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Digital Brands Group Reports Fourth Quarter and Fiscal Year 2023 Financial Results

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Digital Brands Group, Inc. reported a net income loss of $0.6 million in the fourth quarter, excluding non-cash expenses. The company achieved break-even net income due to cost savings despite lower revenue from Sundry. Net revenues increased by 6.8% to $14.9 million, with gross margin increasing by 10.2%. G&A expenses decreased, and sales & marketing expenses also saw a decline. The company is optimistic about revenue growth and lower operating expenses in the upcoming quarters.
Positive
  • Net income loss of $0.6 million in the fourth quarter, excluding non-cash expenses.
  • Net revenues increased by 6.8% to $14.9 million.
  • Gross margin increased by 10.2% to $6.5 million.
  • G&A expenses decreased by 12.7% to $14.3 million.
  • Sales & marketing expenses decreased by 18.5% to $4.0 million.
  • Excitement for revenue growth and lower operating expenses in the upcoming quarters.
Negative
  • Net loss per share attributable to common stockholders was $10.2 million.
  • Net loss per diluted share was $18.81, excluding non-cash expenses.
  • Gross profit margins decreased to 18.3% in the fourth quarter.
  • Net loss per diluted share attributable to common stockholders was $3.7 million in the fourth quarter.
  • Conference call details were not provided in the PR.

The report from Digital Brands Group highlights a reduction in net loss per share from a staggering $1,233.10 to a more manageable $20.46 year-over-year, which is a significant improvement. The gross profit margin increase to 43.9% from 42.5% suggests efficiency improvements in cost management or pricing strategies. Analyzing the decrease in general and administrative expenses by 35.7% (excluding non-cash items), it's indicative of stringent cost control measures. The reduction in sales and marketing expenses could signal a shift towards more targeted, digital-first strategies, which are typically more cost-effective.

Digital Brands Group's strategy of spinning out Harper & Jones indicates an operational restructure which may aim to streamline the brand portfolio and focus on core assets. This move, coupled with the mention of revenue growth re-acceleration, could pique the interest of investors looking for companies on the path to profitability. Another noteworthy point is the opening of an outlet store, suggesting a multichannel retail approach which could diversify revenue streams and enhance brand visibility.

For retail investors, the emphasis should be on the decreased net loss and the improved operating expense structure. The net income loss of $0.6 million (excluding non-cash expenses) in the fourth quarter could suggest that the company is approaching a breakeven point. Investors might also find the projection of an 'inflection point' in 2024 compelling, but should balance this against the historical performance and understand the potential risks in a brand-centric, consumer discretionary market.

Net income loss was only $0.6 million in the fourth quarter, excluding non-cash expenses

AUSTIN, Texas, April 15, 2024 /PRNewswire/ -- Digital Brands Group, Inc. ("DBG") (NASDAQ: DBGI), a curated collection of luxury lifestyle, digital-first brands, today reported financial results for its fourth  quarter and fiscal year ended December 31, 2023. 

"The fourth quarter was the end of Sundry's bottom, which our first quarter results will reflect.  Despite lower revenue contribution from Sundry in the fourth quarter, we almost achieved break even net income due to our cost savings (excluding non-cash expenses).  Based on first quarter wholesale shipments and second quarter wholesale bookings, we are excited to see revenue growth meaningfully re-accelerate. This increase in the revenue trend will be coupled with a significantly lower operating expense structure," said Hil Davis, CEO of Digital Brands Group.

"We are excited to announce our first quarter earnings in May, which we believe will show the strength of the business. We will also have preliminary results from our outlet store opening in Allen, TX.  Simply put, as we have stated, 2024 is the year we expected to experience the inflection point in our business."

