Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a media
and consumer products company with over $4 billion in retail sales
generated by its brands through livestreaming alone and over 10,000
hours of show programming time, today announced its financial
results for the first quarter ended March 31, 2023. The Company
also provided updates on its strategic transformation efforts to
date.
Robert W. D'Loren, Chairman and Chief Executive
Officer of Xcel commented, “During the first quarter of 2023 and
subsequent months, we have made significant progress toward
our efforts to transform the Company into a modern, working
capital asset-light, and highly profitable media and consumer
products business. In addition to the new licensing agreements that
were announced in April, we recently signed a new master licensing
agreement for the Halston Brand, which provides us with both
immediate additional liquidity today and a tremendous opportunity
to grow the brand in the future. At the same time, we have already
started to realize benefits from cost savings, and expect those to
be fully realized by the third quarter of this year, resulting in
total savings of $13 million on an annualized basis. Based on our
progress to date, we expect to achieve positive monthly EBITDA by
the end of 2023 and beyond.”
Strategic Transformation
In the first quarter of 2023, Xcel began to
restructure its business operations by entering into new licensing
agreements with best-in-class business partners. The Company
entered into a new interactive television licensing agreement with
America’s Collectibles Network, Inc. d/b/a JTV (“JTV”) for the
Ripka Brand, and a separate license with JTV for the Ripka Brand’s
e-commerce business.
In conjunction with the successful launch of the
C Wonder Brand on HSN in March, Xcel licensed the wholesale
production operations related to the brand to One Jeanswear Group,
LLC (“OJG”). This new license with OJG also includes other new
celebrity brands that Xcel plans to launch in 2023 and beyond, for
distribution through interactive television and Xcel’s
livestreaming and social commerce platforms. OJG currently produces
all apparel for Xcel’s LOGO by Lori Goldstein
Brand.
For its Halston Brand, Xcel entered into a new
master licensing agreement, which resulted in an up-front advance
payment in May 2023. This agreement has a term of twenty five years
(consisting of an initial 5-year period, followed by a twenty year
period), contains minimum net sales requirements that increase
throughout the term, and provides for future guaranteed minimum
royalties.
The Company expects the transition of its
operating businesses to be completed by the end of the second
quarter of 2023.
First Quarter 2023 Financial
Results
Total revenue was $6.1 million, a decrease of
$2.7 million or 31% compared with the prior year quarter, primarily
driven by lower licensing revenue as a result of the sale of the
Isaac Mizrahi brand in the second quarter of 2022, partially offset
by higher product revenues as the result of the sale of our C
Wonder apparel inventory to HSN as part of the restructuring and
transformation of our business operating model.
Net loss attributable to Xcel Brands was
approximately $5.6 million, or $(0.29) per basic and diluted share,
compared with a net loss of $3.5 million, or $(0.18) per basic and
diluted share, for the prior year quarter. After adjusting for
certain cash and non-cash items, results on a non-GAAP basis were a
net loss of approximately $3.6 million, or $(0.18) per share for
the quarter ended March 31, 2023, and a net loss of approximately
$1.9 million, or $(0.10) per share, for the quarter ended March 31,
2023. Adjusted EBITDA was negative $3.2 million for the current
quarter and negative $0.9 million for the prior year
quarter.
Balance Sheet
The Company's balance sheet at March 31, 2023
reflected stockholders' equity of approximately $64 million, cash
and working capital of approximately $5 million, exclusive of the
current portion of lease obligations.
Conference Call and Webcast
The Company will host a conference call with
members of the executive management team to discuss these results
with additional comments and details at 5:00 p.m. Eastern Time on
May 18, 2023. A webcast of the conference call will be available
live on the Investor Relations section of Xcel's website at
www.xcelbrands.com or directly
at https://edge.media-server.com/mmc/p/c4ktea4d. Interested
parties unable to access the conference call via the webcast may
dial 800-715-9871 or 646-307-1963 and use the passcode 9807764. A
replay of the webcast will be available on Xcel’s website.
