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
Solo Brands operates four premium outdoor brands: Solo Stove, Chubbies, Oru Kayak (“Oru”) and International Surf Ventures (“ISLE”), with Oru and ISLE regarded in aggregate as Watersports. Our brands develop innovative products and market them directly to customers primarily through our direct-to-consumer (“DTC”) channel, which includes e-commerce and owned retail stores, as well as partnerships with key retailers. 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 fire pits, 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. In 2025, the Company completed the disposition of the manufacturing operations for the TerraFlame brand. However, we continue to own the intellectual property of TerraFlame, as well as sole distribution rights of TerraFlame branded products. 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, 2025, we experienced a decrease in our net sales from $454.6 million for the year ended December 31, 2024 to $316.6 million. The decline in net sales was primarily driven by the decline in DTC and retail channel net sales within the Solo Stove segment, offset in part by an increase in net sales across both channels within the Chubbies segment. While net sales for the year ended December 31, 2025 declined when compared to the prior year, loss from operations decreased from $174.6 million to $113.5 million, respectively. This decrease was primarily driven by a reduction in restructuring, contract termination and impairment charges and effective management of operating expenses to align with the decline in net sales, particularly advertising and marketing costs and distribution costs. Partially offsetting these expense declines was the reduction in gross profit realized from the lower net sales in the current year when compared to the prior year.
On December 17, 2025, as part of the Corporate Simplification transactions, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Holdings and Solo Merger Sub LLC (“Merger Sub”), a subsidiary of Solo Brands, Inc. and SP SS Blocker Purchaser, LLC (“Blocker”), formed for the sole purpose of merging with and into Holdings. Pursuant to the Merger Agreement, effective January 1, 2026 (the “Effective Time”), Merger Sub was merged with and into Holdings, with Holdings continuing as the surviving entity (the “Merger”) as our wholly owned subsidiary of Solo Brands, Inc.
Pursuant to the Merger Agreement, at the Effective Time, each of the common units of Holdings (“LLC Units”) beneficially owned by members of Holdings were cancelled and converted automatically into a right to receive one share of our Class A common stock, except for any LLC Units beneficially owned by either Solo Brands, Inc. or Blocker, which were cancelled for no consideration in accordance with the Merger Agreement and Holdings’ Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”). At the Effective Time, the limited liability company interests of Merger Sub were converted into LLC Units as the surviving entity, resulting in Holdings continuing as our wholly owned subsidiary. In addition, immediately following the Effective Time, all of the issued and outstanding shares of our Class B common stock were retired and cancelled in accordance with our Amended and Restated Certificate of Incorporation and the Holdings LLC Agreement. As a result, upon completion of the Merger, there were no LLC Units or shares of Class B common stock of the Company outstanding.
The Merger and related transactions did not terminate or otherwise accelerate our obligations under the Tax Receivable Agreement, dated as of October 27, 2021, by and among us, Holdings and the other parties from time to time party thereto. However, as a result of the Merger, the total future potential cash payments due under the Tax Receivable Agreement are generally limited.
Economic Factors Affecting our Performance
Tariffs
We sell our products in the U.S. as well as various foreign countries, primarily in Europe, Canada and Australia. We also have historically sourced and procured inventory primarily out of China and Vietnam, with some products sourced through Mexico. Tariffs on certain foreign origin goods, particularly from China, continue to put pressure on our input costs. As a result of higher tariffs and tariff uncertainty, in 2025, we began to diversify our supply base and shifted some purchase orders to Vietnam and Cambodia, reducing our reliance on sourcing from China for Solo Stove and eliminated our sourcing from China almost entirely for the Chubbies segment. In line with the decline in net sales in 2025, purchase order activity and inventory receipts from our international suppliers was lower for the year ended December 31, 2025 when compared to the same period in 2024, further limiting the overall impact of tariffs in 2025. Additionally, we closed and relocated the operations of a distribution center in Mexico to the U.S., in response to the repeal of the 321 Tariff Relief as of August 31, 2025. While these diversification and distribution center closure efforts as well as certain price increases reduced the impact of the higher tariffs, the impacts thereof were nonetheless meaningful to inventory reflected in the consolidated balance sheets and on cost of goods sold within the consolidated statements of operations and comprehensive income (loss). We expect inventory and costs of goods sold, on a per unit basis, to increase in future periods as a result of these and any additional tariffs in future periods, to the extent they remain effective. The strategies we have implemented and continue to implement to mitigate the impact of such tariffs or other trade
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actions may not be successful. 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.”
Our product lines involve production with steel manufactured outside the U.S., the target of recent tariff actions, impacting virtually all of our Solo Stove brand products. In addition, certain of our Oru brand products are manufactured in and distributed from Mexico. As such, they are subject to any applicable tariffs placed on goods imported from Mexico.
On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the incremental tariffs was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming a prior decision of the CIT that the U.S. President lacked authority to impose incremental tariffs. As a result, on February 20, 2026, the U.S. President issued an executive order stating that the incremental tariffs were no longer in effect and ending the collection of the incremental tariffs. However, the U.S. President then issued an additional executive order imposing tariffs pursuant to Section 122 of the Trade Act of 1974 for 150 days, effective February 24, 2026. We continue to monitor the changing tariff and trade restrictions and are evaluating the potential impacts of these decisions for 2026 and any potential impacts on consumer demand and pricing expectations. We filed a lawsuit in the CIT challenging the legality of incremental tariffs and are seeking to recover the approximately $8 million in incremental tariffs that we paid in 2025 and 2026. See Part I, Item 3. Legal Proceedings for additional information.
Tax Legislation
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective beginning in 2026. As the Company is in a loss position, the tax benefit was limited, with the expected cash tax benefit expected to be immaterial as well.
Macroeconomic Factors
Current macroeconomic factors, including overall economic and political uncertainty, financial and capital markets instability, new or increasing tariffs, high interest rates and high inflation, remain very dynamic and highly uncertain. The effects of the macroeconomic environment could further reduce our net sales and negatively impact our gross margin, net income (loss) and cash flows.
Discussion within the relevant comparative periods and sections have been included below.
Other Key Factors Affecting Our Financial Condition and Results of Operations
Trends in Seasonality
In 2025, we have seen a shift in the seasonal demand within our retail channel with the first quarter far exceeding the third quarter. Historically, our net sales have been highest in our second and fourth quarters. We believe that this change in trend in 2025 could be indicative of a potential long-term change in our seasonality, which we will continue to monitor in future periods.
