Q1 2022 Xcel Brands Inc Earnings Call

Hello, and welcome to Excel Brands' first quarter earnings conference call. At this time, all participants are in listen only mode.

Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of XL brands and as a reminder, this conference call is being recorded.

I would now like to turn the call over to Andrew Berger of SM Berger and company. Thank you Andrew you May now begin.

Good evening, everyone and thank you for joining US we appreciate your participation and interest and hope that all of you are safe and well with us on the call today are chairman and Chief Executive Officer, Robert to Lauren Chief Financial Officer, Jim Haran, and executive Vice President of business development and Treasury, Seth Burroughs, but.

By now everyone should have had have had access to the earnings release for the first quarter ended March 31, 2022, which went out a short while ago and in addition, the company will file with the Securities and Exchange Commission. Its quarterly report on Form 10-Q by May 23 2022.

The release and quarterly report will be available on the company's website at Www Dot XL brands Dot Com. This call is being webcast and a replay will be available on the company's investor Relations website.

Before we begin please keep in mind that this call will contain forward looking statements. All forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today.

These risk factors are explained in detail in the company's most recent annual report filed with the SEC <unk> does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.

The NAMIC nature of the current macroeconomic and geopolitical environment means what is that on today's call could change materially at any time.

Finally, please note that on today's call management will refer to certain non-GAAP financial measures such as non-GAAP net income non-GAAP diluted earnings per share and adjusted EBITDA. Our management uses these non-GAAP metrics 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 the Companys results of operations.

Management believes these financial performance measurements are also useful because they measure these measures adjust for certain costs and other events that management believes are not representative of our core business operating results and thus they provide supplemental information to assist investors in evaluating the company's financial results.

These non-GAAP measures 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 you.

You may refer to the attachment to the company's earnings release or part one item two of the Form 10-Q for a reconciliation of non-GAAP measures.

And now I'm pleased to introduce Robert to Lauren Chairman and Chief Executive Officer. Please go ahead.

Thank you Andrew Good evening, everyone and thank you for joining us I will start and ice.

Call with some opening remarks, followed by some operating highlights for the quarter after which our CFO , Jim Haran will discuss our financial results for the first quarter of 2022 in more detail.

We have worked very hard over the past 12 years to position X L brands as a design production and media platform focused on driving growth in consumer brands through a livestream driven strategy and are pleased both with the success, we have been able to achieve under our brands on.

On direct response, TV as well as our ability to materially increase long term value of our brands and there is no. Better example of this than our Isaac Mizrahi brand that generated $30 million of retail sales when we acquired it in two.

11 that is now generating over $350 million in annual retail sales.

We are working.

Multiple new projects within our existing businesses.

And based upon the pipeline of projects and opportunities that are currently either planned or being considered we are positioning itself as a leading platform for brands, primarily driven by the rapidly growing livestream shopping experience now happening at all types on all types of screens.

Now turning to a few highlights from our first quarter result in the first quarter of 2022, we continued to show strong topline revenue growth year over year.

We had $8 7 million of topline revenues, which is 12% of our nearly 1 million higher than the first quarter of 2021. The company's net loss was $3 5 million compared with a $2 5 million loss from last year and our adjusted EBITDA was flat to last year at a loss of just under.

1 million, we are working hard to reduce operating costs going forward, while continuing to drive growth in new business as mentioned on our last earnings call the fourth.

Quarter of 2021 was challenging for us given a warehouse fire at QVC, which materially impacted our business Q1, 2022 shows a strong recovery for the fourth quarter of last year with net revenues and gross profit up 8% at 36% respectively also net long.

Adjusted EBITDA improved $3 4 million and $1 6 million, respectively on the same comparative basis.

Our current brands remained strong with our Halston brand is showing continued growth and strong sell throughs at retail and new partnerships under the brand, which we expect to announce soon Lori Goldstein has been performing extremely well at QVC and we just finalized development on our new brand gold by Lori golf.

Theme, which we will be showing to retailers in fall 2022.

Our Judith Ripka brand is continuing to gain traction at independent jewelry retailers around the country with 14, New accounts are opened in the first quarter and two new Las Vegas casinos doors opening soon and Lager Burger continues to show strong momentum primarily driven by our <unk>.

