Q4 2023 Xcel Brands Inc Earnings Call
Speaker Change: [music].
Yeah.
Operator: Hello everyone, and welcome to Xcel Brands Incorporated's fourth quarter and fiscal year 2023 results earnings conference call. Please note that this call is being recorded. You will have an opportunity to ask questions to our speakers for today by pressing star number one on your telephone keypad later in the Q&A session. I'd now like to hand the call over to Craig Brelsford from Red Chip. You may now go ahead, please.
Hello, everyone and welcome to XL branch incorporated.
Speaker Change: Our fourth quarter and fiscal year 2023 results earnings Conference call. Please note that this call is being recorded you will have an opportunity to ask questions to our to our speakers for today by pressing star. It number one on your telephone keypad later into Q&A session I'd now like to hand.
Speaker Change: The call over to Craig Craig Bell.
Craig Bell: South Florida from wretched you May now go ahead. Please.
Craig Brelsford: Good evening, everyone, and thank you for joining us. Welcome to the Xcel Brands fourth quarter and fiscal year 2023 earnings call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer Robert DeLoren, 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 fourth quarter and fiscal year ended December 31st, 2023, which went out this evening.
Craig Bell: Good evening, everyone and thank you for joining us and welcome to the X L brands fourth quarter and fiscal year 2023 earnings call. We greatly appreciate your participation and interest with us on the call today are chairman and Chief Executive Officer, Robert <unk>, Chief Financial Officer, Jim Haran.
Speaker Change: <unk> and executive Vice President of business development and Treasury Seth Burroughs.
Speaker Change: Now everyone should have had access to the earnings release for the fourth quarter and fiscal year ended December 31, 2023, which went out this evening and in addition, the company has filed with the Securities and Exchange Commission. It's annual report on Form 10-K.
Craig Brelsford: And in addition, the company has filed with the Securities and Exchange Commission its annual report on Form 10-K. The release and the annual report will be available on the company's website at www.xcelbrands.com. This call is being webcast, and the replay will be available on the company's investor relations website.
Speaker Change: <unk> annual report will be available on the company's website at www Dot XL brands Dot com.
Speaker Change: This call is being webcast and a replay will be available on the company's investor Relations website.
Craig Brelsford: 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. Xcel 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 set on this call could change materially at any time.
Speaker Change: 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.
Speaker Change: And 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 macro economic environment.
Speaker Change: That means that what is said on this call could change materially at any time.
Craig Brelsford: 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 EPS, 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 company's 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.
Speaker Change: 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 EPS and adjusted EBITDA.
Speaker Change: 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.
Speaker Change: To identify business trends relating to the company's results of operations.
Speaker Change: 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.
Speaker Change: 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.
Craig Brelsford: 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 attached to the company's earnings release or to Part 1, Item 2 of the Form 10-K for a reconciliation of non-GAAP measures.
Speaker Change: In accordance with GAAP.
Speaker Change: You may refer to the attachment to the company's earnings release or to part one item two of the Form 10-K for a reconciliation of non-GAAP measures.
Craig Brelsford: And now, I'm pleased to introduce Robert DeLoren, Chairman and Chief Executive Officer. Bob, please go ahead. Thank you.
Speaker Change: And now I'm pleased to introduce Robert to Lauren Chairman and Chief Executive Officer, Bob. Please go ahead.
Robert DeLoren: Thank you, Craig. Good evening, everyone, and thank you for joining us.
Robert: Thank you, Greg and 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.
Robert DeLoren: I would like to start today's call with an update on our strategic transformation efforts, a plan that we affectionately refer to internally as Project Fundamentals for May 9th. And I'll also talk a little bit about our core business and how it's performing under this plan. After that, our CFO, Jim Haran, will discuss our financial results in more detail.
Robert: That we affectionately referred to internally as project fundamentals for many months.
Robert: Also.
Robert: A little bit about our core business.
Robert: How it's performing under this plan after that our CFO, Jim Haran will discuss our financial results in more detail.
Robert DeLoren: I am happy to report that we have fully completed our restructuring plan, which included discontinuing all wholesale operating activities and outsourcing these activities to industry-leading licensing partners. As I mentioned in our last earnings call, we are currently tracking annual operating cost reductions of approximately $14 million compared with 2022 and are working hard with all of our new production partners to drive our business. We plan to launch our new brand, Tower Hill by Christie Brinkley, on HSN next month, followed by the launch of additional categories of products outside of HSN starting this fall.
James F. Haran: I'm happy to report that we have fully completed our restructuring plan, which included discontinuing all wholesale operating activities and outsourcing outsourcing these activities to industry, leading licensing partners.
James F. Haran: Mentioned in our last earnings call. We are currently tracking annual operating cost reductions of approximately $14 million compared with 2022 and are working hard with all of our new production partners to drive our business. We plan to launch our new brands Howard Hill by Christie <unk>.
James F. Haran: <unk> on HSN next month.
James F. Haran: By the launch of additional categories of products outside of HSN. Starting this fall we have received strong interest from potential licensing partners for the brand across multiple categories. The recently launched C. Wonder by Christian Siriano, Brian is also doing very well and generated $12 5 million at retail sales.
Robert DeLoren: We have received strong interest from potential licensing partners for the brand across multiple categories. The recently launched Sea Wonder by Christian Siriano brand is also doing very well and generated $12.5 million in retail sales in its first nine months in 2023. Sea Wonder won the Rising Star brand award on HSN in 2023, and we expect to see sales volume ramp up to about $20 to $25 million in 2024, with a goal of over $50 million in 2025, including HSN and other retailers.
