Solo Brands Inc.
03/23/2026 | Press release | Distributed by Public on 03/23/2026 05:46
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Risk Factors" and our audited consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
Overview
Solo Brands operates four premium outdoor brands: Solo Stove, Chubbies, Oru Kayak ("Oru") and International Surf Ventures ("ISLE"), with Oru and ISLE regarded in aggregate as Watersports. Our brands develop innovative products and market them directly to customers primarily through our direct-to-consumer ("DTC") channel, which includes e-commerce and owned retail stores, as well as partnerships with key retailers. 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. We operate as two reportable segments: Solo Stove, which includes the Solo Stove and TerraFlame brands and primarily offers indoor and outdoor fire pits, stoves, and accessories, and Chubbies, which offers premium casual apparel and activewear. The remaining operating segments are included within the Corporate and All Other category. In 2025, the Company completed the disposition of the manufacturing operations for the TerraFlame brand. However, we continue to own the intellectual property of TerraFlame, as well as sole distribution rights of TerraFlame branded products. The CODM makes operating decisions, assesses financial performance, and allocates resources based upon discrete financial information at the reportable segment level.
For the year ended December 31, 2025, we experienced a decrease in our net sales from $454.6 million for the year ended December 31, 2024 to $316.6 million. The decline in net sales was primarily driven by the decline in DTC and retail channel net sales within the Solo Stove segment, offset in part by an increase in net sales across both channels within the Chubbies segment. While net sales for the year ended December 31, 2025 declined when compared to the prior year, loss from operations decreased from $174.6 million to $113.5 million, respectively. This decrease was primarily driven by a reduction in restructuring, contract termination and impairment charges and effective management of operating expenses to align with the decline in net sales, particularly advertising and marketing costs and distribution costs. Partially offsetting these expense declines was the reduction in gross profit realized from the lower net sales in the current year when compared to the prior year.
On December 17, 2025, as part of the Corporate Simplification transactions, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Holdings and Solo Merger Sub LLC ("Merger Sub"), a subsidiary of Solo Brands, Inc. and SP SS Blocker Purchaser, LLC ("Blocker"), formed for the sole purpose of merging with and into Holdings. Pursuant to the Merger Agreement, effective January 1, 2026 (the "Effective Time"), Merger Sub was merged with and into Holdings, with Holdings continuing as the surviving entity (the "Merger") as our wholly owned subsidiary of Solo Brands, Inc.
Pursuant to the Merger Agreement, at the Effective Time, each of the common units of Holdings ("LLC Units") beneficially owned by members of Holdings were cancelled and converted automatically into a right to receive one share of our Class A common stock, except for any LLC Units beneficially owned by either Solo Brands, Inc. or Blocker, which were cancelled for no consideration in accordance with the Merger Agreement and Holdings' Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"). At the Effective Time, the limited liability company interests of Merger Sub were converted into LLC Units as the surviving entity, resulting in Holdings continuing as our wholly owned subsidiary. In addition, immediately following the Effective Time, all of the issued and outstanding shares of our Class B common stock were retired and cancelled in accordance with our Amended and Restated Certificate of Incorporation and the Holdings LLC Agreement. As a result, upon completion of the Merger, there were no LLC Units or shares of Class B common stock of the Company outstanding.
The Merger and related transactions did not terminate or otherwise accelerate our obligations under the Tax Receivable Agreement, dated as of October 27, 2021, by and among us, Holdings and the other parties from time to time party thereto. However, as a result of the Merger, the total future potential cash payments due under the Tax Receivable Agreement are generally limited.
Economic Factors Affecting our Performance
Tariffs
We sell our products in the U.S. as well as various foreign countries, primarily in Europe, Canada and Australia. We also have historically sourced and procured inventory primarily out of China and Vietnam, with some products sourced through Mexico. Tariffs on certain foreign origin goods, particularly from China, continue to put pressure on our input costs. As a result of higher tariffs and tariff uncertainty, in 2025, we began to diversify our supply base and shifted some purchase orders to Vietnam and Cambodia, reducing our reliance on sourcing from China for Solo Stove and eliminated our sourcing from China almost entirely for the Chubbies segment. In line with the decline in net sales in 2025, purchase order activity and inventory receipts from our international suppliers was lower for the year ended December 31, 2025 when compared to the same period in 2024, further limiting the overall impact of tariffs in 2025. Additionally, we closed and relocated the operations of a distribution center in Mexico to the U.S., in response to the repeal of the 321 Tariff Relief as of August 31, 2025. While these diversification and distribution center closure efforts as well as certain price increases reduced the impact of the higher tariffs, the impacts thereof were nonetheless meaningful to inventory reflected in the consolidated balance sheets and on cost of goods sold within the consolidated statements of operations and comprehensive income (loss). We expect inventory and costs of goods sold, on a per unit basis, to increase in future periods as a result of these and any additional tariffs in future periods, to the extent they remain effective. The strategies we have implemented and continue to implement to mitigate the impact of such tariffs or other trade
actions may not be successful. For additional information, see Part I, Item 1A. Risk Factors, "Tariffs or other restrictions placed on foreign imports or any related counter-measures are taken by other countries harm our business and results of operations"and "Our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, societal, and political risks associated with those markets."
