Solo Brands, Inc. (NYSE:DTC) Q2 2023 Earnings Call Transcript

Solo Brands, Inc. (NYSE:DTC) Q2 2023 Earnings Call Transcript August 4, 2023

Operator: Good morning, and welcome to the Solo Brands, Incorporated Second Quarter Fiscal 2023 Financial Results Call. [Operator Instructions] I would now like to turn the conference call over to our host, Bruce Williams. Please go ahead.

Bruce Williams: Good morning, everyone, and thank you for joining the call to discuss Solo Brands’ second quarter results, which we released this morning and can be found on the Investor Relations section of our website at investors.solobrands.com. Today’s call will be hosted by Chief Executive Officer, John Merris; and Chief Financial Officer, Somer 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 expectations. 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. We encourage you to review these filings for a discussion of these risks, including our soon-to-be-filed quarterly report on Form 10-Q 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 adjusted EBITDA and adjusted EBITDA margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance and facilitate period-to-period comparisons of our core operating results and the results of peer companies. 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. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies.

We are unable to provide a reconciliation of non-GAAP adjusted EBITDA margin to net income margin, the most directly comparable GAAP financial measure on a forward-looking basis, without unreasonable efforts because items that impact this GAAP financial measure are not within the company’s control and/or cannot be reasonably predicted. Now I will turn the call over to John.

John Merris: Thank you, Bruce, and thank you for joining the call to discuss our second quarter results. I will begin by reviewing our second quarter performance and then provide an update on our key operational strategies. Somer will review our second quarter results and provide our outlook. We are pleased with our performance, and I’m grateful to our team for their dedication and hard work to produce results in this environment. Against a challenging consumer backdrop, we focused on driving profitable sales, which enabled us to deliver better-than-expected margins and profitability. For the quarter, we generated sales of $131 million, in line with our expectations and a 170 basis point expansion in EBITDA margin to 19.1%. Our results for the quarter demonstrate that we are committed to a disciplined approach to drive strong return on invested capital and free cash flow.

During the quarter, we leaned into the strong momentum we were seeing through our wholesale channel. We are rapidly gaining shelf space while increasing our door count. We have built strong relationships with our retail partners, and consumers have reacted enthusiastically to the presentation of our brands at stores across the country. Within the online channel, we used our digital marketing lever to strategically pare back our spending as we saw strength in wholesale. As we grew into an omni-channel model, we have focused on elevating our brand positioning and aligning our sales calendar with our retail partners. We have also pulled back our use of flash sales year-over-year, leading to a reduction in the level of planned promotions. As expected, this pullback in promotions and advertising during the quarter led to a moderation in sales trends in our direct channel; but, longer term, we believe that this is appropriate to drive consistent messaging and to better reflect the value of our brands.

We are increasingly managing our business with an omni-channel approach. And given the strong consistent EBITDA margins in both channels, we plan to be disciplined in directing marketing investments that will optimize growth. To that end, we continue to refine our marketing investments to grow our brand awareness. We know that we are currently gaining exposure to a broader audience through our retail partners, and we are leaning into this opportunity. By investing in shop-in-shops, end caps, bundles and point-of-sale displays, we are able to tell a better story and create a stronger connection to our brands. For example, in SCHEELS stores, we have created a beautiful in-store Solo Stove shopping experience that showcases the depth of our assortment.

Our improved positioning in retail stores provides a seamless customer experience for those shopping our brands at retail or online. In addition to enhancing our in-store presence with our retail partners, we see opportunities to build awareness for our entire platform of brands. We believe that many of our customers do not know all of the brands that are part of the Solo brand family, which creates a significant opportunity to increase the number of customers that shop across our brands. Beginning in the second half of the year, we will be adding marketing inserts to our packaging that display all of our distinct brands and offer an incentive to try another brand. We are incredibly excited about the potential for this initiative. Moving forward, we remain committed to our key priorities: investing in product innovation, growing our wholesale penetration and building our international business.

