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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Risk Factors” and our audited consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Overview

We own and operate premium brands with ingenious products that we market and deliver through our direct-to-consumer (“DTC”) platform and retail partnerships. We aim to help our customers enjoy good moments that create lasting memories. We consistently deliver innovative, high-quality products that are loved by our customers and revolutionize the outdoor experience, build community and help everyday people reconnect with what matters most. We operate as two reportable segments: Solo Stove, which includes the Solo Stove and TerraFlame brands and primarily offers indoor and outdoor firepits, stoves, and accessories, and Chubbies, which offers premium casual apparel and activewear. The remaining operating segments are included within the Corporate and All Other category. The CODM makes operating decisions, assesses financial performance, and allocates resources based upon discrete financial information at the reportable segment level.

For the year ended December 31, 2024, we experienced a decrease in our net sales from $494.8 million for the year ended December 31, 2023 to $454.6 million. The decline in net sales was primarily driven by the Solo Stove segment, as a result of a lack of significant new product launches in 2024 when compared to the prior year, with the prior year continuing to benefit from the release of new products in the fourth quarter of 2022. This resulted in a decline in DTC channel net sales of 10.9% in 2024 when compared to the prior year. The retail channel net sales similarly experienced a decline, of a lesser magnitude, in 2024 when compared to the prior year, further driven by a non-recurring transaction with a marketing barter partner in the third quarter of 2023. These declines driven by the Solo Stove segment were offset in part by increases within the Chubbies segment in both the retail and DTC net sales channels, primarily driven by continued growth within our retail strategic partnerships.

Key Factors Affecting Our Financial Condition and Results of Operations

In 2024, the Company refined its strategic vision and conducted a comprehensive evaluation of its initiatives and brands. The evaluation included analysis of the brand level financials, product design, customer metrics, marketing campaign effectiveness and potential synergies, amongst other items. This evaluation, undertaken over the course of 2024, led the Company to undertake the following activities during the second half of 2024:

•termination of underperforming marketing agreements with marketing barter partners that no longer aligned with the Company’s current marketing strategy;

•winding up of the IcyBreeze reporting unit stemming from underperformance and management’s determination to revise product designs; and

•reorganizing the Oru and ISLE reporting units to eliminate costs and capitalize on potential synergies, through restructuring under a revised management structure.

Management undertook these activities with the intent of enhancing the foundation of the Company as part of the strategic initiative to return the Company to growth. The items noted above had the following purposes:

•Through the termination of the underperforming marketing agreements, management could be able to repurpose the funds previously allocated to these marketing contracts, towards increased investment in direct response marketing. Marketing spend under a certain marketing agreement was $16.9 million in 2023 and $3.7 million in 2024. Redirection of these marketing funds to direct response marketing may generate more favorable returns on the marketing dollars spent in future periods, as direct response marketing is better aligned to how our target market consumes their media.

•IcyBreeze was acquired in 2023 to enter the portable cooler market and expand our product offering. Through the course of ownership, IcyBreeze underperformed projections. Management made the decision to wind-down the operations of IcyBreeze in the third quarter of 2024, with sell through of remaining legacy products. This wind-down of operations, while resulting in a direct reduction to revenue attributable to the Company, is also anticipated to benefit net income (loss) in future periods.

•The reorganization of the Oru and ISLE reporting units under a single brand president and leadership team was designed to be strategically beneficial, as both brands operate within the same outdoor watersports space. The Company expects to benefit from improved margins through the consolidation of overhead and exploration of manufacturing and logistics synergies. In addition, the Company expects to be able to better leverage the combined scale of the Oru and ISLE reporting units as we seek to scale and achieve growth.

While these activities are intended to provide future benefit to the Company, the majority of these activities required cash outlays in 2024. In order to fund these cash outlays, the Company leveraged cash from operations and draws on the Revolving Credit Facility (as defined below). The following table outlines the cash outlays and the period in which they occurred.

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Activity Cash Outlay (dollars in thousands) Period

Termination of marketing agreements $ 9,000 Q4 2024

Reorganization of the Oru and ISLE reporting units 349 Q4 2024

Wind-down of the operations of the IcyBreeze reporting unit 205 Q3 - Q4 2024

Economic Factors Affecting our Performance

We sell our products in the U.S. as well as various foreign countries, primarily Europe, Canada and Australia. We also source and procure inventory, primarily out of China, with some products sourced through Mexico. As such, we are exposed to and impacted by global macroeconomic factors. In recent years, tariffs on goods manufactured in China have increased significantly. In addition, the U.S. presidential administration recently imposed an additional aggregate 20% tariffs on goods manufactured in China, 25% tariffs on all steel manufactured outside of the U.S. and 25% tariffs on almost all goods manufactured in Mexico and Canada. China, Canada and Mexico have retaliated or are expected to retaliate with tariffs on goods manufactured in, or exported by, the United States.

Tariffs on certain foreign origin goods continue to put pressure on input costs, for which we have been able to partially mitigate through the U.S. government’s duty draw-back mechanism, tariff exclusion process, footprint utilization, and prudent sourcing. Our product lines involve production with steel manufactured outside the U.S., including steel manufactured in Mexico that is subject to the new tariffs, including virtually all of our Solo Stove and TerraFlame brands’ products. Further, certain of our Solo Stove, Oru and TerraFlame brands’ products are produced in Mexico and are subject to the new tariffs on Mexico. These tariffs and retaliatory actions are expected to have a significant adverse effect on our results of operations and margins and sales of our products outside the U.S. Any strategies we implement to mitigate the impact of such tariffs or other trade actions may not be successful. In addition, there can be no assurances that we will be able to pass any increased costs from tariffs on to our customers, that demand or profitability will not be materially adversely impacted, or that we will be successful in implementing efforts to mitigate the effect of tariffs on our business. Sourcing materials from domestic suppliers and manufacturing vendors or transitioning production to the U.S. would be a costly and lengthy process with uncertain results. For additional information, see Part I, Item 1A, Risk Factors, “Tariffs or other restrictions placed on foreign imports or any related counter-measures are taken by other countries harm our business and results of operations” and “Our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, societal, and political risks associated with those markets.”

Current macroeconomic factors remain very dynamic, such as greater political uncertainty, as well as financial instability, new or increasing tariffs, high interest rates and high inflation, all of which could reduce our net sales or negatively impact our gross margin, net loss and cash flows.

Discussion within the relevant comparative periods and sections have been included below.

Consolidated Results for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Consolidated Net Sales

Net sales are comprised of DTC and retail channel sales to retail partners. Net sales in both channels reflect the impact of partial shipments, product returns, and discounts for certain sales programs or promotions.

Our net sales have historically included a seasonal component. In the DTC channel, our historical net sales tend to be highest in our second and fourth quarters, while our retail channel has generated higher sales in the first and third quarters. Additionally, we expect variances in our net sales throughout the year relative to the timing of new product launches.

Year Ended December 31, Change

The decrease in net sales for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decline in both DTC and retail channel net sales within the Solo Stove segment as a result of a lack of new product launches in the 2024 period, with the prior year benefiting from new products released in the fourth quarter of 2022, and a non-recurring transaction in 2023 with a marketing barter partner. The non-recurring transaction with a marketing barter partner in the third quarter of 2023 contributed $7.2 million of retail channel net sales to the 2023 period. Partially offsetting these declines, the Chubbies segment experienced increases in both DTC and retail channel net sales.

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Consolidated Gross Profit and Gross Margin

Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party manufacturers, inbound freight and duties, costs related to manufacturing of certain of our products, product quality testing and inspection costs and depreciation on molds and equipment that we own.

Year Ended December 31, Change

Gross margin (Gross profit as a % of net sales)(1) 57.3 % 61.1 % (377)

(1) Change in gross margin period over period in basis points

In 2024, the Company wrote down $18.3 million of inventory and related purchase orders of the IcyBreeze reporting unit as part of the restructuring, contract termination and impairment charge activity. This write down was reflected in cost of goods sold, resulting in cost of goods sold for 2024 exceeding the respective prior year period amount and negatively impacting the gross margin in the 2024 period.

When excluding the write down of inventory and purchase orders described above, cost of goods sold decreased for the year ended December 31, 2024 compared to the prior year period, in line with the decline in net sales. Similarly, gross profit for the year ended December 31, 2024 compared to the prior year period also declined in line with the decline in net sales, when excluding the write down of IcyBreeze reporting unit.

Consolidated Operating Expenses

Operating expenses consist of (1) selling, general and administrative (“SG&A”) expenses, (2) restructuring, contract termination and impairment charges, (3) depreciation and amortization expenses and (4) other operating expenses, as defined below.

•Selling, General and Administrative (“SG&A”) Expenses - SG&A expenses consist primarily of marketing costs, wages, equity-based compensation expense, benefits costs, costs of our warehousing and logistics operations, costs of operating on third-party DTC marketplaces, professional fees and services, costs of shipping product to our customers and general corporate expenses.

•Restructuring, Contract Termination and Impairment Charges - Restructuring, contract termination and impairment charges consist of severance and employee-related benefits, contract termination fees and asset impairment charges.

•Depreciation and Amortization Expenses - Depreciation and amortization expenses consist of depreciation of property and equipment and amortization of definite-lived intangible assets.

•Other Operating Expenses - Other operating expenses include certain costs incurred as a result of being a public company, secondary offering completed in May 2023, acquisition-related expenses, business optimization and expansion expenses and management transition costs.

Year Ended December 31, Change

The decrease in operating expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decrease in restructuring, contract termination and impairment charges, as a result of fewer goodwill and long-lived asset impairment charges, offset in part by the increase in contract termination expenses with the termination of a legacy marketing agreement with a former marketing barter partner.

