Q2 2023 Xcel Brands Inc Earnings Call
Shanker, Anthony from Sidoti and Deborah from Crystal equity.
[music].
Okay.
Hello, and welcome to <unk> second quarter, 2023 earnings conference call.
My name is Krista and I'll be the conference operator today.
We will have a question and answer session at the end of the call to ask a question. Please press star one on your telephone keypad I will now I will turn the call over to Andrew Berger Investor Relations. Please go ahead.
Good evening, everyone and thank you for joining US welcome to the X L brands second quarter 2023 earnings call. We greatly appreciate your participation and interest with us on the call today are chairman and Chief Executive Officer, Robert Warren Chief Financial Officer, Jim Haran, and executive Vice President of business development and Treasury Seth Burroughs.
By now everyone should have had access to the earnings release for the second quarter ended June 32023, which went out this evening and in addition, the company plans to file with the Securities and Exchange Commission. Its quarterly report on Form 10-Q Tomorrow.
The release and quarterly report will be available on the company's website at www Dot XL brands dotcom.
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 dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time.
Finally, please note that on today's call management will refer to certain non-GAAP financial measures, including 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.
Our management believes these financial performance measurements 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 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 may refer to the attachment to the company's earnings release or to 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, Bob. Please go ahead.
Thank you Andrew Good evening, everyone and thank you for joining us I would like to start today's call with an update on our strategic transformation efforts.
Our business is performing under the new operating model after that our CFO , Jim Haran will discuss our financial results in more detail.
Starting in the first quarter of 2023, we began to restructure our business operations shifting from a working capital intensive wholesale business model to a business model that is working capital light highly profitable and focused on high touch licensing livestream shopping and social commerce.
Alright strategies during the second quarter of 2023, we continue to execute on this plan and I'm pleased to report that we have substantially completed this transition of our operating businesses as a result of all of our restructuring efforts going forward, we expect to save approximate.
<unk> 13 million and operating expenses on an annualized basis.
Compared to 2022.
Hence levels, including approximately $6 million of reduced payroll cost and 7 million and lower operating costs. These cost savings began.
In the first quarter of 2023 and are expected to be fully realized by the end of the third quarter of 2023, our current financial forecast indicate that we will return to profitability by the end of this year driven by these cost savings combined with revenue from our new licenses and brand launches in <unk>.
2023 that will continue to ramp and grow in 2024 to effectuate. This transformation, we have engaged with best in class business partners and entered into multiple new licensing agreements some of which I spoke about on last quarter's call and some of which.
Our new this quarter, we believe that the evolution of our operating model from these new arrangements powered by extraordinary livestream and social Commerce technology that solves many of today's challenges in ecommerce will provide our company with a competitive advantage and significant.
Cost savings going forward, while offering our customers exceptional quality at attractive prices. We also believe our live streaming technology will enable us to fully engage with and entertain our customers in ways that were not possible in the past and may.
We signed the master licensing agreement with G III apparel group.
For the Halston brand under which G. III has taken over and assumed all of the existing licensing contract for the brand together with apparel wholesale operations and distribution in department stores E Commerce and other retailers. This is a 25 year license agreement, which includes in market rate Royal.
Certain royalty advances escalating guaranteed minimum sales requirements certain guaranteed minimum payments and are ripe for G. III to acquire the brand at the end of the license term.
We started to realize revenues from this agreement in the second quarter of 2023, but expect that more meaningful growth will come in fall 2024, when <unk> plans to launch their halston line at better Department stores, our partnership with G. III given their extensive production.
Auction and distribution capabilities provides us with a tremendous opportunity to grow the brand and take Hoffman to the next level G. III management has publicly stated that they have assigned some of their premier talent to develop the brand and they are targeting to grow the halston brand globally to two.
$50 million in annual wholesale sales by year for the license agreement.
We're excited about our long term partnership with G. III. We believe is one of the best hotel companies in our industry.
For our Judith Ripka brand, we entered into a new licensing agreements in the first and second quarters to move all segments of our Judith Ripka business to jewelry television Jay.
<unk> TV as it is known has rapidly become one of the largest jewelry retailers in the U S. The brand launched on J T V. Dotcom on July one and is scheduled to launch on air on J T V. In October with a surprise celebrity appearance plan for the launch we expect the brand will have dramatically increased.
At a time compared to Q V C with significant on air presence for the <unk> network in the first year and beyond also J T V launch the wholesale and Judith Ripka Dot com businesses under their management last month, we believe this presents a fantastic and exciting opportunity to grow the brand on TV.
