Digital Brands Group Inc (DBGI) 2023 Q1 法說會逐字稿

Hello, and welcome to the Digital Brands Group, Inc., Q1 2023 Earnings Conference Call Webcast. (Operator instructions). As a reminder, this conference is being recorded.

您好，歡迎來到 Digital Brands Group, Inc. 2023 年第一季度收益電話會議網絡廣播。 （操作員說明）。提醒一下，本次會議正在錄製中。

It's now my pleasure to turn the call over to John McNamara, Investor Relations. Please go ahead, John.

現在我很高興將電話轉給投資者關係部門的約翰·麥克納馬拉 (John McNamara)。請繼續，約翰。

Thank you. Good morning, everyone, and welcome to the Digital Brands Group 2023 first quarter conference call and webcast. With us on the call this morning is Hil Davis, Chief Executive Officer of Digital Brands. Before we begin, we remind everyone that certain matters discussed during today's call or answers that may be provided to questions may constitute forward-looking statements as defined under federal securities laws. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the risk factors section of the company's quarterly report on Form 10 Q filed with the SEC. Copies of these documents are available on the SEC's website as well as on the company's website, actual results may differ materially from those expressed or implied by such forward-looking statements.

謝謝。大家早上好，歡迎參加 Digital Brands Group 2023 年第一季度電話會議和網絡廣播。今天早上與我們通話的是 Digital Brands 首席執行官希爾·戴維斯 (Hil Davis)。在開始之前，我們提醒大家，今天電話會議中討論的某些事項或可能提供的問題答案可能構成聯邦證券法定義的前瞻性陳述。這些聲明受到許多條件的約束，其中許多條件超出了公司的控制範圍，包括公司向 SEC 提交的 10 Q 表格季度報告的風險因素部分中列出的條件。這些文件的副本可在 SEC 網站以及公司網站上獲取，實際結果可能與此類前瞻性陳述明示或暗示的結果存在重大差異。

The Company undertakes no obligation to update these statements for revisions or changes after the date of this call, except as required by law.

除非法律要求，否則公司不承擔在本次電話會議之後更新這些聲明的修訂或變更的義務。

With that, I'd like to now turn the call over to Hil Davis, CEO.

現在，我想將電話轉給首席執行官希爾·戴維斯 (Hil Davis)。

Go ahead, Hil.

繼續吧，希爾。

Yes. Thank you, John. As we stated during our fourth quarter fiscal year 2022 conference call in mid-April, we experienced significant operating leverage with the acquisition of Sundry. To that point, our operating loss would have been only $250,000, excluding the non-cash expenses, and approximate $250,000 in Sundry expenses that we are no longer incurring since we completed the integration in late March. As you can see from our release, we experienced operating leverage on every line item, and we still expect to achieve some additional expense reductions going forward.

是的。謝謝你，約翰。正如我們在 4 月中旬的 2022 財年第四季度電話會議上所說，通過收購 Sundry，我們獲得了巨大的運營槓桿。到那時，我們的運營虧損僅為 250,000 美元，不包括非現金費用，以及自 3 月底完成整合以來我們不再產生的大約 250,000 美元的雜項費用。正如您從我們的發布中看到的，我們在每個項目上都經歷了運營槓桿，並且我們仍然期望未來實現一些額外的費用削減。

Also, please keep in mind, our e-commerce revenue for both January and February was half our March e-commerce revenue as we transitioned to a performance marketing agency, our e-commerce revenue has extremely high gross margin and requires very little additional operating expense to execute, so the flow through would have been extremely high. This is why we're excited for the fall as we have: one, e-commerce in full force; two, higher price-point items like leathers, sweaters, and outerwear; three, Bailey 44 generating revenue from the wholesale channel again; and four, distilled with a full product assortment versus Limited and busted sizing in inventory. This is while we expect to achieve EBITDA positive this fall, which, by the way, is only three months away.

