XELB - Earnings call 4 2020 | Xcel Brands, Inc.

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Operator

Welcome to Xcel Brands' Fourth Quarter and Full Calendar Year 2020 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. may you Andrew,

Andrew Berger

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

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

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

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

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

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

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

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

Robert D'Loren

pandemic. into discuss as the in XXXX. Thank and impact and and us. track remarks an business for today's highlights get employees your their past the the our It's will for to opportunity and back commitment Haran, take more you, to to our into by our partners After brief Andrew, to normal. year and recovery opening safe I from throughout to families detail. I on results our with thank some insights exciting accelerated healthy. want call staying followed joining and start you of all I business in are this financial Xcel good Jim this you evening, operating everyone, push succeed thank of will new CFO, we COVID-XX that, forward hope

Getting no of through company there That in for were not Unfortunately, it would filed the is closing delayed acquisition further, that transactions while Form challenging. acknowledging I finalizing new any annual we recent made these Now said, late. remotely credit by and unusually XX-K and excuse before I other its audit-related remiss working being facility. matters the go be late. our

Our in the -- and on behalf future. of better to we doing team, I our entire apologize, commit

will the the short XXXX presentation. change our to The already rest enthusiastically of economic in stating the the and of that challenging retail risk last the of a before of and of industry humbly extraordinary. XX the was I play pandemic, experienced were all Now is business, nothing magnitude months, turn obvious, have we changes year. social At including over acceleration

starting and signs retail of in industry see reopening the to and recovery economy the are We in overall. both U.S.

positioned to operating and balance model crisis. this Our strong us omnichannel technology-enabled navigate and sheet strategy

that we to well result, we a As lie positioned are opportunities believe ahead. seize the

I channels of XXXX licensing all sails the the wind pandemic into COVID in across our calls, out tremendous previous showed distribution. wholesale coming of year proverbial non-QVC the mentioned As businesses. the of knocked and Unfortunately, potential

the net of line impact is Our million. we $XX that XXXX. of EBITDA PPP were COVID, from $X top $X million sales and net respectively, our revenues down businesses non-QVC in plan licensing $X.X relief received, million reduced million, over the anticipated Therefore, by and

actions and reduce we year we we last As employees expenses every in-office safeguard in employees we EBITDA, cash key reduced down the increase slightly to debt this by our by liquidity. our work cash, returning $X the Also, step term implemented approximately appropriate to million did ended balance increased and you while conserve while to took and further summer. know, sheet Accordingly, back year-end. possible

Xcel. everyone this their and want Our for to been during crisis, great employees dedication I truly to continued have thank

So for let's look XXXX. optimistic we're at why

to and QX. we poised are to in track momentum business entire We beginning accelerate in 'XX and back on growth expect the get to beyond, drive

acquisition than the in of business in leader as before, of of stronger Goldstein brand interactive April the the TV XXXX solidifies now television us is and channel Lori the ever interactive Our distribution.

HSN globally for this and The grow U.K. in to wholesale QVC the of Halston Channel business. the in our continue We TVSN Canada, and U.S., Shopping additions channel in with Australia Italy H

Longaberger, and Judith doing well. are which Ripka businesses, Our includes DTC

higher is XXXX. In pace fact, for Longaberger significantly on sales throughout

channels, plan store us very first distribution That rollout. by full- June. off-price to our Ripka all said, doing the and store week we Judith taken Ripka despite and jewelry planned caused our which livestream as In the of first including across result impairment well wholesale, the a opening pandemic, Judith business charge e-commerce addition, our store reduce first to the show of our at and open is

and to As wholesale a model are our underway. expect the from within drop QX to transitioned and a showing business, us operating positioned programs for and QX this, growth. soft, caution. QX proceed give this has in-store growth to to and currently QX we license Notwithstanding be with multiple with reminder, product we business better And ship over well model long-term stabilization we distribution. In showing control apparel channel continue an

that to continued is in sold also our Wonder currently C. offerings category We brand at Walmart. expand our