This decrease was partially offset by increases in SG&A, primarily due to a $6.0 million increase in the fair market value changes in contingent consideration related to certain of our 2023 acquisitions, increases for rent expense of $1.4 million as a result of the addition of seven additional owned retail stores within our Chubbies segment and professional services and information technology expenditures of $1.7 million and $2.6 million, respectively, each of which were incurred to support future growth plans. Increases in other operating expenses were also recognized in the 2024, primarily as a result of increases to management transition costs, including additional cost associated with onboarding senior leadership positions and strategic consulting engagements. These strategic consulting arrangements consisted primarily of engagements for brand and marketing strategy, product roadmap development, cost efficiency program design and information technology and finance transformations.

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Consolidated Income (Loss) From Operations

Income (loss) from operations is comprised of gross profit, less selling, general and administrative expenses, depreciation and amortization expense, restructuring, contract termination and impairment charges and other operating expenses.

Year Ended December 31, Change

The decrease in loss from operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decrease in restructuring, contract termination and impairment charges, offset in part by the decline in gross profit.

Consolidated Interest Expense

Interest expense, net consists primarily of interest on our Revolving Credit Facility and Term Loan.

Year Ended December 31, Change

Interest expense, net increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to an increase in the weighted average interest rate on our total debt balance, as well as a higher average debt balance in 2024 when compared to the prior year.

Consolidated Income Taxes

Income taxes represent federal, state, and local income taxes on the Company's allocable share of taxable income of Holdings, as well as Oru's and Chubbies' federal, state and foreign tax expense related to international subsidiaries. We are the sole managing member of Holdings, and as a result, consolidate the financial results of Holdings. Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of Holdings, as well as any stand-alone income or loss generated by Solo Brands, Inc.

Year Ended December 31, Change

Income tax benefit decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by the book losses in the prior year due to the restructuring, contract termination and impairment charges (see Note 3, Restructuring, Contract Termination and Impairment Charges for more information) which exceeded those recognized in 2024, as well as by the increase in the Company’s valuation allowance, as compared to the prior year which included a net release of the Company’s valuation allowance.

Solo Stove Segment Results for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Solo Stove Net Sales

Year Ended December 31, Change

The decrease in net sales for the year ended December 31, 2024 compared to the year ended December 31, 2023 was driven by declines in both DTC and retail channel net sales. The DTC and retail channel net sales were both impacted by a lack of new product introductions in 2024, with the prior year benefiting from new products released in the fourth quarter of 2022. The decline in retail channel net sales was further impacted by a non-recurring transaction in the prior year with a marketing barter partner. The non-recurring transaction with a marketing barter partner in the third quarter of 2023 contributed $7.2 million of retail channel net sales to the 2023 period.

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Solo Stove Gross Profit and Gross Margin

Year Ended December 31, Change

Gross margin (Gross profit as a % of net sales) 61.7 % 61.4 % 30

(1) Change in gross margin period over period in basis points

The decrease in gross profit for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily the result of the decrease in net sales. During this same period of comparison, gross margin remained relatively flat, in line with the decrease in net sales.

Solo Stove Segment Operating Expenses

Segment operating expenses consist of (1) marketing expenses, (2) employee related expenses, such as wages and benefits, and (3) other segment operating expenses, which primarily consist of shipping and fulfillment related expenses.

Year Ended December 31, Change

Segment operating expenses were relatively flat for the year ended December 31, 2024 compared to the year ended December 31, 2023, with increases in employee related compensation as a result of costs associated with the separation of certain management personnel and addition of senior leadership positions, as well as increases in other segment operating expenses as a result of an increase in seller fees stemming from increased marketplace sales within the DTC net sales channel. Partially offsetting, marketing expense declined in line with the decline in net sales.

Chubbies Segment Results for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Chubbies Net Sales

Year Ended December 31, Change

The increase in net sales for the year ended December 31, 2024 compared to the year ended December 31, 2023 was driven by increases realized in the Retail net sales channel as a result of continued growth within our retail strategic partnerships, coupled with the continued ability to identify and meet consumer demands within the DTC net sales channel, with both website and owned retail store performance exceeding the prior period.

Chubbies Gross Profit and Gross Margin

Year Ended December 31, Change

Gross margin (Gross profit as a % of net sales) 59.4 % 60.6 % (120)

(1) Change in gross margin period over period in basis points

The increase in gross profit for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily the result of the increase in net sales. During this same period of comparison, gross margin decreased slightly as a result of the growth in retail channel net sales.

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Chubbies Segment Operating Expenses

Year Ended December 31, Change

The increase in segment operating expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by increases in employee related compensation, as a result of the increased headcount for the seven additional owned retail stores opened in 2024.

Liquidity and Capital Resources

Historically, our cash requirements have principally been for working capital purposes and acquisitions. We expect these needs to continue as we seek to develop and grow our business. In the longer-term, growth opportunities, such as continued expansion into international markets and possible brand and mission consistent acquisition opportunities, may significantly increase our expenses (including our capital expenditures) and cash requirements. We fund our working capital, which is primarily comprised of inventory, accounts payable, and accounts receivable, net, and other cash requirements from cash flows from operating activities, cash on hand, and borrowings under our Revolving Credit Facility. Our cash flows from operating activities and borrowings under the Revolving Credit Facility are our principal sources of liquidity and result primarily from the sales of our portfolio of products as described in Part I, Item 1, Business, of this Annual Report. Our future product sales and our cash flows are difficult to predict, and actual sales may not be in line with our forecasts.

We maintain the majority of our cash and cash equivalents in bank deposit and overnight sweep accounts with major highly rated multi-national and local financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions, and any inability to access or delay in accessing these funds could adversely affect our business and financial position.

The table below reflects our sources, facilities and availability of liquidity as of December 31, 2024. See Note 12, Long-Term Debt in Item 8 of this Annual Report for additional information.

Going Concern

Substantial doubt about our ability to continue as a going concern exists. We incurred a net loss of $113.4 million during the year ended December 31, 2024 and had an accumulated deficit of $228.8 million. We had cash and cash equivalents of $12.0 million and total debt outstanding of $150.7 million as of December 31, 2024. As discussed above, in addition, subsequent to December 31, 2024, we drew an additional $277.3 million on our Revolving Credit Facility (as defined herein), which matures on May 12, 2026. As of December 31, 2024, we were in compliance with the financial and operational covenants under the credit agreement governing our Revolving Credit Facility, however, due to uncertainty in our business and our expected levels of indebtedness, without the application of successful mitigating strategies, we expect to experience difficulty remaining in compliance with the quarterly financial covenants. Failure to satisfy either the interest coverage ratio or total net leverage ratio (each described below) is an event of default under the credit agreement. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the credit facility immediately due and payable and exercise other remedies as set forth in the credit agreement.

We are evaluating strategies to refinance our existing debt. These strategies could include restructuring our debt, issuing new debt or entering into other financing arrangements. In addition, our plans are focused on improving our results and liquidity through a variety of operational improvements throughout 2025, including decreasing costs through a reduction in force and closures of select distribution centers. However, there can be no assurance that we will be able to refinance or restructure our debt or that we will be able to execute any operational improvements. As a result, there can be no assurance that we will be able to obtain or generate additional liquidity when needed or under acceptable terms, if at all. While we believe our plans to refinance or restructure our debt and execute operational improvements can alleviate the conditions that raise substantial doubt, these plans are not entirely within our control and cannot be assessed as being probable of occurring.

Although we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash requirements, or the effects of our plan to refinance or restructure our debt or enter into other financing arrangements as described above, there is uncertainty about our ability to meet our cash obligations for the next twelve months.

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Revolving Credit Facility and Term Loan

On May 12, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., the Lenders and L/C Issuers party thereto (each as defined therein) and the other parties thereto (as subsequently amended on June 2, 2021, September 1, 2021 and May 22, 2023, the “Revolving Credit Facility”). As so amended, the Revolving Credit Facility allows us to borrow up to $350.0 million of revolving loans, including the ability to issue up to $20.0 million in letters of credit, with $1.4 million of letters of credit issued and outstanding as of December 31, 2024. While our issuance of letters of credit does not increase our borrowings outstanding under the Revolving Credit Facility, it does reduce the amounts available under the Revolving Credit Facility. The Revolving Credit Facility matures on May 12, 2026 and bears interest at a rate equal to the base rate as defined in the agreement plus an applicable margin, which as of December 31, 2024, was based on SOFR. Interest is due on the last business day of each March, June, September and December. Principal under the Revolving Credit Facility is not due until maturity.

In addition to the above, the amendment on September 1, 2021 included a provision to borrow up to $100.0 million under the Term Loan. The proceeds from the Term Loan were used to fund the Chubbies acquisition. The Term Loan matures on May 12, 2026 and bears interest at a rate equal to the base rate as defined in the agreement plus an applicable margin, which as of December 31, 2024, was based on SOFR. We were required to make quarterly principal payments on the Term Loan beginning on December 31, 2021. At December 31, 2024, we had $83.0 million outstanding on the Term Loan. All required principal payments were made on time and with available cash through the year ended December 31, 2024. Interest payments are due on a quarterly basis under the Term Loan, with the same due dates as noted for the Revolving Credit Facility above.

Other Terms of the Revolving Credit Facility

The Revolving Credit Facility provides for incremental term loans, incremental equivalent debt, or revolving commitment increases (we refer to each as an “Incremental Increase”) in amounts such that, after giving pro forma effect to such Incremental Increase, our total secured net leverage ratio (as defined in the Revolving Credit Facility) would not exceed the then-applicable cap under the Revolving Credit Facility. In the event that any lenders fund any of the Incremental Increases, the terms and provisions of each Incremental Increase, including the interest rate, shall be determined by us and the lenders, but in no event shall the terms and provisions, when taken as a whole and subject to certain exceptions, of the applicable Incremental Increase, be more favorable to any lender providing any portion of such Incremental Increase than the terms and provisions of the loans provided under the Revolving Credit Facility unless such terms and conditions reflect market terms and conditions at the time of incurrence or issuance thereof as determined by us in good faith.

