Sequential Brands Group, Inc. (“Sequential” or the “Company”)
(Nasdaq:SQBG) today announced financial results for the first
quarter ended March 31, 2018.
First Quarter 2018 Results:
Effective January 1, 2018, the Company adopted a new revenue
recognition standard ("ASC 606"), which impacted the Company’s
reported revenue. The Company adopted ASC 606 using the modified
retrospective method, which means that the total amount of revenue
reported for first quarter 2017 has not been restated in the
current financial statements. In the interest of comparability
during the transition year to ASC 606, the company will provide
revenue, net income and earnings per share information in
accordance with both ASC 606 and revenue recognition rules in
effect prior to the adoption of ASC 606 (“ASC 605”).
Under New Revenue Recognition Standard, ASC
606
This new methodology resulted in a positive adjustment to
retained earnings of $1.1 million on the adoption date and first
quarter 2018 revenue that is $1.3 million lower than revenue
recognized under the previous standard. Most important, the
accounting change does not impact the underlying business momentum
and has no impact on free cash flow.
- Revenue for the first quarter 2018 was $38.1 million
- On a GAAP basis, the net loss for the first quarter of 2018 was
$(2.3) million or $(0.04) per diluted share.
- On a non-GAAP basis, net income for the first quarter was $3.6
million, or $0.06 per diluted share. See Non-GAAP Financial Measure
Reconciliation tables below for a reconciliation of GAAP to
non-GAAP measures.
- Adjusted EBITDA for the first quarter of 2018 was $21.2
million.
Under Prior Year’s Revenue Recognition Standard, ASC
605
The following information indicates what our results of
operations would have been under the old revenue recognition
standard. These amounts are measures provided for comparability
purposes:
- Revenue for the first quarter of 2018 would have been $39.4
million, flat compared to 2017.
- Net loss for the first quarter of 2018 would have been $(1.3)
million or $(0.02) per diluted share compared to net loss in the
prior year’s first quarter of $(1.2) million or $(0.02) per diluted
share.
- Non-GAAP net income for the first quarter would have been $4.9
million, or $0.08 per diluted share, compared to $5.9 million, or
$0.09 per diluted share, in the prior year period. See
Non-GAAP Financial Measure Reconciliation tables below for a
reconciliation of GAAP to non-GAAP measures.
- Adjusted EBITDA for the first quarter of 2018 would have been
$22.5 million, compared to $23.0 million in the prior year
quarter.
“We are encouraged by our solid start to 2018 and the momentum
underway across our portfolio of strong, diversified brands," said
Karen Murray, CEO of Sequential Brands Group. "We remain focused on
executing against our strategic plan to grow revenue, manage costs
and improve our balance sheet."
Investor Call and Webcast:
Management will provide further commentary
today, May 9, 2018, on the Company’s financial results and
financial update via a conference call and webcast beginning at
approximately 8:30 am 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. A replay of the
conference call is available on the Company’s website.