Results for the Fiscal Year

  • Net revenues increased 6.8% to $14.9 million compared to $14.0 million a year ago
    • This excludes revenue from Harper & Jones as it was spun out in the second quarter
    • This represents the lowest point of Sundry's wholesale revenues in the second half of 2023 versus the first and second quarter wholesale bookings for 2024
  • Gross margin increased 10.2% to $6.5 million compared to $5.9 million a year ago
    • Gross profit margins increased to 43.9% from 42.5% a year ago
  • G&A expenses, including non-cash items, decreased 12.7% to $14.3 million compared to $16.4 million a year ago
    • G&A expenses, excluding non-cash item expenses, decreased 35.7% to $8.8 million compared to $13.7 million a year ago
    • G&A expenses included $5.5M in non-cash expenses associated with D&A and stock option expenses
  • Sales & Marketing expenses decreased 18.5% to $4.0 million compared to $5.0 million a year ago
    • Sales and marketing expenses ratio was 27.1% compared to 35.4% a year ago
  • Net loss per share attributable to common stockholders was $10.2 million, or $20.46 per share, compared to a loss of $38.0 million, or a loss of $1,233.10 per share, a year ago
    • Net loss, excluding the non-cash charges and add backs was $8.0 million compared to a loss of $28.8 million a year ago
    • Net loss per diluted share, excluding non-cash expenses and add backs, was $18.81 per share compared to $934.38 per share a year ago

Results for the Fourth Quarter

  • Net revenues were $2.8 million compared to $3.4 million a year ago
    • This includes non-cash contra revenue adjustment of $0.7 million. Excluding these, net revenues would have been $3.5 million
    • This also represents one of the lowest points of Sundry's wholesale revenue based on both the first and second quarter wholesale bookings
  • Gross profit decreased $0.5 million compared to $0.6 million a year ago
    • This includes non-cash expenses of $0.3 million
    • Gross profit margins decreased to 18.3% from 19.0% a year ago, which includes the non-cash expenses to net revenues and cost of goods sold. Excluding these charges, gross profit margins would have been 43.5%
  • G&A expenses, including non-cash items, decreased 30.6% to $2.2 million compared to $3.2 million a year ago
  • Sales & Marketing expenses decreased 13.4% to $0.8 million compared to $1.0 million a year ago
  • Net loss per diluted share attributable to common stockholders was $3.7 million, or $8.76 per share, compared to a loss of $15.8 million, or a loss of $511.54 per share, a year ago
    • Net loss was $0.6 million, excluding the non-cash charges of $3.1 million, compared to a loss of $19.2 million a year ago
    • Net loss per diluted share, excluding non-cash expenses was $1.48 per share compared to $621.22 per share a year ago

Conference Call and Webcast Details Updated

Management will host a conference call on Monday, April 15 at 5:00 p.m. ET to discuss the results. The live conference call can be accessed by dialing 866-605-1828 from the U.S. or internationally. The conference I.D. code is 13746007 or referencing Digital Brands or via the web by using the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=jg0EmFTQ.

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


Year Ended









December 31, 


December 31, 









2023


2022


2023


2022
















Net revenues


$       2,789,287


$         3,375,245


$       14,916,422


$        13,971,178

Cost of net revenues


2,278,110


2,732,897


8,372,642


8,030,908



Gross profit


511,177


642,348


6,543,780


5,940,270
















Operating expenses:










General and administrative


2,183,799


3,145,228


14,299,389


16,371,536


Sales and marketing


847,781


979,355


4,035,835


4,950,635


Distribution


251,398


89,059


1,002,343


611,569


Impairment


-


15,539,332


-


15,539,332


Change in fair value of contingent consideration


-


(5,854,052)


(10,698,475)


564,303



Total operating expenses


3,282,978


13,898,922


8,639,092


38,037,375
















Loss from operations


(2,771,801)


(13,256,574)


(2,095,312)


(32,097,105)
















Other income (expense):










Interest expense


(609,551)


(2,963,845)


(5,517,118)


(9,014,337)


Other non-operating income (expenses)


30,335


438,395


(704,166)


3,068,080



Total other income (expense), net


(579,216)


(2,525,450)


(6,221,284)


(5,946,257)
















Income tax benefit (provision)


(368,034)


-


(368,034)


-

Net loss from continuing operations


(3,719,051)


(15,782,024)


(8,684,630)


(38,043,362)

Income (loss) from discontinued operations, net of tax


-


-


(1,562,503)


-

Net loss




$     (3,719,051)


$      (15,782,024)


$      (10,247,133)


$      (38,043,362)
















Weighted average common shares outstanding - 










basic and diluted


424,402


30,852


424,402


30,852

Net loss from continuing per common share - basic and diluted

$              (8.76)


$             (511.54)


$               (20.46)


$          (1,233.10)


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

 