to for estimate if income. over $XX significantly to would goal contribute top achieved, XXXX and margins Our million and line businesses, in which, these operating we is sales generate in direct-to-consumer our wholesale

will market television dynamic Xcel. I we $X us strategy loan current past, Goldstein transaction am in will opportunistic our and lender and and facility of million we As we've X, well us that more to now approval for opportunities investments retail significantly share of Goldstein the $XX sheet XX% line announced strategically have television. opportunistic. be accretive positioned million, Supporting for our our more significant technology that leveraging by is exist transformative of grown excited provide media. of additional the available the his in mentioned platform subject transactions and XXXX, brands in have and provide the retail a the over Lori that with us of that brands with and by balance up in owning entertainment increases social may includes made a highly supports this for and amortization been in beyond. I It disciplined in the time Lori it Jim the presentation. On interactive over credit our grow term by closed shopping, strategies, liquidity new supports, to week, week, a brand. $XX XXXX interactive an be the balance details reduced refinancing of to channel We is growth sales last by closed important financing, environment. acquisition acquisition which to over can April last our loan million of This our

Our acquired the structuring we value a and or Goldstein job Lori X.Xx fantastic net a team closing for multiple basis, did present this of annual a transaction. Xx brand On royalties EBITDA. than less

our existing year. shareholders, a integration incur and plug-in We have debt $X.X given platform. with no of to and we simple, recoup is to end by there it cash obligations initial this to straightforward transaction. is fairly And did of important is connection that this note investment this not any was The to potential dilution a the is in licensing business that the term million it licensing our brand

also this growing brand believe which market distribution. for businesses and is includes livestreaming internationally share in and We DTC brand that ITV, in leveraging business, and new the channels the of in upside there other significant increasing

that a the the coming is has as may as mentioned have distribution accelerated years. dramatically percentage the I QVC's past, a has pandemic sustainable, the of increase in and the As e-commerce in that model proven sales channel of business livestreaming adoption pandemic of

grow estimate according by For billion And billion $XXX from to that expected example, an store. China, billion $XX livestreaming next $X in in Judith by years June is We of plan Ripka X to the Research. X expected livestreaming in XXXX live the with events livestreaming and to new in has opening they to grown -- XXXX launched flagship over billion Longaberger launch connection alone. U.S. with the in our in Coresite

across to continue roll will We brands. all out livestreaming

Results been very strong. with have Longaberger

uniquely livestreaming XX%. with livestreaming. interactive per our positioned succeed generating are technology, rates global minute sales Xcel sales is via to given high new deep our retail TV, knowledge compared with of conversion events to this in exceeding We

distribution. we heading of we most new fact, of the U.S.-based experienced that this channel one retail into are In believe companies

across So are the opportunities growth excited to we we by have our for and brands retail channels. recap,

underway television scale interactive consumer we recently the industry. expanded cash strong COVID growth opportunities, with platform continue potential enhance entered to drive operating reinvesting massive opportunities of business. products our acquisition the which fund consumer and disruption a and will to growth our our Our We capital accelerate in and the within access business flows, take pandemic technology-enabled of products are to the advantage to to increase

will will look all second crisis retail Xcel and COVID significant for the progress throughout the by demonstrate second are are challenging working headed updating half are the we the Board of XXXX. first we the landscape for strong anticipate employees our of ends, we quarters, the the I direction continue the all to making to create and are we investors. significant value shareholders, investors hard and forward am we Brands. excited on believe our Management, While as growth and in year

for As you I thank always, all of support. your

Now XXXX. for full call I would to the December to to financial over Jim fiscal turn quarter year and discuss like fourth XX, results the ended

