Digital Brands Group Inc (Pre-Reincorporation) (DBGI) 2024 Q3 法說會逐字稿

Greetings. Welcome to the Digital Brands Group third quarter 2024 conference call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, John McNamara. You may begin.

問候。歡迎參加 Digital Brands Group 2024 年第三季電話會議。（操作員說明）請注意，本次會議正在錄音。現在我將把會議交給主持人約翰·麥克納馬拉。你可以開始了。

Thank you. Good afternoon, everyone, and welcome again to the Digital Brands 2024 third quarter earnings conference call and webcast. With us on the line from management is Hil Davis, Chief Executive Officer, who will provide an overview of the quarter. At the end of the prepared remarks, Hil will respond to a few questions that were submitted prior to the conference call.

謝謝。各位下午好，歡迎再次參加 Digital Brands 2024 年第三季財報電話會議和網路直播。與我們連線的是執行長希爾·戴維斯，他將概述本季的業績。在準備好的發言結束後，希爾將回答一些在電話會議之前提交的問題。

As usual, we would remind you all that this call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended. This may include statements regarding the company's business strategy and growth strategy. Expressions, which identify forward-looking statements speak only as of the date the statement is made.

照例，我們要提醒各位，本次電話會議可能包含經修訂的 1933 年證券法第 27A 條所定義的前瞻性陳述。這可能包括有關公司業務策略和成長策略的聲明。標明前瞻性陳述的表述僅代表該陳述作出之日的觀點。

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. Future developments and actual results could differ materially from those set forth in these 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.

這些前瞻性聲明主要基於公司的預期，並受到許多風險和不確定性的影響，其中一些風險和不確定性無法預測或量化，且超出公司的控制範圍。未來的發展和實際結果可能與這些前瞻性聲明中所述的內容有重大差異。鑑於這些風險和不確定性，不能保證前瞻性資訊會被證明是準確的。

With that, I will now turn the call over to Hil Davis. Go ahead, Hil.

接下來，我將把電話交給希爾·戴維斯。請繼續，希爾。

Good afternoon, and thank you, John. As we stated in our press release, our third quarter was the last quarter we significantly focused on paying down debt and liabilities given the soft macro economy and the overhang of the election. Starting in October this year, we transitioned from cleaning up the balance sheet to focusing on increasing top line growth.

下午好，謝謝你，約翰。正如我們在新聞稿中所述，鑑於宏觀經濟疲軟和選舉的不確定性，第三季是我們最後一個重點償還債務和負債的季度。從今年10月開始，我們從清理資產負債表轉向專注於提高營收成長。

As we stated in our press release yesterday, we partnered with VaynerCommerce to drive digital revenue. This partnership has already led to a 34% increase in daily digital revenues and a 7% increase in average order volume during the 17-day period, which was October 22 through November 7. And then this was prior to the 30 days they took over, which was September 22 to October 21.

正如我們昨天在新聞稿中所述，我們與 VaynerCommerce 合作，以推動數位收入成長。此次合作已使每日數位收入成長了 34%，在 17 天的時間裡（10 月 22 日至 11 月 7 日），平均訂單量增加了 7%。而這發生在他們接手的 30 天之前，也就是 9 月 22 日至 10 月 21 日。

We believe these results reinforce the positive value of our partnership with VaynerCommerce. We intend to add the agency's e-mail and SMS campaigns, which is text messaging campaign services starting this week. This partnership was the first step in a multistep growth strategy, coupled with the launch of AVO.

我們相信這些結果進一步鞏固了我們與VaynerCommerce合作的正面價值。我們計劃從本週開始增加該機構的電子郵件和簡訊行銷活動，也就是簡訊行銷服務。此次合作是多步驟成長策略的第一步，同時推出了 AVO。

Other initiatives to this partnership, which we are in the process of launching or will launch are as follows: adding several apps to our Shopify platform that they have set increased conversion rates of their other brands they work with by 20% plus; selling on other digital platforms such as Amazon and TikTok, which we plan to launch in Q1; launching influencer campaigns. This is going to be a big focus for us, partnering with influencers and leveraging different platforms.

