XELB - Earnings call transcript Q4 2018

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Operator

Welcome to the Xcel Brands, Inc. Fiscal Year 2018 Fourth Quarter Investor Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator instructions]. to conference like Berger, to now Relations. Investor would turn over the Andrew I ahead. go Please

Andrew Berger

are Treasury, everyone evening appreciate With call Officer, and We you Financial Chief your interest. fourth ended had and the Chief access Executive Officer, and today Robert earnings of the company website afternoon, X, quarter D’Loren; December April now, year to replay XX, out on By and release Business President Good us This report went Haran; and thank Burroughs. everyone at the participation the and being for and webcast Executive Chairman The joining XXXX, website. us. annual and Exchange by to fiscal XX-K be XXXX. Jim Investor will Development with for which Vice Seth and should on is www.xcelbrands.com. this be in Commission and Form its release annual addition company’s the report call file a the on Securities will Relations the available plans company’s the available on have

or expectations whether explained statements, are as to contain materially please any that Xcel Before will this could does a call and statements statements. obligation actual the to All mind forward-looking cause of in not otherwise. results factors that risk forward-looking company’s begin, result keep are These certain uncertainties today. information, in undertake from revise subject or to in detail SEC we events future discussed any filings. publicly forward-looking new here update risks differ

EBITDA. income, share, measures call, non-GAAP non-GAAP such net management non-GAAP note will please adjusted refer financial today’s per Finally, diluted and earnings certain on as that to

from in a results of of metrics assist to period-to-period to trends basis operations. related management measures and company’s as comparing non-GAAP operating the business identify Our on to performance consistent uses performance

measures operating certain results, of adjust should evaluating management Our net are investors in business these any the isolation in considered useful provide presented they income, company’s supplemental our GAAP. not as calculated other believes and assist to share, measures performance be are or representative not management other with for because accordance per in these or performance that financial earnings and core These non-GAAP information cost results. of to financial and also believes measures measurements financial thus alternatives events

You company’s to of may X release for Part the a Item refer in reconciliation Form XX-K the measures. non-GAAP attachment the earnings of X, or

and please Now I am Chairman pleased ahead. Bob, go introduce to Chief Officer. D’Loren, Robert Executive

Robert D’Loren

of this we performance provide our for Good financial highlights. and our you an Q&A. with Thank the overview XXXX will detail, more evening discuss by evening I’ll conclude and you, then everyone our and thank financial will Jim Haran start opening After Andrew. joining in then CFO call that, for us. results operating some

revenues a infrastructure. performance. financial due was adjusted which from Fine including of first a and December in apparel business year to we which jewelry management and XXXX. In our full disciplined our operating licensing Judith in and operations in e-commerce experienced royalties jewelry approach our expense and wholesale apparel launched Ripka launched business, started with X% up investing and sales, XXXX, planned $XX.X growth wholesale in primarily million Now, continued was was let's and QVC business, in million in year in XX% wholesale last get which from EBITDA achieved our year. e-commerce strength We This last and to up $X.X Jewelry

non-recurring approximately exit income goodwill and year space XX% for over excluding office charges our of operating last XXXX charge. by increased last Our year’s the previous

production operating technology competitive with fast a to us of transition completion and operating significant to platform our We capabilities our products integrated Company. a vertical based from nearing market We licensing media and are our advantages. and consumer company technology believe including provides

other through interactive channels. digital remains sales distribution focus TV, expanding and of and our wholesale our brands all This products. on TV includes channels, of Our and direct-to-consumer media

growth We developing current by make and strides platform. our encouraged in our to continue are

look taking channel, We in by television our improvement at distribution Halston growth room in Now, brand for see closer in our operations Mizrahi our performing by a Isaac interactive brand. well, and business business. especially H and level to have made executive help reassigned additional organization have Also, the XXX% within brand commitments on focus forward. to this a product our design development we senior catapult merchandising to Qurate is

in for closely work we Judith In XXXX, and to brands, increase opportunities HSN productivity continue for We to look excellent with our on counts launched Qurate Ripka expansion customer this for and results. with channel.

are within QVC there are We and Qurate both significant us excited Group. Ripka on We for Retail Judith HSN. the to believe opportunities have now

in Turning our January our In executive to a we launched launched Fine we wholesale XXXX, Judith our experienced wholesale November Jewelry wholesale And of merchandising develop wholesale operations. Also, we businesses: recruited operations business. of and apparel to and XXXX, direct-to-consumer highly our and businesses. manage Ripka direct-to-consumer and