DIGITAL BRANDS GROUP, INC

STATEMENTS OF CASH FLOW










Year Ended









December 31, 









2023


2022

Cash flows from operating activities:





Net loss




$    (10,247,133)


$(38,043,362)

Adjustments to reconcile net loss to net cash used in operating activities:







Depreciation and amortization


3,249,194


2,226,376



Amortization of loan discount and fees


3,937,007


6,506,384



Loss on extinguishment of debt


716,517


-



Loss on disposition of business


1,523,940


-



Stock-based compensation


408,810


602,038



Shares issued for services


1,656,428


-



Change in credit reserve


202,761


(118,840)



Change in fair value of contingent consideration


(10,698,475)


564,303



Deferred tax expense


368,034


-



Deferred offering costs


-


367,696



Fees incurred in connection with debt financings


-


568,149



Change in fair value of warrant liability


-


(18,223)



Change in fair value of derivative liability


-


(1,354,434)



Impairment of goodwill and intangible assets


-


15,539,331



Forgiveness of Payroll Protection Program


-


(1,760,755)


Changes in operating assets and liabilities:








Accounts receivable, net


497,771


(475,036)




Due from factor, net


144,755


655,708




Inventory


375,682


471,831




Prepaid expenses and other current assets


551,259


(402,515)




Accounts payable


1,900


919,131




Accrued expenses and other liabilities


1,047,431


1,992,649




Deferred revenue


(183,782)


(74,268)




Due to related parties


-


278,590




Accrued interest


434,958


984,358



Net cash used in operating activities


(6,012,942)


(10,570,889)

Cash flows from investing activities:





Cash acquired (consideration) pursuant to business combination


-


(7,247,303)

Purchase of property, equipment and software


(29,675)


(5,533)

Deposits




118,494


(60,548)



Net cash provided by (used in) investing activities


88,819


(7,313,384)

Cash flows from financing activities:





Proceeds (repayments) from related party advances


(155,205)


-

Advances (repayments) from factor


154,073


(3,096)

Repayments of related party notes


-


(170,000)

Repayment of contingent consideration


-


(645,304)

Proceeds from venture debt


-


237,500

Issuance of loans and note payable


5,479,611


3,280,360

Repayments of convertible and promissory notes


(10,129,811)


(7,437,349)

Issuance of convertible notes payable


-


6,951,250

Proceeds from public offering


-


19,347,446

Offering costs


-


(2,921,646)

Issuance of common stock, net of offering costs


8,145,381


-

Exercise of warrants


1,167,566


-



Net cash provided by financing activities


4,661,614


18,639,161

Net change in cash and cash equivalents


(1,262,509)


754,888

Cash and cash equivalents at beginning of year


1,283,282


528,394

Cash and cash equivalents at end of year


20,773


1,283,282

Less: cash of discontinued operations


-


7,666

Cash of continuing operations at end of year


$            20,773


$    1,275,616












Supplemental disclosure of cash flow information:





Cash paid for income taxes


$                      -


$                   -

Cash paid for interest


$          711,815


$       734,869












Supplemental disclosure of non-cash investing and financing activities:





Conversion of notes into preferred stock


$       5,759,177


$                   -

Conversion of notes into common stock


$                      -


$  11,983,389

Right of use asset


$          467,738


$       102,349

Warrants issued in connection with note


$                      -


$    1,368,741

Derivative liability in connection with convertible note


$                      -


$       559,957

Conversion of related party notes and payables into preferred and common stock

$                      -


$    6,300,000

Conversion of venture debt into preferred stock


$                      -


$                   -


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

 

DIGITAL BRANDS GROUP, INC

STATEMENT OF BALANCE SHEETS










December 31, 









2023


2022

ASSETS









Current assets:








Cash and cash equivalents


$              20,773


$         1,275,616



Accounts receivable, net


74,833


583,368



Due from factor, net


337,811


839,400



Inventory



4,849,600


5,122,564



Prepaid expenses and other current assets


276,670


766,901



Assets per discontinued operations, current


-


241,544





Total current assets


5,559,687


8,829,393

Property, equipment and software, net


55,509


104,512

Goodwill






8,973,501


8,973,501

Intangible assets, net


9,982,217


12,906,238

Deposits






75,431


193,926

Right of use asset


689,688


102,349

Assets per discontinued operations


-


2,628,136





Total assets


$       25,336,033


$       33,738,055












LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)