About Xcel Brands
Xcel Brands, Inc. (NASDAQ:XELB) is a media and
consumer products company engaged in the design, production,
marketing, live streaming, wholesale distribution, and
direct-to-consumer sales of branded apparel, footwear, accessories,
fine jewelry, home goods and other consumer products, and the
acquisition of dynamic consumer lifestyle brands. Xcel was founded
in 2011 with a vision to reimagine shopping, entertainment, and
social media as one thing. Xcel owns the Judith Ripka, Halston,
LOGO by Lori Goldstein, and C. Wonder brands and a minority stake
in the Isaac Mizrahi brand. It also owns and manages the
Longaberger brand and the Q Optix brand through its controlling
interests in Longaberger Licensing LLC and Q Optix, LLC. Xcel is
pioneering a true modern consumer products sales strategy which
includes the promotion and sale of products under its brands
through interactive television, digital live-stream shopping,
brick-and-mortar retail, and e-commerce channels to be everywhere
its customers shop. The company’s brands have generated in excess
of $4 billion in retail sales via livestreaming in interactive
television and digital channels alone. Headquartered in New York
City, Xcel Brands is led by an executive team with significant live
streaming, production, merchandising, design, marketing, retailing,
and licensing experience, and a proven track record of success in
elevating branded consumer products companies. With an experienced
team of professionals focused on design, production, livestreaming
and digital marketing, Xcel maintains control of product quality
and promotion across all of its product categories and distribution
channels. Xcel differentiates by design. www.xcelbrands.com
Forward Looking Statements
This press release contains forward-looking
statements. All statements other than statements of historical fact
contained in this press release, including statements regarding
future events, our future financial performance, business strategy
and plans and objectives of management for future operations, are
forward-looking statements. We have attempted to identify
forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "ongoing," "could," "estimates,"
"expects," "intends," "may," "appears," "suggests," "future,"
"likely," "goal," "plans," "potential," "projects," "predicts,"
"seeks," "should," "would," "guidance," "confident" or "will" or
the negative of these terms or other comparable terminology. These
forward-looking statements include, but are not limited to,
statements regarding our anticipated revenue, expenses,
profitability, strategic plans, and capital needs. These statements
are based on information available to us on the date hereof and our
current expectations, estimates and projections and are not
guarantees of future performance. Forward-looking statements
involve known and unknown risks, uncertainties, assumptions and
other factors, including, without limitation, the risks discussed
in the "Risk Factors" section and elsewhere in the Company's Annual
Report on form 10-K for the year ended December 31, 2022 and its
other filings with the SEC, which may cause our or our industry's
actual results, levels of activity, performance, or achievements to
differ materially from those expressed or implied by these
forward-looking statements. Moreover, we operate in a very
competitive and rapidly changing environment. New risks emerge from
time to time and it is not possible for us to predict all risk
factors, nor can we address the impact of all factors on our
business or the extent to which any factor, or combination of
factors, may cause our actual results to differ materially from
those contained in any forward-looking statements. You should not
place undue reliance on any forward-looking statements. Except as
expressly required by the federal securities laws, we undertake no
obligation to update any forward-looking statements, whether as a
result of new information, future events, changed circumstances, or
any other reason.
For further information please contact:Andrew
BergerSM Berger & Company, Inc.
216-464-6400andrew@smberger.com
Xcel Brands,
Inc. and Subsidiaries |
Unaudited