Our product lines involve production with steel manufactured outside the U.S., the target of recent tariff actions, impacting virtually all of our Solo Stove brand products. In addition, certain of our Oru brand products are manufactured in and distributed from Mexico. As such, they are subject to any applicable tariffs placed on goods imported from Mexico.
On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act ("IEEPA") does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the incremental tariffs was within the exclusive jurisdiction of the U.S. Court of International Trade ("CIT"), thus affirming a prior decision of the CIT that the U.S. President lacked authority to impose incremental tariffs. As a result, on February 20, 2026, the U.S. President issued an executive order stating that the incremental tariffs were no longer in effect and ending the collection of the incremental tariffs. However, the U.S. President then issued an additional executive order imposing tariffs pursuant to Section 122 of the Trade Act of 1974 for 150 days, effective February 24, 2026. We continue to monitor the changing tariff and trade restrictions and are evaluating the potential impacts of these decisions for 2026 and any potential impacts on consumer demand and pricing expectations. We filed a lawsuit in the CIT challenging the legality of incremental tariffs and are seeking to recover the approximately $8 million in incremental tariffs that we paid in 2025 and 2026. See Part I, Item 3. Legal Proceedings for additional information.
Tax Legislation
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective beginning in 2026. As the Company is in a loss position, the tax benefit was limited, with the expected cash tax benefit expected to be immaterial as well.
Macroeconomic Factors
Current macroeconomic factors, including overall economic and political uncertainty, financial and capital markets instability, new or increasing tariffs, high interest rates and high inflation, remain very dynamic and highly uncertain. The effects of the macroeconomic environment could further reduce our net sales and negatively impact our gross margin, net income (loss) and cash flows.
Discussion within the relevant comparative periods and sections have been included below.
Other Key Factors Affecting Our Financial Condition and Results of Operations
Trends in Seasonality
In 2025, we have seen a shift in the seasonal demand within our retail channel with the first quarter far exceeding the third quarter. Historically, our net sales have been highest in our second and fourth quarters. We believe that this change in trend in 2025 could be indicative of a potential long-term change in our seasonality, which we will continue to monitor in future periods.
2025 Restructuring Activity
In 2025, management, along with our Board of Directors, engaged strategic consulting firms to assist with improving our financial results. This operational improvement involved the engagement of restructuring, legal and investment banking consultants to perform financial planning, forecasting and project management activities. Certain of these strategic consulting firms assisted and continue to assist in developing operational plans for the near- and long-term, as well as identifying cost saving initiatives to reduce our operational expenses and aid in the development of enhanced internal reporting to deliver timely insight to management.
The cost saving initiatives identified and executed upon during the year ended December 31, 2025 were designed to reduce operational expenditures over the long-term. The key cost saving initiatives and operational planning activities undertaken in 2025 were as follows:
•Restructuring
◦retention payments for key personnel to support the sustainment of operations and focus on cost saving and operational improvements;
◦reduction in force ("RIF") of management and non-management personnel in an effort to align headcount with the operational needs of the business, resulting in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods;
•Contract Terminations
◦termination of an underperforming licensing agreement in an effort to redeploy the allocated funds for operational purposes;
◦renegotiation of a settlement of a termination fee with a former advertising services vendor at a more favorable amount to the Company, to reduce cash outflow;
•closure of three distribution centers in 2025 to reduce fixed costs in the short term and in future periods, as well as eliminate unnecessary capacity;
•termination of a lease agreement for an owned retail store and impairment of a separate owned retail store as a result of underperformance, and in the case of the terminated owned retail store to reduce forward operating losses;
•revision of pricing structure throughout our brands in order to mitigate, in part, the expected impacts of tariffs in subsequent periods;
•reduction in marketing spend and promotional activity within the Solo Stove segment to better align product pricing with our retail partners; and
•effecting the Corporate Simplification.
While these activities are intended to provide future benefit to the Company, most of these activities required up-front cash outlays. In order to fund these cash outlays, the Company used cash from operations and borrowings under the 2021 Revolving Credit Facility (as defined below) and the 2025 Revolving Credit Facility (as defined below). The following table outlines the cash outlays and the period(s) in which they occurred.
