AUSTIN, Texas, Nov. 11, 2021 /PRNewswire/ -- Digital
Brands Group, Inc. ("DBG") (NASDAQ: DBGI), a curated
collection of luxury lifestyle, digital-first brands, today
reported financial results for its third quarter ended September 30, 2021.
Third quarter 2021 net revenue increased 75% year over year to
$2.2 million versus $1.2 million a year ago. Our gross profit margin
increased 96% year over year to 55.9% from negative 40.1% a year
ago, an increase of $1.7 million in
gross profit dollars.
Our net loss per diluted share was $0.76 versus a net loss of $5.89 per diluted share a year ago, an
improvement of 677% year over year. Our net loss attributable
to common stockholders was $8.9
million versus a net loss of $3.9
million a year ago. The net loss included a non-cash expense
associated with a change in the fair value of contingent
liabilities of $4.0. million and a
non-cash expense associated with a change in the fair value of our
convertible notes of $0.6
million.
"Our third quarter 2021 results reflect another quarter of
meaningful improvement in our business results from our first and
second quarter results as we were able to benefit from the cash
inflows from our IPO in the middle of May," said Hil Davis, Chief Executive Officer of Digital
Brands Group.
"These improving business trends have continued into the fourth
quarter. We now expect our fourth quarter revenues to double once
again on a sequential quarterly basis to $4.0M, as the table below illustrates."
Stateside Acquisition Completed
We also finalized our acquisition of Stateside at the end of
August, which resulted in only one month of revenue and cash flow
contribution to our third quarter results. We expect Stateside to
add meaningful revenue and cash flow to our fourth quarter of 2021,
and in fiscal year 2022.
Fiscal Year 2022 Revenue and EBITDA Guidance
We are providing fiscal year 2022 net revenue guidance of
$37.5M to $42.5M, an increase of 350% from 2021 revenue
expectations. Additionally, the Company forecasts positive
EBITDA for 2022, as it leverages its shared services platform.
"Our 2022 revenue guidance reflects the power of our brand
portfolio, especially as we are able to benefit from the full year
revenue contribution from our acquisitions in 2021," said
Hil Davis, Chief Executive Officer
of Digital Brands Group.
"This forecasted increase of 350% in our year over revenue
growth does not reflect any potential additional acquisitions, nor
does it reflect any meaningful benefit from our expected increase
in marketing spend."
"We expect to achieve cash flow EBITDA in 2022 due to the
leverage we are experiencing from our shared services platform. We
are excited about the cost savings we are experiencing from this
shared services platform, especially as it relates to revenue
generating marketing initiatives."
Our forecasted increase in 2022 revenues is driven by the
following factors:
- For DSTLD:
-
- The addition of wholesale revenue with limited key accounts for
brand awareness;
- A meaningful increase in digital marketing advertising, which
was minimal in 2021;
- A full year of selling on Amazon;
- A full inventory stock for the entire year;
- And new product expansion driven by our recently hired women's
designer.
- For Bailey 44:
-
- A full year of wholesale revenue versus six months in
2021;
- A meaningful increase in digital marketing advertising, which
was minimal in 2021;
- And a full inventory stock for the entire year.
- For Harper & Jones:
-
- A full year of revenue contribution versus approximately seven
months in 2021;
- New showroom openings;
- The full year benefit of new clothiers who started in the
second half of 2021;
- And a meaningfully larger ready to wear offering versus
2021.
- For Stateside:
-
- A full year of revenue contribution versus four months in
2021;
- New product categories in women's knits and woven tops and
bottoms;
- A meaningful increase in digital marketing advertising, which
was minimal in 2021.
Acquisition Update
Finally, as we discussed in our S-1, we expect to continue to
grow through acquisitions and expect to continue to acquire
companies this year and next year. These acquisitions require GAAP
PCAOB audits. These audits take time, which results in a delayed
acquisition timeframe weighted toward the back months of 2021.
Third Quarter 2021 Highlights
- Net Sales were $2.2. million
versus $1.2 million in the year ago
quarter, an increase of 75% year over year. The increase in net
sales was driven by the increase in revenue at Bailey 44 and DSTLD plus the addition of
Harper & Jones for the full quarter and Stateside on a pro-rata
basis.
