Q4 2023 Digital Brands Group Inc Earnings Call

Participants

John McNamara; IR; Digital Brands Group, Inc.

Hil Davis; CEO; Digital Brands Group, Inc.

Presentation

Operator

Greetings and welcome to Digital Brands Group, Inc. fourth-quarter and full year 2023 earnings call. At this time, all participants are in a listen-only mode and a question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded It is now my pleasure to introduce John McNamara, Investor Relations. Thank you. You may begin.

John McNamara

Thank you. Good afternoon, everyone, and welcome to the Digital Brands Group fourth-quarter and fiscal year 2023 ernings conference call and webcast. With us on the line from management is Chief Executive Officer, Bill Davis. He'll will begin the call with an overview of the quarter and the full year, and then we will open up the line for questions. As usual, we will remind you that this call may contain forward-looking statements as defined in Section 27 A of the Securities Act of 1933 as amended, including statements regarding, among other things, the Company's business strategy and growth strategy.
Expressions, which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the ompany's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the Company's control. Future developments and actual results could differ materially from those set forth in these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. With that, I'll turn I'll turn the call over to Hil Davis.Go ahead.

Hil Davis

He'll get after everyone, and thank you, John. The fourth quarter was and as sundries bottom, which our first quarter results will reflect as well as our Q2 wholesale bookings, despite lower revenue contribution from sundry. In the fourth quarter, we almost achieved breakeven net income due to our cost savings, excluding non-cash expenses, based on first quarter wholesale shipments and second quarter wholesale bookings, we're excited to see revenue growth meaningfully reaccelerate. This increase in the revenue trend will be coupled with a significantly lower operating expense structure, which you can already start to see in Q4 and you saw in Q3, which will accelerate in Q1 and going forward.
So with that, let's discuss the fiscal year and fourth quarter results. Net revenues increased 6.8% to $14.9 million compared to $14 million a year ago. This excludes revenue from Harper & Jones as it was spun out in the second quarter. Please note that these results exclude the wrap of the reference also for our agenda for the third quarter 22 and 23. Importantly, this represents the lowest point in sundries wholesale revenues in the second half of 2023 versus the first and second quarter wholesale bookings for 2024.
And also, please note that this includes some non-cash charges we had to take which I'll discuss more in the fourth quarter numbers. Gross margin increased 10.2% to $6.5 million compared to $5.9 million. Gross profit margins increased to 43.9 from 42.5 a year ago. And this also includes significant noncash charges that we took as part of the audit process, which will not occur going forward. 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 noncash item expenses decreased 35.7% to $8.8 million compared to $13.7 million a year ago. Our G&A expenses included $5.5 million in non-cash expenses associated with DNA and stock option expenses, a lot associated with the Sentry acquisition. Sales and marketing expenses decreased 18.5% to $4 million compared to $5 million a year ago. Sales and marketing expense ratio was 27.1% compared to 35.4% a year ago.
Net loss per share attributable to common shareholders was $10.2 million or $20.46 per share compared to a loss of $38 million or $1,233 and $0.1 per share. Please note that the share count was only 422,000 shares at an average during the fourth quarter and the year. So these numbers are significantly impacted by the low share count. Net loss, excluding non-cash charges and add-backs, was $8 million compared to a loss of $28.8 million.
Again, let me repeat that the non-cash charges and add-backs to our loss was $8 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. For the fourth quarter, results are as follows. Net revenues were $2.8 million compared to $3.4 million a year ago.
This includes the low point of sundries wholesale revenue based on our taking them over and changing the design team. And we've since seen a significant increase in first and second quarter wholesale bookings and shipments. This also includes a noncash contra revenue adjustment of $0.7 million from the sundry acquisition. Excluding these net revenues would have been $3.5 million versus $3.4 million a year ago, despite the fact that sundries struggled in the second half of this past year, gross profit decreased zero point gross profit was $0.5 million compared to $0.6 million a year ago.
This includes noncash expenses of $0.3 million due to some write-downs that the auditors wanted us to take mostly associated with the sundry acquisition. Gross profit margins decreased to 18.3% from 19 a year ago, which again includes the non-cash expenses and the net revenues and cost of goods sold. Excluding these charges, gross gross profit margin 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.
I think this gives you an idea of our leverage on our G&A line and also what will happen as revenues accelerate given this lower G&A cost.
Sales and marketing expense decreased 13.4% to $0.8 million compared to $1 million a year ago. Net loss per diluted share attributable to common shareholders was $3.7 million or $8.76 per share, which includes non-cash expenses that compared to a loss of $15.8 million for five under $11.54 per share. Excluding those non-cash charges of $3.1 million in the fourth quarter. All due to the audit was COMPARED is our net loss was $0.6 million or $600,000, excluding non-cash charges, and that's compared to $19.2 million a year ago.
And that's on substantially lower revenue associated with the sundry turnaround. Net loss per diluted share, which was 424,000 shares. So please keep that in mind was $1.48 versus $621.22 a year ago. So as you can see our revenues were negatively impacted by that the contra revenue adjustments cost gets sold as well. And then when you back out all the audit, non-cash charges that we took as part of the audit, we lost $600,000 on a low revenue for us due to the sundry turnaround and concluded, including we are excited to announce our first quarter earnings in May, which we believe show the strength of the business between wholesale shipments and bookings will also have the preliminary results from our outlet store opening in Allen, Texas this weekend.
As we have stated, 2024 is the year we expected to experience the inflection point in our business. Thanks, everyone, for their time. I do have one call-in question that I would like to on to talk about that. We've got a question on why the S-3 filing on Friday. The first reason is that it is good corporate governance The second is this was the last day of our 60 day look-back period, which we were able to catch the highest price of the of our stock ending that day.
I think that's really important. We went into the very last day to do it. And this gives us option value in case anything were to happen and we needed cash versus filing an S-1. So it's good corporate guidance. We took advantage of the high price on the 60 day look-back period. And as investors, this is what you'd want us to do the other option, I guess is if we needed cash and two or three or four, six or nine months, we could file an S-1.
So we thought this was a much better use of being able to take advantage of good corporate governance and a high looks at crude price. With that, I'll open it up to the Q&A, please.

Question and Answer Session

Operator

(Operator Instructions) There are no questions in the queue at this time. I'd like to hand it back to Mr. Davis for closing remarks.

Hil Davis

But said, I appreciate everyone's time and we'll talk very soon. Everyone, have a good day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.