Judith Ripka, dotcom and and wholesale distribution with our partner going forward. This license agreement provides for royalties on net retail sales generated through J T. V's TV e-commerce, and other direct to consumer outlets and royalties on wholesale sales as well as a profit share on the wholesale.
<unk> dot com businesses in connection with executing the J T V licenses, we sold J TV all of our remaining jewelry inventory in April of 2023.
For our C Wonder brand, we launched on HSN at the end of March with the first show achieving over 200% of planned sales and sales continued to gain strong momentum during Q2.
During the second quarter HSN reported it had its best week of 2023 and noted Christian Siriano as the parents and curates earnings call. The wholesale production for our HSN business has been licensed to one jeans wear group or O J G. O J G is an industry leading.
Layer of apparel across multiple points of distribution. That's licensed commence during the second quarter and we are working on some exciting license extensions and other categories for the C. Wonder brand. Finally, we expect to be announcing sometime in September a new brand launched on HSN.
Connick American Supermodel. This continues our push into building a brand portfolio of Influencers and creators to drive our TV and direct to consumer livestream and social commerce platform.
With respect to the longer Burger brand, we are in the process of launching our latest version of our social Commerce technology that we believe will revolutionize social commerce and E Commerce in general and plan to incorporate longaberger into our home products social commerce marketplace.
Finally regarding our QVC interactive television business.
The logo by Lori Goldstein brand is performing well on QVC with sales in the second quarter of 2023 exceeding quarterly sales for the last three sequential quarters.
Isaac Mizrahi brand was below plan for the corner in for the quarter and that sales during the second quarter of 2023 due to a one time increase in return rate on certain items and scheduling conflicts with is it in this connection we worked with QVC and Isaac to coordinate on their scheduling and are making improvements to ice.
<unk> remote studio and expect sales to rebound in the latter half of 2023 and return to planned levels.
And now I'd like to turn the call over to Jim to discuss our results and financial highlights Jeff.
Thanks, Bob and good evening everyone.
I will briefly discuss our financial results for the quarter and six months ended June 32023.
Total revenue for the second quarter of 2023 was $6 8 million, representing a decrease of approximately $1 7 million from the second quarter of 2022, but an increase of approximately one 7 million or approximately 11% from the first quarter of 2020.
This year over year revenue decline from the prior year quarter compared with the current quarter was driven by a $2 $7 million decrease in licensing revenue.
<unk> attributable to the sale of a majority interest in the Isaac Mizrahi brand in May 2022, and.
And partially offset by an increase of approximately $1 1 million in net sales largely due to the sale of our Judith Ripka fine jewelry inventory to Jay TV in connection with the entrance into a new contractual arrangements with JP Davis.
On a year to date basis revenue for the current six months decreased by approximately $4 4 million from the prior year six months to $12 8 million. This decline in revenue was driven by a $6 $4 million decrease in license fee revenue primarily attributable to the sale of the majority interest in yards at Missouri brand and partially offset by the <unk>.
<unk> of approximately $2 1 million and net product sales.
Due to the sale of our jewelry fine jewelry inventory and C wonder apparel inventory to HSN as part of the restructuring and transformation of our business operations and the launch of the C Wonder brand.
Gross profit margin from product sales decrease from approximately 22% in the prior year quarter to approximately 13% in the current quarter.
<unk> decreased on a year to date basis from 30% in the prior year six months to 21% in the current year six month period.
These decreases in gross margin was the result of exiting the wholesale operations portion of our business, which included the sale of our inventory at discounted prices.
The only inventory the company had at June 30 was Longaberger inventory.
Our operating costs and expenses were $5 2 million for the current quarter down by $4 3 million or 45% from $9 5 million in the prior year quarter.
On a year to date basis, our operating costs and expenses with $12 1 million in the current year period down by $5 7 million was 32% from $17 8 million in the prior year six months.
For both the quarter and year to date periods. This decrease in operating expenses was primarily attributable to the restructuring and transformation of our business and cost associated with the Isaac Mizrahi brand.
We expect that our operating costs and expenses will continue to decrease to reach a run rate of approximately $4 million per quarter by the end of 2023.
We did not have any significant amount of interest and finance expense in the current quarter with his current six months as we fully repaid all of the outstanding term loan debt in the second quarter of 2022.
Overall, we had a net loss excluding noncontrolling interest for the current quarter of approximately $3 5 million or minus <unk> 18 per share compared with net income of $9 5 million or <unk> 48 per share in the prior year quarter.
