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Digital Brands Group Reports First Quarter 2024 Financial Results

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Digital Brands Group (NASDAQ: DBGI) has reported its first-quarter financial results for 2024, with a significant reduction in net operating loss to $225,000 from $3.7 million a year ago. Although net revenues declined to $3.6 million from $4.4 million due to a shift in wholesale shipments to Q2, gross profit margins improved to 48.1%. General and administrative (G&A) expenses saw a substantial decrease to $1 million from $4.5 million, and sales and marketing expenses also dropped to $700,000. The net loss was $684,000 or $0.46 per diluted share, compared to a loss of $6.1 million or $27.48 per diluted share a year ago. Management will discuss these results in a conference call on May 20, 2024.

Positive
  • Net operating loss reduced significantly to $225,000 from $3.7 million a year ago.
  • Gross profit margins increased to 48.1% from 45.5% a year ago.
  • G&A expenses decreased to $1 million from $4.5 million.
  • Sales and marketing expenses decreased to $700,000 from $1 million.
  • Net loss improved to $684,000 or $0.46 per diluted share, from $6.1 million or $27.48 per diluted share.
Negative
  • Net revenues declined to $3.6 million from $4.4 million due to a shift in wholesale shipments.
  • Gross profit decreased to $1.7 million from $2.0 million a year ago.

The latest financial results from Digital Brands Group highlight significant improvements in their operating efficiency. A key point is the reduction in operating loss from $3.7 million to $225,000 year-over-year, which indicates that the company's cost control measures are bearing fruit. Additionally, the gross profit margin increased to 48.1% from 45.5%, showing better pricing power or cost management. Notably, the General and Administrative (G&A) expenses saw a significant drop, decreasing to $1.0 million from $4.5 million the previous year, resulting in a lower G&A expense ratio. This is an exceptional improvement and may suggest a streamlined back-office or better resource allocation.

However, net revenues declined to $3.6 million from $4.4 million due to the delayed wholesale shipments. While this shift in revenue will benefit the second quarter, it does highlight reliance on timing for financial performance, which might concern some investors.

For a retail investor, these results indicate a positive trend towards profitability and operational efficiency, but the dependency on wholesale revenue timing should be monitored.

DBG's first-quarter results reveal an interesting shift in their market approach. The significant reduction in sales and marketing expenses to $700,000 from $1.0 million and the concurrent drop in their expense ratio suggests a more efficient marketing strategy. This move towards cost-efficiency could be a sign of mature market positioning and perhaps a greater reliance on organic growth or word-of-mouth rather than high-cost advertising campaigns.

Additionally, the company's strategy to push wholesale shipments into the second quarter is a tactical maneuver that might boost short-term performance metrics but is not without risk. Investors should be aware that while this strategy might enhance next quarter’s revenue, it could potentially mask underlying issues in demand consistency or supply chain management.

Overall, the financial results reflect a strategic cost-cutting and efficiency-oriented approach, which can be favorable for long-term sustainability but warrant a cautious watch on future revenue consistency.

Loss from operations was $225,000 versus $3.7 million a year ago

Austin, TX, May 20, 2024 (GLOBE NEWSWIRE) -- Digital Brands Group, Inc. (“DBG”) (NASDAQ: DBGI), a curated collection of luxury lifestyle, digital-first brands, today reported financial results for its first quarter ended March 31, 2024.

“Despite a timing shift in our wholesale shipments, which shifted revenue from the first quarter to the second quarter, we experienced significant operating expense leverage. We expect this operating leverage to continue throughout the year. In fact, this operating leverage coupled with higher revenues will result in higher flow through to our operating and net income,” said Hil Davis, CEO of Digital Brands Group.

