XELB - Earnings call transcript Q2 2022

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Operator

Welcome to Xcel Brands Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not prohibited 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

Seth Development that Good ended Haran; quarterly are morning, have file welcome Earnings Form joining XX-Q and the Robert earnings Financial on available and you will release We in Burroughs. and report Chief on are well. a D'Loren; With Executive had access and and and the release Xcel Chief for and www.xcelbrands.com. And Vice now, everyone thank will us, website its President be company By hope should interest to and XXXX, with out to the XXXX the June call, Treasury, your for went ago. of Brands The report of you appreciate safe and the the company's today on second today. at quarterly which us, Business the Securities participation everyone, while quarter Jim and short addition, all the Chairman Second Call. Officer, Commission Officer, XX, Exchange Quarter Executive

company's the relating quarter, and too, its The a company at website Isaac is is webcast, filed will on call brand. being that X-K on the it second and transaction, Relations replay sale interest of Mizrahi the During available company Form the company's a in to Investor closed the the a report XX% announced available on it, www.xcelbrands.com. This website. be

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

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

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

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

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Robert D'Loren

Global, committed to it Under venture our to and to growth closing, this which This to going when operating in strategic the than $XX manage role the Thank at some and morning, cover review interest in the By plan that and to of XXXX. agreement I Canada. to under future will WHP a brand, retained the our detail. newly proceeds the brand have to joint QVC, announce company. with of oversee we in agreement States and we connection, in Mizrahi to a venture sale. acquired business for Isaac private and we ownership Mizrahi into with interest XX, this agreement more have new The United in grow Isaac combined with transaction venture entered management the of in a WHP, for into our with Global, the XX% use share license forward will of plans apparel of sale working the continue then proceeds million financial I our and the in iconic Good with with entered and brand participating from brand to the our the WHP able on resulted and thank WHP develop XX% develop cash us. will for Jim second In significantly Mizrahi been earnout, the you the pleased brand. our CFO, Isaac brand business joint today's operating brand continue our $XX.X highlights with the retaining a start business the quarter, completed and to you, then the brand apparel in Mizrahi in you remain which we Haran, Andrew. the joining a Isaac call through interest discuss results transformation our at we soon. we hope equity-backed May higher a Isaac of everyone, of valued Mizrahi sale $X million the XX% value women's quarter on the million. and with will successfully the we formed a be agreement I'm second business licensing is venture women's

international as partner global WHP's time, it in believe was the direct-to-consumer to transaction with growth phase growth well Isaac We of expertise. for for allowed value us of by as same in a next to the the and substantial Overall, including a leverage the we at brand, brand, growth. footprint are Isaac that Mizrahi retaining from material for the a future realize in transformational this excited interest Xcel its that created while us Mizrahi launch opportunities WHP website a

hard design production media call, a as stream position stated live growth and focused our years driving value for on QX consumer and I long-term over worked brands. to on past platform As Xcel we creating XX have earnings the

upon innovative have developed live marketplace. streaming entertainment proprietary a an is also social We media reimagining, thing and emerging become rapidly platform based this have leader and in one shopping,

We under to increase direct value long-term both our as positions. sheet. financial From our significantly Eagle debt brands Concurrent success increased transaction transaction. with our under pleased the and a repaid this brands our with Mizrahi well capital significantly able cash and by are of the with materially our First perspective, been XXX% enhanced our television achieve our on we transaction, have to loan agreement the quarter as balance response the outstanding second working we Isaac as ability of evidenced

significant For to the in which pursue growth. are now that accelerate XXXX, first a opportunities time since we started company, us the with debt-free provides company flexibility we

of important when and earnings discussed, said, up more fluid. should environment. year, our in fully, liquidity retail announced remainder for to manage impact cancellations initially the costs challenges not levels issues, transaction, with shaping that strong having expected. revenues caused as note capital has extremely inflation, will added had today's in came This, inventory I As will that That we chain recent the the selling the the initiatives and for access resulted the high business we brand and supply suddenly, retailers the environment headwinds by and I in as of combined Mizrahi is XXXX majority remains critically Isaac greater XXXX. order market discuss I the continued new

