SQBG - Earnings call transcript Q3 2017 | Sequential Brands Group, Inc.

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Operator

Good morning, and thank you for joining Sequential Brands Group Third Quarter 2017 Earnings Call.

Before we begin, I'd like to bring to your attention that statements that are not historical facts contained in this conference call are forward-looking statements that involve a number of risks, uncertainties, and other factors, all of which are difficult or impossible to predict, and many of which are beyond the control of the company. This may cause the actual results, performance or achievements of the company to materially differ from the results, performance or achievements expressed or implied by such forward-looking statements. We refer you to our public filings and the press release we issued this morning for a summary of such factors. The words believe, anticipate, expect, may, will, should, estimate, project, plan, confident or similar expressions identify forward-looking statements. not speak reliance date only was to statements, these that cautioned made. may which as are place on undue forward-looking statement Listeners of the to law, as as whether of or undertake by than events, result revise the future Other no forward-looking required a obligation otherwise. update information, statements, or these we

of Relations metrics in I'd terms for Cooper, Investor each tables the of non-GAAP Chief the Brands portion www.sequentialbrandsgroup.com. Additionally, in conference over may reconciliation Financial release Sequential turn website, EBITDA the like to today net income be ready. found you and and adjusted our now are press distributed all non-GAAP can of when Cooper, to Interim Group. you're begin Andrew Mr. Officer the

Andrew Cooper

our joining an valuation and call. that approximately sales. strategic the per loss earnings third quarter quarter net prior Included was non-core third the On share. company’s outlook third the on the for a intangible will to for loss charges X% Sequential’s in million for quarter non-cash brands XXXX assets full $XX share $XX.X quarter the million review asset million for update diluted our together for commentary of Karen XXXX CEO GAAP basis, $XX $XX.X certain review a net from third Good of third a XXXX Today, for on This million, resulted results $X.XX of income impairment will XXXX of brands. indefinite-lived to or compared XX, was Murray, or of morning, revenue conference represent company’s million in to and outlook $X.XX to XXXX per $X.X related pertains charge were provide the diluted initiatives. for regular year year quarter our XXXX. quarter the thank September our loss XXXX I then compared provide and and you ended the the Total quarter. our

million, or in the positive XXXX. $X.XX net initiatives $XXX.X prior the still have The we business indefinite-lived period. share, ended Excluding EBITDA the the $X.XX or $XXX.X to per third or was expenses, $XX.X on in to for $XX.X charges period. XXXX net diluted per $XX.X factors. the was to for the September million $X.X EBITDA XXXX months non-operating some $X.X our There to realized prior of non-cash to was months intangible prior departure nine new income related impairment deals to for the $X.XX certain the the assets associated XXXX per in per the compared diluted million share was diluted $XX.X in to million, compared a million $X.XX quarter million, and quarter. $X.XX XXXX was million to businesses for the the related non-GAAP was on charges The prior nine share. were net prior $X.X related compared share, year weeks September impact $X.X and year $X.XX to other diluted anticipated Total would XX, the the per million million, of company's months primarily or results in ended the by third Martha quarter for in quarter September for impairment company's ended $XX revenue a GAAP share, We diluted $X.X $XX.X increased year XX, a the months $XX.X expect costs quarter. in million the loss million, certain September nine few On year’s loss securities, Adjusted $XX.X to year available-for-sale XX% delays XX, compared compared of include diluted compared the or basis, ended in million of for former ended of period. to Non-GAAP income months the net with of XXXX sale income million, brands. nine for million, offset XX, recent XX, share, non-core had charges nine impacted expiration which Store million legacy of September these XXXX. CEO, per XXXX Adjusted or

were successful one to change Additionally, was air of launch And for the finally, despite a softness a there Heelys QVC international distributor. for with dates number a of there very of some the unexpected categories. specific QVC,

less full of have of core third revenue we on $XX adjusted a the approximately million We expect million business. underlying acquisition-related as year of which We flow in including we the cash capital result not taxes the EBITDA both cash quarter of As profile the previous Adjusted XXXX free costs $XXX licensing cash cash excludes shortfall, now expenditures QX the million calls, the of million. to and cash $XX flow restricted reported range items licensing to outlook $XXX cash cash. in EBITDA, is calculated XXXX. closed with flow adjusted for our other interest, $XX revising to On are focuses changes balance and and sheet the and and free adjusted business. million