Non-GAAP Financial Measures:
This press release contains historical and
projected measures of Adjusted EBITDA, non-GAAP net income and
non-GAAP earnings per diluted share. The Company defines
Adjusted EBITDA as net income (loss) attributable to Sequential
Brands Group, Inc. and Subsidiaries, excluding interest income or
expense, income taxes, depreciation and amortization, deal advisory
costs, non-cash compensation, restructuring costs, costs incurred
in connection with CEO transition, Martha Stewart Living Omnimedia
(MSLO) shareholder and pre-acquisition litigation costs, realized
loss on the sale of available-for-sale securities, MSLO
pre-acquisition sales tax refunds, other non-cash items, impairment
of available-for-sale securities, non-cash impairment of goodwill
and trademarks, net of non-controlling interest, and
severance. Non-GAAP net income and non-GAAP earnings per
share are non-GAAP financial measures which represent net income
(loss) attributable to Sequential Brands Group, Inc. and
Subsidiaries, excluding deal advisory costs, mark-to-market
adjustments to non-cash stock-based compensation provided to
non-employees, write-off of deferred financing costs, restructuring
costs, costs incurred in connection with CEO transition, non-cash
stock-based compensation - restructuring, MSLO shareholder and
pre-acquisition litigation costs, realized loss on the sale of
available-for-sale securities, MSLO pre-acquisition sales tax
refunds, other non-cash items, impairment of available-for-sale
securities, non-cash impairment of goodwill and trademarks, net of
non-controlling interest, and adjustment to taxes. These
non-GAAP metrics are an alternative to the information calculated
under U.S. generally accepted accounting principles (“GAAP”), as
provided in the reports the Company files with the Securities and
Exchange Commission, may be inconsistent with similar measures
presented by other companies and should only be used in conjunction
with the Company’s results reported according to GAAP. Any
financial measure other than those prepared in accordance with GAAP
should not be considered a substitute for, or superior to, measures
of financial performance prepared in accordance with GAAP. We
consider these measures to be useful measures of our ongoing
financial performance because they adjust for certain costs and
other events that the Company believes are not representative of
its core licensing business. See below for a reconciliation
of these non-GAAP metrics from the most directly comparable GAAP
measure.
About Sequential Brands Group, Inc.
Sequential Brands Group, Inc. (Nasdaq:SQBG)
owns, promotes, markets, and licenses a portfolio of consumer
brands in the home, active and fashion 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
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 potential refinancing, estimates of GAAP net
income, Adjusted EBITDA, revenue (including guaranteed minimum
royalties), and margins, 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,"
"future," "seek," "could," "predict," 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 (the "SEC"); (ii) general economic,
market or business conditions; (iii) the Company's ability to
identify suitable targets for acquisitions and to obtain financing
for such acquisitions on commercially reasonable terms; (iv) the
Company's ability to timely achieve the anticipated results of
recent acquisitions and any potential future acquisitions; (v) the
Company's ability to successfully integrate acquisitions into its
ongoing business; (vi) the potential impact of the consummation of
recent acquisitions or any potential future acquisitions on the
Company's relationships, including with employees, licensees,
customers and competitors; (vii) the Company's ability to achieve
and/or manage growth and to meet target metrics associated with
such growth; (viii) the Company's ability to successfully attract
new brands and to identify suitable licensees for its existing and
newly acquired brands; (ix) 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; (x) the Company's ability
to achieve its guidance; (xi) continued market acceptance of the
Company's brands; (xii) changes in the Company's competitive
position or competitive actions by other companies; (xiii)
licensees' ability to fulfill their financial obligations to the
Company; (xiv) concentrations of the Company's licensing revenues
with a limited number of licensees and retail partners; and (xv)
other circumstances beyond the Company's control. Refer to
the section entitled "Risk Factors" set forth in the Company's
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a
discussion of important risks, uncertainties and other factors that
may affect the Company's 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
not under any 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. Readers should understand that it is not possible
to predict or identify all risks and uncertainties to which the
Company may be subject. Consequently, readers should not
consider such disclosures to be a complete discussion of all
potential risks or uncertainties.