2025 Restructuring Activity
In 2025, management, along with our Board of Directors, engaged strategic consulting firms to assist with improving our financial results. This operational improvement involved the engagement of restructuring, legal and investment banking consultants to perform financial planning, forecasting and project management activities. Certain of these strategic consulting firms assisted and continue to assist in developing operational plans for the near- and long-term, as well as identifying cost saving initiatives to reduce our operational expenses and aid in the development of enhanced internal reporting to deliver timely insight to management.
The cost saving initiatives identified and executed upon during the year ended December 31, 2025 were designed to reduce operational expenditures over the long-term. The key cost saving initiatives and operational planning activities undertaken in 2025 were as follows:
•Restructuring
◦retention payments for key personnel to support the sustainment of operations and focus on cost saving and operational improvements;
◦reduction in force (“RIF”) of management and non-management personnel in an effort to align headcount with the operational needs of the business, resulting in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods;
•Contract Terminations
◦termination of an underperforming licensing agreement in an effort to redeploy the allocated funds for operational purposes;
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◦renegotiation of a settlement of a termination fee with a former advertising services vendor at a more favorable amount to the Company, to reduce cash outflow;
•closure of three distribution centers in 2025 to reduce fixed costs in the short term and in future periods, as well as eliminate unnecessary capacity;
•termination of a lease agreement for an owned retail store and impairment of a separate owned retail store as a result of underperformance, and in the case of the terminated owned retail store to reduce forward operating losses;
•revision of pricing structure throughout our brands in order to mitigate, in part, the expected impacts of tariffs in subsequent periods;
•reduction in marketing spend and promotional activity within the Solo Stove segment to better align product pricing with our retail partners; and
•effecting the Corporate Simplification.
While these activities are intended to provide future benefit to the Company, most of these activities required up-front cash outlays. In order to fund these cash outlays, the Company used cash from operations and borrowings under the 2021 Revolving Credit Facility (as defined below) and the 2025 Revolving Credit Facility (as defined below). The following table outlines the cash outlays and the period(s) in which they occurred.
The 2025 restructuring activity was concluded in the fourth quarter of 2025. The Company anticipates additional restructuring related activity in 2026, as it continues to optimize its operating platform in line with the focus on building a smaller, profitable company.
Activity Cash Outlay (dollars in thousands) Period
Engagement of strategic consulting firms $ 7,548 Fiscal year 2025
Retention payments to key personnel 5,790 Q2 and Q4 2025
Closure of distribution centers 2,144 Fiscal year 2025
Reduction in force 983 Fiscal year 2025
2024 Restructuring Activity
In 2024, the Company underwent significant changes to its management team, which brought about a change in strategic vision and evaluation of the Company’s initiatives and brands. The evaluation included analysis of the brand level financials, strengths of each of the brands, product design and customer service metrics, marketing campaign effectiveness and cost, efficiencies of brands on a standalone or aggregated basis, amongst other things. This evaluation led the Company to undertake the following activities during the second half of 2024:
•terminated underperforming marketing agreements with marketing barter partners that no longer aligned with the Company’s current marketing strategy;
•charges related to the IcyBreeze reporting unit stemming from underperformance and management’s determination to revise product designs under the Solo Stove segment; and
•reorganized the Oru and ISLE reporting units to eliminate costs and capitalize on potential synergies, through restructuring under a revised management structure.
In order to fund the cash outlays required for these initiatives, the Company leveraged income from operations and draws on the 2021 Revolving Credit Facility. The following table outlines the cash outlays and the period in which they occurred.
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
Discussion within the relevant comparative periods and sections have been included below.
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Consolidated Results for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Consolidated Net Sales
Net sales are comprised of DTC and retail channel sales to retail partners. Net sales within all 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. In 2025, retail channel net sales were highest in the first and fourth quarters. We believe that this change in trend could indicate a potential long-term change in our seasonality, which we will continue to monitor in future periods. 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, 2025 compared to the year ended December 31, 2024 was primarily driven by a decline in net sales within the Solo Stove segment, offset in part by an increase in net sales across both channels within the Chubbies segment.
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 profit margin (Gross profit as a % of net sales)(1) 59.4 % 57.3 % 210
(1) Change in gross profit 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.
Gross profit and Cost of goods sold, when considered with or without the impacts of the write down of inventory and purchase orders described above, decreased for the year ended December 31, 2025 compared to the prior year period, while gross profit margin increased when including the impact of the write down and decreased when excluding the impact.
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Consolidated Operating Expenses
Operating expenses consist of (1) selling, general & 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 & 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, acquisition-related expenses, business optimization and expansion expenses and management transition costs, including severance.
Year Ended December 31, Change
The decrease in operating expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by a decrease in SG&A as a result of a significant decrease in advertising and marketing expenses, coupled with a decrease in distribution costs driven by the lower net sales in Solo Stove DTC channel.
Restructuring, contract termination and impairment charges also experienced a significant decline for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of non-recurring goodwill impairment charges in the prior year and non-recurring terminations of underperforming marketing agreements, offset in part primarily by larger intangible asset impairment charges in 2025. See Note 3 - Restructuring, Contract Termination and Impairment Charges in our Notes to Consolidated Financial Statements for additional detail.
Further, a decrease was realized in other operating expenses, as a result of decreases in management severance and strategic consulting engagements not related to restructuring or refinancing activity, offset in part by the loss recognized from the disposition of the TerraFlame manufacturing operations, in the second quarter of 2025. See Note 22 - Variable Interest Entities for additional information regarding the partial disposition.
Consolidated Income (Loss) From Operations
Income (loss) from operations is comprised of gross profit, less selling, general & 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, 2025 compared to the year ended December 31, 2024 was primarily driven by a reduction in selling, general & administrative expenses through effective management of these expenses in alignment with the decline in net sales, particularly advertising and marketing costs and distribution costs, and a reduction in restructuring, contract termination and impairment charges, offset in part by the reduction in gross profit realized from the decline in net sales in the current year when compared to the prior year.
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Consolidated Interest Expense
Interest expense, net consists primarily of interest on our revolving credit facilities and term loans.
Year Ended December 31, Change
Interest expense, net increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 as a result of a higher average debt balance and higher average interest rates. Interest rates under the 2025 Refinancing Agreement (as defined below) are higher than those under our prior credit facilities.