First relationship levels We and with expect in with have to quarters enhance our line capital working capital new maintained acquisition coming future a Eagle our the financing. commercial bank for

believe will our and current exploring We industry position retail and will past continue that be prudently approaching but this attractive In economic with environment, we several our the to sheet. balance acquisition are slowdown maintaining deals as capital there while strategic we've provide growth enhance and strong investments in work quickly move quarters. to believe seen to earnings we a will put the the at opportunities competitive

for working are Ken first We new as which also within announced our live with stream spokesperson we of Director recently Halston. projects appointment multiple Creative the businesses, existing the of and Downing on the

Halston launches distribution in 'XX, several planned including Spring have new U.K. the in We for arrangement a

HSN, through manufacturing QVC launch We also been and optical whereby has inventory Xcel which recently be a with investments. any material business all leverage partner venture on on without and systems joint the will to launched soon, a able multi-branded filed capital

developments, we the C. Wonder help growth We will and by create QVC new these with distribution which for U.K. announcements HSN our existing soon. agreement brands are expand and expect in and extremely our executed a brand excited in our relationship more Also,

revenue customers. while long Longaberger distribution expect Finally, we projects recently Isaac a advantage XXXA are a an new give impact will Section a to planned us opportunities improve From center Mexico short-term through a or and and in Ohio that a we currently warehouse new upon that margins established high-level tariff transaction of based to domestic replace perspective, agreement considered. these our either quickly and competitive serve Mizrahi with in earnings, new better the significant savings and the being had facility pipeline on executed

pressure we We as stream for In industry towards balance raw This are drive concerns. by and liquidity, continued as very pleased platform asset geopolitical will are cancellations material cost financial strengthening and and the Xcel values and capital live more step to opportunities. driven rich closing, positioning to primarily our believe and our even logistics, with fund brands, transaction shopping. the new in current a sheet with is and strong flexibility, businesses our important access as margin due our order leading companies dealing macro

we will pursuing, well thrust our us result, headwinds that sheet, investments growth strong to business a position with us. believe suddenly are been we have As economic our through upon that balance the combined grow

C. of stock now share Judith far and The exceed and we our Wonder, to cap. Isaac this Longaberger supports Lori and Isaac call, Mizrahi. asset Mizrahi in I brands Ripka and our values hypothesis. our Halston owned wholly continue As Goldstein, and transaction include believe ownership in market that price today's

of we and history, excited with acquire we creating driven businesses the enter build existing and our leading continue at shareholder partnerships I and our direction strongest new We stakeholders. in by am pipeline live of The a is platform have brands, value reputation for success have goal opportunities platform new a we'll the enhancing value brands created headed. stream platform are by by as for industry proven developed the into shopping. our and supported long-term in our the brands brands have to our And

Jim Isaac Mizrahi Now Jim? and for detail results the call I'd the turn discuss more in quarter. our the second over like to to transaction to

Jim Haran

quarter the Bob, a $X.X XX, prior for Thanks, results the was of XXXX. million revenue will and the quarter months Total representing and XXXX approximately everyone. for second year financial decrease six good from briefly or discuss $X.X I quarter. our of ended morning, June million, XX%

remarks, These with were period. revenue million million for declines based headwinds. $X.X current revenues or approximately down and $X.X the XX% attributable a comparable decrease compared million quarter. the compared decreased prior to X% XX, the representing by for Net approximately XX, XXXX, driven respectively, Net XXXX factories For decreased the our This the in Gross compared Mexico months offset Relocating months prior by $XX.X by Wholesale distribution and quarter canceled cost our on have in that closing in primarily year, current will apparel year-to-year going Bob was XXXX is in his prior attributable prior revenue a by overseas direct-to-consumer customers approximately year to in year interest in the has sales XX% the on Isaac million. were attributable decreases retail during current from as quarter. supply to months. quarter XXXX, Goldstein sales by for from brand year approximately our majority the million prior the to year XX% in the with of revenues of six ended Mizrahi industry selling partially increased declined the the period. six and apparel the in approximately from licensing XX% and product of the mentioned period and primarily and ownership approximately primarily the approximately period, wholesale orders - with approximately of $X.X months, prior Isaac - licensing revenues year. Net of XX% orders in licensing were the apparel the forward. six-month relating the cancellation as higher goods to offset $X as $X.X logistics brand. second were current opening was first six total seasoned revenue or May $XX.X compared $X margin of brand to period XX% the of and increased from the decrease licensing for million, current to declines global during partially chain basis inventory million in months six-month six impact the which sale current temporary a as mainly the Lori profit in six well current to primarily XX% current of half to approximately and the revenue wholesale costs. And of inventory on These our positive sale due in write-downs entire year the quarter June the off as the lower, with million

sale was increase $X.X the be expected to million in that costs not $XX.X current the the were million quarter. brand Mizrahi prior related expenses operating Our expenses are to the onetime half million continue. $X.X to of up and this from year Approximately Isaac for attributable of would quarter,