The Revolving Credit Facility is (a) jointly and severally guaranteed by the Guarantors (as defined in the Revolving Credit Facility) and any future subsidiaries that execute a joinder to the guaranty and related collateral agreements and (b) secured by a first priority lien on substantially all of our and the Guarantors’ assets, subject to certain customary exceptions.

The Revolving Credit Facility requires us to comply with certain financial ratios, including:

•at the end of each fiscal quarter, a total net leverage ratio (as defined in the Revolving Credit Facility) for the four quarters then ended of not more than: 4.00 to 1.00 for each quarter ended in 2022 and through June 30, 2023; 3.75 to 1.00 for each quarter ending June 30, 2023 through March 31, 2024; and 3.50 to 1.00 for each quarter ending June 30, 2024 or thereafter;

•at the end of each fiscal quarter, an interest coverage ratio (as defined in the Revolving Credit Facility) for the four quarters then ended of not less than 3.00 to 1.00.

In addition, the Revolving Credit Facility contains customary financial and non-financial covenants limiting, among other things, mergers and acquisitions; investments, loans, and advances; affiliate transactions; changes to capital structure and the business; additional indebtedness; additional liens; the payment of dividends; and the sale of assets, in each case, subject to certain customary exceptions. The Revolving Credit Facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, defaults under other material debt, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the Revolving Credit Facility to be in full force and effect, and a change of control of our business. We were in compliance with all covenants under the Revolving Credit Facility as of December 31, 2024.

Cash Flows

Year Ended December 31, Change

Cash flows provided by (used in):

Operating activities

The $51.9 million decrease in cash provided by operating activities period over period, was due to a $13.7 million increase in cash usage from changes in operating assets and liabilities (“working capital”), which was primarily driven by increased cash usage in inventory replenishment, as the

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prior year benefited from a higher beginning inventory balance that required less replenishment throughout the year. The increase in changes in working capital was coupled with an increase in cash usage of $38.2 million from changes in net income (loss) after non-cash adjustments, driven by a decline in our operations, primarily net sales, reflected through changes in net income (loss).

Investing activities

The $38.6 million decrease in cash used in investing activities, was primarily driven by the $34.6 million decrease in cash used in acquisition activity in 2024, compared to the prior year with the 2023 acquisitions, partially offset by an increase in capital expenditures in 2024, primarily related to the addition of seven owned retail stores within our Chubbies segment in 2024.

Financing activities

The $9.2 million decrease in cash used in financing activities, was primarily due to a $34.4 million decrease in cash used in net drawdowns and payments on our debt and a $6.2 million decrease in cash used in distributions to non-controlling interests, partially offset by a $37.0 million decrease in cash used for the repurchase of the Company’s Class A common stock as compared to 2023, of which $31.2 million was subsequently retired and the remainder utilized as a portion of the contingent consideration payments related to the 2023 acquisitions.

Contractual Obligations

Our material cash commitments from known contractual and other obligations primarily consist of obligations for long-term debt and related interest, leases for properties and equipment and purchase obligations as part of normal operations. See Note 12, Long-Term Debt, in Item 8 of this Annual Report for more information regarding scheduled maturities of our long-term debt. See Note 14, Leases, in Item 8 of this Annual Report for additional information on leases.

As of December 31, 2024, we executed a termination agreement for advertising services, resulting in a remaining commitment of $5.4 million that is due in the first quarter of 2025. These purchase obligations include all enforceable, legally binding agreements to purchase goods or services or pay consideration due that specify all significant terms, regardless of the duration of the agreement, and exclude agreements with variable terms for which we are unable to estimate the minimum amounts.

For information regarding our other contractual obligations, see Note 12 - Long-Term Debt, Note 14 - Leases, and Note 2 - Significant Accounting Policies in Item 8 of this Annual Report.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

See Note 2, Significant Accounting Policies, to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information about our significant accounting policies, including our critical accounting policies. The critical accounting estimates that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements include those noted below. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Revenue Recognition

Revenue is recognized for the amount of consideration to which we expect to be entitled in exchange for transferring promised goods to a customer. The consideration promised in a contract with a customer includes fixed and variable amounts. The fixed amount of consideration is the standalone selling price of the goods sold. Variable considerations, including cash discounts, rebates and sales incentives programs, are deducted from gross sales in determining net sales at the time revenues are recorded. Variable considerations also include the portion of goods that are expected to be returned and refunded. We determine these estimates based on historical experience and trends. The actual amount of customer returns and rebates may differ from our estimates. We elected to account for shipping costs as fulfillment activities, and not as separate performance obligations. Net sales include shipping costs charged to the customer with the related shipping expense recognized in selling, general and administrative expenses when the revenue is recognized. Sales taxes collected from customers are excluded from net sales, which are subsequently remitted to government authorities.

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Inventory

Inventories, consisting primarily of finished goods are recorded at the lower of cost or net realizable value. Cost is determined using an average costing method, calculated using the weighted average cost of historical purchases. Our inventory balances include all costs incurred to deliver inventory to our distribution facilities in its finished state, such as inbound freight, import duties and tariffs. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand, market conditions and product obsolescence. As a result, we have not recorded any write-downs to inventory below cost, except as it relates to obsolete or slow-moving inventory. If actual market conditions are less favorable than those projected by management, additional write-downs are recorded. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold to customers, resulting in lower cost of sales and higher income from operations than expected in that period.

Income Taxes

In determining the provision for income taxes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, expectations for future pre-tax operating income, the time period over which our temporary differences will reverse, and the implementation of feasible and prudent tax planning strategies. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions, including projected revenue growth, and operating margins, among others. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.

We have recorded a valuation allowance against Solo Brands, Inc. and Oru’s deferred tax assets resulting from current losses, as discussed below, resulting in a net deferred tax asset the consolidated group. Solo Brands, Inc. evaluated and concluded that as of December 31, 2024, we had $19.1 million of valuation allowances. However, since future financial results may differ from previous estimates, periodic adjustments to our valuation allowances may be necessary. If we determine in the future that we will be able to fully utilize all or part of these deferred tax assets, we would record a reversal of our valuation allowance through earnings in the period the determination was made, which would have a positive effect on our results of operations and earnings in future periods.

Goodwill

Goodwill is not amortized, but is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. In conducting the impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We currently operate as five reporting units. As of our annual assessment date, October 1, 2024, we had two reporting units with remaining goodwill, Solo Stove and Chubbies. As of December 31, 2024, as a result of the goodwill impairment charge recognized for Solo Stove as of that date, discussed in further detail in Note 10, Goodwill, only the Chubbies reporting unit had goodwill remaining.

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference.

To determine reporting unit fair value as part of the quantitative test, we use a weighting of fair values derived from the income approach and the market approach. Under the income approach, we project the future cash flows and discount these cash flows to reflect their present value, inclusive of their relative risk. The cash flows used are consistent with those we use in our internal planning, which reflects actual business trends experienced and our long-term business strategy. Under the market approach, we use the guideline company method to develop valuation multiples and compare our reporting unit to similar publicly traded companies.

In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different estimates of fair value.

Impairment charges related to goodwill are recorded to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss). See Note 10, Goodwill, for further details regarding our goodwill balance and accumulated impairment losses.

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As a result of the identification of goodwill impairment indicators as of September 30, 2024, discussed in further detail in Note 9, Intangible Assets, net, we performed a goodwill impairment test as of September 30, 2024. Through performance of this test, we determined that the carrying amounts of the IcyBreeze and Solo Stove reporting units exceeded their respective fair values and goodwill impairment charges of $19.9 million and $25.0 million, respectively, were recognized. The Chubbies reporting unit was determined to have a fair value exceeding its book value by more than 5% as of September 30, 2024. Goodwill at the remaining reporting units of the Company were fully impaired as of December 31, 2023.

The future occurrence of a potential indicator of impairment could include matters such as: a decrease in expected net earnings, a further decline in equity market conditions, a decline in comparable market multiples, a continued and sustained decline in our common stock price, a significant adverse change in legal factors or the general business climate, an adverse action or assessment by a regulator, and a significant downturn in demand for products offered by us. In the event of significant adverse changes of the nature described above, it may be necessary for us to recognize a non-cash impairment of goodwill, which could have a material adverse effect on our consolidated business, results of operations and financial condition. Based on the results of the quantitative interim goodwill impairment test, the calculated fair value of the Chubbies reporting unit exceeded its book value by less than 10% as of September 30, 2024. Therefore, a 150 basis point (“BPS”) increase in the discount rate, a 175 BPS decrease in the EBITDA margin or a 400 BPS decrease in revenue growth would indicate a potential hypothetical impairment charge for this reporting unit for the amounts reflected in the chart below.

Chubbies

Sensitivity analysis, approximate hypothetical impairment charge:

Discount rate increase of 150 BPS (1,383)

EBITDA margin decrease of 175 BPS (1,383)

Revenue growth rate decrease of 400 BPS (383)

Intangible Assets

We evaluate the carrying value of definite-lived intangible assets whenever a change in circumstances indicates that the net carrying value may not be recoverable from the undiscounted future cash flows from operations. Events or circumstances that could trigger an impairment review of a long-lived asset or asset group include, but are not limited to: (i) a significant decrease in the market price of the asset, (ii) a significant adverse change in the extent or manner that the asset is used or in its physical condition, (iii) a significant adverse change in legal factors or in the business climate that could affect the value of the asset, (iv) an accumulation of costs significantly in excess of original expectation for the acquisition or construction of the asset, (v) a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast of continuing losses associated with the use of the asset and (vi) a more-likely-than-not expectation that the asset will be sold or disposed of significantly before the end of its previously estimated useful life. If an impairment exists, the net carrying values are reduced to fair values. The estimates of undiscounted future cash flows used during an impairment review of a long-lived asset or asset group require judgments and assumptions of future cash flows that are expected to arise as a direct result of the use and eventual disposition of the asset or asset group. If these assets were for sale, our estimates of their values could be significantly different because of market conditions, specific transaction terms and a buyer's perspective on future cash flows.