Digital livestream shows and micro and nano Influencer driven strategy, we expect that our interactive television businesses with both HSN and QVC will present, a significant opportunity for us in 2022 and beyond with our existing brands as well as multiple new brand opportunities that we hope to also.

Soon.

Also based upon our current business trends, we expect that the company will return to profitability this year.

Our investments in people technology live streaming design product development and supply chain management are now greatly benefiting the company, we believe our financial flexibility and significant untapped rich asset values positions us well to drive our current businesses and fund new opportunities.

This is even more important as companies in our industry are dealing with margin pressure due to logistics smart materials cost as a result, we believe that the growth in <unk>.

Estimates, we are pursuing combined with our strong balance sheet asset values will position us well to grow our business. Despite any economic headwinds that may look ahead.

Closing the past two years has taught us to focus on who we are and what we stand for in the world and in our industry also.

We know that in the face of continued uncertainty both globally and in our industry, we need to keep our focus and priorities crystal clear that as we exist to design and develop great products and to re imagine shopping entertainment and social media is one thing.

Now I'd like to turn the call over to Jim to discuss our financial results for the quarter and the year.

Thanks, Bob and good evening, everyone I'll briefly discuss financial results for the quarter ended March 31st 2022.

Total revenue for the first quarter of 2022 was $8 7 million, representing an increase of approximately $9 million or 12% from the prior year quarter and primarily related to acquisition, but we go see Brent in April 2021.

Gross margin from product sales declined from approximately 48% in the first quarter of 2021 to approximately 40% in the current quarter, primarily driven by the sell off of age inventory a portion of which we had reserved for in 2021 and.

And as well as increased logistics and global supply chain cost in the first quarter.

Operating expenses were $10 1 million for the current quarter up 1.6 million from $8 5 million in the prior year quarter. This increase was primarily driven by costs associated with the launch.

Including <unk> 6 million of additional noncash trademark amortization expense.

Italy operating expenses for the current quarter reflect various cost increases for multiple service providers and vendors due to the current inflationary economic environment, most notably in the area of shipping warehousing and logistics costs, we have and will continue to actively manage and control. These costs as best we can in the current environment.

Interest and finance expense for the current quarter was $27 million compared with 23 million in the prior year quarter.

This increase was due to the new term loan agreement that we entered into in April 2021, and amended at the end of 2021, which resulted in higher outstanding principal balance and a higher interest rate than our previous term loan debt.

Overall, our net loss, excluding noncontrolling interest for the first quarter 2022 was approximately $3 5 million or minus <unk> 18 per share compared with $2 5 million minus <unk> 13 per share in the first quarter of 2021.

On a non-GAAP basis, our net loss for the current quarter was $1 9 million or minus <unk> 10 cents per share compared with 1.5 million minus eight cents per share in the first quarter of 2021.

Adjusted EBITDA was relatively consistent year over year at approximately negative one 9 billion for both the current and prior year quarter.

As a reminder, non-GAAP net income non-GAAP diluted EPS and adjusted EBITDA, a non-GAAP on what are the terms our earnings press release, and our Form 10-Q present, a reconciliation of these items with the most directly comparable GAAP measures.

Turning to our balance sheet as of March 31, 2022, the company had unrestricted cash and cash equivalents of approximately $3 1 million and positive net working capital of $5 2 million, excluding the current portion of lease obligations.

Our bank debt at March 31st 2022 was approximately 28 4 million.

And lastly in closing we continue to project based on our latest forecast for 2022 that the company will return to profitability by the end of the current fiscal year and with that I would like to turn the call back over to Bob Bob.

Thank you Jim This concludes our prepared remarks operator.

Thank you.

At this time, we'll be conducting a question and answer session.

If you'd like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the queue.

Press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starches.

So we poll for questions.

There are no questions at this time I would like to turn the call back to Mr. Lorin for any closing remarks.

Thank you operator, ladies and gentlemen, thank you for your time today, we greatly appreciate your continued interest and support and X L brands as always stay fit eat well and be healthy.

Thank you. This concludes today's conference you may now disconnect.

Yeah.