XELB - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Xcel Brands 2020 Q3 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Andrew Berger, Investor Relations. Please go ahead.

Andrew Berger

thank joining and everyone, evening, you us. for Good interest that these all appreciate and your you hope and participation in We of and are times. uncertain challenging safe Executive today With the Executive Burroughs. Vice Development Officer, are Officer, Business and Robert of Treasury, Chairman Jim us Haran; D'Loren; call and and on President Financial Chief Chief Seth which release ago. quarter ended third now, should everyone the while have By short XX, access went XXXX, for a to the earnings out September file to by with Securities And in plans addition, report XX-Q company Commission Exchange Form quarterly November the its the and XXXX. on XX, and available at website report release The quarterly will on the be company's www.xcelbrands.com. This Relations call be Investor website. will replay webcast, is and a company's available on the being

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

the time. today dynamic to virus. what that on and In flow the business, about materially these impact financial is extent said the and There of have condition, of of could impact The results COVID-XX addition, duration this at pandemic change on circumstances ongoing uncertainty is any continues significant cash significant the a the company's nature of call means operations.

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

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

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

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

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

Robert D'Loren

of Andrew, I you good for our some start development. provide and retail by you, with detail. the in I families Jim After of been social technology greatly The months will financial call overview healthy. third CFO, us. then evening, thank financial Haran, our will hope of and performance your an Thank are and joining quarter remarks opening highlights. safe that, followed today's by brief everyone, all our you operating has staying some and and that the have affecting extraordinary we disruptive yet results in U.S., past short COVID-XX an industry business, seen time, been It pandemic since and have change first been more the the amount have over and few pandemic. hit economic that forces accelerated years only the retail X discuss

media the and and world. marketing this omnichannel is and distribution, in social upon integrated and Xcel streaming current based live sales However, capabilities, enable will to technology achieve that platform an operating strategy, Brands post-COVID we environment agile which success at our us believe in model,

forward and taking to strategy than even While to current actions stronger before. safeguard to assets, the continuing our to we from on our invest move we resources emerge are crisis appropriate employees, are and in execute

business model that streaming has as QVC X sustainable, live given TV and it QVC's in not interactive but trends sell that it's a our is been to for moment, on Over has well recent right business. track of months, sales products generating with the proven and business vehicle XX the on track, in products. past over we across of believe we other only and back our trend lines record are streaming past positioned streaming $X QVC billion this given success streaming are live years, actively via for on the live retail live technologies leveraging over focused of We

bottom and caused wholesale business results decreased primarily financial revenues QX by in COVID-XX, our top both line been and licensees' have impacted in Our line businesses. by revenue Xcel's results, wholesale

and and e-commerce Longaberger As previously peer-to-peer interactive TV well. our businesses business Judith commerce performing direct-to-consumer, social Ripka, are mentioned, our

to by businesses We capabilities live streaming XXXX. direct-to-consumer expect accelerate growth launching in in these

Finally, the businesses. potential by I excited am these of extremely

our review to like would I by operation channel distribution. Now

food we In on in Halston across a and Canada, QVC licensees our wholesale non-QVC Licensing business environment, to Our current our soft beverage. business, are H interactive back develop launched portfolio by of well on Live sleepwear, our face of over in fully and May. primarily after XX track our Australia of X on Channel in The mask our working Isaac U.K. is HSN, April that in and the more and in including TVSN and brands. successful basis. This manage TV outstanding Shopping we products development the and in Recently, Mizrahi sales months driven on continue brand loungewear, Italy performance brand was

reduced respectively. XX, expected experienced decrease non-QVC ended of net XX% our As for we impact in the non-QVC and businesses income licensees wholesale previously a licensing to COVID-XX. Accordingly, X from and in experience XXXX, in months canceled reported, sales September their XX% we QX orders the and

However, beginning of showing many is licensees the of the our we that quarter, in for XX% recovery progress. second are a from up

signed in opportunities and environment. new licenses various during third in categories work continue present to current successfully quarter XX and to over the retail have the We that categories channels identify