Impairment charges related to intangible assets are recorded to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss). See Note 9, Intangible Assets, net in Item 8 of this Annual Report, for further details regarding intangible asset balances and related accumulated amortization and impairment losses.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see “Recently Adopted Accounting Pronouncements” and “Recently Issued Accounting Standards—Not Yet Adopted” in Note 2, Significant Accounting Policies, in Item 8 of this Annual Report on Form 10-K.

JOBS Act

We currently qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, we are provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We have elected to adopt new or revised accounting guidance within the same time period as private companies, unless management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. Our utilization of these transition periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.

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Interest Rate Risk

In order to maintain liquidity and fund business operations, we have a long-term credit facility and separate term loan that bear variable interest rates based on prime, federal funds, or SOFR plus an applicable margin based on our total net leverage ratio. As of December 31, 2024, we had indebtedness of $69.0 million and $83.0 million, with annualized rates of interest of 7.03% and 7.08%, under our Revolving Credit Facility and Term Loan, respectively. The nature and amount of our long-term debt varies as a result of business requirements, market conditions, and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations, but as of December 31, 2024, we have not entered into any such contracts. A 100 bps increase in SOFR would increase our interest expense by approximately $1.5 million in any given year.

Inflation Risk

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and SG&A expenses as a percentage of net sales, if the selling prices of our products do not increase with these increased costs.

Commodity Price Risk

The primary raw materials and components used by our contract manufacturing partners include stainless steel and aluminum. We believe these materials are readily available from multiple vendors. Certain of these products use petroleum or natural gas as inputs. However, we do not believe there is a significant direct correlation between petroleum or natural gas prices and the costs of our products. The U.S. government has imposed tariffs on certain foreign goods from a variety of countries and regions that it perceives as engaging in unfair trade practices. If we become unable to recover a substantial portion of any increased tariff related costs from our customers, manufacturers, or other available avenues, the imposition of the new or increased international tariffs could materially and adversely affect our business, financial condition and results of operations. We will continue to monitor international trade policy and will make adjustments to our supply base where possible to mitigate the impact on our costs. We do not currently hedge commodity price risk.

Foreign Currency Risk

Our international sales are primarily denominated in local currencies. During 2024 and 2023, net sales in international markets accounted for 6.9% and 6.0% of our consolidated revenues, respectively. Therefore, we do not believe exposure to foreign currency fluctuations has had a material impact on our net sales. A portion of our operating expenses are incurred outside the Unites States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. In addition, our suppliers may incur many costs, including labor costs, in other currencies. To the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margin. In addition, a strengthening of the U.S. dollar may increase the cost of our products to our customers outside of the United States. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. A 100 bps unfavorable change in foreign currency exchange rates to which we are exposed would increase our operating expenses by approximately $0.3 million and decrease our net sales by approximately $0.3 million for the year ended December 31, 2024.

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm - PCAOB Firm ID: 42 51

Consolidated Balance Sheets 52

Consolidated Statements of Operations and Comprehensive Income (Loss) 53

Consolidated Statements of Cash Flows 54

Consolidated Statements of Equity 56

Notes to Consolidated Financial Statements

Note 1 - Organization and Description of Business 57

Note 2 - Significant Accounting Policies 58

Note 3 - Restructuring, Contract Termination and Impairment Charges 64

Note 4- Revenue 65

Note 5 - Acquisitions 66

Note 6 - Inventory 67

Note 7 - Prepaid Expenses and Other Current Assets 68

Note 8 - Property and Equipment, net 68

Note 9 - Intangible Assets, net 69

Note 10 - Goodwill 70

Note 11 - Accrued Expenses and Other Current Liabilities 71

Note 12 - Long-Term Debt 72

Note 13 - Other Non-Current Liabilities 72

Note 15 - Equity-Based Compensation 75

Note 16 - Income Taxes 79

Note 17 - Commitments and Contingencies 82

Note 18 - Fair Value Measurements 82

Note 20 - Net Income (Loss) Per Share 84

Note 21 - Variable Interest Entities 85

Note 22 - Segments 85

Note 23 - Related Parties 86

Note 24 - Subsequent Events 87

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Solo Brands, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Solo Brands, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), cash flows and equity for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring net losses from operations, has an accumulated deficit, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. In addition, without the application of successful mitigating strategies, the Company expects to experience difficulty remaining in compliance with financial covenants which would be considered an event of default resulting in all amounts outstanding immediately due and payable. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The 2024 consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2021.

Dallas, Texas

March 12, 2025

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SOLO BRANDS, INC.

Consolidated Balance Sheets

ASSETS

Current assets

Prepaid expenses and other current assets 12,223 21,893

Non-current assets

LIABILITIES AND EQUITY

Current liabilities

Accrued expenses and other current liabilities 41,661 55,155

Current portion of long-term debt 8,625 6,250

Non-current liabilities

Commitments and contingencies (Note 17)

Equity

Accumulated other comprehensive income (loss) (434) (230)

Equity attributable to the controlling interest 133,712 241,262

Equity attributable to noncontrolling interests 59,645 131,001

See Notes to Consolidated Financial Statements

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SOLO BRANDS, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Year Ended December 31,

(In thousands, except per share data) 2024 2023

Operating expenses

Restructuring, contract termination and impairment charges 136,099 248,967

Depreciation and amortization expenses 25,702 26,593

Non-operating (income) expense

Other non-operating (income) expense 528 (7,297)

Total non-operating (income) expense 14,532 3,707

Net income (loss) attributable to Solo Brands, Inc. $ (113,356) $ (111,347)

Other comprehensive income (loss)

Foreign currency translation, net of tax (204) (268)

Net income (loss) per Class A common stock

Basic and diluted $ (1.94) $ (1.84)

Weighted-average Class A common stock outstanding

See Notes to Consolidated Financial Statements

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SOLO BRANDS, INC.

Consolidated Statements of Cash Flows

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Restructuring, contract termination and impairment charges 136,099 248,967

Noncash operating lease expense 8,517 8,373

Change in fair value of contingent consideration 4,438 (1,573)

Prepaid marketing charges 1,871 —

Amortization of debt issuance costs 860 860

Barter credits — (7,160)

Changes in assets and liabilities

Accrued expenses and other current liabilities (14,133) 6,811

Other non-current assets and liabilities 176 2,409

Operating lease liabilities (8,586) (8,113)

Prepaid expenses and other current assets 343 (9,222)

Payments of contingent consideration (3,000) —

Net cash provided by (used in) operating activities 10,517 62,423

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments of contingent consideration — (9,386)

Acquisitions, net of cash acquired — (34,600)

Net cash provided by (used in) investing activities (14,512) (53,079)

CASH FLOWS FROM FINANCING ACTIVITIES:

Debt issuance costs paid (167) —

Finance lease liability principal paid (144) (379)

Exercise of Options for Class A common stock — 39

Common stock repurchases — (36,957)

Distributions to non-controlling interests (4,284) (10,511)

Taxes paid related to net share settlement of equity awards (207) (305)

Stock issued under employee stock purchase plan 395 247

Net cash provided by (used in) financing activities (3,657) (12,866)

Effect of exchange rate changes on cash (210) 71

Net change in cash and cash equivalents (7,862) (3,451)

Cash and cash equivalents balance, beginning of period 19,842 23,293

Cash and cash equivalents balance, end of period $ 11,980 $ 19,842

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SUPPLEMENTAL DISCLOSURES:

Cash interest paid, net of amounts capitalized $ 13,469 $ 10,327

Construction in progress in accounts payable $ 268 $ —

SUPPLEMENTAL NONCASH INVESTING AND FINANCING DISCLOSURES:

Treasury stock retirements — 31,164

Re-issuance of treasury stock — 5,342

See Notes to Consolidated Financial Statements

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SOLO BRANDS, INC.

Consolidated Statements of Equity

(In thousands) Class A Common Stock Class B Common Stock

Equity-based compensation for non-employees — — — — 333 — — — — 333

Other comprehensive income (loss) — — — — — — 58 — 210 268

Tax distributions to non-controlling interests — — — — — — — — (10,511) (10,511)

Employee stock purchase plan 54 — — — 247 — — — — 247

Treasury stock retirement — (6) — — — (31,158) — 31,164 — —

Surrender of stock to settle taxes on equity awards — — — — — — — (305) — (305)

Exercise of options for Class A common stock 8 — — — 39 — — — — 39

Other comprehensive income (loss) — — — — — — (204) — — (204)

Tax distributions to non-controlling interests — — — — — — — — (4,284) (4,284)

Employee stock purchase plan 239 — — — 396 — — — — 396

Surrender of stock to settle taxes on equity awards — — — — — — — (207) — (207)

See Notes to Consolidated Financial Statements

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SOLO BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – Organization and Description of Business

Description of Business

Solo Brands, Inc. (“Company” or “Solo Brands”), through a majority-owned subsidiary, Solo Stove Holdings, LLC (“Holdings”), operates five premium brands - Solo Stove, Oru Kayak, Inc. (“Oru”), International Surf Ventures, Inc. (“ISLE”), Chubbies, Inc. (“Chubbies”), and Sconberg, LLC (“TerraFlame”). Solo Stove offers portable, low-smoke fire pits, grills, and camping stoves for backyard and outdoor use in different sizes, fire pit bundles, gear kits, stoves, cookware, dinnerware, and a variety of clothing and accessories. Oru offers a flagship line of lightweight, foldable kayaks. ISLE produces high-quality stand-up paddle boards with colorful designs that are engineered to accommodate every skill level, style, and interest. Chubbies is a fun-loving, premium apparel brand that offers well-fitted comfortable clothing with unique style. TerraFlame provides customers the ability to bring the fire inside with an indoor fire pit. Solo Brands distributes its products through individual brand websites and other partners across North America, Europe and Australia.