我們正在啟動或即將啟動的與此合作關係的其他舉措如下：在我們的 Shopify 平台上添加幾個應用程序，這些應用程式已將其與其他合作品牌的轉換率提高了 20% 以上；在亞馬遜和 TikTok 等其他數位平台上銷售產品，我們計劃在第一季度推出；開展網紅行銷活動。我們將重點放在與有影響力人士合作以及利用不同平台這一方面。

And with VaynerMedia buying side, there's a lot of reception now for that. Launching limited edition product capsules every month that are only available online in small quantities that have exclusive pricing, fabrics, and design. And this really follows the sneaker industry in terms of the shoe drops. So we plan to focus on that for all the brands for our DTC channel.

而VaynerMedia的購買方目前對此反應熱烈。每月推出限量版產品系列，僅在線少量發售，並採用獨家定價、面料和設計。就鞋款發售而言，這確實與運動鞋產業的趨勢一致。因此，我們計劃將重點放在我們所有 DTC 管道的品牌上。

Please note that we had none of these before. And going forward, we will have all of these. There are also other major initiatives in the works along with these noted above, which we will announce as we get closer to launching those. So I think what I want everyone to really take away from this is Q3, you had probably one of the worst macro economies. You had the election and then you had us focusing on paying back debt and liabilities.

請注意，我們之前都沒有這些東西。展望未來，我們將擁有這一切。除了上述舉措之外，我們還有其他一些重大舉措正在籌備中，我們將在接近啟動時公佈這些舉措。所以，我希望大家真正記住的是，第三季度，你們經歷了可能是最糟糕的宏觀經濟時期之一。你們舉行了選舉，然後又讓我們把精力集中在償還債務和負債上。

And that's really important because we feel, based on everything we see now that, that was the bottom. And it was intentional because it did not make sense based on our conversations with other companies to invest heavily in digital marketing. And as everyone's noted, which I'll talk about here in a second, the wholesale and the consumer has been soft.

這非常重要，因為根據我們現在看到的一切，我們感覺那已經是谷底了。這是有意為之，因為根據我們與其他公司的交流，我們認為在數位行銷方面投入巨資是不明智的。正如大家所指出的（我稍後會談到這一點），批發和消費市場一直疲軟。

So not only in addition to these that's important, the company also will benefit by an increase of over $4.5 million in earnings in 2025 that is associated with amortized noncash expenses, which includes Stateside's goodwill concluding at the end of year -- at the end of this year as well as $3.1 million in amortized interest expense, which was also sum of cash ending at this end of this year. So again, next year, we'll already see a benefit of $4.5 million in earnings associated with those two items.

因此，除了這些重要因素之外，該公司還將受益於 2025 年超過 450 萬美元的收益增長，這與攤銷的非現金支出有關，其中包括 Stateside 的商譽將於今年年底結清，以及 310 萬美元的攤銷利息支出，這也是今年年底結清的現金總額。所以，明年，這兩項措施將帶來 450 萬美元的收益。

In addition to that, we took a meaningful wholesale price increase at Sundry, which has met zero resistance, and that alone should add more than $500,000 a year to gross margins. And we know that it's hit zero resistance because we've been selling wholesale for spring into the market already. As you can see, this really reflects a major inflection point in our business as we have shifted from cleaning up the balance sheet into a growth mode. Given the majority of our cash was being used to pay down debt and liabilities, we could not invest properly in growth.

