Xcel Brands
May 9, 2016

Xcel Brands Announces First Quarter 2016 Financial Results

 

Company Reports Double-Digit Year-Over-Year Revenue Growth of 27% to $8.4 Million

First Quarter Adjusted EBITDA of $2.0 million and Non-GAAP Earnings per Diluted Share of $0.07

Company Announces Successful Launch of C. Wonder on QVC

NEW YORK, May 09, 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 first quarter ended March 31, 2016.

"We are pleased to announce a strong start to 2016 in which we achieved double-digit top-line growth propelled by our brands and differentiated business model," said Robert W. D'Loren, Xcel's Chairman and Chief Executive Officer. "These positive results reflect the continued execution of our strategic plan. Looking ahead, we remain confident in our ability to drive increased long-term shareholder value as we continue to invest in and leverage our operating platform."

First Quarter 2016 Financial Results

Total revenue for the first quarter of fiscal 2016 increased 27% to $8.4 million, compared with $6.6 million for the prior year quarter.

Net loss was less than ($0.1) million for the quarter ended March 31, 2016, or $0.00 per share, compared with a net loss of ($0.3) million, or ($0.02) 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, 2016 was $1.2 million, or $0.07 per diluted share, compared with $1.7 million, or $0.11 per diluted share in the prior year quarter.

Adjusted EBITDA for the quarter ended March 31, 2016 decreased approximately $0.2 million to $2.0 million, compared with $2.2 million for the quarter ended March 31, 2015.

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.

The Company's balance sheet at March 31, 2016 remains strong, with stockholders' equity of $101 million as of March 31, 2016, cash and cash equivalents of approximately $12.6 million, and adjusted working capital (which excludes obligations payable in stock) of approximately $16.5 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 Monday, May 9, 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 888-401-4668. 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 3214484.

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, 2015 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 data)  
           
     March 31, 2016     December 31, 2015   
     (Unaudited)       
Assets          
Current Assets:          
Cash and cash equivalents   $ 12,586     $ 16,860    
Accounts receivable, net     9,127       7,594    
Prepaid expenses and other current assets     726       655    
Total current assets     22,439       25,109    
Property and equipment, net     973       871    
Trademarks and other intangibles, net     112,041       112,323    
Goodwill     12,371       12,371    
Restricted cash     1,109       1,109    
Other assets     287       343    
Total non-current other assets     126,781       127,017    
Total Assets   $ 149,220     $ 152,126    
                   
Liabilities and Stockholders' Equity          
Current Liabilities:          
Accounts payable, accrued expenses and other current liabilities   $ 2,263     $ 3,372    
Deferred revenue     40       597    
Current portion of long-term debt     7,864       8,918    
Current portion of long-term debt, contingent obligations     -       250    
Total current liabilities     10,167       13,137    
Long-Term Liabilities:                  
Long-term debt, less current portion     30,793       31,860    
Deferred tax liabilities, net     6,698       6,749    
Other long-term liabilities     594       297    
Total long-term liabilities     38,085       38,906    
Total Liabilities     48,252       52,043    
                   
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, 2016 and        
December 31, 2015, and 18,674,852 and 18,434,634 issued and outstanding at        
March 31, 2016 and December 31, 2015, respectively     19       18    
Paid-in capital     94,928       93,999    
Retained earnings     6,021       6,066    
Total Stockholders' Equity     100,968       100,083    
                   
Total Liabilities and Stockholders' Equity   $ 149,220     $ 152,126    
                   

 

             
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,  
       2016           2015     
Revenues            
Net licensing revenue   $ 8,345       $ 6,524    
Net e-commerce sales     47         67    
Total revenues     8,392         6,591    
Cost of goods sold     70         45    
Gross profit     8,322         6,546    
                     
Operating expenses            
Salaries, benefits and employment taxes     4,210         3,103    
Other design and marketing costs     829         284    
Other selling, general and administrative expenses     1,306         986    
Stock-based compensation     1,212         1,013    
Depreciation and amortization     426         262    
Total operating expenses     7,983         5,648    
                     
Other expense            
Loss on extinguishment of debt     -         611    
                     
Operating income     339         287    
                     
Interest and finance expense            
Interest expense - term debt     311         312    
Other interest and finance charges     124         199    
Total interest and finance expense     435         511    
                     
Loss from continuing operations before income taxes     (96 )       (224 )  
             
Income tax benefit     (51 )       (106 )  
                     
Loss from continuing operations     (45 )       (118 )  
             
Loss from discontinued operations, net     -         (213 )  
                     
Net loss   $ (45 )     $ (331 )  
                     
Basic and diluted net loss per share:            
Continuing operations   $ (0.00 )     $ (0.01 )  
Discontinued operations, net     0.00         (0.01 )  
Net loss   $ (0.00 )     $ (0.02 )  
                     
