EX-99.1 2 tv501028_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

 

FOR IMMEDIATE RELEASE

 

XCEL BRANDS, INC. ANNOUNCES SECOND QUARTER 2018 FINANCIAL RESULTS

 

Company Reports Second Quarter Total Revenues of $8.5 Million; +1.4% from Prior Year Quarter

 

Second Quarter Operating Income of $1.3 Million, +15% from Prior Year Quarter

 

Second Quarter GAAP Net Loss of $0.1, Non-GAAP Net Income of $1.5 million; Adjusted EBITDA of $2.2 Million

 

 

NEW YORK, NY (August 9, 2018) – Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a consumer products company, today announced its financial results for the second quarter and six months ended June 30, 2018.

 

Robert W. D'Loren, Chairman and Chief Executive Officer of Xcel commented, “Our second quarter results saw a marked improvement in operating income from the prior year. While still rationalizing our business model transition process, positive momentum continues to build across our multiple channels of distribution, and I am pleased by our results.”

 

Second Quarter 2018 Financial Results

 

Total revenue for the second quarter of 2018 was $8.5 million, a net increase of $0.1 million over the prior year quarter, primarily driven by our jewelry wholesale and ecommerce business. Net revenue for the second quarter of 2018 decreased $0.1 million to $8.3 million from $8.4 million as higher licensing revenue from our ongoing interactive business was primarily offset by lower revenue associated with the previously reported termination and transition of the C Wonder Brand from QVC, whose sell-off period terminated in January 2018.

 

GAAP net loss was approximately $(0.1) million for the quarter ended June 30, 2018, or $(0.01) per basic and diluted share, compared with net income of $0.2 million, or $0.01 per basic and diluted share, for the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the quarters ended June 30, 2018 and June 30, 2017, was approximately $1.5 million, or $0.08 per diluted share for each period.

 

Adjusted EBITDA for the quarter ended June 30, 2018 was approximately $2.2 million, compared to approximately $2.3 million in the prior year quarter, a decrease of $0.1 million from the same quarter in the prior year.

 

First Six Months of Fiscal 2018 Financial Results

 

Total revenue for the six months ended June 30, 2018 was $17.3 million, an increase of $0.5 million or 2.7% over the prior year period. Total revenue for the six months ended June 30, 2018 was positively affected by the commencement of the wholesale and e-commerce jewelry business. Net revenue for the six months ended June 30, 2018 was in excess of $16.8 million, slightly higher than in the prior year period as higher licensing revenue from our ongoing interactive business and wholesale and department store business were offset by lower revenue associated with the previously noted termination and transition of the C Wonder Brand from QVC.

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

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GAAP net income was approximately $0.4 million for the six months ended June 30, 2018, or $0.02 per basic and diluted share, an increase of $0.6 million, or $0.03 per basic and diluted share from the prior year six months, representing an increase of more than 300% in GAAP net income and earnings per share from the prior year period. After adjusting for certain cash and non-cash items, non-GAAP net income for the six months ended June 30, 2018 was approximately $2.9 million, or $0.16 per diluted share, compared with $2.7 million, or $0.14 per diluted share in the prior year six months, representing an increase of 11% and 8%, respectively, from the prior year period.

 

Adjusted EBITDA for the six months ended June 30, 2018 was approximately $4.4 million, an increase of $0.2 million, or 4% from the prior year period.

 

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. generally accepted accounting principles ("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.

 

The Company's balance sheet at June 30, 2018 remained strong, with stockholders' equity of approximately $98.7 million, cash and cash equivalents of $7.6 million, and working capital of approximately $10.1 million. During the current six months, the Company reduced its term debt by approximately $2.7 million to approximately $19.3 million.

 

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 Thursday, August 9, 2018. A webcast of the conference call will be available live on the Investor Relations section of Xcel's website at www.xcelbrands.com. Interested parties unable to access the conference call via the webcast may dial 1-855-327-6837. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 10005329.