除此之外，我們還大幅提高了雜貨的批發價格，這項舉措沒有遇到任何阻力，光是這一項每年就能為毛利增加 50 萬美元以上。我們知道它沒有遇到任何阻力，因為我們已經開始向市場批發銷售春季產品了。正如你所看到的，這確實反映了我們業務的一個重大轉折點，因為我們已經從清理資產負債表轉向了成長模式。由於我們大部分的現金都用於償還債務和負債，我們無法對成長進行適當的投資。

Even if we invested in growth, it would have been in a weak macro consumer market that is impacting all retailers from Home Depot to Levi's to lululemon to all the fast fashion brands, and even has impacted all the luxury brands. So any growth investment during the last nine months would have been met with a soft consumer market based on the publicly reported results of these brands.

即使我們投資於成長，也是在一個疲軟的宏觀消費市場中，這影響了從家得寶到李維斯到lululemon等所有零售商，以及所有快時尚品牌，甚至影響了所有奢侈品牌。因此，根據這些品牌公開報告的表現來看，過去九個月的任何成長投資都將面臨疲軟的消費市場。

Now that the election is behind us, and we feel that the consumer has stabilized and the balance sheet has been meaningfully cleaned up, we feel now is the right time to make this transition into growth. Before we could do that, we needed the right digital partner, and we needed the cash flow in order to do this.

現在選舉已經過去，我們感覺消費者已經穩定下來，資產負債表也得到了實質的清理，我們認為現在是向成長過渡的合適時機。在此之前，我們需要合適的數位合作夥伴，也需要足夠的現金流來實現這一目標。

We believe that we found the right digital partner in VaynerCommerce, and we also now have the cash flow to invest in the growth. We are extremely excited to move into this transition and are already excited about the results we have seen thus far with only one piece of the product -- or the growth initiative being rolled out with others coming starting this week and going forward.

我們相信，我們找到了合適的數位合作夥伴 VaynerCommerce，而且我們現在也有足夠的現金流來投資成長。我們非常興奮地進入這一轉型階段，並且對目前為止僅推出產品的一部分（或增長計劃）就取得的成果感到興奮，其他部分將從本週開始陸續推出。

So with that, let's discuss the third quarter results. Net revenues were $2.4 million compared to $3.3 million a year ago. I think the important thing here is we decided to walk away from our largest wholesale account due to a single-digit gross margin before the required additional expenses to manage that account, which include making multiple samples because they wanted their own sizing. This meant that this account was net negative in cash contribution. So while it added revenue, we lost money on it.

那麼，接下來我們來討論一下第三季的業績。淨收入為 240 萬美元，而去年同期為 330 萬美元。我認為這裡最重要的是，我們決定放棄我們最大的批發客戶，因為在管理該客戶所需的額外費用（包括製作多個樣品，因為他們想要自己的尺寸）之前，該客戶的毛利率只有個位數。這意味著該帳戶的現金投入為負值。所以，雖然它增加了收入，但我們卻賠了錢。

So going forward, we will lose this revenue, but we will increase our profitability. This was over $800,000 of the difference in the year-over-year difference. And I think that's really important to understand is that while it impacted revenue, it did not -- it actually improved profitability and will continue to improve profitability as we move through next year. Net revenues were also negatively impacted by limited digital advertising spend, which we've discussed, which resulted in low e-commerce revenue.

因此，未來我們將失去這部分收入，但我們將提高獲利能力。這比上一年同期的差額高出 80 多萬美元。我認為真正需要理解的是，雖然這影響了收入，但實際上並沒有——它提高了盈利能力，而且隨著我們進入明年，盈利能力還將繼續提高。淨收入也受到數位廣告支出有限的負面影響，正如我們之前討論過的，這導致電子商務收入較低。

And also as we discussed, since adding VaynerCommerce, we've seen a meaningful increase in that digital revenue, and that's with them just A/B testing product right now with content that we had. We're reshooting a lot of content with them next month, and they are getting a good gauge on what types of ads are working best. So we will shoot that content best into -- we'll shoot the content based on what ads are performing best, and we just had a call about that today.

