Exhibit 99.1
FOR IMMEDIATE RELEASE
XCEL BRANDS ANNOUNCES SECOND QUARTER 2017 FINANCIAL RESULTS
Company Expanding its Presence in Dillard’s
Second Quarter Net Revenues of $8.4 Million
Second Quarter GAAP Net Income of $0.2 Million
Second Quarter Non-GAAP Net Income of $1.5 Million; Adjusted EBITDA of $2.3 Million
NEW YORK, NY (August 9, 2017) – Xcel Brands, Inc.(NASDAQ: XELB) (“Xcel” or the “Company”), a media and brand management company, today announced its financial results for the second quarter and six months ended June 30, 2017.
Robert W. D'Loren, Chairman and Chief Executive Officer of Xcel commented, “We are focused on providing solutions to help retailers navigate the complex transformation underway within our industry. I am pleased by the continued growth in our department store business as our retail partners work with us to implement these solutions. After the successful launch of our H Halston brand at Dillard’s this March, I am excited that we will be expanding our relationship with Dillard’s by launching our IMNYC Isaac Mizrahi brand this September.”
Mr. D’Loren continued, “The performance of our interactive television business remains strong. The trends within our interactive business are improving with increased productivity per minute, and higher show achievement rates in our apparel businesses. Xcel is well positioned to capitalize on the ongoing transformation that is impacting many of our markets as a result of the unique platform we have created and I am encouraged by the direction we are headed.”
Second Quarter 2017 Financial Results
Total net revenues for the second quarter of 2017 were $8.4 million, down approximately 8% from $9.1 million in the prior year quarter. This was primarily attributable to lower revenue associated with the
C Wonder brand which is transitioning away from QVC and from the exiting of the LCNY license agreement in July 2016, both previously reported. These were partially offset by higher revenues from our wholesale and department store businesses as we increase the number of stores our brands are sold in and expand our short-lead production platform in our department store business into more product categories.
GAAP net income was $0.2 million for the quarter ended June 30, 2017, or $0.01 per share, compared with a net loss of approximately ($0.1) million, or ($0.00) per share on a diluted basis, in the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the quarter ended June 30, 2017 was $1.5 million, or $0.08 per diluted share, compared with $1.9 million, or $0.10 per diluted share in the prior year quarter.
Adjusted EBITDA for the quarter ended June 30, 2017 decreased approximately $0.4 million to $2.3 million, compared with $2.7 million for the same quarter in the prior year.
The Company achieved significant growth in Non-GAAP net income and Adjusted EBITDA for the past two consecutive quarters, as the Company’s strategy of focusing on its own brands and the growth of the short lead production platform continues to improve results.
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
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First Six Months of Fiscal 2017 Financial Results
Total net revenues for the six months ended June 30, 2017 were $16.8 million, down approximately 4% from $17.5 million in the same period in 2016. The decrease was attributable primarily to lower revenues associated with the management and design of the LCNY brand, partially offset by the previously mentioned higher revenues from our wholesale and department store businesses.
GAAP net loss was approximately ($0.2) million for the six months ended June 30, 2017, or ($0.01) per share, compared with net loss of ($0.1) million, or ($0.01) per share on a diluted basis, for the six months ended June 30, 2016. After adjusting for certain cash and non-cash items, non-GAAP net income for the six months ended June 30, 2017 was $2.7 million, or $0.14 per diluted share, compared with $3.1 million, or $0.16 per diluted share, for the same period in the prior year.
Adjusted EBITDA for the six months ended June 30, 2017 decreased approximately $0.5 million to $4.2 million, compared with $4.7 million for the same period in the prior year.
See reconciliation tables below for non-GAAP metrics. These non-GAAP metrics may be inconsistent with similar measures presented by other companies and should only be used in conjunction with our results reported according to U.S. generally accepted accounting principles ("GAAP"). Any financial measure other than those prepared in accordance with GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
The Company's balance sheet at June 30, 2017 remained strong, with stockholders' equity of $107.0 million, cash and cash equivalents of $7.6 million, and working capital of approximately $10.8 million. During the current six months, the Company reduced its senior term debt by $5.3 million to $20 million, with a remaining $0.5 million principal payment due over the balance of 2017.