 

About Xcel Brands

Xcel Brands, Inc. (NASDAQ:XELB) is a consumer products company engaged in the design, production, licensing, marketing, and direct-to-consumer sales of branded apparel, footwear, accessories, jewelry, home goods, and other consumer products, and the acquisition of dynamic consumer lifestyle brands. Xcel was founded by Robert W. D’Loren in 2011 with a vision to reimagine shopping, entertainment, and social as one. Xcel owns and manages the Isaac Mizrahi, Judith Ripka, H Halston, C. Wonder, and Highline Collective brands, pioneering a ubiquitous sales strategy which includes the promotion and sale of products under its brands through interactive television, internet, bricks and mortar retail, and e-commerce channels. Headquartered in New York City, Xcel Brands is led by an executive team with significant production, merchandising, design, marketing, retailing, and licensing experience, and a proven track record of success in elevating branded consumer products companies. With a team of over 100 professionals focused on design, production, 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

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

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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, 2017 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 Berger

SM Berger & Company, Inc.

216-464-6400

andrew@smberger.com

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 4  

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

           

   June 30, 2018   December 31, 2017 
   (Unaudited)     
Assets          
Current Assets:          
Cash and cash equivalents  $7,643   $10,185 
Accounts receivable, net   10,073    8,528 
Inventory   789    - 
Prepaid expenses and other current assets   1,502    592 
Total current assets   20,007    19,305 
Property and equipment, net   3,151    2,376 
Trademarks and other intangibles, net   109,554    110,120 
Restricted cash   1,509    1,509 
Other assets   735    1,708 
Total non-current assets   114,949    115,713 
           
Total Assets  $134,956   $135,018 
           
Liabilities and Stockholders' Equity          
Current Liabilities:          
Accounts payable, accrued expenses and other current liabilities  $2,278   $1,260 
Accrued payroll   1,437    2,270 
Deferred revenue   22    16 
Current portion of long-term debt   6,038    5,459 
Current portion of long-term debt, contingent obligations   100    100 
Total current liabilities   9,875    9,105 
Long-Term Liabilities:          
Long-term debt, less current portion   16,080    19,389 
Deferred tax liabilities, net   7,934    6,375 
Other long-term liabilities   2,375    2,455 
Total long-term liabilities   26,389    28,219 
Total Liabilities   36,264    37,324 
           
Commitments and Contingencies          
           
Stockholders' 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 at June 30, 2018 and December 31, 2017, respectively, and 18,266,202 and 18,318,961 issued and outstanding at June 30, 2018 and December 31, 2017, respectively   18    18 
Paid-in capital   99,608    98,997 
Accumulated deficit   (934)   (1,321)
Total Stockholders' Equity   98,692    97,694 
           
Total Liabilities and Stockholders' Equity  $134,956   $135,018 

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 5  

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

                       

   For the Three Months   For the Six Months 
   Ended June 30,   Ended June 30, 
   2018   2017   2018   2017 
                 
Net licensing revenue  $8,141   $8,370    16,622    16,800 
Sales   346    -    631    - 
Total revenue   8,487    8,370    17,253    16,800 
Cost of goods sold (sales)   229    -    409    - 
  Net revenue   8,258    8,370    16,844    16,800 
                     
Operating costs and expenses                    
Salaries, benefits and employment taxes   4,121    4,360    8,546    8,727 
Other design and marketing costs   817    645    1,555    1,516 
Other selling, general and administrative expenses   1,117    1,134    2,410    2,414 
Stock-based compensation   461    723    968    1,806 
Depreciation and amortization   456    390    867    784 
Total operating costs and expenses   6,972    7,252    14,346    15,247 
                     
Operating income   1,286    1,118    2,498    1,553 
                     
Interest and finance expense                    
Interest expense - term debt   234    304    482    632 
Other interest and finance charges   32    44    70    94 
Total interest and finance expense   266    348    552    726 
                     
Income before income taxes   1,020    770    1,946    827 
                     
Income tax provision   1,133    557    1,559    1,013 
                     
Net (loss) income  $(113)  $213   $387   $(186)
                     
Basic net  (loss) income per share  $(0.01)  $0.01   $0.02   $(0.01)
                     
Diluted net (loss) income per share  $(0.01)  $0.01   $0.02   $(0.01)
                     
Basic weighted average common shares outstanding   18,314,775    18,449,210    18,324,130    18,561,453 
Diluted weighted average common shares outstanding   18,314,775    18,813,044    18,700,911    18,561,453 