James Haran

On I we mandated driven filed quarter from on product the Bob, which briefly store our orders in decrease year by Thanks, revenue results sales, expect April will The by million the financial report of fourth financial SEC positive growth ended net revenue our our year contributing everyone. was from XX% $X.X from net canceled more that and quarter product reduced quarter. December a Please down in XX. Total discuss by factors were XX-K, or business. for closings of be described XX% evening, due quarter, approximately annual note, note continued in of the orders million, third XX, Form year-over-year nationwide. approximately to the our and pronounced for by wholesale the e-commerce were driven the are XXXX. the fully results to pandemic. most with decrease direct-to-consumer caused This customers prior increased $X.X orders by was XXXX which million $X.X stay-at-home fourth and sales a quarter good

the in revenues declined our approximately year in the lower profit impact from decrease of quarter's year due economic million prior top the COVID-XX $X.X primarily of current a $X.X the with licensees. resulted revenues The quarter. compared line Licensing quarter, million gross prior in on to impact

revenue these from current product the in XX% prior increased gross Despite quarter margin sales XX% in year declines, quarter. to profit the from

through model gives Our from direct-to-consumer we long-term expect increased benefit control revenues move the volume margin product decision from and greater arrangements and to certain growth. away licensing that and us of wholesale to the

a charge quarter. $XX the for current a operating a million due to $XX.X expenses million prior million the impairment were year in related $X in year. the $XX.X impairment from with was quarter, recorded noncash prior Our noncash million primarily current increase brand million compared quarter similar $X.X increase representing in Ripka charge the This trademarks recorded to the

operating Also current in was per in a loss quarter. strategy minus period the the contributing of to bricks-and-mortar the delays and driven increase expenses impairment brand, brand transition by XXXX store of charge wholesale million the a for quarter uncertainty a increase depreciation with charge for compared or was the Xcel and pandemic. $X.XX portion share The expense. Net Brands by million year implementing Ripka of per The and licensing in the million primarily diluted retail a impairment the as direct-to-consumer current loss $X.XX diluted of timing for to was $XX.X attributable a was the $X.X $X.X amortization driven in model basic basic share net minus of and result from COVID-XX or to prior and model. the approximately

gross items, quarter noncash cash prior of approximately net $X.X loss for decrease or in non-GAAP of was year or a minus year with factor for million After EBITDA quarter. decrease was share sales top quarter. quarter the non-GAAP and EBITDA. Adjusted adjusting share The the the approximately and compared earnings $X.X line profit in million compared approximately was adjusted for $X.XX the per $X.XX current for current million net in $X.X with in prior million $X.X certain contributing the per million $X.X

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

with Our GAAP of these release comparable earnings presents most reconciliation press directly a items measures. the

full Moving year our to results.

between decline business the revenue our prior our or and evenly million or networks. licensing revenue a our H XXXX, from of model in Retail business. brand the Qurate wholesale approximately with For Net licensing to due XX% result ITV COVID-XX and as Group million year, year impacts reduction combination split a total of decreased a of $X.X roughly decreased from a the wholesale minimum $XX.X XX% the Halston other and transitioning guaranteed with to royalties supply prior

our from impact Wholesales year the closures wholesale prior was for affected compared year. as businesses. was in the $X.X were in prior product increase year the gross of during our XX% from down Despite million margin by store most the or government-ordered current decline with $X.X direct-to-consumer revenue XX% year a This e-commerce offset the declines, these sales million XX% as customers. of primarily

This million current previously mentioned increase Century noncash expenses were year expense a operating pandemic, in from current a customers primarily prior year. Tote, million of the the recorded prior $XX.X increase to Mart, Also year, for was notably charge in Our contributing million expense $X & million a increase year the was to depreciation the debt in the compared Lord bankruptcy due million $XX.X impairment current representing $X.X and COVID-XX the similar with several the noncash year. in million Le recorded due to in the $XX $X.X amortization related impairment Stein and the of retail recognized increase XX. Taylor, million $X.X from bad to charge

various of December, by pandemic, Protection to recognized management CARES assistance the reduction under partially cost cost temporary as operating well from as $X.X to COVID-XX a employee expenses actions expenses. as in costs offset government which and received the to April Program year including Paycheck in during response reduction current cutting company by the current through Act, the operating reductions were year for increases These nonessential compensation the and taken million

