Solo Brands Inc

NOTE 3 -Restructuring, Contract Termination and Impairment Charges

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

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

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

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

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

Underperforming Marketing Agreements

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

Charges Related to the IcyBreeze Reporting Unit

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

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

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

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

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

NOTE 4 –Revenue

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

NOTE 5 –Acquisitions

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

2023 Acquisitions

TerraFlame

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

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

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

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

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

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

IcyBreeze

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

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

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

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

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

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

NOTE 6 –Inventory

Inventory consisted of the following (in thousands):

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

NOTE 7– Prepaid Expenses and Other Current Assets

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

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

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

NOTE 8 –Property and Equipment, net

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

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

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

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

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

NOTE 9 –Intangible Assets, net

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

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

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

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

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

2024 Impairment Testing

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

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

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

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

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

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

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

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

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

2023 Impairment Testing

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

Amortization Expense

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

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

NOTE 10 –Goodwill

The carrying value of goodwill was as follows:

Impairment Testing

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

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

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

2024 Impairment Testing

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

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

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

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

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

2023 Impairment Testing

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

NOTE 11 –Accrued Expenses and Other Current Liabilities

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

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

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

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

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

NOTE 12 –Long-Term Debt

Long-term debt consisted of the following (dollars in thousands):

Long-term debt, net approximates fair value based on the variable nature of interest at market rates and is valued using Level 2 inputs within the fair value hierarchy, as defined in Note 2, Significant Accounting Policies, in this Annual Report. See Note 18, Fair Value Measurements of this Annual Report for more information regarding the fair value considerations for long-term debt, net.

Interest expense related to long-term debt was $14.0 million and $11.0 million for the years ended December 31, 2024 and 2023, respectively.

Revolving Credit Facility and Term Loan

On May 12, 2021, the Company entered into a credit agreement with a bank (the “Revolving Credit Facility”). On June 2, 2021, September 1, 2021 and May 22, 2023, the Company entered into amendments to the Revolving Credit Facility, which resulted in an increase in the maximum amount available under the Revolving Credit Facility to $350 million. Under the terms of the Revolving Credit Facility, the Company has access to certain swing line loans and up to $20.0 million in letters of credit, with $1.4 million of letters of credit issued and outstanding as of December 31, 2024. The Revolving Credit Facility matures on May 12, 2026 and bears interest at a variable rate equal to either the base rate (as defined in the credit agreement) or SOFR plus an applicable margin. Interest is due, at a minimum, on a quarterly basis, with principal in respect of Revolving Credit Facility, not due until maturity. During the year ended December 31, 2024 the Company made draws of $80.0 million and payments of $71.0 million under the Revolving Credit Facility. Availability for future draws on the Revolving Credit Facility was $279.6 million and $289.4 million as of December 31, 2024 and 2023, respectively.

In addition to the above, the amendment on September 1, 2021 included a provision for the Company to borrow up to $100.0 million under a term loan (the “Term Loan”). The proceeds from the Term Loan were used to fund the Chubbies acquisition (see Note 5 for information on the acquisition). The Term Loan matures on May 12, 2026 and bears interest at a variable rate equal to either the base rate (as defined in the credit agreement) or SOFR plus an applicable margin. The Company was required to make quarterly principal payments on the Term Loan beginning on December 31, 2021. The Company was in compliance with all covenants under the credit agreement as of December 31, 2024.

As of December 31, 2024, the future maturities of principal amounts of our total debt obligations, excluding lease obligations (see Note 14 for future maturities of lease obligations), for the next five years and in total, consists of the following (in thousands):

(1) The debt matures in 2026, and, as a result, there are no required payments in 2027 or thereafter.

NOTE 13 –Other Non-Current Liabilities

Significant other non-current liabilities were as follows (in thousands):

(1)Accrued advertising was completely alleviated as of December 31, 2024, as a result of the previously non-current payable to a former marketing barter partner becoming current as of December 31, 2024 and being reclassified to accounts payable on the consolidated balance sheets.