For Media and Investor Relations inquiries,
contact:
Sequential Brands Group, Inc.Katherine NashT: +1
512-757-2566E: knash@sbg-ny.com
|
|
SEQUENTIAL BRANDS GROUP, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
January 1, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
2018 |
|
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
As Reported ASC 606 |
|
As Reported ASC 605 |
|
ASC 606 Adjustments |
|
ASC 606 Opening Balance Sheet |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
23,337 |
|
|
$ |
18,902 |
|
|
$ |
- |
|
$ |
18,902 |
|
Restricted cash |
|
|
2,029 |
|
|
|
1,531 |
|
|
|
- |
|
|
1,531 |
|
Accounts receivable,
net |
|
|
55,909 |
|
|
|
60,102 |
|
|
|
6,335 |
|
|
66,437 |
|
Asset held for
sale |
|
|
2,721 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
Prepaid expenses and
other current assets |
|
|
12,256 |
|
|
|
8,635 |
|
|
|
- |
|
|
8,635 |
|
Total current
assets |
|
|
96,252 |
|
|
|
89,170 |
|
|
|
6,335 |
|
|
95,505 |
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
|
9,246 |
|
|
|
7,035 |
|
|
|
- |
|
|
7,035 |
|
Intangible assets,
net |
|
|
987,143 |
|
|
|
995,170 |
|
|
|
- |
|
|
995,170 |
|
Other assets |
|
|
4,125 |
|
|
|
5,836 |
|
|
|
- |
|
|
5,836 |
|
Total assets |
|
$ |
1,096,766 |
|
|
$ |
1,097,211 |
|
|
$ |
6,335 |
|
$ |
1,103,546 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses |
|
$ |
18,075 |
|
|
$ |
19,126 |
|
|
$ |
- |
|
$ |
19,126 |
|
Current portion of
long-term debt |
|
|
28,300 |
|
|
|
28,300 |
|
|
|
- |
|
|
28,300 |
|
Current portion of
deferred revenue |
|
|
13,240 |
|
|
|
8,102 |
|
|
|
4,387 |
|
|
12,489 |
|
Total current
liabilities |
|
|
59,615 |
|
|
|
55,528 |
|
|
|
4,387 |
|
|
59,915 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of
current portion |
|
|
596,166 |
|
|
|
602,297 |
|
|
|
- |
|
|
602,297 |
|
Long-term deferred
revenue, net of current portion |
|
|
10,940 |
|
|
|
11,845 |
|
|
|
- |
|
|
11,845 |
|
Deferred tax
liability |
|
|
68,209 |
|
|
|
67,799 |
|
|
|
463 |
|
|
68,262 |
|
Other long-term
liabilities |
|
|
6,756 |
|
|
|
6,204 |
|
|
|
- |
|
|
6,204 |
|
Total liabilities |
|
|
741,686 |
|
|
|
743,673 |
|
|
|
4,850 |
|
|
748,523 |
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
|
Common stock |
|
|
645 |
|
|
|
635 |
|
|
|
- |
|
|
635 |
|
Additional paid-in
capital |
|
|
511,279 |
|
|
|
508,444 |
|
|
|
- |
|
|
508,444 |
|
Accumulated other
comprehensive income |
|
|
759 |
|
|
|
80 |
|
|
|
- |
|
|
80 |
|
Accumulated
deficit |
|
|
(226,503 |
) |
|
|
(225,369 |
) |
|
|
1,130 |
|
|
(224,239 |
) |
Treasury stock |
|
|
(3,718 |
) |
|
|
(1,799 |
) |
|
|
- |
|
|
(1,799 |
) |
Total Sequential Brands
Group, Inc. and Subsidiaries stockholders’ equity |
|
|
282,462 |
|
|
|
281,991 |
|
|
|
1,130 |
|
|
283,121 |
|
Noncontrolling
interest |
|
|
72,618 |
|
|
|
71,547 |
|
|
|
355 |
|
|
71,902 |
|
Total equity |
|
|
355,080 |
|
|
|
353,538 |
|
|
|
1,485 |
|
|
355,023 |
|
Total liabilities and
equity |
|
$ |
1,096,766 |
|
|
$ |
1,097,211 |
|
|
$ |
6,335 |
|
$ |
1,103,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEQUENTIAL BRANDS GROUP, INC. AND
SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except share and per share
data) |
|
|
|
|
|
|
|
|
|
Three Months Ended March
31, |
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
As Reported ASC 606 |
|
Adjustments |
|
ASC 605 |
|
As Reported ASC 605 |
|
|
|
|
|
|
|
|
Net revenue |
$ |
38,104 |
|
|
$ |
(1,267 |
) |
|
$ |
39,371 |
|
|
$ |
39,400 |
|
Operating expenses |