Organization

While operating as a limited liability company from 2011 to 2019, Solo Brands, LLC had two owners, or the Founders, which together owned 100% of the outstanding membership interest. Pursuant to the membership interest purchase agreement (“the 2019 Agreement”) dated September 24, 2019, SS Acquisitions, Inc. (which was majority-owned by Bertram Capital) acquired 66.74% of the total Class A-1 and Class A-2 units of Solo Brands, LLC from the Founders. The remaining interests were retained by the Founders and other employees who acquired interest as part of the 2019 Agreement.

Holdings was formed as a single-member limited liability company in the state of Delaware on October 6, 2020. Through a wholly-owned subsidiary, pursuant to the securities purchase agreement (the “2020 Agreement”) dated October 9, 2020, Holdings acquired 100% percent of the outstanding units of Solo Brands, LLC (previously Frontline Advance, LLC dba Solo Stove).

For all periods, the operations of the Company are conducted through Solo Brands, LLC. As a result of the 2020 Agreement, Solo Brands, LLC became a wholly-owned subsidiary of Holdings. In exchange, Holdings issued Class A and B units, through which Summit Partners Growth Equity Funds, Summit Partners Subordinated Debt Funds, and Summit Investors X Funds (collectively, the “Summit Partners”) acquired an effective 58.82% percent of Holdings. The remaining units were retained by the Founders, SS Acquisitions, Inc., and other employees (collectively, the “Continuing LLC Owners”).

Solo Brands, Inc. was incorporated in Delaware on June 23, 2021 for the purpose of facilitating an initial public offering and other related transactions in order to carry on the Company’s business. On October 28, 2021, Solo Brands, Inc. completed its initial public offering (“IPO”) of 14,838,708 shares of Class A common stock.

In connection with the IPO, the organizational structure was converted to an umbrella partnership-C-Corporation with Solo Brands, Inc. having a controlling equity interest in Holdings. The Reorganization Transactions were accounted for as a transaction between entities under common control. As the sole managing member, Solo Brands, Inc. operates and controls all of the business and affairs and, through Holdings and its subsidiaries, conducts the business. Solo Brands, Inc. consolidates Holdings in its consolidated financial statements and reports a non-controlling interest related to the common units held by the Continuing LLC Owners on its audited consolidated financial statements.

Basis of Presentation

The consolidated financial statements contained herein have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the rules of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include those of our wholly owned and majority-owned subsidiaries and the entity consolidated under the variable interest entity model. Intercompany balances and transactions are eliminated in consolidation. Certain prior period amounts have been conformed to the current period’s presentation.

Going Concern

The consolidated financial statements have been prepared in accordance with U.S. GAAP assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists.

The Company incurred a net loss of $113.4 million during the year ended December 31, 2024 and had an accumulated deficit of $228.8 million. The Company had cash and cash equivalents of $12.0 million and total debt outstanding of $150.7 million as of December 31, 2024. In addition, subsequent to December 31, 2024, the Company drew an additional $277.3 million under its Revolving Credit Facility (as defined herein), which matures on May 12, 2026. As of December 31, 2024, we were in compliance with the financial and operational covenants under the credit agreement governing our Revolving Credit Facility, however, due to uncertainty in our business and our expected levels of indebtedness, without the application of successful mitigating strategies, we expect to experience difficulty remaining in compliance with the quarterly financial covenants. Failure to

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satisfy either the interest coverage ratio or total net leverage ratio (each described below) is an event of default under the credit agreement. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the credit facility immediately due and payable and exercise other remedies as set forth in the credit agreement.

The Company is evaluating strategies to refinance its existing debt. These strategies could include restructuring our debt, issuing new debt or entering into other financing arrangements. In addition, the Company’s plans are focused on improving its results and liquidity through a variety of operational improvements throughout 2025, including a reduction of force and closures of select distribution centers. However, there can be no assurance that the Company will be able to refinance or restructure its debt or that it will be able to execute any operational improvements. As a result, there can be no assurance that the Company will be able to obtain or generate additional liquidity when needed or under acceptable terms, if at all. While the Company believes its plans to refinance the Revolving Credit Facility and execute operational improvements can alleviate the conditions that raise substantial doubt, these plans are not entirely within our control and cannot be assessed as being probable of occurring.

The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reporting expenses that may be necessary if the Company were unable to continue as a going concern.

NOTE 2 – Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all wholly-owned and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. For our consolidated non-wholly owned subsidiaries, a noncontrolling interest is recognized to reflect the portion of income and equity that is not attributable to the Company.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates and assumptions about future events and their effects cannot be made with certainty. Estimates may change as new events occur when additional information becomes available and if our operating environment changes. Actual results could differ from our estimates.

Concentrations of Credit Risk

The Company extends trade credit to its retail customers on terms that generally are practiced in the industry. The Company periodically performs credit analyses and monitors the financial condition of its customers to reduce credit risk. The Company performs ongoing credit evaluations of its customers, but generally does not require collateral to support accounts receivable. Accounts receivable mostly consist of amounts due from our business-to-business customers.

For the years ended December 31, 2024 and 2023, Dick’s Sporting Goods accounted for 32.6% and 24.2% of the Company’s total outstanding accounts receivable, respectively. There are no other significant concentrations of receivables that represent a significant credit risk.

For the years ended December 31, 2024 and 2023, no single customer accounted for more than 10% of total net sales.

The Company is exposed to risk due to the concentration of business activity with certain third-party manufacturers of our products. The Company, through the use of these certain third-party manufacturers, manufactures a variety of merchandise in China, including camp stoves, fire pits, kayaks and stand up paddle boards. The majority of the casual wear, sportwear, swimwear, outerwear, loungewear, and other accessories are currently made in Vietnam between a variety of manufacturers. Additional manufacturing is done in India, China, Mexico, and the United States.

Segment Information

The Company’s CEO, as the chief operating decision-maker (“CODM”), organizes the Company, manages resource allocations, and measures performance on the basis of two reportable segments, each of which represents significant product lines. This is supported by the operational structure of the Company, which includes marketing, distribution, information technology, accounting and finance, human resources, payroll and legal functions primarily focused on these two individual product categories.

Fair Value Measurements

Accounting standards require certain assets and liabilities to be reported at fair value in the consolidated financial statements and provide a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.

Fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

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Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets or liabilities in active markets and other inputs, such as interest rates and yield curves, that are observable at commonly quoted intervals.

Fair values determined by Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset or liability.

In instances whereby inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Cash and Cash Equivalents

The Company considers all investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist principally of bank deposits and overnight sweep accounts. The Company continually monitors its position with, and the credit quality of, the financial institutions with which it invests. The Company has maintained bank balances in excess of federally insured limits. We have not historically experienced any losses in such accounts.

Accounts Receivable, net

Accounts receivable, net consist of amounts due to the Company from retailers and direct-to-corporate customers, as well as receivables from the credit card and payment application services used by the Company. Accounts receivable, net are recorded at invoiced amounts, less contractual allowances for trade terms, sales incentive programs, and discounts. The Company maintains an allowance for expected credit losses, which is determined based on a review of specific customer accounts where the collection is doubtful, as well as an assessment of the collectability of receivable of customer groups that share similar risk characteristics. This assessment is based on historical and anticipated trends, existing and forecasted economic conditions and other factors. All accounts are subject to an ongoing review of ultimate collectability. Receivables are written off against the allowance when it is certain the amounts will not be recovered.

Bad debt expense is recorded to selling, general, & administrative expenses on the consolidated statements of operations and comprehensive income (loss). Bad debt expense for the years ended December 31, 2024 and 2023 was $0.6 million and $0.3 million, respectively.

Inventory

Inventories, consisting primarily of finished goods are recorded at the lower of cost or net realizable value. Cost is determined using an average costing method, calculated using the weighted average method. Our inventory balances include all costs incurred to deliver inventory to our distribution facilities, such as inbound freight, import duties and tariffs. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company makes ongoing estimates relating to the net realizable value of inventories based upon assumptions about future demand, market conditions and product obsolescence. Obsolete or slow-moving inventory is written down to estimated net realizable value. Acquired inventory is recorded at fair value using a mix of cost, comparative sales and market approaches.

Property and Equipment, net

Property and equipment acquired through acquisitions (as described in Note 5, Acquisitions) are recorded at estimated fair value as of the acquisition date using a mix of cost, comparative sales and market approaches. Costs of maintenance and repairs are charged to expense when incurred. When property and equipment are sold or disposed of, the cost and related accumulated depreciation is written off, and a gain or loss, if applicable, is recorded. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Property and equipment are depreciated on a straight-line method over their estimated useful lives. The useful lives for property and equipment are as follows:

Useful Life

Computers, software, and other equipment 3 Years

Machinery 5 - 10 Years

Leasehold improvements Shorter of lease term or 10 Years

Furniture and fixtures 3 - 5 Years

Buildings 29 - 40 Years

Software Costs

We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for

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internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs include external direct costs of materials and services utilized in developing or obtaining computer software, compensation and related benefits for employees who are directly associated with the software projects and interest costs incurred while developing internal-use computer software. Capitalized software costs are included in other non-current assets on our consolidated balance sheets and amortized on a straight-line basis when placed into service over the estimated useful lives of the software, which approximate 3 to 10 years.

Software amortization is recorded to selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss) and was $0.2 million and nominal for the years ended December 31, 2024 and 2023, respectively. Net capitalized software and development costs were $5.4 million as of December 31, 2024 which are recorded to other non-current assets on the consolidated balance sheets.

Goodwill

Goodwill is determined based upon the excess enterprise value over the estimated fair value of assets and liabilities assumed and is recorded at its estimated fair value at the date of acquisition. The Company reviews goodwill at the reporting unit level, which is one level below the operating segment, for impairment annually on October 1st of each fiscal year and on an interim basis whenever events or changes in circumstances indicate the fair value of such assets may be below their carrying value.

Intangible Assets, net

Intangible assets are comprised of brands, trademarks, developed technology, customer relationships, patents and proprietary software and are recorded at their estimated fair values at the date of acquisition. Acquired definite-lived intangible assets are valued using an excess earnings method for customer related intangibles and a relief from royalty method for tradenames and patents. Intangible assets subject to amortization are amortized using the straight-line method over the estimated useful lives of the assets.