XX% plan for strong of order stated excess XXXX. growth I on wholesale book, our based business showing quarter, we sales our As in last and our in were

quarter. the fourth the through improve, from the upon into retail our heading dependent to Wholesale continue will during wholesales quarter be quarter Some sales pandemic. third as orders resumed but partners up navigating of sales in the were success significantly second

was While positioned jewelry are we levels impacted our similar in department before in impacted was hit Like shown store our business we XXXX wholesale believe growth by XXXX, the apparel, we to were the that resume were business wholesale pandemic. by pandemic.

our previously independent we efforts retailer As to results indie great mentioned, with the shifted sales to channel date. or

distribution for new supported XXXX year. pandemic momentum working aggressive platform campaign. on our new recruiting through marketing this for stylists We earlier our an both and strong year, over expect associates or and are beyond. season as channel the brand We sales. we In launched have businesses, it new Longaberger Also, seeing holiday as growth Ripka business our this well Judith was in collections e-commerce sales early up in of our last are in with and great XX% several this continued direct-to-consumer launched peer-to-peer collaborations some digital exciting and product

product assortments food Our include home and furnishings, accessories, basket.

over to where recruited new seeking members week. shows have each people exciting platform, income. the joining This this and economies potential, extremely X,XXX ways stylists are with make very like additional one is to particularly sales We in significant

all platform customers conclusion, streaming flexible in shop. technology light everywhere retail with supply a presence We also integrated reach so model launch positioned and have vertical and new capability our or we can this have In great stated and can peer-to-peer to and through of these in that we partners as capital brands retail are forms XXXX. true they either ourselves that categories models created with in in I omnichannel fee-based with our before, live model can a speed our our We've flexibility. distribution testing these businesses a and approach, through highly wholesale working do expect

jewelry, and not retail peer-to-peer categories recent by of Ripka only this harness and trends commerce wellness our diversify social the commerce us jewelry the knowledge home our to potential live and live and business form through of commerce expertise Finally, our extremely product the in Longaberger streaming. given to platform, of offering businesses give power I'm excited but in deep sales. streaming-driven Judith social These potential especially

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

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

to months. results like Jim? financial X Now over turn Jim our first quarter the review call I'd to for the the and to

James Haran

the our $X.X overall COVID-XX. quarter. net good will X equal September prior and of contribution these margin to of was financial gross we for also which report XX% related profit prior results results described less in are year a XXXX XX% margin renewal financial fully quarter in the the expect reduced ended year. licensing Gross million quarter, was revenue million, year with or licensees current prior Licensing which November a quarter, a quarter were from and quarterly XXXX. which sales. million orders to sales due to in wholesale of on discuss everyone. January Bob, months in million arrangements in COVID-XX due revenue and profit reduction third from from and $X.X XX% current declined quarter the year-over-year prior XX. results XX% impact of briefly approximately this guaranteed more for that our wholesales, economic existing upon product our the our filed to $X.X the our most year in pronounced up from the combination from the year Thanks, in by canceled increased revenues revenue margin the by decrease quarter. on evening, $X.X note I in was XX, XX% SEC of of XX-Q, decrease be Form roughly This minimum approximately quarter down effective approximately Total X the Please to declines, Despite on

cash diluted or was $X.X Adjusted $X.XX and in per a for share non-GAAP million share earnings million $X.XX or adjusting approximately approximately prior share for current approximately compared per was related per $X.XX quarter. share $X.X in of noncash million and for quarter includes net cutting items, including $X.X is relief. prior was with million After diluted Payroll Partially million current million compared million $X.X the year of income quarter. certain the loss million diluted the year representing compensation the with loss COVID-XX $X.X the prior with reductions year million Program and the several in million reduction bankruptcy of employee due This a Protection decrease Our costs decrease to retail response $X.XX primarily the the customers. or the and decrease quarter from Net operating operating reserves bad to and pandemic, quarter, were expenses cost $X.X nonessential $X.X in is negative were current actions year quarter. current quarter. the basic for compared quarter of taken prior for non-GAAP expenses the per debt $X.X temporary share $X.XX the per $X.XX million EBITDA for $X.X to net approximately offsetting basic diluted for and