另外，請記住，我們一月和二月的電子商務收入都是三月電子商務收入的一半，因為我們轉型為績效營銷機構，我們的電子商務收入具有極高的毛利率，並且需要很少的額外運營執行費用，因此流量會非常高。這就是為什麼我們對秋季感到興奮，因為我們有：第一，電子商務的全面發展；二是高價位商品，如皮革、毛衣和外套；三、百利44再次從批發渠道創收；第四，以完整的產品種類進行蒸餾，而不是庫存有限且尺寸過大。與此同時，我們預計今年秋季將實現 EBITDA 為正值，順便說一句，距離實現這一目標只有三個月了。

In addition to that, we are also excited about our two new revenue channels that we will launch this fall.

除此之外，我們還對今年秋季推出的兩個新收入渠道感到興奮。

The first is our proprietary affiliate program, which we have been building a founding group of influencers and affiliates for the soft launch in August. We believe this is an extremely scalable channel based on my past experiences and the positive reception we are experiencing.

第一個是我們專有的聯屬計劃，我們一直在為八月份的軟啟動建立一個由影響者和聯屬公司組成的創始團隊。根據我過去的經驗和我們正在經歷的積極反響，我們相信這是一個極具擴展性的渠道。

The second is our multi-brand retail store strategy based on the success of existing DTC brands with their own retail stores. Coupled with the success of our multi-brand website, we believe that we can operate 50-plus stores in Tier one locations. We have seen the revenues of our peers in these locations, and they are generating between $2 million to $4 million plus per store and are profitable at the store level. Again, this is 50 stores times $2 to $4 million in revenue per store. We will use our free cash flow this fall to ramp our store growth and expect to add five plus stores a year for the next few years and accelerated after that, we believe both channels will increase our e-commerce and wholesale revenue as these channels will increase brand awareness and customer acquisition.

第二個是我們的多品牌零售店戰略，其基礎是現有 DTC 品牌擁有自己的零售店的成功。加上我們多品牌網站的成功，我們相信我們可以在一級地點經營 50 多家商店。我們已經看到了這些地區同行的收入，他們每家商店的收入在 200 萬至 400 萬美元以上，並且在商店層面實現盈利。同樣，這是 50 家商店乘以每家商店 2 至 400 萬美元的收入。我們將利用今年秋天的自由現金流來促進我們的商店增長，並預計在未來幾年內每年增加五家以上商店，並在此之後加速，我們相信這兩個渠道將增加我們的電子商務和批發收入，因為這些渠道將增加我們的電子商務和批發收入。提高品牌知名度和客戶獲取。

And we believe our membership program, which will launch in the second half of June, just a few weeks away will drive customer retention and repeat purchases. To that point, we are creating e-commerce only monthly drops like the sneaker business that will only be available to members and will be offered a special member pricing, which will not include a wholesale markup. The customer value proposition is very strong. As you can see, the first quarter was proof of the operating leverage we can achieve and the clear short path to profitability.

我們相信我們的會員計劃將於六月下半月推出，幾週後將提高客戶保留率和重複購買率。到目前為止，我們正在創建每月僅推出的電子商務產品，例如運動鞋業務，該業務僅向會員提供，並將提供特殊的會員定價，其中不包括批發加價。客戶價值主張非常強大。正如您所看到的，第一季度證明了我們可以實現的運營槓桿以及清晰的盈利路徑。

So with that, let's discuss the first quarter results. Results for the first quarter are as follows.

那麼，我們來討論第一季度的業績。第一季度的業績如下。

Net revenues increased 48.4% in the first quarter of 2023 to $5.1 million compared to $3.4 million a year ago. Please note, we did not receive the full benefit of the e-commerce revenue in January and February as we had reduced Digital's advertising spend associated with transacting a transition to performance making marketing agency.