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
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Conference Call and Webcast
The Company will host a conference call with members of the executive management team to discuss these results with additional comments and details at 5:00 p.m. Eastern Time on Wednesday, August 9, 2017. A webcast of the conference call will be available live on the Investor Relations section of Xcel's website at www.xcelbrands.com. Interested parties unable to access the conference call via the webcast may dial 888-857-6931. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 8379955.
About Xcel Brands
Xcel Brands, Inc. (NASDAQ:XELB) is a media and brand management company engaged in the design, production, licensing, marketing, and direct-to-consumer sales of branded apparel, footwear, accessories, jewelry, home goods, and other consumer products, and the acquisition of dynamic consumer lifestyle brands. Xcel was founded by Robert W. D’Loren in 2011 with a vision to reimagine shopping, entertainment, and social as one. Xcel owns and manages the Isaac Mizrahi, Judith Ripka, H Halston, C. Wonder, and Highline Collective brands, pioneering a ubiquitous sales strategy which includes the promotion and sale of products under its brands through interactive television, internet, brick and mortar retail, and e-commerce channels. Headquartered in New York City, Xcel Brands is led by an executive team with significant production, merchandising, design, marketing, retailing, and licensing experience, and a proven track record of success in elevating branded consumer products companies. With a team of over 100 professionals focused on design, production, and digital marketing, Xcel maintains control of product quality and promotion across all of its product categories and distribution channels. Xcel differentiates by design.www.xcelbrands.com
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
Page 4
Forward Looking Statements
This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including "anticipates," "believes," "can," "continue," "ongoing," "could," "estimates," "expects," "intends," "may," "appears," "suggests," "future," "likely," "goal," "plans," "potential," "projects," "predicts," "seeks," "should," "would," "guidance," "confident" or "will" or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding our anticipated revenue, expenses, profitability, strategic plans and capital needs. These statements are based on information available to us on the date hereof and our current expectations, estimates and projections and are not guarantees of future performance. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including, without limitation, the risks discussed in the "Risk Factors" section and elsewhere in the Company's Annual Report on form 10-K for the year ended December 31, 2016 and its other filings with the SEC, which may cause our or our industry's actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
For further information please contact:
Andrew Berger
SM Berger & Company, Inc.
216-464-6400
andrew@smberger.com
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
Page 5
Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
| June 30, 2017 | December 31, 2016 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 7,621 | $ | 14,127 | ||||
| Accounts receivable, net | 8,748 | 6,969 | ||||||
| Prepaid expenses and other current assets | 876 | 807 | ||||||
| Total current assets | 17,245 | 21,903 | ||||||
| Property and equipment, net | 2,520 | 2,600 | ||||||
| Trademarks and other intangibles, net | 110,673 | 111,220 | ||||||
| Goodwill | 12,371 | 12,371 | ||||||
| Restricted cash | 1,509 | 1,509 | ||||||
| Other assets | 1,705 | 1,517 | ||||||
| Total non-current assets | 128,578 | 129,217 | ||||||
| Total Assets | $ | 145,823 | $ | 151,120 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 1,054 | $ | 1,523 | ||||
| Accrued payroll | 1,261 | 2,185 | ||||||
| Deferred revenue | 73 | 234 | ||||||
| Current portion of long-term debt | 3,943 | 6,427 | ||||||
| Current portion of long-term debt, contingent obligations | 100 | - | ||||||
| Total current liabilities | 6,431 | 10,369 | ||||||
| Long-Term Liabilities: | ||||||||
| Long-term debt, less current portion | 22,019 | 25,495 | ||||||
| Deferred tax liabilities, net | 7,914 | 6,901 | ||||||
| Other long-term liabilities | 2,472 | 2,181 | ||||||
| Total long-term liabilities | 32,405 | 34,577 | ||||||