James F. Haran: In its first nine months in 2023 C. Wonder one the rising Star brand award on HSN in 2023, and we expect to see sales volume ramp up to about 20% to $25 million in 2024 with a goal of over $50 million in 2025, including HSN and other retailers.
Robert DeLoren: Also, we expect to announce the launch of another celebrity designer brand on HSN before the end of this year. JTV, our partner for our Judith Ripka brand, launched its first Judith Ripka on-air shows in the fourth quarter of 2023. Sales results were very strong. In fact, we exceeded every business metric they planned.
James F. Haran: Also we expect to announce the launch of another celebrity designer brand on HSN before the end of this year Jay TV, our partner for our Judith Ripka brand launched its first first Judith Ripka on air shows.
James F. Haran: The fourth quarter of 2023 sales results were very strong and in fact, we exceeded every business metric. They plan, we are working with <unk> to offer greater product assortment, including our Judith Ripka George jewelry products, both on air and on <unk> Dot Com. This has the potential.
Robert DeLoren: We are working with JTV to offer greater product assortments, including our Judith Ripka couture jewelry products, both on-air and on jtv.com. This has the potential to add over 50 million visitors to the Judith Ripka e-commerce business and allows for email marketing campaigns to an additional 2.1 million customers. We look forward to seeing strong sales momentum carry forward from 2024 and beyond. G3 is on schedule to launch Hulsten in the fall of 2024. We expect them to begin shipping shortly after the second quarter.
James F. Haran: To add over 15 million visitors.
James F. Haran: Judith Ripka E Commerce business and allows for email marketing campaigns to an additional $2 1 million customers. We look forward to seeing strong sales momentum carried forward from 2024 and beyond GE.
James F. Haran: <unk> three is on schedule to launch Halston for fall of 2024, and we expect them to begin shipping shortly after the second quarter I should note that this launch is a season later than we initially planned they recently reiterated their three year forecast for halston at $500 million wholesale just in apparel.
Robert DeLoren: I should note that this launch is a season later than we initially planned. They recently reiterated their three-year forecast for Hulsten at $500 million wholesale, just in apparel, shoes, and bags from their core production. We expect revenues from this license to begin to pick up later this year, and we will hit our $8 million maximum royalty after they exceed approximately $160 million in annual wholesale sales. We have soft-launched our video and social commerce marketplace, Ormi, with seven vendors. 1,000 users downloaded the app in its first week.
James F. Haran: Shoes and bags from their core production, we expect revenues from this license to begin to pick up later this year and we will hit our 8 million maximum royalty after they exceed approximately $160 million in annual wholesale sales, we have soft launched our video and social column.
James F. Haran: <unk> marketplace Forney with seven vendors 1000 users downloaded the app in the first week as previously mentioned this is a joint venture with a technology company in which <unk> owns a 30% interest in this new video and social Commerce marketplace. We believe this marketplace has the potential to transform.
Robert DeLoren: As previously mentioned, this is a joint venture with a technology company in which Xcel owns a 30% interest in this new video and social commerce marketplace. We believe this marketplace has the potential to transform video and social commerce in the U.S., and its use and growth potential are virtually unlimited. Based on all of our progress with Project Fundamentals and the organic growth in our brand, we will return to profitability in 2024.
James F. Haran: Video and social commerce in the U S and its use and growth potential is virtually unlimited based on all of our progress with project fundamentals and the organic growth in our brands.
James F. Haran: We will return to profitability in 2024, I should note that the QVC and HSN business overall was softer than expected in Q1 of 2024. This was caused by continued scheduling complex with talent. We continue to work with all on air talent to get there on a our schedules and.
Robert DeLoren: I should note that the QVC and HSN business overall was softer than expected in Q1 of 2024. This was caused by continued schedule changes and conflicts with talent. We continue to work with all on-air talent to get their on-air schedules and the businesses back on track for the remainder of 2024 and beyond. As you know, we closed the credit facility in October of 2023 with Israel Discount Bank to improve our balance sheet liquidity and recently closed a $2.4 million common stock offering to improve stock liquidity and further improve our balance.
James F. Haran: The business is back on track for the remainder of 2024 and beyond.
James F. Haran: As you know we closed the credit facility in October of 2023, with Israel discount bank to improve our balance sheet liquidity and recently closed the two 4 million common stock offering to improve stock liquidity and further improve our balance sheet, Jim will cover the fourth quarter and full year 2012.
Robert DeLoren: Jim will cover the fourth quarter and full year 2023 financial results in more detail. Finally, we are working hard on IR Activity and thank our long-term and new shareholders for their support. Now, I would like to turn it over to you.
James F. Haran: Q3 financial results in more detail. Finally, we are working hard at IR activity and thank our long term and new shareholders for their support now I would like to turn the call over to Jim to discuss our financial highlights.
James F. Haran: Thanks, Bob, and good evening, everyone. I will briefly discuss our financial results for the quarter and fiscal year ended December 31st, 2023. Total revenue for the fourth quarter of 2023 was $2.3 million, representing a decrease of approximately $1.8 million from the fourth quarter of 2025. This decline was primarily driven by a $2.5 million decrease in net profit due to the exit from and licensing of the wholesale apparel and fine jewelry business.
James F. Haran: Jim.
James F. Haran: Thanks, Bob and good evening everyone.
James F. Haran: I will briefly discuss our financial results for the quarter and fiscal year ended December 31 2023.
James F. Haran: Total revenue for the fourth quarter of 2023 was $2 3 million, representing a decrease of approximately $1 8 million from the fourth quarter of 2022.
James F. Haran: This decline was primarily driven by a $2 $5 million decrease in net product sales due to the exit from in licensing of the wholesale apparel and jewelry businesses.
