- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to Xcel Brands’ Third Quarter Earnings Conference Call. 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 & Company. Thank you. begin. now may you Andrew,

Andrew Berger

us Good for and Commission morning, welcome the filed earnings joining evening. addition, the XX, and Chief on By D’Loren; Chief Executive interest. and third at the with you have We quarter today and being the Investor access now, ended Xcel and XX. everyone call yesterday, Jim is Financial quarterly company and Development replay This a earnings Relations its Robert which thank company’s With and And of to website on to the The President September should website. participation XXXX, XXXX XX-Q the appreciate for available Exchange Vice last the release and went Brands the webcast, www.xcelbrands.com. Form Business call Officer, out greatly are and release Treasury, us, and report the your Securities everyone, be Officer, on third November quarterly call. Haran; will Chairman available Executive Seth report Burroughs. had company’s on in are quarter

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

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

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

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

pleased to D’Loren, release am go refer or ahead. to to introduce Form I may X, non-GAAP XX-Q Item for measures. – Executive of Bob, of Chairman And earnings the company’s now You the and Chief X earnings the reconciliation Part to attachment a Robert Officer. the to please

Robert D’Loren

financial Andrew. everyone, After thank Jim our results joining you, detail. some and by in some morning, brief with remarks, like highlights that, operating followed Good to us. will Haran, start Thank call I’d insights. CFO, today’s our opening more you discuss for

a with venture the formed newly WHP As last Global. entered into of completed we quarter, XX% and a our we reported brand Mizrahi business in Isaac sale interest

continue with announcements That to of the has business said, We WHP’s an expect soon lot respect and impacted the some will transaction the of of have for new progress and made for the with the and to development. third to to related have XXXX. a impact revenues integration make operations remainder our venture quarter progress earnings into our

environment year. and further have caused earnings retail In a addition, near-term the revenues during retail challenging headwinds business by impacted and

quarterly business controlling near-term by our headwinds. As manage expenses carefully earnings despite discussed we on last call, our will

XXXX. into to for I Halston. expect we EBITDA spokesperson the having doing setting creative Director excited appointment going of by impact direction. Siriano, with the Halston am the spring our the recent stream for stage on initiatives and to of how for on-air of brand, am debut on XXXX. track live These we Ken a appointment in brand. the creative he’s starting Ken’s Ken aspects Wonder Christian on HSN, We are excited that are of of the as Creative as Creative of C. host is initiatives all and Downing pursuing very positive impact the the I the September XXXX include his under for shows positively go-forward the in announcement also and are extremely by well and revenues as Director brand Christian HSN, our

Christian seeing are by significant the new Wonder multiple across Siriano C. for categories. interest We from brand licensees potential

to with media and are social Christian million be excited his We nearly working X followers. of following significant

these existing talent to Furthermore, new and During working systems material any initiatives continue the and work with QVC. celebrities and and of Overall, able and business we without a HSN to current partner two a hope create to expect developments optical quarter, optics, inventory growth leverage This our we and with several our joint our shortly. capital we we on conducted expand in also multi-branded on business venture whereby launched QVC HSN. announce new them investments. is relationship to through help new be brands other

interactive and the with TV to platforms celebrities, destination brand stream product for stream proprietary media million creative talent XX social and new Our combined our goal over reaches live followers our build is launches. shopping a live through

shows. our see products Longaberger from success live have sell also our especially stream to continued live business, as perspective in stream shopping out We regularly our in we

in been and from We with has our attract to leader partially least stream ability have this at and our as top live commerce, responsible stream a and successfully and brands our talent for HSN social initiatives Xcel and platforms. live new positioned Brands QVC

currently coming levels to to offset complex opportunities planned access lost to a having Isaac the we impact the than projects and continue a either capital From having are in discussed challenging sheet, is is perspective, being new business financial financial critically our we and a that greater expect the I considered While, year. new revenue on short-term the the in results, transaction environment. debt-free Mizrahi and or businesses today’s important strong and and maintain strong balance we believe earnings more liquidity

capital warehouse offset the duty to as are in efficiency plan enhance XXXX together operating I, with Jim coming teams, operating new a our line. and cost. expect levels a the increased our on quarters working business, in operating We and for it to logistics, cost for bank commercial to recent goals relates Also, especially capital working hard with

brands, other by our year-end, pipeline. for can respect period. operation In we are excited closing, Wonder with operating plan annualized the implement business new our million that coupled including as operating growth costs opportunities expect to that C. and announcements We – Halston warehouse in efficiencies in over the new about $X.X we reduce an by over with Mexico, as for the to our opportunities existing well brand over

opportunities We continue to new opportunities, partnerships. and acquisition strategic explore including