Consolidated Income Taxes
Income taxes represent federal, state, and local income taxes on our allocable share of taxable income of Holdings, as well as Oru’s and Chubbies’ federal and state taxable income, and our foreign tax expense related to international subsidiaries. The tax benefit resulting from the recurring losses of Solo Stove is fully offset for all periods presented by a valuation allowance. Prior to the Corporate Simplification described above, we were the sole managing member of Holdings and, as a result, consolidated the financial results of Holdings. Holdings was treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Holdings was not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings was passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We have been 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.
Subsequent to the Corporate Simplification, effective as of January 1, 2026, income taxes will represent the federal, foreign, state and local income taxes of the consolidated filing group of Solo Brands, Inc. and its subsidiaries. The Corporate Simplification allows us to net the tax benefit (loss) generated by Solo Brands, Inc. and its wholly-owned subsidiaries, Chubbies and Oru, whereas prior to the effective date separate returns were required for each respective brand. As a result, we expect that future periods will incur lower income tax expense in periods in which any of these brands generate a loss which would offset income generated by other brands.
Year Ended December 31, Change
The increase in income tax expense for the year ended December 31, 2025 compared to the income tax benefit for the year ended December 31, 2024 was primarily driven by a full valuation allowance on deferred tax assets on losses generated from the Solo Stove segment in 2025, with only a partial valuation allowance in the prior year, as well as an increase in income tax expense associated with the Chubbies segment in the year ended December 31, 2025.
Solo Stove Segment Results for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Solo Stove Net Sales
Year Ended December 31, Change
The decrease in both retail and DTC channel net sales for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by lower unit volumes in the DTC channel as a result of disciplined pricing and promotional actions, as well as reduced retail replenishment as partners worked through excess inventory.
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Solo Stove Cost of Goods Sold
Year Ended December 31, Change
The decrease in cost of goods sold for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily in line with the decrease in net sales. Tariff increases in 2025 did not have a significant impact on cost of goods sold for the Solo Stove segment due to lower inventory purchases and reduced sell through of inventory subject to the higher tariff rates.
Solo Stove Operating Expenses
Segment operating expenses consist of (1) marketing expenses, (2) employee related expenses, such as wages and benefits, and (3) other operating expenses, which primarily consist of shipping and fulfillment related expenses.
Year Ended December 31, Change
Operating expenses decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of a decrease in marketing expenses, as well as decreases in other operating expenses driven by a decrease in seller fees and shipping expenses, both stemming from the decline in DTC channel net sales. Further, decreases in employee related expenses were recognized for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily as a result of the reduction in headcount and related expenses as part of the reduction in force described in Note 3 - Restructuring, Contract Termination and Impairment Charges.
Chubbies Segment Results for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Chubbies Net Sales
Year Ended December 31, Change
The increase in net sales for the year ended December 31, 2025 compared to the year ended December 31, 2024 was driven by increases 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.
Chubbies Cost of Goods Sold
Year Ended December 31, Change
The increase in cost of goods sold for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily in line with the increase in net sales.
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Chubbies Operating Expenses
Year Ended December 31, Change
Operating expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 declined, primarily as a result of reductions in marketing expenses and employee related expenses.
Liquidity and Capital Resources
Our cash requirements are for working capital, payment of restructuring and other fees and repayment of our current and long-term debt obligations. We expect these and other cash needs to continue as we seek to improve, develop and transform our business. We fund our working capital, which is primarily comprised of inventory and accounts payable, and other cash requirements from cash flows from operating activities, cash on hand, and borrowings under our 2025 Revolving Credit Facility. Our cash flows from operating activities and borrowings under the 2025 Revolving Credit Facility are our principal sources of liquidity. Cash flows from operating activities result primarily from the sales of our portfolio of products. Our future product sales and our cash flows are difficult to predict, and actual sales may not be in line with our forecasts.
The Corporate Simplification discussed within the Overview section is intended to limit material liability for cash payments that might otherwise be due in 2026 and beyond, under the terms of the Tax Receivable Agreement, as well as future distributions to redeemable noncontrolling interests. For more information on the Corporate Simplification, see the Overview section above.
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, 2025. See below for details on our outstanding debt balance as of December 31, 2025.
Cash and cash equivalents $ 20,034
Revolving Credit Facility $ — 54,865
The Company must comply with financial covenants under the 2025 Refinancing Amendment, including a minimum fixed charge coverage ratio, a maximum leverage ratio and a minimum liquidity amount, with the first full measurement period for such financial covenants to occur in the third quarter of 2026, as well as other non-financial covenants, as described in further detail below and in Note 13 - Debt, net. As of December 31, 2025, we were in compliance with the covenants applicable as of such date under the 2025 Refinancing Agreement.
In evaluating our ability to continue as a going concern for the twelve months following the issuance of the financial statements, contained in this Form 10-K, management considered projected compliance with our financial covenants and historical operating performance. Variability in operating results that could affect future covenant compliance raises substantial doubt about our ability to continue as a going concern.
Management is executing cost reduction and operational initiatives and, based on current projections, expects to remain in compliance with the covenants under the 2025 Refinancing Agreement. Accordingly, management believes these plans alleviate the substantial doubt about the Company’s ability to continue as a going concern for at least the twelve months following the issuance of these financial statements.
Accordingly, we believe our cash, cash equivalents and cash from operating activities will be sufficient to fund our obligations for at least the next twelve months following the issuance of our financial statements included in this Annual Report on Form 10-K. Our future capital requirements will depend on many factors including the outcome of our ongoing cash savings and operational initiatives, our future financial results, the expansion of sales and marketing activities, the introduction of new and enhanced products, the market acceptance of our products, and global trade and market conditions.
If we fail to realize the expected benefits from our ongoing and future cost saving and operational improvement initiatives, if our liquidity condition deteriorates, or if we pursue potential opportunities that are not successful, our business, operating results and financial condition could be materially adversely impacted and could result in the breach of our financial and nonfinancial covenants. As a result, we may be required to seek additional
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funds from issuances of equity or debt, including from additional credit facilities or loans from other sources, pursue strategic transactions or seek additional relief from our creditors. There is no guarantee that such sources, transactions or relief will be available when needed, or at all.
Revolving Credit Facilities and Term Loans
On May 12, 2021, we entered into the 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. The Credit Agreement was subsequently amended on June 2, 2021, September 1, 2021, May 22, 2023 and most recently by the 2025 Refinancing Amendment. Initially, the credit agreement contemplated a revolving credit facility (the “2021 Revolving Credit Facility”), with the amendment on September 1, 2021 including a provision to borrow up to $100 million under a term loan (the “2021 Term Loan”) which was in addition to the available capacity on the 2021 Revolving Credit Facility.
