Xcel Brands
Mar 15, 2016

Xcel Brands Announces Fourth Quarter and Full Year 2015 Financial Results

Company Reports Double-Digit Year-over-Year Revenue Growth of 34% to $27.7 Million

2015 Adjusted EBITDA Increased 33% to $9.3 Million


Full Year Non-GAAP Earnings per Diluted Share of $0.36

NEW YORK, March 15, 2016 (GLOBE NEWSWIRE) -- Xcel Brands, Inc. (NASDAQ:XELB) ("Xcel" or the "Company"), a brand development and media company, today announced its financial results for the fourth quarter and full year ended December 31, 2015.

"Fiscal 2015 was a year marked with significant milestones and strong business performance fueling robust growth to our top and bottom line," said Robert W. D'Loren, Xcel's Chairman and Chief Executive Officer. "These milestones include our successful up-listing to the NASDAQ Global Market, a completed public equity offering, the strategic acquisition of the C. Wonder brand, the launch of H by Halston brand on QVC and the creation of a quick-time-response or short lead time supply chain to improve and maximize full price sell-through for our retail partners. Additionally, we recently announced the refinancing of our senior credit facility providing us with increased financial flexibility. We are entering 2016 with powerful momentum and are confident that our recent results and achievements, coupled with the on-going execution of our key initiatives, leave us well positioned to achieve continued revenue expansion, increased profitability and sustainable long-term growth across our portfolio of brands."

Fourth Quarter 2015 Results
Total revenue for the fourth quarter of fiscal 2015 increased 31% to $7.5 million, compared with $5.7 million for the fourth quarter of fiscal 2014.

Net income was $0.8 million for the quarter ended December 31, 2015, or $0.04 per diluted share, compared with a net loss of ($0.6) million, or ($0.05) per diluted share, in the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the quarter ended December 31, 2015 was $2.1 million, or $0.10 per diluted share, compared with $1.0 million, or $0.07 per diluted share in the prior year quarter.

Adjusted EBITDA for the quarter ended December 31, 2015 increased approximately $1.7 million to $3.0 million, compared with $1.3 million for the quarter ended December 31, 2014.

Full Year 2015 Results
Total revenue for the year ended December 31, 2015 increased 34% to $27.7 million, compared with $20.7 million in the prior year.

Net income was $2.6 million for the year ended December 31, 2015, or $0.15 per diluted share, compared with a net loss of ($1.0) million, or ($0.08) per diluted share, in the prior year. After adjusting for certain cash and non-cash items, non-GAAP net income for the year ended December 31, 2015 was $6.3 million, or non-GAAP earnings per diluted share of $0.36, compared with $5.2 million, or non-GAAP earnings per diluted share of $0.40, compared with the prior year.

Adjusted EBITDA for the year ended December 31, 2015 increased approximately $2.3 million to $9.3 million, compared with $7.0 million in the prior year.

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 ("U.S. GAAP"). Any financial measure other than those prepared in accordance with U.S. GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.

Balance Sheet
The Company's balance sheet remains strong with stockholders' equity of $100.1 million as of December 31, 2015, an increase of approximately $39.9 million compared with December 31, 2014, and adjusted working capital (which excludes obligations payable in stock) of approximately $16.0 million as of the end of the current fiscal year. Cash and cash equivalents increased approximately $8.3 million to $16.9 million, compared with $8.5 million at December 31, 2014.

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, March 15, 2016. 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 888-329-8893. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 877-870-5176 using replay pin number 4909666.

About Xcel Brands
Xcel Brands, Inc. (NASDAQ:XELB) is a brand development and media 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, and C. Wonder brands, pioneering an omnichannel sales strategy which includes the promotion and sale of products under its brands through direct-response 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 retailing, licensing, design, and marketing experience, and a proven track record of success in elevating branded consumer products companies.  With a team of over 70 designers and social media focused marketing executives, 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, 2014 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 
Consolidated Balance Sheets 
     
   December 31, 2015  December 31, 2014  
   (unaudited)   
Assets    
Current Assets:    
  Cash and cash equivalents $  16,860,000 $  8,531,000  
  Accounts receivable, net    7,594,000    3,641,000  
  Prepaid expenses and other current assets    647,000    532,000  
  Current assets held for disposition from discontinued retail operations    8,000    503,000  
    Total current assets    25,109,000    13,207,000  
  Property and equipment, net    871,000    833,000  
  Trademarks and other intangibles, net    112,323,000    97,679,000  
  Goodwill    12,371,000    12,371,000  
  Restricted cash    1,109,000    -   
  Other assets    343,000    271,000  
  Long-term assets held for disposition from discontinued retail operations    -     123,000  
    Total non-current other assets    126,146,000    110,444,000  
Total Assets $  152,126,000 $  124,484,000  
     
