SQBG - Earnings call transcript Q4 2018 | Sequential Brands Group, Inc.

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Operator

Thank you and good morning.

Before we begin I 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 to differ materially 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 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 the cautioned made. may which as are place on undue forward-looking statement Listeners of the to we as as whether of or undertake by than events result revise law, future Other no forward-looking required a obligation otherwise. update information, statements, or these will

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

Peter Lops

Good XXXX morning. full and us And joining for thank fourth on quarter our you conference call. year

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

the expense results compared of last fourth to be once per ASC be guidance, ASC which I’ll $XX.X the $XX.X for results the Net XXX. and million discussing revenue Company's a the note $X.XX for prior $X.X year's includes you quarter earnings quarter was quarter. and on consistent million XXX. ASC loss direct under $X.X will that quarter under purposes this the XXXX be the share, a the for again to comparative results million the in million, to diluted under was Please that For release million XXX or million, Total basis This with review net related we'll GAAP the compared prior in Non-GAAP our litigation to $X.XX of legacy in quarter the share the notably, to year's or of fourth $X.XX fourth the that investments for XXXX to Active brand our due most brand, fourth million matter. or quarter EBITDA quarter. a per planned diluted per a was or $XX.X diluted share million net loss made per Adjusted we the $X.XX in share, compares to was $XX.X $X.X income compared marketing in $X XXXX. Division. quarter of for ambassadors $XXX.X diluted million to

million prior a brand year a to For with GAAP licensee related license Walmart the and $XXX.X legacy direct-to-retail full million $X.X or to a settlement loss share prior income the total diluted XX, the to of $X.X a trademarks expense Non-GAAP or million full matter two the and or noncash This prior for impairment compared million $X.XX includes year. part year. to December million net in $X.XX charges million ended $XXX.X the related year $XX.X the in quarter, with third diluted in XXXX December December December share, cents Net $X.X ended charges to a of million XX, the in the reported a the as $XX.X in related was brands. compares full basis the compared the period. million net to year diluted year. full of on of $X.XX diluted XX loss million, for shift and year of per Adjusted $XX.X or $XX.X XXXX EBITDA year to AVIA million litigation compared company’s a which to for strategic revenue positive $X.XX XX, share was XXXX, $XX.X a the ended share, prior per the million, for $XXX.X per per was the was XXXX –

million adjusted is that AVIA year's EBITDA settlement quarter, Excluding would brand million. the $X.X have third $XX.X in charge this the included been for

flow therefore was excludes and the considered is with as net $XX.X including ended year cash We our XX, debt Our and $XXX.X restricted full adjusted of capital cash the to of taxes million December cash. million calculated cash XXXX for of cash EBITDA, interest, XXXX core $XX items which free adjusted expenditures and to are million licensing closed business. that not fourth quarter cash less

maturities flexibility. facilities As lien we at debt refinancing of our and under XXXX and and first refinancing of Bank the covenant respectively, rate weighted facilities America third on previously, the we improved the average through mentioned and lowered KKR. The the second beginning our quarter, closed of our our XXXX extended with interest

low-single full revenue growth For expect both we digit for XXXX year EBITDA. and adjusted

reminder, reporting ASC’s results only be we moving success. forward, under that, call turn to me With Karen. a As over the let will

Karen Murray

with to business in XXXX, growth the understanding remain remain also multiple on finish for Thank across long-term executive to on model key brand, level our we partnerships completed marketplace. competitive new Building several our had it evolve that, continues while and to that focused and renewed today's best our evolve the in Peter. portfolio. licensing must we fields, you, organic that with We key them growth. we the refinance, a strengthened brands position progress XXXX We across added to completed talent, solid made

are company. brands. the Stewart, our represent the focus ANDX, drivers and look at Jumping Avia, strategic for GAIAM, six into with results, around previous brands we Simpson our to Martha quarterly consistent continuing growth core on always, opportunities Joe's, As highlights Jessica I'll the largest quarters, for which

is brand division. ANDX, GAIAM, Active active Vanessa's believe we're and for further by we The division most them of division such is each Actress and accelerate key for as industry A component passionate billion our for and by legend, largest Avia. the area most position and her partnered ambassador through followers you talented active the power to XX with the Biel new and evaluate active global where to brand expected ANDX is Avia, makes and phenomenal. is growth, take Vanessa social expose to NBA wear have very me ones media for actress Jessica marketplace of $XXX customers to million positioned market sources, both it Kevin compelling recently opportunities our announced in Let new domestically talented, a our strengthen for to about reach internationally. We of it. as that an that each uniquely our and think includes XXXX, Hudgens. profitable which Avia help and to we growth as Garnett, strategy brands. According ambassadors been GAIAM have well. attract brand and we the help singer, star current