The 2025 restructuring activity was concluded in the fourth quarter of 2025. The Company anticipates additional restructuring related activity in 2026, as it continues to optimize its operating platform in line with the focus on building a smaller, profitable company.
| Activity |
Cash Outlay
(dollars in thousands)
|
Period | ||||||
| Engagement of strategic consulting firms | $ | 7,548 | Fiscal year 2025 | |||||
| Retention payments to key personnel | 5,790 |
Q2 and Q4 2025
|
||||||
| Closure of distribution centers | 2,144 |
Fiscal year 2025
|
||||||
| Reduction in force | 983 | Fiscal year 2025 | ||||||
2024 Restructuring Activity
In 2024, the Company underwent significant changes to its management team, which brought about a change in strategic vision and evaluation of the Company's initiatives and brands. The evaluation included analysis of the brand level financials, strengths of each of the brands, product design and customer service metrics, marketing campaign effectiveness and cost, efficiencies of brands on a standalone or aggregated basis, amongst other things. This evaluation led the Company to undertake the following activities during the second half of 2024:
•terminated underperforming marketing agreements with marketing barter partners that no longer aligned with the Company's current marketing strategy;
•charges related to the IcyBreeze reporting unit stemming from underperformance and management's determination to revise product designs under the Solo Stove segment; and
•reorganized the Oru and ISLE reporting units to eliminate costs and capitalize on potential synergies, through restructuring under a revised management structure.
In order to fund the cash outlays required for these initiatives, the Company leveraged income from operations and draws on the 2021 Revolving Credit Facility. The following table outlines the cash outlays and the period in which they occurred.
| Activity |
Cash Outlay
(dollars in thousands)
|
Period | ||||||
| Termination of marketing agreements | $ | 9,000 | Q4 2024 | |||||
| Reorganization of the Oru and ISLE Reporting Units | 349 | Q4 2024 | ||||||
| Wind-down of the Operations of the IcyBreeze Reporting Unit | 205 | Q3 - Q4 2024 | ||||||
Discussion within the relevant comparative periods and sections have been included below.
Consolidated Results for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Consolidated Net Sales
Net sales are comprised of DTC and retail channel sales to retail partners. Net sales within all 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 channel, our historical net sales tend to be highest in our second and fourth quarters, while our retail channel has generated higher sales in the first and third quarters. In 2025, retail channel net sales were highest in the first and fourth quarters. We believe that this change in trend could indicate a potential long-term change in our seasonality, which we will continue to monitor in future periods. Additionally, we expect variances in our net sales throughout the year relative to the timing of new product launches.
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Net sales
|
$ | 316,581 | $ | 454,550 | $ | (137,969) | (30.4) | % | |||||||||||||||
| Direct-to-consumer net sales | 200,939 | 319,064 | (118,125) | (37.0) | % | ||||||||||||||||||
| Retail net sales | 115,642 | 135,486 | (19,844) | (14.6) | % | ||||||||||||||||||
The decrease in net sales for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by a decline in net sales within the Solo Stove segment, offset in part by an increase in net sales across both channels within the Chubbies segment.
Consolidated Gross Profit and Gross Margin
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.
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%(1)
|
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|
Gross profit
|
$ | 188,080 | $ | 260,264 | $ | (72,184) | (27.7) | % | |||||||||||||||
|
Gross profit margin (Gross profit as a % of net sales)(1)
|
59.4 | % | 57.3 | % | 210 | ||||||||||||||||||
(1) Change in gross profit margin period over period in basis points
In 2024, the Company wrote down $18.3 million of inventory and related purchase orders of the IcyBreeze reporting unit as part of the restructuring, contract termination and impairment charge activity. This write down was reflected in cost of goods sold, resulting in cost of goods sold for 2024 exceeding the respective prior year period amount and negatively impacting the gross margin in the 2024 period.
Gross profit and Cost of goods sold, when considered with or without the impacts of the write down of inventory and purchase orders described above, decreased for the year ended December 31, 2025 compared to the prior year period, while gross profit margin increased when including the impact of the write down and decreased when excluding the impact.
Consolidated Operating Expenses
Operating expenses consist of (1) selling, general & administrative ("SG&A") expenses, (2) restructuring, contract termination and impairment charges, (3) depreciation and amortization expenses and (4) other operating expenses, as defined below.
•Selling, General & Administrative ("SG&A") Expenses- 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.
•Restructuring, Contract Termination and Impairment Charges- Restructuring, contract termination and impairment charges consist of severance and employee-related benefits, contract termination fees and asset impairment charges.
•Depreciation and Amortization Expenses- Depreciation and amortization expenses consist of depreciation of property and equipment and amortization of definite-lived intangible assets.
•Other Operating Expenses - Other operating expenses include certain costs incurred as a result of being a public company, acquisition-related expenses, business optimization and expansion expenses and management transition costs, including severance.
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Operating expenses
|
$ | 301,563 | $ | 434,882 | $ | (133,319) | (30.7) | % | |||||||||||||||
| Selling, general & administrative expenses | 176,248 | 262,172 | (85,924) | (32.8) | % | ||||||||||||||||||
|
Restructuring, Contract Termination and Impairment Charges
|
93,495 | 136,099 | (42,604) | (31.3) | % | ||||||||||||||||||
| Depreciation and amortization expenses | 25,674 | 25,702 | (28) | (0.1) | % | ||||||||||||||||||
| Other operating expenses | 6,146 | 10,909 | (4,763) | (43.7) | % | ||||||||||||||||||
The decrease in operating expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by a decrease in SG&A as a result of a significant decrease in advertising and marketing expenses, coupled with a decrease in distribution costs driven by the lower net sales in Solo Stove DTC channel.