Prior year quarter included a $26 million gain on the sale of the majority interest.
As our brand.
The current quarter's results also represent an improvement from the first quarter of 2023 net loss of $5 6 million or 28 cents per share.
On a non-GAAP basis, we had a net loss for the current quarter of $1 7 million or minus <unk> <unk> per share compared with a net loss of $3 6 million or minus <unk> 18 per share in the prior year quarter.
Adjusted EBITDA was negative $9 million for the current quarter compared with negative $2 8 million in the prior year quarter. The current quarter's adjusted EBITDA point 9 million compares favorably with adjusted EBITDA of negative $2 million and a negative $5 9 million in the immediately preceding two quarters ended March 31 2000.
'twenty three and December 31, 2022, respectively.
For the balance of 2023, we expect our adjusted EBITDA to continue to improve throughout the year and we currently project that as a result of the restructuring and transformation plan.
We will achieve positive monthly EBITDA by the end of 2023.
It should be noted that the reported current EBITDA includes an adjustment for certain costs and operating losses relating to the wholesale apparel and jewelry operations as these businesses have been transitioned to third parties.
On a year to date basis, our net loss, excluding noncontrolling interest for the current six months was approximately $9 1 million or minus <unk> 46 per share compared with net income of 6 million or <unk> 30 per share in the prior year comparable period.
On a non-GAAP basis, we had a net loss for the current six months of $5 3 million from minus 27 per share compared with a net loss of $5 5 million or minus <unk> 28 cents per share.
In the prior year six month period.
Finally, adjusted EBITDA was negative $2 9 million for the current six months, representing $8 8 million improvement over negative $3 7 million of EBITDA in the prior year six months.
And once again as a reminder, non-GAAP net income non-GAAP diluted EPS and adjusted EBITDA, a non-GAAP unaudited terms.
Our earnings press release, and Form 10-Q present, a reconciliation of these items with the most directly comparable GAAP measures.
Now turning to our balance sheet as of June 32023, the company had cash and cash equivalents of approximately $3 5 million and positive net working capital of $6 million, excluding the current portion of our lease obligations.
The new strategic missile license with a new licensee for the Halston brand, which was executed in May 2023 includes certain upfront cash payment.
Under our current financial projections, we believe this coupled with our expense cuts and working capital position provides the company with adequate liquidity going forward.
And with that I would like to turn the call back over to Bob Bob. Thank you. Jim. This concludes our prepared remarks operator.
At this time, if you would like to ask a question. Please press star one on your telephone keypad will pause for a moment to compile the Q&A roster.
Your first question comes from the line of Anthony <unk> from Sidoti. Please go ahead. Your line is open.
Uh huh.
Excuse me.
Sales on the bottom line better than our expectations here.
So firstly I guess starting in the third quarter, we will have clean comparisons for the licensing part of your revenue.
As we're now past the one year anniversary of the sale of Isaac Mizrahi, So Bob you mentioned, the challenging retail environment, but.
You certainly have that.
Lot of work you've been busy signing new licensing agreements. So how should we think about just the overall the licensing revenue piece of your business now going forward.
When you say how should we look at it Anthony can you.
Can you be specific.
Yeah.
In terms of you know a third.
For the balance of the year as far as you know how should we think about as far as.
The revenue.
Do you expect that to grow.
Even with this challenging retail environment.
Just wondering.
Why did they get a better sense for you know.
So what you expect from here.
Sure.
Overall at QVC.
Well they are down for the year, we're trending better than than QVC. Overall, so we expect that our royalties.
Coming from interact from our interactive television businesses will be as forecasted.
We were a little below plan on Isaac.
It was really.
There was some higher returns.
We've looked very carefully.
What the <unk>.
Items were that were returning we didn't see anything from a product perspective. So we're still trying to understand what drove that and is it likely that that will be the case.
Going into Q3 and Q4, we don't think so but.
We'll know better as the months go by here.
I would say as it relates to all of the new licenses, we've modeled and only the minimums under those contracts.
G three launches in fall of 'twenty four.
So we will be.
Continuing to collect the minimums under that agreement until they launch.
And J T V.
Have launched online and they have begun shipments.
Judith Ripka dot com and for the wholesale business.
The on Air launch is scheduled for mid October .
Assuming.
That happens.
Schedule.
Yes.
We're anticipating that.
We'll be off to a very strong start there given the number of hours in the big event, that's planned around the launch.
All the marketing that <unk> is doing.
For the launch.