Current liabilities:







Accounts payable


$         7,538,902


$         8,016,173



Accrued expenses and other liabilities


4,758,492


3,936,920



Due to related parties


400,012


555,217



Contingent consideration liability


-


12,098,475



Convertible note payable, net


100,000


2,721,800



Accrued interest payable


1,996,753


1,561,795



Loan payable, current


2,325,842


1,829,629



Promissory note payable, net


4,884,592


9,000,000



Right of use liability, current portion


1,210,814


102,349



Liabilities per discontinued operations, current


-


1,071,433





Total current liabilities


23,215,407


40,893,791

Loan payable



150,000


150,000

Deferred tax liability


368,034


-

Liabilities per discontinued operations


-


147,438





Total liabilities


23,733,441


41,191,229












Commitments and contingencies
















Stockholders' equity (deficit):






Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares







 issued and outstanding as of both December 31, 2023 and 2022


-


-


Series A convertible preferred stock, $0.0001 par, 6,300 shares designated, 6,300 shares issued and







outstanding as of both December 31, 2023 and 2022, respectively


1


1


Series C convertible preferred stock, $0.0001 par, 4,786 and 0 shares 







outstanding as of December 31, 2023 and 2022, respectively


1


-


Common stock, $0.0001 par, 1,000,000,000 shares authorized, 1,114,359 and 178,758 shares







issued and outstanding as of December 31, 2023 and 2022, respectively


110


18


Additional paid-in capital


115,596,930


96,294,123


Accumulated deficit 


(113,994,449)


(103,747,316)





Total stockholders' equity (deficit)


1,602,592


(7,453,174)





Total liabilities and stockholders' equity (deficit)


$        25,336,033


$        33,738,055


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

Related Links

https://www.digitalbrandsgroup.co 

https://ir.digitalbrandsgroup.co 

 

Cision View original content:https://www.prnewswire.com/news-releases/digital-brands-group-reports-fourth-quarter-and-fiscal-year-2023-financial-results-302116664.html

SOURCE Digital Brands Group, Inc.

FAQ

What was Digital Brands Group's net income loss in the fourth quarter?

Digital Brands Group reported a net income loss of $0.6 million in the fourth quarter, excluding non-cash expenses.

How much did net revenues increase by for Digital Brands Group?

Net revenues increased by 6.8% to $14.9 million for Digital Brands Group.

What was the percentage increase in gross margin for Digital Brands Group?

Gross margin increased by 10.2% to $6.5 million for Digital Brands Group.

Did G&A expenses increase or decrease for Digital Brands Group?

G&A expenses decreased by 12.7% to $14.3 million for Digital Brands Group.

What was the change in sales & marketing expenses for Digital Brands Group?

Sales & marketing expenses decreased by 18.5% to $4.0 million for Digital Brands Group.

What is Digital Brands Group's outlook for revenue growth?

Digital Brands Group is excited to see revenue growth meaningfully re-accelerate in the upcoming quarters.

What is Digital Brands Group's expectation for operating expenses?

Digital Brands Group expects a significantly lower operating expense structure in the upcoming quarters.

What was the net loss per share attributable to common stockholders in the fourth quarter?

Net loss per share attributable to common stockholders was $3.7 million in the fourth quarter for Digital Brands Group.

What was the gross profit margin in the fourth quarter for Digital Brands Group?

Gross profit margins decreased to 18.3% in the fourth quarter for Digital Brands Group.

When will Digital Brands Group announce their first quarter earnings?

Digital Brands Group will announce their first quarter earnings in May.

Where was the outlet store opening for Digital Brands Group?

Preliminary results from the outlet store opening in Allen, TX will be announced by Digital Brands Group.

What was the net loss per diluted share excluding non-cash expenses for Digital Brands Group?

Net loss per diluted share, excluding non-cash expenses, was $18.81 per share for Digital Brands Group.

What was the change in net loss per diluted share for Digital Brands Group compared to a year ago?

Net loss per diluted share was $18.81, excluding non-cash expenses, compared to $934.38 per share a year ago for Digital Brands Group.

Digital Brands Group, Inc.

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