Restructuring, contract termination and impairment charges also experienced a significant decline for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of non-recurring goodwill impairment charges in the prior year and non-recurring terminations of underperforming marketing agreements, offset in part primarily by larger intangible asset impairment charges in 2025. See Note 3 - Restructuring, Contract Termination and Impairment Charges in our Notes to Consolidated Financial Statements for additional detail.
Further, a decrease was realized in other operating expenses, as a result of decreases in management severance and strategic consulting engagements not related to restructuring or refinancing activity, offset in part by the loss recognized from the disposition of the TerraFlame manufacturing operations, in the second quarter of 2025. See Note 22 - Variable Interest Entities for additional information regarding the partial disposition.
Consolidated Income (Loss) From Operations
Income (loss) from operations is comprised of gross profit, less selling, general & administrative expenses, depreciation and amortization expense, restructuring, contract termination and impairment charges and other operating expenses.
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Income (loss) from operations
|
$ | (113,483) | $ | (174,618) | $ | 61,135 | 35.0 | % | |||||||||||||||
The decrease in loss from operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by a reduction in selling, general & administrative expenses through effective management of these expenses in alignment with the decline in net sales, particularly advertising and marketing costs and distribution costs, and a reduction in restructuring, contract termination and impairment charges, offset in part by the reduction in gross profit realized from the decline in net sales in the current year when compared to the prior year.
Consolidated Interest Expense
Interest expense, net consists primarily of interest on our revolving credit facilities and term loans.
| Year Ended December 31, |
Change
|
|||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
||||||||||||||||||||||
|
Interest expense, net
|
$ | 26,560 | $ | 14,004 | $ | 12,556 | 89.7 | % | ||||||||||||||||||
Interest expense, net increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 as a result of a higher average debt balance and higher average interest rates. Interest rates under the 2025 Refinancing Agreement (as defined below) are higher than those under our prior credit facilities.
Consolidated Income Taxes
Income taxes represent federal, state, and local income taxes on our allocable share of taxable income of Holdings, as well as Oru's and Chubbies' federal and state taxable income, and our foreign tax expense related to international subsidiaries. The tax benefit resulting from the recurring losses of Solo Stove is fully offset for all periods presented by a valuation allowance. Prior to the Corporate Simplification described above, we were the sole managing member of Holdings and, as a result, consolidated the financial results of Holdings. Holdings was treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Holdings was not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings was passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We have been 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.
Subsequent to the Corporate Simplification, effective as of January 1, 2026, income taxes will represent the federal, foreign, state and local income taxes of the consolidated filing group of Solo Brands, Inc. and its subsidiaries. The Corporate Simplification allows us to net the tax benefit (loss) generated by Solo Brands, Inc. and its wholly-owned subsidiaries, Chubbies and Oru, whereas prior to the effective date separate returns were required for each respective brand. As a result, we expect that future periods will incur lower income tax expense in periods in which any of these brands generate a loss which would offset income generated by other brands.
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | |||||||||||||||||||
| Income tax expense (benefit) | $ | 3,422 | $ | (8,958) | $ | 12,380 | (138.2) | % | |||||||||||||||
The increase in income tax expense for the year ended December 31, 2025 compared to the income tax benefit for the year ended December 31, 2024 was primarily driven by a full valuation allowance on deferred tax assets on losses generated from the Solo Stove segment in 2025, with only a partial valuation allowance in the prior year, as well as an increase in income tax expense associated with the Chubbies segment in the year ended December 31, 2025.
Solo Stove Segment Results for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Solo Stove Net Sales
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Net sales
|
$ | 167,220 | $ | 297,379 | $ | (130,159) | (43.8) | % | |||||||||||||||
| Direct-to-consumer net sales | 124,303 | 220,552 | (96,249) | (43.6) | % | ||||||||||||||||||
| Retail net sales | 42,917 | 76,827 | (33,910) | (44.1) | % | ||||||||||||||||||
The decrease in both retail and DTC channel net sales for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by lower unit volumes in the DTC channel as a result of disciplined pricing and promotional actions, as well as reduced retail replenishment as partners worked through excess inventory.
Solo Stove Cost of Goods Sold
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Cost of goods sold
|
$ | 63,524 | $ | 113,977 | $ | (50,453) | (44.3) | % | |||||||||||||||
The decrease in cost of goods sold for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily in line with the decrease in net sales. Tariff increases in 2025 did not have a significant impact on cost of goods sold for the Solo Stove segment due to lower inventory purchases and reduced sell through of inventory subject to the higher tariff rates.
Solo Stove Operating Expenses
Segment operating expenses consist of (1) marketing expenses, (2) employee related expenses, such as wages and benefits, and (3) other operating expenses, which primarily consist of shipping and fulfillment related expenses.