adjusted our For months first the cash nine million. of flow free $XX.X XXXX, was

million. adjusted the to $XX free now range the expect to cash in year, of be $XX flow million For we

high-single-digit the growth our projecting mid XXXX, for brands. low support growth additional revenue we reflect adjusted full marketing to For are to EBITDA year to and mid-single-digit

for guaranteed XXXX contractual approximately are Our $XXX million. royalties minimum

with call end refinancing over net of to Karen. to now debt target current the turn Based the continue million that, for like capital our year We QX structure, on With I pay million would to debt. a we $XXX expect of XXXX. $XX approximately to and down

Karen Murray

morning to joining everyone Thank today’s on and Andrew, good you, call. us

through drive past the I quarter working business, focused driving growth number at the executive While capital our identify disappointed by place cost disciplined spent prioritizing parallel, in our of forward, to maintaining brands strategic the core our key for on priorities our right with ensure growth execution, my our specifically focusing months structure. to third the with initiatives. on a results, are augmenting focusing focusing on are improving long-term and have business on team people seven controls, sustainable closely we teams in to

quarter, hiring with well-known of seasoned announced of D'Angelo, XX Carolyn in the years the of space. brands over several President is the in a managing Specifically, growing we Home. Carolyn executive our experience Home and

of digital We are the in hires development international business team expertise process in in making to our key and business. the with

approach management, disciplined more a drivers the that taking on the are are for brand honing in brands to company. growth We

including and FUL. for Joe, Caribbean wrote Nevados, Mint, we brands We legacy some our are down Franklin the also best that of options the evaluating quarter in Revo,

our to our begun continue managing and has expenses space on We footprint. construction on focus reduced office

pursue are we As a quarter, advisors last we first reported forward quarter and refinance. XXXX continue with to our moving

We our core by strength our encouraged the brands initiatives and year. are into of next

division. Let highlights me walk of you by the through some

remains to for plan are ANDX brand. initiative had ANDX’s growth. player. continues NBA with additional new a as celebrating a captured XXXX Our a successfully performing Active in XXth above currently lifestyle driver a globally-recognized consistent big endorsement brand division by a be and underway marketing Plans strong market share including anniversary

space the forward. Walmart share quarter. AVIA and marketing the and have brand on to yoga the face shelf new and going the this of spring. to at initiative In is first growth for highly during brand in expect GAIAM. this strength quarter, continues we wellness exhibit in to we the announced Actress more anticipate further exciting We ambassador ever campaign a popular will appear Jessica now Biel information

XXXX. We collection of debut to co-designed that in to stores is fall also launch expected a plan capsule Biel by Jessica

the excited are a this opens distribution. up about We it to partnership the broadens retail brand’s as to brand exposure more audience and wider

the expand next are on We to & additional stores with store Yoga year. schedule also York to GAIAM Lord inside to City’s Experiential month plans this Taylor launch New

to new scratched the brand only with believe hold as opportunities Jessica globally that categories. In Simpson division, continues we and Fashion the expand continue this We several landscape. the the we surface brand its into own GAIAM to to it in retail see have

e-commerce brand underway We categories. for and the expanded including plans a relaunched site many have

The outerwear, has starting as and we with division core performing result There well innovative sell-through. and are is been categories the and announced great the continue continues development Stewart line outperformed the traction As business apparel, to handbags retail QVC’s grow brand brand merchandizing kick-off in Martha great garden expectations. grow groups footwear has global product above Joe’s which business. placement a of Home key with beddings. happening with the Martha quarter. brand’s in so food The and of driving last Tracy QVC quarter, the including launched brands much and in on Ellen activity the at year-over-year. partnership dresses, to

really we holiday in to launching launches Martha quarter, QVC launch the Michael’s in and new time apparel resonates line, according the the to XXXX. heads just next Martha launch to was consumer to with latest QVC relationship in back should of forward tomorrow the we holidays. Also apparel It’s with be Martha’s category clear fact, best that new assortment. out of and in with our one are rolled expanded soft Wines history. month their the an line Skincare categories In of their assortment launch the starting looking our of for Martha QVC

on track in Michael’s launch for at are business craft XXXX. We full the our of

and Martha at strong Home recently also it’s country Our the fabulous and Stewart launched the looks at across a the stores all line performer. holiday Depot line also

with closely partnership team with team new opportunities the the strong throughout to a developed we’ve brand on Macy’s, the are working a expand and store. For

distribution as significant business our We continue as brand month-over-month. to expanded just successful QVC that grow Spoon due for Marley marketing I into business to as Stewart mentioned. are with partnership Wines for Martha such Sales kit channels as the of projecting been meal growth our well has