We XXXX. have in return our that cost. are to and to profitability disciplined optimistic we operating And in the continue be will company will

I’d the financial our to to discuss to quarter. for third Jim Now, call over turn highlights results and like the

Jim Haran

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

licensing during inventory million lower, attributable approximately in licensing licensing million nine revenue revenue nine for million, decrease approximately in million and licensing the the of million million $X brand net $X.X decrease by a revenue revenue primarily attributable XXXX. These majority approximately Lori decreased nine are being months Goldstein year by for current were XX, in or September of XX% seasoned compared quarter. Sales year Isacc compared declines in orders $XX.X driven months increased as the in to was quarter primarily driven to as and, approximately sales. $X.X by May more by revenue, the orders or current caused excess which XX% of overseas prior wholesale profit revenue to by months, for driven the the to of Gross slightly decreased the comparable decreases XXXX recently, to the net This by total by in declines the brand. the temporary with XXXX, of $X.X a quarter is a partially XX%, Net the For current XX% revenue This with retailers and was on in from Mizrahi brand, which reduced and $X.X respectively, to generated decrease nine $XX.X the entire in prior combination the period declines the both the from $X.X XXXX, apparel year or the canceled margin decreased the representing XX% million year offset primarily ended and third Net industry-wide with period. the approximately revenues due factories revenue licensing discounts were interest months prior levels. These in prior sale were paused to XX, period. million. closing of year early current current as was Mizrahi inventory sale from sales compared product from from Isacc quarter attributable quarter. licensing XX% in

the decline write-downs nine-month the current gross of off selling the and inventory period early primarily orders. margin in related sales seasoned the canceled inventory the year declined due prior in XX% year to was product sales from in to For from XX% nine-month period, This to apparel year. for the

Lori quarter. were was $XX.X the year-to-date million the brand. brand. up year with $X.X Our primarily year, increase the by from with was months initiatives. million partially brand, offset the current a to our Mizrahi entire by of of current increases operating and months. Isacc year expenses associated new quarter, in On which down million cost the and operating expenses attributable Isacc million prior were costs the incurred owned the mainly the $X.X sale connection the were Isacc $XX.X These in prior nine the investments from decrease with costs basis, This and driven Goldstein expenses for related for This transaction the combination to $X noncash brand associated in cash Mizrahi million million, costs the we in $X.X Mizrahi

the net interest noncontrolling per share $X.X million a million partial quarter third of $X.X net have quarter of XXXX. category, $X.X of Overall, compared economic year-to-date $X.X other service This with due the includes On a XXXX. notably warehousing continue other current the our In net in quarter Adjusted minus managed costs, year current was the non-GAAP to for we with quarter. decrease $X.XX the outstanding of the million year $X.XX of second $X.X amortization third for many and minus of current $X.X all cost of to with per with in approximately experienced attributable income share income of or venture was share of Mizrahi overall $X.XX in were the in XXXX negative revenues the Although quarter prior area recognized cut the increases the operating due our breakeven have governing from loss the we compared for method third the finance [ph] quarter. repayment million intangibles. to EBITDA a of decrease a had of distribution we, the to companies, the sale the we to per Isacc $X recorded or shipping, XXXX. in generally essentially million business equity include logistics category, and Mizrahi inflationary to gain mentioned. period the $X had lower most net nine million essentially we current expenses pursue $XX.X excluding the basis, million in loss providers EBITDA for in quarter of The this was like debt or and full the loss and both in current with The prior minus current for in Interest environment, expenses ways costs. in million the accordance previously provisions quarter loss control the quarter primarily and quarter compared months quarter million loss Isacc of Also brand. from brand. $X the vendors second compared million

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

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

Turning now sheet. our to balance

approximately lease $XX.X of the September of of obligations unrestricted and million, net working XXXX, As contingent the positive payable XX, company cash had $X.X obligations portion shares current stock. and excluding in of capital of million our

The and revenues alluded Isacc continue shortly. XXXX. remainder for to for begin the quarters earlier earnings business initiatives will the on and Bob impact to of to an an Although sale of the had Mizrahi contributing the our have new earnings last will impact our two

to in costs will In addition is efficiency quality. to company plans operating Bob. has in D’Loren the expected profitability The I to initiatives, works This and to call that new areas, operating these back half of And the Operator? remarks. the XXXX of to prepared costs several beyond. and turn the Jim. combination that, Robert turn would like the company our in maintaining reduce concludes Bob? revenue Thank and second back over operating you, sources with

Operator

Your the line first Company. question Instructions] [Operator with & of from Lebiedzinski Sidoti comes Anthony

Anthony Lebiedzinski

for Good taking morning Thank gentlemen. question. the

just first, about So third some the questions quarter.