Condensed Consolidated Statements of Operations |
(in
thousands, except share and per share data) |
|
|
|
|
|
|
|
|
|
For the
Three Months Ended |
|
|
March
31, |
|
|
2023 |
|
2022 |
Revenues |
|
|
|
|
|
|
Net licensing revenue |
|
$ |
2,222 |
|
|
$ |
5,961 |
|
Net sales |
|
|
3,828 |
|
|
|
2,786 |
|
Net revenue |
|
|
6,050 |
|
|
|
8,747 |
|
Cost of
goods sold |
|
|
2,693 |
|
|
|
1,680 |
|
Gross profit |
|
|
3,357 |
|
|
|
7,067 |
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
Salaries, benefits and employment taxes |
|
|
3,465 |
|
|
|
4,861 |
|
Other selling, general and administrative expenses |
|
|
3,493 |
|
|
|
3,416 |
|
Total operating costs and expenses |
|
|
6,958 |
|
|
|
8,277 |
|
|
|
|
|
|
|
|
Operating loss before other expenses, including non-cash
expenses |
|
|
(3,601 |
) |
|
|
(1,210 |
) |
|
|
|
|
|
|
|
Other expense, including non-cash expenses |
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,797 |
|
|
|
1,820 |
|
Loss from equity method investment |
|
|
515 |
|
|
|
- |
|
Other expense, including non-cash expenses |
|
|
2,312 |
|
|
|
1,820 |
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(5,913 |
) |
|
|
(3,030 |
) |
|
|
|
|
|
|
|
Interest and finance expense |
|
|
|
|
|
|
Interest expense - term loan debt |
|
|
- |
|
|
|
708 |
|
Other interest and finance charges (income), net |
|
|
25 |
|
|
|
1 |
|
Total interest and finance expense |
|
|
25 |
|
|
|
709 |
|
|
|
|
|
|
|
|
Loss
before income taxes |
|
|
(5,938 |
) |
|
|
(3,739 |
) |
|
|
|
|
|
|
|
Income tax
benefit |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
Net
loss |
|
|
(5,938 |
) |
|
|
(3,739 |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
(295 |
) |
|
|
(252 |
) |
Net
loss attributable to Xcel Brands, Inc. stockholders |
|
$ |
(5,643 |
) |
|
$ |
(3,487 |
) |
|
|
|
|
|
|
|
Loss per
share attributed to Xcel Brands, Inc. common stockholders: |
|
|
|
|
|
|
Basic and
diluted net loss per share |
|
$ |
(0.29 |
) |
|
$ |
(0.18 |
) |
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
Basic and
diluted weighted average common shares outstanding |
|
|
19,633,194 |
|
|
|
19,571,119 |
|
|
|
|
|
|
|
|
Xcel Brands,
Inc. and Subsidiaries |
Unaudited
Condensed Consolidated Balance Sheets |
(in
thousands, except share and per share data) |
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
|
(Unaudited) |
|
|
Assets |
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,612 |
|
|
$ |
4,608 |
|
Accounts receivable, net |
|
|
5,969 |
|
|
|
5,110 |
|
Inventory |
|
|
3,099 |
|
|
|
2,845 |
|
Prepaid expenses and other current assets |
|
|
1,032 |
|
|
|
1,457 |
|
Total current assets |
|
|
11,712 |
|
|
|
14,020 |
|
|
|
|
|
|
|
|
Non-Current Assets: |
|
|
|
|
|
|
Property and equipment, net |
|
|
1,237 |
|
|
|
1,418 |
|
Operating lease right-of-use assets |
|
|
5,185 |
|
|
|
5,420 |
|
Trademarks and other intangibles, net |
|
|
46,130 |
|
|
|
47,665 |
|
Equity method investment |
|
|
18,680 |
|
|
|
19,195 |
|
Deferred tax assets, net |
|
|
1,107 |
|
|
|
1,107 |
|
Other assets |
|
|
110 |
|
|
|
110 |
|
Total non-current assets |
|
|
72,449 |
|
|
|
74,915 |
|
Total Assets |
|
$ |
84,161 |
|
|
$ |
88,935 |
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Accounts payable, accrued expenses and other current
liabilities |
|
$ |
5,549 |
|
|
$ |
3,958 |
|
Accrued income taxes payable |
|
|
555 |
|
|
|
568 |
|
Accrued payroll |
|
|
477 |
|
|
|
416 |
|
Current portion of operating lease obligations |
|
|
1,395 |
|
|
|
1,376 |
|
Current portion of contingent obligations |
|
|
- |
|
|
|
243 |
|
Total current liabilities |
|
|
7,976 |
|
|
|
6,561 |
|
Long-Term Liabilities: |
|
|
|
|
|
|
Long-term portion of operating lease obligations |
|
|
5,531 |
|
|
|
5,839 |
|
Contingent obligations |
|
|
6,396 |
|
|
|
6,396 |
|
Total long-term liabilities |
|
|
11,927 |
|
|
|
12,235 |
|
Total
Liabilities |
|
|
19,903 |
|
|
|
18,796 |
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
Preferred stock, $.001 par value, 1,000,000 shares authorized, none
issued and outstanding |
|
|
- |
|
|
|
- |
|
Common stock, $.001 par value, 50,000,000 shares authorized, and
19,571,119 shares issued and outstanding at March 31, 2022 and
December 31, 2021. |
|
|
20 |
|
|
|
20 |
|