NOTE 14 –Leases

The following tables present the components of the leased assets and lease liabilities and their classification in the Company's consolidated balance sheets (in thousands):

The components of lease expense were as follows (in thousands):

The weighted average remaining lease term and discount rate are presented in the following table:

Cash flow and other information related to leases is included in the following table (in thousands):

Future maturities of lease liabilities at December 31, 2024 are presented in the following table (in thousands):

As of December 31, 2024, the Company had entered into a lease agreement for an additional retail store front with an estimated aggregate ROU asset of $0.6 million, which has not yet commenced. This lease is expected to commence in 2025 with a lease term of 10 years.

NOTE 15 –Equity-Based Compensation

Summary of Equity-Based Compensation Expense

The table below summarizes equity-based compensation expense recognized by award type (in thousands):

The following table summarizes the Company’s total unrecognized equity-based compensation as of December 31, 2024 (in thousands):

Excess tax benefits (detriments) related to equity-based compensation were $(1.2) million and $(0.5) million for the years ended December 31, 2024 and 2023.

Incentive Units

Prior to the IPO, certain employees of the Company purchased incentive units in Solo Stove Holdings, LLC for $0.000001 per unit. The majority of the incentive units were issued in December 2020 with additional issuances in January and March 2021. The Company used the Monte Carlo simulation model to determine the fair value of the incentive units. Each incentive award consists of service-based units (representing one-third (1/3) of the number of incentive units) and performance-based units (representing two-thirds (2/3) of the number of incentive units).

The incentive units with a service condition are scheduled to vest over four years with 25% vesting on the one-year anniversary of the grant date and the remaining 75% of such service-based units vesting in substantially equal monthly installments over the following three years, subject to the employee’s continued employment through each applicable vesting date. Additionally, the vesting of the service-based units will accelerate upon the occurrence of a sale transaction prior to the employee’s termination of employment. The IPO did not meet the definition of a sale transaction per the incentive unit agreement. Therefore, the vesting of the service-based units did not accelerate upon the IPO, nor did the vesting schedule change.

Determining the fair value of awards requires judgment. The Monte Carlo simulation and Black-Scholes models were used to estimate the fair value of awards that have service, performance and/or market vesting conditions. The assumptions used in these models require the input of subjective assumptions, which for the incentive units were as follows:

A summary of the common units is as follows for the periods indicated:

(1) Note there were performance and service-based units that vested by December 31, 2024. However, none of them are exercisable due to the Stockholders Agreement, as described above.

The total fair value of incentive units vested and converted into shares during 2024 and 2023 was $0.4 million and $12.8 million, respectively.

Incentive Award Plan

In October 2021, the Board adopted, and the stockholders of the Company approved, the 2021 Incentive Award Plan (“Incentive Award Plan”), which became effective on October 28, 2021. Upon the Incentive Award Plan becoming effective, there were 10,789,561 shares of Class A common stock authorized under the Incentive Award Plan. The shares of Class A common stock authorized under the Incentive Award Plan will increase annually, beginning on January 1, 2023 and continuing through 2031, by the lesser of (i)5% of the then outstanding common stock, or (ii) a smaller amount as agreed by the Board. As of December 31, 2024,15,580,013 shares of Class A common stock were authorized under the Incentive Award plan.

Restricted Stock Units

The Company grants restricted stock units (“RSUs”) under the Incentive Award Plan. The RSUs are unfunded, unsecured rights to receive, on the applicable settlement date, shares of our Class A common stock or an amount in cash or other consideration determined by the plan administrator to be of equal value as of such settlement date. RSUs are issued to eligible employees under the Incentive Award Plan, subject to the employee’s continued employment with the Company through the applicable vesting date. The RSUs generally vest between three andfour years. Expense related to RSUs granted to non-employee directors is recognized on a straight-line basis over the vesting period, with newly appointed non-employee directors grants and grants to continuing non-employee directors vesting over aone-year period, while historically newly appointed non-employee directors grants vested over athree-year period.