|
18,050 |
|
|
|
- |
|
|
|
18,050 |
|
|
|
23,408 |
|
Loss on asset held for
sale |
|
5,142 |
|
|
|
- |
|
|
|
5,142 |
|
|
|
- |
|
Income from
operations |
|
14,912 |
|
|
|
(1,267 |
) |
|
|
16,179 |
|
|
|
15,992 |
|
Other income |
|
(135 |
) |
|
|
- |
|
|
|
(135 |
) |
|
|
(34 |
) |
Interest expense,
net |
|
15,392 |
|
|
|
- |
|
|
|
15,392 |
|
|
|
14,486 |
|
(Loss) income before
income taxes |
|
(345 |
) |
|
|
(1,267 |
) |
|
|
922 |
|
|
|
1,540 |
|
(Benefit from)
provision for income taxes |
|
(41 |
) |
|
|
(257 |
) |
|
|
216 |
|
|
|
585 |
|
Net (loss) income |
|
(304 |
) |
|
|
(1,010 |
) |
|
|
706 |
|
|
|
955 |
|
Net income attributable
to noncontrolling interest |
|
(1,960 |
) |
|
|
(3 |
) |
|
|
(1,957 |
) |
|
|
(2,135 |
) |
Net loss attributable
to Sequential Brands Group, Inc. and Subsidiaries |
$ |
(2,264 |
) |
|
$ |
(1,013 |
) |
|
$ |
(1,251 |
) |
|
$ |
(1,180 |
) |
|
|
|
|
|
|
|
|
Loss per share
attributable to Sequential Brands Group, Inc. and
Subsidiaries: |
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.04 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
Basic and diluted |
|
63,232,138 |
|
|
|
63,232,138 |
|
|
|
63,232,138 |
|
|
|
62,459,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEQUENTIAL BRANDS GROUP, INC. AND
SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS |
(in thousands) |
|
|
|
|
|
Three Months Ended March
31, |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Provided By
Operating Activities |
$ |
17,660 |
|
|
$ |
13,411 |
|
Cash Used In Investing
Activities |
|
(1,839 |
) |
|
|
(261 |
) |
Cash Used In Financing
Activities |
|
(10,888 |
) |
|
|
(10,826 |
) |
|
|
|
|
Net Increase In Cash
and Restricted Cash
|
|
4,933 |
|
|
|
2,324 |
|
Balance — Beginning of
period |
|
20,433 |
|
|
|
20,654 |
|
Balance — End of
period |
$ |
25,366 |
|
|
$ |
22,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial
Measure Reconciliation |
|
|
|
|
|
|
|
(in thousands, except
earnings per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
|
ASC 606(1) |
|
Adjustments(2) |
|
ASC 605(2) |
|
ASC 605(2) |
Reconciliation of GAAP
net loss to non-GAAP net income: |
|
|
|
|
|
|
|
GAAP net loss
attributable to Sequential Brands Group, Inc. and Subsidiaries |
$ |
(2,264 |
) |
|
$ |
(1,013 |
) |
|
$ |
(1,251 |
) |
|
$ |
(1,180 |
) |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
Deal
advisory costs (a) |
|
297 |
|
|
|
- |
|
|
|
297 |
|
|
|
32 |
|
Non-cash
mark-to-market adjustments to stock-based compensation (b) |
|
6 |
|
|
|
- |
|
|
|
6 |
|
|
|
(288 |
) |
Costs
incurred in connection with CEO transition (c) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,713 |
|
MSLO
shareholder and pre-acquisition litigation (d) |
|
23 |
|
|
|
- |
|
|
|
23 |
|
|
|
113 |
|
Other
non-cash items (e) |
|
57 |
|
|
|
- |
|
|
|
57 |
|
|
|
- |
|
Loss on
asset held for sale (f) |
|
5,142 |
|
|
|
- |
|
|
|
5,142 |
|
|
|
- |
|
Debt
refinancing costs (g) |
|
373 |
|
|
|
- |
|
|
|
373 |
|
|
|
- |
|
Adjustment to taxes (h) |
|
(41 |
) |
|
|
(257 |
) |
|
|
216 |
|
|
|
460 |
|
Total non-GAAP
adjustments |
|
5,857 |
|
|
|
(257 |
) |
|
|
6,114 |
|
|
|
7,030 |
|
|
|
|
|
|
|
|
|
Non-GAAP net income
(3) |
$ |
3,593 |
|
|
$ |
(1,270 |
) |
|
$ |
4,863 |
|
|
$ |
5,850 |
|
|
|
|
|
|
|
|
|
Non-GAAP
weighted-average diluted shares (i) |
|
63,734 |
|
|
|
63,734 |
|
|
|
63,734 |
|
|
|
62,813 |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
|
ASC 606(1) |
|
Adjustments(2) |
|
ASC 605(2) |
|
ASC 605(2) |
