Executive Summary

Q3 revenue declined to $2.44M (–25% YoY; –28% QoQ) as DBGI dropped its largest low-margin wholesale account and limited digital ad spend; gross margin held ~flat sequentially at 46.0% (vs. 45.9% in Q2) but down YoY from 52.3% .
Net loss improved to $(3.54)M vs $(5.44)M YoY; diluted EPS was $(1.63) vs $(14.55) YoY, aided by cost reductions (G&A down to $2.43M, –$1.31M YoY; >$0.5M sequential decline) despite lower sales .
Management pivoted from balance-sheet cleanup to growth starting October: partnered with VaynerCommerce (early lift: +34% daily digital revenue, +7% AOV in late Oct/early Nov), plans to add email/SMS, influencers, capsule drops, and new channels (Amazon, TikTok in Q1) .
2025 earnings setup: interest expense amortization ends, cutting quarterly interest to ~$105K and adding ~+$3.1M to net earnings; total >$4.5M earnings uplift as amortized non-cash items conclude, plus Sundry pricing action adding >$0.5M to annual gross margin dollars .
Consensus estimates: S&P Global (Capital IQ) quarterly EPS/revenue consensus was unavailable at the time of request; no formal guidance ranges were issued. Key stock catalysts: evidence of sustained DTC growth from the VaynerCommerce stack, Amazon/TikTok launches, and margin/interest expense inflection into 2025 .

What Went Well and What Went Wrong

What Went Well

Cost discipline and mix quality: G&A fell to $2.43M (–$1.31M YoY; >$0.5M QoQ reduction), with management asserting further benefit from outsourcing marketing to VaynerCommerce; S&M ratio improved YoY to 26.9% (35.3% LY) .
Strategic growth pivot underway: “Starting in October… we transitioned… to focusing on increasing top line growth,” with VaynerCommerce already improving daily digital revenue (+34%) and AOV (+7%), and additional initiatives (email/SMS, influencer, monthly capsules) now launching .
2025 earnings tailwinds: Interest expense to ~$105K/quarter starting Q1 and ~+$3.1M annual net earnings benefit; aggregate >$4.5M uplift as amortized non-cash expenses conclude; Sundry wholesale price increase expected to add >$0.5M to gross margin annually .

What Went Wrong

Top-line pressure: Revenue fell to $2.44M (–$0.96M YoY; –$0.96M QoQ) driven by dropping the largest wholesale account (single-digit gross margin) and limited ad spend suppressing e-commerce .
Gross margin compression YoY: 46.0% vs 52.3% LY due to fixed cost burden (warehouse, labor, pattern/sewing/design) and lower digital revenue mix; gross profit dollars decreased to $1.12M (vs $1.70M LY) .
Intangible impairment: Q3 recognized a $0.6M impairment of intangible assets, adding to operating expense burden in the quarter .

Financial Results

P&L Snapshot (YoY and Sequential)

Metric	Q3 2023	Q2 2024	Q3 2024
Revenue ($)	$3,257,332	$3,396,069	$2,440,801
Gross Margin %	52.3%	45.9%	46.0%
Gross Profit ($)	$1,703,288	$1,558,677	$1,121,587
G&A Expense ($)	$3,735,527	$2,946,688	$2,429,040
Sales & Marketing ($)	$1,151,377	$615,190	$655,833
Sales & Marketing as % of Revenue	35.3%	18.1%	26.9%
Operating Income (Loss) ($)	$(3,422,162)	$(2,302,235)	$(2,744,165)
Interest Expense ($)	$(1,956,080)	$(1,239,624)	$(742,557)
Net Income (Loss) ($)	$(5,435,994)	$(3,510,481)	$(3,541,237)
Diluted EPS ($)	$(14.55)	$(2.08)	$(1.63)

Notes:

Revenue decline primarily from dropping an unprofitable wholesale account and constrained digital ad spend .
Gross margin down YoY on fixed-cost burden and mix; sequentially flat due to similar mix dynamics .

KPIs and Operating Items

KPI/Item	Q2 2024	Q3 2024	Notes
Digital ROAS (management commentary)	2.6x–2.9x (during ramp back on)	Not disclosed (Vayner lift metrics cited below)	ROAS metric emphasized in Q2 as growth lever
VaynerCommerce early impact	N/A	+34% daily digital revenue; +7% AOV (10/22–11/7 vs 9/22–10/21)	Early post-quarter proof point of growth pivot
G&A non-cash inclusion	$1.8M non-cash in Q2 G&A	$1.6M non-cash in Q3 G&A	D&A/goodwill amortization effects
Intangible impairment	—	$0.6M	Q3 item
Interest expense (quarterly)	$(1.24)M	$(0.74)M	Management expects ~$0.105M/quarter in 2025

Segment/Brand Breakdown

Not disclosed in financial statements; management commentary highlighted dropping a large, low-margin wholesale account and pricing action at Sundry .

