SQBG - Earnings call transcript Q3 2018 | Sequential Brands Group, Inc.

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Operator

Thank you, and good morning.

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 in the press release we issued this morning for a summary of such factors. The words belief, anticipate, expect, may, will, should, estimate, project, plan, confident or similar expressions identify forward-looking statements. not speak reliance date only statement made. to statements, these that cautioned was may which as are place on undue forward-looking the Listeners of the to by as whether result of or undertake Other forward-looking events a law, future as revise these required no than obligation otherwise. update information, or statements we

today Investor flow each CEO, terms Chief On metrics distributed and now Brands non-GAAP adjusted Peter net the can Additionally, press all found Relations over in website, and call today's www.sequentialbrandsgroup.com. I’ll call portion of Karen the the our to are income Sequential and Mr. turn Lops. Financial tables for Group the are non-GAAP EBITDA conference adjusted and be in free Lops. Murray; cash reconciliation release Officer,

ready. when begin are may you You

Peter Lops

thank our XXXX Good third for morning, joining quarter and call. earnings you

licensing recognized where it license revenue term year-to-date if standard ASC of of revenue prior most $X.X lower our based is third I than million quarter the on XXX. XXXX, the requires quarter ASC basis, recognize January from the $X.X revenue Company’s contractual on lower company recognition were The and in our over us revenue previous on reported on adopted revenue period which a As each calls revenue varies particular we standard effective royalties for the impact new the standard revenue line retrospective year. in This basis Reported million are agreements. minimum straight modified of the under XXX new X, contract. a to recognition went impacts this guaranteed the of each XXXX

to review direct be and consistent For under XXXX Company's the ASC release quarterly comparative the for you earnings ASC XXX. under year-to-date XXX results purposes with guidance, results to I’ll and the and

net million $X.X a in diluted for diluted the in brands. in prior XXXX of the compared for in non-core trademarks shift income will remarks. item the share, to or a partnership $X.XX quarter noting a related as further XXXX payments of retail performance year's cash and revenue per a to prior of that two expensed EBITDA million and while was during direct note with license million was strategic $X.XX of quarter. $X.XX loss to Adjusted with includes was $X.X to $XX.X $X.XX year's indefinite-lived loss quarter her Non-GAAP a a the discuss financial for $X.X that the of to charge AVIA The the quarter to $XX positive quarter million, assets licensee the this of part year compared worth was net compared intangible million please third $XX.X diluted million the for quarter. made net the is multiple non-recurring Karen third quarter million $X.X $XX.X, of this or share It's charge or per Walmart share quarter, for the or this $XX.X prior this $XX net review loss to settlement million our over the I Before related will this Walmart new XXXX. a to million of diluted Total with for impairment the years. quarter, million AVIA be in in per the quarter. compared Included brand. per share, noncash quarter third

earlier, expense. this $X.X quarter mentioned million I As a settlement includes

to loss for And months would ended adjusted quarter or or in in the been the ended EBITDA EBITDA to period. $XX.X Excluding million $X.XX Non-GAAP $XX.X prior per was for or million share net XX, for $X.XX the per diluted would million months ended period. this a diluted year $XX.X been was share, nine year diluted $X.XX $X.XX $X.X per $XX.X the months nine compared income to the September $XX.X XXXX Total period. million, $X.XX share $XXX.X for Net non-GAAP September loss XX, diluted net prior compared in million Adjusted XX, year million, revenue million $XXX.X share, income have XX, was per the in September ended of or the September compared to million was months period. share. for compared XXXX million $XX of XXXX $X.X net have year XXXX third nine million. or prior the the per prior diluted nine XXXX

have been $XX $XX charge, non-GAAP diluted EBITDA income million. per $X.XX share settlement or net and been adjusted million $X.X million the have would Excluding would

