Digital Brands Group Inc (DBGI) 2023 Q2 法說會逐字稿

Greetings and welcome to Digital Brands Group second quarter 2023 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, [John McNamara]. Thank you. You may begin.

歡迎參加 Digital Brands Group 2023 年第二季度收益電話會議。 （操作員指示）謹此提醒，本次會議正在錄製中。現在我想將會議交給主持人 [約翰·麥克納馬拉]。謝謝。你可以開始了。

Thank you and good morning, everybody, and welcome again to the Digital Brands Group second quarter 2023 earnings conference call and webcast. With us on the call this morning is Hil Davis, Chief Executive Officer of Digital Brands. Hil will begin the call with a brief overview of the quarter, and then we'll open up the line for questions.

謝謝大家，大家早上好，再次歡迎參加 Digital Brands Group 2023 年第二季度收益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)。希爾將在電話會議開始時簡要概述本季度的情況，然後我們將開通提問熱線。

This call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions, which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control.

本次電話會議可能包含經修訂的 1933 年《證券法》第 27A 條定義的前瞻性陳述，包括有關公司業務戰略和增長戰略等的陳述。識別前瞻性陳述的表述僅代表該陳述發表之日的情況。這些前瞻性陳述主要基於公司的預期，並受到許多風險和不確定因素的影響，其中一些風險和不確定因素無法預測或量化，超出了公司的控制範圍。

Future developments and actual results could differ materially from those set forth, in contemplated by, or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. Company will be hosting a Q&A session at the conclusion, as I mentioned. And with that, I will turn the call over to Hil Davis.

未來的發展和實際結果可能與前瞻性陳述所闡述的、預期的或潛在的結果存在重大差異。鑑於這些風險和不確定性，無法保證前瞻性信息將被證明是準確的。正如我提到的，公司將在結束時舉辦問答環節。接下來，我會將電話轉給希爾·戴維斯。

Go ahead, Hil.

繼續吧，希爾。

Yeah. Thanks, John, and good morning, everyone. As we stated during our fourth quarter fiscal year 2022 conference call, which was in mid-April, we would experience meaningful revenue growth and significant operating leverage with the acquisition of Sundry, which was completed December 30, last year.

是的。謝謝約翰，大家早上好。正如我們在 4 月中旬舉行的 2022 財年第四季度電話會議上所說，通過去年 12 月 30 日完成的 Sundry 收購，我們將實現有意義的收入增長和顯著的運營槓桿。

As you can see from our second quarter results, we did experience significant revenue growth and we also experienced operating leverage on every line item. In fact, based on our current wholesale bookings and our current e-commerce trends, our third quarter and fourth quarter revenues will be meaningfully higher than this quarter. Again, we have visibility into our wholesale bookings. These are orders that we're already shipping and that are placed. And based on that, our revenues for the third and fourth quarter will be meaningfully higher than this quarter.

正如您從我們第二季度的業績中看到的那樣，我們確實經歷了顯著的收入增長，並且我們還經歷了每個項目的運營槓桿。事實上，根據我們目前的批發預訂和當前的電子商務趨勢，我們第三季度和第四季度的收入將明顯高於本季度。再次，我們可以了解我們的批發預訂。這些是我們已經發貨並已下達的訂單。基於此，我們第三季度和第四季度的收入將顯著高於本季度。

Additionally, we'll continue to show a higher level of cost savings in our third and fourth quarters as well versus this quarter, driven by combination of layoffs and redundancies that no longer have severance attached to them or just natural leak as people left after we acquired Sundry. So we are only in the first inning of the structural shift in our business. As I stated earlier, we already know what wholesale bookings are for our third and fourth quarters, and we're already selling spring now and getting very strong feedback.

此外，與本季度相比，我們將繼續在第三和第四季度顯示出更高水平的成本節省，這是由於裁員和裁員的共同推動，不再附帶遣散費，或者只是在我們離開後人員自然流失。收購了Sundry。因此，我們僅處於業務結構轉變的第一階段。正如我之前所說，我們已經知道第三季度和第四季度的批發預訂量，而且我們現在已經在銷售春季產品並獲得了非常強烈的反饋。

In addition to that, we have the additional cost synergies, we will experience and then you layer on our e-commerce trend and it is very exciting to see how this is playing out. And none of the above that I just mentioned includes the benefits from our two new revenue channels that we will launch this fall, which are: one, our proprietary affiliate program; and two, our multi-brand retail store.

