XELB - Earnings call transcript Q4 2019

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Operator

Welcome to the Xcel Brands Fourth Quarter and Annual 2019 Earnings Conference Call. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of Xcel Brands. And as a reminder, this conference call is being recorded.

I would now like to turn the call over to Andrew Berger of SM Berger & Co. Thank you. begin. now may you Andrew,

Andrew Berger

us Good Treasury, Financial evening, appreciate all joining We Vice Business Officer, times. you you Chairman of today and President Chief Burroughs. Jim and participation and Haran; thank Executive With difficult your these that D’Loren; safe for the interest call are are Seth Chief us. Robert in everyone, and on Officer, and of Executive Development hope and

associated for the release fourth had will company The XXXX, addition, Relations the Form access XX-K. today. file to fiscal available on be Exchange extend note the Securities needed website. to annual now, ended quarter of replay company’s a And with plans By should report with year and XX-K. Form earnings company’s available and Please date that Commission being at given everyone have This which the went the on market will in the December annual annual Investor to be its XX, the the its COVID-XX, on call final the company the is www.xcelbrands.com. out webcast, the report after closed and website on report release and events

the result this publicly cash actual in to at we explained is or statements or call and forward-looking duration what factors a detail not and cause significantly statements. SEC And nature risk COVID-XX discussed the statements, are continues any dynamic uncertainties Xcel condition, differ results this having the in impact on are and operations. mind financial undertake of time. significant company's All information, otherwise. materially certain a forward-looking subject flow whether revise future any this here update circumstances is events These of today. please the Before to results begin, of means these expectations call there at keep about significant could does filings. the on impact in pandemic expense of any uncertainty virus. said new as obligation that are forward-looking company’s business on from that now and the of Also time will contain to The risks materially

and Finally, will EBITDA. on trends measures, to non-GAAP income, such non-GAAP today’s relating these results call, and operations. period measures that business please to to Management share non-GAAP basis assist consistent certain uses from adjusted note of non-GAAP identify refer earnings management in period as per on to metrics performance financial the comparing performance company’s diluted to operating as net a of

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

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

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

Robert D’Loren

Thank you you, evening, Andrew. Good thank us. and joining for everyone,

and safe of hope all stated, Andrew you your healthy. I and As families are

that is Jim will our financial an give norm. these XXXX the now We our CFO, our detail. financial provide overview some operating I’ll working highlights. new from days. results After Haran, are and of then This discuss all in performance home more

result is the is about comes COVID-XX take event is not events great What long with the all of all human how moment of when and of a uncertainty will only of Before the significant may is forecast talk I nearly a is how of be this a our over. deal that disaster. but It a to the world an I uncertainty. part this emerge economic it it's results, from challenging this. to impossible financial It global discuss pandemic. tragedy, most want to happening will The in the unprecedented consumer throughout

challenge our our tell It of QX will delivery. though QX overall is the spring balance believe and the what be too we soon and the economic That to impact said, it XXXX will the on perhaps Xcel, is in current with impact year. business

experiencing cases are have not their are centers. they and retail being because distribution by cancelled We goods certain closed accounts orders received in our

through early certain managing price core inventory, summer are off selling we into channels it some or to forward if products packing we even spring moving explore have any unsold this We up perhaps for and XXXX. goods by and fall will

not inventory We significant platform is to time, fortunate fabrics our anticipate will very we of part DNA that brands are year-round and are strategy brand to do across in design season have agnostic. that this our At liquidate. we that

cash costs non-essential and we reducing for will from and to respect expenses emerge weather retail flows only this inventory, to to cutting and including and all working but all partners have across measures our cash, of to the With better taken in other with management costs, cash, to conserve not compensation ensure conserve reduce to the order stronger. suppliers it employee storm, including action furloughing board, our appropriate we time our certain that employees

of goal the in partners and with to and on Also, them to completely to we this with this are of our through supply this everything transparent event Our employees. all work chain together. doing be retail fairly minimize collaborate impact our is possible

rolled through over are have out assistance past programs month. been government that various Finally, the working the we

products business that consumer believe a transition to company Xcel their for in these Xcel. events brands. are the licensing position together back and have we to I when growth is Xcel normal. and I come working and to to showing true from They optimal business strong strategy times. by consumer team our Xcel dedication the our uncertain Our these been teams the to our members Further, how pure believe to continue overwhelmed are it gets business vertical a remotely have speaks of strength operate address to