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Operating expenses
|
$ | 85,810 | $ | 137,489 | $ | (51,679) | (37.6) | % | |||||||||||||||
| Marketing expenses | 35,985 | 67,682 | (31,697) | (46.8) | % | ||||||||||||||||||
| Employee related compensation | 10,963 | 12,642 | (1,679) | (13.3) | % | ||||||||||||||||||
| Other operating expenses | 38,862 | 57,165 | (18,303) | (32.0) | % | ||||||||||||||||||
Operating expenses decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of a decrease in marketing expenses, as well as decreases in other operating expenses driven by a decrease in seller fees and shipping expenses, both stemming from the decline in DTC channel net sales. Further, decreases in employee related expenses were recognized for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of the reduction in headcount and related expenses as part of the reduction in force described in Note 3 - Restructuring, Contract Termination and Impairment Charges.
Chubbies Segment Results for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Chubbies Net Sales
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
|
Net sales
|
$ | 122,943 | $ | 112,713 | $ | 10,230 | 9.1 | % | |||||||||||||||
| Direct-to-consumer net sales | 59,126 | 57,824 | 1,302 | 2.3 | % | ||||||||||||||||||
| Retail net sales | 63,817 | 54,889 | 8,928 | 16.3 | % | ||||||||||||||||||
The increase in net sales for the year ended December 31, 2025 compared to the year ended December 31, 2024 was driven by increases in the retail net sales channel as a result of continued growth within our retail strategic partnerships, coupled with the continued ability to identify and meet consumer demands within the DTC net sales channel.
Chubbies Cost of Goods Sold
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%(1)
|
|||||||||||||||||||
|
Cost of goods sold
|
$ | 51,749 | $ | 45,707 | $ | 6,042 | 13.2 | % | |||||||||||||||
The increase in cost of goods sold for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily in line with the increase in net sales.
Chubbies Operating Expenses
| Year Ended December 31, |
Change
|
||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 |
$
|
%
|
|||||||||||||||||||
| Operating expenses | $ | 48,783 | $ | 51,193 | $ | (2,410) | (4.7) | % | |||||||||||||||
| Marketing expenses | 12,371 | 14,569 | (2,198) | (15.1) | % | ||||||||||||||||||
| Employee related compensation | 12,910 | 13,833 | (923) | (6.7) | % | ||||||||||||||||||
| Other operating expenses | 23,502 | 22,791 | 711 | 3.1 | % | ||||||||||||||||||
Operating expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 declined, primarily as a result of reductions in marketing expenses and employee related expenses.
Liquidity and Capital Resources
Our cash requirements are for working capital, payment of restructuring and other fees and repayment of our current and long-term debt obligations. We expect these and other cash needs to continue as we seek to improve, develop and transform our business. We fund our working capital, which is primarily comprised of inventory and accounts payable, and other cash requirements from cash flows from operating activities, cash on hand, and borrowings under our 2025 Revolving Credit Facility. Our cash flows from operating activities and borrowings under the 2025 Revolving Credit Facility are our principal sources of liquidity. Cash flows from operating activities result primarily from the sales of our portfolio of products. Our future product sales and our cash flows are difficult to predict, and actual sales may not be in line with our forecasts.
The Corporate Simplification discussed within the Overview section is intended to limit material liability for cash payments that might otherwise be due in 2026 and beyond, under the terms of the Tax Receivable Agreement, as well as future distributions to redeemable noncontrolling interests. For more information on the Corporate Simplification, see the Overview section above.
We maintain the majority of our cash and cash equivalents in bank deposit and overnight sweep 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 December 31, 2025. See below for details on our outstanding debt balance as of December 31, 2025.
| (in thousands) |
Utilized as of December 31, 2025
|
Availability as of December 31, 2025
|
|||||||||
| Cash and cash equivalents | $ | 20,034 | |||||||||
| Revolving Credit Facility | $ | - | 54,865 | ||||||||
| Term Loan | 253,139 | - | |||||||||
The Company must comply with financial covenants under the 2025 Refinancing Amendment, including a minimum fixed charge coverage ratio, a maximum leverage ratio and a minimum liquidity amount, with the first full measurement period for such financial covenants to occur in the third quarter of 2026, as well as other non-financial covenants, as described in further detail below and in Note 13 - Debt, net. As of December 31, 2025, we were in compliance with the covenants applicable as of such date under the 2025 Refinancing Agreement.
In evaluating our ability to continue as a going concern for the twelve months following the issuance of the financial statements, contained in this Form 10-K, management considered projected compliance with our financial covenants and historical operating performance. Variability in operating results that could affect future covenant compliance raises substantial doubt about our ability to continue as a going concern.
Management is executing cost reduction and operational initiatives and, based on current projections, expects to remain in compliance with the covenants under the 2025 Refinancing Agreement. Accordingly, management believes these plans alleviate the substantial doubt about the Company's ability to continue as a going concern for at least the twelve months following the issuance of these financial statements.