Our unrelenting focus on innovation is at the heart of our success. Our team continues to push boundaries and explore new avenues to create compelling products. Over the last 12 months, we have introduced a flurry of new innovation, and we’ve been pleased with the consumer response, with notable callouts of Solo Stove of our Pi Pizza Oven, Mesa and Fire Pit Surround; at Chubbies of our Everywhere Pant; at ISLE of our Switch; and at Oru Kayak of our Lake. We continue to generate strong customer responses from our most recent innovations. Looking ahead, we’re excited about our new product launches planned for the back half of the year and look forward to unveiling the first of several in the third quarter. We are at the early stages of our wholesale expansion, which is ramping at a faster-than-expected rate.

As such, we recognize that this channel shift may be pressuring the top line in our direct channel in the near-term, but we believe that our omni-channel strategy will produce a halo effect as our brand recognition grows and customers look to our direct channel to continue their relationship with our brands. In the wholesale channel, we are building stronger relationships with our partners. We are now part of the normal planning cycle for many of our key retailers, which is leading to an increase in door count, additional shelf space and improved product placement. We recognize the mutual benefits of working closely with our retail partners, and we will continue to drive awareness and sales across all channels. Our international business remains a significant opportunity for us.

Today, it is still a relatively small part of our overall business, and we are focused on investing and building the infrastructure to position us for long-term growth. We are taking a measured and methodical approach to our growth in new markets, recognizing the importance of making disciplined marketing choices. Similar to our domestic business, we are looking at the international business holistically and are channel agnostic. We are building relationships with retail partners, including Costco Europe, which we believe will enable us to grow our brand recognition more rapidly. Before I turn the call over to Somer, I’d like to discuss the current environment. Consumers continue to be selective in choosing which brands they shop. Our company’s focus on customer experience and product innovation is helping us deliver in spite of this environment.

With a clear mission to deliver good moments and lasting memories, our customers continue to refer us to their friends and come back for themselves. Life truly is better around Solo Brands products, and I look forward to our innovation pipeline and continued momentum as we execute through the second half of the year. And now for Somer.

Somer Webb: Thanks, John, and good morning, everyone. Today I will walk you through our second quarter results and then provide our outlook for the remainder of 2023. For 2023, our plan is to execute a balanced, profitable omni-channel strategy for our business. We believe our execution of the plan through the first half of the year has been very successful. We have leaned into building strategic relationships with key retail partners, elevating our brand through intentionality on price and promotion, and broadening our customer reach through enhanced brand marketing. We realize this strategy could put some pressure on our online business in the short-term, but we remain confident that it will deliver strong financial results for our shareholders in the long-term.

During the second quarter, we continued to experience strong sales momentum in our wholesale channel. Reorder volume continued throughout the quarter, along with new product placement in key retailers. As we saw strength from wholesale, we reduced digital marketing spend in our direct-to-consumer channel. We continued to focus on generating profitable revenues and delivered $25 million in EBITDA and 19.1% margin for the second quarter. Net sales decreased 3.7% to $130.9 million compared to $136 million in the prior year period. Sales were driven by strong demand in the wholesale channel, which were offset by softer trends in our direct-to-consumer business. Wholesale net sales increased 57% to $31.3 million for the second quarter compared to $19.9 million in the prior year, driven by increased shelf space within our existing partners as well as growth in door count.

Our direct-to-consumer net sales decreased 14.2% to $99.7 million for the second quarter compared to $116.1 million in the same period in the prior year due to being less promotional and reducing our overall marketing spend. Moving to gross margin. Gross margin rate decreased to 63.4% compared to 63.7% in the second quarter of 2022. Our margin rate was impacted by higher wholesale channel mix year-over-year, driven by our strong sales at our retailers, which carry a lower gross margin. However, as noted previously regarding profitability, we are channel agnostic as each channel generates similar contribution margins. Selling, general and administrative expenses for the second quarter decreased to $63.5 million, or 48.5% of net sales as compared to $69.2 million, or 50.9% of net sales in the same period last year.

The variance was driven by $6.8 million decline in variable costs, partially offset by $1.2 million of higher fixed costs. The decline in variable costs was due to lower marketing and distribution expense. Our second quarter net income was $11.5 million and net income per diluted share was $0.12. Second quarter adjusted net income was $17.9 million and our adjusted EPS was $0.22 per diluted share. Adjusted EBITDA increased 5.6% to $25 million, and adjusted EBITDA margin increased 170 basis points to 19.1%. Now turning to the balance sheet. At the end of the period, we had $60.6 million in cash and cash equivalents. As of June 30, we had $50 million in outstanding borrowings under the revolving credit facility and $93.8 million under the term loan agreement.