- Our gross profit margin increased 96% year over year to 55.9%
from negative 40.1%. Gross profit increased by $1.7 million due to improved gross margins at all
our brands.
- Net loss attributable to common stockholders was $8.9 million, or $0.76 per diluted share, compared to net loss
attributable to common stockholders of $3.9
million, or $5.89 per diluted
share, in the prior year period.
- Net loss in the third quarter of 2021 included a non-cash
expense associated with a change in the fair value of contingent
liabilities of $4.0 million and a
non-cash expense associated with a change in the fair value of our
convertible notes of $0.6
million.
Conference Call and Webcast Details
The Company will host a conference call and webcast at
8:30 a.m. ET on Friday, November 12
to discuss 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 13725121 or via the web by using the
following link: https://tinyurl.com/efyarha2.
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
|
|
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Net
revenues
|
|
|
|
|
|
$
2,163,280
|
|
$
1,234,805
|
Cost of net
revenues
|
|
|
|
|
|
954,137
|
|
1,729,709
|
Gross profit
(loss)
|
|
|
|
|
|
1,209,143
|
|
(494,904)
|
Operating
expenses
|
|
|
|
|
|
9,121,907
|
|
2,901,364
|
Operating
loss
|
|
|
|
|
|
(7,912,764)
|
|
(3,396,268)
|
Other
expenses
|
|
|
|
|
|
(1,025,283)
|
|
(518,312)
|
Loss before provision
for income taxes
|
|
|
|
(8,938,047)
|
|
(3,914,580)
|
Provision for income
taxes
|
|
|
|
|
-
|
|
(276)
|
Net loss
|
|
|
|
|
|
|
$
(8,938,047)
|
|
$
(3,914,856)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding -
|
|
|
|
|
|
|
|
|
|
basic and
diluted
|
|
|
|
|
|
11,786,592
|
|
664,167
|
Net loss per common
share - basic and diluted
|
|
|
|
|
|
|
$
(0.76)
|
|
$
(5.89)
|
|
The accompanying
notes are an integral part of these financial
statements.
|
DIGITAL BRANDS
GROUP, INC
|
STATEMENTS OF CASH
FLOW
|
|
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
|
$
(22,659,480)
|
|
$
(8,088,980)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
652,732
|
|
716,568
|
|
Amortization of loan
discount and fees
|
|
|
682,956
|
|
144,974
|
|
Stock-based
compensation
|
|
|
4,155,641
|
|
105,643
|
|
Fees incurred in
connection with debt financings
|
|
|
132,609
|
|
-
|
|
Change in fair value
of warrant liability
|
|
|
21,930
|
|
(1,792)
|
|
Change in fair value
of derivative liability
|
|
|
627,956
|
|
-
|
|
Change in fair value
of contingent consideration
|
|
|
7,039,394
|
|
-
|
|
Deferred income tax
benefit
|
|
|
(1,100,120)
|
|
-
|
|
Impairment of
intangible assets
|
|
|
-
|
|
784,500
|
|
Loss on disposal of
property and equipment
|
|
|
-
|
|
593,449
|
|
Change in credit
reserve
|
|
|
66,748
|
|
(182,758)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
|
(32,582)
|
|
(74,256)
|
|
Due from factor,
net
|
|
|
(540,257)
|
|
1,334,263
|
|
Inventory
|
|
|
(483,477)
|
|
2,578,261
|
|
Prepaid
expenses
|
|
|
(1,259,835)
|
|
(113,566)
|
|
Accounts
payable
|
|
|
749,352
|
|
1,161,279
|
|
Accrued expenses and
other liabilities
|
|
|
451,298
|
|
(721,062)
|
|
Deferred
revenue
|
|
|
(78,492)
|
|
(13,564)
|
|
Accrued compensation -
related party
|
|
|
(108,550)
|
|
(29,302)
|
|
Accrued
interest
|
|
|
206,163
|
|
656,734
|
|
Net cash used in
operating activities
|
|
|
(11,476,014)
|
|
(1,149,609)
|
Cash flows
from investing activities:
|
|
|
|
|
Cash acquired