2023 年第一季度淨收入增長 48.4%，達到 510 萬美元，而去年同期為 340 萬美元。請注意，我們在 1 月和 2 月並沒有獲得電子商務收入的全部收益，因為我們減少了與向績效營銷機構過渡相關的 Digital 廣告支出。

Gross margin profit for Q1 2023 increased 113.9% to $2.4 million compared to $1.1 million a year ago. Our gross profit margin increased significantly to 47.9% from 33.2% a year ago. G&A expenses, including non-cash items increased 8.4% to $4.6 million compared to $4.3 million a year ago. G&A as a percentage of revenue declined to 91% from 124.6% a year ago.

2023 年第一季度的毛利率從一年前的 110 萬美元增長了 113.9%，達到 240 萬美元。我們的毛利率從一年前的33.2%大幅增加至47.9%。包括非現金項目在內的一般管理費用增加了 8.4%，達到 460 萬美元，而去年同期為 430 萬美元。 G&A 佔收入的百分比從一年前的 124.6% 下降至 91%。

Most notably, G&A expenses included non-cash expenses of $3.1 million compared to $1.8 million a year ago. These are detailed in our free cash flow statement on our cash flow statement on our press release and in our 10 Q. Excluding these non-cash items, G&A would have been $1.6 million compared to $x2.5 million a year ago, which is a percentage of revenues declined to 30.4% from 72.6% a year ago.

最值得注意的是，G&A 費用包括 310 萬美元的非現金費用，而一年前為 180 萬美元。這些在我們的自由現金流量表、新聞稿和第 10 季度現金流量表中進行了詳細說明。不包括這些非現金項目，一般管理費用將為 160 萬美元，而一年前為 250 萬美元，即佔收入的比例從一年前的 72.6% 下降至 30.4%。

Sales and marketing expenses increased 7.2% to $1.1 million compared to $1 million a year ago. That's a 7.2% increase in sales and marketing versus a 48.4% increase in e-commerce of total revenue. Sales and marketing expense ratio was 21.9% compared to 30.3% a year ago. Our loss from operations declined to $3.6 million compared to a loss of $5.6 million a year ago. Excluding the non-cash items in G&A expenses, loss from operations declined to $500,000 compared to a loss of $3.8 million a year ago. We repeat that excluding the non-cash items in G&A expenses, loss from operations declined to $500,000 compared to a loss of $3.8 million a year ago. And please note that these losses included approximately $250,000 in expenses associated with the integration and timing of the Sundry transition, which will no longer be incurred as they have been transitioned into our burning facility and the Sundry headcount is lower today than it was at the acquisition.

銷售和營銷費用增加 7.2%，達到 110 萬美元，而一年前為 100 萬美元。銷售和營銷收入增長了 7.2%，而電子商務佔總收入增長了 48.4%。銷售和營銷費用率為 21.9%，而去年同期為 30.3%。我們的運營虧損從一年前的 560 萬美元下降至 360 萬美元。不包括一般管理費用中的非現金項目，運營虧損從一年前的虧損 380 萬美元降至 50 萬美元。我們重申，不包括一般管理費用中的非現金項目，運營虧損從一年前的虧損 380 萬美元降至 50 萬美元。請注意，這些損失包括與 Sundry 過渡的整合和時間安排相關的約 250,000 美元費用，這些費用將不再產生，因為它們已過渡到我們的燃燒設施中，而且今天的 Sundry 員工人數低於收購時的人數。

Net loss attributable to common stockholders was $6.2 million, or a loss of $1.8 per diluted share compared to $7.8 million, or $59.18 per diluted share a year ago. Excluding the non-cash items from G&A and other income, net loss would have been $2.4 million, or a loss of 42% per diluted share compared to a net loss of $6.1 million or a loss of 40.577¢ per diluted share a year ago. Our first quarter 2023 financial details are included in the Company's Form 10 Q for the three months ended March 31st, 2023.