We out end and product be as introducing the at the such month. of will rolling our cookie have holiday Thanksgiving new box offerings a box kit been

media the she Martha and Slow launching incredibly Event. local branded well launched Today to Stewart’s marketing with and from featured for partners the showcasing opportunity a Gannett. our her the Martha she as This product and front, was Cooker Food her been country, book great been book attend. as XXth events Martha Martha These She Newlywed offerings USA in a at Martha that Kitchen. latest key On did Tuesday, weekend, who in all a third across out Last XXth since brand retail our this partnership consumers Wine the to on busy. event Stewart’s have getting launched book demonstration has Scottsdale cooking quarter our markets

second & Potluck tuning an for Dinner increased During on brand premiered Martha the second viewership the of people to over quarter, ratings Snoop's night million of ages, The but the VHX with specifically in. season of with show had offers and premiere. the phenomenal XX% Football which audience an exposure X.X all to Night Monday Party millennials the during

driver in in friar. the division, consumer growth In you careful core main meet his will expectations, the revenue of very key have about been two brand are As quarter near-term into are the on closing, we and back business, and single-digit promote take let terrific continues we the and Growing our the that and and believe single-digit I committed Emeril air we on following benefiting for to underway the progress are capital our strengthening We growth Thank for the recently Martha to mentioned over QVC opportunities business a future gaining that the long-term. see in we the be and appearing most to and we Lowe's It’s calls, have important a building new those to ago Also exciting for partner with recently expanded momentum initiatives our brand. weeks been a pursuing Sands the time have are our our our larger retailers many work adjusted the company Club, previous distribution Stewart making. call brand food Emeril operator it licensees, year. partners priorities out Martha the business company. joining manner that are in Home which only while we terrific for deterred and and both is note to combined have selective with Q&A. targets mid to me did are growth. mid into the turn less processes a high we structure its right and no we now, has say against to core for EBITDA low believe today we potential not strong growth. doing The and our Emeril has our to brands the for place preliminary over putting that, people heading next we the deliver call of

Operator

proceed Instructions] question. CL Thank Our from you. first [Operator Marotta is question Steve King. with with your Please

Steve Marotta

Andrew. and Karen morning, Good

Andrew Cooper

Steve. Hi,

Steve Marotta

year, And next least well? think about talk for mentioned Can the you drivers to would about revenue little opportunities be you at by wanted Obviously, growth? please the revenue some talk quantify, brand just what the bit as but brand? maybe, qualify what I driver, you not growth mid a laggards be do to high-single-digit. that of will the

Karen Murray

Hi, Steve. Karen. How It’s are you?

Steve Marotta

Hi.

Karen Murray

Okay.

So, for really about are we XXXX, brands. optimistic the

have business. the the I talk the probably best year there year. brands, last pipeline than our Martha. versatile brands exact and within The brands As are you think To time we growth about is robust specifically, know, in more the portfolio is brands this

about be you that. sign as for XXXX doing and non-traditional for know, we will traditional what portfolio. annualized we it’s Martha and that. our licensing the Much most As the of brand could are in deals deals, have well diversified we as excited place brand We in really are

brands business, positioned in of as as our like there of clothes. health portfolio really and the will wellness some But are we line GAIAM it the other within to all GAIAM, within soft us apparel of the is fact which signed a distribution and the nicely ambassador that continues channels hard the wellness in also big fits most with brands well of So, and retail space. because distribution. within a different a that that is We portfolio expanding Martha of is clothes the new and and growth exciting brand health help outside drive one driver the the within for be today brand area. Jessica Biel goods