The borrowing capacity on the revolving credit facility was $350 million as of June 30, leaving $300 million of availability. We have a strong liquidity position, and we believe we are able to take advantage of strategic opportunities with a net leverage that remains less than 1.5x. In the quarter, we were able to leverage the health of our balance sheet and execute a roughly $28 million share buyback of 5.6 million Class A shares at $5 per share. Inventory at the end of the second quarter was $113.7 million, roughly in line with a year ago. We are pleased with our continued progress of our inventory management and are well-positioned going into the back half of the year. Turning to our outlook. We are excited about the pipeline of new products we have planned for the back half of the year and the continued momentum we are seeing in our wholesale channel.

With more than half of our sales anticipated in the second half of the year and a significant portion in the fourth quarter, there is a lot of business in front of us, but we remain optimistic about our ability to deliver in the near- and long-term. As demonstrated in our first half results, the focus on driving profitable growth, along with continued momentum in wholesale, has enabled us to deliver on revenue while seeing strength on EBITDA margin. We reiterate a revenue range of $520 million to $540 million, with the most likely outcome at the midpoint of the range of $530 million. While we are reiterating revenue guidance, we are raising our adjusted EBITDA target from 16.5% to 17.5% to 17% to 18% for the full year. In closing, our brands continue to execute at the highest levels driving new innovation and creating incredible experiences for our customers.

We are incredibly excited about the tremendous amount of growth in front of us. We will continue to focus on strategically investing for the future while delivering profitable growth to our shareholders. I will now turn the call over to the operator to begin Q&A.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Chasen Bender of Citi. Your line is now open. Please go ahead.

Chasen Bender: Good morning. Thanks for slotting [ph] me in. I’d just like to start on the guidance. First of all, can you just give us a little bit more color on how you’re planning the rest of the year? I think last quarter you were talking about cadence of 20% in third quarter. And I can’t remember the figure off the top of my head. And what is it, 40% in the fourth quarter? Just any evolution on how you’re thinking about that. And then, specifically on the EBITDA margin guidance, can you just kind of unpack the upward revision there? It looks like it was largely a flow through of 2Q, but I’m curious if there’s anything else behind it.

Somer Webb: Yes. Absolutely good questions. So as we think about the back half of the year, we have stated it’s roughly 20% in Q3, roughly 40% in Q4. I did mention in previous quarters that there is going to be some timing dynamic around wholesale, depending on if it goes out at the end of Q3 or early Q4, just the timing with our relationships with our retailers. So it’s going to be — I think if you think about 60%, or roughly 60% in the back half, that’s a good estimate. And 20% to 40% is probably a good estimate. But again, it’s going to be based on the timing of when we actually ship out those wholesale orders for the holidays. So there’s a little bit of flexibility there just as we dial in this new kind of landscape of wholesale.

On the EBITDA margins, you’re exactly right. So we kind of raised the guidance based on our performance in the first half of the year. We are leaving flexibility in the back half. We’ve mentioned that our marketing spend is a variable lever that we can leverage, and we can throttle it up and throttle it down. You saw us in the first half see strength in wholesale, and we throttled it back some. However, in the second half, we have new product innovation, which we do expect that we’ll probably throttle up marketing spend. And so that’s why we are taking the advantage of just the benefit from that first half, and we are revising our guidance up from an EBITDA margin standpoint, but with the flexibility to go ahead and lean into marketing spend in the second half.

Chasen Bender: Got it. Makes sense. And then, just in terms of the wholesale expansion, great to see the momentum there. I’m curious, have you started to have your 2024 shelf planning conversations with retailers? And if so, how are they going? Are they — are you picking up the additional door shelf and end cap space that you were expecting? And just kind of any color on how that should evolve into 2024.