除此之外，我們還有額外的成本協同效應，我們將體驗到，然後您可以根據我們的電子商務趨勢進行分層，看到這一趨勢如何發揮作用是非常令人興奮的。我剛才提到的上述內容都不包括我們將於今年秋天推出的兩個新收入渠道的好處，它們是：一是我們專有的聯盟計劃；二是我們的專有聯盟計劃。第二，我們的多品牌零售店。

In fact, we've had to place a limit on the number of reps in the affiliate program and are now already building a waiting list. Keep in mind, I was able to double the revenue for J. Hilburn every year using this affiliate program, which took revenues from 0 to $55 million in six years. So as you can imagine, we are extremely excited about the virality and reach of this program, given that we are already on a waitlist.

事實上，我們不得不對聯屬網絡營銷計劃中的代表數量進行限制，並且現在已經在建立一個等待名單。請記住，通過這個聯盟計劃，我每年都能使 J. Hilburn 的收入翻倍，六年內收入從 0 增加到 5500 萬美元。正如您可以想像的那樣，鑑於我們已經在候補名單上，我們對這個計劃的病毒式傳播和影響力感到非常興奮。

Additionally, we are back in the wholesale market with Bailey 44, and we've added several new reps that are showing the product for spring deliveries and are already receiving wholesale orders. We had no benefit from wholesale last year for Bailey 44. We also will receive our first license income check for Bailey 44 next week, which throws directly to the bottom line at almost 100%. And we are in discussions regarding another license deal with one of our other brands.

此外，我們帶著 Bailey 44 重返批發市場，並且添加了幾位新代表，他們正在展示春季交付的產品，並且已經收到批發訂單。去年我們沒有從 Bailey 44 的批發中獲得任何好處。下週我們還將收到 Bailey 44 的第一筆許可證收入支票，這直接影響到幾乎 100% 的利潤。我們正在討論與我們其他品牌之一的另一項許可協議。

As you can see, the second quarter is proof of the revenue growth and the operating leverage we are achieving post the Sundry acquisition. And as a reminder, we will generate internal free cash flow on a weekly basis in October. All this will be incredibly transformative to us.

正如您所看到的，第二季度證明了我們在收購 Sundry 後實現的收入增長和運營槓桿。提醒一下，我們將在 10 月份每週產生內部自由現金流。所有這一切都將對我們產生難以置信的變革。

So let's dive into the second quarter results. Net revenue increased 69.6% in the second quarter of 2023 to $4.5 million compared to $2.6 million a year ago. Please note that these results exclude the revenue from our disposition of Harper & Jones for both the second quarter in 2022 and in 2023. Gross margins for the second quarter of 2023 increased 40.4% to $2.2 million compared to $1.5 million a year ago. Our gross profit margins increased significantly to 52% from 42% a year ago, and we expect to continue to see an increase in our gross margin, especially as our e-commerce trends continue to accelerate.

讓我們深入了解第二季度的業績。 2023 年第二季度淨收入增長 69.6%，達到 450 萬美元，而去年同期為 260 萬美元。請注意，這些結果不包括我們在2022 年第二季度和2023 年處置Harper & Jones 的收入。2023 年第二季度的毛利率增長了40.4%，達到220 萬美元，而一年前為150 萬美元。我們的毛利率從一年前的 42% 大幅增長至 52%，並且我們預計毛利率將繼續增長，特別是隨著我們的電子商務趨勢繼續加速。

G&A expenses, including non-cash items, decreased 4% to $4.1 million compared to $4.2 million a year ago. So you've got 69.6% in revenue growth and a decrease in your G&A expense, that shows the leverage we're getting. G&A as a percent of revenue declined to 90.7% from 160.1% a year ago. Please note that our G&A expenses include $1.3 million in non-cash expenses tied to depreciation and amortization, amortization of loan discount, and stock option expense.

包括非現金項目在內的一般管理費用從去年同期的 420 萬美元下降了 4%，降至 410 萬美元。因此，您的收入增長了 69.6%，並且 G&A 費用減少，這顯示了我們所獲得的影響力。 G&A 佔收入的百分比從一年前的 160.1% 下降至 90.7%。請注意，我們的一般管理費用包括與折舊和攤銷、貸款折扣攤銷以及股票期權費用相關的 130 萬美元非現金費用。

Sales and marketing expenses decreased 20.1% to $1.1 million compared to $1.4 million a year ago. Again, revenues increased 69.6%, while our sales and marketing expenses decreased by $300,000. That's incredible leverage on this line item. Sales and marketing expense ratio was 50.9% compared to 89.3% a year ago. Income from operations was $9 million compared to a loss of $10.6 million a year ago. Net income attributable to common stockholders was $5 million, or $0.38 per diluted share compared to a loss of $9.5 million a year ago or a loss of $26.47 per diluted share.

