PR Newswire
AUSTIN, Texas, Aug. 17, 2023
Net Earnings of $5.0 million or $0.38 per diluted share
Revenues increased 69.6% to $4.5 million, which excludes the revenue from the Harper & Jones spin out
AUSTIN, Texas, Aug. 17, 2023 /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, 2023.
"We are pleased to see the significant revenue growth and operating leverage since the acquisition of Sundry. In fact, based on wholesale bookings and current e-commerce trends, our third quarter and fourth quarter revenues will be meaningfully higher than this quarter. Additionally, we will continue to show a higher level of cost savings in our third and fourth quarters versus this quarter, " said Hil Davis, CEO of Digital Brands Group.
"We are also excited about our two new revenue channels that will launch this Fall, which are our proprietary affiliate program and our multi-brand retail store. We have had to place a limit on the number of reps in the affiliate program and are now building a waiting list."
Results for the Second Quarter
- Net revenues increased 69.6% to $4.5 million compared to $2.6 million a year ago
- This excludes revenue from Harper & Jones as it was spun out in the second quarter
- Gross margin increased 40.4% to $2.2 million compared to $1.5 million a year ago
- Gross profit margins increased to 52.0% from 42.0% a year ago
- G&A expenses, including non-cash items, decreased 4.0% to $4.1 million compared to $4.2 million a year ago
- G&A as a % of revenue declined to 90.7% from 160.1% a year ago
- G&A expenses included $1.3M in non-cash expenses associated with D&A, amortization of loan discount, and stock option expense
- Sales & Marketing expenses decreased 20.1% to $1.1 million compared to $1.4 million a year ago
- Sales and marketing expenses ratio was 50.9% compared to 89.3% a year ago
- Income from operations was $9.0 million compared to a loss of $10.6 million a year ago
- Net income attributable to common stockholders was $5.0 million, or $0.38 per diluted share, compared to a loss of $9.5 million, or a loss of $26.47 per diluted share, a year ago
"We are still on track to generate internal free cash flow in October and based on current trends we expect this internal free cash flow to increase every quarter." said Hil Davis, Chief Executive Officer of Digital Brands Group.
Conference Call and Webcast Details Updated
Management will host a conference call on Thursday, August 17 at 10:30 a.m. ET to discuss the results. The live conference call can be accessed by dialing (866) 605-1828 from the U.S. or internationally. The conference I.D. code is 13740703 or via the web by using the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=O1i6mEmc.
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.
DIGITAL BRANDS GROUP, INC | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Restated | Restated | |||||||||||||
Net revenues | $ 4,493,424 | $ 2,649,432 | $ 8,869,803 | $ 5,278,562 | ||||||||||
Cost of net revenues | 2,157,349 | 1,536,703 | 4,540,488 | 3,552,396 | ||||||||||
Gross profit | 2,336,075 | 1,112,729 | 4,329,315 | 1,726,166 | ||||||||||
Operating expenses: | ||||||||||||||
General and administrative | 4,074,051 | 4,243,031 | 8,380,063 | 8,073,621 | ||||||||||
Sales and marketing | 1,097,326 | 1,372,568 | 2,036,677 | 2,230,087 | ||||||||||
Distribution | 242,214 | 221,925 | 512,399 | 424,773 | ||||||||||
Change in fair value of contingent consideration | (12,098,475) | 5,920,919 | (12,098,475) | 7,121,240 | ||||||||||
Total operating expenses | (6,684,884) | 11,758,443 | (1,169,336) | 17,849,721 | ||||||||||
Income (loss) from operations | 9,020,959 | (10,645,714) | 5,498,651 | (16,123,555) | ||||||||||
Other income (expense): | ||||||||||||||
Interest expense | (1,086,889) | (2,173,769) | (2,951,487) | (3,730,612) | ||||||||||
Loss on disposition of business | - | - | - | - | ||||||||||
Other non-operating income (expenses) | 2,240 | 3,336,963 | (676,749) | 2,653,375 | ||||||||||
Total other income (expense), net | (1,084,649) | 1,163,194 | (3,628,236) | (1,077,237) | ||||||||||
Income tax benefit (provision) | - | - | - | - | ||||||||||
Net income (loss) from continuing operations | 7,936,310 | (9,482,520) | 1,870,415 | (17,200,792) | ||||||||||