John Merris: We have started having those conversations with our retail partners. Certainly, some are more accelerated and have happened in a deeper way than others. But overall signs right now are very positive. We are seeing expansion in door count, better real estate in stores generally across the board. But particularly when we’re talking about wholesale expansion, just to be more specific, it’s Chubbies and Solo Stove; those two brands in particular, which obviously drive the most volume inside of Solo brand. So good conversations so far. We are seeing really healthy momentum across the board with our retail partners across those two brands, specifically.

Chasen Bender: Got you. I appreciate that color. And then if I could just sneak one more in. I was hoping if you could just give us a refresh on how you’re thinking about capital allocation and priority from here, given you’ve clearly repurchased a lot of shares over the last couple of months from some of your sponsors and key stakeholders. So maybe just give us an update on how you’re thinking about that into the rest of the year.

Somer Webb: Yes, absolutely. So as we said, kind of going into this year, we believe the focus on free cash flow generation, we expected it to be kind of over 100% of EBITDA. We’ve obviously shown that we can generate a lot of free cash flow. We are going to be very disciplined and strategic about how we use that capital. You saw that we did the repurchase in Q2, that we’ve done with the TerraFlame acquisition. We continue to look at strategic opportunities from an M&A standpoint. But we want to use our capital to the best of our ability that benefits our shareholders. But those are the two main things. And then, of course, we’re going to pay down our revolving credit line by the end of the year. So between paying off debt, not to the term loan, but our revolving credit line, M&A opportunities, and then what we did on the share buyback in Q2.

Chasen Bender: Got it. Appreciate the color. I will pause there and pass it on.

Operator: Thank you. [Operator Instructions] Our next question comes from the line of Robert Ohmes of Bank of America. Your line is now open. Please go ahead.

Unidentified Analyst: Hi. It’s Maddie on for Robbie. Can you talk a little bit more about — you called out the decrease in DTC revenue driven by the product mix shift and the decrease in marketing spend. Can you talk more about what it was, like what this product mix shift was? Thanks.

Somer Webb: Yes. So if you recall, we’ve launched — so Mesa was one of the big launches at Solo Stove, when we launched that product at the end of Q3. And so, as we’re rolling over that, some of the mix shift from an overall revenue standpoint is more orders are going out with Mesa than they were going out with Bonfire last year. So if you think about, and this kind of goes in with our wholesale strategy as well, as we introduced Bonfires into the market with our wholesale retailers, some of the products at our customers, they’re still engaging with us and order count is up, but they’re coming to us for the products that they’re not necessarily maybe finding in their retailers. And so Mesa has become a bigger percentage of our mix, and it’s just a lower price point product.

Unidentified Analyst: Got it. Thank you. And then the next question is, you recently added TerraFlame to your portfolio. Can you talk about the breakdown of wholesale to DTC revenue? And does it have a similar profitability with the other brands in your portfolio as you look to market across brands?

John Merris: Yes, absolutely. So it does look similar from an overall mix standpoint. There’s some good wholesale business coming through with TerraFlame, particularly with Target. We are looking to expand that otherwise strong direct-to-consumer marketplace business coming out of TerraFlame. From a margin perspective, really healthy gross margins that flow down through the P&L, so similar margin profile to what you would expect to see. I’ll just remind everyone on the call, it’s — from a materiality standpoint, TerraFlame is quite small compared to the rest of our platform. It’s one that we think has a lot of strength behind it and a big market opportunity particularly amongst the growing Solo Stove customer base. As we have the opportunity to take the fire inside, as we’ve talked about our “Bring Smores Indoors,” that’s one that we are really excited to lean into.

So we think that there’s a lot of market opportunity and market potential for that brand. Right now, we are very focused on integration and finding those synergies across the audiences. As we look at ’24, I think you’ll start seeing better momentum and strength behind that specific brand, the TerraFlame brand.

Unidentified Analyst: Great. Thank you.

Operator: Thank you. Our next question comes from the line of Peter Keith of Piper Sandler. Your line is now open. Please go ahead.

Peter Keith: Hey, thanks. Good morning, guys and congrats on the improved profitability. Maybe sticking on that topic, I just want to think about gross margin, not only in the back half of the year, but kind of going forward and the trajectory and potential to drive gross margin higher. Could you just walk us through the puts and takes, Somer, maybe around the wholesale gross margin headwind, and then how the dynamics of lower freight are also flowing through and should continue to flow through?