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

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

was revenue X-month were down the as over XX% our attributable or in business margin million licensing as declines, million XX% $X.X first XXXX. of results. margin or X for XX% the product was growth Despite of months compared the partially months, to our million profit volume period for year. the the which prior Moving revenue months Gross from the XX% XXXX, product decreased impacts prior the same quarter in the prior the XX% mentioned to our current offset our during the year, $X.X prior current the year. by approximately XX% COVID-XX sales was $X.X these to first X sales fears during were business. of in from power gross previously In overall wholesale the months X Net of in total year, X profit in up current pandemic

with $XX.X and reductions which of the the XXXX, for share amortization by are prior per the the under in from reduction in compared customers. operating to the the and per included prior decreased the $X.XX diluted and months X in in noncash for adjusting months several expenses, the for net result million management $X.X related approximately million income and reserves income diluted approximately and for year After million the depreciation $X brand. expenses the in our $X.X bad the in for the X adjusted The cost income as a $X.X approximately $X.XX retail EBITDA debt income or these operating the some offsetting Net also bankruptcy months. were certain period to was the X term diluted the operating which increase cost months to for of of was pandemic on $X.XX the of $X.X acquisition to million year million Interest share in lower Act, operating cash in year And per were was through for million by expense. notably minus for current extinguishment for million decrease expense of drivers $X.X approximately X The main related decrease period approximately $X.X finance or fact months X million year Adjusted government million expenses in a share X gain year to months. of approximately the X $X.X taken Partially loss Our share a X months, per February we aforementioned primarily expenses current basic earnings the of includes current diluted X Paycheck items, $X.X the non-GAAP XXXX. obligations attributable $X.X the XX% the prior amendment. as months was million $XX.X X received million, on months. million $X.X reduction XX, reduction contingent the current decrease of approximately non-GAAP of down Protection recognized current from prior same share actions that X months. prior debt to current C. was million $X.X is and million prior net EBITDA loan million the than Wonder of is $X.X CARES other This including year noncash $X.XX expenses. approximately with Program response or compared in loss period assistance per this offsetting

position. cash our to turning Now

$X.X As the X.Xx the the million Paycheck of XXXX. principal during looking $X.X company compared approximately cash cash to activities and in December X control through approximately by EBITDA management of XX, received collections months XXXX, from This million increase cash was measures assistance September cost had first of with at of primarily investments and unrestricted At equivalents months. debtors, now debt. approximately our attributable net the by combination XX, increase by XXXX, in operating results, implemented Program. by outstanding debt. partially million against cash government provided cash our which reflect provided and conversion and was or million and The September was bank our the technology at offset term total payments continued for of $XX.X $XX.X cash continued operating term Protection term debt was XX XX, approximately debt net adjusted trailing cash And

received requirements XXXX, at working are XXXX. with lastly, September also relief. current the compared this million approximately $X.X action $X.X was flexibility. December We to allowed we and portion Our million we Program Act. CARES principal Act, the obligations And senior under accordingly liquidity of XX, a Program of CARES amount Flexibility Protection And proceeds the loan Protection And will that, have the forgiven be and expect treated Paycheck the based Act call on to entire turn grant. the and would that the Paycheck back over through Bob. additional capital XX, year, excluding year, of us $X.X to at which for debt conditions lease taking I the restructured financed earlier and with and and loan reduce payments million we covenant to provide our earlier term on this Also to Bob? the like the similar

Robert D'Loren

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

Operator

Instructions]. [Operator

Our first Capital Penn question comes from Robert with [ph]. Marsden

Unidentified Analyst

appears making the diversification end. Congratulations the time. really other on this worked through it It that

Robert D'Loren

you know. the Thank been time you. in tough industry, It's a as

Unidentified Analyst

Wonder, the How's do and you product shot Yes. were XXXX? Walmart? if more that brand exposure comment in the they categories. could SKUs you outlook in there? the there last like is mentioned to more continues of and the On regarding they And call, you kind something C. positive, the doing online to testing asking well, any for a that get stores the for