On June 13, 2025, we entered into Amendment No. 4 to Credit Agreement and Limited Waiver and Amendment No. 1 to Security Agreement (the “2025 Refinancing Amendment”), which effected a reallocation and restructuring of all revolving loans and term loans then outstanding and the waiver of certain then existing events of default. The 2025 Refinancing Amendment resulted in decreased outstanding debt, extended maturities, lower short-term cash requirements as a result of our ability to make certain interest payments in kind, and deferral with respect to compliance with certain financial covenants for a certain period of time, as further described below.
After giving effect to the loan reallocation and restructuring effected pursuant to the 2025 Refinancing Amendment, the credit facilities evidenced by the Amended Credit Agreement consist of the following: (i) revolving commitments under the Revolving Credit Facility in an aggregate amount equal to $90 million (the “2025 Revolving Credit Facility”), subject to availability under the borrowing base set forth in the 2025 Refinancing Amendment; and (ii) refinancing term loans, including the 2021 Term Loan (the “2025 Term Loan”) in an aggregate principal amount equal to $240 million. The 2025 Revolving Credit Facility also includes the ability to issue up to $20 million in letters of credit, with $3.7 million of letters of credit issued and outstanding as of December 31, 2025. While our issuance of letters of credit does not increase our borrowings outstanding under the 2025 Revolving Credit Facility, it does reduce the amounts available under the 2025 Revolving Credit Facility.
In connection with the entry into the 2025 Refinancing Amendment, during the year ended December 31, 2025, we refinanced (i) $136.5 million of loans under the 2021 Revolving Credit Facility, and (ii) $32.5 million of 2021 Term Loan outstanding on June 13, 2025.
Under the 2025 Refinancing Amendment, the maturity date of the 2025 Revolving Credit Facility and the 2025 Term Loan is June 30, 2028. We are required to make mandatory amortization payments on the 2025 Term Loan as follows: (a) beginning with the fiscal quarter ending on June 30, 2026, the aggregate outstanding principal amount of the 2025 Term Loan as of June 13, 2025 multiplied by 0.25% and (b) beginning with the fiscal quarter ending on June 30, 2027, the aggregate outstanding principal amount of the 2025 Term Loan as of June 13, 2025 multiplied by 1.00%.
Each of the 2025 Revolving Credit Facility and the 2025 Term Loan bear interest at (depending on our election from time to time) either an adjusted term rate defined in the agreement based on SOFR or the base rate defined in the Amended Credit Agreement, each plus an applicable margin. The interest is payable in kind, and thus capitalized thereon and increasing the principal balance thereof, (i) on a quarterly basis through March 31, 2026, (ii) for the period beginning on April 1, 2026 and ending on March 31, 2027 upon our election, and (iii) after March 31, 2027, it is only payable in cash. The unfunded portion of the commitments under the 2025 Revolving Credit Facility will accrue an annual commitment fee.
The 2025 Refinancing Amendment also requires the Company to comply with additional reporting requirements, including, among others, (i) delivering on the date that is twenty (20) days after the end of the previous calendar month, (a) a borrowing base certificate calculating the borrowing base and availability under the 2025 Revolving Credit Facility, (b) a 13-week cash flow forecast for the Company and its subsidiaries, (c) a liquidity report, and (d) an accounts and inventory report; and (ii) delivering no later than thirty (30) days after the end of the previous calendar month, a key performance indicator report and certain additional reports on the Company’s operating plan and other measures, such as Credit Agreement Adjusted EBITDA. In addition, the 2025 Refinancing Amendment extends the delivery dates for quarterly financial statement deliverables to sixty (60) days after the end of the applicable fiscal quarter.
In addition, pursuant to the 2025 Refinancing Amendment, we will be or were required to comply with the following financial covenants: (a) a minimum Consolidated EBITDA of $25 million for the four fiscal quarters ended December 31, 2025, (b) a maximum Total Leverage Ratio, which is tested on a quarterly basis, commencing with the fiscal quarter ending on September 30, 2026, (c) a minimum Fixed Charge Coverage Ratio, which is tested on a quarterly basis, commencing with the fiscal quarter ending on September 30, 2026, (d) a $10.0 million average minimum liquidity covenant for the first three calendar months of each fiscal year and a $20 million average minimum liquidity covenant for the last nine calendar months of each fiscal year, which in each case as applicable, is tested on a monthly basis, commencing with the fiscal month ending on July 31, 2026.
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Cash Flows
Year Ended December 31, Change
Cash flows provided by (used in):
Operating activities
The $57.1 million increase in cash used in operating activities period over period, was due to a $30.8 million increase in cash usage from changes in operating assets and liabilities (“working capital”), which was primarily driven by an increase in cash usage for accounts payable, mostly related to inventory purchases and marketing expenses incurred in the fourth quarter of 2024, offset in part by the reduction in replenishment of inventory as we focus on prudent management of our inventory balances in the 2025 period. The increase in changes in working capital was coupled with an increase in cash usage of $26.4 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 $2.5 million decrease in cash used in investing activities, was primarily due to a decline in the number of retail store openings within our Chubbies Segment in the current year when compared to the prior, with just one store opening in 2025 and seven store openings in 2024, offset in part by an increase in the capitalization of software in 2025, primarily driven by an increase in capital projects in 2025 compared to 2024.
Financing activities
The $70.2 million increase in cash provided by financing activities, was primarily due to a $68.9 million increase in cash provided by net debt activity, inclusive of borrowings, repayments and debt issuance costs in relation to the 2025 Refinancing Amendment and a $4.3 million decrease in cash used in distributions to non-controlling interests, offset in part by a $2.5 million payment in connection with the disposition of the TerraFlame manufacturing operations.
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 13, Debt, net, in Item 8 of this Annual Report for more information regarding scheduled maturities of our long-term debt. See Note 15, Leases, in Item 8 of this Annual Report for additional information on leases.
For information regarding our other contractual obligations, see 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
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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 & administrative expenses when the revenue is recognized. Sales taxes collected from customers are excluded from net sales, which are subsequently remitted to government authorities.
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 resulting in a net deferred tax asset the consolidated group. Solo Brands, Inc. evaluated and concluded that as of December 31, 2025, we had $40.6 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 four reporting units. As of our annual assessment date, October 1, 2025, we had one reporting unit with remaining goodwill, Chubbies.
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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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 annual quantitative impairment test of goodwill, the calculated fair value of the Chubbies reporting unit exceeded its book value by more than 10% as of December 31, 2025. However, a 100 basis point (“BPS”) increase in the discount rate, a 200 BPS decrease in the EBITDA margin or a 200 BPS decrease in revenue growth could indicate a potential hypothetical fair value less than the reporting units carrying value.