XQ the as performance. far as curious, just So

it was notable there fairly the any to quarter month-to-month? consistent were business So as Or the progressed? changes

Robert D’Loren

out. we XX% quarter quarter in the wholesale we Wonder some both Ken sales whole would. five in Q-Optics online March first had very it until we he’s creative very was we working Isaac, the we’re at line. But the and Ken as in we or exists we teams course, that be to C. more that the retailers. And did XX next out fill we losses over way which we new exactly of turn business, Anthony that the well, or Isaac say, on would roster HSN. the the And the in launched be exactly bring current with we into days Halston, inventory – the shaped we’ll And the shows which, interest be And there will three initiatives – Downing will would already planning with that the XXX been part, six up the were thought announced. for involved business Halston. were our to pipeline, sold that brought some anticipate launches new then of most coming by When networks, it’s new announcements successful have XXXX. with XXXX. will into launch situation the have we most making initiatives – in thought followed That the Bob, has the I of brand that busy anticipated the expect canceled has

Anthony Lebiedzinski

Got it.

percentage, that it second And certainly up versus up gross Okay. was Thanks as Bob. that last Yes. for good then to see far and the quarter. the as being margin year versus

would So you attribute that what to?

Robert D’Loren

team I inventory a very did would the sourcing good very we here job and say did very, manage tight.

it. So I think that’s a good piece of

Going That’s significantly forward in a online. will bring both as XXXX, perspective. cost we warehouse perspective into duty help a as to with Mexico well going from the logistics

So and we’re excited up warehouse that get running. to

Anthony Lebiedzinski

Mexico the Okay. opening? the warehouse And timing what’s of

Robert D’Loren

we – month. this now It’s are testing shipments

the warehouse. into integrated fully We’re

XPL We are Los the our from Mexico. moving in goods Angeles XPL to in

should be year-end, operational we by So fully there.

Anthony Lebiedzinski

it. Got

you speaking, – And what fourth from right trends? sort through of good a apparel, then That’s just also what demand on perspective share And the so midway Can Okay. are to then seeing for kind any sort hear. broadly jewelry us, so of and seeing you comments with you’re Longaberger, – there? now, of quarter. far you’re

Robert D’Loren

Yes.

up first. So are I’ll retailers Most question answer with inventory. the apparel backed

out over-inventoried. XXXX I wholesalers, and it ahead because retailers think supply that got difficult we’ve of to of for today with for the it normal now of that it in to buy part do and experiencing good a flush that all to are been a COVID, in many Journal chain to And headlines retailers get of to take of inventory see move will little QX retailers as to starting and since discounting inventory. because inventory. and And lot I was the that back recent Wall everyone inventory itself most all operating QX believe the as levels of that beginning problems in that, are Street XXXX. significantly a we’re

see more we in expect then and a to and soft be demand that and in normal return levels buying store QX, wholesale QX department will QX channels we’ll So QX. of the little in that

launching, less by that place HSN with we’re television the There interactive with is commitments on programs we’re sensitive to Our business are and on that new that. in business. track

Anthony Lebiedzinski

it. Got

a Okay. warehouse QVC right? And that have, hurt ago in comparison, certainly you by I severely guess then was business year so theory, an the fire, easier

Robert D’Loren

people amazing don’t the fire And on other general. warehouses. of to happen in and understand think QVC capacity doesn’t in not overnight. an switch curate XPL. QVC difficult I – most It Yes. the situation. of and I did so It’s didn’t think they easy that to impact through just navigating a fully very a job do implications their the It’s really have

Anthony Lebiedzinski

it. Got

for luck Okay. Well, and best of holiday the thanks season.

Robert D’Loren

Thank you, Anthony.

Operator

comes from Equity Crystal with Research. question next of Your Fiakas Debra line the

Debra Fiakas

morning thank Good margin questions. return for was gross my and to I taking the to you hoping discussion.

additional we one December perhaps an thereof? until and impact be Just perhaps quarter from the in the really not in see your it quarter benefits operations XXXX? Would follow-up. just – first Mexico a visible would the Or

Robert D’Loren

into first we brought So the paid see the it, U.S. Debra, XPL, you quarter. When we those duty. until into goods LA won’t the

moving now to to And then arrive goods test. shipped be Mexico consumer And will year, bonded port sure by run next LA We’re be in trucked is for everything and Mexico down running from direct in go January, LA then really and to to the will forward just duty goods savings. just efficiently.