普通股股東應占淨虧損為 620 萬美元，即稀釋後每股虧損 1.8 美元，而一年前為 780 萬美元，即稀釋後每股虧損 59.18 美元。不包括 G&A 和其他收入中的非現金項目，淨虧損將為 240 萬美元，或攤薄每股虧損 42%，而一年前淨虧損為 610 萬美元，或攤薄每股虧損 40.577 美分。我們的 2023 年第一季度財務詳細信息包含在公司截至 2023 年 3 月 31 日止三個月的 10 Q 表格中。

In closing, as we have stated, since we went public, adding salary to the portfolio was our tipping point in terms of one, our ability to scale revenue faster through new channels and e-commerce and to generate positive EBITDA and cash flow, which will in turn allow us to invest our growth channels at an accelerated rate. So this is a major tipping point, and the first quarter results were the first and smallest benefit and proof of concept from our Sundry acquisition. We expect the tipping point and the benefit and the proof-of-concept to only accelerate as we move into the fall.

最後，正如我們所說，自從我們上市以來，在投資組合中增加薪資是我們的轉折點，一方面，我們有能力通過新渠道和電子商務更快地擴大收入，並產生正的 EBITDA 和現金流，這反過來，這將使我們能夠加速投資我們的增長渠道。因此，這是一個重要的轉折點，第一季度的業績是我們收購 Sundry 帶來的第一個也是最小的收益和概念證明。我們預計，隨著秋季的到來，臨界點、效益和概念驗證只會加速。

We are excited for the forecasted monthly free cash flow that we should generate this fall associated with one; positive EBITDA and two; the end of our MCA payments in early October, we should generate over $500,000 in free cash flow monthly starting after our last MCA payment in early October, we will use this free cash flow to accelerate the growth channels that are generating strong returns as well as potentially buying back shares, if that is the highest and best use of capital, we should have the cash flow to pursue both our accelerated growth strategy and share buyback program. If that is the best use of capital and creates a higher returns. And at these levels, obviously, this dual approach would be the best case for shareholders.

我們對今年秋季預計產生的每月自由現金流感到興奮；正 EBITDA 和兩個；十月初我們的 MCA 付款結束後，從 10 月初最後一次 MCA 付款開始，我們每月應該會產生超過 500,000 美元的自由現金流，我們將利用這些自由現金流來加速產生強勁回報的增長渠道以及可能回購股票，如果這是資本的最高和最佳利用，我們應該有現金流來追求我們的加速增長戰略和股票回購計劃。如果這就是資本的最佳利用並創造更高的回報。顯然，在這些層面上，這種雙重方法對股東來說是最好的情況。

Thanks, everyone, for their time, and let's open it up for questions, please.

謝謝大家抽出時間，讓我們開始提問。

Thank you. And I'll be conducting a question-and-answer session. (Operator instructions)

謝謝。我將主持問答環節。 （操作員說明）

If there are no questions at this time, I'd like to turn floor back over for any further closing comments.

如果此時沒有問題，我想請大家進一步發表最後評論。

Yes. Well, thanks, everyone, for attending the call. And I think the key thing here is, we talked about the Sentry acquisition being the tipping point. I think the first quarter results prove that.

是的。好的，謝謝大家參加電話會議。我認為這裡的關鍵是，我們談到收購 Sentry 是一個轉折點。我認為第一季度的業績證明了這一點。

I think what's most exciting as we look forward? Not only do we have our current growth drivers? We've got the affiliate program. We've got store growth. We've got significant cash flow and we'll use that not only accelerate that. But like, as we said at these levels to buy back shares and drive shareholder return, I appreciate everyone's time and have a good day.

我想我們期待的最令人興奮的是什麼？我們不僅有我們目前的增長動力？我們有聯盟計劃。我們的商店有所增長。我們擁有大量現金流，我們不僅會利用它來加速這一進程。但是，就像我們在這些級別上所說的回購股票並推動股東回報一樣，我感謝大家的時間並祝您有美好的一天。

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

謝謝。今天的電話會議和網絡廣播到此結束。此時您可以斷開線路並度過美好的一天。我們感謝您的參與。