which of Our cash items of was million related cash nine and less first is to capital cost cash calculated cash cash that EBITDA with including not and expenditures. months exclude restricted million quarter flow our closed as adjusted XXXX, of adjusted as business, interest, the third core And $XXX.X taxes such $XX.X free prior net and sheet to for of XXXX changes balance acquisitions. million the $XX.X debt. We are

in the provides XXXX XXXX, on respectively, debt covenant and second lowers flexibility. refinancing As third with our first rate greater lien weighted of Bank The facilities with last we our refinancing and overall closed of our the call interest the facilities of and America extends average we under and beginning maturities the quarter, us the through mentioned KKR. on

end our As of let results I a the maintaining With we to the providing our and quarter for brand, adjusted Karen. single-digit growth we we the end to fourth license On mid low approach next as of single-digit full Walmart Avia guidance call to look retail onetime the current with growth. over EBITDA settlement call, be range XXXX as direct the that and to the are at year the to to me and the guidance. lower transition of excluding expect forward turn to mid well related revenue high that, will year,

Karen Murray

expenses I third year as execute approach morning good maintain joining to and had joined the productive continue everyone us which balance regarding to quarter on and positioning long-term our quarter, We've the and years for strengthen our call. brands X.X against deliver business us our made have ago, we Peter, success. of refinance progress strengthening you, our growth, organic flexibility. of completed the We our a in profile and we strategy sheet. over the portfolio financial and to enhances Thank exciting additional disciplined a Since the company with provides

our We strategy division have as dynamic recent our with new a a lead clear in business development experience hire, as place, a efforts. including to leaders new global executive well most team

firing is on cylinders. all team Our

us this on we have in of the a ahead. year more and deals assessed divest a small drivers robust of growth year, business. to portfolio which key place focused efforts of with our time last as we So far the pipeline this this brands purpose year two we've look signed significantly ensuring are also to led that brands compared We've all

a our our the is from we've investments, the consumers, We in as said pleased year. relates that investments incremental in brand with strategic investments evolve marketplace. marketing we to These which they ambassadors, of we have brands seen made continue the of support brands to many highlight We're so beginning which in and crowded moment. especially I'll today's as these already initial our it and results critical competitive of mind for top would at be

Avia, XX% Simpson Joe's six As calls, on largest core Gaiam, approximately ANDX, the represent I've are business our Martha Stewart, Jessica and growth brands; discussed of drivers. previous and

in made We across strategic progress expansion distribution key brand to areas. growth include several We've and Those levers organic digital, integrations. have drive these each international, company. the category and of

brand. Avia First, surrounding the We're very Active excited division. our the about momentum

of our increased marketplace, partnership store. competitors as have brand As a in positive today's in shelf and especially their store our we've with Walmart, shelf result seen reduced. for brand This has the space product new their direct-to-retail lose development in very a presence space assortment or is seen

momentum higher distribution, positive to We initiatives a the also into of based ambassador, well tier retail opportunity the new brand as grow on as our Avia brand related expect domestically includes the for which brand to internationally. additional

program, Macy's, for our discussions store strategic with both them goods Wednesday, business. be in are initiatives. strength its soft our sales last the key media its approximately garnered are retail with Biel off and In city a parks One We well million partner the the kicked media Just quarter, in and and and roots. Avia million media top initiatives Gaiam China we anniversary paint launch Jessica off strong inner at to a ANDX nationwide. BANDIER, performer strong Overall, of driven by conditions we the ANDX’s as and very hard XXth impressions and locations online. that with as this a brick-and-mortar the Gaiam tier in implemented our new first had court other Bloomingdales, to a streetball opened year, marketing at continues recognition launched to partners. In collection Walmart. larger in celebrating we've top celebratory core recent start. launched X.X initiative we launch improve for goods event basketball was products several quarter, brand social parks impressions designed $XX

program three completely refurbished guests. park global in opened aired plans marketing was first repainted the ANDX and and Director, with Kevin and Internationally just month. stores during in to first included Oakland, broadcast. more Garnett and brands California, for continues celebrity and artists the are a The ANDX's season ambassador in setting event to The that was TNT has been direction Creative musical initiatives. open these popular West traction. NBA of next opening stores there underway instrumental launch gain two China

fashion into incredible and categories brand it our division. we distribution to new appeal The an has Simpson as Turning introduce Jessica consumer channels.