Accordingly, we believe our cash, cash equivalents and cash from operating activities will be sufficient to fund our obligations for at least the next twelve months following the issuance of our financial statements included in this Annual Report on Form 10-K. Our future capital requirements will depend on many factors including the outcome of our ongoing cash savings and operational initiatives, our future financial results, the expansion of sales and marketing activities, the introduction of new and enhanced products, the market acceptance of our products, and global trade and market conditions.
If we fail to realize the expected benefits from our ongoing and future cost saving and operational improvement initiatives, if our liquidity condition deteriorates, or if we pursue potential opportunities that are not successful, our business, operating results and financial condition could be materially adversely impacted and could result in the breach of our financial and nonfinancial covenants. As a result, we may be required to seek additional
funds from issuances of equity or debt, including from additional credit facilities or loans from other sources, pursue strategic transactions or seek additional relief from our creditors. There is no guarantee that such sources, transactions or relief will be available when needed, or at all.
Revolving Credit Facilities and Term Loans
On May 12, 2021, we entered into the 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. The Credit Agreement was subsequently amended on June 2, 2021, September 1, 2021, May 22, 2023 and most recently by the 2025 Refinancing Amendment. Initially, the credit agreement contemplated a revolving credit facility (the "2021 Revolving Credit Facility"), with the amendment on September 1, 2021 including a provision to borrow up to $100 million under a term loan (the "2021 Term Loan") which was in addition to the available capacity on the 2021 Revolving Credit Facility.
On June 13, 2025, we entered into Amendment No. 4 to Credit Agreement and Limited Waiver and Amendment No. 1 to Security Agreement (the "2025 Refinancing Amendment"), which effected a reallocation and restructuring of all revolving loans and term loans then outstanding and the waiver of certain then existing events of default. The 2025 Refinancing Amendment resulted in decreased outstanding debt, extended maturities, lower short-term cash requirements as a result of our ability to make certain interest payments in kind, and deferral with respect to compliance with certain financial covenants for a certain period of time, as further described below.
After giving effect to the loan reallocation and restructuring effected pursuant to the 2025 Refinancing Amendment, the credit facilities evidenced by the Amended Credit Agreement consist of the following: (i) revolving commitments under the Revolving Credit Facility in an aggregate amount equal to $90 million (the "2025 Revolving Credit Facility"), subject to availability under the borrowing base set forth in the 2025 Refinancing Amendment; and (ii) refinancing term loans, including the 2021 Term Loan (the "2025 Term Loan") in an aggregate principal amount equal to $240 million. The 2025 Revolving Credit Facility also includes the ability to issue up to $20 million in letters of credit, with $3.7 million of letters of credit issued and outstanding as of December 31, 2025. While our issuance of letters of credit does not increase our borrowings outstanding under the 2025 Revolving Credit Facility, it does reduce the amounts available under the 2025 Revolving Credit Facility.
In connection with the entry into the 2025 Refinancing Amendment, during the year ended December 31, 2025, we refinanced (i) $136.5 million of loans under the 2021 Revolving Credit Facility, and (ii) $32.5 million of 2021 Term Loan outstanding on June 13, 2025.
Under the 2025 Refinancing Amendment, the maturity date of the 2025 Revolving Credit Facility and the 2025 Term Loan is June 30, 2028. We are required to make mandatory amortization payments on the 2025 Term Loan as follows: (a) beginning with the fiscal quarter ending on June 30, 2026, the aggregate outstanding principal amount of the 2025 Term Loan as of June 13, 2025 multiplied by 0.25% and (b) beginning with the fiscal quarter ending on June 30, 2027, the aggregate outstanding principal amount of the 2025 Term Loan as of June 13, 2025 multiplied by 1.00%.
Each of the 2025 Revolving Credit Facility and the 2025 Term Loan bear interest at (depending on our election from time to time) either an adjusted term rate defined in the agreement based on SOFR or the base rate defined in the Amended Credit Agreement, each plus an applicable margin. The interest is payable in kind, and thus capitalized thereon and increasing the principal balance thereof, (i) on a quarterly basis through March 31, 2026, (ii) for the period beginning on April 1, 2026 and ending on March 31, 2027 upon our election, and (iii) after March 31, 2027, it is only payable in cash. The unfunded portion of the commitments under the 2025 Revolving Credit Facility will accrue an annual commitment fee.
The 2025 Refinancing Amendment also requires the Company to comply with additional reporting requirements, including, among others, (i) delivering on the date that is twenty (20) days after the end of the previous calendar month, (a) a borrowing base certificate calculating the borrowing base and availability under the 2025 Revolving Credit Facility, (b) a 13-week cash flow forecast for the Company and its subsidiaries, (c) a liquidity report, and (d) an accounts and inventory report; and (ii) delivering no later than thirty (30) days after the end of the previous calendar month, a key performance indicator report and certain additional reports on the Company's operating plan and other measures, such as Credit Agreement Adjusted EBITDA. In addition, the 2025 Refinancing Amendment extends the delivery dates for quarterly financial statement deliverables to sixty (60) days after the end of the applicable fiscal quarter.