Robert D'Loren

when impact which really customers. is higher has value to very experiencing more spring, Fall price higher in COVID. are are their testing there you engagement We're But on seeing the points was e-commerce currently about high much engagement. platform, we when for we launched, an X much product think brands from interesting and benefits their much, We value that better. been customer date --

We new launched well. licenses. very doing have some under We XX that our items are categories

what's So at roll spring perhaps with forward seeing of phase we're the what And XXX the to bags would MSRPs of next doors, those we in the the can the what in would sell-throughs some we marketing. adjust order with so some would positive fall, already where feeling volumes strong bring greater minimums, currently or be succeed points that as MSRPs now floor. we're look price we on are floors. terms on like on looking production we like business are that this, the that line on we're where look which at of far, into Walmart's And based we with the can

So we'll call. that's our we next apprised are. keep in everyone as go we forward, where And

Unidentified Analyst

know of that year billion the was $XX that of year or million a much. revenues. only little XX% an It $X strategy a to something next being have say second was you the you type guess I is idea business at But point, that what a think, outlier X% for sounds peak be progress in Is could one basket to X, as execute back Longaberger issue, now you like if Xcel this bit revenues a asking other X, the there. you of it to going collection all-time on that a was look I XXXX, But case. million out Excellent. this that there's and level, get $XXX that I made did that. format, any guys for in would too in or fad On you with deal. this every the do well and X and there achieve? could such years, business,

Robert D'Loren

So the tabletop sold company was than a home. They Longaberger the business, And more very for had time, that historically vision David had would business. everything one jewelry significant fairly strong baskets. for a Longaberger, in sell food the They business. at point Longaberger's

give we're our away strategy and continue would for for everything Dave their Our home." customers "Someday, the was to vision. to fact, going sell free Dave's say, In baskets

sales we first, had. we're we Last today, what the our baskets things launched Over just above When of And at perhaps with brought QX, were that's so, about or of shift. But because would about sales anticipate X,XXX SKUs to we all will really on we will we baskets. site. seeing And that's market X,XXX XXX the end their it the last have be end someone month that our we're by accept by that want for the home. where all QX. the SKUs month, everything of business and XX% at

We of X,XXX rule. their wine of there's your Today, the business will the XX% subscription now And We end XX,XXX be think businesses, members maybe of $X,XXX About them even And your most that about QX, launching sellers about if do did we'll mathematics you XX% associates members, business are by historically, shortly. in And that sales this of sooner. annual sales. are company, we at sales anticipate volume. of a be an over direct in a XX-XX trained have X,XXX very like geometric. sellers. bit

math out of terms and you you're If could where XX,XXX go. doing there, yourself the this each can they're run in stylists running $X,XXX,

James Haran

This is Jim Haran.

the we XXX% we a Just this quarter, year. months. put little We to in in quarter of first the in our the Longaberger X than sales QX did e-comm did third color first launched on

brand sales. pretty and the we're at on early progress So very the pleased our returns of

Unidentified Analyst

going what and for X of I income figures next wholesale under year, would hope -- . you item revenues line to expect the statement, the in be that's business?

Robert D'Loren

will our of in wholesale -- just I digital we appear excess in It ROAs And really add, in business Xx. direct-to-consumer. but will it's happier. It sales, is other one the is couldn't . be that thing

Unidentified Analyst

is stodgy any when to able resurrect business to marketing with via of create that it . tried you went buzz networking it? now was bankrupt? still been the than it Or America you've sort it Middle it social Have

Robert D'Loren

XXX over marketing. generated started impressions media We've since million we

Operator

Showing turn to Instructions]. I session. our questions, like [Operator Bob closing conference to no over the further would question-and-answer remarks. any D'Loren for back this concludes

Robert D'Loren

thank you, in in eat and all Operator. harmony peace, Brands. all support you your and the and wish Xcel of evening. you always, appreciate We as gentlemen, Thank happiness be this holiday season. and We for fit, your healthy. interest time And greatly fast Ladies approaching well stay continued

Operator

has now Thank for The attending presentation. conference today's you concluded.

You may now disconnect.

Xcel Brands (XELB) 16 Nov 202020 Q3 Earnings call transcript