- Q1 Revenue increased 117% to $13.6 million vs. $6.3 million in
the prior year quarter
- Q1 Adjusted EBITDA increased 156% to $8.0 million vs. $3.1
million in the prior year quarter
Sequential Brands Group, Inc. ("Sequential" or the "Company")
(Nasdaq:SQBG) today announced financial results for the first
quarter ended March 31, 2015.
First Quarter 2015 Results:
Total revenue for the first quarter ended March 31, 2015
increased to $13.6 million, compared to $6.3 million in the prior
year quarter. Adjusted EBITDA for the first quarter increased to
$8.0 million, compared to $3.1 million in the prior year quarter.
On a non-GAAP basis, net income for the quarter was $1.3 million,
or $0.03 per diluted share, compared to $0.8 million, or $0.03 per
diluted share, in the prior year quarter. On a GAAP basis, net
income for the quarter was $1.4 million, or $0.04 per diluted
share, compared to net income of $0.7 million, or $0.03 per diluted
share, in the prior year quarter. See tables below for a
reconciliation of GAAP to non-GAAP measures.
Yehuda Shmidman, Sequential's Chief Executive Officer,
commented, "We are pleased to begin 2015 with a strong quarter and
the recently announced acquisition of a majority interest in the
Jessica Simpson brand. Core to our growth strategy is that we are
focused on executing on our playbook of both organic and
acquisition growth, and our recent results and future plans reflect
this strategy."
Financial Update:
For the year ending December 31, 2015, the Company is
reiterating revenue guidance of $78.0 - $81.0 million with Adjusted
EBITDA of $48.5 - $50.5 million. The Company's contractual
guaranteed minimum royalties for 2015 total more than $62 million.
Consistent with the Company's historical quarterly results, the
Company expects revenue for 2015 to be weighted to the third and
fourth quarters due to seasonality in the businesses of many of the
Company's licensees.
During the first quarter, the Company recognized a non-material
gain from the divestiture of the People's Liberation brand to a
third party operating company. However, for financial reporting
purposes, the gain is excluded in the Company's non-GAAP results as
it is not reflective of the Company's ongoing licensing
business.
Investor Call and Webcast:
Management will provide further commentary today, April 30,
2015, on the Company's financial results via a conference call and
webcast beginning at approximately 10:00am ET. To join the
conference call, please dial (877) 407-0789 or visit the investor
relations page on the Company's website
www.sequentialbrandsgroup.com.
Non-GAAP Financial Measures:
See reconciliation tables below for non-GAAP metrics.
These non-GAAP metrics may be inconsistent with similar
measures presented by other companies and should only be used in
conjunction with our results reported according to U.S. GAAP.
Any financial measure other than those prepared in accordance
with U.S. GAAP should not be considered a substitute for, or
superior to, measures of financial performance prepared in
accordance with U.S. GAAP.
About Sequential Brands Group, Inc.
Sequential Brands Group, Inc. (Nasdaq:SQBG) owns, promotes,
markets, and licenses a portfolio of consumer brands in the
fashion, active and lifestyle categories. Sequential seeks to
ensure that its brands continue to thrive and grow by employing
strong brand management, design and marketing teams. Sequential has
licensed and intends to license its brands in a variety of consumer
categories to retailers, wholesalers and distributors in the United
States and around the world.
For more information, please visit Sequential's corporate
website at: www.sequentialbrandsgroup.com. To inquire about
licensing opportunities, please
email: newbusiness@sbg-ny.com.