Now to I'd XXXX. our financial of overview an performance give like for

and business to or attributable We we model. investments a direct QX and business jewelry last of licensing revenue to have that pleased our up our XX% growth to and the the and pure in was from fiscal transition is from year completion wholesale line revenues, achieved made ended this licensing up directly XXXX. quarter, for report $XX.X million top in the a wholesale in fourth $XX.X businesses e-commerce are which approximately from apparel revenues the we XX% vertical to consumer We total year. This with year million

products, helped higher deliver and business top change including us line in licensing us significant direct-to-consumer. control strong growth over more This significant multiple potential gives this new Combining in to our margins XXXX. channels, revenue our growth capability model with

not on our in for EBITDA XXXX, our with talent well as we XXXX conflicts While air our during than C. the one-time rather Wal-Mart of hoped December Spring had for, was of planned what XXXX. launching QVC brand primarily availability Fall to due at scheduling as Wonder as

significant production highly leverageable operating proprietary and our competitive with believe model, provides advantages. design, we us forward, supply technologies, our chain platform Going including

brand, the brands our we consumer we and in made during dynamic acquired of everywhere XXXX that a goal strategic our our continue on the to time, At QX and of XXXX. brand expanding digital which products Our to for sales synergistic to TV, our being lifestyle Heritage Longaberger interactive the direct-to-consumer as distribution focus with shop. are Halston customer add same media, XX% look of and the remains such portfolio, in will through a interest acquisition we QX wholesale

peer-to-peer XXXX. the XXXX licensee brand weeks as QVC Longaberger Premium Heritage our Distribution launched in within Halston well Retail under our We business of Our introducing as it digital model. did November in license online acquisition, on well current a in

from both difficult peer-to-peer extra And these selling believe to distribution diversify based addition portfolio we our In ROI people expertise. happy to are times, way country these social brand strong preliminary be able Also, generate platform. our very our we offer and to in through return this begin on to acquisitions XXXX. to next starting across a income channels, generation results a category our

a closer channel. by distribution our take at let's Now operations look

television our for performing effectively brands plan year. at well on performed business the QVC with interactive in XXXX Our

executed a also We on QVC collaboration successful XXXX. during with New Balance

strongest in interactive XXXX, brand continues the television Isaac our our ahead be to brand. business to Looking Mizrahi

actions grow We started categories the have increasing to including new launching business and XXXX, already appearances. Isaac's in taking QVC with

are working wholesale to XXXX. by we future latter quarters. H from transitioning come a currently towards in same to the a with license More our in of half QVC the time, direct-to-retail Halston this model on At business

how fully depends Of unfold. COVID-XX events the course, of all this

successful our categories manage brands. and Wonder slightly business due C. our new significantly with across but XX most at business, for over to for developing maybe signed in Most distribution we to which over recent slated XXXX, have we grow to continue the XX of In were delayed of ancillary in been licensees Fall launch events. have Wal-Mart, categories and our licensing a portfolio

retained to these programs. keep and all best on newsletter Also, informed Rome the our of to practices it we of Blank to relates licensees programs as a created have us have various advise release COVID-XX

with currently Balance [Crayola] Sesame collaborations we with their we at working we in successful anniversary Studio collaboration to Additionally, which New their hope retrospective, XXXX. for between in for XXXX, developed as [ph] a Also, XXth well Street capsule a Halston of Target on both XX-year XX, launch are collection and and with and launch as QVC.

apparel United with continue to launched of Palacio Macy's including El of performance, States Based execution walmart.com and C. and collections Saks successfully our Wonder and especially wholesale business, in XXXX. our brand our on new our the strong in the were brands our accounts, XX team in on teams able sales and sourcing excellent and merchandising new retail in in Mexico, February performance our place we In XXXX, design, their products.