| Total Liabilities | 38,836 | 44,946 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding | - | - | ||||||
| Common stock, $.001 par value, 35,000,000 shares authorized at June 30, 2017 and December 31, 2016, and 18,471,001 and 18,644,982 issued and outstanding at June 30, 2017 and December 31, 2016, respectively | 18 | 19 | ||||||
| Paid-in capital | 98,354 | 97,354 | ||||||
| Retained earnings | 8,615 | 8,801 | ||||||
| Total Stockholders' Equity | 106,987 | 106,174 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 145,823 | $ | 151,120 | ||||
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
Page 6
Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net revenues | $ | 8,370 | $ | 9,112 | $ | 16,800 | $ | 17,473 | ||||||||
| Operating costs and expenses | ||||||||||||||||
| Salaries, benefits and employment taxes | 4,360 | 4,217 | 8,727 | 8,427 | ||||||||||||
| Other design and marketing costs | 645 | 831 | 1,516 | 1,660 | ||||||||||||
| Other selling, general and administrative expenses | 1,134 | 2,020 | 2,414 | 3,365 | ||||||||||||
| Stock-based compensation | 723 | 1,453 | 1,806 | 2,665 | ||||||||||||
| Depreciation and amortization | 390 | 359 | 784 | 785 | ||||||||||||
| Total operating costs and expenses | 7,252 | 8,880 | 15,247 | 16,902 | ||||||||||||
| Operating income | 1,118 | 232 | 1,553 | 571 | ||||||||||||
| Interest and finance expense | ||||||||||||||||
| Interest expense - term debt | 304 | 352 | 632 | 663 | ||||||||||||
| Other interest and finance charges | 44 | 178 | 94 | 302 | ||||||||||||
| Total interest and finance expense | 348 | 530 | 726 | 965 | ||||||||||||
| Income (loss) before income taxes | 770 | (298 | ) | 827 | (394 | ) | ||||||||||
| Income tax provision (benefit) | 557 | (208 | ) | 1,013 | (259 | ) | ||||||||||
| Net income (loss) | $ | 213 | $ | (90 | ) | $ | (186 | ) | $ | (135 | ) | |||||
| Basic net income (loss) per share | $ | 0.01 | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||||
| Diluted net income (loss) per share | $ | 0.01 | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||||
| Basic weighted average common shares outstanding | 18,449,210 | 18,671,648 | 18,561,453 | 18,565,198 | ||||||||||||
| Diluted weighted average common shares outstanding | 18,813,044 | 18,671,648 | 18,561,453 | 18,565,198 | ||||||||||||
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
Page 7
Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
| For the Six Months Ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (186 | ) | $ | (135 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expense | 784 | 785 | ||||||
| Amortization of deferred finance costs | 99 | 94 | ||||||
| Stock-based compensation | 1,806 | 2,665 | ||||||
| Amortization of note discount | 19 | 158 | ||||||
| Deferred income tax | 1,013 | (259 | ) | |||||
| Non-cash property exit charge | - | 648 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,779 | ) | (2,484 | ) | ||||
| Prepaid expenses and other assets | (67 | ) | 92 | |||||
| Accounts payable, accrued expenses and other current liabilities | (1,394 | ) | 449 | |||||
| Deferred revenue | (161 | ) | (558 | ) | ||||
| Other liabilities | 290 | 875 | ||||||
| Net cash provided by operating activities | 424 | 2,330 | ||||||
| Cash flows from investing activities | ||||||||
| Cost to acquire intangible assets | (18 | ) | - | |||||
| Purchase of property and equipment | (140 | ) | (1,718 | ) | ||||
| Net cash used in investing activities | (158 | ) | (1,718 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from exercise of stock options | - | 20 | ||||||
| Shares repurchased including vested restricted stock in exchange for withholding taxes | (806 | ) | (302 | ) | ||||
| Payment of deferred finance costs | (7 | ) | (69 | ) | ||||
| Payment of long-term debt | (5,959 | ) | (3,000 | ) | ||||
| Payment of QVC earnout obligation | - | (250 | ) | |||||
| Net cash used in financing activities | (6,772 | ) | (3,601 | ) | ||||
| Net decrease in cash and cash equivalents | (6,506 | ) | (2,989 | ) | ||||
| Cash, cash equivalents, and restricted cash at beginning of period | 15,636 | 17,969 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 9,130 | $ | 14,980 | ||||
| Reconciliation to amounts on consolidated balance sheets: | ||||||||
| Cash and cash equivalents | $ | 7,621 | $ | 13,471 | ||||
| Restricted cash | 1,509 | 1,509 | ||||||
| Total cash, cash equivalents, and restricted cash | $ | 9,130 | $ | 14,980 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for income taxes | $ | 144 | $ | 118 | ||||