GAIAM. think we with opportunities global have I

out building & time about Lord last the that at our also Taylor call. space talked are we We on

the focused Taylor The example really retail solutions traffic. but our on just GAIAM are our not just different Lord space. providing is expansion We Martha examples solutions providing and the with brand, to one we also of also of brand And experiential there food solutions driving nutritional with & with partners as is and with where well. GAIAM are type providing opportunities a beverage

that, partnership ambassador player ANDX for brand for So, NBA to in That are to continues grow we really about also addition strong really to the and a where our brand new Active it’s exciting division. is announce a ANDX. a as brand

Steve Marotta

the with the to takes from becoming a side, $X you ahead puts XXXX, and about helpful. correctly, little the bit And about talking you’ve believe, cost savings EBITDA least million That’s million to got line? $X looking talk I a I the standpoint, Can remember line about other there. associated sales

Andrew Cooper

Yes, absolutely, Steve.

margins rent, in So, begun portion very are It’s where you company. with we to XXXX. the we’ve right, continue space of news is the which to beautiful the see up impacting we those in respect a functional – good half. very to categories, other news savings respect savings expense is ultimately good XXXX, will construction we’ve the cutting having had good XXXX. to and for robust in ended space be the A going With

are top-line, growth As excited on ahead, we and the we which EBITDA high very the look is talked we digits single achieve mid-to low-to-mid line. what about on to

translates marketing some which to expense looking growth really that additional So ahead will help are we basically that is, believe fuel we XXXX. in what that

Steve Marotta

That’s very helpful. Thank you.

Operator

Lyon is Genuity. question Camilo proceed your Please next Canaccord with Our question. from with

Camilo Lyon

key I Thanks. international hoping of those your just talk the And brands about the e-commerce go Good growth in are is portion morning we outlook you the unfolding sales XXXX? how everyone. for what of component key into was your brands? could as

Karen Murray

Camilo, Hi, it’s Karen.

that each that we they call has in biggest really call, within about I of some I we by looking, talked opportunities last area. stated expertise the biggest the this to the last and to and one are the of on far specific, talent one every even So, – have and still Digital brands. digital are the international believe be new in with as bring Sequential our we opportunities

of We announcing our you new hires. in digital as close all know, because, some are an are we It’s to getting underpenetrated brands opportunity for the area.

a with continue three-pronged We approach.

one that moving Amazon. the and and represented they are of way forward their The each Amazon a first way out on really with one every brands are building and our figuring right partnership is, all in

such our with sites. partner Macys.com. building ecommerce of In continue And is addition really out sites, retail all that, third the branded opportunity grow we to to as

space makes really opportunities we brands as digital So, for ensuring grow to substantial growth well a and all digital focusing three strategy as sense of in the future. again, our that in have on the that in

because more to roadmap talent as, far of As that point is brand. at our help so believe this an fact of but international, are that area the us also hiring some probably opportunities, is key digital figure I even that, out one underpenetrated, the grow we to again biggest our is than

have business that Asia in that a and We dialogue tremendous are we to bringing way. substantial building in already the brand, Alibaba Martha with opportunity and with

are specifically globally our brands, through We doing as Macy’s many there are to grow in opportunities Asia. But well. But T-Mall.

opportunity for big So, us.

Camilo Lyon

Thanks for or brands words, to the non-core just the on here of ongoing And for influencing a refinancing of any have are pay sale potential that, you gears discussion those of brands? the those that receive could what of are that dispose. And is value sort there you any is now? some Karen. Shifting contemplation that is some discussion of discussion Is that a will little brands? – that that you other looking the the of of refinancing irrespective use dollars debt? the portion In be refinancing down to bit

Andrew Cooper

the first. answer last I’ll Right. question

it’s some in advanced our amount. pursuing ultimately, previous be material a discussions don’t a because and we is while non-core divestitures. on brands. – refinancing any calls, I about So and to really of because of the of because going as not But irrespective that on talked smaller couple, sales a actually want not achieve we couple it’s hugely that, of brands And discussion say are these to we

as company, talked sheet has to I helpful when with real think got we've be the of some focus, at as helpful core we you some strategically it brands. about, to So the helpful our and and will look really balance XXXX, also, drivers growth Karen

will resources to right in so, really our And focus allow the us place. it

Camilo Lyon

with Great. guys. holiday Thanks good and luck

Andrew Cooper

Thanks.