銷售和營銷費用從一年前的 140 萬美元下降 20.1% 至 110 萬美元。收入再次增長 69.6%，而我們的銷售和營銷費用減少了 300,000 美元。這個訂單項的槓桿作用令人難以置信。銷售和營銷費用率為 50.9%，而去年同期為 89.3%。運營收入為 900 萬美元，而一年前為虧損 1,060 萬美元。歸屬於普通股股東的淨利潤為 500 萬美元，即稀釋後每股收益 0.38 美元，而一年前為虧損 950 萬美元，即稀釋後每股虧損 26.47 美元。

Our second quarter 2023 financial details are included in the company's Form 10-Q for the three months ended June 30, 2023.

我們的 2023 年第二季度財務詳細信息包含在公司截至 2023 年 6 月 30 日止三個月的 10-Q 表格中。

So in closing, we have stated since we went public, adding Sundry to the portfolio was our tipping point in terms of: one, our ability to scale revenue faster; two, reduce overhead and leverage fixed costs; and three, generate positive EBITDA and cash flow. Our second quarter results reflect that we are in the first inning of the tipping point. In fact, we will experience additional cost savings and synergies in our third and fourth quarter results as well as higher revenue base -- a higher revenue in our third and fourth quarter, just based on our wholesale bookings alone. None of the forecast include the revenue growth, operating leverage, and cash flow that the affiliate program will add in the fourth quarter and every quarter after that. In addition, we'll have a multi-brand retail stores and the Bailey 44 licensing income, which we are now receiving. Our first check is next week.

因此，最後，我們自上市以來就曾表示，將 Sundry 添加到投資組合中是我們的轉折點：第一，我們更快擴大收入的能力；二、減少管理費用，槓桿固定成本；第三，產生正的 EBITDA 和現金流。我們第二季度的業績反映出我們正處於轉折點的第一局。事實上，我們將在第三和第四季度的業績中體驗到額外的成本節省和協同效應，以及更高的收入基礎——僅基於我們的批發預訂，我們的第三和第四季度的收入就更高。所有預測均不包括聯盟計劃在第四季度以及此後每個季度增加的收入增長、運營槓桿和現金流。此外，我們還將擁有多品牌零售店以及我們現在正在收到的 Bailey 44 授權收入。我們的第一次檢查是下週。

In summary, you have: one, accelerating organic revenue growth; two, new revenue channels launching in the fourth quarter; three, declining operating expense due to synergies; four, licensing income; and five, internal free cash flow in the fourth quarter. I think it is fair to say that we have turned the corner and are extremely excited about our near and long-term future.

總而言之，您可以：第一，加速有機收入增長；二、第四季度新的收入渠道推出；三、協同效應帶來運營費用下降；四、授權收入；五、第四季度內部自由現金流。我認為可以公平地說，我們已經渡過了難關，並對我們的近期和長期未來感到非常興奮。

And with that, thanks, everyone, for their time. We look forward to our continued momentum, which we already know is coming. And this concludes our second quarter 2023 earnings call. We'll open it up to Q&A, please.

在此，感謝大家抽出時間。我們期待我們持續的勢頭，我們已經知道這種勢頭即將到來。我們的 2023 年第二季度財報電話會議到此結束。我們將開放問答環節。

Thank you. (Operator Instructions) There are no questions at this time. At this point, I'd like to turn the call back over to management for any closing comments.

謝謝。 （操作員說明） 目前沒有任何問題。此時，我想將電話轉回管理層以獲取任何結束意見。

Well, thanks, everyone, for joining the call. We hope that everyone can see the significant shift in our business model and the momentum we're experiencing. And as I said, we already have a wholesale bookings for Q3 and Q4 booked, and we're already selling into Q1 and we already know the operating leverage we're going to continue to get. So we're very excited about how we're going to continue to execute against our vision that we laid out at the IPO and the acquisition of the Sundry on December 30, was the game changer we needed. And I think you're seeing that show up every quarter so far and we'll continue to do so.

好的，謝謝大家加入通話。我們希望每個人都能看到我們商業模式的重大轉變和我們正在經歷的勢頭。正如我所說，我們已經預訂了第三季度和第四季度的批發訂單，並且我們已經在第一季度進行銷售，我們已經知道我們將繼續獲得的運營槓桿。因此，我們對如何繼續執行我們在 IPO 中製定的願景感到非常興奮，而 12 月 30 日收購 Sundry 正是我們所需要的遊戲規則改變者。我認為到目前為止每個季度都會出現這種情況，我們將繼續這樣做。

So with that, thanks, everyone, for the time, and we look forward talking at our next conference call.

因此，謝謝大家，我們期待在下一次電話會議上進行討論。

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

今天的會議到此結束。此時您可以斷開線路，我們感謝您的參與。