| Cash paid during the period for interest | $ | 677 | $ | 560 | ||||
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
Page 8
Xcel Brands, Inc. and Subsidiaries
Reconciliation of Non-GAAP measures
(Unaudited)
Non-GAAP net income:
| Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (amounts in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income (loss) | $ | 213 | $ | (90 | ) | $ | (186 | ) | $ | (135 | ) | |||||
| Non-cash interest and finance expense | 10 | 80 | 19 | 158 | ||||||||||||
| Stock-based compensation | 723 | 1,453 | 1,806 | 2,665 | ||||||||||||
| Non-recurring facility exit charges | - | 670 | - | 670 | ||||||||||||
| Deferred income tax provision | 557 | (208 | ) | 1,013 | (259 | ) | ||||||||||
| Non-GAAP net income | $ | 1,503 | $ | 1,905 | $ | 2,652 | $ | 3,099 | ||||||||
Non-GAAP diluted EPS:
| Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Diluted earnings (loss) per share | $ | 0.01 | $ | (0.00 | ) | (0.01 | ) | $ | (0.01 | ) | ||||||
| Non-cash interest and finance expense | 0.00 | 0.00 | 0.00 | 0.01 | ||||||||||||
| Stock-based compensation | 0.04 | 0.08 | 0.10 | 0.14 | ||||||||||||
| Non-recurring facility exit charges | - | 0.03 | - | 0.03 | ||||||||||||
| Deferred income tax provision | 0.03 | (0.01 | ) | 0.05 | (0.01 | ) | ||||||||||
| Non-GAAP diluted EPS | $ | 0.08 | $ | 0.10 | $ | 0.14 | $ | 0.16 | ||||||||
| Weighted average shares - Non-GAAP diluted: |
| Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Basic weighted average shares | 18,449,210 | 18,671,648 | 18,561,453 | 18,565,198 | ||||||||||||
| Effect of exercising warrants | 363,834 | 673,995 | 364,197 | 663,270 | ||||||||||||
| Effect of exercising stock options | - | 42,914 | 328 | 39,777 | ||||||||||||
| Non-GAAP weighted average diluted shares | 18,813,044 | 19,388,557 | 18,925,978 | 19,268,245 | ||||||||||||
| Adjusted EBITDA: |
| Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (amounts in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income (loss) | $ | 213 | $ | (90 | ) | $ | (186 | ) | $ | (135 | ) | |||||
| Depreciation and amortization | 390 | 359 | 784 | 785 | ||||||||||||
| Interest and finance expense | 348 | 530 | 726 | 965 | ||||||||||||
| Income tax provision (benefit) | 557 | (208 | ) | 1,013 | (259 | ) | ||||||||||
| State and local franchise taxes | 27 | 24 | 56 | 49 | ||||||||||||
| Stock-based compensation | 723 | 1,453 | 1,806 | 2,665 | ||||||||||||
| Non-recurring facility exit charges | - | 670 | - | 670 | ||||||||||||
| Adjusted EBITDA | $ | 2,258 | $ | 2,738 | $ | 4,199 | $ | 4,740 | ||||||||
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM
Page 9
Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income, exclusive of stock-based compensation, non-cash interest expense from discounted debt related to acquired assets, gain on the reduction of contingent obligations, loss on extinguishment of debt, non-recurring facility exit charges, certain discrete tax items related to vesting or exercise of stock-based awards, and net income or loss from discontinued operations. Non-GAAP net income and non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.
Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income before stock-based compensation, interest and other financing costs, loss on extinguishment of debt, gain on the reduction of contingent obligations, income taxes, other state and local franchise taxes, depreciation and amortization, non-recurring facility exit charges, and net income or loss from discontinued operations.
Management uses non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to our results of operations. Management believes non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are also useful because they provide supplemental information to assist investors in evaluating our financial results. Non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in accordance with GAAP. Given that non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are financial measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures. In evaluating non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA, you should be aware that in the future we may or may not incur expenses similar to some of the adjustments in this document. Our presentation of non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results, and not rely on any single financial measure.
1333 Broadway, 10th floor • new york, new york • 10018
Phone: 347-727-2474 • INFO@XCELBRANDS.COM