factors may be updated from time to time in its other filings with the SEC. The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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 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)

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Equity

(Unaudited)

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

Consolidated Statements of Equity

(Unaudited)

See Notes to Consolidated Financial Statements (Unaudited)

SOLO BRANDS, INC.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – Significant Accounting Policies

NOTE 2 – Revenue

NOTE 3 – Inventory

NOTE 4 – Prepaid Expenses and Other Current Assets

NOTE 5 – Accrued Expenses and Other Current Liabilities

NOTE 6 – Long-Term Debt, Net

NOTE 7 – Equity-Based Compensation

NOTE 8 – Income Taxes

NOTE 9 – Fair Value Measurements

NOTE 10 - Variable Interest Entities

NOTE 11 – Net Income (Loss) Per Share

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 June 30, 2024, we experienced an increase in our net sales from $130.9 million for the three months ended June 30, 2023 to $131.6 million for the current period. The growth in net sales was primarily driven by the continued growth in our retail channel net sales(1). Similar to prior periods, we continued to see net sales channel mix shift from DTC to retail, with retail channel net sales growing 4.8%. While the DTC channel net sales trailed those of the prior period of the prior year, primarily resulting from the sustained demand for lower priced items within the DTC channel, the decline was nominal within the second quarter.

For the six months ended June 30, 2024, we experienced a decrease in our net sales from $219.1 million for the six months ended June 30, 2023 to $216.9 million for the current period. The decline in net sales was primarily driven by a decline in DTC channel net sales, primarily attributable to the first quarter. The first quarter DTC channel net sales decline was driven by inefficient marketing, resulting from non-productive spend associated with a legacy marketing contract. The decline was offset in part by increases within our retail channel net sales, resulting from the continued growth within our retail strategic partnerships and the net sales channel mix shift from DTC to retail.

(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.

Results of Operations

Three and Six Months Ended June 30, 2024 Compared to the Three and Six Months Ended June 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 generated higher sales in the first and third quarters. Additionally, we expect variances in our net sales throughout the year relative to the timing of new product launches.

The increase in net sales for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was driven by the increase in orders within the retail channel net sales offset by a slight decline in DTC net sales. The increase in order volume within the retail sales channel was driven by the continued growth with our retail strategic partnerships.

The decrease in net sales for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily the result of less effective marketing in the first quarter of 2024 and thereby lower site traffic within our DTC net sales channel. The retail channel net sales continued to benefit from growth within our retail strategic partnerships, evidenced by the increase in order volume throughout the first six months of the year..

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

The increase in cost of goods sold for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and the decreases in gross profit and gross margin for the same period was primarily the result of certain fair value adjustments related to acquired inventory in the 2023 acquisitions.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

The increase in cost of goods sold for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily the result of sales activity, with no comparable amount in the prior period, and certain fair value adjustments related to acquired inventory, both stemming from the 2023 acquisitions.

The decrease in gross profit and gross margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily the result of the decrease in net sales, coupled with product mix shift and inventory fair value write-ups, stemming from the 2023 acquisitions.

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

The increase in SG&A for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was driven by $4.5million of variable cost increases and $2.8million of fixed cost increases.

The variable cost increases for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 were primarily the result of a $2.6million increase in marketing spend and a $1.7million increase in distribution costs resulting from increases in shipping and fulfillment costs due to the increase in order volume.

The fixed cost increases for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 were primarily the result of a $1.2million increase in employee-related costs driven by separation of certain management personnel and addition of senior leadership positions, as well as additional increases in professional services and information technology expenditures, each of which were incurred to support future growth plans.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

The increase in SG&A for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was driven by $9.9million of variable cost increases and $1.1million of fixed cost increases.

The variable cost increases for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 were primarily the result of a $5.6million increase in marketing spend and a $4.1million increase in distribution costs resulting from increases in shipping and fulfillment costs and the increase in order volume.