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.
To determine asset group 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 asset group 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 intangibles could result in significantly different estimates of fair value.
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 on Form 10-K, for further details regarding intangible asset balances and related accumulated amortization and impairment losses.
The impact of these impairment charges and the change in useful life of the brand intangible asset will result in amortization expense decreasing by approximately $8 million on an annual basis.
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 (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. We expect that we will no longer qualify as an emerging growth company as of December 31, 2026.
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
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, 2025, we had indebtedness of $253.1 million, with an annualized rate of interest of 9.17%, under our 2025 Term Loan, with no current indebtedness under our 2025 Revolving Credit Facility. As of December 31, 2025, we have not entered into any interest rate swap contracts. A 100 bps increase in SOFR would increase our interest expense by approximately $2.5 million in any given year.
Inflation Risk
Inflationary factors such as increases in the cost of our products 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 majority of the commodities, components, parts, and accessories used in our manufacturing process, as well as finished goods, are exposed to commodity cost changes. These changes may be affected by several factors, including, for example, demand; inflation; deflation; changing prices; foreign currency fluctuations; tariffs; duties; trade regulatory actions; industry actions; and changes to international trade policies, agreements, and/or regulation, including antidumping and countervailing duties on certain products imported from foreign countries; and competitor activity.
Our primary cost exposures for commodities, components, parts, and accessories used in our products are with 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 and potentially will continue to impose tariffs on certain foreign goods, particularly steel and aluminum, as well as goods from China. In any given period, we strategically attempt to mitigate potentially unfavorable impacts as a result of changes to the cost of commodities, components, parts, and accessories that affect our product lines through the following initiatives: collaboration with suppliers, reviewing alternative sourcing options, engaging in internal cost reduction efforts, and utilizing tariff exclusions and duty drawback mechanisms, all as appropriate. We do not currently hedge commodity price risk. When appropriate, we may also increase prices on some of our products to offset changes in the cost of commodities, components, parts, and accessories. To the extent that commodity and component costs increase and we do not have firm pricing from our suppliers, or our suppliers are not able to honor such prices, and/or our initiatives and/or product price increases are less effective than anticipated and/or do not fully offset cost increases, we may experience a decline in our revenues and/or gross margins, which could materially adversely affect our results of operations and financial condition.
Foreign Currency Risk
Our international sales are primarily denominated in local currencies. During the years ended December 31, 2025 and 2024, net sales in international markets accounted for 7.0% and 6.9% 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 United 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 $0.1 million and decrease our net sales by approximately $0.2 million for the year ended December 31, 2025.
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Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm - PCAOB Firm ID: 243 47
Report of Independent Registered Public Accounting Firm - PCAOB Firm ID: 42 48
Consolidated Balance Sheets 49
Consolidated Statements of Operations and Comprehensive Income (Loss) 50
Consolidated Statements of Cash Flows 51
Consolidated Statements of Equity (Deficit) 53
Notes to Consolidated Financial Statements
Organization and Description of Business 54
Significant Accounting Policies 55
Restructuring, Contract Termination and Impairment Charges 61
Other Non-Operating, Net 63
Inventory 63
Prepaid Expenses and Other Current Assets 64
Property and Equipment, net 64
Intangible Assets, net 65
Goodwill 66
Other Non-Current Assets 68
Accrued Expenses and Other Current Liabilities 68
Debt, net 68
Other Non-Current Liabilities 70
Equity-Based Compensation 72
Income Taxes 74
Commitments and Contingencies 77
Fair Value Measurements 77
Net Income (Loss) Per Class A Common Stock 79
Variable Interest Entities 79
Segments 80
Related Parties 82
Subsequent Events 82
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Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Solo Brands, Inc.
Grapevine, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Solo Brands, Inc. (the “Company”) as of December 31, 2025, the related consolidated statements of operations and comprehensive income (loss), equity (deficit), and cash flows for the year then ended, 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, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit 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 consolidated 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 audit 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 audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BDO USA, P.C.
We have served as the Company’s auditor since 2025.
Dallas, Texas
March 23, 2026
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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 sheet of Solo Brands, Inc. (the Company) as of December 31, 2024, the related consolidated statements of operations and comprehensive income (loss), cash flows and equity for the year 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 the results of its operations and its cash flows for the year 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 audit 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 audit 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 audit 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
except for the effects of the reverse stock split discussed in Note 1, as to which the date is
March 23, 2026
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SOLO BRANDS, INC.
Consolidated Balance Sheets
ASSETS
Current assets
Prepaid expenses and other current assets 8,767 12,223
Non-current assets
LIABILITIES AND EQUITY
Current liabilities
Accrued expenses and other current liabilities 30,843 41,661
Current portion of long-term debt 1,800 8,625
Non-current liabilities
Other non-current liabilities 677 9,056
Commitments and contingencies (Note 18)
Equity
Accumulated other comprehensive income (loss) (274) (434)
Equity attributable to noncontrolling interests 5,398 59,645
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) 2025 2024
Operating expenses
Restructuring, contract termination and impairment charges 93,495 136,099
Depreciation and amortization expenses 25,674 25,702
Non-operating (income) expense
Other non-operating (income) expense 1,972 528
Income tax expense (benefit) 3,422 (8,958)
Net income (loss) attributable to Solo Brands, Inc. $ (101,321) $ (113,356)
Other comprehensive income (loss)
Foreign currency translation, net of tax 160 (204)
Net income (loss) per Class A common stock
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 74,041 136,099
Noncash operating lease expense 7,461 8,517
Amortization of debt issuance costs 3,490 860
Equity-based compensation, net 3,019 6,754
Loss on disposition of TerraFlame manufacturing operations 1,516 —
Loss (gain) on disposal of property and equipment 1,015 —
Prepaid marketing charges — 1,871
Change in fair value of contingent consideration (787) 4,438
Changes in assets and liabilities
Prepaid expenses and other current assets 3,494 343
Accrued expenses and other current liabilities (9,958) (14,133)
Operating lease liabilities (6,024) (8,586)
Other non-current assets and liabilities (148) 176
Payments of contingent consideration — (3,000)
Net cash provided by (used in) operating activities (46,602) 10,517
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used in) investing activities (12,049) (14,512)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities and term loans 287,322 80,000
Repayments of revolving credit facilities and term loans (199,322) (79,250)
Finance lease liability principal paid (94) (144)
Net consideration paid to Former Sellers of TerraFlame (2,500) —
Distributions to non-controlling interests — (4,284)
Surrender of stock to settle taxes on restricted awards (359) (207)
Stock issued under employee stock purchase plan — 395
Net cash provided by (used in) financing activities 66,545 (3,657)
Effect of exchange rate changes on cash 160 (210)
Net change in cash and cash equivalents 8,054 (7,862)
Cash and cash equivalents balance, beginning of period 11,980 19,842
Cash and cash equivalents balance, end of period $ 20,034 $ 11,980
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SUPPLEMENTAL DISCLOSURES:
Cash interest paid, net of amounts capitalized $ 12,147 $ 13,469
Cash income taxes paid (received)
State:
California — 455
Foreign:
Total cash income taxes paid (net of refunds) 1,039 4,284
Construction in progress in accounts payable — 268
Issuance of Class A common stock in lieu of cash lender consent fee 750 —
See Notes to Consolidated Financial Statements
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SOLO BRANDS, INC.