Guidance Changes

DBGI did not issue formal numerical guidance ranges. Management provided directional/outlook items:

Metric/Item	Period	Previous Guidance	Current Guidance/Outlook	Change
Quarterly interest expense run-rate	Starting Q1 2025	N/A	~$105K/quarter; ~+$3.1M 2025 net earnings benefit from amortization roll-off	Lowered vs current run-rate; positive earnings impact
Aggregate earnings uplift from amortized non-cash items concluding	FY2025 vs 2024	N/A	>+$4.5M uplift as amortized non-cash expenses conclude by end-2024 (includes items such as Stateside goodwill and interest amortization)	New
Sundry wholesale pricing action	FY2025 annualized	N/A	>+$0.5M annual gross margin dollar uplift	New
DTC marketing stack via VaynerCommerce	Q4 2024 onward	N/A	Email/SMS, influencers, monthly limited-edition capsules; broaden channels (Amazon, TikTok in Q1)	New growth initiatives
Sales and marketing operating model	Q4 2024 onward	Internal team	Outsourced to VaynerCommerce; expect marketing costs to decline as spend reallocated to performance channels	Model shift

Footnote: Management referenced a >$4.5M 2025 earnings uplift from amortized non-cash items concluding, alongside a specific ~+$3.1M net benefit from interest expense amortization ending; language suggests the $3.1M is a component of the broader earnings uplift rather than incremental to it .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2024)	Previous Mentions (Q2 2024)	Current Period (Q3 2024)	Trend
Balance sheet cleanup/debt	Focus on leverage; auditors/Nasdaq compliance discussion; expectation for lower interest expense trajectory	Paid off >$5M debt/AP; private-market strategic review context	Retired $1.3M remaining convertible notes; no convertible debt outstanding	Improved; overhang removed
Macro and demand	Wholesale shipment delays impacted Q1 timing	Cautious spend amid soft consumer; managing ROAS	Soft macro and election overhang cited; pivot to growth after October	Stabilizing per management post-election
DTC/digital marketing	Highlighted operating leverage; store opening; channel mix philosophy	ROAS 2.6x–2.9x; intent to re-accelerate DTC	Vayner partnership; +34% daily revenue, +7% AOV; adding email/SMS, influencers, capsules	Turning up; proof points emerging
Channels: Amazon/TikTok	—	—	Plan to launch in Q1	New initiatives
Pricing/mix (Sundry)	New design/price sharpening; easy comps ahead	Strong wholesale sell-through; new licensing; “Build Your Own Bundle” concept	Wholesale price increase at Sundry; >$0.5M gross margin uplift; dropped negative-margin account	Favorable mix quality
Strategic alternatives/Nasdaq shell	Board exploring options given valuation dislocation	Ongoing; shell value discussed	Not emphasized in Q3 prepared remarks; focus shifted to growth	De-emphasized on call
Non-cash amortization and interest	Expect benefits starting Q4/Q1; GAAP vs cash dynamics	Reiterated non-cash nature; >50% of $1.8M G&A non-cash	2025: interest ~$105K/quarter; ~+$3.1M benefit; >$4.5M total uplift as amortized items conclude	Positive 2025 setup

Management Commentary

“Starting in October this year, we transitioned from cleaning up the balance sheet to focusing on increasing top line growth.”
“This partnership has already led to a 34% increase in daily digital revenues and a 7% increase in average order volume…” (VaynerCommerce) .
“Gross profit margins were 46.0%… [decline] is the fixed costs associated with gross margins including warehouse rent and labor expenses, pattern makers and sewers… and lower digital revenue…” .
“Starting in Q1 next year, interest expenses will decline to $105,000 a quarter… [benefit] approximately $3.1 million to our net earnings in fiscal 2025.” .
“We took a meaningful wholesale price increase at Sundry… that alone should add more than $500,000 a year to gross margins.” .

Q&A Highlights

Capital structure cleanup: Management confirmed the payoff of $1.3M convertible notes; no remaining convertible debt; only longer-term “patient” debt remains .
Marketing operating model: VaynerCommerce relationship is performance-incentivized with a large, dedicated team; initial ad spend modest (~$1,500/day) while A/B testing and content pipeline ramps .
Wholesale account exit: The largest wholesale customer carried ~7% gross margin and was net cash negative; exiting reduces revenue but improves profitability and operating margin trajectory .
Wholesale pipeline: Discussions with additional major retailers for Sundry and Stateside; management cited better margin/brand quality from prospective majors .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was unavailable at time of request due to access limitations; as a result, we cannot present a vs-consensus comparison. Investors should assume model updates will focus on: (1) a reduced 2025 interest expense run-rate (~$105K/quarter), (2) gross margin dollars from Sundry pricing, and (3) DTC growth trajectory via VaynerCommerce and new channels .
No formal quantitative guidance ranges were issued in the press release or call .

Key Takeaways for Investors

Mix quality over volume: Dropping a cash-negative wholesale account and holding GM ~flat sequentially supports a higher-quality revenue base despite near-term sales pressure .
Operating leverage credible: G&A and S&M discipline, plus outsourcing marketing, should improve flow-through as digital ramps .
Near-term DTC catalysts: VaynerCommerce impact already visible; layering email/SMS, influencers, and monthly capsules, with Amazon/TikTok in Q1, create multiple shots on goal for revenue acceleration .
2025 earnings inflection: Interest expense roll-off (~+$3.1M) and end of amortized non-cash items (>+$4.5M total uplift) set a materially lower expense base before growth benefits .
Watch gross margin and ROAS: Sustained improvement in digital mix and conversion should lift GM% and revenue efficiency; track S&M% and gross profit dollars as leading indicators .
Wholesale opportunity with better partners: Management indicates majors with superior margins are in discussions; monitor order flow and sell-through .
Risk: Macro softness and execution risk in scaling new channels and content; Q3 included a $0.6M intangible impairment and non-cash G&A still meaningful near term .

Additional Relevant Releases (Q3 context)

Marketing partnership with VaynerCommerce (10/21 start; performance data through 11/7): +34% daily digital revenue, +7% AOV; email/SMS to be added .
Paid off $1.3M remaining convertible notes (11/7): removes convertible overhang .
AVO DTC brand launch (9/4): value-premium positioning with monthly drops; leverages existing fabrics/supply chain .

Digital Brands Group, Inc. (DBGI)·Q3 2024 Earnings Summary