Debra Fiakas

introduction. more tracking question. us the another you number or least and was I I color optical days a don’t the plans your the at on product, of want to provide but then not you in it’s might provide bit tell expectations hoping And whether of or you. your Thank figures, launch figures appreciate perhaps dollar the little perhaps early

Robert D’Loren

will they operating Heading networks, to had into be of both a pieces debugged, to soft lot were speak, QVC to and the New the program. so their base. there on QVC aggressively and believe eyewear back-end to customer program were that really previously efficiently. and that not to say it’s they would did The I and it will HSN begin do So I market offer begin HSN brings Year. launches, more brands

the strong for we business years, optimistic us. very will a over this that, coming So develop into are

Debra Fiakas

the Thank the we of your to until got you. with air? And to designers. Downing spring Siriano? jumped Christian ask about we right we then and on I newest wanted before Will Ken just two personalities see additions into thing XXXX roster already of also same have to in. the will see him Or wait –

Robert D’Loren

March we expect show The January. first land to early of – goods scheduled the goods Christian’s So is are XXXX. for in warehouse

So will that first possible end do some toward the be March. is we it of show may of marketing before? And type Absolutely.

will Christian think Director as become very Creative the we new of and visible when the C. Wonder start the face year. I

Debra Fiakas

Very has really. to of question just And more a shopping then it’s question, last it – with good. do

You’ve shoppers site. a or the together place? interact talked technically allow putting between just they sales And navigate direct-to-consumer interaction I to how about the crafted? QVC platform Xcel will or How – is description a to wanted Brands to they how going multi-brand you’re speaking where of HSN, site and can navigate, take if would just know, to two be going

Robert D’Loren

foremost, generally Well, first differences, collection and speaking. there are

is is at Ripka the a sold channels, Judith direct-to-consumer same as as significant channels live QVC look wholesale The Judith. product brand, presence on you Ripka we not which Judith our well streaming. as with through If have the brand,

on Kors in being available being some America. strategy. similar than, view product. there and virtually don’t say, will any this michaelkors.com department Michael a overlap be we be to going it’s So every And There store different

Debra Fiakas

very you Thank helpful. Okay. was That very all much.

Robert D’Loren

Thank you.

Operator

Lunder Marc from next line question Your comes with Instructions] of [Operator Capital. Lunder the

Marc Lunder

bit Where reducing situation, always to morning. type a to kind kind us going far more a compensation and you’re bridge the have there specifics talk those? for what SG&A, question. Good can of about you both give do of as some year sales been next to Thanks little as of those, taking and

Robert D’Loren

Sure.

Marc, business. we So soon that. And will right more us by by wholesale December navigate that in has will be And to platform do in a there those $X.X the announcements to built and a and significant for with reductions we March specifically how COVID million, The to to then it to of and about maybe challenge we size have we’re been place going in only and of at COVID. our some retailers overhead a year-end, plan challenging is all believe supply Marc apparel best more have XXXX, costs various for launched literally through to jewelry launching hit XXXX. those deal commitments having business, in of onboarded business, people, were making with reduce

So rightsizing working we on have the overhead. been

So XXXX, growth normal, and when think company profitability. things that to to the back we can return now get we really in

Marc Lunder

– or been for not. And profitability, measurable they’re guys it’s do kind growth looking years looking I’m been can some are a of meeting investors growth you you have for wondering objectives of do? they’re what say, have shooting we’ve mean their where to a you’re just that number I that okay, objectives if you and

Robert D’Loren

nicely into issues. second work and would inventory of warehousing challenges continue we new QVC that We how growth to is warehouse some will QVC. HSN think returning lot appropriately interactive the of both we do. QVC going COVID all we There terms with analyst that fire, doing this And navigating effects of year, they’re guidance in Certainly, had there work issues. the And will come in company. think through to TV business come grow their is will business we’ll micro and a half anticipate the out with of that we the grow. our from a they of through and launches job through great their And anticipate, at us core business we the their looking of the and that back as the all the out believe with of

Marc Lunder

Thank you.

Robert D’Loren

you, Thank Marc.

Operator

this call And the closing turn speakers I’ll questions. back time, the further to any are for no there at remarks.

Robert D’Loren

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

ever, than As more well and healthy. always, fit, stay eat be and

Operator

for you conference today’s concludes Thank participating. call. This

your may lines. You disconnect

Xcel Brands (XELB) 15 Nov 222022 Q3 Earnings call transcript