The fixed cost increases for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 were primarily the result of increases of $1.3million in professional services costs and $1.0million in software expenses, offset in part by a $1.6million decline in employee-related costs stemming from decreased equity-based compensation and bonus expense.

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.

Other operating expenses increased for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, primarily as a result of increases to management transition costs resulting from expenses related to additional senior leadership positions and strategic consulting engagements.

Interest Expense, Net

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

Interest expense, net increased for the three and six months ended June 30, 2024 compared to the three and six months ended June 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

The Company is subject to U.S. federal, federal, state, and local income taxes on the Company's allocable share of taxable income of 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.

Income tax expense decreased for the three and six months ended June 30, 2024 when compared to the three and six months ended June 30, 2023, driven by a decrease to the forecasted AETR and the shift of income to certain corporate subsidiaries within our partnership, a reduction of income attributable to noncontrolling interests, nondeductible compensation and the impacts of other discrete items recorded in the current period.

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 June 30, 2024. See Note 6 - Long-Term Debt, Net, to the unaudited consolidated financial statements included elsewhere in this Quarterly Report.

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 $350.0million of revolving loans, including the ability to issue up to $20.0million in letters of credit, with $0.6million of letters of credit issued and outstanding as of June 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 June 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 May12, 2026 and bears interest at a rate equal to the base rate as defined in the agreement plus an applicable margin, which as of June 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 six months ended June 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.

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

Operating activities

The $54.6million increase in cash used in operating activities period over period, as shown in the table above, was due to a $26.8million increase in cash usage from changes in operating assets and liabilities (“working capital”) and a $27.8million 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 current period. The decrease in cash provided by working capital was primarily due to:

•a $13.9million increase in cash used in changes in accrued expenses and other current liabilities primarily due to larger cash outflows in the six months ended June 30, 2024 when compared to the same period in the prior year for accrued inventory purchases;

•a $10.1million decrease in cash provided by changes in inventory due to increased inventory replenishment for the six months ended June 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 $7.4 million increase in cash used in changes in prepaid expenses and other current assets primarily due to increases in tax receivables and prepaid marketing in the six months ended June 30, 2024 compared to the same period in the prior year; partially offset by

•a $3.8million increase in cash provided by 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 second quarter of 2024 compared to the same period in the prior year; with

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

Investing activities

The $3.7million 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, partially offset by an increase in capital expenditures from continued investments to support our future growth.

Financing activities

The $14.0million decrease in cash used in 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 $28.5 million, partially offset by a reduction in net draws on the Revolving Credit Facility.

Contractual Obligations

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 circ*mstances. 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 six months ended June 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 circ*mstances 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 June 30, 2024, we had indebtedness of $75.0 million and $88.8 million, with annualized rates of interest of 7.00% and 6.93%, 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 June 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 six months ended June 30, 2024 and 2023, net sales in international markets accounted for 7.2% and 6.8% 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 Unites 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 $0.1 million for the six months ended June 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 June 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 are operating effectively as of June 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 June 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

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.

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 June 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 June 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

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.

2021 INCENTIVE AWARD PLAN

PERFORMANCE STOCK UNIT GRANT NOTICE

Capitalized terms not specifically defined in this Performance Stock Unit Grant Notice (the “Grant Notice”) have the meanings given to them in the 2021 Incentive Award Plan (as amended from time to time, the “Plan”) of Solo Brands, Inc. (the “Company”).

The Company has granted to the participant listed below (“Participant”) the Awards that vest subject to Performance Criteria described in this Grant Notice (the “Performance Stock Units” or “PSUs”), subject to the terms and conditions of the Plan and the Performance Stock Unit Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.

Participant:Christopher T. Metz

Grant Date:April 8, 2024

Number of PSUs:733,000

Vesting Schedule:See Annex

By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.