Paid-in capital |
|
|
103,649 |
|
|
|
103,592 |
|
Accumulated deficit |
|
|
(38,440 |
) |
|
|
(32,797 |
) |
Total Xcel Brands, Inc. stockholders' equity |
|
|
65,229 |
|
|
|
70,815 |
|
Noncontrolling interest |
|
|
(971 |
) |
|
|
(676 |
) |
Total Equity |
|
|
64,258 |
|
|
|
70,139 |
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
84,161 |
|
|
$ |
88,935 |
|
|
|
|
|
|
|
|
Xcel Brands,
Inc. and Subsidiaries |
Unaudited
Condensed Consolidated Statements of Cash Flows |
(in
thousands) |
|
|
|
|
|
|
|
|
|
For the
Three Months Ended |
|
|
March
31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
|
Net loss |
|
$ |
(5,938 |
) |
|
$ |
(3,739 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation
and amortization expense |
|
|
1,797 |
|
|
|
1,820 |
|
Amortization
of deferred finance costs |
|
|
- |
|
|
|
91 |
|
Stock-based
compensation |
|
|
57 |
|
|
|
32 |
|
Proportional
share of trademark amortization of equity method investee |
|
|
515 |
|
|
|
|
Deferred
income tax benefit |
|
|
- |
|
|
|
- |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts
receivable |
|
|
(859 |
) |
|
|
(1,036 |
) |
Inventory |
|
|
(254 |
) |
|
|
(566 |
) |
Prepaid
expenses and other assets |
|
|
425 |
|
|
|
15 |
|
Accounts
payable, accrued expenses and other current liabilities |
|
|
1,396 |
|
|
|
2,620 |
|
Cash paid in
excess of rent expense |
|
|
(54 |
) |
|
|
(128 |
) |
Net
cash used in by operating activities |
|
|
(2,915 |
) |
|
|
(891 |
) |
|
|
|
|
|
|
|
Cash
flows from investing activities |
|
|
|
|
|
|
Purchase of
property and equipment |
|
|
(81 |
) |
|
|
(35 |
) |
Net
cash used in investing activities |
|
|
(81 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
|
Proceeds
from long-term debt |
|
|
- |
|
|
|
(625 |
) |
Net
cash used in financing activities |
|
|
- |
|
|
|
(625 |
) |
|
|
|
|
|
|
|
Net
decrease in cash, cash equivalents, and restricted
cash |
|
|
(2,996 |
) |
|
|
(1,551 |
) |
|
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash at beginning of period |
|
|
4,608 |
|
|
|
5,222 |
|
|
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash at end of period |
|
$ |
1,612 |
|
|
$ |
3,671 |
|
|
|
|
|
|
|
|
Reconciliation to amounts on consolidated balance
sheets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
1,612 |
|
|
$ |
3,063 |
|
Restricted
cash |
|
|
- |
|
|
|
608 |
|
Total cash,
cash equivalents, and restricted cash |
|
$ |
1,612 |
|
|
$ |
3,671 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
- |
|
|
$ |
623 |
|
Cash paid during the period for income taxes |
|
$ |
16 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
Non-GAAP net (loss) income and non-GAAP diluted
EPS are non-GAAP unaudited terms. We define non-GAAP net income as
net (loss) income attributable to Xcel Brands, Inc. stockholders,
exclusive of amortization of trademarks, our proportional share of
trademark amortization of equity method investees, stock-based
compensation, loss on extinguishment of debt, gain on sales of
assets, gain on reduction of contingent obligations, costs
(recoveries) in connection with potential acquisitions, certain
adjustments to the provision for doubtful accounts related to the
bankruptcy of and economic impact on certain retail customers due
to the COVID-19 pandemic, asset impairments, and income taxes.
Non-GAAP net income and non-GAAP diluted EPS measures do not
include the tax effect of the aforementioned adjusting items, due
to the nature of these items and the Company’s tax strategy.
Adjusted EBITDA is a non-GAAP unaudited measure,
which we define as net (loss) income attributable to Xcel Brands,
Inc. stockholders before depreciation and amortization, our
proportional share of trademark amortization of equity method
investees, interest and finance expenses (including loss on
extinguishment of debt, if any), income taxes, other state and
local franchise taxes, stock-based compensation, gains on reduction
of contingent obligations, gains on sale of assets, costs
(recoveries) in connection with potential acquisitions, asset
impairments, and certain adjustments to the provision for doubtful
accounts related to the bankruptcy of and economic impact on
certain retail customers due to the COVID-19 pandemic.