Basic and diluted weighted average common shares outstanding     18,458,748         14,069,419    
                     

 

Xcel Brands, Inc. and Subsidiaries  
Unaudited Condensed Consolidated Statements of Cash Flows  
(in thousands)  
             
    For the Three Months Ended March 31,  
       2016          2015    
             
Cash flows from operating activities            
Net loss   $ (45 )     $ (331 )  
Adjustments to reconcile net loss to net cash            
used in operating activities:            
Loss from discontinued operations, net     -         213    
Depreciation and amortization expense     426         262    
Amortization of deferred finance costs     46         39    
Stock-based compensation     1,212         1,013    
Allowance for doubtful accounts     -         35    
Amortization of note discount     80         155    
Deferred income tax benefit     (51 )       (340 )  
Tax benefit from vested stock grants and exercised options     -         (28 )  
Loss on extinguishment of debt     -         611    
Changes in operating assets and liabilities:            
Accounts receivable     (1,534 )       (1,277 )  
Prepaid expenses and other assets     (66 )       (175 )  
Accounts payable, accrued expenses and other current liabilities     (1,110 )       (483 )  
Deferred revenue     (557 )       12    
Other liabilities     297         (57 )  
Net cash used in operating activities from continuing operations     (1,302 )       (351 )  
Net cash used in operating activities from discontinued operations, net     -         (49 )  
Net cash used in operating activities     (1,302 )       (400 )  
                     
Cash flows from investing activities            
Cash consideration for asset acquisition of the H Halston Brand     -         (14 )  
Purchase of property and equipment     (246 )       (27 )  
Net cash used in investing activities     (246 )       (41 )  
                     
Cash flows from financing activities            
Proceeds from exercise of stock options     20         -    
Tax benefit from vested stock grants and exercised options     -         28    
Shares repurchased including vested restricted stock in exchange for     (302 )       -    
withholding taxes            
Payment of deferred finance costs     (69 )       (10 )  
Payment of long-term debt     (2,125 )       (1,000 )  
Payment of QVC earnout obligation     (250 )       -    
Payment of installment obligations related to the acquisition of the Ripka Brand   -         (900 )  
Net cash used in financing activities     (2,726 )       (1,882 )  
                     
Net decrease in cash and cash equivalents     (4,274 )       (2,323 )  
             
Cash and cash equivalents, beginning of period     16,860         8,531    
                     
Cash and cash equivalents, end of period   $ 12,586       $ 6,208    
                     
Supplemental disclosure of non-cash activities:            
Issuance of common stock as payment for a portion of the Ripka Seller Notes   $ -       $ 2,400    
                     
Supplemental disclosure of cash flow information:            
Cash paid during the period for income taxes   $ 112       $ 303    
Cash paid during the period for interest   $ 270       $ 222    
                     

 

Xcel Brands, Inc. and Subsidiaries
Reconciliation of Non-GAAP measures
             
  Non-GAAP net income:          
      Quarter Ended March 31,  
  (amounts in thousands)     2016       2015    
             
  Net loss   $   (45 )   $   (331 )  
  Non-cash interest and finance expense       78         160    
  Stock-based compensation       1,212         1,013    
  Loss on extinguishment of debt       -         611    
  Loss from discontinued operations, net       -         213    
  Non-GAAP net income   $   1,245     $   1,666    
                     
             
  Non-GAAP diluted EPS:          
      Quarter Ended March 31,  
        2016       2015    
             
  Basic and diluted loss per share   $   -      $   (0.02 )  
  Non-cash interest and finance expense   $   0.01         0.01    
  Stock-based compensation   $   0.06         0.07    
  Loss on extinguishment of debt   $   -          0.04    
  Loss from discontinued operations, net   $   -          0.01    
  Non-GAAP diluted EPS   $   0.07     $   0.11    
                     
             
  Weighted average shares - Non-GAAP Dilutive:        
      Quarter Ended March 31,  
        2016       2015    
             
  Basic weighted average shares       18,458,748         14,069,419    
  Effect of exercising warrants       650,433         971,874    
  Effect of exercising stock options       32,787         139,595    
  Weighted average shares - Non-GAAP Dilituve     19,141,968         15,180,888    
                     
             
  Adjusted EBITDA:          
      Quarter Ended March 31,  
  (amounts in thousands)     2016       2015    
             
  Net loss   $   (45 )   $   (331 )  
  Depreciation and amortization       426         262    
  Interest and finance expense       357         351    
  Non-cash interest expense from discounted debt related to asset acquisitions       78         160    
  Income tax benefit       (51 )       (106 )  
  State and local franchise taxes       25         29    
  Stock-based compensation       1,212         1,013    
  Loss on extinguishment of debt       -         611    
  Loss from discontinued operations, net       -         213    
  Other non-cash adjustments       -         1    
  Adjusted EBITDA   $   2,002     $   2,203    
                     

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 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 (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 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 (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