SOLO BRANDS, INC.PARTICIPANT

By:/s/ Kent Christensen By:/s/ Chris Metz

Name: Kent Christensen Name: Christopher T. Metz

Title: General Counsel

4/9/2024

Exhibit A

PERFORMANCE STOCK UNIT AGREEMENT

Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.

ARTICLE I. GENERAL

1.1Award of PSUs. The Company has granted the PSUs to Participant effective as of the grant date set forth in the Grant Notice (the “Grant Date”). Each PSU represents the right to receive one Share or, at the option of the Company, an amount of cash, in either case, as set forth in this Agreement. Participant will have no right to the distribution of any Shares or payment of any cash until the time (if ever) the PSUs have vested.

1.2Incorporation of Terms of Plan. The PSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.

1.3Unsecured Promise. The PSUs will at all times prior to settlement represent an unsecured Company obligation payable only from the Company’s general assets.

ARTICLE II.

VESTING; FORFEITURE AND SETTLEMENT

2.1Vesting; Forfeiture. The PSUs will vest according to the vesting schedule in the Grant Notice except that any fraction of a PSU that would otherwise be vested will be accumulated and will vest only when a whole PSU has accumulated. In the event of Participant’s Termination of Service for any reason, all unvested PSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company, including the Grant Notice.

2.2Settlement.

(a)PSUs will be settled in Shares or cash at the Company’s option as soon as administratively practicable after the vesting of the applicable PSU, but in no event more than thirty (30) days after the PSU’s vesting date. Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.

(b)At the time of settlement, Participant will receive one Share for each vested PSU. No fractional Shares will be issued upon settlement. The Company, in its sole discretion, may instead substitute an amount in cash for the vested PSU. If a PSU is settled in cash, the amount of cash paid with respect to the PSU will equal the Fair Market Value of a Share on the day immediately preceding the settlement date.

ARTICLE III.

TAXATION AND TAX WITHHOLDING

3.1Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.

3.2Tax Withholding.

(a)Participant will not receive any shares issued upon settlement of the vested PSUs unless Participant makes arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the settlement of the vested PSUs. The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the PSUs as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company reduce the amount of such withholding taxes from other compensation payable to the Participant or retain Shares otherwise issuable under the Award. The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the PSUs to, or to cause any such Shares to be held in book-entry form by, Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the vesting and settlement of the PSUs or any other taxable event related thereto.

(b)Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the PSUs, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the PSUs. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the PSUs or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structure the PSUs to reduce or eliminate Participant’s tax liability.

3.3Broker-Assisted Sales. In the event any tax withholding obligation arising in connection with the PSUs will be satisfied under Section 9.5(c) of the Plan, then the Company may elect to instruct any broker acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of Shares from those Shares then issuable upon the settlement of the PSUs as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company or Subsidiary thereof with respect to which the withholding obligation arises. Participant’s acceptance of these PSUs constitutes Participant’s instruction and authorization to the Company and such broker to complete the transactions described in this Section 3.3, including the transactions described in the previous sentence, as applicable. In the event of any broker- assisted sale of Shares in connection with the payment of tax withholdings: (a) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation occurs or arises, or as soon thereafter as reasonably practicable; (b) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (c) Participant will be responsible for all broker’s fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Participant as soon as reasonably practicable; (e) Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (f) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation,

Participant agrees to pay immediately upon demand to the Company or its applicable Subsidiary with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the applicable withholding obligation.

ARTICLE IV.

OTHER PROVISIONS

4.1Administration. The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons. To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.

4.2PSUs Not Transferrable. Unless otherwise determined by the Administrator, (a) the PSUs may not be sold, assigned or transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, subject to the Administrator’s consent, pursuant to a domestic relations order and (b) neither the PSUs nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy). Any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by this Section 4.2.

4.3Adjustments. Upon the occurrence of certain events as provided in Article VIII of the Plan, Participant acknowledges that the PSUs and the Shares subject to the PSUs are subject to adjustment, modification and termination.

4.4Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.