Results for the First Quarter

  • Net revenues were $3.6 million compared to $4.4 million a year ago

o   Net revenues were negatively impacted by wholesale shipments that slipped from the end of March to the first half of April

o   This wholesale revenue shift will benefit our second quarter revenue

  • Gross profit margins increased to 48.1% compared to 45.5% a year ago

o   Gross profit was $1.7 million compared to $2.0 million a year ago

  • G&A expenses decreased to $1.0 million compared to $4.5 million a year ago

o   G&A expense ratio was 27.2% compared to 100.5% a year ago

  • Sales & Marketing expenses were $700,000 compared to $1.0 million a year ago

o   Sales and marketing expenses ratio was 19.8% compared to 22.0% a year ago

  • Net operating loss was $225,000 compared to a loss of $3.7 million a year ago
  • Net loss was $684,000, or a loss of $0.46 per diluted share, compared to a loss of $6.1 million, or a loss of $27.48 per diluted share, a year ago

Conference Call and Webcast Details Updated

Management will host a conference call on Monday, May 20, 2024 at 10:30 a.m. ET to discuss the results. The live conference call can be accessed by dialing 888-506-0062 from the U.S. or internationally. The conference I.D. code is 817721 or referencing Digital Brands or via the web by using the following link: https://www.webcaster4.com/Webcast/Page/3044/50662.

Forward-looking Statements

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


DIGITAL BRANDS GROUP, INC
STATEMENT OF OPERATIONS

  Three Months Ended 
  March, 31 
  2024  2023 
Net revenues $3,576,587  $4,439,508 
Cost of net revenues  1,855,851   2,420,194 
Gross profit  1,720,736   2,019,314 
         
Operating expenses:        
General and administrative  971,732   4,460,462 
Sales and marketing  708,150   977,154 
Distribution  265,499   270,185 
Total operating expenses  1,945,381   5,707,802 
         
Loss from operations  (224,645)  (3,688,487)
         
Other income (expense):        
Interest expense  (504,991)  (1,864,598)
Other non-operating income (expenses)  45,901   (678,989)
Total other income (expense), net  (459,090)  (2,543,587)
         
Income tax benefit (provision)  -   - 
Net loss from continuing operations  (683,735)  (6,232,075)
Income from discontinued operations, net of tax  -   95,726 
Net loss $(683,735) $(6,136,349)
         
Weighted average common shares outstanding -        
basic and diluted  1,485,210   226,814 
Net loss per common share - basic and diluted $(0.46) $(27.48)


The accompanying notes are an integral part of these financial statements.

DIGITAL BRANDS GROUP, INC

STATEMENTS OF CASH FLOW

  Three Months Ended 
  March 31, 
  2024  2023 
Cash flows from operating activities:        
Net loss $(683,735) $(6,136,349)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  1,117,240   959,207 
Amortization of loan discount and fees  492,858   1,412,425 
Loss on extinguishment of debt  -   689,100 
Stock-based compensation  100,299   105,594 
Shares issued for services  224,265   499,338 
Change in credit reserve  (151,611)  109,298 
Changes in operating assets and liabilities:        
Accounts receivable, net  (207,071)  282,947 
Due from factor, net  (297,951)  (77,776)
Inventory  201,127   299,188 
Prepaid expenses and other current assets  (24,545)  (218,286)
Accounts payable  (1,409,514)  (416,093)
Accrued expenses and other liabilities  (440,775)  464,855 
Deferred revenue  -   115,292 
Accrued interest  (161,130)  218,740 
Net cash used in operating activities  (1,240,541)  (1,692,520)
Cash flows from investing activities:        
Purchase of property, equipment and software  (13,785)  - 
Deposits  -   87,379 
Net cash provided by (used in) investing activities  (13,785)  87,379 
Cash flows from financing activities:        
Repayments from related party advances  (1,233)  (104,170)
Advances from factor  27,936   217,625 
Issuance of loans and note payable  -   3,542,199 
Repayments of convertible notes and loan payable  (518,026)  (5,677,621)
Issuance of common stock for cash  1,736,206   5,000,003 
Offering costs  -   (686,927)
Net cash provided by financing activities  1,244,882   2,291,109 
Net chane in cash and cash equivalents  (9,443)  685,968 
Cash and cash equivalents at beginning of period  20,773   1,283,282 
Cash and cash equivalents at end of period $11,330  $1,969,250 
         
Supplemental disclosure of cash flow information:        
Cash paid for income taxes $-  $- 
Cash paid for interest $-  $60,465 
         
Supplemental disclosure of non-cash investing and financing activities:        
Right of use asset $-  $467,738 

The accompanying notes are an integral part of these financial statements.

