Xcel Brands
May 9, 2017

Xcel Brands Announces First Quarter 2017 Financial Results

Company Reports First Quarter Net Revenues of $8.4 Million

First Quarter GAAP Pre-Tax Income of $0.1 Million; GAAP Net Loss of $0.4 Million

First Quarter Non-GAAP Net Income of $1.1 Million; Adjusted EBITDA of $1.9 Million

Company Announces Successful Launch of H Halston brand at Dillard's

NEW YORK, May 09, 2017 (GLOBE NEWSWIRE) -- Xcel Brands, Inc. (NASDAQ:XELB) ("Xcel" or the "Company"), a media and brand management company, today announced its financial results for the first quarter ended March 31, 2017.

"We are pleased by the strong performance of our interactive television business during the first quarter of 2017," said Robert W. D'Loren, Xcel's Chairman and Chief Executive Officer. He further stated, "We continue to refine our short lead production platform in our department store business and are excited to announce the successful launch of our H Halston brand at Dillard's." 

First Quarter 2017 Financial Results

Total net revenues for the first quarter of fiscal 2017 were $8.4 million, up approximately 1% compared with the prior year quarter. This was attributable to higher revenues from interactive television and Quick-Time-Response department store initiatives, largely offset by the expiration of the LCNY agreement in July 2016.

GAAP net loss was $(0.4) million for the quarter ended March 31, 2017, or $(0.02) per share, compared with a net loss of less than ($0.1) million, or ($0.00) per share, in the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the quarter ended March 31, 2017 was $1.1 million, or $0.06 per diluted share, compared with $1.2 million, or $0.07 per diluted share in the prior year quarter.

Adjusted EBITDA for the quarter ended March 31, 2017 decreased approximately $0.1 million to $1.9 million, compared with $2.0 million for the quarter ended March 31, 2016.

See reconciliation tables below for non-GAAP metrics. These non-GAAP metrics may be inconsistent with similar measures presented by other companies and should only be used in conjunction with our results reported according to U.S. generally accepted accounting principles ("GAAP"). Any financial measure other than those prepared in accordance with GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

The Company's balance sheet at March 31, 2017 remains strong, with stockholders' equity of $106.1 million, cash and cash equivalents of $10.2 million, and working capital of approximately $10.5 million.

Conference Call and Webcast
The Company will host a conference call with members of the executive management team to discuss these results with additional comments and details at 5:00 p.m. Eastern Time on Tuesday, May 9, 2017. A webcast of the conference call will be available live on the Investor Relations section of Xcel's website at www.xcelbrands.com. Interested parties unable to access the conference call via the webcast may dial 800-231-9012. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 4482351.

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

Forward Looking Statements
This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including "anticipates," "believes," "can," "continue," "ongoing," "could," "estimates," "expects," "intends," "may," "appears," "suggests," "future," "likely," "goal," "plans," "potential," "projects," "predicts," "seeks," "should," "would," "guidance," "confident" or "will" or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding our anticipated revenue, expenses, profitability, strategic plans and capital needs. These statements are based on information available to us on the date hereof and our current expectations, estimates and projections and are not guarantees of future performance. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including, without limitation, the risks discussed in the "Risk Factors" section and elsewhere in the Company's Annual Report on form 10-K for the year ended December 31, 2016 and its other filings with the SEC, which may cause our or our industry's actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.


Xcel Brands, Inc. and Subsidiaries 
Unaudited Condensed Consolidated Balance Sheets 
(in thousands, except share and per share data) 
      
   March 31, 2017   December 31, 2016  
      
Assets     
Current Assets:     
Cash and cash equivalents $  10,201 $  14,127 
Accounts receivable, net    8,706    6,969 
Prepaid expenses and other current assets    887    807 
Total current assets    19,794    21,903 
Property and equipment, net    2,624    2,600 
Trademarks and other intangibles, net    110,955    111,220 
Goodwill    12,371    12,371 
Restricted cash    1,509    1,509 
Other assets    1,514    1,517 
Total non-current assets    128,973    129,217 
Total Assets $   148,767  $   151,120  
      
Liabilities and Stockholders' Equity     
Current Liabilities:     
Accounts payable, accrued expenses and other current liabilities $  2,228 $  1,523 
Accrued payroll    833    2,185 
Deferred revenue    75    234 
Current portion of long-term debt    6,193    6,427 
Total current liabilities    9,329    10,369 
Long-Term Liabilities:     
Long-term debt, less current portion    23,817    25,495 
Deferred tax liabilities, net    7,357    6,901 
Other long-term liabilities    2,202    2,181 
Total long-term liabilities    33,376    34,577 
Total Liabilities    42,705    44,946 
      
Commitments and Contingencies     
      
Stockholders' Equity:     
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding   -     -  
Common stock, $.001 par value, 35,000,000 shares authorized at March 31, 2017 and     
December 31, 2016, and 18,447,692 and 18,644,982 issued and outstanding at    
March 31, 2017 and December 31, 2016, respectively    18    19 
Paid-in capital    97,642    97,354 
Retained earnings     8,402    8,801 
Total Stockholders' Equity    106,062    106,174 
      
Total Liabilities and Stockholders' Equity $   148,767  $   151,120  
      

 

Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
      
  For the Three Months Ended March 31,
    2017      2016  
      
Net revenues $  8,430   $  8,361 
      
Operating costs and expenses     
Salaries, benefits and employment taxes    4,367      4,210 
Other design and marketing costs     871      829 
Other selling, general and administrative expenses    1,280      1,345 
Stock-based compensation    1,083      1,212 
Depreciation and amortization    394      426 
Total operating costs and expenses    7,995      8,022 
      