COVID-XX we In hit pandemic our in the all. momentum before wholesale us had fact, great business

Based our in showing and order on our growth of in were XXXX. we book, XX% strong excess sales plan

maintaining Ripka been under more identity. are bring forward this trend our and business while brand sales to retail and e-commerce as Judith discussed, wholesale while in In contemporary market, Ripka to stores wholesale jewelry normalize. growth on resume impacted order believe well to XXXX, we reopen our business, of new be styles right we As going brand have focused level our Judith the positioned and collections will in we

testing order to New and and styles merchandising collections consumer XD in designed leverage winning the decisions. inform inventory purchasing all in are and determine insight

licensee advanced by extremely to June. we license in four from took more the platform fine collections to are pipeline back five We launched our brought our be jewelry successfully new with and in have technology with market integrated since the

response and received industry consumers have We positive both significant from collections from insiders. these

We business. continues potential e-commerce we strong to our Finally, to than strong business show continue see doubled versus XXXX. our XXXX XXXX. business more The in growth in growth in

company in our In approach, that having a so distribution our to operating of products, sportswear in can operational home completed transition conclusion, everywhere the media they and we jewelry vertical with omni-channel positioned and business dresses, shop. customers have with based We year all of through forms ended the strong core we technology fine sheet. and expertise our balance product presence maintained reach consumer a a ourselves and women's,

our and strengths. our are strong balance people, Our our brands sheet

come it are stronger. through that doing COVID-XX emerge the to so from possible We we events everything

Now I'd review call results Jim? Jim for the financial over XXXX. to to like to turn our

James Haran

that December results more XX, Thanks, ended filed Form which and and in discuss on annual financial briefly XXXX. by will results with our financial quarter April are I good described our fully the everyone. report XX-K, SEC for XX. be will Bob, year note evening, Please the

million million XXXX of sales. XX% net revenue. fourth or million attributable profit gross for quarter approximately $X.X year year in prior licensing primarily quarter the of quarter, the by prior $X.X revenue quarter, over $X.X decreased to increase and million $X.X was e-commerce a driven approximately $XX.X net Total wholesale lower the primarily Current million, to from

driven a brand a by This $XX.X related is were this Ripka impairment from and current the $X.X the million $X.X and charge licensing attributable wholesale primarily respectively. quarters, model model the prior transition of to direct-to-consumer timing brand Operating a increase continued of model. expenses to million and million to trademarks in the

in for were generally costs incurred and year slightly our interest did current we The expenses on, worked recurring million flat, prior from close. acquisition Other but attributable from Halston includes $X.X finance our quarter transition operating that of increased the increase also to quarter Total $X.X of from by Halston Heritage year down were prior debt and quarter. million trademarks. the not acquisition XXXX the the potential expenses term February

quarter, quarter's $X.XX fourth share with compared previously GAAP diluted million and quarter. impairment was million for GAAP charge. net net negative the of current share prior the includes $X.X million year negative loss for loss or net per basic or approximately the diluted $X.X $X.XX loss as non-cash and per basic mentioned, $X.X And a

$X.XX cash net was After for $X.XX income compared million approximately items, with the and non-GAAP for million and adjusting current $X.X was per certain approximately share non-cash share $X.X per year million $X.X non-GAAP decreased compared the quarter. diluted quarter approximately earnings quarter. the $X.X prior or or diluted current in EBITDA quarter $X.X per share with prior million in the year for million approximately Adjusted

full-year approximately revenue was December $X.X or million ended year Total $XX.X prior Moving over the results. increase now of XX, for the an XXXX, the XX% year. to million,

by primarily for quarter, and increase experienced the revenue the sales. trend driven the was the total in e-commerce with for year current wholesale As