We're fairly comfortable with where we are in terms of our forecast and then going into next year.
All of these outsourced programs really begin to kick in we're going to see a big pickup in.
The royalty revenues in 'twenty four 'twenty five 'twenty six.
As all of them ramp up.
As I said on the call. These are.
The best.
In class.
Partners that we could be in business with <unk> has become one of our largest jewelers.
In the country.
One jeans wear is a very significant wholesale of apparel.
Across almost every point of distribution.
G III I think speaks for itself.
We're very bullish on where we think royalties will go on the core brands.
Absolutely.
Great to hear and then.
Jim you mentioned that the only inventory left on the balance sheet is from Longaberger I know you guys have.
As discussed previously about potentially divesting the lager Burger or.
Or maybe doing some other things with it. So do you have any updated thoughts on that brand.
And then I can address that as Seth.
We're still working on that but.
I would say we should expect to have.
Date on that.
In the next quarter.
That would be favorable to the company.
Okay.
Good to hear.
And then.
Do you guys have any updated thoughts on the launch of your social marketplace in App in terms of timing or anything else that you can share with us or us.
Or is it more or less kind of consistent with what you said previously.
So.
It's fairly consistent as the technology is done where we.
We're testing.
Pitt and Longaberger community now of course, it will turn into a broader marketplace approach.
We're anticipating that that will be for holiday of this year.
Alright, thats good to hear alright, well, thanks best of luck and I'll pass it onto the next caller.
Thanks Anthony.
Your next question comes from the line of Erin Warwick from breakout in factories. Please go ahead. Your line is open.
Hey, good evening, Thanks for taking my call and congratulations on this great job of restructuring.
The thing that I wanted to ask.
Ask about I guess I'll begin with you have in your latest investor presentation on your website.
So in $19 million.
Revenue for next year and $5 million for EBITDA.
My understanding is that that's based upon the contract minimums that you have right now for royalties.
That an accurate understanding.
So there is two components to it.
One is the contractual minimums and the new agreements that we executed and then to historical.
Licensing revenues coming out of our interactive television business and to help you to compare to.
'twenty three forecasted top line of $18 million to $19 million.
In 'twenty for you.
You need to back $3 2 million out of two.
<unk> because those are wholesale sales that occurred in Q1 and there were a few small sales.
In Q2, so to get apples to apples.
It's $15 million of royalties in 'twenty, three and $19 million of royalties in 'twenty four.
It sounds like there's some upside potential, but it's not really built into that into that market and then from what you said previously in your prepared remarks.
No doubt, particularly as it relates to.
G III.
Royalties.
This is not our guidance it was.
Statements made in their earnings call they expect.
The business will be at 250 million wholesale by the fourth year.
And if you just.
Do some quick math on average royalty rate.
You'll see that there should be very significant growth coming out of that license.
And quite frankly, Mike.
Couldnt think of a better partner for us to be in business with for our Judith Ripka brand at <unk>, We're expecting big things there, we're going from one hour of on air time.
Last year with <unk> over 120 hours on the launch here.
And as QVC has exited the jewelry business for the most part over the last five.
Five or six years.
<unk> picked up a lot of that market share. So we're very excited about potential there too.
And we have a very robust pipeline.
New brands going into interactive TV, our C Wonder Christian Siriano brand is doing incredibly well in fact, we are live as we speak.
Was the TFS today shoot.
Shooting here from our studio in New York and we are.
We're going to launch.
Brand.
It's a household name everyone knows her.
Can't say, who it is and until we get a little closer to the launch, but we think we have great potential with that Brian we've created with the supermodel.
<unk>, an interactive TV outside of interactive TV.
We are we are very excited about the core business.
Fantastic So Q3 <unk>.
Made a one time upfront payment it sounds like theyre going to be making annual minimum payments plus potentially more than that and then at the end of the 25 years they have the option to.
Purchased the brand is that correct.
Correct.
And.
I mean, what can you give us a ballpark number of what you know what they expected royalties would.
Would be from that and what the payment was.
Yes.
<unk> given us on.
Some of the conference calls, we think stabilized royalties.
You run a model at about $8 million per year.
Over the 25 years, it's a $170 million cost and royalties.
The license we will generate.
And.
I think that.
As a great place for us to land with with that asset.
Yes.
Yeah, I mean, given the fact that it's.
Higher than Europe .
Current market cap and trade you can forget the net present value or any sort of discounted cash flow and that thats extremely.
Positive contract for you guys.
Wanted to ask a little bit more about.
Social commerce side of things.