The following table summarizes the activity related to the Company’s restricted stock units:

The total weighted average grant date fair value of RSUs vested and converted into shares during 2024 and 2023 was $4.1 million and $4.4 million, respectively.

Executive Performance Stock Units

In January 2024, the Company granted Executive Performance Stock Units (“EPSUs”) to the Chief Executive Officer (“CEO”) under the Incentive Award Plan. The EPSUs are unfunded, unsecured rights to receive, if the Company achieves certain stock price targets (measured as a volume-weighted stock price over 100 consecutive trading days) at any time until the three and half year anniversary of the grant date and the grantee remains an employee of the Company, shares of our Class A common stock or an amount in cash of equal fair market value of a share on the day immediately preceding the settlement date. As the EPSUs contain a market condition, the Company will recognize the full amount of compensation expense regardless of if the stock price targets are achieved, but only as long as the grantee remains an employee of the Company.

In connection with the grant of SPSUs in April 2024, the Company modified the EPSUs previously granted to increase the number of awards granted, lower the stock price targets and change the number of days used for the volume-weighted stock price measure to 30 consecutive trading days.

The EPSUs are divided into four tranches. The fair value of the EPSUs granted in the year ended December 31, 2024 was derived using a Monte Carlo simulation. It was determined that mid-points between $1.99 to $2.17 for the pre-modification awards and $2.23 to $2.66 post-modification were the most reasonable estimate of grant date fair value for each of thefour tranches. The grant date fair values of the EPSUs are a non-recurring measurement and are considered a level 3 estimate. See Note 2 - Significant Accounting Policies for additional information about the fair value framework and the levels within. Additionally, due to the full vesting of the awards upon achievement of the stock price target and continued employment, or within 180 days of termination without cause or Good Reason (as defined in the employment agreement previously filed as referenced in Exhibit 10.26), the period over which compensation expense will be recognized was derived through the same Monte Carlo simulations.

The table below contains the derived service periods over which compensation expense will be recognized for each of thefour tranches of EPSUs:

The following table summarizes the activity related to the Company’s executive performance stock units:

Special Performance Stock Units

In April 2024, the Company granted SPSUs under the Incentive Award Plan. The SPSUs are unfunded, unsecured rights to receive, if the Company achieves certain stock price targets (measured as a volume-weighted stock price over 30 consecutive trading days) at any time until the three year anniversary of the grant date and the grantee remains an employee of the Company, shares of our Class A common stock or an amount in cash of equal fair market value of a share on the day immediately preceding the settlement date. As the SPSUs contain a market condition, the Company will recognize the full amount of compensation expense regardless of if the stock price targets are achieved, but only as long as the grantee remains an employee of the Company.

The SPSUs are divided into three tranches. The fair value of the SPSUs granted in the twelve months ended December 31, 2024 were derived using a Monte Carlo simulation. It was determined that mid-points between $1.07 to $1.43 were the most reasonable estimate of grant date fair value for each of thethree tranches. The grant date fair values of the SPSUs are a non-recurring measurement and are considered a level 3 estimate. The SPSUs have a requisite service period ofthree years over which compensation expense will be recognized.

The following table summarizes the activity related to the Company’s special performance stock units:

Performance Stock Units

In October 2022 and subsequent to, the Company has granted performance stock units (“PSUs”) under the Incentive Award Plan. The PSUs were unfunded, unsecured rights to receive, if the Company achieved an internally-derived performance target within atwo year period after January 1, 2023 during a fiscal quarter, shares of our Class A common stock or an amount in cash of equal fair market value of a share on the day immediately preceding the settlement date. As of December 31, 2023, the Company assessed the likelihood of achieving the internally-derived performance target for the PSUs granted in October 2022 and determined that it was not probable to be achieved. As such, the equity-based compensation recognized from the grant date through the date of assessment, or December 31, 2023, was reversed. As of December 31, 2024, the remaining unvested PSUs as of December 31, 2023 were forfeit due to lack of achievement of the internally-derived performance target.