In addition, pursuant to the 2025 Refinancing Amendment, we will be or were required to comply with the following financial covenants: (a) a minimum Consolidated EBITDA of $25 million for the four fiscal quarters ended December 31, 2025, (b) a maximum Total Leverage Ratio, which is tested on a quarterly basis, commencing with the fiscal quarter ending on September 30, 2026, (c) a minimum Fixed Charge Coverage Ratio, which is tested on a quarterly basis, commencing with the fiscal quarter ending on September 30, 2026, (d) a $10.0 million average minimum liquidity covenant for the first three calendar months of each fiscal year and a $20 million average minimum liquidity covenant for the last nine calendar months of each fiscal year, which in each case as applicable, is tested on a monthly basis, commencing with the fiscal month ending on July 31, 2026.
Cash Flows
| Year Ended December 31, |
Change
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| (dollars in thousands) | 2025 | 2024 |
$
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%
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Cash flows provided by (used in):
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Operating activities
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$ | (46,602) | $ | 10,517 | $ | (57,119) | (543.1) | % | |||||||||||||||
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Investing activities
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(12,049) | (14,512) | 2,463 | 17.0 | % | ||||||||||||||||||
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Financing activities
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66,545 | (3,657) | 70,202 | 1919.7 | % | ||||||||||||||||||
Operating activities
The $57.1 million increase in cash used in operating activities period over period, was due to a $30.8 million increase in cash usage from changes in operating assets and liabilities ("working capital"), which was primarily driven by an increase in cash usage for accounts payable, mostly related to inventory purchases and marketing expenses incurred in the fourth quarter of 2024, offset in part by the reduction in replenishment of inventory as we focus on prudent management of our inventory balances in the 2025 period. The increase in changes in working capital was coupled with an increase in cash usage of $26.4 million from changes in net income (loss) after non-cash adjustments, driven by a decline in our operations, primarily net sales, reflected through changes in net income (loss).
Investing activities
The $2.5 million decrease in cash used in investing activities, was primarily due to a decline in the number of retail store openings within our Chubbies Segment in the current year when compared to the prior, with just one store opening in 2025 and seven store openings in 2024, offset in part by an increase in the capitalization of software in 2025, primarily driven by an increase in capital projects in 2025 compared to 2024.
Financing activities
The $70.2 million increase in cash provided by financing activities, was primarily due to a $68.9 million increase in cash provided by net debt activity, inclusive of borrowings, repayments and debt issuance costs in relation to the 2025 Refinancing Amendment and a $4.3 million decrease in cash used in distributions to non-controlling interests, offset in part by a $2.5 million payment in connection with the disposition of the TerraFlame manufacturing operations.
Contractual Obligations
Our material cash commitments from known contractual and other obligations primarily consist of obligations for long-term debt and related interest, leases for properties and equipment and purchase obligations as part of normal operations. See Note 13, Debt, net, in Item 8 of this Annual Report for more information regarding scheduled maturities of our long-term debt. See Note 15, Leases, in Item 8 of this Annual Report for additional information on leases.
For information regarding our other contractual obligations, see Note 2 - Significant Accounting Policies in Item 8 of this Annual Report.
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 on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.
See Note 2, Significant Accounting Policies, to the consolidated financial statements included in Item 8 of this Annual Report on 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 include those noted below. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
Revenue Recognition
Revenue is recognized for the amount of consideration to which we expect to be entitled in exchange for transferring promised goods to a customer. The consideration promised in a contract with a customer includes fixed and variable amounts. The fixed amount of consideration is the standalone selling price of the goods sold. Variable considerations, including cash discounts, rebates and sales incentives programs, are deducted from gross sales in determining net sales at the time revenues are recorded. Variable considerations also include the portion of goods that are expected to be returned and refunded. We determine these estimates based on historical experience and trends. The actual amount of customer returns and rebates
may differ from our estimates. We elected to account for shipping costs as fulfillment activities, and not as separate performance obligations. Net sales include shipping costs charged to the customer with the related shipping expense recognized in selling, general & administrative expenses when the revenue is recognized. Sales taxes collected from customers are excluded from net sales, which are subsequently remitted to government authorities.
Inventory
Inventories, consisting primarily of finished goods are recorded at the lower of cost or net realizable value. Cost is determined using an average costing method, calculated using the weighted average cost of historical purchases. Our inventory balances include all costs incurred to deliver inventory to our distribution facilities in its finished state, such as inbound freight, import duties and tariffs. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand, market conditions and product obsolescence. As a result, we have not recorded any write-downs to inventory below cost, except as it relates to obsolete or slow-moving inventory. If actual market conditions are less favorable than those projected by management, additional write-downs are recorded. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold to customers, resulting in lower cost of sales and higher income from operations than expected in that period.