DIGITAL BRANDS GROUP, INC
STATEMENT OF BALANCE SHEETS

  March 31,  December 31, 
  2024  2023 
ASSETS        
Current assets:        
Cash and cash equivalents $11,330  $20,773 
Accounts receivable, net  281,904   74,833 
Due from factor, net  759,437   337,811 
Inventory  4,648,473   4,849,600 
Prepaid expenses and other current assets  301,215   276,670 
Total current assets  6,002,359   5,559,687 
Property, equipment and software, net  69,294   55,509 
Goodwill  8,973,501   8,973,501 
Intangible assets, net  9,262,670   9,982,217 
Deposits  75,431   75,431 
Right of use asset  465,069   689,688 
Total assets $24,848,324  $25,336,033 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable $6,266,814  $7,538,902 
Accrued expenses and other liabilities  4,317,717   4,758,492 
Due to related parties  398,779   400,012 
Convertible note payable, net  100,000   100,000 
Accrued interest payable  1,835,623   1,996,753 
Loan payable, current  2,300,674   2,325,842 
Promissory note payable, net  5,057,666   4,884,592 
Right of use liability, current portion  1,073,389   1,210,814 
Total current liabilities  21,350,662   23,215,407 
Loan payable  150,000   150,000 
Deferred tax liability  368,034   368,034 
Total liabilities  21,868,696   23,733,441 
         
Commitments and contingencies        
         
Stockholders' equity:        
Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares        
 issued and outstanding as of both March 31, 2024 and December 31, 2023  -   - 
Series A convertible preferred stock, $0.0001 par, 6,300 shares designated, 6,300 shares issued and        
outstanding as of both March 31, 2024 and December 31, 2023  1   1 
Series C convertible preferred stock, $0.0001 par, 3,239 and 4,786 shares issued and        
outstanding as of March 31, 2024 and December 31, 2023, respectively  1   1 
Common stock, $0.0001 par, 1,000,000,000 shares authorized, 1,714,157 and 1,114,359 shares        
issued and outstanding as of March 31, 2024 and December 31, 2023, respectively  169   110 
Additional paid-in capital  117,657,641   115,596,929 
Accumulated deficit  (114,678,184)  (113,994,449)
Total stockholders' equity  2,979,628   1,602,592 
Total liabilities and stockholders' equity $24,848,324  $25,336,033 


The accompanying notes are an integral part of these financial statements.

About Digital Brands Group

We offer a wide variety of apparel through numerous brands on a both direct-to-consumer and wholesale basis. We have created a business model derived from our founding as a digitally native-first vertical brand. We focus on owning the customer's "closet share" by leveraging their data and purchase history to create personalized targeted content and looks for that specific customer cohort.

Digital Brands Group, Inc. Company Contact

Hil Davis, CEO
Email: invest@digitalbrandsgroup.co
Phone: (800) 593-1047

SOURCE Digital Brands Group, Inc.

Related Links

https://www.digitalbrandsgroup.co

https://ir.digitalbrandsgroup.co


FAQ

What were Digital Brands Group's net revenues for Q1 2024?

Digital Brands Group's net revenues for Q1 2024 were $3.6 million, down from $4.4 million a year ago, due to a shift in wholesale shipments.

How did Digital Brands Group's gross profit margin change in Q1 2024?

The gross profit margin for Digital Brands Group increased to 48.1% in Q1 2024 from 45.5% a year ago.

What is Digital Brands Group's operating loss for Q1 2024?

Digital Brands Group reported an operating loss of $225,000 for Q1 2024, a significant improvement from a loss of $3.7 million a year ago.

What were the G&A expenses for Digital Brands Group in Q1 2024?

Digital Brands Group's G&A expenses for Q1 2024 were $1 million, significantly lower than the $4.5 million reported a year ago.

What is the net loss per diluted share for Digital Brands Group in Q1 2024?

The net loss per diluted share for Digital Brands Group in Q1 2024 was $0.46, compared to a loss of $27.48 per diluted share a year ago.

Digital Brands Group, Inc.

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