Consolidated Statements of Equity (Deficit)
(In thousands) Class A Common Stock Class B Common Stock
Other comprehensive income (loss) — — — — — — (204) — — (204)
Tax distributions to non-controlling interests — — — — — — — — (4,284) (4,284)
Employee stock purchase plan 6 — — — 396 — — — — 396
Surrender of stock to settle taxes on equity awards — — — — — — — (207) — (207)
Conversion of Class B common stock 153 — (153) — — — — — — —
Other comprehensive income (loss) — — — — — — 160 — — 160
Surrender of stock to settle taxes on equity awards — — — — — — — (359) — (359)
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 four premium brands - Solo Stove, Oru Kayak (“Oru”), International Surf Ventures (“ISLE”), Chubbies. The Company’s brands develop innovative products and market them directly to customers primarily through the direct-to-consumer (“DTC”) channel, which includes e-commerce and owned retail stores, as well as partnerships with key retailers. Solo Stove offers portable, low-smoke and propane fire pits, grills, and camping stoves for backyard and outdoor use in different sizes, as well as indoor fire pits that allow the customer to bring the fire inside, fire pit bundles, gear kits, stoves, cookware, dinnerware, and a variety of clothing and accessories. Watersports, which is comprised of our two primarily water-oriented brands, Oru and ISLE, offers a flagship line of lightweight, foldable kayaks and 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. In 2025, the Company completed the disposition of the manufacturing operations for the TerraFlame brand. However, we continue to own the intellectual property of TerraFlame, as well as sole distribution rights of TerraFlame branded products. Solo Brands distributes its products through international iterations of the Solo Stove website and other partners across North America, Europe and Australia.
Organization
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 370,968 shares of Class A common stock, as adjusted for the 1-for-40 reverse stock split described below.
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 an 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.
Reverse Stock Split
On July 8, 2025, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of all issued and outstanding shares of the Company’s common stock at a ratio of 1-for-40. The reverse stock split did not change the par value or the authorized number of shares of the Company’s common stock. The Company’s consolidated financial statements present the retroactive effect of the reverse stock split on the Company’s Class A and Class B common stock and per share amounts for all periods presented.
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.
On June 13, 2025, the Company entered into Amendment No. 4 to the Credit Agreement and Limited Waiver and Amendment No. 1 to Security Agreement (the “2025 Refinancing Amendment”), which amended the credit agreement dated May 12, 2021 (as amended, the “Credit Agreement”) by and among the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The 2025 Refinancing Amendment restructured the Company’s outstanding revolving and term loans, extended certain maturities, reduced near-term cash interest requirements through the ability to make certain interest payments in-kind and deferred compliance with certain financial covenants for a defined period of time.
The Company satisfied a minimum Credit Agreement Adjusted EBITDA covenant requirement for the twelve months ended December 31, 2025. Beginning with the quarter ending September 30, 2026, the Company will be required to comply with additional financial covenants under the Amended Credit Agreement, including leverage, fixed charge coverage and minimum liquidity requirements, as described further in Note 13, Debt, net.
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In evaluating its ability to continue as a going concern for the twelve months following the issuance of these financial statements, management considered projected compliance with these financial covenants and the Company’s historical operating performance. Conditions and events, including the risk of variability in operating results that could affect future covenant compliance, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance of these financial statements.
Management has developed plans intended to mitigate these conditions, including optimization of the Company's distribution and fulfillment network, and reductions in marketing spend and other fixed operating costs. Based on current projections on the implementation of these actions to the extent necessary, management expects the Company to remain in compliance with its financial and non-financial covenants under the Amended Credit Agreement and believes that these plans alleviates the substantial doubt about the Company’s ability to continue as a going concern for at least the twelve months following the issuance of these financial statements.
If the Company does not achieve the expected benefits from these operational initiatives or if operating results or liquidity deteriorate, the Company could be required to seek additional capital through equity or debt financings or other sources. There can be no assurance that such financing would be available on acceptable terms, or at all.
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.
As of December 31, 2025 and 2024, Dick’s Sporting Goods represented 28.0% and 32.6%, respectively, of total outstanding accounts receivable. As of December 31, 2025, Spreetail represented 12.7% of total outstanding accounts receivable. There are no other significant concentrations of receivables that represent a significant credit risk.
For the years ended December 31, 2025 and 2024, 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, Vietnam and Cambodia, 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.
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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.
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.
The fair value determination of the Company’s reporting units, asset groups and related goodwill and intangible assets is subjective in nature and requires the use of estimates and assumptions that are sensitive to changes. Assumptions include estimation of the estimation of future revenue and projected margins, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and capital spending, and determination of discount rates. Some of the inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of the asset groups and reporting units, it is possible a material change could occur. As a result, there can be no assurance that the estimates and assumptions made for purposes of the goodwill and finite-lived intangible impairment tests will prove to be an accurate prediction of future results.
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 trends and existing economic conditions, as well as other relevant 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, 2025 and 2024 was $0.4 million and $0.6 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 in a business combination is recorded at fair value using a mix of cost, comparative sales and market approaches.
Property and Equipment, net
Property and equipment are recorded at cost, except property and equipment acquired through acquisitions which 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.
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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, as well as applicable cloud computing application implementation costs, incurred in connection with developing or obtaining computer software for 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 & administrative expenses on the consolidated statements of operations and comprehensive income (loss) and was $1.7 million and $0.2 million for the years ended December 31, 2025 and 2024, respectively. Purchases of $5.9 million and $5.6 million related to software were included in capital expenditures within the consolidated statement of cash flows for the years ended December 31, 2025 and 2024, respectively.