(consideration) pursuant to business combination
|
|
(5,442,966)
|
|
106,913
|
Issuance of related
party receivable
|
|
-
|
|
(10,000)
|
Purchase of property,
equipment and software
|
|
(13,585)
|
|
(266,390)
|
Deposits
|
|
(67,431)
|
|
98,835
|
|
Net cash provided by
(used in) investing activities
|
|
|
(5,523,982)
|
|
(70,642)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from related
party advances
|
|
-
|
|
22,856
|
Repayments to
factor
|
|
(39,520)
|
|
(1,684,703)
|
Proceeds from venture
debt
|
|
-
|
|
862,500
|
Issuance of loans
payable
|
|
2,626,050
|
|
1,701,044
|
Repayments of
promissory notes and loans payable
|
|
(2,002,731)
|
|
-
|
Issuance of
convertible notes payable
|
|
5,078,650
|
|
-
|
Proceeds from initial
public offering
|
|
10,000,002
|
|
-
|
Exercise of
over-allotment option with public offering, net
|
|
1,364,997
|
|
-
|
Exercise of
warrants
|
|
1,768,046
|
|
-
|
Proceeds from sale of
Series A-3 preferred stock
|
|
-
|
|
355,945
|
Subscription
receivable from Series A-3 preferred stock
|
|
-
|
|
22,677
|
Proceeds from sale of
Series CF preferred stock
|
|
-
|
|
286,518
|
Offering
costs
|
|
(2,116,957)
|
|
(104,996)
|
|
Net cash provided by
financing activities
|
|
|
|
16,678,537
|
|
1,461,841
|
Net increase in
cash and cash equivalents
|
|
(321,459)
|
|
241,590
|
Cash and cash
equivalents at beginning of period
|
|
575,986
|
|
40,469
|
Cash and cash
equivalents at end of period
|
|
$
254,527
|
|
$
282,059
|
|
The accompanying
notes are an integral part of these financial
statements.
|
DIGITAL BRANDS
GROUP, INC
|
STATEMENT OF
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
254,527
|
|
$
575,986
|
|
Accounts receivable,
net
|
|
|
272,264
|
|
35,532
|
|
Due from factor,
net
|
|
|
1,094,309
|
|
210,033
|
|
Inventory
|
|
|
2,327,542
|
|
1,163,279
|
|
Prepaid expenses and
other current assets
|
|
|
1,525,818
|
|
23,826
|
|
Total current
assets
|
|
|
5,474,460
|
|
2,008,656
|
Deferred offering
costs
|
|
367,696
|
|
214,647
|
Property, equipment
and software, net
|
|
|
97,862
|
|
62,313
|
Goodwill
|
|
|
|
17,771,031
|
|
6,479,218
|
Intangible assets,
net
|
|
|
16,779,126
|
|
7,494,667
|
Deposits
|
|
|
|
174,109
|
|
92,668
|
|
Total assets
|
|
|
$
40,664,284
|
|
$
16,352,169
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
$
6,855,352
|
|
$
5,668,703
|
|
Accrued expenses and
other liabilities
|
|
1,853,954
|
|
1,245,646
|
|
Deferred
revenue
|
|
193,023
|
|
1,667
|
|
Due to related
parties
|
|
232,635
|
|
441,453
|
|
Contingent
consideration liability
|
|
10,527,910
|
|
-
|
|
Convertible notes,
current
|
|
100,000
|
|
700,000
|
|
Accrued interest
payable
|
|
855,729
|
|
737,039
|
|
Note payable -
related party
|
|
299,489
|
|
137,856
|
|
Venture debt,
current
|
|
300,000
|
|
5,854,326
|
|
Loan payable,
current
|
|
1,796,000
|
|
992,000
|
|
Promissory note
payable, current
|
|
655,000
|
|
4,500,000
|
|
Total current
liabilities
|
|
23,669,092
|
|
20,278,690
|
Convertible note
payable, net
|
|
2,793,385
|
|
1,215,815
|
Loan
payable
|
|
1,677,213
|
|
709,044
|
Promissory note
payable
|
|
2,845,000
|
|
-
|
Venture debt, net of
discount
|
|
5,701,755
|
|
-
|
Derivative
liability
|
|
2,486,843
|
|
-
|
Warrant
liability
|
|
28,195
|
|
6,265
|
|
Total
liabilities
|
|
39,201,483
|
|
22,209,814
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
|
|
Series Seed
convertible preferred stock, $0.0001 par, no shares and 20,714,518