In limited circumstances, the Company has and will grant PSUs with differing targets and/or vesting periods than those noted above, at the discretion of the plan administrator.

The following table summarizes the activity related to the Company’s performance stock units:

No PSUs vested and converted into shares during 2024 or 2022. The total fair value of PSUs vested and converted into shares during 2023 was $0.1 million.

Stock Options

Upon IPO, the Company granted stock options under the Incentive Award Plan. Stock options provide for the purchase of shares of the Company’s Class A common stock in the future at an exercise price set on the grant date. Unless otherwise determined by the plan administrator and except for certain substitute options granted in connection with a corporate transaction, the stock option's exercise price will not be less than 100% of the fair market value of the underlying share on the date of grant. The options vest over four years, with 25% vesting on the first anniversary of the grant date and the remainder vesting in substantially equal quarterly installments over the following three years, subject to the employee’s continued employment with the Company through the applicable vesting date.

The following summary sets forth the stock option activity under the Incentive Award Plan:

(1) The aggregate intrinsic value is zero because the closing Class A common stock price at the end of the fiscal year is less than the weighted-average exercise price of the options.

The fair value of each option was estimated at the grant date using the Black-Scholes method with the following assumptions:

Employee Stock Purchase Plan

In October 2021, the Board adopted, and the stockholders of the Company approved, the 2021 Employee Stock Purchase Plan (the “ESPP”). The maximum number of shares of common stock which will be authorized for sale under the ESPP is equal to the sum of (a)1,618,434 shares of Class A common stock and (b) an annual increase on the first day of each fiscal year beginning in 2023 and ending in 2031, equal to the lesser of (i)0.5% of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the Board; provided, however, no more than 6,473,736 shares of common stock may be issued under or transferred pursuant to rights granted under Section 423 Component (as defined within the ESPP) of the ESPP (which numbers may be adjusted pursuant to the ESPP).

As of December 31, 2024,2,097,479 shares of Class A common stock were authorized for sale under the ESPP and awards with respect to 395,243 shares of Class A common stock have been issued under the ESPP.

NOTE 16 –Income Taxes

Provision for Income Taxes

Income (loss) before income taxes was as follows (in thousands):

The provision (benefit) for income taxes comprises (in thousands):

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income (loss) before the provision for income taxes. The sources and tax effects of the differences are as follows (dollars in thousands):

The Company’s effective income tax rates for the years ended December 31, 2024 and 2023 were 4.7% and 15.6%, respectively. The decrease in the amount of income tax benefit for the year ended December 31, 2024 when compared to the year ended December 31, 2023 was primarily driven by the book losses in the prior year due to the restructuring, contract termination and impairment charges (see Note 3, Restructuring, Contract Termination and Impairment Charges for more information) which exceeded those recognized in 2024, as well as by the increase in the Company’s valuation allowance, as compared to the prior year which included a net release of the Company’s valuation allowance.

Deferred Tax Assets and Liabilities

Significant components of the Company's net non-current deferred tax assets and liabilities are as follows (in thousands):

As of December 31, 2024, the Company has $3.0 million federal net operating losses ("NOLs") and has state NOLs of $0.6 million. The state NOLs will begin to expire in 2038, while the federal NOLs are indefinite lived. As of December 31, 2024, the Company hasno foreign NOLs. The majority of the NOLs were generated from losses incurred in 2024, of which future realizability of these tax benefits will be subject to limitations on future taxable income and interest.