Somer Webb: Yes, for sure, Peter. So from a gross margin standpoint, kind of year-to-date, we bought [indiscernible] about a 150 basis point headwind from kind of the mix shift to wholesale from the direct channel. And then that’s offset by about 50 basis points of what I’d say is pricing discipline, so just being less promotional, and then about 75 basis points from freight. We expected to have the benefit kind of in the second half. We started at seeing it come through in our Q2 numbers. I expect it to be more in a 100 to 150 basis points in the back half. But from an overall mix standpoint, kind of going in, what we are expecting right now is that our overall mix kind of wholesale to direct-to-consumer stays pretty consistent with the first half.

But we should get a little bit additional tailwind from the freight. We do think, from an overall year-over-year standpoint, we will be about as promotional as we are — we have been in the past in the back half on our holiday promotions. So we think pricing will probably stay relatively the same. We will gain some from freight. And then overall, we will still have a little bit of the headwind overall from the wholesale to — or the direct-to-consumer to wholesale mix shift.

Peter Keith: Okay. That’s helpful. I guess we will work through that in the model, but I did just want to think about that — the D2C sales. So is the — I guess, the down 14%, and I know there’s some product mix within that that’s impacting, is the down 14% kind of the low point of the year just based on your outlook? Or could D2C get a little bit worse from here maybe in the back half?

John Merris: Thanks, Peter. So basically, if you just look at the front half of the year on a blended basis, so you had the down 14% in Q2, I think, down 8% or 9% in Q1, but on a blended basis roughly around down 12%. And if you look at the way we are thinking about it for back half, it’s very similar. So again, we’ve talked about this in the past. Our quarters tend to ebb and flow with wholesale, quarters 1 and 3 being a little bit higher wholesale, quarters 2 and 4 being a little bit higher D2C just based on the timing and seasonality of the business. So exactly how that flows through quarter-to-quarter is — again, Somer was talking about this — but because we are newer in wholesale and we don’t know exactly the timing of the Q3 to Q4 sell-in to some of our retail partners, it could shift slightly.

But I think, if you look at the front half of the year, you roll that to the back half of the year, that’s how we’re thinking about it. It’s on a blended basis, we are anticipating or flowing through roughly down 12% or so for the back half on the D2C.

Peter Keith: Okay. That’s very helpful. Thanks so much guys. Appreciate it.

Operator: Thank you. Our next question comes from the line of Phillip Blee of William Blair. Your line is now open. Please go ahead.

Phillip Blee: Great. Thank you. Maybe you could just break down the sales outlook for the second half a bit more for us. How are you guys thinking about product newness? How much does international play into your expectations? And then how should that flow through to margins? Thanks.

John Merris: Yes. Thanks for the question. So just quickly on international, so still less than 10% of our overall business, it’s relatively new. Last year was our first full year really having international markets open. And we are continuing to see good momentum there, and we are excited about the opportunity. But as a relative percent of our overall business, it’s still less than 10%, and we don’t anticipate that changing for the back half of this year. In terms of product and newness, innovation and our overall outlook, Somer mentioned this, but the back half of this year there’s definitely a lot of strength in the innovation pipeline. So we have even starting this quarter, you’ll start seeing healthy momentum in innovation and product rollouts.

Those are going to continue even into the beginning parts in the first half of Q4 as we really look to launch these products ahead of our Black Friday/Cyber Monday and the strength of that period. So in the back half of the year, not a lot changes from the front half of the year in terms of what we are seeing split wise by channel, split wise by even region; and the brands within the platform, with the exception of Solo Stove having the strength that it does in Q4. But we do anticipate having product innovation really being able to lean into the newness and some of the new products that we have rolling to the back half of the year. Those have already been planned into our forecast. So all year, we’ve kind of been planning that. So as we talked about having 60% of our revenue in the back half of the year, that’s a healthy mix between the strength in Q4 and the planned back half product innovation that we are rolling out.

Phillip Blee: Okay, great. And then you mentioned the opportunity for crossover demand. Can you may be shed some light on where you are now with that, how often you see your customers shopping multiple brands? And then your strategy of including marketing inserts pretty similar to what you do for accessories, which you’ve seen a lot of success with. So how quickly do you think you can start to see some demand generation related to this initiative? Thank you.