Adjusted or mentioned. working second brand. to category, of share warehouse year the previously and minus $X.XX second our $X.XX was million and the the various interest negative primarily is experienced interest the of will current loan million environment, longer primarily million $XX.X $X.X managed to repayment of we million quarter or the quarter the initiatives providers flow of current And incurred distinguishment the XXXX income premium. brand. cut in term new the was our the all is current basis, XXXX forth. of continue million that any principal interest our with a the increases for quarter service $X.X compared share $X.XX of $X.X which a our associated year-to-date and Interest control the in in current a previously to driven we with The we finance overall million gain compared excluding set of Mizrahi cost $X.X debt This outstanding period $X.X million from a as prior was we was the expense prior quarter period payments Isaac shipping, as in subsequent lower both by and per to early the year, outstanding development we including debt, for noncontrolling initiatives million higher fact Separately, a costs, EBITDA minus inflationary loss vendors no had repayment $X.X costs compared we multiple operating on versus area The cost approximately recognized the the debt a The quarter quarter $X.X a quarter $X.X product plan on, well six-month per again, and in of gross included May share, notably of fully year expenses. result recognized we logistics related income prior in EBITDA most for several new investment quarter. statement trend expense revenues fact in of per decrease paid replace in for loss term a due with current we mentioned In loan or quarters. of with benefit minus and and million On Although current second net of ways revenue other the million had are net non-GAAP with to to sales have our Overall, company's thus in from $X.X share or we current design a for attributable in million and have have cash the part compared the warehousing income, of the costs. was off pursue net per to due these and economic $X.X year the and quarter. basis period. the on finance million basis, all as $X.XX On $X.X quarter that XXXX. year the XXXX. year-to-date Mizrahi of in

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

Our earnings with measures. most our press reconciliation present release GAAP these XX-Q of a the directly comparable Form and items

now to Turning our sheet. balance

June at XXXX, unrestricted our its of positive net lease low million level working cash and the shares is XX, It portion approximately cash current obligations of that of stock. noted balance $XX had of cash end $XX our equivalents company As and the of million, contingent of the be obligations quarter. and capital in payable each excluding at should

XXXX. Our XX, outstanding over debt, approximately current that, debt paid which to $XX with million payments. all in call eliminate fully term back have annual like Bob? cash to million service would million $XX $X.X balance discussed, June the turn off will at I Bob. with as is And we approximately loan compared And

Robert D'Loren

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

Operator

is [Operator & Company. Sidoti you. question Thank Instructions] from with Please Our first proceed. Anthony Lebiedzinski

Anthony Lebiedzinski

taking questions. Thank morning. Good for you the

Halston going if color on you So about guys Can in and projects? you revenue impact C. far just new could new I some far the we pipeline of And think help stuff think the us how these products. you perhaps strong the maybe us as Wonder, talked give and as on know project as should those? any you additional about to forward earnings and your about announced of as that other

Robert D'Loren

good. Sounds

So new both are HSN. pipeline and of are a QVC majority that the in with projects launching the for

launched premium as fully First significantly launch this the to joint HSN, with that Downing by of in then will And Q-Optics, for with of we QVC. the that a well I the distributed of the course, to in the spokesperson better tiers HSN the Nordstrom, Neiman's, that end with will build also be for that Wonder launched as both with three venture Creative the here Ken we in Ken of with for distribution. believe next as the of optical of call of premium going level are of business the And in be business QVC, Bloomingdale, will with the to HSN to we significant retailers. Macy's new announcing the announcement continue we to U.K. in a business for hope be pipeline retailers have in is few Halston, deal weeks. of Halston spring a Director with There that our initiatives we Saks, some for that distribution also off-price C. And new and 'XX. one That we which line will the are increase U.S., like and are we a are distribution increase working additional Halston be brand. and there week,

employees So pipeline on, staff that's of any oversee for old well some a startup time. as the capital freelance product developed on for we these significant to deployed launched development, before majority brought as product other and are No cost to the get launch that these that being we additional than in transactions. of the businesses working