Income (loss) from discontinued operations, net of tax | (2,892,050) | (51,404) | (2,962,503) | (166,074) | ||||||||||
Net income (loss) | $ 5,044,260 | $ (9,533,924) | $ (1,092,088) | $ (17,366,866) | ||||||||||
Weighted average common shares | 6,170,227 | 358,223 | 5,920,596 | 245,911 | ||||||||||
Weighted average common shares outstanding - diluted | 20,865,111 | 358,223 | 20,615,480 | 245,911 | ||||||||||
Net income (loss) from continuing per common share - basic | $ 1.29 | $ (26.47) | $ 0.32 | $ (69.95) | ||||||||||
Net income (loss) from continuing per common share - diluted | $ 0.38 | $ (26.47) | $ 0.09 | $ (69.95) | ||||||||||
The accompanying notes are an integral part of these financial statements. |
DIGITAL BRANDS GROUP, INC | ||||||||||
Six Months Ended | ||||||||||
June 30, | ||||||||||
2023 | 2022 | |||||||||
Cash flows from operating activities: | ||||||||||
Net loss | $ (1,092,088) | $ (17,200,792) | ||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
Depreciation and amortization | 1,765,619 | 1,113,188 | ||||||||
Amortization of loan discount and fees | 1,611,433 | 2,818,174 | ||||||||
Loss on extinguishment of debt | 689,100 | - | ||||||||
Loss on disposition of business | 2,923,940 | |||||||||
Stock-based compensation | 207,094 | 258,852 | ||||||||
Shares issued for services | 499,338 | - | ||||||||
Change in credit reserve | 344,140 | (5,053) | ||||||||
Change in fair value of contingent consideration | (12,098,475) | 7,121,240 | ||||||||
Change in fair value of warrant liability | - | (18,223) | ||||||||
Change in fair value of derivative liability | - | (880,388) | ||||||||
Forgiveness of Payroll Protection Program | - | (1,760,755) | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable, net | 375,685 | (100,662) | ||||||||
Due from factor, net | (96,955) | 202,787 | ||||||||
Inventory | 454,011 | (128,255) | ||||||||
Prepaid expenses and other current assets | (44,213) | (395,781) | ||||||||
Accounts payable | 92,494 | 435,110 | ||||||||
Accrued expenses and other liabilities | 1,346,068 | 1,461,572 | ||||||||
Deferred revenue | (183,782) | (55,034) | ||||||||
Accrued interest | 217,479 | 690,624 | ||||||||
Net cash used in operating activities | (2,989,112) | (6,443,396) | ||||||||
Cash flows from investing activities: | ||||||||||
Cash disposed | (18,192) | - | ||||||||
Purchase of property, equipment and software | (27,855) | - | ||||||||
Deposits | 87,378 | - | ||||||||
Net cash provided by investing activities | 41,331 | - | ||||||||
Cash flows from financing activities: | ||||||||||
Proceeds (repayments) from related party advances | (57,427) | (172,036) | ||||||||
Advances (repayments) from factor | 154,073 | (142,436) | ||||||||
Issuance of loans and note payable | 4,194,799 | 548,808 | ||||||||
Repayments of convertible and promissory notes | (6,604,552) | (3,068,750) | ||||||||
Issuance of convertible notes payable | - | 2,301,250 | ||||||||
Issuance of common stock in public offering | 5,000,003 | 9,347,450 | ||||||||
Offering costs | (686,927) | (1,930,486) | ||||||||
Net cash provided by financing activities | 1,999,969 | 6,883,800 | ||||||||
Net chane in cash and cash equivalents | (947,812) | 440,404 | ||||||||
Cash and cash equivalents at beginning of period | 1,283,282 | 528,394 | ||||||||
Cash and cash equivalents at end of period | $ 335,470 | $ 968,798 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||
Cash paid for income taxes | $ - | $ - | ||||||||
Cash paid for interest | $ 686,071 | $ 191,152 | ||||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||||
Conversion of notes into common stock | $ - | $ 1,802,372 | ||||||||
Conversion of notes into preferred stock | $ 5,759,177 | $ - | ||||||||
Right of use asset | $ 467,738 | $ 201,681 | ||||||||
Warrant and common shares issued with notes | $ - | $ 98,241 | ||||||||
The accompanying notes are an integral part of these financial statements. |
DIGITAL BRANDS GROUP, INC | ||||||||||
June 30, | December 31, | |||||||||
2023 | 2022 | |||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ 335,470 | $ 1,275,616 | ||||||||
Accounts receivable, net | 196,919 | 583,368 | ||||||||
Due from factor, net | 438,142 | 839,400 | ||||||||
Invento | ||||||||||