Liabilities and Stockholders' Equity    
Current Liabilities:    
  Accounts payable, accrued expenses and other current liabilities $  3,312,000 $  3,529,000  
  Deferred revenue    597,000    256,000  
  Installment obligations in connection with the acquisition of the Ripka Brand   -     2,190,000  
  Current portion of long-term debt    8,918,000    5,650,000  
  Current portion of long-term debt, contingent obligations    250,000    5,766,000  
  Current liabilities held for disposition from discontinued retail operations    60,000    218,000  
    Total current liabilities    13,137,000    17,609,000  
Long-Term Liabilities:    
  Long-term debt, less current portion    31,860,000    39,024,000  
  Deferred tax liabilities, net    6,749,000    7,449,000  
  Other long-term liabilities    297,000    178,000  
    Total long-term liabilities    38,906,000    46,651,000  
Total Liabilities    52,043,000    64,260,000  
     
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 December 31, 2015 and   
  December 31, 2014 and 18,434,634 and 14,011,896 issued and outstanding at   
  December 31, 2015 and December 31, 2014, respectively    18,000    14,000  
  Paid-in capital    93,999,000    56,718,000  
  Retained earnings     6,066,000    3,492,000  
    Total Stockholders' Equity    100,083,000    60,224,000  
     
Total Liabilities and Stockholders' Equity $  152,126,000 $  124,484,000  

 


Xcel Brands, Inc. and Subsidiaries
Consolidated Statements of Operations
      
      
  For the Quarter Ended December 31,For the Year Ended December 31,
    2015    2014    2015    2014  
   (unaudited)  (unaudited)  (unaudited)  
Revenues     
  Net licensing revenue $  7,323,000 $  5,598,000 $  27,405,000 $  20,580,000 
  Net e-commerce sales    150,000    93,000    316,000    127,000 
    Total revenues    7,473,000    5,691,000    27,721,000    20,707,000 
  Cost of goods sold    136,000    51,000    267,000    73,000 
    Gross profit    7,337,000    5,640,000    27,454,000    20,634,000 
      
Operating expenses     
  Salaries, benefits and employment taxes    2,601,000    2,752,000    12,240,000    9,523,000 
  Other design and marketing costs     614,000    317,000    2,375,000    1,084,000 
  Other selling, general and administrative expenses    1,161,000    1,250,000    3,643,000    3,106,000 
  Stock-based compensation    1,227,000    832,000    4,640,000    5,151,000 
  Depreciation and amortization    426,000    240,000    1,379,000    935,000 
    Total operating expenses    6,029,000    5,391,000    24,277,000    19,799,000 
      
Other expenses (income)     
  Gain on reduction of contingent obligation    -     -     (3,000,000)   (600,000)
  Loss on extinguishment of debt    -     -     1,371,000    -  
    Total other income, net    -     -     (1,629,000)   (600,000)
      
Operating income     1,308,000    249,000    4,806,000    1,435,000 
      
Interest and finance expense     
  Interest expense - term debt    295,000    237,000    1,220,000    834,000 
  Other interest and finance charges    133,000    190,000    584,000    654,000 
    Total interest and finance expense    428,000    427,000    1,804,000    1,488,000 
      
Income (loss) from continuing operations before income taxes    880,000    (178,000)   3,002,000    (53,000)
      
Income tax provision (benefit)    121,000    (165,000)   156,000    (97,000)
      
Income (loss) from continuing operations    759,000    (13,000)   2,846,000    44,000 
      
Income (loss) from discontinued operations, net    9,000    (539,000)   (272,000)   (1,076,000)
      
Net income (loss) $  768,000 $  (552,000)$  2,574,000 $  (1,032,000)
      
Basic net income (loss) per share:     
Continuing operations $  0.04 $  -  $  0.18 $  -  
Discontinued operations, net    -     (0.05)   (0.02)   (0.09)
Net income (loss) $  0.04 $  (0.05)$  0.16 $  (0.09)
      