Reconciliation of GAAP
Diluted EPS to non-GAAP Diluted EPS: |
|
|
|
|
|
|
|
GAAP earnings (loss)
per share attributable to Sequential Brands Group, Inc. and
Subsidiaries |
$ |
(0.04 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
Deal
advisory costs (a) |
|
0.01 |
|
|
|
- |
|
|
|
0.01 |
|
|
|
0.00 |
|
Non-cash
mark-to-market adjustments to stock-based compensation (b) |
|
0.00 |
|
|
|
- |
|
|
|
0.00 |
|
|
|
(0.01 |
) |
Costs
incurred in connection with CEO transition (c) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.11 |
|
MSLO
shareholder and pre-acquisition litigation (d) |
|
0.00 |
|
|
|
- |
|
|
|
0.00 |
|
|
|
0.00 |
|
Other
non-cash items (e) |
|
0.00 |
|
|
|
- |
|
|
|
0.00 |
|
|
|
- |
|
Loss on
asset held for sale (f) |
|
0.08 |
|
|
|
- |
|
|
|
0.08 |
|
|
|
- |
|
Debt
refinancing costs (g) |
|
0.01 |
|
|
|
- |
|
|
|
0.01 |
|
|
|
- |
|
Adjustment to taxes (h) |
|
(0.00 |
) |
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
0.01 |
|
Total non-GAAP
adjustments |
$ |
0.10 |
|
|
$ |
(0.00 |
) |
|
$ |
0.10 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
Non-GAAP earnings per
share (3) |
$ |
0.06 |
|
|
$ |
(0.02 |
) |
|
$ |
0.08 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
|
ASC 606(1) |
|
Adjustments(2) |
|
ASC 605(2) |
|
ASC 605(2) |
Reconciliation of GAAP
net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
GAAP net loss
attributable to Sequential Brands Group, Inc. and Subsidiaries |
$ |
(2,264 |
) |
|
$ |
(1,013 |
) |
|
$ |
(1,251 |
) |
|
$ |
(1,180 |
) |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
(Benefit
from) provision for income taxes |
|
(41 |
) |
|
|
(257 |
) |
|
|
216 |
|
|
|
585 |
|
Interest
expense, net |
|
15,392 |
|
|
|
- |
|
|
|
15,392 |
|
|
|
14,486 |
|
Non-cash
compensation |
|
1,346 |
|
|
|
- |
|
|
|
1,346 |
|
|
|
991 |
|
Depreciation and amortization |
|
906 |
|
|
|
- |
|
|
|
906 |
|
|
|
1,293 |
|
Deal
advisory costs (a) |
|
297 |
|
|
|
- |
|
|
|
297 |
|
|
|
32 |
|
Costs
incurred in connection with CEO transition (c) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,713 |
|
MSLO
shareholder and pre-acquisition litigation (d) |
|
23 |
|
|
|
- |
|
|
|
23 |
|
|
|
113 |
|
Other
non-cash items (e) |
|
57 |
|
|
|
- |
|
|
|
57 |
|
|
|
- |
|
Loss on
asset held for sale (f) |
|
5,142 |
|
|
|
- |
|
|
|
5,142 |
|
|
|
- |
|
Debt
refinancing costs (g) |
|
373 |
|
|
|
- |
|
|
|
373 |
|
|
|
- |
|
Severance
(j) |
|
(10 |
) |
|
|
- |
|
|
|
(10 |
) |
|
|
- |
|
Total Adjustments |
|
23,485 |
|
|
|
(257 |
) |
|
|
23,742 |
|
|
|
24,213 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(4) |
$ |
21,221 |
|
|
$ |
(1,270 |
) |
|
$ |
22,491 |
|
|
$ |
23,033 |
|
|
|
|
|
|
|
|
|
(1) |
|
Financial information identified as ASC 606 has been prepared in
accordance with the new revenue recognition guidance adopted as of
January 1, 2018. |
|
|
|
(2) |
|
The
Company adopted ASC 606 using the modified retrospective basis,
which means that the revenue reported for 2017 has not been
restated. For comparability during the transition from ASC
605 to ASC 606, financial information for 2018 is also shown as
adjusted to the previous accounting guidance. The ASC 605
information for current year should be considered in addition to,
not as a substitute for, the financial information prepared in
accordance with ASC 606. There was no change to prior year
presentation; financial information for prior year was prepared in
accordance with ASC 605. |
|
|
|
(3) |
|
Non-GAAP