正如我們之前討論過的，自從引入 VaynerCommerce 以來，我們的數位收入有了顯著增長，而他們目前只是在我們已有的內容上進行 A/B 測試。下個月我們將與他們重新拍攝大量內容，這樣他們就能很好地了解哪些類型的廣告效果最好。所以我們會根據廣告效果最好的情況來投放內容，我們今天才就此事開過電話會議。

Gross profit margins were 46% compared to 52.3% on the balance sheet. The biggest factor in this decline is actually the fixed cost associated with our gross margins, which includes the entire warehouse rent and all the labor expenses associated with it, our pattern makers and sewers, and as well as some design member experiences. So keep that in mind. There's a lot of fixed costs in our gross profit margin, so these will naturally lift as our revenue lift, and that's really important to understand is that fixed cost nature.

毛利率為 46%，而資產負債表上的毛利率為 52.3%。導致利潤下降的最大因素實際上是與毛利率相關的固定成本，其中包括整個倉庫租金和所有相關的勞動力成本、製版師和縫紉工的工資，以及一些設計成員的經驗成本。所以要記住這一點。我們的毛利率包含許多固定成本，因此隨著收入的成長，這些成本自然也會成長，理解這一點非常重要，那就是固定成本的本質。

Gross profit margins were negatively impacted by lower digital revenue associated with the limited digital advertising revenue in the quarter. Gross profit in dollars was $1.1 million compared to $1.7 million a year ago. G&A expenses decreased $1.3 million to $2.4 million compared to $3.7 million a year ago. That is a significant reduction year-over-year to a tune of $1.3 million. Also included in our G&A was $1.6 million in noncash expenses, which includes goodwill expenses for the brands we've acquired, depreciation, and other items like that.

由於本季數位廣告收入有限，導致數位收入下降，毛利率受到負面影響。毛利為110萬美元，去年同期為170萬美元。一般及行政費用從去年同期的 370 萬美元減少 130 萬美元至 240 萬美元。與前一年相比，減少了130萬美元，降幅顯著。此外，我們的一般及行政費用還包括 160 萬美元的非現金支出，其中包括我們收購品牌的商譽支出、折舊以及其他類似項目。

G&A also, expenses declined from the last quarter by over $500,000. So as you can see, we continue to get leverage on our cost savings and the intentional way we're managing the expenses. And now that we're going back into growth mode, we're excited to see what's going to happen there. Sales and marketing expenses were $655,000 compared to $1.2 million a year ago. Sales and marketing expenses ratio was 26.9% compared to 35.3% a year ago.

此外，一般及行政費用也比上一季減少了超過 50 萬美元。所以正如你所看到的，我們繼續利用成本節約和有意識地管理支出的方式來提高效益。現在我們重新進入成長階段，我們很興奮地想看看接下來會發生什麼。銷售和行銷費用為 65.5 萬美元，而去年同期為 120 萬美元。銷售和行銷費用比率為 26.9%，而一年前為 35.3%。

Please note that the majority of the sales and marketing expenses is the marketing team. And as we stated, we have now outsourced our sales and marketing team to VaynerCommerce. So you will see this cost go down as well and supplement that -- increased digital dollars going forward. Net loss was $3.5 million compared to a net loss of $5.4 million a year ago. This includes a $1.6 million loss in noncash expenses. And to that point as you can tell, even though our revenues were lower, our net loss was significantly lower. A lot of it attributable to the fact that, that wholesale account was highly negative.

請注意，銷售和行銷費用的大部分都用於支付行銷團隊的費用。正如我們之前所說，我們現在已經將銷售和行銷團隊外包給了VaynerCommerce。因此，你會看到這部分成本也隨之下降，並以此作為補充——未來數位貨幣消費額將會增加。淨虧損為 350 萬美元，而去年同期淨虧損為 540 萬美元。這其中包括160萬美元的非現金支出損失。正如你所看到的，儘管我們的收入較低，但我們的淨虧損卻顯著降低。這很大程度是由於批發帳戶的負債非常高所造成的。

Starting in Q1 next year, our interest expense will decline to $105,000 from over $700,000 a quarter due to the completion of the amortization of the interest expense debt at year-end. This means the annual benefit of this interest expense being fully amortized is $3.1 million a year that will benefit net earnings in fiscal 2025. Net loss per diluted share was $1.63 compared to a net loss of $14.55 a year ago, a significant increase.