Operator

is question Please Dave Roth from next Our your King Markets. question. with Capital with proceed

David King

morning. Hi,

Andrew Cooper

Morning.

David King

the off, brands, about XXXX, Karen, you growth guess sort you to expect in that mid-single-digit do a about of that but, touched are high-single-digit being growth? international opportunity? I bit And talk biggest targeting the see which segments do like you to that on be e-com where and which first the sounds drivers in you you of sort of thinking it brands top-line little biggest can

Karen Murray

Yes, I talked think, QVC. earlier. think definitely Martha, really touched it’s the about I that same on I I didn’t

Martha plan. you with that performed we QVC’s just well As know, of three QVC and all launched categories. surpassed those And categories in just so

we as So, in eight new are XXXX, active to for look dialogues probably six we categories. to

when with think substantial So for about should growth you within business the Martha. the annualized be there QVC business XXXX,

we really categories excited new about about So could the open excited that are and and opportunities the we that new up.

it’s that, partners, experiential I existing categories, as GAIAM to other be talk expanded within of, opportunities didn't retail in brands spoke internationally. even addition said, the expansion. We can that just In the I in global about

So more business. serious come grow That experiences about ambassador our GAIAM. portion if think it intentions will new a shortly. to so will of open from we that be up there Jessica, a elevated announced we weren't our to just well as signing are signed I business and by and have ANDX, opportunities wouldn’t that many will bigger

but And for some And products opportunities really they addition growth to bit not the Joe’s has in well. introduced only marketplace build core have performed new plans ANDX. and out because that, with we the business. extend big into So to sleeper, of we a to been year, we a this Joe’s categories, have

exciting for an brand as well. been has Joe’s us So,

to I four the think would our growth most are for those So contribute XXXX. that

David King

Okay. That’s helpful. Andrew, me things currently in excuse of - where have – then, And do terms stands lifetime you GMRs.

second quarter million. $XXX.X you think ended I with three

et guys loss just available the then give talked in dry reduce at I as expense. some peers that those investment maybe one about given curious where what's cetera at third. one we’ve of about the of of some and But that it wondering for peers related you willingness point challenges, that investment. ability, particularly end securities I the you think, your think interest Just out to to peers. the being of are took try what's of the refi, yourselves to facing about point was the you – example that primary there? had sale additional I And goal one those past for some was powder, of the that at one think think And a there to

to they environment, when the am look more maybe try capacity? acquisitive that be having I appetite what’s situation? are the the Thanks. at in So, challenges wondering, what’s and Again, to

Andrew Cooper

how the we absolutely. cost way so, ultimately, as our number head to one we weighted the and in Yes, begun to optimistic reduce the dictate are we’ve of best okay. the that ultimately, is the average pursuing company primary Right, to With financing, that And for interest process cost to and debt. happen QX respect opportunity, to the that objective market and will reduce is far into as it’s rate. marketplace some example of refinancing. flexibility an some been to part we that. pursue on of the of push in achieve and has in of recently really refinancing. a strategy Authentic terms But is those objective we that prime is, M&A something I core the savings comps think can Brands is There successful also our good of interest that that can

other ahead, the it’s so, brands many will iconics And be there out we look as there or it’s opportunities. marketplace, whether in

will today, we sit As we here be opportunistic.

to open if flexibility the be in we more aggressive something a we M&A market. and done refinancing, do would that But deleveraging, that. was is up could get accretive, look core to as we that certainly was at – objective that the will We

David King

that And Okay. have color. good GMR That’s then, you do number?

Andrew Cooper

on the – number at that when you am the actually quarterly more last the about but basis, of get we I and beyond, going on details look a north we when is XXX talked some call. to so, we XXXX look Yes, at

David King

Perfect. for rest and the taking luck my Thanks Okay, year. of the for good questions okay.

Andrew Cooper

Thanks.

Karen Murray

you. Thank

Operator

the today’s of reached [Operator and we’ve Ladies gentlemen, Instructions] session. the question-and-answer This conference. end concludes

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

Sequential Brands (SQBG) 9 Nov 172017 Q3 Earnings call transcript