and The capital a spring. and during authentic, these Avia GAIAM at engaged in expected the Kohl's space stores. in GAIAM line with benefit Plans stores holiday designed passionate, soft remains the driven of for in collections and shelf business. top debut product represent. performing ambassadors this Walmart and All well the they expanding brands Kohl's and performer, the apparel assortments are to especially by brand line are was brand's full from Vanessa women's season. to store. goods The co is continue underway hard performer by top is and The goods presence its increased

is chain. and health example launch its and for and expansions one future at testing at many aligns Kohl's at be also line driven a the the GAIAM untapped stores strength had GAIAM of into Teas brand available the by ANDX boy's development. The core strong terrific with Green market very quarter brand's of closely men's and a for the a in performed that which men's whole well. in are space the a of wellness foods speak month. Organic its grocery Walmart, particularly this We expanded space recently products us with We apparel nationwide accessories will beverage categories great

continued to new celebrates streetball tied in XXth anniversary, marketing the which implement We initiative brand’s the quarter its to roots.

China is a in for off to ANDX business start. strong Our

six to aggressive plan year. domestically to has to in launch The opened traction continues stores an exploring partner roll stores specialty more gain this brand and XXXX. also for Our out last year plans and stores we are

Camuto to category. includes Jessica's Group, quarter support Turning renewal partner, which the their demonstrating our with its brand brands, fashion our division, Jessica and in during continued multiyear the Simpson largest for we licensing footwear long-time line a Joe's for signed

of handbags, footwear, byproducts e-commerce the the for preparing allow and such while experience are to We fragrance, brand's Jessica site, consumers luggage, which denim, world having swimwear. access to will as soon-to-launch

the the growth Denim to with been beauty business brand’s category track We’re been with of to continues There line. brand. launch be momentum particularly has – kids our significant and continues well fall. Hong to and store concepts will the experiential to International strong currently for in exploring Australia. City for Taiwan, be Angeles. retail and partners Los market new New flagship a concept two we're brand. also closely the brand, for a brand. Joe's Joe's These working elevated with We've to an continues in Kong, develop development on the in leads to and designs men this locations, for Beauty the brand closely opportunity York perform opportunities our

fragrance, including planning and many categories hosiery new have the year, more. throughout to We also we're launch

to announced home Stewart new multiple includes categories. a Martha new Last the Stewart Martha a to Growth product Turning CBD of partnership we develop division, the and brands. Emeril Canopy line which offerings for week Lagasse across with broad

price pairs for first and This brand. the by debut with across and we product Martha seasonal to with excited opportunity solution, great California will design Stewart growth future. followed California first an Martha decor and strong effectiveness to on branded a for partnership into animals. both a and explores multiple partnership, will relate a improving holidays. be develop and We're co to Closets for lives on As customers exciting world-leading to the platform continues cannabis for organization is cannabinoids the plans as Martha's knowledge an leading category represents significant initial to Canopy of will and and Growth This line of and focus Martha the company, be in Stewart. to hemp the Canopy – Growth. products, advisory for pets leaning us Canopy diversified stages that expanding the is humans modular a provide very of while California kind a Canopy which brand licensing accessible opportunity. QVC Closets that of a consumer Closets this We're they that part the in an with the be humans we're fall a this is versatile, point. great lines of very in CBD with its signed vast a line other for announce serving role opportunity agreement

the continue drivers We best QVC. opportunities are exploring to resonate the for and we're expand fact business learn Martha in with the major customer. currently categories beyond those and to categories with accessories Apparel that

the as global expand territories as in with On we're presence sign brand new Stewart Africa as South partners front, Asia, with expected this South America the year. well advanced to to new conversation an Martha deals such Southeast

of accessories. in Our brand online Middle over front TV We signed the a through small Emeril impressions week team digital Lagasse Partnership for garnering filmed is per grilling line across country. and and rails also Everyday of recently million Asia. balance an a and infomercial electric products the new and social of on XX focusing Tristar products New on brand. audience live debuted has Emeril East the media developed capturing in the for growth branded via kitchen the The

to amount Dynamix there Home with products TJ recently remain textiles, new core to assortment partnership In a kitchen mitts, towels, you Tristar, HomeGoods. available expanded our oven across apron. we executing will our now includes and marketplace time, kitchen our such the deliver we growth organic position strategic integration. for expansion value. joining competitive over At the Q&A. long-term evaluating you driving us the Thank distribution on opportunities the international call we against as strategy and focused with see, brand significant operator for In best of evolve in and that are activity also can remain partnership back our digital and at today. on the same which brand so Emeril’s I business closing, addition to brands. turn underway The to We with category Maxx of through today's is shareholder and call as launched merchandise