Jewelry Fine to we As In systems e-commerce business. including data in our XXXX, and this launched experienced of technologies, we drive direct-to-consumer in recruited e-commerce I analytics site mentioned, optimization December executive invested marketing and Judith CRM, highly business. Ripka a XXXX,

resulted in XXXX. exceeding sales by investments budget in our XX% Our e-commerce for Ripka Judith

quality launch More a now later this believe serve the over new We on the our apparel results. wholesale greater bottom-line our us on are by run we for XXX% design over sales our in and this rate Also, better and of and top-line customers, direct-to-consumer sales efficiencies XXXX chain importantly, maintain supply plan business and and year. over control e-commerce better and gives improve control increase to products, judithripka.com rationale grow distribution. to to site within is

Mizrahi retail and this [Judith with announcement with in remain gain ‘XX. and different Isaac partners exciting make retailers We through new collaborations collaboration our announced collaborations retail specialty Balance and to partnerships we this specialty morning and on momentum we in specialty In the and exploring and collaborations offer seek concepts to opportunities, as expect opportunities specialty Finally, nationwide. about channel we New increase brand new product in and brand assortment fab, Ripka]. to of to continue committed retail we collaboration business, our

Now, under Halston Xcel. Trademarks this of Trademarks, regarding the Heritage the Halston of our and purchase acquisition ownership Halston consolidates

acquired the As and H opportunity Houston December brand’s American Halston recent a its an of nuances design focus of us preserve label we in XXXX. reminder, brand, Houston and on This continuing the trademarks H iconic to this the acquisition by gives their previously entirety while to legacy.

for accreditive operations labels. that expect be Halston the transaction We and apparel will period Heritage Halston this in an initial our after our startup to licensees of key earnings

shop. balance going in through forward. to our growth all exploring conclusion, given and opportunistic design position technology, we production that through this ourselves and to approach, additional In we and have all our and path channel extent, acquisitions forms positioned of forward. expansion establish distribution a our that company are the our Finally, exciting To place, our of diversification have represents presence open strong the business so reach now operating we as sheet platform logical everywhere in they a opportunities model based customers can technology we

spent Now, to nearly investment we and ever more the than believe the we opportunities time with transition funded, and this company. for continue create complete that growth will

for required blocks retail innovative of to solutions generating sustainable our believe growth our shareholders. the is challenges today's commitment and building cornerstone Finally, creating the for long-term we

our results. Jim Now to I turn over review to Jim? call to would financial like the

James Haran

and a company's evening, of our million, in net $X.X in Judith of from over described and Please the increase filed attributed financial on prior quarter note $X.X ended driven SEC $X.X primarily revenue quarter, net or year Bob, which million and e-commerce Fine e-commerce XX-K from revenue sales. Ripka fully and with XX, Jewelry will briefly be wholesale to discuss margin our more XXXX quarter fourth that primarily good Thanks, net million report December from Xst. was wholesale, operations April will financial $X are wholesale results I Total operations. everybody. XXXX. prior quarter, results and sales Form quarter the to annual for million million by XX% the $X.X the apparel the increased by year Current for

million prior respectively. Our in and year current million and the were $X.X operating quarters $XX expenses

compared year. per loss share the up approximately the costs current $XX.X $X.X approximately share prior year’s exit non-cash million on increase operating net quarter. $X.X fourth facility year million depreciation million business. prior current diluted approximately in and per quarter. prior associated million of in $X.XX salaries decrease outstanding increase salaries quarter per with year share GAAP in $X.X diluted $XX.X compensation. our increase net marketing XX.X for expenses, was partially million other in net million e-commerce December million diluted and for $X.XX and to in million attributable to adjusting certain the $X.XX increased million was XX.X approximately million million and a and prior offset up GAAP charge related quarter up shares goodwill or in for per by quarter, $X.X apparel average Excluding non-recurring $X.X compared balance. a million to income to the term million. million attributable based negative the prior XXXX company's The in in was compared to non-recurring Adjusted the shares charge a lowering $XX.X million of operating XXXX facility interest debt $X.X non-GAAP prior quarter. to exit fourth in to to basic of of charge the $X.X launch weighted includes This our other and share and the million with wholesale ended is expenses in million per After XX% $X.X and the to $X.X of was prior loss average non-GAAP negative facility. or quarter by approximately quarter. office approximately $X.X included with year earnings $X.XX operating and amortization share EBITDA The prior our goodwill items, increase on weighted compared in million loss of $X.X decreased cash basic primarily was quarter the loss XX, stock-based for current our and the XX% diluted and or compared $X.XX operations by the relate decrease net to the year based $X.XX expense The Interest The expenses net $X.X with operating $X.X quarter for of outstanding, quarter’s a million