In addition, external legal costs incurred in the defense of our trademarks and patents are capitalized when we believe that the future economic benefit of the intangible asset will be increased, and a successful defense is probable. In the event of a successful defense, the settlements received are netted against the external legal costs that were capitalized. Capitalized trademark and patent defense costs are amortized over the remaining useful life of the asset. Where the defense of the trademark or patent maintains rather than increases the expected future economic benefits from the asset, the costs would generally be expensed as incurred. The external legal costs incurred and settlements received may not occur in the same period.

The useful lives for intangible assets subject to amortization are as follows:

Useful Life

Trademarks 5-15 Years

Customer relationships 6-15 Years

Developed technology 6 Years

Patents 8-10 Years

Proprietary software 3 Years

Debt Issuance Costs

Debt issuance costs incurred by the Company in connection with obtaining debt are recorded on the balance sheet as a direct deduction from the carrying value of the associated debt liability. The costs are amortized on a straight-line basis over the term of the related debt and reported as a component of interest expense, net.

Leases

The Company leases space for warehouses, stores and corporate space under operating leases expiring at various times through 2035. The Company also leases warehouse picking robots under financing leases. The Company determines if an arrangement is a lease at inception of a contract if the terms state the Company has the right to direct the use of, and obtain substantially all the economic benefits from, a specific asset identified in the contract.

The right-of-use asset (“ROU’) assets represent the Company's right to use the underlying assets for the lease term, and the lease liabilities represent the obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments to be made over the lease term. The Company records its operating ROU assets in operating lease right-of-use assets, its current operating lease liabilities in accrued expenses and other current liabilities and its non-current operating lease liabilities in operating lease liabilities. The Company records its finance ROU assets in other non-current assets, its current finance lease liabilities in accrued expenses and other current liabilities and its non-current finance lease liabilities in other non-current liabilities.

Operating lease ROU assets are amortized on a straight-line basis and included within selling, general and administrative expense, along with the lease expense for the lease liability. Finance lease ROU assets are amortized on a straight-line basis over the lease term and included in depreciation

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and amortization expenses, while interest expense on the finance lease liability is included in interest expense, net.

Certain of the Company's lease agreements contain options to extend the lease. The Company evaluates these options on a lease-by-lease basis, and if the Company determines it is reasonably certain to be exercised, the lease term includes the extension. The Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments, and lease expense for operating leases is recognized on a straight-line basis over the lease term. The incremental borrowing rate is the rate of interest the Company could borrow on a collateralized basis over a similar term with similar payments. The Company does not record leases with an initial term of twelve months or less (“short-term leases”).

Certain of the Company's lease agreements include payments for certain variable costs not determinable upon lease commencement, as well as fixed payments for non-lease components, including common area maintenance. These variable and fixed lease payments are recognized in selling, general and administrative expenses, but are not included in the ROU asset or lease liability balances. The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants.

Commitments and Contingencies

From time to time, the Company is involved in various legal proceedings that arise in the normal course of business. While the Company intends to prosecute and defend any lawsuit vigorously, the Company presently believes that the ultimate outcome of any currently pending legal proceeding will not have any material adverse effect on its financial position, cash flows, or results of operations. However, litigation is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, which could impact the Company’s business and the results of operations for the period in which the ruling occurs or future periods. The Company records the appropriate liability when the amount is deemed probable and reasonably estimable. In addition, the Company does not accrue for estimated legal fees and other directly related costs because they are expensed as incurred. Therefore, the consolidated balance sheets do not include a liability for any potential obligations as of December 31, 2024 or 2023.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has a variable interest in an entity and if it is the primary beneficiary. These evaluations are complex and involve judgment and the use of estimates and assumptions based on available historical and prospective information, among other factors. If the Company determines that entities for which the Company holds a contractual or ownership interest in are variable interest entities ("VIE") and that the Company is the primary beneficiary, the Company consolidates such entities in the consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. In the event of significant changes in the interest or relationship with the VIE, the Company reconsiders the determination of the primary beneficiary. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP.

Revenue Recognition

The Company primarily engages in direct-to-consumer transactions, which are comprised of product sales directly from the Company’s website, and business-to-business transactions, or retail, which are comprised of product sales to retailers, including where possession of the Company’s products is taken and sold by the retailer in-store or online. These revenue transactions comprise a single performance obligation satisfied through the transfer of control of promised goods to the customers, based on the terms of sale.

For the Company’s direct-to-consumer and retail transactions, performance obligations are typically satisfied at the point of shipment. The transfer of control occurs at a point in time based on consideration of when the customer has an obligation to pay for the goods, legal title to, and risk and rewards of ownership have been transferred.

Payment is due at the time of sale on our website for our direct-to-consumer transactions. Business-to-business customers’ payment terms vary depending on creditworthiness and the contract terms with each retailer, but the most common is net 30 or net 60 days.

Revenue is recognized for the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. The consideration promised in a contract with a customer includes fixed and variable amounts. The fixed amount of consideration is the stand-alone selling price of the goods sold. Variable considerations, including cash discounts, rebates, and sales incentive programs, are deducted from gross sales in determining net sales at the time revenues are recorded. Any consideration received (or receivable) that the Company expects to refund to the customer is recognized as a refund liability. We determine these estimates based on historical experience and trends. We elected to account for shipping costs as fulfillment activities, and not as separate performance obligations. Net sales include shipping costs charged to the customer with the related shipping expense recognized in selling, general and administrative expenses when the revenue is recognized. Sales taxes collected from customers are excluded from net sales, which are remitted subsequently to government authorities.

Sales Rebates, Returns and Allowances

Sales rebates relate to price concessions within the retail network in order to maintain the margin requirements for our retail partners. Sales returns are recorded when the customer makes a return of a purchased product or when the customer agrees to keep a purchased product in return for a

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reduction in the selling price. The allowance for sales returns is established based on historical return rates and the Company’s analysis of macroeconomic conditions. These amounts are included in net sales at the time of the sale on the consolidated statements of operations and comprehensive income (loss).

Total sales returns and allowances were $19.3 million and $14.7 million for the years ended December 31, 2024 and 2023, respectively. Total sales rebates were $6.3 million and $5.8 million for the years ended December 31, 2024 and 2023, respectively.

Deferred Revenue

Deferred revenue liabilities are recorded when the customer pays consideration, or the Company has a right to an amount of consideration that is unconditional before the transfer of a good to the customer and thus represents the Company’s obligation to transfer the good to the customer at a future date. The Company’s primary deferred revenue liabilities are from its direct-to-consumer channel and represent payments received in advance from customers before the shipment of products.

Cost of Goods Sold

Cost of goods sold includes the purchase cost of our products from our third-party manufacturers, inbound freight and duties, costs related to manufacturing of certain of our products, product quality testing and inspection costs. Cost of goods sold also includes depreciation on molds and equipment that we own, allocated overhead and direct and indirect labor for production facility personnel.

Shipping and Handling Costs

Costs associated with the shipping and handling of customer sales are expensed when the product ships to the customer. These costs are included in selling, general, & administrative expenses on the consolidated statements of operations and comprehensive income (loss).

Marketing Expense

Marketing expense is deferred until the underlying advertisement is shown and recognized in the period of the related program, if within an annual reporting cycle. These costs are included in selling, general, & administrative expenses on the consolidated statements of operations and comprehensive income (loss).

Advertising expense was $96.0 million and $96.9 million for the years ended December 31, 2024 and 2023, respectively.

Research and Development Expense

Research and development costs consist of costs related to new product development, prototyping and testing. These costs are expensed as incurred and included in selling, general, & administrative expenses on the consolidated statements of operations and comprehensive income (loss).

Research and development expense was $1.7 million and $0.7 million for the years ended December 31, 2024 and 2023, respectively.

Restructuring, Contract Termination and Impairment Charges

Restructuring, contract termination and impairment charges are primarily comprised of severance and employee-related benefits, contract termination fees and impairment charges. We recognize employee severance costs as a liability at estimated fair value, at the time of communication to affected employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Contract termination fees include costs incurred to terminate a contract and the impacts to related assets or liabilities associated with these contracts. Asset impairment charges include impairments of long-lived assets, including intangible assets, and goodwill. Restructuring, contract termination and asset impairment activities are recognized when they are incurred and included in restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss).

Other Operating Expenses

Other operating expenses consist of costs incurred for the secondary offering completed in May 2023, acquisition-related expenses, business optimization and expansion expenses and management transition costs.

Income Taxes

The Company accounts for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying values and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense (benefit) on the consolidated statements of operations and comprehensive income (loss) in the period of enactment. A valuation allowance is recognized if the Company determines it is more likely than not that all or a portion of a deferred tax asset will not be recognized. In making such determination, the Company considers all available evidence, including

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scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent and expected future results of operations.

As a result of the Reorganization Transactions, Solo Brands, Inc. became the sole managing member of Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings is passed through to and included in the taxable income or loss of its members, including Solo Brands, Inc. following the Reorganization Transactions, on a pro rata basis. Solo Brands, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Holdings following the Reorganization Transactions. The Company is also subject to taxes in foreign jurisdictions.

Oru Kayak, Inc. and Chubbies, Inc., wholly owned subsidiaries of Holdings, are subject to federal and state income taxes on corporate earnings and accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

In accordance with authoritative guidance on accounting for and disclosure of uncertainty in tax positions, the Company follows a more likely than not measurement methodology to reflect the financial statement impact of uncertain tax positions taken or expected to be taken in a tax return. For tax positions meeting the more-likely-than-not threshold, the tax liability recognized in the consolidated financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, and local jurisdictions, where applicable. If such examinations result in changes to income or loss, the tax liability of the Company could be changed accordingly.