Operator

Thank question C.L. the Our is from go coming you. with first Marotta your [Operator of King. line Instructions] with question. Please ahead Steve

Steve Marotta

Peter, both? Good morning, Karen and are you how

Karen Murray

you? are how Good,

Peter Lops

Steve. Morning Good

Steve Marotta

Peter you. Thank just to one morning. thing. Good clarify want

guided low accurate? you believe single growth to You fiscal XXXX. digit EBITDA said, in that I revenue and Is

Peter Lops

That's correct.

Steve Marotta

year previous will be lumpiness sales– earnings than that years? is – And within earnings other hadn't growth is relevant but I words, growth sales in the the that that year, back and In of in more be most the usual assume occurred dodginess, and the of there occurring half any will occurring anything there? there

Peter Lops

It'll No, correct. the where into you haven't, years be that's it half is loaded of past second the similar Steve to back year.

You're absolutely correct.

Steve Marotta

little brand year agreements signed Okay. be rolling or Karen, the into more a fiscal over on XX months largest to and XXXX? previously. had been talk probably had that EBITDA than about they last bit and I the ducktail this course that been mean incremental you can XX revenue would drivers this we'll opportunity licensing of in

Karen Murray

category, of And but lot we our – specifically home have Sosure Steve. gaining presented always, the opportunities are as traction. have that really In a within active Emeril. Martha, been even general, we businesses

to much we're online, growing were Martha, as them for pretty performers the quarter we expect and well. that's the But as ANDX the brands, grow growth continue and where well those top the internationally. businesses We GAIAM

Steve Marotta

now, with now too? think most bit international on it can by where assuming you Asia, about And of In penetration would Africa you and I'm do annual is Southeast basis balance talk say But little you on division. think the represent are brands, encompass most this number? a would an the for you areas that growth. you South about those comfortable America, the Martha, would be that that when Great. that, international, touched more you South where

Karen Murray

out I we've lot the several similar The very are those in international talked in out to the international substantial up opened year. business quoted our many a level Sure. agreements XXXX, end China. traction revenue brands well about when good that rollout we've is past. that The which is at total roll planned we in is news and of a six we in these we've aggressive we've ANDX, say year. business active to as we're countries. of is resonate. year would really mentioned this our business this There stores and the the And roll more the at that resonating early an for start that But as We'll in that brands fortunately, in made learning about wherein later

is And but the is GAIAM in Chile, all currently also Canada, we in in rollout We the England, say, China we're Germany, of France Japan, China, are Brazil, Israel, businesses also but and growing the and in active soon to talked Canada I would be countries in U.K. China, U.K. you South Mexico, Avia then – Korea. ANDX about Austria mentioned, and And

South America brands all Asia, occur Africa. it's conversations, active agreements, into So I conversations, advanced year to but the with full Southeast start said, will and new and setting they're mostly, rollouts then in Martha, are XXXX. up but this later South – as And the really really

to looking sign we're So those year. this

Steve Marotta

fiscal mostly actually standpoint? Last know you to you too Is will in be of I Now we And in an how more little from is more that how you bit in on color a if channel. up And obviously, see chain. you Or us mentioned more that it's talk want about mass helpful. bit in give but if a that us segmented? very don't a you can could you specialty plan That's color – could brand a little something stores that's the little XXXX. early, bit disclose the Avia could announcement? revenue Terrific. traction question give just

Karen Murray

a last think partnership is that And with and you'll the last mass to call, to not Hudgens, the recall, we Vanessa But the with start in Vanessa our Vanessa mass position partnership of we channel, today. roll I line to fall this tier. are but partnership the in out in – year. we have upper expanded with beyond start the It mostly will mentioned channel looking

you'll aggressive a partnership. But with at of more active So the see rollout, that Vanessa's again, She's to very year. a end this start ambassador.

the late her plans year brand channel great the have into of this We elevate outside mass to for XXXX.

Steve Marotta

best helpful, of Very luck.

Karen Murray

you, Steve. Thank

Operator

Roth of The King next your question. is with line proceed Please from Capital. question the with Dave

Dave King

Thanks and hello everyone. Karen.

should Thanks. opportunities in I thinking brand the might some about about that? think point? And think Does you're considering. to evolve of you that business mean sales? talked for brands mentioned and we evaluating the others you you maybe your noncore be up I you being past How this sale. Are be potentially at considering

Karen Murray

Great. Hi, Dave.

We landscape know. retail – brands. for much portfolio time. and opportunities growing tell are small at We the during we our athleisure would sell opportunities record, as again, I But the you opportunity We say Today, our Okay. the we very an whole Revo and presence every for the space, broken as that all like look I we active a evaluating And of we're a us did sounds our few increase in industry brands. pretty call, always of our the focused that, believe but all noncore we changing, is it's script. and as stated area. to is that portion a business

So and on all athleisure opportunities the active, brands. evaluating focus our for is

Dave King

active that as you're correctly? potential Does hearing Am then that acquisitions I that well? mean in considering

Karen Murray

be the not our where our focus, point, investments just could it and in that an brand business. the but we're that across of investments more or that in board It's in whether in ambassadors, this a investing space can grow profitable. really acquisition. mean understanding it's about really It brands But could talking portion almost where in at understanding space,

growing. in and I profitable that of most part it's script, our the As is one stated business our

focusing out that the it's so be are in mentioned an a it'll $XXX on. script, we going to I as – plans, business, XXXX, area the looking think billion definitely I to

Dave King

deal new in and helpful. can the But terms over the annual but Just probably there, just you I Martha. That's can how then and early, CBD for share? should don't of we the share Perfect. And much. But potential know want thinking be revenue, what near to I to rate, know it's royalty stated that, you what you share term? about GMRs? longer lifetime minimums, Okay.

Karen Murray

was the Could didn't reason, some part? Because to sentence. muffed, for ask repeat first we Dave, it and hear you, the we first

Dave King

No problem.

of it was royalty Martha. can was et minimums, the I about deal revenue, for the in – new On you CBD rate, curious just what cetera. terms on share

Karen Murray

Okay.

Sorry, part it. we of hear didn't Canopy the

Okay.

know, products XXXX, other other development the a is for XXXX. perspective that's week, growth the to that role, really great categories. this and Growth is and space development in about is full opportunity important pet active and an this did excited multiple general, cannabis is also arena. Canopy The you last us. come In and and this serving from advisory had partnership specifically, focusing line that space, a is It's human. be just think a a really opportunity. an and you year. I we her company Canopy. a addition, announced think many the brands, and As categories a leaders and is This space partnership. developing really this out will hemp we're where involvement the This on space. of partnership I just it's year, our then deal Martha and XXXX will into a we that a in past. revenue rolling twofold we products tell a But is partnership, great licensing is leading though, similar, licensing we've in we'll with But great sign and arrangements for these It's of we these real be the would in general, really

Dave King

debt million Can was to lastly $X then so. I for Okay, GMRs? million And about It in or me. have do quarter. the rate reductions end potential on helpful. year last about at think perfect. looks as down like you $XXX further progresses? That's the quarter, year the[ph] lifetime it you you. talk of just came Thank sequentially And then

Peter Lops

David, it’s Peter.

million $XXX year Your we're about at GMR question, end. yes,

things As like and you – as as deals we renew that. know, deals can and fluctuate we that expire

missed So quite that a area it's I the your question. first for of bit. maintained part And

up little broke a You bit.

Dave King

But on it debt. was

sequentially. down I came that field. think it talk $X about you million reduction just Can further in

Peter Lops

Understood, you. thank

a lowered decline. so our to you schedule. completed so So still working We're have we you know, see our of our saved We've We refinance. and an debt year why we on debt, paydown cost $XX our some reduce that aggressive that's interest. recently and million

Dave King

for perfect. Yes, Thanks my taking question.

Peter Lops

Thank you.

Operator

Thank concludes today's you. conference. This

We You participation. want may this for your at disconnect lines time. you thank this time. We to your

Sequential Brands (SQBG) 6 Mar 192018 Q4 Earnings call transcript