Anthony Lebiedzinski

Got these that. of some is just color of follow-up, freelance that? these as any costs And as start-up to any a and on far Is that? for of workers there way it. Thanks quantify sort the magnitude

Robert D'Loren

can't development, generally, of all onetime of about and workload. It's start-up per we hand initiative. $XXX,XXX season, And P&L, new And brand launch the we a additional that. including capitalize But terms for need Sure. a of extra in are that those to product hits cost to for the they onetime are employees take on that course, costs. freelance costs

Ohio up up business the our XPL big into We business. process that for that event in cannot incurring setup Longaberger new the cost Longaberger has and those most just we The state-of-the-art of They also we operations additional setting Mexico cost. the XPL costs in And we are for XPL set orders outgrown enough some in. fast there. a a if technology-related and are moved we're warehouse run

Anthony Lebiedzinski

Got it.

far new to is you facility Okay. new the that, what And as Mexico to expect then facility, by? the when to as complete that timing follow up and Ohio on as the

Robert D'Loren

year-end. operational by be will Mexico

from forward will We and then savings depending upon there. from in facility The to new XX% duty shipping goods. from one apparel, December be XX% that take material launches on of the it late the the anywhere is in

for the it's the for advantage So rules, familiar very there not to concept minimis significant with And Section a us. you're qualify amount of the duty de is the trade savings. XXXA, if

shipment is $XXX, And it the so duty-free. direct consumer as under long to the to is

direct-to-consumer. companies, and and HSN our advantage are on It's So taking direct-to-consumer be for that given for for way competitive prices HSN can Xcel. much and retail more XXX% QVC is both margins that many particularly of that program their of it a business, are companies we QVC, a and orders

Anthony Lebiedzinski

additional Got the it. Thanks for color.

you as opportunity think look So most portfolio, to where the you current you at have brand your expand? do

Robert D'Loren

us, will independent and current that that in I the going we've just has us. for upside We started distribution meaningful be for significant think distribution. distribution boutiques be Halston Immediate program given the a better is XXX there. its to new believe business stores U.K. department

in and are distribution discussion do something Liverpool a Mexico similar in with We above. in to

we So on business we HSN. have business program that will there voice drive can status we C. with to out think of Also at tremendous our with think authentic drive Wonder upside. see the coming line retails also the board, And with perfectly warehouse, be also HSN. at significant I duty-free upside has the in an Ken now Halston being

reporting, of for significant program over us be. we will over the three be piece about very next what this. will the years, We this It's weeks, next very, are few and excited business a

Anthony Lebiedzinski

Got it.

the last question And me. for Okay.

these balance maintain should look is back want to enter debt to a that we perhaps projects, new you So a assume debt-free to sheet? now, willingness into for what your Or as go position? you

Robert D'Loren

as to We term debt. balance would prefer relates have a to debt-free sheet any it

in we say line. should securing the of We a are capital will - working process or I

much a and and as planned of programs and secured the that will amount various it's the line well AR HSN increase as of be QVC of to launch by these have for us inventory. the we inventory premium, in credit Given carrying efficient more Halston for

Anthony Lebiedzinski

Got it.

sense. a makes of Okay. lot That

very much luck. and best you, thank of Well, Okay.

Robert D'Loren

Anthony. you, Thank

Operator

with question Please proceed. from Equity Debra Crystal Research. Fiakas next is Our

Debra Fiakas

And thank for taking my you questions. you. Thank

a the question less one is or brand. first more The your related to sale Mizrahi housekeeping of

retained you statement, of how would How of your income that, that expect on I a P&L? we and significant course, question balance to interest But this looks your it's Jim. in XX% sheet. the XX% maybe portion be Of that wondered is obvious - for a reflected it, and

Jim Haran

can recorded be income so method, equity record the from JV. item. the under us will separate be This would it line a through flow that We'll the

two with there's essentially, - be operating Mizrahi the expense Isaac it's don't for of with the did broken have we too We indefinite-lived component prior, the acquired, be that they but the to pieces. of the go of going we'll want technical, intangibles distributions is to two And I conjunction cash members. an to will the brand which in be noncash - amortizing asset. sort in part as it which core that

