Digital Brands Group Reports Second Quarter 2022 Financial Results

AUSTIN, Texas, Aug. 15, 2022 /PRNewswire/ -- Digital Brands Group, Inc. ("DBG") (NASDAQ: DBGI), a curated collection of luxury lifestyle, digital-first brands, today reported financial results for its second quarter ended June 30, 2022. 

Second Quarter 2022 Highlight Compared to Second Quarter 2021

• Net revenues of $3.7 million, an increase of 273% or $2.7 million
• Gross profit margin of 58.1%, an increase of 450%, versus 39.3%
• Net loss per diluted share of $0.27 versus a net loss of $1.97
• Net loss attributable to common stockholders was $9.5 million versus a net loss of $10.7 million
• The net loss included non-cash expenses associated with a change in the fair value of contingent liabilities of $5.9 million versus $3.1 million
• Net loss, excluding the non-cash expense associated with a change in the fair value of contingent liabilities, was $3.6 million versus $7.7 million
• Net loss per diluted share, excluding the non-cash expense associated with a change in the fair value of contingent liabilities, of $0.10 versus a net loss of $1.41

"We delivered strong top line results, which we expect to meaningfully accelerate in the second half of the year as we enter our peak selling period. In addition, our gross margin of 58% expanded significantly both sequentially and year-over-year, which we also expect to continue throughout the second half of the year," said Hil Davis, Chief Executive Officer of Digital Brands Group.

"The increasing top line combined with our higher gross margins are creating operating leverage on our fixed costs of business. Given these trends, we expect our combined EBITDA for the September through December period of 2022 to be flat to negative $500,000. We believe this shows there is a clear and short path to profitability," said Davis.

"To that point, we are excited to announce that we hired a head of wholesale for dstld, which has never been offered in the wholesale channel. She joins us from another denim brand, where she increased their wholesale revenue from $6 million to $39 million in three years. This additional revenue driver for 2023 is just one more way we will drive top line growth and achieve profitability," concluded Davis. 

Second Quarter 2022 Highlights

Net Sales were $3.7 million versus $1.0 million in the year ago quarter, an increase of 273% year over year. Our second quarter is our lowest wholesale revenue quarter across all our wholesale brands as these brands only ship two of the three months due to lower wholesale demand during this period.  

Gross profit margin was 58.1% versus 39.3% a year ago, an increase of 450%. Gross profit increased by $1.8 million due to improved gross margins at all our brands. Additionally, this is the first quarter we have reported where we did not incur any inventory write-downs associated with older product, which we believe illustrates the gross margin power of our brands. 

General and administrative expenses as a % of revenue decreased 538% to 133.5% of revenues versus 716.7% a year ago. General and administrative expenses were $5.0 million versus $7.2 million in the year ago quarter. Starting in September, all our brands will share one office and one distribution center, which will result in additional cost savings going forward.  Also, we do not expect any additional increases in general and administrative expenses in the second half of the year, which should result in significant revenue leverage as we enter our peak revenue season.

Sales and marketing expenses were 45.6% of revenues versus 92.0% a year ago, a decrease of 50.4%. Sales and marketing expenses were $1.7 million versus $923,000 a year ago. We continue to experience meaningful e-commerce revenue growth year-over year associated with our digital marketing programs.  This increase in e-commerce revenue is also driving higher gross margins across all our wholesale brands.

Distribution expenses were 5.9% of revenues versus 7.0% a year ago, a decline of 14.7%.  Distribution expenses were $222,000 versus $70,000 a year ago, driven by the addition of Harper & Jones and Stateside distribution expenses in this quarter versus approximately one-third of Harper & Jones distribution expenses and no distribution expenses for Stateside a year ago.  We expect to benefit from a reduction in our distribution expenses associated with operating one distribution center versus two distribution centers, as we have consolidated into one distribution center.

Change in the fair value of contingent considerations, which is a non-cash expense, was $5.9 million versus $3.1 million a year ago.

Loss from operations excluding the change in fair value of contingent considerations was $4.7 million versus $7.8 million a year ago.

Net loss attributable to common stockholders was $9.5 million, or $0.27 per diluted share, compared to net loss attributable to common stockholders of $10.7 million, or $1.97 per diluted share, a year ago.

Excluding the non-cash charge associated with the change in fair value of contingent considerations, net loss attributable to common stockholders was $3.6 million, or $0.10 per diluted share, compared to net loss attributable to common stockholders of $7.7 million, or $1.41 per diluted share, a year ago.

Conference Call and Webcast Details

The Company will host a conference call and webcast at 8:30 a.m. ET today to discuss results. The live conference call can be accessed by dialing (866) 605-1828 from the U.S. or internationally or via the web by using the following link: https://tinyurl.com/3xp45f9f. The conference I.D. code is 13732332.

Forward-looking Statements

Certain statements included in this release are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting DBG and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as "will," "anticipate," "estimate," "expect," "should," and "may" and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding DBG's plans, objectives, projections and expectations relating to DBG's operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. DBG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of DBG to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel and accessories; disruption to DBGs distribution system; the financial strength of DBG's customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; DBG's response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers; manufacturing and product innovation; increasing pressure on margins; DBG's ability to implement its business strategy; DBG's ability to grow its wholesale and direct-to-consumer businesses; retail industry changes and challenges; DBG's and its vendors' ability to maintain the strength and security of information technology systems; the risk that DBG's facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; DBG's ability to properly collect, use, manage and secure consumer and employee data; stability of DBG's manufacturing facilities and foreign suppliers; continued use by DBG's suppliers of ethical business practices; DBG's ability to accurately forecast demand for products; continuity of members of DBG's management; DBG's ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; DBG's ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; adverse or unexpected weather conditions; DBG's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent DBG from fulfilling its financial obligations; and climate change and increased focus on sustainability issues. More information on potential factors that could affect DBG's financial results is included from time to time in DBG's public reports filed with the SEC, including DBG's Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

About Digital Brands Group
We offer a wide variety of apparel through numerous brands on a both direct-to-consumer and wholesale basis. We focus on owning the customer's "closet share" by leveraging their data and purchase history to create personalized targeted content and looks for that specific customer cohort.

Digital Brands Group, Inc. Company Contact
Hil Davis, CEO
Email: invest@digitalbrandsgroup.co
Phone: (800) 593-1047

Related Links

https://www.digitalbrandsgroup.co

https://ir.digitalbrandsgroup.co

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SOURCE Digital Brands Group, Inc.