As described in Note 1, Organization and Description of Business, in connection with the IPO and Reorganization Transactions, the organizational structure was converted to an umbrella partnership C-Corporation with Solo Brands, Inc. having a controlling equity interest in Holdings. Due to goodwill and intangible impairments, the difference between the financial reporting basis and tax basis of this investment is a deferred tax asset of $55.4 million as of December 31, 2024.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), projected taxable income, and tax-planning strategies in this assessment. In order to fully realize the deferred tax asset, the Company has considered the reversal of its deferred tax liabilities. Beginning in the quarter ended September 30, 2024, the Company concluded, based on the weight of all available positive and negative evidence, that all of the partnership deferred tax assets, on a more likely than not basis, will not be realized. As a result, a valuation allowance on the partnership deferred tax assets was established. As of December 31, 2024, there has been no change in the valuation allowance assessment related to Oru’s deferred tax assets, with a full valuation allowance remaining in place.

The changes in gross unrecognized tax positions are as follows (in thousands):

The Company recognizes interest and penalties, if any, related to unrecognized tax positions in income tax expense (benefit) on the consolidated statements of operations and comprehensive income (loss), which were nominal in any period presented.

Solo Brands, Inc. was formed in June 2021 and did not engage in any operations prior to the Reorganization Transactions. The statute of limitations remains open for tax years beginning in 2021 for Solo Brands, Inc. Additionally, although Holdings is treated as a partnership for U.S. federal and state income tax purposes, it is still required to file an annual U.S. Return of Partnership Income, which is subject to examination by the Internal Revenue Service ("IRS"). The statute of limitations remains open for tax years beginning in 2020 for Holdings.

Pursuant to its election under Section 754 of the Internal Revenue Code (the "Code"), the Company expects to obtain an increase in its share of the tax basis in the net assets of Holdings when LLC Interests are redeemed or exchanged by the non-controlling interest holders and other qualifying transactions. The Company plans to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interests occurs. The Company intends to treat any redemptions and exchanges of LLC Interests by the non-controlling interest holders as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On October 27, 2021, the Company entered into a tax receivable agreement with the then-existing non-controlling interest holders (the "Tax Receivable Agreement") that provides for the payment by the Company to the non-controlling interest holders of 85% of the amount of any tax benefits that the Company actually realizes, or in some cases is deemed to realize, as a result of (i) increases in its share of the tax basis in the net assets of Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments"). The Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in Holdings or the Company. The rights of each non-controlling interest holder under the Tax Receivable Agreement are assignable to transferees of its LLC Interests.

During the year ended December 31, 2024, there wereno redemptions of LLC Interests that would have resulted in an increase in the tax basis of the Company’s investment in Holdings subject to the provisions of the Tax Receivable Agreement. During the year ended December 31, 2024, inclusive of interest, no payments were made to the members of Holdings pursuant to the Tax Receivable Agreement. As of December 31, 2024, there wereno payments due under the Tax Receivable Agreement.

NOTE 17 –Commitments and Contingencies

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

NOTE 18 –Fair Value Measurements

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within Note 2, Significant Accounting Policies.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

There were no transfers between the valuation hierarchy Levels 1, 2 and 3 for years ended December 31, 2024 and 2023.

The table below reconciles beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Contingent Consideration

The contingent consideration as of December 31, 2024 consists of an earnout and post-closing payment, resulting from acquisition activity in 2023 and rely on forecasted results through the expected earnout and post-closing payment periods. The fair value of the earnout is valued using a Monte Carlo simulation and the fair value of the post-closing payment is valued using a threshold and cap (capped call) structure. These contingent considerations represent stand-alone liabilities that are measured at fair value on a recurring basis each reporting date using inputs that are unobservable and significant to the overall fair value measurement and are considered a level 3 estimate. See Note 5, Acquisitions for additional information. The contingent consideration liabilities are recorded in accrued expenses and other current liabilities and other non-current liabilities on the consolidated balance sheets. Changes in fair value of contingent consideration are recorded in selling, general and administrative expenses.