Operating income     435      339 
      
Interest and finance expense     
Interest expense - term debt    328      311 
Other interest and finance charges    50      124 
Total interest and finance expense    378      435 
      
Income (loss) before income taxes    57      (96)
      
Income tax provision (benefit)    456      (51)
      
Net loss $  (399)  $  (45)
      
Basic and diluted net loss per share $  (0.02)  $  (0.00)
      
Basic and diluted weighted average common shares outstanding    18,674,943      18,458,748 
      

 

Xcel Brands, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
      
  For the Three Months Ended March 31,
    2017      2016  
      
Cash flows from operating activities     
Net loss $  (399)  $  (45)
Adjustments to reconcile net loss to net cash      
used in operating activities:     
Depreciation and amortization expense    394      426 
Amortization of deferred finance costs    50      46 
Stock-based compensation    1,083      1,212 
Amortization of note discount     9      80 
Deferred income tax provision (benefit)    456      (51)
Changes in operating assets and liabilities:     
Accounts receivable    (1,737)     (1,534)
Prepaid expenses and other assets    (83)     (66)
Accounts payable, accrued expenses and other current liabilities    (647)     (1,110)
Deferred revenue    (159)     (557)
Other liabilities    21      297 
Net cash used in operating activities    (1,012)     (1,302)
      
Cash flows from investing activities     
Cost to acquire intangible assets    (18)     - 
Purchase of property and equipment    (135)     (246)
Net cash used in investing activities    (153)     (246)
      
Cash flows from financing activities     
Proceeds from exercise of stock options and warrants    -       20 
Shares repurchased including vested restricted stock in exchange for      
withholding taxes     (795)     (302)
Payment of deferred finance costs    (7)     (69)
Payment of long-term debt     (1,959)     (2,125)
Payment of earn-out obligations    -       (250)
Net cash used in financing activities    (2,761)     (2,726)
      
Net decrease in cash, cash equivalents, and restricted cash    (3,926)     (4,274)
      
Cash, cash equivalents, and restricted cash at beginning of period    15,636      17,969 
      
Cash, cash equivalents, and restricted cash at end of period $  11,710   $  13,695 
      
Reconciliation to amounts on consolidated balance sheets:     
Cash and cash equivalents $  10,201   $  12,586 
Restricted cash    1,509      1,109 
Total cash, cash equivalents, and restricted cash $  11,710   $  13,695 
      
Supplemental disclosure of cash flow information:     
Cash paid during the period for income taxes $  110   $  112 
Cash paid during the period for interest $  370   $  270 
      

 

Xcel Brands, Inc. and Subsidiaries
Reconciliation of Non-GAAP measures
(Unaudited)
       
 Non-GAAP net income:     
   Quarter Ended
March 31,
 
 (amounts in thousands)  2017   2016  
       
 Net (loss) $  (399) $  (45) 
 Non-cash interest and finance expense    9     78  
 Stock-based compensation    1,083     1,212  
 Discrete tax items    420     -  
 Non-GAAP net income $  1,113  $  1,245  
       
       
 Non-GAAP diluted EPS:     
   Quarter Ended
March 31,
 
    2017   2016  
       
 Diluted (loss) per share $  (0.02) $  (0.00) 
 Non-cash interest and finance expense     0.00     0.01  
 Stock-based compensation    0.06     0.06  
 Discrete tax items    0.02     -   
 Non-GAAP diluted EPS $  0.06  $  0.07  
       
       
 Weighted average shares - Non-GAAP diluted:     
   Quarter Ended
March 31,
 
    2017   2016  
       
 Basic weighted average shares    18,674,943     18,458,748  
 Effect of exercising warrants    364,430     650,433  
 Effect of exercising stock options    2,646     32,787  
 Weighted average shares - Non-GAAP diluted    19,042,018     19,141,968  
       
       
 Adjusted EBITDA:     
   Quarter Ended
March 31,
 
 (amounts in thousands)  2017   2016  
       
 Net (loss) $  (399) $  (45) 
 Depreciation and amortization    394     426  
 Interest and finance expense    378     435  
 Income tax provision (benefit)    456     (51) 
 State and local franchise taxes    29     25  
 Stock-based compensation    1,083     1,212  
 Adjusted EBITDA $  1,941  $  2,002  
       

 

Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income, exclusive of stock-based compensation, non-cash interest expense from discounted debt related to acquired assets, gain on the reduction of contingent obligations, loss on extinguishment of debt, non-recurring facility exit charges, certain discrete tax items related to vesting or exercise of stock-based awards, and net income or loss from discontinued operations. Non-GAAP net income and non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company's tax strategy.

Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income before stock-based compensation, interest and other financing costs, loss on extinguishment of debt, gain on the reduction of contingent obligations, income taxes, other state and local franchise taxes, depreciation and amortization, non-recurring facility exit charges, and net income or loss from discontinued operations.

Management uses non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to our results of operations. Management believes non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are also useful because they provide supplemental information to assist investors in evaluating our financial results. Non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in accordance with GAAP. Given that non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are financial measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures. In evaluating non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA, you should be aware that in the future we may or may not incur expenses similar to some of the adjustments in this document. Our presentation of non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results, and not rely on any single financial measure.

 

For further information please contact:

Jeff Sonnek/John Mills
ICR
646-277-1263
Jeff.Sonnek@icrinc.com / John.Mills@icrinc.com