從明年第一季開始，由於年底利息支出債務攤銷完成，我們的利息支出將從每季超過 70 萬美元下降到 10.5 萬美元。這意味著，如果這項利息支出完全攤銷，每年可帶來 310 萬美元的收益，這將使 2025 財年的淨利潤受益。每股攤薄淨虧損為 1.63 美元，去年同期淨虧損為 14.55 美元，增幅顯著。

So in closing, what I'd like to say, and I think it's really important is that we're really excited about this transition that we're making from having to really focus on cleaning up the balance sheet and a really difficult macro market into now more of growth. We have a strong partner in VaynerCommerce and are already experiencing better results.

最後，我想說的是，而且我認為這非常重要，那就是我們對正在發生的這種轉變感到非常興奮，我們不再需要專注於清理資產負債表和應對非常艱難的宏觀市場，而是更專注於成長。我們與 VaynerCommerce 建立了強大的合作夥伴關係，並且已經取得了更好的成果。

And these results are only from the digital advertising channel only and do not include our text messaging, our e-mail, our influencer partnerships, our monthly [capsule] collection and other initiatives we have not announced but are finalizing. In addition to that, 2025 will experience a $4.5 million earnings benefit versus 2024. This is a significant lift to 2025's earnings and that is before any benefit from the growth initiatives noted above. That concludes our third quarter 2024 conference call.

而且這些結果僅來自數位廣告管道，還不包括我們的簡訊、電子郵件、影響者合作、每月[膠囊]系列以及其他我們尚未宣布但正在最終確定的舉措。除此之外，2025 年的收益將比 2024 年增加 450 萬美元。這將大幅提升 2025 年的收益，而且這還不包括上述成長計畫帶來的任何好處。本次2024年第三季電話會議到此結束。

I'm going to read through some questions and answers that were sent to us in advance of the conference call. One of the first questions is, What was the debt -- convertible debt look like on the balance sheet?

我將宣讀一些在電話會議之前發送給我們的問答。首先要問的問題之一是，資產負債表上的債務－可轉換債券是什麼樣的？

As we stated, we paid back $1.3 million in that convertible debt. So the company has no convertible debt left on its balance sheet. And the only debt that we have is longer-term and that is patient debt as well. So we've really cleared that overhang, which is really important because that pressure is not there. And that's going to allow us to really focus on growing this moving forward.

正如我們之前所說，我們已經償還了130萬美元的可轉換債券。因此，該公司資產負債表上已沒有任何可轉換債券。我們唯一的債務是長期債務，也是耐心債務。所以我們已經徹底清除了那個懸垂物，這非常重要，因為壓力已經消失了。這將使我們能夠真正專注於推動這項業務的未來發展。

Also, there was a question about just the Vayner relationship and how it came about and what it looks like. So we knew VaynerMedia because they had reached out to us but felt like we were too small and didn't have enough going on to make it happen. We followed back up with them recently, especially with the launch of AVO as they dug in to what we're doing, they really got excited about. In fact, at first, they had mentioned that they probably weren't right for us.

此外，還有一個問題是關於Vayner之間的關係，以及這種關係是如何產生的，看起來是什麼樣的。我們認識 VaynerMedia 是因為他們聯繫過我們，但我們覺得我們規模太小，也沒有足夠的計畫來促成此事。最近我們又跟他們進行了後續溝通，尤其是在 AVO 推出之後，他們深入了解了我們正在做的事情，他們對此感到非常興奮。事實上，一開始他們就說過，他們可能不太適合我們。

But then as we circle back, they dug in a little bit and said, you know what, this makes a lot of sense, even in the tune of the fact that it's a heavily incentivized percentage of a revenue deal So they're putting their money where their mouth is. And for that perspective, on every call when we do a couple of calls a week, about 15 people from their team on the call. So they are highly invested in this. And I think that's really important.