Warranty

The Company warrants its products against manufacturing defects and will replace all products sold by an authorized retailer that are deemed defective within a contractual time period, dependent upon the product and brand. The Company does not warranty its products against normal wear or misuse. These costs are included in cost of goods sold on the consolidated statements of operations and comprehensive income (loss).

Warranty expense was $0.4 million and $0.7 million for the years ended December 31, 2024 and 2023, respectively.

Net Income (Loss) Per Class A Common Stock

Basic net income (loss) per Class A common stock is computed by dividing net income (loss) by the weighted average number of shares of Class A common stock outstanding during the period. Diluted net income (loss) per Class A common stock assumes conversion of potentially dilutive securities such as stock options, restricted stock units, and performance stock units.

Equity-Based Compensation

The Company recognizes equity-based compensation expense for employees and non-employees based on the grant-date fair value of the award. Certain awards contain service and performance vesting conditions. The grant date fair values of restricted stock awards that contain service vesting conditions and performance stock awards that contain a performance target are estimated based on the fair value of the underlying shares on the grant date. The Company uses a Black-Scholes option-pricing model to calculate the fair value of stock options. This model requires various judgmental assumptions including volatility, the risk free rate, and expected term. For awards with market vesting conditions, the fair value is estimated using a Monte Carlo simulation model, which incorporates the likelihood of achieving the market condition. For service-based awards and performance-based awards that are considered probable of vesting, compensation cost is recognized on a straight-line basis over the requisite service period. Equity-based compensation expense is recorded in the selling, general and administrative expense line item on the consolidated statements of operations and other comprehensive income (loss).

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU amended the existing segment reporting requirements by requiring disclosure of the significant segment expenses based on how management internally views segment information and by allowing the disclosure of more than one measure of segment profit or loss, as well as by expanding the interim period segment requirements. The ASU also requires single-reportable segment entities to report the disclosures required under Topic 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU for the period ended December 31, 2024 and the amendments have been applied retrospectively to all prior periods presented in the financial statements consistent with the standard. Refer to our segments disclosure in Note 22, Segments for more information.

Recently Issued Accounting Pronouncements - Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that requires presentation of specific categories of reconciling items, as well as reconciling items that meet a quantitative threshold, in the reconciliation between the income

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tax provision and the income tax provision using statutory tax rates. The ASU also requires disclosure of income taxes paid disaggregated by jurisdiction with separate disclosure of income taxes paid to individual jurisdictions that meet a quantitative threshold. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements, but will require certain additional disclosures. We do not expect to early adopt at this time.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), that requires the disclosure of certain amounts included in certain expense captions on the face of the income statement. The FASB subsequently issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) to clarify the effective date of ASU 2024-03. The guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements, but will require certain additional disclosures. We do not expect to early adopt at this time.

NOTE 3 - Restructuring, Contract Termination and Impairment Charges

In 2024, the Company underwent a significant change in management and personnel across the organization. The new management team engaged in a detailed review of the business and its brand level components, both internally and through the engagement of external strategic partners. As a result of this review, management executed the following activities:

•termination of underperforming marketing agreements with marketing barter partners that no longer aligned with the Company’s current marketing strategy;

•identification of various asset impairment charges related to the discontinuation of IcyBreeze, stemming from underperformance and management’s determination to revise product design; and

•reorganization of the Oru and ISLE reporting units to eliminate costs and capitalize on potential synergies, through restructuring under a revised management structure, which resulted in severance and other changes totaling $0.6 million.

As a result of these activities, the Company recognized significant charges for restructuring and contract terminations, in addition to asset impairment charges related to IcyBreeze. The key initiatives undertaken by management, as described below, were completed as of December 31, 2024.

Underperforming Marketing Agreements

During 2024, the Company terminated a certain underperforming marketing agreement with a marketing barter partner that it believed did not align to its target customers or business. The terminated contract releases the Company from purchase commitments for advertising services of an aggregate amount of $97.5 million, with $30.0 million due in 2024 and $67.5 million thereafter. The Company recognized an aggregate expense of $21.6 million related to the write-down of certain receivables of $5.4 million, impairment of trade credits of $7.2 million that were recorded in prepaid expenses and other current assets and a payment of $9.0 million to settle the contract.

Charges Related to the IcyBreeze Reporting Unit

During the third quarter of 2024, management performed a strategic review of the IcyBreeze reporting unit, given legacy products driving underperformance of the business. As of December 31, 2024, operations had ceased, with sell through of remaining legacy products being complete and the employees of IcyBreeze being repurposed within other areas of the Company. Accordingly, we performed quantitative impairment tests for long-lived assets and goodwill, as discussed in Note 9, Intangible Assets, net and Note 10, Goodwill. Management also evaluated other IcyBreeze assets and liabilities and recorded certain reserves, where required.

During 2024, the Company recognized $19.9 million and $13.3 million of impairment charges as they relate to the goodwill and intangible assets of the reporting unit, respectively. Furthermore, we recorded impairments of $2.9 million for land, buildings and equipment and $0.3 million related to certain marketing contract terminations and $18.3 million of inventory reserves related to the write-down and disposition of inventory (see Note 6, Inventory). These charges were recorded within Restructuring, contract termination and impairment charges, other than the inventory related charges that were recorded to Cost of goods sold. The aggregate loss recognized for charges related to the IcyBreeze reporting unit was $54.6 million for 2024.

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The components of the restructuring, contract termination and impairment charges, inclusive of the $76.0 million of goodwill impairment within our Solo Stove reporting unit and $0.6 million of long-lived asset impairment are as follows:

Year Ended December 31,

Restructuring charges 580 —

Contract termination 15,351 —

Total restructuring, contract termination and impairment charges 136,099 248,967

1See Note 9, Intangible Assets, net, Note 10, Goodwill and Note 14, Leases for additional information on the recognized impairment charges as of December 31, 2024 and 2023.

No significant initiatives were undertaken or related amounts recorded in the fourth quarter of 2024.

NOTE 4 – Revenue

The following table disaggregates our net sales by channel (in thousands):

Year Ended December 31,

Net sales by channel

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NOTE 5 – Acquisitions

The following transactions were accounted for under the acquisition method of accounting for business combinations as governed by ASC 805, Business Combinations.

2023 Acquisitions

TerraFlame

On May 1, 2023, Solo Brands, LLC, a wholly-owned subsidiary of Holdings, entered into an Equity Purchase Agreement to acquire 100% of the voting equity interests in TerraFlame, that constitute a business for purposes of Accounting Standards Codification (“ASC”) 805, Business Combinations, for total purchase consideration of $13.2 million, of which $5.5 million was cash paid at closing. The Company acquired TerraFlame to increase its brand and market share in the overall outdoor activities industry and penetrate the indoor fire and decor industry, as TerraFlame manufactures, markets, and sells fire features for both outdoor and indoor use.

The excess enterprise value of TerraFlame over the estimated fair value of assets and liabilities assumed was recorded as goodwill. Goodwill was recorded to reflect the excess purchase consideration over net assets acquired, which represents the value that is expected to be achieved from expanding the Company’s product offerings and other synergies related to the acquisition of TerraFlame. The primary factor that contributed to the recognition of goodwill was the expected future revenue growth of TerraFlame.

The following table summarizes the fair values of the assets acquired and liabilities assumed by the Company at the acquisition date (in thousands):

Cash consideration to the seller $ 5,456

Fair value of the earnout liability 2,617

Fair value of the post-closing payment liability 5,125

Total Purchase Consideration $ 13,198

Accounts receivable 421

Property and equipment 4,510

Prepaid expenses and other assets 5

Intangible assets 5,600

Accounts payable and accrued liabilities (913)

Deferred revenue (33)

Total identifiable net assets 11,289

Subsequent to the acquisition date, the contingent consideration recorded as part of the acquisition was remeasured as of December 31, 2024. See Note 18, Fair Value Measurements for information related to the activity and remeasurement of contingent consideration.

Transaction related expenses incurred to date as a result of the acquisition of TerraFlame amounted to $0.5 million and are recorded in other operating expenses within the consolidated statements of operations and comprehensive income (loss).

Net sales of TerraFlame included in the Company’s consolidated statements of operations and comprehensive income (loss) since the acquisition date for the years ended December 31, 2024 and 2023 were $5.8 million and $4.5 million, respectively. TerraFlame had a net loss of $3.2 million for the year ended December 31, 2024 and net income of $1.7 million for the year ended December 31, 2023.

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IcyBreeze

On July 1, 2023, Solo Brands, LLC, a wholly-owned subsidiary of Holdings, entered into an Equity Purchase Agreement to acquire 100% of the voting equity interests in IcyBreeze, which constitutes a business for purposes of ASC 805, for total purchase consideration of $52.1 million. Cash paid at closing was $29.4 million, net of $7.8 million in cash acquired. The Company acquired IcyBreeze to pair a seasonally complimentary in-demand product in the outdoor activities industry to its current product portfolio, as IcyBreeze manufactures, markets, and sells portable air-conditioning products.

The excess enterprise value of IcyBreeze over the estimated fair value of assets and liabilities assumed was recorded as goodwill. Goodwill was recorded to reflect the excess purchase consideration over net assets acquired, which represents the value that is expected to be achieved from expanding the Company’s product offerings and other synergies related to the acquisition of IcyBreeze. The primary factor that contributed to the recognition of goodwill was the expected future revenue growth of IcyBreeze.

The following table summarizes the fair values of the assets acquired and liabilities assumed by the Company at the acquisition date (in thousands):

Cash consideration to the seller $ 37,180

Fair value of the earnout liability 14,897

Total Purchase Consideration $ 52,077

Property and equipment 4,187

Prepaid expenses and other assets 26

Accounts payable and accrued liabilities (711)

Deferred revenue (159)

Total identifiable net assets 32,225

See Note 18, Fair Value Measurements for information related to the activity and remeasurement of contingent consideration.

Transaction related expenses incurred to date as a result of the acquisition of IcyBreeze amounted to $0.4 million and are recorded in other operating expenses within the consolidated statements of operations and comprehensive income (loss).