Debra Fiakas

Okay. good. And that to see when shareholders begin? Very can expect

Jim Haran

It was the a breakeven this quarter. We brand only a had month. for

didn't we anything. record So

quarter. the to third the start in starting P&L see that on You'll

Debra Fiakas

to And only? regard that Is apparel, it apparel? Mizrahi license course, license? you. going there women's on you're on sports the we that of in brand, the Thank new have see Excellent. for women's of limitations that then, you a broad create array are can where Or Okay. to

Robert D'Loren

very will about an under Debra, to offering. it And I'll announcement making be So launch that apparel. a It's take we broad very that, expect all-classifications soon. be

Debra Fiakas

faster Are Wonder a see brand. take at sort to that to Are expecting Okay. regarding place the asked C. into queues C. Wonder place, you pace activity take than what new person by was expecting - the items? Mizrahi the you of maybe would we the previous this

Robert D'Loren

Wonder launch. C. be the months. before development been place is three last in Isaac over would Fall The Yes. Spring 'XX. It product 'XX has a

Debra Fiakas

In 'XX?

Robert D'Loren

Yes.

Debra Fiakas

Okay.

global a more is this And Okay. question. of

about at off in this unexpected just gave it's every of headlines but But mentioned preliminary consumer in the survey consumer to And pace of And in just had big you to set last sense spiked June. remarks, indicated the the and related big number a I averages up Michigan economists, maybe see was orders can is that of that your out some do sentiment. you're if sentiment low what University wondered, You they a Friday, that's day. which at and it? way order look course, of the how Xcel opening what is how XX.X%, of Bob, sizes your a inflation out of numbers or the make headlines terms you - order Brands, experiencing shareholders ticket in vis-à-vis these average size, of

Robert D'Loren

And of we're the on inventory for business us that year. on orders course, for they where of was back the many try us of to levels managing the this through cancel could, deliveries. those they very year in significant China. We sourced impact this know, And did. So business, And as has were had our wholesale in that various we XX- we that to goods supply at chain apparel out hold while XX-day most ordered. in of factories many as manufacturing that of orders delays in issues. - different there China are inputs, buttons you our And caused ready did. because to could where shutdowns could, trims, were of as cases, began goods, provinces orders challenging cancel we But stages of were certain goods a are in pull retailers we there as

goods logistics do and direct-to-consumer. doing and then, you're were diligence under on they there de shipping minimis started two-and-half to we $XXX change is because the negotiate to where container will while We repurpose identifying cancel and research our are than of costs did. biggest $XXX course, we best that's when And this fairly challenge. XXXA, ago, advantage more we the costs from Section warehouse orders years very significantly where are still improving, a we could saw been and And with they factories, pre-COVID. a those our And significant

Debra Fiakas

making actually by that them? to bringing consumers you you chain. with appreciate question. up adjustment to means consumers my do value What quite bit like upstream distribution next to a this keep I of I at It just seems do If that your has give give because attract you your bringing little regard just policies and to could engage other you're in that could in if Right. to value your just to or now use color a juncture, Do of sales maybe strategies. to you on bit a you little on wondered to coming like, pricing. you feel in loyal pricing you? color customers us have to you us bring

Robert D'Loren

not going have Calvin I and followers. production, important the branded of And bored companies do reach positioned tier platform there And be Tommy. to best purchase and are And the that is, we at price is brands particularly be like is what years consumers engineering that build whatever to to going And followers Today, the should believe duty-free is companies we is do. it with do platform they to is to of way well point pricing we consumer, a something and XX static companies that that leading each XX, So we that one very to of or have distribution. price. product, some tier believe like and with it's consumer live at the through we building distribution. ago say, streaming. doing The fair that images. feel People capability, believe way audience a winners at necessarily emerged to work art a tomorrow's may directly fast apparel with the that engaged ability regardless companies have say, be highly

Debra Fiakas

you. Thank favor of in next the right. queue All I'll questioner. in the back get

Robert D'Loren

Thank you, Debra.

Operator

D'Loren this would for to at time. over remarks. closing the turn Mr. questions conference back more I no to like have We

Robert D'Loren

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

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

Operator

This you. today's conference. does Thank conclude

disconnect for your lines time, and your at you You may thank this participation.

Xcel Brands (XELB) 15 Aug 222022 Q2 Earnings call transcript