celebrities brand a performing for also include cosmetics brands Camuto out the continued Japan, Nordstrom. currently serve it well footwear available Jessica’s growing many Joe's for in brand and kids year, lines are as sizeable is largest at stores, country's is has and brand the carried which calls. younger as as for been is underway beauty wear. brushes consumers. first especially the as the line Each channel Irina the brand performer. licensing we makeup in we expand yesterday, Just we denim us on the well such the a Young; influencers be kid's retail these shoppers Beauty men's in support continues new past huge has allowing It The fourth These a time line Women's success as influencers brand well. with this ambassadors. brand Their the to also new stores. we launched our it propel platform, line top be and growing Nordstrom Those all to now Joe's Earlier country category. millennials the quarter of forward number out Sampaio. strong internationally. premium for well fashion a category with beauty beauty partner singer where department its brand and kids performing the men's ambassadors on opportunity brand. unique to to a intimates business Plans continues years Joe’s to in de models multiple be at brand for key brands discussed at are Mexico, positive demonstrating time Sara for partner the and global In seen rolling one with both one the our as for of and where Shayk long color denim is into year, stores. fragrance was is Brett with engage strong number this our brand. brand be and results, for in Group, then the online at I've XXXX renewed Palacio skincare. of The who is a by and help new know our is Hierro, followed will Across loungewear will

the Home division. Now to

the We handbags home the in This pleased the outerwear, the and performing the brand for including fall QVC and sweaters, we added continue on Martha platform. were on QVC categories scarves. in of performance top fashion to brand Apparel categories quarter. elevated be the with décor new

today, showcasing QVC trim pressure and cooker her on her is with Martha fact, along cookbook. holiday In

growth be we'll name to few. just active expanding new wear, Last Martha's cold additional we line category explore create new with inspired of Aerosoles line outside exciting more weather, wear, categories has QVC move including jewelry, we partnership fashion to on by an announced QVC. a and As high of demand to us led into year, that next fashionable footwear incredible has style. into for opportunities lounge been Martha's of week, The a and

also As of serve part will for Martha and accessories. the Aerosoles as brand the partnership, footwear ambassador

a in beverage We big way. in Martha also build recently new and signed partnerships two to Stewart's out presence food

branded Stewart across The expand to the cafes is an country agreement Martha first internationally. and

are part cafes the company headquarters plans city. taking our is Stewart underway additional in of deal, throughout Martha partner As and cafe the Martha the our for over Stewart

signed across will Martha In of at agreement addition, branded sold the line a an that be country. to we Stewart coffee create retail locations

and recently holiday incremental a season, flower subscription great opportunities strategic in partnerships Martha Martha seen we XXXX, fresh as for floral where our across also monthly the debt investments to about Similar closing, new bloomsybox.com. the the curated area Wine, have initial to we customers we we've In time direct-to-consumer we receive feel sustainable of against and is priorities. Martha brands a brand the farms great Stewart Spoon made Starting cut our more We a near completed globe. roses for We X, refinance, for from delivery with our end results. made progress just December partnership platform and partnership an the the signed marketing expand. with Marley have this positive by in will believe of that

talented have clear a a in place We strategy team our with across divisions.

activity back a as have now number updated keeping We We we we over we on I XXXX. executed head progress call of of robust the joining you look new and operator call underway the for to on and you renewals our business us have forward our Q&A. and appreciate turn deals new a today. pipeline into significant

Operator

you. Thank

conducting Roth Our comes [Operator the proceed We will question first your line a Please now be session. question. question-and-answer Dave Instructions] King with of with Capital. from

Dave King

everyone. morning, Good Thanks.