Management uses non-GAAP net income, non-GAAP
diluted EPS, and Adjusted EBITDA as measures of operating
performance to assist in comparing performance from period to
period on a consistent basis and to identify business trends
relating to our results of operations. Management believes non-GAAP
net income, non-GAAP diluted EPS, and Adjusted EBITDA are also
useful because these measures adjust for certain costs and other
events that management believes are not representative of our core
business operating results, and thus, these non-GAAP measures
provide supplemental information to assist investors in evaluating
our financial results.
Non-GAAP net income, non-GAAP diluted EPS, and
Adjusted EBITDA should not be considered in isolation or as
alternatives to net income, earnings per share, or any other
measure of financial performance calculated and presented in
accordance with GAAP. Given that non-GAAP net income, non-GAAP
diluted EPS, and Adjusted EBITDA are financial measures not deemed
to be in accordance with GAAP and are susceptible to varying
calculations, our non-GAAP net income, non-GAAP diluted EPS, and
Adjusted EBITDA may not be comparable to similarly titled measures
of other companies, including companies in our industry, because
other companies may calculate these measures in a different manner
than we do.
In evaluating non-GAAP net income, non-GAAP
diluted EPS, and Adjusted EBITDA, you should be aware that in the
future we may or may not incur expenses similar to some of the
adjustments in this document. Our presentation of non-GAAP net
income, non-GAAP diluted EPS, and Adjusted EBITDA does not imply
that our future results will be unaffected by these expenses or any
unusual or non-recurring items. When evaluating our performance,
you should consider non-GAAP net income, non-GAAP diluted EPS, and
Adjusted EBITDA alongside other financial performance measures,
including our net income and other GAAP results, and not rely on
any single financial measure.
($ in thousands) |
Three Months
Ended |
March
31, |
|
March
31, |
2023 |
|
2022 |
(Unaudited) |
|
(Unaudited) |
Net loss attributable to Xcel Brands, Inc. stockholders |
$ |
(5,643 |
) |
|
$ |
(3,487 |
) |
Amortization
of trademarks |
|
1,520 |
|
|
|
1,514 |
|
Proportional
share of trademark amortization of equity method investee |
|
515 |
|
|
|
|
Stock-based compensation |
|
57 |
|
|
|
32 |
|
Deferred
income tax benefit |
|
- |
|
|
|
|
Non-GAAP
net loss |
$ |
(3,551 |
) |
|
$ |
(1,941 |
) |
|
|
|
|
|
|
|
Three Months
Ended |
March
31, |
|
March
31, |
2023 |
|
2022 |
(Unaudited) |
|
(Unaudited) |
Diluted
loss per share |
$ |
(0.29 |
) |
|
$ |
(0.18 |
) |
Amortization
of trademarks |
|
0.08 |
|
|
|
0.08 |
|
Proportional
share of trademark amortization of equity method investee |
|
0.03 |
|
|
|
- |
|
Stock-based compensation |
|
0.00 |
|
|
|
|
Certain
adjustments to provision for doubtful accounts |
|
- |
|
|
|
|
Deferred
income tax benefit |
|
- |
|
|
|
|
Non-GAAP
diluted EPS |
$ |
(0.18 |
) |
|
$ |
(0.10 |
) |
Non-GAAP
weighted average diluted shares |
|
19,633,194 |
|
|
|
19,571,119 |
|
|
|
|
|
|
|
($ in thousands) |
Three Months
Ended |
March
31, |
|
March
31, |
2023 |
|
2022 |
(Unaudited) |
|
(Unaudited) |
Net loss
attributable to Xcel Brands, Inc. stockholders |
$ |
(5,643 |
) |
|
$ |
(3,487 |
) |
Depreciation
and amortization |
|
1,797 |
|
|
|
1,820 |
|
Proportional
share of trademark amortization of equity method investee |
|
515 |
|
|
|
- |
|
Interest
and finance expense |
|
25 |
|
|
|
709 |
|
State and
local franchise taxes |
|
21 |
|
|
|
36 |
|
Stock-based
compensation |
|
57 |
|
|
|
32 |
|
Adjusted
EBITDA |
$ |
(3,228 |
) |
|
$ |
(890 |
) |
|
|
|
|
|
|
Xcel Brands (NASDAQ:XELB)
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From Mar 2024 to Apr 2024
Xcel Brands (NASDAQ:XELB)
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From Apr 2023 to Apr 2024