James F. Haran: Partially offsetting the decline in net sales was an increase in net licensing revenue of.7 million, primarily driven by the combination of better performance during the quarter by the Lori Goldstein Brand on QVC and growth of the C-Window Brand on HSN.
James F. Haran: Offsetting the decline in net sales.
James F. Haran: Was the increase in net licensing revenue of <unk> 7 million, primarily driven by the combination of better performance during the quarter by the logo by Lori Goldstein, Brian on QVC and growth of the sea, where the brands on HSN.
James F. Haran: For the full year, revenue decreased by approximately $8 million from the prior year to $17.8 million. This decline in revenue is driven by an approximate $5.5 million decrease in licensing revenue, primarily attributable to the May 2022 sale of a majority interest in the Isaac Mazzari brand, partially offset by increased licensing revenue generated by the C1da brand. Net product sales decreased by approximately 2.5 million to 8.6 million as we sold off all of our apparel and jewelry inventory during the first half of 2023 as part of the restructuring and did not have any jewelry or wholesale apparel sales in the second half of 2023.
James F. Haran: For the full year revenue decreased by approximately $8 million from the prior year to $17 8 million.
James F. Haran: This decline in revenue was driven by an approximately $5 5 million decrease in licensing revenue primarily attributable to the May 2022 sale of a majority interest in <unk>.
James F. Haran: Already brands, partially offset by increased licensing revenue generated by the C Wonder brand.
James F. Haran: Net product sales decreased by approximately $2 5 billion to $8 6 million as we sold off all of our apparel and jewelry inventory during the first half of 2023 as part of the restructuring.
James F. Haran: Did not have any jewelry or wholesale apparel sales in the second half of 2023.
James F. Haran: Our direct operating costs and expenses were $5.5 million in the current quarter, down by $2.9 million, or 34% from $8.4 million in the prior year quarter. On a full year basis, our operating costs and expenses were $23.3 million in the current year, down by $9.8 million, or 30% from $33.1 million in the prior year. This decrease in operating expenses was primarily attributable to the restructuring of our business in 2023, as well as the elimination of costs associated with the Isaac Lazari brand following a sale of the majority interest in the brand.
James F. Haran: Our direct operating costs and expenses were $5 5 billion to the current quarter down by $2 9 million with 34% from $8 4 million in the prior year quarter.
James F. Haran: On a full year basis, our operating costs and expenses were $23 $3 million in the current year down by $98 million or 30% from $33 1 million in the prior year.
James F. Haran: This decrease of operating expenses was primarily attributable to the restructuring of our business in 2023.
James F. Haran: As well as the elimination of costs associated with the <unk> brand.
James F. Haran: So of the majority interest in Nebraska.
James F. Haran: It should be noted that in the fourth quarter and for the full year, there were certain non-recurring costs associated with restructuring the company. As a result of all of our efforts to transform our business model in 2023 and as we move into 2024, we expect our direct operating costs and expenses to reach an average run rate of under $4 million per quarter.
James F. Haran: It should be noted that in the fourth quarter and for the full year, there were certain nonrecurring costs associated with restructuring the company.
James F. Haran: As a result, all of our efforts to transform our business model in 2023.
James F. Haran: As we move into 2024, we expect our direct operating costs and expenses to reach average run rate of under $4 million per quarter.
James F. Haran: <unk>.
James F. Haran: Overall, we had net loss excluding noncontrolling interest for the current quarter of approximately $6 8 million or 34 cents per share compared with a net loss of $6 million or minus 30 cents per share in the prior year quarter.
James F. Haran: Overall, we had a net loss excluding non-controlling interest for the current quarter of approximately $6.8 million or $0.34 per share compared with a net loss of $6 million or minus $0.30 per share in the prior year quarter. On a non-GAAP basis, we had a net loss for the current quarter of $4.7 million, or minus 24 cents per share, compared with a net loss of $6.2 million, or minus 32 cents per share, in the prior year quarter.
James F. Haran: On a non-GAAP basis, we had a net loss for the current quarter of $4 $7 million with minus 24 cents per share compared with a net loss of $6 2 million from minus 32 cents per share in the prior year quarter.
James F. Haran: Adjusted EBITDA was negative $1 2 million for the current quarter, an improvement of approximately $4 7 million compared with negative $5 9 million in the prior year quarter.
James F. Haran: For the current year and a net loss excluding non controlling interest was approximately $21 1 billion or minus $1 seven per share compared with a net loss of $4 million or minus <unk> <unk> per share in the prior year, which included a $26 million gain on the sale of a majority interest.
James F. Haran: Adjusted EBITDA was negative $1.2 million for the current quarter, an improvement of approximately $4.7 million compared with negative $5.9 million in the prior year quarter. For the current year, our net loss excluding non-controlling interest was approximately $21.1 million, or minus $1.07 per share, compared with a net loss of $4 million, or minus $0.20 per share, in the prior year, which included a $20.6 million gain on the sale of a majority interest in the Isaac Mizrahi Grant.
And the Isaac Mizrahi brand.
James F. Haran: Our non-GAAP basis, we had a net loss for the current year of $12 2 million or minus <unk> 62 per share, which represents an improvement from the net loss of $15 million or minus <unk> 77 per share for the prior year.
James F. Haran: Also it should be noted that the non-GAAP net loss for 2023 includes approximately $5 1 million of various nonrecurring restructuring related charges.
James F. Haran: On a non-debt basis, we had a net loss for the current year of $12.2 million, or minus $0.62 per share, which represents an improvement from the net loss of $15 million, or minus $0.77 per share, for the prior year. Also, it should be noted that the non-GAAP net loss for 2023 includes approximately $5.1 million of various non-recovering restructuring related charges. And finally, adjusted EBITDA was negative $5.7 million for the current year, representing a $6.8 million improvement over the negative $12.5 million EBITDA in the prior year.