Net sales of IcyBreeze included in the Company’s consolidated statements of operations and comprehensive income (loss) since the acquisition date for the years ended December 31, 2024 and 2023 were $14.8 million and $7.6 million, respectively, and net losses for the same periods were $61.7 million and $2.8 million, respectively. For information on the restructuring activities related to IcyBreeze undertaken in the third and fourth quarters of 2024, see Note 3, Restructuring, Contract Termination and Impairment Charges.

NOTE 6 – Inventory

Inventory consisted of the following (in thousands):

Inventory obsolescence expense is recorded to cost of goods sold on the consolidated statements of operations and comprehensive income (loss) and was $18.0 million and $2.0 million for the years ended December 31, 2024 and 2023, respectively. The increase in inventory obsolescence in 2024 was related to the $18.3 million write down of inventory associated with the wind-down of the operations of IcyBreeze as noted in Note 3, Restructuring, Contract Termination and Impairment Charges.

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NOTE 7 –Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Prepaid expenses and other current assets $ 12,223 $ 21,893

(1) Non-trade receivables decreased as of December 31, 2024, as a result of the write-down of the receivable from a former marketing barter partner as part of the contract termination, described in detail in Note 3, Restructuring, Contract Termination and Impairment Charges.

(2) Inventory prepaid deposits decreased as of December 31, 2024, as a result of fewer inventory orders not yet shipped in the 2024 period as a result of replenishment timing.

NOTE 8 – Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

Construction in progress 335 836

Accumulated depreciation and amortization (15,543) (9,481)

Depreciation expense was $5.2 million and $4.1 million for the years ended December 31, 2024 and 2023, respectively.

Depreciation related to the tooling used to manufacture fire pits is included within cost of goods sold on the consolidated statements of operations and comprehensive income (loss). Depreciation for the tooling was $0.9 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively.

The Company capitalized $0.3 million and $0.6 million in website development costs during the years ended December 31, 2024 and 2023, respectively. Capitalized website development costs are included in property and equipment, net on the consolidated balance sheets. Amortization of website development costs was $0.5 million and $0.4 million for the years ended December 31, 2024 and 2023, respectively, and included in depreciation and amortization expenses on the consolidated statements of operations and comprehensive income (loss).

During the year ended December 31, 2024, the Company recognized impairment of property and equipment in the amount of $2.9 million. See Note 3, Restructuring, Contract Termination and Impairment Charges for more information on the impairment.

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NOTE 9 – Intangible Assets, net

Intangible assets, net consisted of the following (in thousands):

Gross carrying value

Accumulated amortization and impairments

Accumulated amortization and impairments, gross (87,966) (55,207)

(1) For the year ended December 31, 2024, the Company recorded a brand noncash impairment charge of $6.5 million.

(2) For the year ended December 31, 2023, the Company recorded an aggregate trademark noncash impairment charge of $2.7 million.

(3) For the year ended December 31, 2023, the Company recorded a customer relationships noncash impairment charge of $0.4 million.

(4) For the year ended December 31, 2024, the Company recorded a patents noncash impairment charge of $6.8 million.

2024 Impairment Testing

In the third quarter of 2024, the Company observed the following triggering events for the Company’s held and used long-lived asset groups:

•A sustained decline in the share price of the Company’s Class A common stock as of September 30, 2024; and

•Underperformance of the IcyBreeze reporting unit for the third quarter and year to date period ended September 30, 2024;

As a result of the identified triggering events, the Company performed a recoverability test for the identified long-lived asset groups, and the results of the test indicated that the carrying amounts for the long-lived asset group of IcyBreeze were not expected to be recovered. The Company estimated the fair value of the asset group, which included the use of level 3 inputs, of IcyBreeze and wrote down the intangible assets to their estimated fair value, resulting in nominal value assigned to the existing intangible asset(s). See Note 3, Restructuring, Contract Termination and Impairment Charges for impairment considerations as they relate to the property and equipment, net of IcyBreeze.

The Company recorded an aggregate $13.3 million impairment charge to the intangible assets of IcyBreeze as of December 31, 2024. As a result of this impairment charge, the Company also reassessed the useful life of the intangible assets of IcyBreeze. As of December 31, 2024, $0.9 million of value continued to be attributable to the patent intangible asset of IcyBreeze, for which the Company expects to continue to obtain value over its remaining useful life. As such, the remaining useful life of the patent intangible asset was not revised. The impact of the impairment does not have a material impact to amortization expense in any future year.

In the fourth quarter of 2024, the Company observed the following triggering events for the Company’s held and used long-lived asset groups:

•A sustained decline in the share price of the Company’s Class A common stock as of December 31, 2024; and

•A significant decline in performance of the Solo Stove reporting unit in comparison to previous forecasts for the fourth quarter of 2024;

As a result of the identified triggering events, the Company performed a recoverability test for the identified long-lived asset group, and the results of the test indicated that the carrying amounts for the long-lived asset group of Solo Stove were expected to be recoverable.

2023 Impairment Testing

During the year ended December 31, 2023, the Company recorded aggregate intangible asset impairment charges of $13.4 million and $0.8 million for the Oru and ISLE asset groups, respectively. These impairment charges primarily resulted from the decline in projected future cash flows, indicating that the carrying values as of December 31, 2023 were in excess of the fair values for each respective reporting unit.

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Amortization Expense

Amortization expense was $19.4 million and $22.0 million for the years ended December 31, 2024 and 2023, respectively. Amortization expense is recorded to depreciation and amortization expenses on the consolidated statements of operations and comprehensive income (loss).

Estimated amortization expense for the next five years is as follows (in thousands):

Years ending December 31, Amount

Total future amortization expense $ 189,701

NOTE 10 – Goodwill

The carrying value of goodwill was as follows:

Solo Stove Chubbies All Other Consolidated

Impairment Testing

Goodwill is tested at the reporting unit level, which is deemed to be the operating segment, as discreet financial information is not available below the operating segment level. As of the annual impairment testing date, October 1, 2024, the Solo Stove and Chubbies reporting units were the only reporting units with remaining goodwill balances.

Annually, we perform a quantitative test on all reporting units with goodwill balances as of our annual assessment date of October 1. For the quantitative goodwill impairment analyses performed as of the respective periods noted below, the Company estimated the fair value of the reporting units using a weighting of fair values derived from the income and market approaches, which include level 3 inputs, where comparable market data was available. Under the income approach, the Company determined the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections were based on management’s estimates of revenue growth rates, operating margins, EBITDA margins, consideration of industry and market conditions, terminal growth rates and management’s estimates of working capital requirements. The discount rate for each reporting unit was based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of each reporting unit and its estimated cash flows. Under the market approach, the Company utilized a combination of methods, including estimates of fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit.

The goodwill balance includes $358.5 million and $262.7 million of accumulated impairment charges for the years ended December 31, 2024 and 2023, respectively. Impairment charges are recorded to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss).

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2024 Impairment Testing

In the third quarter of 2024, the Company identified goodwill impairment indicators indicating the fair value of one or more of our reporting units more likely than not did not exceed their carrying values. As a result of the goodwill impairment indicators noted above in Note 9, Intangible Assets, net, the Company determined it appropriate to perform an interim quantitative goodwill impairment test for all of its reporting units as of September 30, 2024.

As a result of the quantitative goodwill impairment test performed as of September 30, 2024, the Company determined that the carrying amounts of the IcyBreeze and Solo Stove reporting units exceeded their respective fair values and goodwill impairment charges of $19.9 million and $25.0 million, respectively, were recognized. The Chubbies reporting unit was determined to have a fair value exceeding its book value by more than 5%.

The Company completed its annual goodwill impairment test as of October 1, 2024. Due to the relative proximity of the quantitative test performed as of September 30, 2024, the Company qualitatively assessed whether it is more likely than not that the fair values of its reporting units were less than their carrying values. This assessment was made based on relevant information, including applicable facts and circumstances, known as of the goodwill impairment assessment date. Based on the results of this qualitative analysis, the Company does not believe that it is more likely than not that the carrying values of its reporting units exceed their fair values as of the test date of October 1, 2024.

In the fourth quarter of 2024, the Company identified goodwill impairment indicators indicating the fair value of one or more of our reporting units more likely than not did not exceed their carrying values. As a result of the goodwill impairment indicators noted above in Note 9, Intangible Assets, net, the Company determined it appropriate to perform an interim quantitative goodwill impairment test for its Solo Stove reporting unit as of December 31, 2024.

As a result of the quantitative goodwill impairment test performed as of December 31, 2024, the Company determined that the carrying amount of the Solo Stove reporting unit exceeded its fair value and a goodwill impairment charge of $51.0 million was recognized, fully impairing the remaining goodwill of the reporting unit.

2023 Impairment Testing

During the year ended December 31, 2023, the Company recorded aggregate goodwill impairment charges of $214.3 million, $18.8 million and $1.7 million for the Solo Stove, Oru and ISLE reporting units, respectively. These impairment charges primarily resulted from the decline in projected future cash flows, indicating that the carrying values as of December 31, 2023 were in excess of the fair values for each respective reporting unit. The remaining reporting units were determined to have fair values exceeding their book values by more than 10%.

NOTE 11 – Accrued Expenses and Other Current Liabilities

Significant accrued expenses and other current liabilities were as follows (in thousands):

Accrued expenses and other current liabilities $ 41,661 $ 55,155

(1) Accrued payroll declined to $1.8 million as of December 31, 2024, as a result of the payment in the first quarter of the bonus accrued as of December 31, 2023, with no bonus accrual as of December 31, 2024.

(2) Accrued shipping costs declined to $1.2 million as of December 31, 2024, the result of lower shipping activity within the fourth quarter of 2024.

(3) Accrued marketing declined to a nominal amount as of December 31, 2024, as a result of a payment to a former marketing barter partner in the first quarter of 2024.

(4) Accrued income taxes were substantially alleviated as of December 31, 2024, as a result of the decline in the pre-tax book income for 2024.