It sounds like you said you should be ready to have that out before the holiday season is that what you said to the previous caller.
Yes, we haven't modeled any assumptions about the launch of the marketplace into our model.
The investments have been made in the tax spend spend needed. There we are working with.
Some industry trends.
In certain cases industry competitors that are join are interested in joining the marketplace because the technologies.
Serious problem in the industry today return on AD spend.
Since the privacy rules have changed is becoming.
Something that just.
Is intolerable, who is in the industry a lot of e-commerce platforms or suddenly.
Losing money.
And with this platform and the return on AD spend is infinite because brand doesn't pay until there is a sale.
And for Us.
It's it's a marketplace model not a lot of risk in terms of operations.
30%.
Yes.
Sales, we pay the Influencers and then whatever our operating overhead is and then of course. It provides another channel of distribution as the audience grows.
In that.
Platform for our brands and our celebrities.
So.
So we're taking a read and react approach.
We will get it launched.
We will see how it begins to scale.
But like anything else in social media, we think we'll have a good start with the customer base from the brands that have signed with us and with our own customers.
And then we will.
We use what we learn over the first quarter after the launch too.
<unk> forecast.
Revenues going forward.
How many brands that has signed with you on what what's the nature of these types of brands and some of them household names what should we expect there.
And most of them are big brands.
Household names.
Customer bases.
<unk>.
We'll be announcing.
So those are in connection with the launch.
And.
Where we are.
Very excited about it it's been two years.
With more than two half years in the works.
Yes.
We're happy.
We'll be launching for holiday.
Yes.
And so I guess.
Maybe just a little bit about what how this is going to be differentiated from.
The current social media platforms, and the way in their model of our business and advertising.
It helps.
So.
To really.
Cut to the chase, it's democratizing marketing dollars it's shifting.
Dollars from advertisers to the people.
The technology is.
Yes.
As a desktop application as well as an application in for the user.
And we're really striving to do here is to.
Turn the everyday shopper into a paid influencer so.
App is really easy to use.
<unk> is creating a tech talk.
It's a content.
Yes.
Shopper, where the influencer shares it with a friend or a follower and they buy they get paid.
So in many ways, it's shifting AD dollars from the advertisers to the people.
Yes.
You highlighted really hadn't thought of it before it gets out.
The brands don't have to pay until something is sold so I guess they are paying the influencer. Once an item is actually sold but nothing and they are paying them in advance of that is that correct.
Correct and the problem with that.
The models the way it works now.
Digital advertising is a bit like dark.
Paying influencers and in advance.
Just don't know how they're going to convert.
So again, it's a bit of a blind shot many many cases.
Well. Thank you guys. So much I appreciate your time.
We look forward to here.
If you would like to ask a question. Please press star one on your telephone keypad your.
Your next question comes from the line of Debra <unk> from Crystal Equity Research. Please go ahead. Your line is open.
Thank you operator.
Good evening and thank you for taking my questions I really appreciate it in your opening remarks that sort of.
Carl logical rundown on your restructuring effort and I'm pleased to hear that things are going as you had hoped.
Until we got to the part where you gave us a little teams and of course I can't just let that go we've got to ask a question about the celebrity Thats Youre looking forward to help with your launch of Judith Ripka on.
Jay television and I Wonder do you probably can't tell the name, but you could perhaps tell us a little bit more about the relationship as it is.
Expect it to be permanent or just several one time.
Appearance and then also maybe you could tell us a little bit more about the compensation that is.
How do you go about flooring.
<unk>, including the supermodel that comes along with later this fall.
Thank you.
You.
Craft your relationship with them.
So.
Those are a couple of questions on China.
Sure.
So.
We expect that that celebrity will make multiple appearances.
For the brand.
During 2024.
Kickoff sure.
She will be on air for a couple of hours.
With our new.
Superstar gas too is highly brook.
The daughter in law Judith Ripka.
And.
Not familiar with represents.
Whereas.
Under study for close to 15 years.
<unk> has been great over the years with us and bringing product to the market.
Yes.
It's going to do really really well.
On <unk> the second part of your question how do we.
Attract talent.
One.
I would say after doing as many hours on <unk>.
HSN and QVC as we have thanks.
<unk> has developed a reputation for working with talent.
And.
Operating on their behalf to make great product to sell over TV.
As we've said many times this year, we passed $1 billion in sales on GCC by every measure we're one of the largest players we have over 10000 hours of programming time talent tends to come to us.
They're thinking about doing something like this we think that will accelerate as we launch our marketplace and then of course, we do a lot of outreach to.