James F. Haran: And finally, adjusted EBITDA was negative $5 7 million for current year reps.
James F. Haran: Representing a $6 8 million improvement over the negative $12 5 billion EBITDA in the prior year.
Speaker Change: I would like to take this opportunity to remind you avoid the non-GAAP net income.
Speaker Change: non-GAAP diluted EPS and adjusted EBITDA a non-GAAP.
Speaker Change: Our earnings press release, and Form 10-K present, a reconciliation of these items with the most directly comparable GAAP measures.
Speaker Change: Now turning to our balance sheet liquidity as of December 31, 2023, the company had cash cash equivalents of approximately $3 million and positive net working capital of $2 1 million, excluding the current portion of our lease obligations.
Speaker Change: Since executing our restructuring and transformation program in 2023, our cash usage has decreased significantly.
James F. Haran: I would like to take this opportunity to remind everyone that non-definite income..., non-GAAP dilutes EPS and adjusted EBITDA on non-GAAP unoiled terms. The Earnings Crushed Release and Form 10-K present a reconciliation of these items with the most directly comparable gap measure.
Speaker Change: It's projected to continue to improve with the launch of Halston by G. III. This fall the launch of Tower Hill by Christie Brinkley and continued growth in SC Bruckner licensing businesses.
Speaker Change: Cash used in operating activities. During the current year was $6 5 million compared with cash used in operating activities of $14 2 million in the prior year.
James F. Haran: Turning to our balance sheet and our liquidity, as of December 31st, 2023, the company had cash and cash equivalents of approximately $3 million and positive net working capital of $2.1 million, excluding the current portion of our lease obligation. Since executing our Restructuring and Transformation Program in 2023, our cash usage has decreased significantly and is projected to continue to improve with the launch of Halston by G3 this fall, the launch of Tower Hill by Christie Brinkley, and continued growth in our C. Wenda and Judith Rupter licensing business.
Speaker Change: Over the past few months, we have taken additional steps to further solidify our balance sheet.
Speaker Change: First in October 2023, we entered into a new five year term loan and $5 million towards quarterly repayments began in April 2024.
Speaker Change: In March 2024, we issued approximately $3 6 million shares of stock for net proceeds of approximately $2 million. We believe that the additional liquidity provided by these findings and transactions coupled with our expense costs and working capital position provides the company with adequate liquidity going forward.
Speaker Change: And with that I would like to turn the call back over to Bob.
Bob: Thank you Jim.
Bob: Ladies and gentlemen, this concludes our prepared remarks operator.
James F. Haran: Cash used in operating activities during the current year was $6.5 million, compared with cash used in operating activities of $14.2 million in the prior year. Over the past few months, we have taken additional steps to further solidify our balance sheet. First, in October 2023, we entered into a new five-year term loan of $5 million, to which quarterly repayments will begin in April 2024. Second, in March 2024, we issued approximately 3.6 million shares of stock from net proceeds of approximately $2 million.
Bob: Okay.
Operator: We are now opening the floor for question and answer session. If you'd like to ask your question. Please press star and number one on your telephone keypad.
Speaker Change: Our next question comes from.
Speaker Change: I'm sorry first question.
Speaker Change: Yes.
Speaker Change: My apologies.
Speaker Change: Somewhere else taking indirect.
Speaker Change: Our first question comes from Michal Krupinski from Noble capital markets. Your line is now open.
Michal Krupinski: And good evening everyone.
Michal Krupinski: A couple of questions.
Michal Krupinski: But to what extent you had mentioned at HSN and QVC is a little soft to what extent do you think that might affect.
James F. Haran: We believe that the additional liquidity provided by these financing transactions, 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. Thank you.
Michal Krupinski: If that continues on how that might affect.
Michal Krupinski: The return to profitability that you expect can you give us some benchmark for that and then also is there a way to quantify the impact on the revenues for.
Robert DeLoren: Thank you, Jim. Ladies and gentlemen, this concludes our prepared remarks. Operator. Thank you.
Michal Krupinski: What's going on there versus the talent and versus what might be the macro situation with the consumer and so forth. These are weighted.
Operator: We are now opening the floor to questions and answers. If you'd like to ask your question, please press star and number one on your telephone keypad.
Michal Krupinski: Gauge what that might what the impact might be but the macro versus the talent.
Operator: Our first question comes from: Okay. Our first question. Okay. Okay. My apologies. Someone's speaking in the background. Our first question comes from Michael Kupinski from Noble Capital Markets. Your line is now open. Thank you, and good evening.
Michal Krupinski: So I.
Michal Krupinski: I don't think there is a systemic problem.
Michal Krupinski: Michael.
Michal Krupinski: Simply attended QVC vendors Amit.
Michal Krupinski: And they seem to have everything back on track I don't think.
Michal Krupinski: There was a real appreciation.
Michael A. Kupinski: Thank you and good evening, everyone. I have a couple of questions. Bob, to what extent have you mentioned that HSN and QVC are a little soft? To what extent do you think that might affect, you know, if that continues on, how that might affect the, you know, the return to profitability that you expect? Can you give us some benchmarks of that? And then also, is there a way to quantify the impact on revenues for what's going on there versus, you know, the talent and versus what might be the macro situation with the consumer and so forth? Is there a way to kind of gauge what that might be, what the impact might be macro versus the talent?
Michal Krupinski: The.
Michal Krupinski: The.
Michal Krupinski: Implications of their warehouse fire.
Michal Krupinski: How deep.