shares, authorized,
|
|
|
|
|
|
issued and outstanding
at June 30, 2021 and December 31, 2020, respectively
|
|
-
|
|
2,071
|
|
Series A convertible
preferred stock, $0.0001 par, no shares and 14,481,413 shares
authorized, no shares
|
|
|
|
|
|
and 5,654,072 shares
issued and outstanding at September 30, 2021, and December
31, 2020, respectively
|
-
|
|
565
|
|
Series A-2
convertible preferred stock, $0.0001 par, no shares and 20,000,000
shares authorized, no shares
|
|
|
|
|
and 5,932,742 shares
issued and outstanding at September 30, 2021, and December
31, 2020, respectively
|
-
|
|
593
|
|
Series A-3
convertible preferred stock, $0.0001 par, no shares and 18,867,925
shares authorized, no shares
|
|
|
|
|
and 9,032,330 shares
issued and outstanding at September 30, 2021, and December
31, 2020, respectively
|
-
|
|
904
|
|
Series CF convertible
preferred stock, $0.0001 par, no shares and 2,000,000 shares
authorized, no shares
|
|
|
|
|
|
and 836,331 shares
issued and outstanding at September 30, 2021, and December
31, 2020, respectively
|
-
|
|
83
|
|
Series B convertible
preferred stock, $0.0001 par, no shares and 20,714,517 shares
authorized, no shares
|
|
|
|
|
|
and 20,714,517 shares
issued and outstanding at September 30, 2021, and December
31, 2020, respectively
|
-
|
|
2,075
|
|
Undesignated
preferred stock, $0.0001 par, 10,000,000 shares and 936,144 shares
authorized, 0 shares
|
|
|
|
|
|
issued and
outstanding as of both September 30, 2021 and December 31,
2020
|
|
-
|
|
-
|
|
Common stock, $0.0001
par, 200,000,000 and 110,000,000 shares authorized, 12,627,488 and
664,167 shares
|
|
|
|
|
issued and outstanding
as of both September 30, 2021 and December 31, 2020,
respectively
|
|
1,263
|
|
66
|
|
Additional paid-in
capital
|
|
57,467,015
|
|
27,481,995
|
|
Accumulated
deficit
|
|
(56,005,477)
|
|
(33,345,997)
|
|
Total
stockholders' equity (deficit)
|
|
1,462,801
|
|
(5,857,645)
|
|
Total
liabilities and stockholders' equity (deficit)
|
|
$
40,664,284
|
|
$
16,352,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checks:
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,263
|
|
|
|
|
|
|
|
|
|
|
57,467,015
|
|
|
|
|
|
|
|
|
|
|
(56,005,477)
|
|
|
|
|
|
|
|
|
|
|
1,462,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Digital native first brands are brands
founded as e-commerce driven businesses, where online sales
constitute a meaningful percentage of net sales, although they
often subsequently also expand into wholesale or direct retail
channels., Unlike typical e-commerce brands, as a digitally native
vertical brand we control our own distribution, sourcing products
directly from our third-party manufacturers and selling directly to
the end consumer. 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. We have strategically expanded into an omnichannel brand
offering these styles and content not only on-line but at selected
wholesale and retail storefronts. We believe this approach allows
us opportunities to successfully drive Lifetime Value ("LTV") while
increasing new customer growth.
Digital Brands Group, Inc. Company Contact
Hil Davis, CEO
Email: invest@digitalbrandsgroup.co
Phone: (800) 593-1047
View original content to download
multimedia:https://www.prnewswire.com/news-releases/digital-brands-group-reports-third-quarter-2021-financial-results-301422676.html
SOURCE Digital Brands Group, Inc.