$XX.X full-year was million licensing $X.X lower decreased partially the the million attributable approximately was from margins. in This to for profit revenue primarily net offset to by prior wholesale million year. $XX.X Gross that decrease

costs $X.X charge increased million This worked from close. impairment and $X.X did previously primarily $X.X to Ripka million increase of the transaction operating million Our was potential for for [indiscernible] mentioned but prior the that expenses attributable current the the not approximately expenses acquisitions trademarks million brand on, we year the year. in incurred approximately $XX.X and and

and increased and February approximately a million XXXX principal interest rates million debt balance to as the and resulted high higher both higher Interest by prior which in interest of loan the as recurring amendment, expense year $X.X XXXX compared term well for thus with $X.X expense. due extinguishment loss

include reduction of to XXXX. the related XXXX million notably contingent also the Wonder C. $X.X on Our back results gain the obligation the in acquisition

diluted of the $X.X net certain current year per GAAP basic per for year XXXX. per diluted line $X.XX million $X.XX approximately income earnings year. and current a the $X.XX or was in share million for basic and non-cash income $X.X After with of for $X.X non-GAAP with net compared cash approximately bottom or million compared in per was share loss items, non-GAAP share share per and net share and was diluted or diluted prior the $X.X million adjusting Our $X.XX

current million year the for million, EBITDA $X.X $X.X prior Adjusted the was with in year. compared

air availability during mentioned our As Bob, Wal-Mart were at C. XXXX with rather our adjusted in QVC our than as impacted earlier Fall results launching as brand by year-end December, conflicts of EBITDA for and the as planned by on Spring XXXX. one-time scheduling talent well Wonder

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

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

to position. I'd Now, cash turn like to our

and $X.X December primarily during million; with unrestricted of including in compared As This by and approximately Longaberger these which of technology, from had million Halston principal in the $X.X company debt systems brand payments of Heritage XX, XXXX. of XX, total XXXX, PLM cash the of cash our to brands, approximately December $X.X totaling investments million offset were million; million at year, approximately brand was million cash ERP million approximately $X.X unrestricted in new decrease approximately flow $X $X.X the investment including operations. of cash $X.X attributable

$X.X amounts, of million at our debt; $XX.X deferred million of lease the $XX.X XX, Of December At of term generally million stock. $X.X shares to includes million obligations; tax company's were paid the total contingent Looking be obligation which in $XX.X debt. operating of liability. obligations; and XXXX, approximately contingent liabilities million, required is net these of repayment

operating debt lease XXXX total of million portion in obligations. current of XX, the long-term the inclusive liabilities million current were $X.X and million $X.X of of portion At current $X.X December approximately

for capital year. the At XX, adjusted working and million, at $XX.X December debt was current our million Xx of at $X.X on our bank EBITDA XX, approximately contingent any portion liabilities XXXX excluding cash net XXXX. payable obligations $X.X or Our with stock. lease compared past December December total was XX, million of the These

by And the market pandemic. COVID-XX our we the cash inventory, brought and to taking in reduce actions current of finally, cost, as conserve manage appropriate economic Bob uncertainties about mentioned, light are

have flexibility payments, which for in restructured refinanced in we addition, to recovery release will this term us recently with In current run our to environment. XXXX, our debt allow principal additional effectively business reduced senior just provide and

And to the with this, Bob? back Bob. turn to I would call like over

Robert D’Loren

our remarks. This Jim. you, Thank concludes prepared Operator?

Operator

Our very Morris from with go first question comes ahead. John Davidson. Please

John Morris

afternoon, Good everybody. everybody and Thanks. And safe is hope well.

in how here, where expect to Just no matter long to know in two looking at ahead out out get where crisis out coming we terms obviously, you’re going years? trying long-term see a COVID I’m a be, that feel that target, that's of for of or would to you margin but don't would settle valley looking your your year you the if target, the gross Thanks. -- over

Robert D’Loren

Bob. you’re that How take one. I'll are John, Hope you? it's …

John Morris

you. Hey, Bob. Yes, Thank good.