Michal Krupinski: That cut into the organization and how difficult it was for them to recover from that.
Michal Krupinski: Most people don't realize at 100% of the returns were processed through that warehouse.
Michal Krupinski: There was one hundreds of millions of dollars in inventory that burned.
Michal Krupinski: 30% of their distribution capability.
Michal Krupinski: Pretty devastating to any company.
Michal Krupinski: And they've managed to work their way through that.
Michal Krupinski: Zinc.
Michal Krupinski: I think the business is really back on track based on everything that was presented at the vendor conference. So less of a systemic problem in the business.
Michal Krupinski: That said.
Michal Krupinski: There is general softness out there.
Michal Krupinski: Great.
Michal Krupinski: In the consumer World I don't think that is being covered.
Michal Krupinski: Right right by the media.
Michal Krupinski: People are making choices between fuel and energy cost.
Robert DeLoren: So I don't think there's a systemic problem, Michael. I recently attended the QVC Vendor Summit, and they seem to have everything back on track. I don't think there was a real appreciation of the... implications of their warehouse fire, you know, how deep that cut into the organization and how difficult it was for them to recover from that. Most people don't realize that 100% of their returns were processed through that warehouse. There were hundreds of millions of dollars of inventory that burned and 30% of their distribution capability.
Michal Krupinski: So the cost.
Michal Krupinski: Buying discretionary items.
Michal Krupinski: You could argue.
Michal Krupinski: That apparel is unnecessary items.
Michal Krupinski: Okay.
Michal Krupinski: Equal people will delay those purchases, but I don't think that the real problem. The problem spin was getting talent.
Michal Krupinski: We have the Isaac Mizrahi.
Michal Krupinski: Situation in a good place now with Isaac and the backup guests.
GBC is.
Michal Krupinski: Decided to give jackie stature to our backup gas.
Michal Krupinski: The Primetime show, which is great. It takes a little pressure off Isaac and we're working on similar things. So Lori Goldstein. So I think it's a little.
Robert DeLoren: That's pretty devastating to any company, and they've managed to work their way through that, and I think the business is really back on track based on everything that was presented at the vendor conference. So, less of a systemic problem in the business, and, you know, that said, there's general softness out there. In the consumer world, I don't think that is being covered quite right by the media. People are making choices between fuel and energy costs and food costs and buying discretionary items, although you could argue that apparel is a necessary item.
Michal Krupinski: A little difficult for us to really forecast that.
Michal Krupinski: Because we make.
Michal Krupinski: Sure on Eric.
Michal Krupinski: Requests on a monthly basis to our talent.
Michal Krupinski: And the assumption is they're going to do it but it's been complicated.
Michal Krupinski: Coming out of Covid.
Michal Krupinski: Talent became accustomed to doing a remote shows for them.
Michal Krupinski: In places, where they were very comfortable having to go back into studio which requires travel.
Michal Krupinski: Gotcha.
Michal Krupinski: We're doing everything we can to get them back and studio or lean.
Michal Krupinski: Lean more into backup guests that are perhaps a little a little closer to <unk>.
Robert DeLoren: People will delay those purchases, but I don't think that's the real problem. The problem has been with getting talent. We have the Isaac Mizrahi situation in a good place now with Isaac and the backup guest. QVC has decided to give Jackie Stadford, our backup guest, a primetime show, which is great. It takes a little pressure off Isaac, and we're working on similar things for Lori Goldstein. I think it's a little difficult for us to really forecast that because we make our on-air requests on a monthly basis to our talent.
Michal Krupinski: PVC and HSN studios.
Speaker Change: Gotcha, Thanks, Bob for that in a couple of quick questions here.
Speaker Change: Can you talk a little bit about I know that there were some startup costs to kind of get Christie brinkley up and running and was just wondering how much of that cash do you think that will be allocated towards startup for additional brands can you just kind of give us a sense of that and then maybe give us a sense of how much cash you currently have.
Robert DeLoren: And, you know, the assumption is they're going to do it. But it's been complicated. Since coming out of COVID, talent became accustomed to doing remote shows from places where they were very comfortable to having to go back into the studio, which requires travel. We're doing everything we can to get them back in the studio or lean more toward backup guests that perhaps live a little closer to QVC and HSN studios.
Speaker Change: Right now because since we're already kind of close it closed on the <unk>.
Speaker Change: Next quarters, just wondering if you can kind of give us an update on that as well sure. So.
Speaker Change: <unk>.
Speaker Change: In terms of cash required for brands that are launching Christy launches next month.
Speaker Change: All of the startup costs there have been incurred.
Michael A. Kupinski: Gotcha. Thanks, Bob, for that.
Speaker Change: A small.
Speaker Change: Brian that we're launching on HSN this year they will.
Michael A. Kupinski: And a couple quick questions here. Can you talk a little bit about, I know that there were some startup costs to kind of get Christy Brinkley up and running, and I was just wondering how much of that cash do you think that will be allocated towards startup for additional brands? Can you just kind of give us a sense of that? And then maybe give us a sense of how much cash you currently have right now, because since we're already, you know, kind of closing it on the next quarter, just wondering if you could kind of give us an update on that as well? Sure.
Speaker Change: Really no startup cost associated with that one.
Speaker Change: Cause the designer himself is doing all of the lifting on design.
Speaker Change: With a third party vendor that we signed him too.
Speaker Change: Not really uses the air I think Jin Kim.
Speaker Change: Can give you.
Speaker Change: Current position.
Speaker Change: Cash and available working capital, which is all receivables.
Speaker Change: I'm good.
Speaker Change: Horses.
Speaker Change: Jim do you have that number handy.
Speaker Change: Doug.
James F. Haran: So it will be at approximately $3 million of cash we have.