year primarily in the million, results. $XX.X current Moving sales operations. Ripka December wholesale was increase This Jewelry $XX.X primarily XX, Fine revenue the the XXXX, ended Net wholesale for for million total increase or XX% from margin revenue million apparel $X.X December now year. The Total prior year-end revenue year to company's $XX.X was for million attributable was the million increased prior an wholesale to our year. e-commerce e-commerce, XXXX, Judith of from over to attributable XX, $X.X and for to year the increase and ended sales. in and net the

model a $X brick million $X.X operation. XXXX Turning $X.X license transition revenues, from Department decrease and to revenue in Isaac store brands. offset termination revenue was H interactive television our XXXX, year. prior approximately of we compared our offset licensing Mizrahi Wonder the This decreased QVC, of from C. million increase associated to business transitioned brand million, a the C. and of of licensing which decrease mortar a approximately was our store we In partially a Wonder performance strong department and a with brand. led by by the had by Halston wholesale by with

our Turning expenses. operating year-end to

diluted operating increase goodwill other The in attributable a up share, result share $X.X share compared offset to decreased and average depreciation. was year. share term the which million share decrease certain million the with including cash shares $X.X our costs. for net XXXX, with of as to in diluted facility was related in and $X.X per the wholesale year exit lower decreased compared $X.XX basic the approximately and and million was million by in compared $X.X salaries per to expenses $X.XX $XX year. the prior December $X.X and million non-cash million and for approximately ended weighted XX% in million million and XX, Interest $X.X expenses by increase items, increase stock-based and operations of in GAAP increase adjusting million earnings the prior $XX.X net $X.X $X.X salaries based decrease compensation, operating other outstanding and marketing million businesses for XX.X income of in $X.X or in year's of loss. partially XX% launch primarily Excluding the This or million prior or an expense was of net anon-recurring e-commerce amortization million $XX.X with and up year based approximately was $X.XX by per for the to operating per outstanding charge expenses XXXX year the was million a prior diluted XXXX, million and million weighted year, After current XX.X the prior per to in on on income approximately million from non-GAAP shares non-GAAP debt. average diluted $XX.X approximately year $X.X $X.XX basic current

for year adjusted December $X.X XXXX, $X.X to the ended Our XX, up to $X prior was million compared approximately the EBITDA million in million year.

and reminder, unaudited net terms. adjusted non-GAAP a non-GAAP EPS EBITDA As are non-GAAP income, diluted

Our GAAP a with these our reconciliation measures. present to as most Form release earnings XX-K press annual well as comparable on directly report items the

our Now cash turning position. to

XX, equivalents of cash capital to cash business. offset million was million generated million net for to on including non-cash cash adjusted and tax of December $X The activities expenses were CapEx $X.X made $X As the of million deferred repayments offset net operating $X.X of had income decrease cash grants. primarily million $X.X This expenditures, XX of debt by $X.X by provision, principal activities approximately attributable in XXXX, department investment non-recurring $X.X and and with non-cash changes XXXX, cash $XX.X liabilities. our million million primarily in for income provided operating from million was In approximately million in of and net our company $X.X in operating and The we stock-based a expenses $X.X compared stock in of approximately partially repurchased which was cash at primarily we restricted total depreciation from of and compensation, $X.X store XXXX. term a shares in million by attributable assets million decrease December the driven $X.X vesting unrestricted million amortization. cash

contingent $XX.X in At approximately long-term payable obligations option. XXXX, inclusive $XX.X and option. million were December of were deferred $X.X million of current in at cash or of at tax total debt, net these of Looking debt, December current $X.X million million at obligations liabilities XXXX, are debt total term contingent which $X amounts, our and million debt contingent company's $XX.X $X.X liabilities stock of in million XX, in includes approximately million million term XX, stock the obligations the payable $X our portion $X.X million Of of liability. at and

million at $XX.X working exclusive at XXXX XX, payable at December compared Our approximately contingent of $XX.X capital stock was obligations million with XXXX. December XX,

XX, term cash million $X.X December debt of had we term XXXX, million leaving $XX.X our in million. cash $X at and was net debt of As payable our

continue like to adjusted as over was ratio that, very Our to times with low our call be and the than turn EBITDA leverage. would manageable I less net debt we to X Bob? Bob. With positioned to back

Robert D’Loren

and Operator? Ladies Jim. you, remarks. our Thank gentlemen, prepared concludes this