Goodwill
Goodwill is determined based upon the excess purchase consideration over the estimated fair value of assets and liabilities assumed. 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 and patents 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 brands, trademarks, developed technology 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. External legal costs are expensed as incurred if we do not believe that the future economic benefit of the intangible asset will be increased, if a successful defense is not probable, or if a defense is unsuccessful. Capitalized trademark and patent defense costs are amortized over 8-10 years. 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
Debt Issuance Costs
Debt issuance costs related to term debt are recorded as a direct deduction from the carrying value of the associated debt liability on the consolidated balance sheets. The costs are amortized using the effective interest rate method over the term of the related debt. Debt issuance costs related to revolving loans are recorded within other non-current assets and amortized straight-line over the term of the related debt. Amortization of debt issuance costs are recorded as a component of interest expense, net on the consolidated statements of operations and comprehensive income (loss).
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Costs incurred in connection with an expected refinancing, restructuring or debt issuance are capitalized and recorded within other non-current assets.
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 (“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 & 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 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 ROU assets and lease liabilities associated with leases with an initial term of twelve months or less (“short-term leases”) on the consolidated balance sheets.
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 & 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.
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 e-commerce marketplaces, 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
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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 & 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 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 $12.3 million and $19.3 million for the years ended December 31, 2025 and 2024, respectively. Total sales rebates were $5.9 million and $6.3 million for the years ended December 31, 2025 and 2024, 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.
The deferred revenue liability was $1.6 million as of December 31, 2025, all of which is expected to be recognized within twelve months of December 31, 2025. As of December 31, 2024, the deferred revenue liability was $1.8 million, which the Company recognized in full as of the year ended December 31, 2025.
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, with all expense recognized within the fiscal year of first showing. These costs are included in selling, general, & administrative expenses on the consolidated statements of operations and comprehensive income (loss).
Marketing expense was $51.7 million and $96.0 million for the years ended December 31, 2025 and 2024, 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 $0.8 million and $1.7 million for the years ended December 31, 2025 and 2024, 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).
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Other Operating Expenses
Other operating expenses consist of costs incurred as a result of being a public company, acquisition-related expenses, business optimization and expansion expenses and management transition costs, including severance.
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 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 its members, including Solo Brands, Inc., 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 from Holdings. The Company is also subject to taxes in foreign jurisdictions.
Oru and Chubbies, 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).
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. 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. Forfeitures for all equity-based compensation are recognized when incurred. Equity-based compensation expense is recorded in the selling, general & administrative expense line item on the consolidated statements of operations and other comprehensive income (loss).
Foreign Currency Transactions
Foreign currency transaction gains and losses arise from transactions denominated in currencies other than the functional currency of the entity. Monetary assets and liabilities denominated in foreign currencies are remeasured into the functional currency using exchange rates in effect at the balance sheet date.
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Gains and losses resulting from foreign currency transactions and remeasurement are recognized in the consolidated statements of operations and comprehensive income (loss), within other non-operating (income) expense, during the period in which exchange rate changes occur.
Recently Adopted Accounting Pronouncements
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 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. We adopted this ASU for the period ended December 31, 2025 and the amendments have been applied retrospectively to all prior periods presented in the financial statements consistent with the standard. Refer to our income tax disclosure in Note 17 - Income Taxes for more information.
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets (Topic 326), which provides a practical expedient for estimating expected credit losses on current accounts receivable and contract assets arising from revenue transactions accounted for under ASC 606. The guidance permits entities to assume that current economic conditions as of the balance sheet date will persist through the remaining life of the asset when estimating expected credit losses. The guidance is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this ASU for the period ended December 31, 2025, which did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements - Not Yet Adopted
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. The Company does not expect to early adopt at this time.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 modernizes the accounting for internal-use software by removing all references to prescriptive and sequential software development stages. ASU 2025-06 requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed and the software will be used for its intended purpose. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those fiscal years, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. The Company does not expect to early adopt at this time.
NOTE 3 - Restructuring, Contract Termination and Impairment Charges
2025 Restructuring Activity
In 2025, management and the Board of Directors of the Company engaged strategic consulting firms to assist the Company with improving financial results from its operations. This operational improvement effort involved the engagement of restructuring, legal and investment banking consultants to perform financial planning, forecasting and project management activities. Certain of these strategic consulting firms assisted in developing operational plans for the near- and long-term, as well as having assisted and continuing to assist in identifying cost saving initiatives to reduce the operational expenses of the Company and aid in the development of enhanced internal reporting to deliver timely insight to management. Expenses related to these strategic consulting firms recognized within restructuring were $7.8 million for the year ended December 31, 2025, respectively.
The cost saving initiatives identified and executed upon in the year ended December 31, 2025 have been designed to reduce operational expenditures over the long-term. The key cost saving initiatives and operational planning activities undertaken for the year ended December 31, 2025 in excess of $0.5 million, for which the Company recorded the related charges to restructuring, contract termination and impairment charges on the consolidated statements of operations and comprehensive income (loss) as applicable, were as follows:
•Restructuring
◦retention payments to key personnel to support the sustainment of operations and focus on cost saving and operational improvements, resulting in a restructuring charge of $5.8 million;
◦reduction in force (“RIF”) of management and non-management personnel in an effort to align headcount with the operational needs of the business, resulting in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods, resulting in a restructuring charge of $1.0 million for severance;
◦expenses related to the strategic consulting firms discussed above, resulting in a restructuring charge of $7.8 million;
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•Contract Terminations
•termination of an underperforming licensing agreement in an effort to redeploy the allocated funds for operational purposes, of $2.5 million;
•settlement of a termination fee with a former advertising services vendor, with a previously accrued balance of $5.4 million that was settled for $4.0 million, a $1.4 million benefit to the Company; and
•closure of three distribution centers in 2025 to reduce fixed costs in the short term and in future periods, as well as eliminate unnecessary capacity, resulting in charges to restructuring of $1.8 million, contract termination of $0.2 million and impairment of $0.8 million, or an aggregate charge to expense of $2.8 million; and
•termination of a lease agreement for an owned retail store and impairment of a separate owned retail store as a result of underperformance, and in the case of the terminated owned retail store to reduce forward operating losses, resulting in charges to impairment charges of $0.3 million and contract termination of $0.2 million, or an aggregate charge to expense of $0.5 million.
The 2025 restructuring activity was concluded in the fourth quarter of 2025.