On August 22, 2024, the Company and the selling parties of TerraFlame executed an amendment to the Equity Purchase Agreement, modifying specific terms related to the achievement of the contingent consideration thresholds, resulting in an increase in fair value and payment of $3.0 million of the 2023 Earnout, which was paid upon execution of the amendment and recorded in selling, general and administrative expenses. In addition, the post-closing payment terms were amended to provide additional earnout calculation dates to the previously defined post-closing payments. This amendment resulted in the revision of the fair value of the post-closing payment contingent consideration, using the same threshold and cap (capped call) structure as employed for the prior valuations, with the total change in fair value (gain) loss of $1.4 million included in the applicable financial statements as of December 31, 2024.

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, contingent consideration and bank indebtedness. The carrying amount of cash, accounts receivable, and accounts payable, approximates fair value due to the short-term maturity of these instruments.

NOTE 19 –Equity

Class A Common Stock

The Company has 468,767,205 shares of Class A common stock, par value $0.001 per share, authorized. Holders of Class A common stock are entitled to one vote per share on all matters presented to the stockholders in general. In the event of liquidation, dissolution or winding up, each holder of Class A common stock will be entitled to a pro rata distribution of any assets available for distribution to common stockholders.

During the year ended December 31, 2023, pursuant to the Stock Purchase Agreements, dated as of May 10, 2023 and July 12, 2023, by the Company and the selling stockholders party thereto, the Company repurchased 5,605,509 and 627,286 shares of its Class A common stock for $28.0 million and $3.1 million, respectively, which shares were subsequently retired in accordance with resolutions of the Board of Directors’, which is classified as a non-cash financing activity within the consolidated statements of cash flows.

Class B Common Stock

The Company has 50,000,000 shares of Class B common stock, par value $0.001 per share, authorized. Shares of Class B common stock will only be issued in the future to the extent necessary to maintain a one-to-one ratio between the number of LLC Interests held by the Continuing LLC Owners and the number of shares of Class B common stock issued to the Continuing LLC Owners. Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be cancelled on a one-for-one basis if the Company, at the election of the Continuing LLC Owners, redeem or exchange their LLC Interests pursuant to the terms of the Holdings LLC Agreement. Holders of Class B common stock are entitled to one vote per share on all matters presented to the stockholders generally. In the event of liquidation, dissolution or winding up, holders of Class B common stock shall be entitled to receive $0.001 per share and will not be entitled to receive any distribution of the Company’s assets.

Class A Units

Pursuant to the 2020 Agreement, Holdings has authorized 250,000,000 Class A units for issuance at a price of $1 per unit. For so long as any of the Class A units remain outstanding, the Class A units will rank senior to the Class B units discussed below. Holders of Class A units are entitled toone vote per share on all matters to be voted upon by the members. When and if distributions are declared by the Company’s Board, holders of Class A units are entitled to ratably receive distributions until the aggregate unreturned capital with respect to each holder’s Class A units has been reduced to zero. Upon dissolution, liquidation, distribution of assets, or other winding up, the holders of Class A units are entitled to receive ratably the assets available for distribution after payment of liabilities and before the holders of Class B units and incentive units (see Note 15).

Class B Units

Pursuant to the 2020 Agreement, Holdings has authorized 175,000,000 Class B units for issuance at a price of $1 per unit. Holders of Class B units are entitled toone vote per share on all matters to be voted upon by the members. Holders of Class A units and Class B units generally vote together as a single class on all matters presented to the Company’s members for their vote or approval. When and if distributions are declared by the Company’s Board, holders of Class B units are entitled to ratably receive distributions until the aggregate unreturned capital with respect to each holder’s Class B units has been reduced to zero. Upon dissolution, liquidation, distribution of assets, or other winding up, the holders of Class B units are entitled to receive ratably the assets available for distribution after payment of liabilities and Class A unitholders and before the holders of incentive units.