James F. Haran: Yes.
Michael A. Kupinski: Thank you. Thank you.
James F. Haran: Collections is poor.
Robert DeLoren: In terms of cash required for brands that are launching, Christie launches next month, and all of the startup costs there have already been incurred. We have a small brand that we're launching on HSN this year. There were really no startup costs associated with that one because the designer himself is doing all of the lifting on design with a third-party vendor that we signed him up with. So no real use there. I think Jim can give you a current position on cash and available working capital, which is all receivables from good sources. Jim, do you have that number handy?
James F. Haran: The first quarter coming in now so you can figure out the balance of cash is pretty similar to what was at 12 31.
Speaker Change: Gotcha and then just another question on Christie, how should we benchmark the success for Christie's products and do you have any goals I mean can you outline those for US again, and if you've already talked about those I'm sorry, but when maybe you could remind me what your plans for Christie.
Speaker Change: And what your opportunity for revenue might be from that.
Speaker Change: So.
James F. Haran: [inaudible] We'll be at approximately $3 million in cash we have. Our collections for the first quarter are coming in now, so we figured the balance of cash was pretty similar to what it was at 1231.
Speaker Change: The plan.
Speaker Change: There are contractual guaranteed receipt minimums with HSN for both of the Christian Siriano and.
Speaker Change: Christie Brinkley brand.
Speaker Change: This year, we're forecasting and the $7 million range, maybe a little more for Christine depending on.
Michael A. Kupinski: Gotcha. And then can you just ask me another question about Christie, how should we benchmark the success of Christie's products? Do you have any goals? I mean, can you outline those for us again? And if you've already talked about this, I'm sorry, but maybe you can remind me what your plans for Christie are and what your opportunity for revenue might be from that. So.
Speaker Change: Distribution outside of HSN Christy is not.
Speaker Change: And exclusive to them.
Speaker Change: But then there is a significant bump up next year under the agreement for the minimum at HSN.
Speaker Change: And we do things back Christy has great potential.
Speaker Change: Both on HSN and outside of HSN.
Speaker Change: We would expect that.
Robert DeLoren: So, the plan, there are contractually guaranteed receipt minimums with HSN for both the Christian Siriano and the Christy Brinkley brand. This year, we're forecasting in the $7 million range, maybe a little more for Christy, depending on distribution outside of HSN. Christie is not exclusive to them, but then there's a significant bump up next year under the agreement for the minimum at HSN. And we do think that Christie has great potential both on HSN and outside of HSN, so we would expect that business to maybe double going into next year, if not more.
Speaker Change: Business to maybe double going into next year, if not more.
Speaker Change: Great and then just final question, how do we benchmark. This success on army can you kind of.
Speaker Change: Give us some parameters of what you would might look for in terms of whether it be subscribers or how how should we benchmark your the opportunity there going forward.
Speaker Change: Key metrics are a number of vendors onboard and number of users.
Speaker Change: The app.
Key metrics, that's how the company is going to be valued.
Michael A. Kupinski: And then just final question. How do we benchmark success on ARMY? Can you kind of give us some parameters of what you might look for in terms of whether it be subscribers or how should we benchmark the opportunity there going forward?
Speaker Change: And that's what I would look at from quarter to quarter.
Speaker Change: And Bob do you have a certain benchmarks like by the end of the year, what youre anticipating in terms of the number of vendors or number of users I mean anything that you can share with us at this point.
Robert DeLoren: The key metrics are the number of vendors on board and the number of users on the app. Those are the key metrics because that's how the company is going to be valued, and that's what I would look at from quarter to quarter.
Speaker Change: No.
Bob: Really need or me to give that to us.
Bob: And.
Bob: Third company goals, we're being very selective of types of brands that come onto army.
Michael A. Kupinski: And, Bob, do you have certain benchmarks, like by the end of the year, what you're anticipating in terms of the number of vendors or the number of users? I mean, anything that you can share with us at this point?
Bob: We could load a lot of small vendors on.
Bob: But.
Bob: That's not really what for me is targeting we're targeting bigger brands household names brands that are in better premium department stores.
Robert DeLoren: No, I really need Ormi to give that to us. And there are company goals. We're being very selective of the types of brands that come on to ORMI. We could load a lot of small vendors on, but that's not really what ORMI is targeting. We're targeting bigger brands, household names, brands that are in better and premium department stores. And then, of course, with good brands and great products, more people will participate.
Bob: And then of course with good brands and great product and more people will participate.
Speaker Change: Well it looks like it's going to be an exciting year. Thanks, that's all I have.
Speaker Change: Okay, Michael Thank you.
Speaker Change: Sure.
Speaker Change: Operator.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Anthony <unk>.
Anthony: Jan Kees from I.
OTI and company. Your line is now open.
Michael A. Kupinski: Well, it looks like it's going to be an exciting year. Thanks. That's all I have.
Jan Kees: Good afternoon, and thank you for taking the question CSS Anthony will begin skip from Sidoti.
Robert DeLoren: Okay, Michael. Thank you.
Operator: Our next question comes from Anthony Lebiedzinski from S-I-D-O-T-I and Company. Your line is now open.
Anthony: So yeah nice job with lowering your expenses certainly.
Anthony Chester Lebiedzinski: Good afternoon, and thank you for taking the questions. Yes, it's Anthony Lebiedzinski from Sidoti. So, yeah, nice job with lowering your expenses, certainly. Do you think there could be some additional expense efficiencies that you can gain, or do you think you're pretty much tapped out as far as what you can do as far as expenses go forward here?
Do you think there could be some additional expense efficiencies that you can gain or do you think you are pretty much tapped out as far as what you can do as far as.