Diluted net income (loss) per share:     
Continuing operations $  0.04 $  -  $  0.17 $  -  
Discontinued operations, net    -     (0.05)   (0.02)   (0.08)
Net income (loss) $  0.04 $  (0.05)$  0.15 $  (0.08)
      
Basic weighted average common shares outstanding    18,438,585    12,211,059    16,151,163    11,698,880 
Diluted weighted average common shares outstanding    19,406,691    12,211,059    17,223,240    12,816,674 

 

Xcel Brands, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
   
 For the Year Ended December 31,
   2015   2014 
  (unaudited)  
Cash flows provided by operating activities  
  Net income (loss)$  2,574,000 $  (1,032,000)
  Adjustments to reconcile net income (loss) to net cash   
  provided by operating activities:  
    Loss from discontinued operations, net   272,000    1,076,000 
    Depreciation and amortization expense   1,379,000    935,000 
    Amortization of deferred finance costs   141,000    80,000 
    Stock-based compensation   4,640,000    5,151,000 
    Allowance for doubtful accounts   (21,000)   2,000 
    Amortization of note discount    406,000    575,000 
    Deferred income tax benefit   (394,000)   (1,031,000)
    Tax benefit from vested stock grants and exercised options    (306,000)   (508,000)
    Gain on reduction of contingent obligation   (3,000,000)   (600,000)
    Loss on extinguishment of debt   1,371,000    -  
  Changes in operating assets and liabilities:  
    Accounts receivable   (3,931,000)   (103,000)
    Prepaid expenses and other assets   (187,000)   (46,000)
    Accounts payable, accrued expenses and other current liabilities   (217,000)   2,342,000 
    Deferred revenue   341,000    (235,000)
    Other liabilities   119,000    -  
Net cash provided by operating activities from continuing operations   3,187,000    6,606,000 
Net cash provided by (used in) operating activities from discontinued   
  operations, net   108,000    (739,000)
Net cash provided by operating activities   3,295,000    5,867,000 
   
Cash flows used in investing activities  
    Cash consideration for asset acquisition of the Ripka Brand    -     (12,365,000)
    Cash consideration for asset acquisition of the H Halston Brand    (14,000)   (18,513,000)
    Cash consideration for asset acquisition of the C Wonder Brand    (3,587,000)   -  
    Purchase of property and equipment   (530,000)   (246,000)
    Restricted cash for security deposit   (1,109,000)   -  
Net cash used in investing activities from continuing operations   (5,240,000)   (31,124,000)
Net cash used in investing activities from discontinued operations, net   -     (433,000)
Net cash used in investing activities   (5,240,000)   (31,557,000)
   
Cash flows provided by financing activities  
  Proceeds from issuance of Common Stock, net of direct costs   16,107,000    9,294,000 
  Proceeds from exercise of stock options   65,000    6,000 
  Tax benefit from vested stock grants and exercised options   306,000    508,000 
  Shares repurchased including vested restricted stock in exchange for    (748,000)   (978,000)
  withholding taxes   
  Proceeds from term debt related to the Ripka Brand   -     9,000,000 
  Proceeds from term debt related to the H Brand   -     10,000,000 
  Payment of contingent obligation    -     (315,000)
  Payment of deferred finance costs   (10,000)   (505,000)
  Payment of long-term debt    (3,256,000)   (250,000)
  Payment of installment obligations related to the acquisition of the Ripka Brand   (2,190,000)   -  
Net cash provided by financing activities   10,274,000    26,760,000 
   
Net increase in cash and cash equivalents   8,329,000    1,070,000 
   
Cash and cash equivalents, beginning of year   8,531,000    7,461,000 
   
Cash and cash equivalents, end of year$  16,860,000 $  8,531,000 
   
Supplemental disclosure of non-cash activities:  
  Issuance of common stock in connection with C Wonder Brand acquisition $  9,000,000 $  -  
  Contingent obligation related to acquisition of the C Wonder Brand$  2,850,000 $  -  
  Issuance of common stock as payment for a portion of the Ripka Seller Notes$  5,400,000 $  -  
  Issuance of common stock as payment for a portion of the QVC Earn-Out$  2,515,000 $  -  
  Issuance of  Notes payable as partial consideration in the   
  acquisition of the Ripka Brand (net of debt discount)$  -  $  4,165,000 
  Issuance of common stock in connection with Ripka Brand acquisition $  -  $  2,286,000 
  Issuance of common stock and warrants in connection with H Brand acquisition $  -  $  9,611,000 
  Installment obligations related to acquisition of the Ripka Brand$  -  $  2,190,000 
  Contingent obligations related to acquisition of the Ripka Brand$  -  $  3,784,000 
   
