Q4 2019 Earnings Call
Thank you and good morning, before we begin I'd like to bring 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 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 first summary of such factors.
The words believe anticipate expect May will should estimate project plan.
Confident or similar expressions identify forward looking statement.
Nurse or caution to not place undue reliance on these forward looking statements, which may speak only as of the day of the statement which meet.
Other than as required by law, we undertake no obligation to update or revise these forward looking statements, whether as a result of information future events or otherwise.
Additionally, the terms adjusted EBITDA and non-GAAP net income are all non-GAAP metrics and a reconciliation tables for each can be found in the press release distributed today and their investor relations portion of our website Www sequential brands group Dotcom.
Today's call our sequential brands group's CEO, David called an interim CFO, Dan had bridge I'll now turn the conference call over to Mr. Con you may begin when you already.
Thank you and good morning to everyone joining today's fourth quarter 2019, and full year earnings call.
It's been a busy two months since I joined sequential.
I've been immersed in the business meeting with employees brand partners and key licensees.
And I'm energized by the opportunities that the company has in front of it.
Sequential is in the midst of a transformation.
That transformation began last year when the company divested the Martha Stewart and M. Regazzi brands.
Following the divestiture of the company spent the remainder of 2019 and first part of this year focused on optimizing the cost structure of the business, which included a significant reduction of head count.
That's DNA and lease related expenses.
The culmination of this process will be the consolidation of our two New York City offices into one space when we exit our current corporate headquarters.
We will then moved the team into our existing active divisions office in Midtown later this year.
In connection with this we have already subleased over 60% of our current corporate headquarters and continue to actively pursue all sublease opportunities for the balance of the space.
As a result of these cost cutting initiatives, we anticipate an operating expense base of approximately $30 million on an annualized run rate basis, starting this year.
This is a meaningful reduction compared to the company's approximately 70 million dollar operating expense base prior to the divestiture of the home Division.
We expect the savings from these cost reductions to drive a significant margin improvement in 2020.
As part of these efforts last year, we also amended our lending agreements with bank of America, and KKR, who continue to be supportive partners.
Our updated lending agreements further improve our liquidity and cash flow.
Across the company, we are focusing on implementing long term growth strategies for all of our brands.
The team is actively exploring new revenue opportunities for our existing brands, such as category growth and international expansion.
Our largest brands are guy M. and one of the Jessica Simpson Joe's and Ellen Tracy.
Jessica Simpson and Guy I'm in particular have entered 2020 with strong momentum.
First with Jessica just last month. She released her memoir open book, which quickly became in New York Times Best seller.
The media coverage from or book as well as your book Tour has been positive for the brand retail partners and prospects for new business.
Guy Im continues to be a leading brand in the yoga industry and is also uniquely positioned in the health and wellness space, which is one of the fastest growing consumer product sectors.
We are actively pursuing opportunities for the brand to capture more market share beyond its core yogurt business.
Our previously announced strategic review process continues.
After joining the company the board of directors paused the process, so that I had a chance to become familiar with Sequentials operations and its brands I.
I believe there are several interesting opportunities regarding the strategic direction of this company and we are evaluating all of them.
We're working closely with our financial advisor on a broad review of strategic alternatives focused on maximizing shareholder value.
As the company as stated previously alternatives may include the divestiture of one or more existing brands.
The acquisition of one or more new brands.
Stock buyback program and other long term growth initiatives.
In closing 2019, Mark the start of the company's transformation, we made progress simplifying the business with the divestiture of our home division optimizing our current cost structure and amending our lending agreements.
As we move ahead, our focus is centered on driving revenue growth across our portfolio of brands, finishing the last part of expense reductions and completing the strategic review process.
We believe these initiatives coupled with the work already completed in 2019 will help further position the company for long term success.
Look forward to keep me you posted on our progress.
With that let me turn the call over to Dan to take you through the financials for the fourth quarter and full year 2019.
Thank you David.
Total revenue from continuing operations for the fourth quarter ended December 31st 2019 was 24.2 million compared to 35.2 million in the prior year quarter.
As mentioned on prior calls for the fourth quarter results were impacted by onetime items included in the fourth quarter of 2018.
Not included in 2019.
In addition, 2019 fourth quarter revenue came in slightly below expectations due primarily to unexpected softness in the quarter from one of our retail partners.
On a GAAP basis loss from continuing operations for the fourth quarter 2019 was 7.9 million or 12 cents per diluted share compared to a loss from continuing operations for the fourth quarter 2018 of 5.7 million or nine cents.
Per diluted share.
Non-GAAP net loss from continuing operations for the fourth quarter 2019 was 8.9 million or 14 cents per diluted share compared to non-GAAP net income from continuing operations of 2.6 million or five cents per diluted share in the fourth quarter.
2018.
Adjusted EBITDA for the fourth quarter of 2019 was 8 million compared to 17.8 million in the prior year quarter.
Total revenue from continuing operations for the year ended December 31st 2019 was 101.6 million compared to 127.3 million in the prior year.
As mentioned 2019 results were impacted by one time items included in 2018 and not included in 2019.
On a GAAP basis loss from continuing operations for 2018 was 34.3 million or 53 cents per diluted share compared to a loss from continuing operations up 17.5 million or 27 cents per diluted share in the prior year.
Included in 2019 were previously disclosed noncash impairment charges of 33.1 million for indefinite lived intangible assets related to the trademarks for certain brands.
Non-GAAP net loss from continuing operations for 2019 was 16 million or 25 cents per diluted share compared to non-GAAP net income from continuing operations of 8.1 million or 13 cents per diluted share in the prior year.
Adjusted EBITDA for 2019 was 45.8 million compared to 69.9 million in the prior year.
As David mentioned, we expect the savings from our recent expense reductions to drive a significant improvement in adjusted EBITDA margin this year.
We closed the fourth quarter of 2019, with 8.3 million of cash, including restricted cash and 459.9 million of debt net of cash.
Down from 618.7 million of net debt at the end of 2018.
With these strategic review underway, we believe it would not be prudent to provide full year 2020 guidance at this time.
However, as David outlined in his remarks, we're on track and expect to achieve and operating expense base of approximately $30 million before minority interest on an annualized run rate basis, starting this year.
This is a significant reduction compared to the company's nearly $70 million operating expense base prior to the divestiture of the home Division.
Thank you for joining us for a call today I will now turn the call back over to the operator.
Thank you ladies and gentlemen, this concludes our call for today. Thank you for your participation and interest you may disconnect your lines and have a wonderful day.