Forward-Looking Statements
Certain statements in this press release and oral statements
made from time to time by representatives of the Company are
forward-looking statements ("forward-looking statements") within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are made as of the
date hereof and are based on current expectations, estimates,
forecasts and projections as well as the beliefs and assumptions of
management. The Company's actual results could differ
materially from those stated or implied in forward-looking
statements. Forward-looking statements include statements
concerning guidance, plans, objectives, goals, strategies,
expectations, intentions, projections, developments, future events,
performance or products, underlying assumptions and other
statements that are not historical in nature, including those that
include the words "subject to," "believes," "anticipates," "plans,"
"expects," "intends," "estimates," "forecasts," "projects," "aims,"
"targets," "may," "will," "should," "can," the negatives thereof,
variations thereon and similar expressions. Such
forward-looking statements reflect the Company's current views with
respect to future events, based on what the Company believes are
reasonable assumptions. Whether actual results will conform
to expectations and predictions is subject to known and unknown
risks and uncertainties, including: (i) risks and uncertainties
discussed in the reports that the Company has filed with the
Securities and Exchange Commission; (ii) general economic, market,
or business conditions; (iii) changes in the Company's competitive
position or competitive actions by other companies; (iv) the
Company's ability to maintain strong relationships with its
licensees and retail partners; (v) the Company's ability to retain
key personnel; (vi) the Company's ability to achieve and/or manage
growth and to meet target metrics associated with such growth;
(vii) the Company's ability to successfully attract new brands;
(viii) the Company's ability to identify suitable targets for
acquisitions; (ix) the Company's ability to obtain financing for
the acquisitions on commercially reasonable terms; (x) the
Company's substantial level of indebtedness, including the
possibility that such indebtedness and related restrictive
covenants may adversely affect the Company's future cash flows,
results of operations and financial condition and decrease its
operating flexibility; (xi) the Company's ability to integrate
successfully the new acquisitions into its ongoing business; (xii)
the Company's ability to achieve the anticipated results of these
and other potential acquisitions; (xiii) the Company's largest
stockholders control a significant percentage of the Company's
common stock and appointed two members to the Company's board of
directors, which may enable them to exert influence over corporate
transactions and matters affecting the rights of the Company's
stockholders; (xiv) the Company's ability to comply with government
regulations; (xv) changes in laws or regulations or policies of
federal and state regulators and agencies; and (xvi) other
circumstances beyond the Company's control. Refer to section
entitled "Risk Factors" set forth in the Company's Annual Reports
on Form 10-K and the Company's Quarterly Reports on Form 10-Q for a
discussion of important risks, uncertainties and other factors that
may affect our business, results of operations and financial
condition. The Company's stockholders are urged to consider such
risks, uncertainties and factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. Forward-looking
statements are not, and should not be relied upon as, a guarantee
of future performance or results, nor will they necessarily prove
to be accurate indications of the times at or by which any such
performance or results will be achieved. As a result, actual
outcomes and results may differ materially from those expressed in
forward-looking statements. The Company is under no obligation to,
and expressly disclaims any such obligation to, update or alter its
forward-looking statements, whether as a result of new information,
future events or otherwise.
Consolidated Income Statements: |
|
|
|
|
|
(in thousands, except earnings per share
data) |
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
|
2015 |
2014 |
|
|
|
Net revenue |
$ 13,617 |
$ 6,262 |
Operating expenses |
8,676 |
3,750 |
Income from operations |
4,941 |
2,512 |
Other income |
700 |
2 |
Interest expense |
3,160 |
1,270 |
Income before income taxes |
2,481 |
1,244 |
Provision for income taxes |
919 |
397 |
Consolidated net income |
1,562 |
847 |
Net income attributable to noncontrolling
interest |
(118) |
(105) |
Net income attributable to Sequential Brands
Group, Inc. and Subsidiaries |
$ 1,444 |
$ 742 |
|
|
|
Earnings per share attributable to Sequential
Brands Group, Inc. and Subsidiaries: |
|
|
Basic |
$ 0.04 |
$ 0.03 |
Diluted |
$ 0.04 |
$ 0.03 |
|
|
|
Weighted-average common shares
outstanding: |
|
|
Basic |
39,039,993 |
24,700,717 |
Diluted |
41,187,458 |
26,227,439 |
|
|
|
Select Balance Sheet Items: |
|
|
|
|
|
(in thousands) |
(Unaudited) |
|
|
Mar. 31, 2015 |
Dec. 31, 2014 |
|
|
|
Total Assets |
$ 526,261 |
$ 526,363 |
Total Liabilities |
$ 257,962 |
$ 261,463 |
Total Equity |
$ 268,299 |
$ 264,900 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measure
Reconciliation |
|
|
|
|
|
(in thousands, except earnings per share
data) |
|
|
|
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
|
2015 |
2014 |
|
|
|
GAAP net income |
$ 1,444 |
$ 742 |
|
|
|
Adjustments: |
|
|
Deal costs (a) |
300 |
54 |
Non-cash mark-to-market restricted stock
expense (b) |
(30) |
63 |
Sale of People's Liberation brand
(c) |
(700) |
-- |
Tax effect of above items |
151 |
(40) |
Adjustment to taxes (d) |
92 |
-- |
Total non-GAAP adjustments |
(188) |
77 |
|
|
|
Non-GAAP net income (1) |
$ 1,256 |
$ 819 |
|
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
DILUTED EPS: |
2015 |
2014 |
|
|
|
GAAP earnings per share |
$ 0.04 |
$ 0.03 |
|
|
|
Adjustments: |
|
|
Deal costs (a) |
0.01 |
0.00 |
Non-cash mark-to-market restricted stock
(income) expense (b) |
(0.00) |
0.00 |
Sale of People's Liberation brand
(c) |
(0.02) |
-- |
Tax effect of above items |
0.00 |
(0.00) |
Adjustment to taxes (d) |
0.00 |
-- |
Total non-GAAP adjustments |
$ (0.01) |
$ 0.00 |
|
|
|
Non-GAAP earnings per share (1) |
$ 0.03 |
$ 0.03 |
|
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
|
2015 |
2014 |
|
|
|
GAAP net income |
$ 1,444 |
$ 742 |
|
|
|
Adjustments: |
|
|
Taxes |
919 |
397 |
Interest expense, net |
3,160 |
1,270 |
Non-cash compensation |
2,531 |
464 |
Depreciation and amortization |
378 |
205 |
Deal costs (b) |
300 |
54 |
Sale of People's Liberation brand
(c) |
(700) |
0 |
|
6,588 |
2,390 |
|
|
|
Adjusted EBITDA (2) |
$ 8,032 |
$ 3,132 |
|
|
|
(1) Non-GAAP net income and
non-GAAP earnings per share are non-GAAP financial measures which
represent net income, excluding deal costs, mark-to-market
adjustments to non-cash stock-based compensation provided to
consultants and sale of People's Liberation brand. Management
uses this information to measure performance over time on a
consistent basis and to identify business trends relating to the
Company's financial condition and results of
operations. Management believes that these non-GAAP measures
provide investors with information regarding the underlying
performance of the Company's core business operating results on a
cash basis. |
(2) Adjusted EBITDA is defined as
net income, excluding interest income or expense, taxes,
depreciation and amortization, and excluding deal costs, non-cash
compensation and sale of People's Liberation brand. Management
uses Adjusted EBITDA as a measure of operating performance to
assist in comparing performance from period to period on a
consistent basis and to identify business trends relating to the
Company's financial condition and results of operations. The
Company believes Adjusted EBITDA provides additional information
for determining its ability to meet future debt service
requirements and capital expenditures. |
(a) Represents deal related costs
for certain of the Company's acquisitions. |
(b) Represents the mark-to-market
adjustments to non-cash stock-based compensation provided to
consultants. |
(c) Represents the sale of
the People's Liberation brand in Q1 2015. |
(d) Represents the adjustment to
taxes in Q1 2015 to reflect a statutory tax rate of 35% for
comparability purposes in the future. Q1 2014 does not reflect
a tax adjustment. |
|
|
|
|
Reconciliation of Non-GAAP Adjustment to
Taxes |
|
|
|
(in thousands, except statutory tax rate)
* |
|
|
|
|
(Unaudited) |
|
Three Months Ended March 31,
2015 |
|
|
GAAP pre-tax net income |
$ 2,481 |
Less: Net income attributable to
noncontrolling interest |
(118) |
|
2,363 |
Non-GAAP adjustments: |
|
Deal costs (a) |
300 |
Non-cash mark-to-market restricted stock
expense (b) |
(30) |
Sale of People's Liberation brand
(c) |
(700) |
Total non-GAAP adjustments |
(430) |
|
|
Non-GAAP pre-tax net income |
$ 1,933 |
|
|
Provision for taxes |
919 |
35% tax effect of Non-GAAP
adjustments above |
(151) |
Adjustment to taxes
(d) |
(92) |
Normalized taxes |
676 |
|
|
Statutory tax rate |
35% |
|
|
(a) Represents deal related costs
for certain of the Company's acquisitions. |
(b) Represents the mark-to-market
adjustments to non-cash stock-based compensation provided to
consultants. |
(c) Represents the sale of the
People's Liberation brand in Q1 2015. |
(d) Represents the adjustment of
taxes to reflect a statutory tax rate of 35% for comparability
purposes in the future. |
|
|
* This table illustrates the
calculation of the adjustment to taxes necessary to give effect to
a statutory tax rate of 35% that we estimate would be applied to
the Company's income, absent non-recurring items. |
|
|
|
|
|
|
Non-GAAP Financial Measure Reconciliation -
Projected Fiscal Year 2015 |
|
|
(in thousands) |
|
|
|
|
|
|
(Unaudited) |
|
Year ending
December 31, 2015 |
|
High |
Low |
GAAP net income |
$ 13,692 |
$ 12,392 |
|
|
|
Adjustments: |
|
|
Interest expense, net |
19,604 |
19,604 |
Depreciation and amortization |
1,724 |
1,724 |
Taxes |
6,996 |
6,296 |
Estimated deal costs and other (a) |
3,500 |
3,500 |
Non-cash compensation - performance based
awards (b) |
3,434 |
3,434 |
Non-cash compensation - restricted stock
(c) |
2,250 |
2,250 |
Sale of People's Liberation brand
(d) |
(700) |
(700) |
|
36,808 |
36,108 |
|
|
|
Adjusted EBITDA (1) |
$ 50,500 |
$ 48,500 |
|
|
|
(1) Adjusted EBITDA is defined as
net income, excluding interest expense, taxes, depreciation and
amortization, and excluding estimated deal costs and other and
non-cash compensation. Management uses Adjusted EBITDA as a
measure of operating performance to assist in comparing performance
from period to period on a consistent basis and to identify
business trends relating to the Company's financial condition and
results of operations. The Company believes Adjusted EBITDA
provides additional information for determining its ability to meet
future debt service requirements and capital expenditures. |
|
|
|
(a) Represents deal and other
one-time costs related to the Company's acquisition transactions
primarily related to legal, advisory and accounting costs that are
not representative of the Company's day-to-day licensing
business. |
(b) Represents non-cash expenses
related to (1) 210,500 performance based awards granted under the
Company's 2013 Stock Incentive Compensation Plan and (2) 153,389
performance based awards for the 2015 portion granted under the
Company's 2013 Stock Incentive Compensation Plan which the Company
anticipates will be earned in 2015. Excludes (1) future
mark-to-market adjustments to non-cash compensation provided to
consultants for performance based awards and (2) 195,444
performance based awards which the Company does not anticipate will
be earned at this time. |
(c) Excludes future
mark-to-market adjustments to non-cash compensation provided to
consultants. |
(d) Represents the sale of the
People's Liberation brand in Q1 2015. |
CONTACT: Gary Klein, CFO
Sequential Brands Group, Inc.
(646) 564-2577
gklein@sbg-ny.com
ICR:
Rachel Schacter / John Rouleau
(203)-682-8200
Rachel.schacter@icrinc.com
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