Income Taxes
In determining the provision for income taxes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, expectations for future pre-tax operating income, the time period over which our temporary differences will reverse, and the implementation of feasible and prudent tax planning strategies. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions, including projected revenue growth, and operating margins, among others. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.
We have recorded a valuation allowance against Solo Brands, Inc. and Oru's deferred tax assets resulting from current losses resulting in a net deferred tax asset the consolidated group. Solo Brands, Inc. evaluated and concluded that as of December 31, 2025, we had $40.6 million of valuation allowances. However, since future financial results may differ from previous estimates, periodic adjustments to our valuation allowances may be necessary. If we determine in the future that we will be able to fully utilize all or part of these deferred tax assets, we would record a reversal of our valuation allowance through earnings in the period the determination was made, which would have a positive effect on our results of operations and earnings in future periods.
Goodwill
Goodwill is not amortized, but is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. In conducting the impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We currently operate as four reporting units. As of our annual assessment date, October 1, 2025, we had one reporting unit with remaining goodwill, Chubbies.
When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit's carrying amount exceeds its fair value, we will record an impairment charge based on that difference.
To determine reporting unit fair value as part of the quantitative test, we use a weighting of fair values derived from the income approach and the market approach. Under the income approach, we project the future cash flows and discount these cash flows to reflect their present value, inclusive of their relative risk. The cash flows used are consistent with those we use in our internal planning, which reflects actual business trends experienced and our long-term business strategy. Under the market approach, we use the guideline company method to develop valuation multiples and compare our reporting unit to similar publicly traded companies.
In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different estimates of fair value.
Impairment charges related to goodwill are recorded to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss). See Note 10, Goodwill, for further details regarding our goodwill balance and accumulated impairment losses.
The future occurrence of a potential indicator of impairment could include matters such as: a decrease in expected net earnings, a further decline in equity market conditions, a decline in comparable market multiples, a continued and sustained decline in our common stock price, a significant adverse change in legal factors or the general business climate, an adverse action or assessment by a regulator, and a significant downturn in demand for products offered by us. In the event of significant adverse changes of the nature described above, it may be necessary for us to recognize a non-cash impairment of goodwill, which could have a material adverse effect on our consolidated business, results of operations and financial condition. Based on the results of the annual quantitative impairment test of goodwill, the calculated fair value of the Chubbies reporting unit exceeded its book value by more than 10% as of December 31, 2025. However, a 100 basis point ("BPS") increase in the discount rate, a 200 BPS decrease in the EBITDA margin or a 200 BPS decrease in revenue growth could indicate a potential hypothetical fair value less than the reporting units carrying value.
Intangible Assets
We evaluate the carrying value of definite-lived intangible assets whenever a change in circumstances indicates that the net carrying value may not be recoverable from the undiscounted future cash flows from operations. Events or circumstances that could trigger an impairment review of a long-lived asset or asset group include, but are not limited to: (i) a significant decrease in the market price of the asset, (ii) a significant adverse change in the extent or manner that the asset is used or in its physical condition, (iii) a significant adverse change in legal factors or in the business climate that could affect the value of the asset, (iv) an accumulation of costs significantly in excess of original expectation for the acquisition or construction of the asset, (v) a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast of continuing losses associated with the use of the asset and (vi) a more-likely-than-not expectation that the asset will be sold or disposed of significantly before the end of its previously estimated useful life. If an impairment exists, the net carrying values are reduced to fair values. The estimates of undiscounted future cash flows used during an impairment review of a long-lived asset or asset group require judgments and assumptions of future cash flows that are expected to arise as a direct result of the use and eventual disposition of the asset or asset group.
To determine asset group fair value as part of the quantitative test, we use a weighting of fair values derived from the income approach and the market approach. Under the income approach, we project the future cash flows and discount these cash flows to reflect their present value, inclusive of their relative risk. The cash flows used are consistent with those we use in our internal planning, which reflects actual business trends experienced and our long-term business strategy. Under the market approach, we use the guideline company method to develop valuation multiples and compare our asset group to similar publicly traded companies.
In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for intangibles could result in significantly different estimates of fair value.
If these assets were for sale, our estimates of their values could be significantly different because of market conditions, specific transaction terms and a buyer's perspective on future cash flows.
Impairment charges related to intangible assets are recorded to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss). See Note 9, Intangible Assets, net in Item 8 of this Annual Report on Form 10-K, for further details regarding intangible asset balances and related accumulated amortization and impairment losses.
The impact of these impairment charges and the change in useful life of the brand intangible asset will result in amortization expense decreasing by approximately $8 million on an annual basis.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see "Recently Adopted Accounting Pronouncements" and "Recently Issued Accounting Standards-Not Yet Adopted" in Note 2, Significant Accounting Policies, in Item 8 of this Annual Report on Form 10-K.
JOBS Act
We currently qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 (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. We expect that we will no longer qualify as an emerging growth company as of December 31, 2026.
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