Speaker Change: <unk> expenses going forward here.
Robert DeLoren: So we're looking for a little more. Anthony, you know, we have been saying 14, but now with the savings on the lease, with the whole sub-leasing of the 30,000 feet we were in and moving into 12,000 square feet, which is perfect. It's a really beautiful live stream studio. We cut some additional expenses beyond the 14, and we're looking for a little more. So we want to operate as lean as we can, and we'll know in the next quarter or so if we can take a little more out of it.
Anthony: So we're looking for a little more.
Anthony: Anthony.
Anthony: We have been saying 14.
Anthony: Now with the savings on the lease.
Anthony: No.
Anthony: Sub leasing.
Speaker Change: This is <unk>.
Speaker Change: We were in moving into <unk>.
Speaker Change: 12000 square feet, which is perfect.
Speaker Change: Really beautiful livestream.
Speaker Change: We cut some additional expenses beyond the 2014.
Speaker Change: And we're looking for a little more so we want to operate.
Speaker Change: As lean as we can.
Speaker Change: And we'll know in the next quarter or so if we can if we can take a little more out of it.
Anthony Chester Lebiedzinski: Understandable, yeah, thanks. And then, you know, in terms of the various different initiatives with the different licensing partners, you spoke about Christie Brinkley, obviously G3 you announced last year. I guess if you could just kind of go over, you know, which ones you think will be the most impactful, kind of go, you know, go over that in terms of how you think that's going to contribute to your top and bottom lines.
Speaker Change: Understood. Thanks, and then.
Speaker Change: In terms of the various different initiatives with the different licensing partners you spoke about the Christie Brinkley, obviously G III you announced.
Speaker Change: Last year I guess, if you could just kind of like.
Speaker Change: Goal, we'd like to as far as which ones you think will be the most impactful.
Speaker Change: Kind of go.
Speaker Change: Go over that in terms of how you think that's going to.
Speaker Change: Contribute to your top and bottom line.
Robert DeLoren: So, clearly, uh, it, you know, Houlson will lead that with the G3 license. But as you know, they're just launching this fall, and the only information we really have on how they're doing is what they've been saying on their earnings calls, and we're assuming that we will hit the maximum under that license over the next year or two, and that would be 8 million per year, most of which we drop to the bottom line, so that will be driving top and bottom line EBITDA, and then Sea Wonder is doing beautifully The commitment for next year is 50.
Speaker Change: So clearly.
Speaker Change: Yes.
Speaker Change: Paulson, who will lead that with the <unk> license.
Speaker Change: But as you know, they're just launching this fall.
Speaker Change: The only information, we really have on how they're doing.
Speaker Change: What <unk> been saying on their on their earnings calls.
And.
Speaker Change: We're assuming.
Speaker Change: That we will hit the maximum under that license over.
Speaker Change: Over the next year or two.
Speaker Change: And that would be $8 million per year.
Speaker Change: First of which will drop to the bottom line, so that will be driving top and bottom line.
Speaker Change: EBITDA.
Speaker Change: And then then C wonder is doing beautifully for us and its first nine months in the launch in 'twenty three to $13 5 million.
Speaker Change: The Hs and planned for this year is <unk>.
Speaker Change: 25 approximately.
That commitment for next year is 50.
Speaker Change: And.
Robert DeLoren: And we are now working on category extensions for Sea Wonder. So that brand is doing well and has strong growth potential for us. We do think that Christy will ramp up as fast because she is loved by everyone in America. She has a great social media following. And almost any woman over 45, if you stopped them on the street and asked them to name three top fashion models, that name would come up. And she is trusted and loved. So we think it has similar potential, if not more, outside of HSN in Berger's order than perhaps Sea Wonder.
Speaker Change: We are now working on category extensions C wonder so that brand.
Speaker Change: Is doing well and has strong growth potential for us we.
Speaker Change: We do think that Christy will ramp up as fast.
Speaker Change: Christy is loved by everyone in America. She is a great social media following.
Speaker Change: And almost any women over 45 minutes, we stopped them on the street and ask them to name three top fashion models that name would come up.
She is trusted and loved so.
Speaker Change: We think it has similar potential.
Speaker Change: If not more outside of HSN.
Speaker Change: In the quarter than perhaps C wonder.
Anthony Chester Lebiedzinski: Okay, that's very helpful. And then, Bob, you also mentioned that you expect to be profitable this year. Just wanted to see if you could clarify that. Did you expect to be profitable for the full year or just part of the year? And are you talking about EBITDA positive or net income positive? EBITDA, EBITDA. That will start. Expect a pickup from the Halston License as G3 begins.
Speaker Change: Okay, that's very helpful.
Speaker Change: And then Bob you you also mentioned that you expect to be profitable. This year just wanted to see if you could clarify that do you expect to be profitable for the full year or just part of the year and the are you talking about EBITDA positive or net income positive.
Speaker Change: EBITDA EBITDA positive.
Speaker Change: And.
Speaker Change: That will start Q2 Q3 Q4.
Speaker Change: And then we expect the pickup from the hall.
Speaker Change: Boston license as G III begins shipping.
Robert DeLoren: That's very helpful. Thank you very much and best of luck.
Speaker Change: In Q3 and four.
Speaker Change: Okay. That's very helpful. Thank you very much and best of luck. Thank you.
Operator: The question comes from Howard Brous from Wellington Shields. Your line is now open.
Speaker Change: Thanks Anthony.
Speaker Change: Question comes from Howard <unk> from Wellington Shields. Your line is now open.