Supplemental disclosure of cash flow information:  
  Cash paid during the year for income taxes$  453,000 $  109,000 
  Cash paid during the year for interest$  1,157,000 $  653,000 


 
 
Xcel Brands, Inc. and Subsidiaries
Reconciliation of Non-GAAP measures
(unaudited)
     
     
     
Non-GAAP net income:    
 Quarter Ended December 31, Year Ended December 31, 
  2015  2014  2015  2014 
     
Net income (loss)$  768,000 $  (552,000)$  2,574,000 $  (1,032,000)
Non-cash interest and finance expense   85,000    167,000    415,000    575,000 
Stock-based compensation   1,227,000    832,000    4,640,000    5,151,000 
Loss on extinguishment of debt   -    -    1,371,000    - 
Gain on reduction of contingent obligations   -    -    (3,000,000)   (600,000)
Income (loss) from discontinued operations, net   (9,000)   539,000    272,000    1,076,000 
Other non-cash adjustments   -     1,000    -     14,000 
Non-GAAP net income$  2,071,000 $  987,000 $  6,272,000 $  5,184,000 
     
     
Non-GAAP diluted EPS:    
 Quarter Ended December 31, Year Ended December 31, 
  2015  2014  2015  2014 
     
Diluted income (loss) per share $  0.04 $  (0.04)$  0.15 $  (0.08)
Non-cash interest and finance expense    -     0.01    0.02    0.05 
Stock-based compensation   0.06    0.06    0.27    0.40 
Loss on extinguishment of debt   -     -     0.08    -  
Gain on reduction of contingent obligations   -     -     (0.18)   (0.05)
Income (loss) from discontinued operations, net   -     0.04    0.02    0.08 
Non-GAAP diluted EPS$  0.10 $  0.07 $  0.36 $  0.40 
     
     
Weighted average shares - Non-GAAP Dilutive:    
 Quarter Ended December 31, Year Ended December 31, 
  2015  2014  2015  2014 
     
Basic weighted average shares   18,438,585    12,211,059    16,151,163    11,698,880 
Effect of exercising warrants   872,339    971,873    946,903    971,873 
Effect of exercising stock options   95,767    145,922    125,174    145,921 
Weighted average shares - Non-GAAP Dilutive   19,406,691    13,328,854    17,223,240    12,816,674 
     
     
Adjusted EBITDA:    
 Quarter Ended December 31, Year Ended December 31, 
  2015  2014  2015  2014 
     
Net income (loss)$  768,000 $  (552,000)$  2,574,000 $  (1,032,000)
Depreciation and amortization   426,000    240,000    1,379,000    935,000 
Interest and finance expense   343,000    260,000    1,389,000    913,000 
Non-cash interest expense from discounted debt related to asset acquisitions   85,000    167,000    415,000    575,000 
Income tax provision (benefit)   121,000    (165,000)   156,000    (97,000)
State and local franchise taxes   24,000    3,000    108,000    77,000 
Stock-based compensation   1,227,000    832,000    4,640,000    5,151,000 
Loss on extinguishment of debt   -    -    1,371,000    - 
Gain on reduction of contingent obligations   -    -    (3,000,000)   (600,000)
Income (loss) from discontinued operations, net   (9,000)   539,000    272,000    1,076,000 
Other non-cash adjustments   -     1,000    -     14,000 
Adjusted EBITDA$  2,985,000 $  1,325,000 $  9,304,000 $  7,012,000 


Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income (loss), exclusive of stock-based compensation, non-cash interest and finance expense from discounted debt related to acquired assets, gain on the reduction of contingent obligations, loss on extinguishment of debt, other non-cash adjustments, and loss from discontinued operations, net. Non-GAAP net income and non-GAAP diluted EPS do not include the tax effect of the reconciling items.

Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income (loss) before stock-based compensation, interest expense and other financing costs (including gain (loss) on extinguishment of debt), income taxes, other state and local franchise taxes, depreciation and amortization, gain on the reduction of contingent obligations, other non-cash adjustments, and loss on discontinued operations of our retail business.

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 (loss), 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 presentation. 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 (loss) and other GAAP results, and not rely on any single financial measure.

For further information please contact:

Hunter Wells / John Mills
ICR
646-277-1246
Hunter.wells@icrinc.com / John.mills@icrinc.com