So it's different.
Talent management agencies.
Managers of celebrities.
We have built this pipeline in conversation with.
Celebrities at various different levels coming from different sectors, whether their designers or or television celebrities or film celebrities.
<unk> talked to a lot of interesting people over the years.
A level talent has come through the doors.
It's.
It's been an interesting experience for us here over the years, but I think and this is Seth I think.
In terms of what we look for and how we like to compensate celebrities spokespeople.
We've been doing this for 12 years, we've done over $4 billion.
On television we have a good sense of what works and what doesn't work a lot of celebrities don't work.
We have a good sense of does and so we really look for those qualities and characteristics that from our experience work really well on QVC or HSN or direct response television and social commerce.
And then the <unk>.
Second piece of it is somebody who is looking to partner with us we're not looking to make huge payments.
Upfront fees.
We want people, who are open to partnering to grow the business together and to earning money together so.
We have found that that alignment is there.
<unk> and <unk>.
The thing I would add to that.
Yes.
There's a very big difference.
<unk>.
Doing something scripted as opposed to doing something live.
Unscripted.
Yes.
You can tell whether someone's going to work or not.
One hour meeting.
We think I'm good at it.
We do have the number one and number three fashion chosen.
QVC.
We've learned what works.
Excellent. Thank you that was very helpful and I also wanted to bring up but of course, the big announcement that was made this morning.
In your industry tapestry agreeing to acquire them.
Michael Kors group.
Capri Holdings Big numbers.
Tossed around and I wonder.
What kind of impact do you think that might big deals like that in all the consolidations, we see at the luxury.
Levels, what impact if any does that have on you.
Your aspirations to acquire additional brands was there any impact on valuation and the groups, where you're looking or.
Is it to actually increase the number of targets.
Or are showing up and saying hey, we want to find somebody to talk to you.
So it's.
It's an interesting question as the company has been.
Solid day.
It takes another very big transaction for them to move the needle.
Some ways, it's good for us because we're not.
We're not looking for 1 billion transactions.
We're looking for our brand.
Fit into.
Our economic profile, if you will.
And quite frankly.
New.
Social media front end or not.
Meetings.
At least for the moment.
For our high focus.
Sure.
<unk> or companies like that so we think we're uniquely positioned as a company to attract mid tier companies.
In newer smaller players too.
To come to our platform that is very forward thinking and understand where everything is going at the moment with streaming.
Particularly social commerce.
We're excited.
<unk>.
Acquisition was certainly a big within the industry.
Yes.
I'd also add when you look at the environment, there's a lot of brands.
They're either direct to consumer or traditional brands in our industry as Bob mentioned on the call. It's a challenging time in retail and in our industry, especially as interest rates have come up a lot of these brands went through Covid and survived COVID-19 in the era of cheap financing no longer have that option. So we're seeing a lot of brands.
A lot of businesses.
On that.
The M&A World, we feel like it's our opinion that.
M&A in the.
Apparel industry is going to.
Actually skyrocket over the next 12 months.
As always and as Bob mentioned, we are very careful in terms of what we look at an and.
The types of brands and while we look at but we do see a lot of deal flow right now and I think it's only going to increase over the next 12 months.
Excellent. Thank you and then I'd like to squeeze in one question that probably has a very simple answer for Jim I just wanted to clarify.
$4 million.
Run rate quarterly run rate for operating expenses.
Jim I think you said business to be achieved by the end of 2023 and might that be.
Suggestive.
The $4 million for the first time.
Let's say the first quarter of this next year.
This is Debbie if you look at if you look at our last two quarters that we filed we had I believe we had.
Million plus pickup since a reduction in expenses in the second quarter compared to the first quarter I believe of operating expenses $5 1 million. So we're continuing to see those cuts.
Come into play in the third quarter will probably be down somewhere another 600000 and by the fourth quarter will be at a $4 million run rate on an annualized basis on a quarterly basis going forward and I would like to add we are still looking at ways to cut costs further to 2020, So we'll get down to $4 million this year.
And hopefully we will get even below that.
Outside of any other expansions.
Could arise that would change that.
Excellent. Thank you very much failure Farah responses to my questions.
Thank you <unk>.
And we currently have no questions in our queue at this time I will turn the call back over to the presenters.
Thank you Kristen ladies and gentlemen, thank you for your time. This evening, we greatly appreciate your continued interest and support and XL brands as always stay fit eat well and be healthy.
And this concludes today's conference call you may now disconnect.
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