Howard Brous: Thank you. Robert, first of all, congratulations on the transformation of the business. It's been a spectacular job, and we do thank you. 2024 is a transitional year. Everybody's been talking about what it's going to start and when it's going to start. But effectively, when you look at 2025, the estimates on the street of Eber-Dah are almost $10 million. The company's stock is selling for less than one and three quarter times EBITDA.
Howard: Thank you Rob.
Howard: Robert first of all congratulations on the transformation of the business.
Howard: It's been a spectacular job.
Howard: And we.
Howard: We do thank you.
Howard: 2024 is a transitional year, everybody has been talking about what's going to start with.
Howard: And when it's going to start.
Howard: But effectively when you.
Howard: You look at 2025.
Howard: The estimates on the street of EBITDA are almost $10 million.
Howard: Company's stock is selling for less than.
Howard: One and three quarter times EBITDA.
Speaker Change: What are your thoughts.
Yeah.
Robert DeLoren: Well, first, it's a very low EBITDA multiple, particularly when you think of selling Isaac for eight times its EBITDA contribution. And from an asset value perspective, Howard, it's incredibly low. Given that we sold Isaac for six times royalties, and that's the going rate for royalties. The going rate is anywhere, say, from a low of five to a high of eight. Six is a very common multiple, with $15 million of top-line royalties as a round number for 20-4. As it grows, it implies a $100-plus million value against $5 million of debt. It's I think we're undervalued.
Speaker Change: Well one.
Speaker Change: It's a very low.
Speaker Change: EBITDA multiple.
Speaker Change: Particularly when you think of selling Isaac for eight times EBITDA contribution.
Speaker Change: And from an asset value perspective.
Speaker Change: Howard.
Speaker Change: It's incredibly low.
Speaker Change: Given that we sold Isaac for six times royalties.
Speaker Change: And thats the going rate for royalties the going rate is anywhere say from a low of five to a high of eight.
Speaker Change: <unk> is a very common multiple.
Speaker Change: With $15 million of topline royalties.
As a round number for 2008 four.
Speaker Change: Growing.
Speaker Change: And implies a 100 plus million dollars.
Against $5 million of debt.
Speaker Change:
Speaker Change: Okay.
Speaker Change: I think we're undervalued.
Howard Brous: Let me skip to what's going on with Army marketing and interest. I mentioned it during the call, but I'd like... I think we have some more information.
Speaker Change: Let me skip to armies.
Speaker Change: What's going on with one of the marketing and interest.
Speaker Change: Thank you so I have mentioned during the call that I'd like to.
Hey, good morning inflammation.
Robert DeLoren: Sure, so we onboarded our seven first vendors, Premium Denim Company, actually two of them, and some premium beauty brands, as well as some of our own brands, and we've been doing beta testing right up through today, taking little bugs out of the technology, and Ormi has begun a very significant PR campaign and digital marketing campaign. Army's begun hiring influencer recruiters. They started this week, and they're reaching out to influencers around the country to get them on board.
Speaker Change: So we on boarded our seven first vendors.
Speaker Change: Premium denim company.
Speaker Change: Actually two of them.
Speaker Change: In premium beauty brands.
As well as some of our own brands.
Speaker Change: And.
We've been doing beta testing right up through today.
Speaker Change: Taking a little bugs.
Speaker Change: The technology and army is getting ready to launch a <unk>.
Speaker Change: Very significant PR campaign.
Speaker Change: And digital marketing campaign.
Speaker Change: <unk> begun hiring.
Speaker Change: Influencer recruiters.
Speaker Change: <unk> this week.
Speaker Change: And they are reaching out and influencers around.
Speaker Change: Around the country to get them on board.
And then the.
Robert DeLoren: The goal is now to onboard some additional big vendors because each time we onboard a vendor, Howard, we want to debug it before they start the email campaigns to their customers. In week one, we had 1,000 users onboard the app with no email campaigns. It was just almost word of mouth. And all of that is about to start.
Speaker Change: Our goal is now to onboard some additional big vendors because each time, we onboard a vendor Howard we want to debug it before they start the the E mail campaigns to their customers.
Speaker Change: In week, one we had a thousand new users.
Speaker Change: Onboard the App with no email campaigns that was just almost word of mouth.
Speaker Change: And.
Speaker Change: All of that is about to start.
Robert DeLoren: So we are excited about where we are with ORMI, excited about where the tech is. It is almost completely bug-free, which is amazing. We did a lot of beta testing before we put anyone on it, obviously, but you always find things when a new set of eyes start playing around with technology, particularly in apps.
Speaker Change: So we are we are excited about where we are with or me excited about where the tech is.
Speaker Change: It is almost completely bug free which is amazing.
Speaker Change: Beta testing before we put anymore on it obviously.
Speaker Change: You're always tying things one new sets of eyes start start playing around and in technology, particularly in apps.
Howard Brous: Congratulations, Robert. Thank you.
Speaker Change: Congratulations Robert Thank you.
Robert: Thank you Howard.
Operator: As of right now, it seems like we don't have any questions. I'd now like to hand it back over to the management for their final remarks.
Speaker Change: As of right now it seems like we don't have any questions I'd now like to hand back over to the management for their final remarks.
Robert DeLoren: Ladies and gentlemen, thank you for your time this evening. We greatly appreciate your continued interest and support in Xcel Brands. As always, stay fit, eat well, and be healthy. Good night.
Speaker Change: Ladies and gentlemen.
Speaker Change: Thank you for your time. This evening, we greatly appreciate your continued interest and support next L brands as always.
Speaker Change: Ed.
And be healthy.
Speaker Change: Okay.
Operator: Thank you for attending today's call. We hope you have a wonderful day.
Speaker Change: Thank you for attending today's call.
Speaker Change: One we all we hope you have a wonderful day.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].