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: [email protected] 
Phone: (800) 593-1047

Related Links

https://www.digitalbrandsgroup.co 

https://ir.digitalbrandsgroup.co 

SOURCE Digital Brands Group, Inc.

Originally published at https://www.prnewswire.com/news-releases/digital-brands-group-reports-fourth-quarter-and-fiscal-year-2023-financial-results-302116664.html
Some images courtesy of https://pixabay.com

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