year attributable $X.X in a of fact ultimately with year. Interest a Brands period the with minus basic loss in for compared incurred share of for in The of extinguishment was was year. in $X.X loss and period the current million as costs for $X.X $X.X approximately with year XXXX. approximately of was recovered of for XXXX million was $X.X million noncash prior included $X.X loan approximately acquisition obligations in and Xcel the of $X.X basic $X.XX that is was debt for year, of were million adjusted with per on Adjusted prior the finance which related to the included connection EBITDA diluted other the prior XXXX XXXX. or per of million, the of on for approximately the is term year were the per non-GAAP million and result net February EBITDA share to than million current income a current earnings and there attributable year and decrease certain was C. cash the for Wonder compared the And the $XX.X brand. After amendment. Net contingent diluted approximately potential reduction to or these a $X.X the $X.X loss per compared primarily or $X.X diluted reimbursed the in share acquisition, expense a loss notably $X.XX approximately non-GAAP million or million minus costs Net million which gain adjusting Additionally, diluted prior consummated. year the XXXX. not same XX% million lower per items, approximately for $X.X share net share $X.XX million from income $X.XX

now to position. our Turning cash

operating implementation our principal payments the and measures had of cash activities and the approximately largely cash December during assistance management the of and increase systems. operating through to the conservation by received implemented primarily This with $X.X million was net investments cash $X ERP As results, PLM which cash cash XX, unrestricted approximately cash Program. control equivalents compared includes to our government and at provided December XXXX, debt year million by The Paycheck made $X.X by provided term company offset XX, attributable of million of cost Protection and in was by of XXXX. finalize

and was million million, at $XX.X of $XX.X debt X.Xx. ratio Looking total debt debt cash December with our XX, a our obligations. approximately net-to-EBITDA term At was bank at XXXX, net

lease million at $X.X approximately with portion XXXX, was $X.X capital excluding XXXX. million the of at December XX, working compared December current XX, obligations, Our

on of Protection calls, and under mentioned the in through conditions $X.X the As XXXX, Based Act. the on previous Program we under received April requirements Paycheck CARES the Act million CARES Act, and loan and the Program forgiven expect accordingly, Protection proceeds a we be the of have that the the Flexibility the similar will amount Paycheck grant. loan of entire treated to

mentioned, Bob transactions. Lori debt some refinanced and on the Lori acquisition provides this purchase acquired LOGO would we $X increase term brand a to payment and last strong The channel like brand I the As color interactive Goldstein these LOGO The week. in provide our August Goldstein distribution. $X.X with company the another X, brand significantly million at share million a brand our closing payment XXXX. of and television market by included of previously

to recover X cash these generated The consideration expect generates years, by We the flow shall over the the from the balance cash flow flow the next purchase payments brand the be paid from from certain cash hurdles. brand by of provided generated year-end. brand

price the securing purchase we approximately The royalties. shortly new acquired is existing the million million. refinanced the debt and term capital term company's brand, Xx consideration line $X of to annual up expected a adding of we after And debt, $XX working

to current our incremental to interest is for the facility $XX be the approval. rate lenders' is debt X% acquisitions, up subject additional term an in $XX debt. increase utilized approximately provides over will addition, term debt that million which term In average million roughly X%, The weighted current

reduced accumulate working funds cash of opportunity to is of throughout it Although provides payments the $X capital. million. and This principal increase company will term the cost the provide higher, the for

debt XXXX, mentioned anticipate X.Xx. below leverage XX, I net by this debt was to debt net the facility, new As of leverage year. With be our we well December the this end earlier, approximately

line our up and provide for This term for businesses. facility debt, to million. wholesale of liquidity addition In e-commerce $X will provides to additional the capital working the our

drop Bob. valuable back over and working the like success adding would capital With the wholesale will Bob? new that, company. And a to I as would grow -- events call turn may over to early accounts, needed programs, including resource to time growth the be the fuel to I call with that like of ship line of livestreaming

Robert D'Loren

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

Operator

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

Robert D'Loren

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

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

Operator

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

for all may disconnect, participating. and you You thank

Xcel Brands (XELB) 21 Apr 212020 Q4 Earnings call transcript