Pursuant to the 2020 Agreement, the Company’s Board may authorize Holdings to create and/or issue additional equity securities, provided that the number of additional authorized incentive units do not exceed 10% of the outstanding Class A and Class B units without the prior written consent of the majority investors. Upon issuance of additional equity securities, all unitholders shall be diluted with respect to such issuance, subject to differences in rights and preferences of different classes, groups, and series of equity securities, and the Company’s Board shall have the power to amend the schedule of unitholders to reflect such additional issuances and dilution.

NOTE 20 –Net Income (Loss) Per Class A Common Stock

Basic net income (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Solo Brands, Inc. by the weighted average number of shares of Class A common stock outstanding during the period. Diluted net income (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Solo Brands, Inc. by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

The following table sets forth the calculation of the basic and diluted net income (loss) per share for the Company’s Class A common stock (in thousands, except per share data):

During the years ended December 31, 2024 and 2023,0.1 million and 0.2 million options, respectively, and 2.1 million and 0.8 million restricted stock units, respectively, were not included in the computation of diluted net income (loss) per share because their effect would have been anti-dilutive. The Company has determined that the performance stock units and the shares of Class B common stock will in all cases neither be dilutive nor anti-dilutive and has excluded them from the calculation of net income (loss) per Class A common stock for all periods presented.

The shares of Class B common stock and the granted PSUs are subject to a contingency that is not based on the Company’s share price or the price of the convertible instrument, as disclosed in Note 15, Equity-Based Compensation. As such, contingently convertible shares where conversion is not tied to a market price trigger or price of the convertible instrument are excluded from the calculation of diluted EPS until such time as the contingency has been resolved under the if-converted method. Additionally, the Company has issued EPSUs that contain a market condition and vest immediately upon satisfaction of said market condition. As a result of the immediate vesting feature, the EPSUs will in all cases be neither dilutive nor anti-dilutive. Similar to the EPSUs, the SPSUs contain a market condition. However, the SPSUs do not contain an immediate vesting feature, with vesting achieved over the requisite service period ofthree years. As such, the SPSUs, upon achievement of the market condition, will be considered for dilution or anti-dilution through the remainder of the vesting period. Until such time that the market condition is achieved, the SPSUs are considered neither dilutive nor anti-dilutive.

As of December 31, 2024, no shares of the EPSUs or SPSUs were considered dilutive or anti-dilutive.

NOTE 21 -Variable Interest Entities

As of December 31, 2024 and 2023, we consolidatedone entity that is a VIE, that relates to a manufacturing entity for Oru, for which we are the primary beneficiary. Through a management agreement governing the entity, we manage the entity and handle all day-to-day operating decisions. Accordingly, we have the decision-making power over the activities that most significantly impact the economic performance of our VIE and an obligation to absorb losses or receive benefits from the VIE that could potentially be significant to the VIE. These decisions and significant activities include, but are not limited to, manufacturing schedules, production processes, units of production and types of products. The Company is contractually obligated to provide financial support to the VIE.

Total assets of the VIE included on the consolidated balance sheet as of December 31, 2024 and 2023 were $2.2 million and $3.7 million, respectively. Total liabilities of the VIE included on the consolidated balance sheets as of December 31, 2024 and 2023 were $2.8 million and $3.9 million, respectively.

The VIE’s assets may only be used to settle the VIE’s obligations and may not be used for other consolidated entities. The VIE’s liabilities are non-recourse to the general credit of the Company’s other consolidated entities.

NOTE 22 -Segments

The Company conducts its worldwide operations through separate business segments, each of which represents major product lines. Operations are conducted in the U.S. and various foreign countries, primarily in Europe, Canada and Australia. Segment reporting is based upon the “management approach,” i.e., how we organize operating segments for which separate financial information is (1) available and (2) evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer.

The Company’stwo reportable segments are as follows:

Our remaining operating segments that did not meet the criteria necessary to be considered a reportable segment are aggregated into All Other.