Karen Murray

Good morning, Dave.

Peter Lops

Good Dave. morning,

Dave King

back of Martha year, happened the of through first sort was last half. or loss if Stewart the weighing you that out JCP So, it

most might what just thoughts Now I'm able then bit those which of to declining well them. are organic are got agreement be curious on now. are sort your looks kind it like of deaccelerated and to some ones doing turn of And you've this for that you growth brands signed that, Thanks. and anniversaried get right like new when positive. the It you've a quarter. sounds

Karen Murray

Hi, it's Dave, Karen.

of and Okay, Biel the both then growth. strong. a some has also goods core is I'll start is both there women's our at you strong goods. the denim, and brand traction performers the and brand ambassador hard the top been and actually year that really underperformers, to and retail, there whole has very international has is in know, ambassador. Gaiam the Joe's if employed soft strong men's new And strong kids business with business on move you and the as really business strong also very, Jessica been I'll there very will. with ANDX, we as been very Kevin Garnett nice

business fourth ANDX. connection retail. for efforts real of introducing is think on well. that right, there really in Martha and businesses momentum about have was that talked drawn business. all for – the We legacy has product I'd increases only have that And that the customer and on grassroots we're are are the decor the emotional last see QVC, without incredible the Martha, in And the starting year momentum strong say we very retailing you're QVC with strong. with the as home that quarter. at to resonating year most a the strongest craft, apparel, The well. categories This is I momentum home, been incredibly Martha, are

strong, strong. is Michael's is Macy's Our at business also a

are that not Martha our brands our would distributor. Heelys, all brands well. gained what's on still like is – is international So in performing traction going disappointed brand say The I smaller around underperformed, repositioning tell has we're really we’re I And strategy, Caribbean overseas. focused underperformers that our up in a to have partners is engaging business turnaround new you, see Caribbean brand we and Joe a very other there the on with but we're coming shortly. has Joe. with And

relationship the So very just some there good that's our the strong. new is with going of with some color what's retail exciting real also Walmart. on Avia on news is brands. But

feel good of are traction our core our quarter. strong. few we a which And then all, brands in are XX% the the all which But really about within the underperformers smallest we all in a the So really with represent portfolio. have brands brands really business

Dave King

great color. That's great Okay that’s color.

of think, you Avia $XX should those some terms Martha contribute? stuff. some in revenue two $XX much a then with the how like the looks down came million we million. should to of the and So sequentially, down of maybe agreements, about think, said I then it be from new And then How deferred like thinking I bit

new expect up you would these some is that there I guess be do go structure the of these of to to again, With color line, starting see agreements, deals change? or helpful. sort back

Karen Murray

I'll have done hit But we're all this. to the of as for the all, towards get we mean, timing. end. I deals some our low towards we the But the some more range. still year to Yes, But of part we're there's financial maintaining and the end answer have Peter said numbers low in expecting

So to you add that? to do want Peter,

Peter Lops

good Dave. Yes, morning

Dave King

morning. Good

Peter Lops

of it Karen with a think I answer. lot the guidance answered

no that and and I think to structure does for unique it's also surprise it deal is its us. important note, different in what each

And so it vary. can

there's So fits not size one all.

so the different can they're structured, of the in, depending and the the ways. revenue deals on in And come timing way

Dave King

Okay. you lifetime GMRs, was quick, $XXX.X think, it million have royalties last as And one of real what minimum And guaranteed number then do I that like is or more quarter. currently?