但後來我們又回到原點，他們堅持說，你知道嗎，這很有道理，即使考慮到這是一筆收入分成比例很高的交易。所以他們是用實際行動證明自己。從這個角度來看，我們每週會進行幾次電話會議，每次會議大約有 15 位團隊成員參加。所以他們在這方面投入巨大。我認為這非常重要。

And I just -- I'm just really excited about what we can do because we have a pure performance marketing group that's worked with a lot of brands, that has scaled a lot of brands, now fully focused on this. There's no way we could replicate this [bench], if you will, in terms of depth, and width and knowledge in any way on our own without spending millions of dollar.

我真的——我真的對我們能做的事情感到非常興奮，因為我們有一個純粹的效果營銷團隊，他們曾與許多品牌合作，幫助許多品牌擴大了規模，現在他們完全專注於此。如果我們不花費數百萬美元，就深度、廣度和知識而言，我們根本不可能以任何方式複製這種（人才儲備）。

And so we're excited about what that is and what that's going to bring. And we're really excited about agencies really amazing content starting in December and going forward. And just them really taking this over. I mean right now, we've just started spending a little bit more than what we've been spending. I mean we're only spending about $1,500 a day, that's it. And we're already seeing a meaningful lift.

所以我們對它是什麼以及它將帶來什麼感到興奮。我們非常興奮地看到各機構從 12 月開始以及未來一段時間內推出非常精彩的內容。他們真的完全接管了這件事。我的意思是，現在我們只是開始比以前多花一點錢而已。我的意思是，我們每天只花大約1500美元，僅此而已。我們已經看到顯著的成長。

So they're A/B testing the results and they're seeing what works best. And based on that, we plan to shoot content in the first two weeks of December based on the type of results that are working the best. And we plan to shoot that with influencers and really lean into the influencer-heavy world. We're excited about what that can bring.

所以他們正在進行 A/B 測試，看看哪種方法效果最好。基於此，我們計劃在 12 月的前兩週拍攝內容，具體內容將根據效果最佳的拍攝類型而定。我們計劃與網紅合作拍攝，真正深入網紅主導的領域。我們對此感到興奮。

And then finally, I just want to really iterate that this Q2 was the revenue decline, really driven by a wholesale brand that was actually net negative for us on the operation margin. It was about 7% gross margin and net negative on the operating margin. So while the revenue took a massive hit, the gross margin will increase significantly as will -- and when I say gross margins, I mean, absolutely dollars flowing plus the price increase at Sundry.

最後，我想再次強調，第二季的營收下降，主要是因為一個批發品牌實際上為我們帶來了淨虧損，影響了我們的營運利潤率。毛利率約7%，營業利益率為負。因此，雖然收入遭受了巨大打擊，但毛利率將大幅提高——我所說的毛利率是指絕對的現金流入加上雜項的價格上漲。

And so we're excited about that. And we've actually had several majors reach out to us that we're in discussions with to add Sundry and Stateside, too. And that's another reason we decided to drop them is that these other majors have just as big of a reach with much better margins and much higher quality brand name associated with them. So we're excited about where that is as well.

所以，我們對此感到很興奮。實際上，已經有幾家大型公司聯繫我們，我們正在與他們洽談，希望將 Sundry 和 Stateside 也納入其中。這也是我們決定放棄它們的另一個原因，因為其他主要品牌擁有同樣廣泛的受眾群體，利潤率更高，而且品牌聲譽也更好。所以我們也對它的發展方向感到興奮。

So that concludes the quarterly conference call. I appreciate everyone's time and everyone, have a nice day.

季度電話會議到此結束。感謝大家抽出時間，祝大家今天愉快。

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

今天的會議到此結束，您可以斷開線路了。感謝您的參與。