net income and non-GAAP earnings per share are non-GAAP financial
measures which represent net income (loss) attributable to
Sequential Brands Group, Inc. and Subsidiaries, excluding deal
advisory costs, mark-to-market adjustments to non-cash stock-based
compensation provided to non-employees, costs incurred in
connection with CEO transition, MSLO shareholder and
pre-acquisition litigation costs, other non-cash items, loss on
asset held for sale, debt refinancing costs, and adjustment to
taxes. 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 are useful measures of ongoing financial performance
because they adjust for certain costs and other events that the
Company believes are not representative of its core licensing
business. |
|
|
|
(4) |
|
Adjusted
EBITDA is defined as net income (loss) attributable to Sequential
Brands Group, Inc. and Subsidiaries, excluding interest income or
expense, income taxes, depreciation and amortization, deal advisory
costs, non-cash compensation, MSLO shareholder and pre-acquisition
litigation costs, costs incurred in connection with CEO transition,
other non-cash items, loss on asset held for sale, debt
refinancing costs, and severance. 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. |
|
|
|
(a) |
|
Represents deal advisory costs including legal, financial and
accounting services that are not representative of the Company's
day-to-day licensing business. |
|
|
|
(b) |
|
Represents the non-cash mark-to-market adjustments to stock-based
compensation provided to non-employees. |
|
|
|
(c) |
|
Represents $3.2 million in severance expense and $3.5 million in
non-cash stock-based compensation expense in connection with the
CEO transition. The non-cash stock based compensation expense
represents the accelerated vesting of previously granted stock
awards, and was calculated based on the stock’s April 2015
grant-date fair value of $14.33 per share in accordance with
GAAP. The fair value of the shares on the termination date
was $3.95 per share, or approximately $1.1 million total. |
|
|
|
(d) |
|
Represents legal costs related to shareholder and pre-acquisition
litigation matters associated with the Martha Stewart Living
Omnimedia, Inc. acquisition. |
|
|
|
(e) |
|
Adjustments to estimated accruals previously recorded in
conjunction with acquisitions. |
|
|
|
(f) |
|
Represents loss on asset held for sale related to the sale of Revo
trademark completed subsequent to March 31, 2018. During Q1
2018, the asset was written down to its sale price. |
|
|
|
(g) |
|
Represents expenses for professional fees associated with the
Company's efforts toward refinancing its debt facilities. |
|
|
|
(h) |
|
The
Company does not expect to pay cash income taxes in 2018 as the
Company's net operating losses and other tax benefits are expected
to reduce any additional tax obligation. Adjustments in 2017
reflect that the Company expected to pay annual cash income taxes
of $0.5 million as the Company's net operating losses and other tax
benefits are expected to reduce any additional tax obligation. |
|
|
|
(i) |
|
Represents weighted-average diluted shares the Company reported or
would have reported if the Company had GAAP net income in the
periods presented. |
|
|
|
(j) |
|
Represents costs and adjustments to previously recorded costs
associated with employee terminations not representative of the
Company’s day-to-day compensation costs. |
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