Peter Lops

XXX. just over consistent. fairly Yes It's we're

each day little as sign a quarter. each it as Of off up course new And off there's deals goes it quarter. burns we and each burn and down

X.XX. I moment, say So we’re at just or X.XX, at should over XXX the at

Karen Murray

GMRs in command really agreement Dave And a have a But include we sales there. like Bloomz part fortunate DPR just strong QVC, don't and Camuto our for the then Box lot we direct we with business. with renewed partnerships long-term very of the heard relationships are still that mind And example, statement, for we just we also of spoke some that well. that we're in multiyear morning have as meaningful Martha, is but fabulous. brands GMRs as Walmart our which with have this keep you that our like And really a relationship

Peter Lops

that I of number this days. was And as XXX emphasize

couple the new talked have be and subsequent new activities quarter. next when that will deals that Karen captured updated that as to some about Just number gets a happened, of

Karen Murray

perfect. Okay,

sounds it back with some So normal that runoffs? the like go even might up of

Peter Lops

Correct.

Karen Murray

Yeah.

Dave King

question. right, my All Fantastic. for taking great. great, Okay, thanks

Peter Lops

welcome. You're

Karen Murray

Thanks Dave.

Operator

Thank you.

Our next proceed line question. Canaccord Lyon Camilo your question comes from the with with Please Genuity. of

Pallav Saini

Pallav This us about talked first some rest morning. you Karen, give are the digital. is of the the for is you on that the initiatives growth openings business China this of Good my place of Thanks. on some question that update how drive store also initiatives on Camilo. they're brands. in for of year And performing? recent flip year? Can undertaken on and the have you next for in What Active there and the some would an

Karen Murray

Sure.

Okay.

then digital move begin me Let with I'll international. to and

growing. and three all again, our mortar our We've of Avia really with keep businesses have Our a is are kits a in the opening the the grow earlier meal types really we of mind comes Martha Jessica BloomsyBox I and direct online. in just business. We growing up brick business business that But space, real reliant where on which that also different format, platform with direct Understand are digital business, formats. all an part Marley as are is in re-launched such Spoon Macy's of unique got we spoke ANDX with and of beauty brick to is we as dot-coms fact like about strong announced online and retailer talked it that we partners. and and Amazon. Wine businesses, in we've mortar, our we signed Business, the a and for not is online on continuing And, which e-commerce that this just

our strong, Our business partners. is brick but double-digit ahead business is dot-com and mortar our retail with

on far call, the as fact we last up that we as Amazon. about So talked store a Martha remember, were even opening

We continued that to more add business. categories to

business on Gaiam strong been has Our Amazon.

all trending the jessicasimpson.com So retailers of very Amazon, different all are well. and

with that business the and With international, is brands. in on excited what's off. going we're So international really

are that Avia talked has are announcement ANDX brands Our that but opening is Gaiam in both presence the fact expanding. different already countries, ANDX. and the we about China for recent stores Avia, in We up retail and many

retailers, freestanding So brands just it's our with to own opportunity for even retail but a there expand great with our formats. not expand

about expansion really Avia going overseas. the for we're So excited and with what's on ANDX

Pallav Saini

you. my Thank your is, on second year. And question guidance the for

but as results guidance, you year it even end. are might in now? relates for the are lower your Has come changed what might maintained the anything view to be at in next that You've suggesting seeing right these

Peter Lops

Thank you.

more off from in quarter towards opening building I think of growth about place we'll remarks, as the the we and on we've the have we're the talked year some next fourth But XXXX. initiatives talk about look lot we of as Karen investments a we next mentioned made. call. year, momentum in strategic the

the So we forward built very with and far been thus carrying momentum year. into next we've pleased that

Karen Murray

we've I as and got as about you against really know, are feel we've have is got, in place we pipeline that strong already we're about XXXX. executing some well. good to feel good that We announcements what coming XXXX and really really really, tell a for you,

Pallav Saini

luck. good Thanks and

Karen Murray

call today. interest. the session. you. Q&A participation this our Thank concludes your and for and you. Thank Thus concludes Ladies gentlemen, Thank for you

wonderful You have your day. a may and disconnect lines

Sequential Brands (SQBG) 7 Nov 182018 Q3 Earnings call transcript