Our CODM relies on internal management reporting that analyzes our segment's EBITDA, which he utilizes to evaluate performance and allocate resources. As segment assets are not reported to or used by the CODM to measure business performance or allocate resources, total segment assets are not presented below.

The following table presents the percentage of net sales attributable to the Company’stwo reportable segments:

Within our Chubbies segment, a single customer contributed 19.8% and 20.3% of net sales for the years ended December 31, 2024 and 2023, respectively. Within our Solo Stove segment, no single customer contributed more than 10% of net sales for the years ended December 31, 2024 and 2023.

Our sales to foreign customers, mostly attributable to the Solo Stove segment, were $31.5 million and $29.7 million for the years ended December 31, 2024 and 2023, respectively. The following table presents the percentage of international net sales attributable to ourtwo reportable segments:

Net sales to no individual country outside the U.S. accounted for more than 5% of our net sales for the years ended December 31, 2024 and 2023.

1 Includes net sales of our operating segments that did not meet the requirements to be considered a reportable segment, which includes net sales of Oru, ISLE and IcyBreeze, as well as the consolidating elimination entries that are not specific to our reportable segments.

2 Cost of goods sold includes $18.3 million of inventory obsolescence that has been included for reconciliation purposes, but is not considered a component of Segment EBITDA for purposes of resource allocation by the CODM.

3 Includes expenses for shipping and fulfillment, along with other variable expenses incurred in the normal course of business.

4 Includes corporate general and administrative service expenses of $30.8 million and $32.3 million the years ended December 31, 2024 and 2023, respectively, with the remaining non-segment operating expenses being primarily fixed costs.

Net sales exclude all intercompany sales between our reportable segments and All Other, as well as related profits, which were not material for any of the years ended December 31, 2024 and 2023.

NOTE 23 -Related Parties

Related Parties

The Company occasionally enters into transactions with related parties in the normal course of business. One related party, which is wholly owned by an employee of Solo Brands and this employee’s immediate family, purchases merchandise from Solo Brands to sell in a certain geographical market, which is included in net sales on the consolidated statements of operations and comprehensive income (loss). There were no significant expenses associated with related parties for the years ended December 31, 2024 or 2023.

The accounts receivable associated with this related party is included in accounts receivable, net on the consolidated balance sheets. There were no significant liabilities due to related parties as of the years ended December 31, 2024 or 2023.

NOTE 24 -Subsequent Events

Subsequent to December 31, 2024, the Company identified the following significant events, which it has evaluated under the applicable guidance in ASC 855. Based on our evaluation, each of the following is considered as a non-recognized sub-event, as the conditions disclosed did not exist at the balance sheet date of December 31, 2024.

Subsequent to December 31, 2024, the Company drew an additional $277.3 million under its Revolving Credit Facility increasing its total indebtedness to $428.0 million as of March 12, 2025. We are evaluating strategies to refinance our existing debt. These strategies could include restructuring our debt, issuing new debt or entering into other financing arrangements. In addition, our plans are focused on improving our results and liquidity through a variety of operational improvements throughout 2025, including decreasing costs through a reduction in force and closures of select distribution centers. See the Going Concern section in Note 1, Organization and Description of Business for additional information regarding our conclusions that raised substantial doubt about our ability to operate as a going concern.

On February 18, 2025, the Board appointed John Larson, a member of the Company’s Board, as Interim President and CEO. Mr. Larson succeeds Chris Metz, who resigned as the Company’s President and CEO. With the resignation of Chris Metz,1.5 million EPSUs and 0.2 million RSUs, with a fair value of $3.5 million and $0.5 million, respectively, were immediately forfeited. Mr. Larson will receive cash compensation in the amount of $60 thousand per month and a one-time equity award of 1.0 million RSUs that will be granted following the filing of this Annual Report on Form 10-K, and will vest upon the appointment of a permanent President and CEO, and only if on such date, Mr. Larson has continued to serve as Interim President and CEO.