Robert D’Loren

… safe and healthy.

So this will partners offer How is need seen. we think result don't final enough to purchase in lot in. offer high I course, remain we a a the result cover how year, how a them. going to be long retail long are orders this structure that margins of through rest on, retailers plays IMU think been Wholesale We to we of margins remains with margins lower. that to will the approach see dilution for of goes our our of the depend A what don’t will lot -- closed. out generally, upon of partners. retail to we our our to that, But that our tend or has strategy doing as

a push product with say did even to of lot some canceled August we July, the our with cancellations. to But able As we've June, the are I forward been partners. on experiencing orders, call, the

with retail nicely working of partners. been majority the we've our So

be to a margin year. will the real tell the I through little So early what compression think it's

it think long depends happens I and this goes what on. really upon how

John Morris

Great. were good like on prior with Bob, all Longaberger a follow-up the And sounds helpful. that's off is, to start acquisition. it then and my you disruptions, that

want know What prior that Just just how get had want to points to on relative your thus ramped a expectations? the color to little the you of -- been to disruption? from far extra bit up high

Robert D’Loren

them. for and Longaberger as contractors, of an it's products they're time call And the peer-to-peer moment cycles. to you independent people Actually, of very these tend income. of that's are successful. us sales. in where sell our looking are was additional what in these will. like salespeople So times do for them kinds kinds And know, is businesses exceeded in you model often ways because, interesting Longaberger all earn if family, of for opportunity this, to a The well It expectations members terms this in of we launch

what within to to the the next recruiting sales of sales them can are we onto We feel and commissions. Longaberger selling person they days up. for module associates very that optimistic the and be that platform. track about the force recruit XX,XXX sign former through former they're of to had launch thousands this new we'll we And pay And module XX able

to new every products We load continue day.

the to It's the you primarily site, the see there. go offering can you If that of members the and products. kinds customers home we're things

of of jewelry We Judith a small and Longaberger men. have this to offered saleswomen family selection Ripka

platform see onto so brands we'll this our over far, so So good. time. about We're But this. excited very how translate other

John Morris

you. Thank Great.

Operator

go with Walter Partners. Schenker ahead. Please comes next Our from question MAZ

Walter Schenker

the period. trying the along compensation about with you companies, for the see cost some change of to is at sense pleased if Could structure? executives? there top not other very us brands type be, least percentage give just during was thinking broadly, few this many Xcel the might What I reducing

Robert D’Loren

we payable March; XXXX at we our board across executives that two, we the end to on-air including reduction employees, and one, senior income made reduced So and bonus all the of of guest. was --

we on continue to flows. adjust level will our could. based approximately we everyone will XX% look that fairly appropriate our made the the the and We as for analysis at, forecasting variable But of and overhead is we're this us cuts looking the cash XX% as board flow as And across good at based upon we've needed. where of cash we've is been treated news or

Walter Schenker

Thank you.

Robert D’Loren

Thank you.

Operator

[Operator Instructions] remarks. the I no There this D’Loren call now at questions turn to Mr. for further time. closing back are will over

Robert D’Loren

you Ladies recently COVID-XX overall Xcel to all this continues and as thank will your continued got to we appreciate business pandemic. challenges time market store standpoint, operational well these this makes the closures accelerate. believe are your and continue as this years during the for brands. from and to We gentlemen, the consolidation and infrastructure capture for in platform, industry us next due interest enormous The to several industry technological continue perhaps and evening. We Xcel's harder an support both be retail a greatly disruption. believe Notwithstanding as that share leading positioned of an significant and/or retail continue that we uniquely challenges, time challenged

fit, always importantly most As and stay eat well and now, be healthy.

Operator

conference that gentlemen, does conclude today. call and Ladies for our

You may participating. disconnect your lines and thank you for

Xcel Brands (XELB) 13 Apr 202019 Q4 Earnings call transcript