Operator

Yes.

the begin now will session. We Instructions]. question-and-answer [Operator

Please Our question Kawamoto from ahead. with first Davidson. DA comes Michael go

Michael Kawamoto

kind expect versus license ramp in for pick-up material pretty to kind department run your you revenues the a quickly have? just visibility activity and of the business D’Loren see at year. we we'll now, QX QX right QX that what - A run is given I QX increased rate expect think you'll of of up model. sales store for at or fairly rate piece business saw and that Do this for we activity So that Robert the in go quarter, Michael you

behavior we're some we'll We because kind So transitioned picked wholesale through seen preliminary has aware a fall done what from see in I last already and of had feedback a good buyers. 'XX. job, seeing. we in we're there similar -- the you uptake in sales. transitioning and you’ve the would sales to the to brand November The there and But license little up think now upon here business in We're just be from selling Halston the nice team that with spring of based pickup Isaac. getting quarter,

So a we pick-up see expect in QX QX. and to

Michael Kawamoto

both, sell-through it’s sales and a working with in Robert brands brands business D’Loren - No. private -- they're that that accounts? call has on pick-up that are label some with key other about, of that lot a mentioned private talked a couple that the [offset]. that fantastic are the label. you It's you A branded like of is in of And exceeding is have XQ and well, private the on we been of our some that expectations label doing very And private label we particularly our last

received So about the we're well, forward excited really line, about the with what's look those it happening deliveries. optimistic we and private to was and I'm label making really there whole

Michael Kawamoto

Go ahead.

Robert D’Loren

going the towards expect of going was end our year? we the momentum continue to say, e-com is the I to

Michael Kawamoto

Ripka my business. into question That's segway a good Judith second Jewelry the on Fine

and frankly with real its in of the casual, than launching selling on that design, and society five and everything today we point new can fashion that and I the you we drivers better it driver there, and to Ripka runway do awareness are grow Robert think a or What is to is change testing, jewelry and you think the for quite more results more around it's design trend in trending like a is just driven. with styles, landed the state I we better We seeing that's is in experimenting the known we stability? faster direction produce Judith on do view time design. said roll What that with casual product on D’Loren we're adjustments we're key the think in little some over not of bit collections product the make of you trending, platform XXX%. a more live much there? key did - is e-commerce. created A think

we well from us, model nature growth for it’s … see we the of coming going Regarding our e-commerce and react as

Michael Kawamoto

did. channels and or then categories the talk and acquisition going about was opportunities you what largest just maybe here that see growth you Halston on forward? made you Good Can the brand for

Robert D’Loren

is and is with and and H Neiman done half control it the ourselves have over the QVC. at had of can like our course and the Bay in what better our that more The Also we to and Marcus, of selling internal of gives Bloomingdale. and we Saks, tier license the Hudson’s every Hudson’s teams of Halston and virtually distribution much on H happy premium more hopeful we're distribution. Halston Taylor retailers product. exclusivity Halston design with Heritage out Lord year retailers we with of sold & since brand agreement like in the is Lord has by Taylor that second an the & and broader in Halston I'm part product begin ‘XX eliminated with HPC better retailers have Bay. transition that beyond distribute

James Haran

And from little brand control challenging brand. entire given licensing that to it’s that bit that a then a we was split, licensees didn’t standpoint Michael find the

together. brand We are the bringing

up were across or have We license opportunities categories or of additional have new licenses, opened as in signed licensing with. various discussion number already you agencies

licenses So, Halston and -- core have number apparel of we licensees, , on categories Halston those are additional the a Ancillary business we activity. four already we have see so signed significant we

James Haran

Got me. really it, one is last that from just, then And helpful.

core guidance, typically with next you closing lot pleased - how pretty do A very first looking you have know, by in us developments again, up your know now? to you are point. at everything you that business don’t give quarter right it on or You D’Loren this the We differed from the announcement. our where expectations maybe the quarter the and Can much we’re to quarter as provide giving forward shaped gone the anything Robert we're of

Operator

now to turn session. remarks. This over for back I Loren like closing conference Robert question-and-answer D' concludes to the would any the

Robert D’Loren

We support appreciate your Ladies thank for greatly and and you Brands. interest gentlemen, evening. in time your Xcel continued this all

always, eat well and As be fit, healthy. stay

Operator

conference This call. concludes today's

have You day. may and Thank you lines. disconnect a your participating for pleasant

Xcel Brands (XELB) 28 Mar 192018 Q4 Earnings call transcript