John Merris: Yes. We are hopeful that we will start seeing some of that demand flow through quickly, but not counting on it, certainly not dependent on it. So we will see how it goes. We do think that the timing is really good for the brands to go and explore this. I think on our next call, we will have a lot better data for you around what the response has been like, what customers are saying. It’s really early for us to tell. We have some very, very early positive signals, but we really don’t know at scale at all right now. By the end of this month, we will have those marketing inserts in the packages, and by the end of the quarter have much better visibility. So looking forward to talking about that on the next call. Don’t want to preempt it too much yet just because we feel like we still have a lot to learn there.

Operator: Thank you. Our next question comes from the line of Brian McNamara of Canaccord Genuity. Your line is now open. Please go ahead.

Madison Callinan: Hi. This is Madison Callinan. I’m on for Brian. Thanks for taking our questions. I know this is probably not the easiest question to answer, but is there any way to parse out how growth in the direct channel, what it looks like in Q2 if you leaned into more marketing spend in the quarter? Like, for instance, if you gave up a point or two of EBITDA margin, it looks like you be consensus EBITDA margin by more than 200 bps. So any helpful context for that would be great.

John Merris: Yes. We just didn’t think about it as much that way, truthfully. I think there certainly was room to grow revenue if we leaned into marketing spend. We were operating, as we always do, in a positive rollout format, meaning every dollar we spend is generating more dollars in revenue than what we are spending. That being said, especially at Solo Stove and Chubbies, again, our two biggest brands where we have the most momentum in wholesale, we just recognized that we were spending a lot of effort in those partnerships, and we were putting a lot of inventory of some of our marquee foundational products. If you think Solo Stove, lots of fire pits were being seeded into these retail partners. And we just did not see it to be a prudent strategy to really try to drive tons of marketing spend towards fire pit sales at the same time that we are pushing inventory and seeding it into our retail partners to create that foundation.

So again, a short-term pressure on D2C. We think, in the long-term, you’ll start seeing a lot more brand awareness. We know that there are new eyeballs inside of retailers that are getting a better idea of our brand and more familiarity with our brand. And then there will be a time and a season where we do lean into marketing spend. Somer just alluded to that as we talk about the back half of the year and some of the flexibility that that variable lever gives us a marketing expense. So the timing will come where we’ll be able to lean in, and we think it will be a good time for it. It just wasn’t in Q2. So hard to gauge exactly what the impact could have been, but we do think it would have been or could have been positive if we would have. But we are looking at the back half of the year and even into ’24 and taking a more medium to long-term approach.

Madison Callinan: That’s great. Thank you. And then, secondly, with the enhanced product displays at, like, Public Lands and SCHEELS, are there plans to roll those out more broadly? Or are they more like a pilot or test phase right now? Thanks.

John Merris: They have been in pilot test phases, but are quickly rolling beyond just test phases with many of these retailers. SCHEELS is a great example of that, where it’s expanded quickly beyond just the test. Public Lands is very close to expanding beyond the test, and then conversations with other retailers are really starting to expand. The Chubbies in-store display has expanded this season, been very successful, and it’s expanding even more broadly. They’ve already indicated to us for 2024. So we are seeing a little bit of a mix between those. Some are still in test phase, some are past test phase now and are being rolled out. Again, good momentum there. It’s not all happening at once, but we do expect to have more prominent displays in more doors and have better real estate in stores as we roll the 2024 based on the momentum and the feedback that we are getting right now from retailers.

Madison Callinan: Great. I will pass it on. Thank you so much.

Operator: Thank you. As there are no additional questions waiting at this time, I’d like to hand the conference back over to John Merris for closing remarks.

John Merris: Great. Thank you so much. We appreciate everybody being on the call. We are really looking forward to getting into the back half of the year here. We are excited about the newness and innovation upcoming, and look forward to being with you guys in a few months. So thanks for attending today.

Operator: Ladies and gentlemen, this concludes Solo Brands, Incorporated second quarter fiscal 2023 financial results call. Thank you for joining. You may now disconnect your lines.