2024 Restructuring Activity
In 2024, the Company underwent a significant change in management and personnel across the organization. The 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. Management developed a strategic plan focused on returning the Company back to growth. This strategic plan involved the following activities:
•termination of underperforming marketing agreements with marketing barter partners that no longer aligned with the Company’s current marketing strategy;
•charges related to the IcyBreeze reporting unit 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.
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. This plan was completed in the fourth quarter of 2024 and, as such, there are no outstanding liabilities related to this plan as of December 31, 2025.
The components of the restructuring, contract termination and impairment charges, inclusive of the $76.0 million goodwill impairment charge recognized at the Solo Stove reporting unit in 2024, as discussed in Note 10, Goodwill, and the $72.5 million and $0.8 million impairment charges related to the long-lived assets of the Solo Stove reporting unit in 2025, exclusive of amounts discussed above, as discussed in Note 9, Intangible Assets, net and Note 8 - Property and Equipment, net, respectively, are as follows (in thousands):
Year Ended December 31,
(1) Includes other immaterial amounts that are not outlined in the narrative above.
The changes in restructuring liabilities for the year ended December 31, 2025 are as follows:
(in thousands) Restructuring Charges
Balance at December 31, 2024 $ —
Restructuring charges 17,393
Non-cash restructuring charges (679)
The following table summarizes the current liabilities related to the restructuring charges:
Accounts payable $ 249 $ —
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NOTE 4 – Revenue
The following table disaggregates our net sales by channel (in thousands):
Year Ended December 31,
Net sales by channel
The following table disaggregates our net sales by product (in thousands):
Year Ended December 31,
(1) Includes $14.8 million of net sales related to IcyBreeze for the year ended December 31, 2024.
No single customer contributed 10%, or more, of net sales for the years ended December 31, 2025 and 2024.
The following table disaggregates our net sales by geographic region (in thousands):
Year Ended December 31,
No individual country outside the U.S. accounted for more than 5% of our net sales for the years ended December 31, 2025 and 2024.
NOTE 5 – Other Non-Operating, Net
The following table disaggregates other non-operating expenses and income (in thousands):
Year Ended December 31,
Debt refinancing costs(1) $ 4,341 $ —
Foreign exchange (gain) loss (910) 1,078
Total other non-operating, net $ 1,972 $ 528
(1) Consists of one time expenses related to the 2025 Refinancing Amendment, as discussed in Note 13, Debt, net, that were ineligible for capitalization as debt issuance costs.
NOTE 6 – Inventory
Inventory consisted of the following (in thousands):
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Inventory obsolescence expense is recorded to cost of goods sold on the consolidated statements of operations and comprehensive income (loss) and was $0.8 million and $18.0 million for the years ended December 31, 2025 and 2024, respectively. The decrease in inventory obsolescence in 2025 was primarily 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.
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 $ 8,767 $ 12,223
(1)The decrease in prepaid insurance reflects a change in premium payment terms in 2025, under which a portion of premiums was financed rather than fully prepaid in the fourth quarter.
NOTE 8 – Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
Construction in progress 513 335
Accumulated depreciation and amortization (20,653) (15,543)
Depreciation expense for property and equipment, net, less tooling and website development costs, was $6.3 million and $5.2 million for the years ended December 31, 2025 and 2024, 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 $1.1 million and $0.9 million for the years ended December 31, 2025 and 2024, respectively.
Purchases of $4.6 million and $7.5 million related to property and equipment were included in capital expenditures within the consolidated statement of cash flows for the years ended December 31, 2025 and 2024, respectively.
The Company capitalized $0.5 million and $0.3 million in website development costs during the years ended December 31, 2025 and 2024, respectively. Capitalized website development costs are included in property and equipment, net on the consolidated balance sheets. Amortization of website development costs was $0.7 million and $0.5 million for the years ended December 31, 2025 and 2024, respectively, and included in depreciation and amortization expenses on the consolidated statements of operations and comprehensive income (loss).
During the year ended December 31, 2025, the Company recognized impairment of property and equipment in the amount of $0.8 million, which was primarily attributable to tooling fixed assets used in the production of products that the Company determined would no longer be produced as of December 31, 2025 and an impairment in the fair value of the buildings and land acquired in connection with the IcyBreeze purchase. 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 additional information on the remaining impairment and classification of said impairments.
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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 (179,216) (87,966)
(1) Includes aggregate impairments for brand of $77.3 million, trademarks of $7.1 million, customer relationships of $0.5 million and patents of $6.8 million as of December 31, 2025 and aggregate impairments for brand of $6.5 million, trademarks of $5.4 million, customer relationships of $0.5 million and patents of $6.8 million as of December 31, 2024.
Additions of $1.6 million and $1.4 million related to patents, primarily for patent defense, were included in capital expenditures within the consolidated statement of cash flows for the years ended December 31, 2025 and 2024, respectively.
2025 Impairment Testing
In the fourth quarter of 2025, the Company identified a triggering event within our Solo Stove asset group, as a result of lower-than-expected sales volumes. Accordingly, we evaluated the recoverability of the asset group. The carrying amount of the asset group was compared to the sum of the undiscounted cash flows expected to result from their use and eventual disposition. The sum of the undiscounted cash flows attributable to the asset group was less than their carrying amount. Accordingly, these assets were determined to be not recoverable.
We performed a recoverability test for our finite-lived intangible assets, which consist primarily of brands, customer relationships, patents, and tradenames with definite lives. The carrying amount of these assets was compared to the sum of the undiscounted cash flows expected to result from their use and eventual disposition. The sum of the undiscounted cash flows attributable to the finite-lived intangible assets was less than their carrying amount. Accordingly, these assets were determined to be not recoverable.
For the quantitative finite-lived intangible assets impairment analysis performed as of December 31, 2025, the Company estimated the fair value of the asset group using a weighting of fair values derived from the income and market approaches, where comparable market data was available. Under the income approach, the Company determined the fair value of an asset group based on the present value of estimated future cash flows. Cash flow projections were based on management’s estimates of revenue growth rates and 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 the asset group 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, which was 15.0%. The terminal growth rate applied was 3.0%. Under the market approach, the Company utilized market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the asset group.
We performed a separate valuation of certain finite-lived intangible assets, which consists of brands and tradenames with definite lives to determine the amount of impairment to attribute to individual long-lived assets. All other finite-lived assets in the Solo Stove asset group were determined not to be impaired. As a result of the separate valuation, we recorded a non-cash impairment charge of $72.5 million during the year ended December 31, 2025, consisting of:
•Brand Intangible Asset - $70.8 million