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 6  

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

   For the Six Months Ended June 30, 
   2018   2017 
         
Cash flows from operating activities          
Net income (loss)  $387   $(186)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization expense   867    784 
Amortization of deferred finance costs   87    99 
Stock-based compensation   968    1,806 
Amortization of note discount   20    19 
Deferred income tax provision   1,559    1,013 
Changes in operating assets and liabilities:          
Accounts receivable   (1,544)   (1,779)
Inventory   (789)   - 
Prepaid expenses and other assets   (48)   (67)
Accounts payable, accrued expenses and other current liabilities   529    (1,394)
Deferred revenue   6    (161)
Other liabilities   (80)   290 
Net cash provided by operating activities   1,962    424 
           
Cash flows from investing activities          
Cost to acquire intangible assets   -    (18)
Purchase of property and equipment   (1,077)   (140)
Net cash used in investing activities   (1,077)   (158)
           
Cash flows from financing activities          
Shares repurchased including vested restricted stock in exchange for withholding taxes   (702)   (806)
Payment of deferred finance costs   -    (7)
Payment of long-term debt   (2,725)   (5,959)
Net cash used in financing activities   (3,427)   (6,772)
           
Net decrease in cash, cash equivalents and restricted cash   (2,542)   (6,506)
           
Cash, cash equivalents, and restricted cash at beginning of period   11,694    15,636 
           
Cash, cash equivalents, and restricted cash at end of period  $9,152   $9,130 
           
Reconciliation to amounts on consolidated balance sheets:          
Cash and cash equivalents  $7,643   $7,621 
Restricted cash   1,509    1,509 
Total cash, cash equivalents, and restricted cash  $9,152   $9,130 
           
Supplemental disclosure of non-cash activity:          
  Settlement of Ripka earnout through offset to note receivable  $100   $- 
           
Supplemental disclosure of cash flow information:          
  Cash paid during the period for income taxes  $182   $144 
  Cash paid during the period for interest  $512   $677 

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 7  

 

Xcel Brands, Inc. and Subsidiaries

Reconciliation of Non-GAAP measures

(Unaudited)

Non-GAAP net income:                  

 

   Quarter Ended
June 30,
   Six Months Ended
June 30,
 
(amounts in thousands)  2018   2017   2018   2017 
                 
Net (loss) income  $(113)  $213   $387   $(186)
Non-cash interest and finance expense   10    10    20    19 
Stock-based compensation   461    723    968    1,806 
Deferred income tax provision   1,133    557    1,559    1,013 
Non-GAAP net income  $1,491   $1,503   $2,934   $2,652 

 

Non-GAAP diluted EPS:                  

 

   Quarter Ended
June 30,
   Six Months Ended
June 30,
 
   2018   2017   2018   2017 
                 
Diluted (loss) earnings per share  $(0.01)  $0.01    0.02    (0.01)
Non-cash interest and finance expense   0.00    0.00    0.00    0.00 
Stock-based compensation   0.03    0.04    0.06    0.10 
Deferred income tax provision   0.06    0.03    0.08    0.05 
Non-GAAP diluted EPS  $0.08   $0.08   $0.16   $0.14 

 

Weighted average shares - Non-GAAP diluted:                  

 

   Quarter Ended
June 30,
   Six Months Ended
June 30,
 
   2018   2017   2018   2017 
                 
Basic weighted average shares   18,314,775    18,449,210    18,324,130    18,561,453 
Effect of exercising warrants   363,961    363,834    364,070    364,197 
Effect of exercising stock options   2,190    -    12,711    328 
Non-GAAP weighted average diluted shares   18,680,926    18,813,044    18,700,911    18,925,978 

 

Adjusted EBITDA:                  

 

   Quarter Ended
June 30,
   Six Months Ended
June 30,
 
(amounts in thousands)  2018   2017   2018   2017 
                 
Net (loss) income  $(113)  $213   $387   $(186)
Depreciation and amortization   456    390    867    784 
Interest and finance expense   266    348    552    726 
Income tax provision   1,133    557    1,559    1,013 
State and local franchise taxes   14    27    47    56 
Stock-based compensation   461    723    968    1,806 
Adjusted EBITDA  $2,217   $2,258   $4,380   $4,199 

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 8  

 

Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income (loss), exclusive of stock-based compensation, non-cash interest expense from discounted debt related to acquired assets, and deferred tax provision. 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 income before stock-based compensation, interest and finance expense, income taxes, other state and local franchise taxes, and depreciation and amortization.

 

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 they 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 non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures. 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.

 

1333 Broadway, 10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM