xelb_Current_Folio_8K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15 (d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  April 13, 2020

 

XCEL BRANDS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

Delaware

 

001-37527

 

76-0307819

(State or Other Jurisdiction
of Incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

 

 

1333 Broadway, New York, New York

 

10018

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (347) 727-2474

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [ ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

XELB

NASDAQ Global Select Market

 

 

 

Item 2.02

Results of Operations and Financial Conditions

 

On April 13, 2020, the Registrant issued a press release announcing its financial results for the year ended December 31, 2019.  As noted in the press release, the Registrant has provided certain non-U.S. generally accepted accounting principles (“GAAP”) financial measures, the reasons it provided such measures and a reconciliation of the non-U.S. GAAP measures to U.S. GAAP measures.  Readers should consider non-GAAP measures in addition to, and not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.  A copy of the Registrant’s press release is being furnished hereto as Exhibit 99.1 and is incorporated herein by reference.

 

 

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

 

 

 

99.1

Press Release of Xcel Brands, Inc. dated April 13, 2020.

.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

XCEL BRANDS, INC.

(Registrant)

 

 

By:

 

/s/ James F. Haran

 

 

Name:

 

James F. Haran

 

 

Title:

 

Chief Financial Officer

 

Date: April 15, 2020

xelb_Ex99_1

Exhibit 99.1

 

Picture 1

 

FOR IMMEDIATE RELEASE

 

XCEL BRANDS, INC. ANNOUNCES

FOURTH QUARTER AND FISCAL YEAR 2019 RESULTS

 

Fourth Quarter Total Revenues of $11.4 Million,  up 14% from the Prior Year Quarter,  and

Full Year Total Revenues of $41.7 Million,  up 18% from Prior Year

 

NEW YORK, NY (April 13,  2020) – Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a media and consumer products company, today announced its financial results for the fourth quarter and fiscal year ended December 31,  2019.

 

Robert W. D'Loren, Chairman and Chief Executive Officer of Xcel commented, “We continue to be pleased by our top-line revenue growth resulting from the investment in our wholesale and e-commerce channels. This diversification of our distribution channels, combined with our continued efforts and wins in the licensing channel, helped us to deliver a strong finish for the fiscal year”.

 

Fourth Quarter 2019 Financial Results

 

Net revenue for the fourth quarter of 2019 was $11.4 million, a net increase of approximately $1.4 million over the prior year quarter, primarily driven by sales from the Company’s wholesale apparel operations and jewelry wholesale and e-commerce operations.  Gross profit for the fourth quarter of 2019 decreased approximately $0.3  million to $7.6  million from $7.9  million in the prior year quarter,  primarily attributable to lower net licensing revenue that was partially offset by wholesale margins.

 

GAAP net loss was approximately $5.3 million for the fourth quarter, or ($0.28)  per basic and diluted share,  compared with a GAAP net loss of $0.3 million, or ($0.02) per basic and diluted share, for the prior year quarter.  The current year quarter’s net loss is primarily attributable to a $6.2 million impairment charge related to the Judith Ripka Trademarks.  After adjusting for certain cash and non-cash items, non-GAAP net income for the quarters ended December 31,  2019 and December 31,  2018 was approximately $0.9 million, or $0.05 per diluted share,  and approximately $1.2 million, or $0.07  per diluted share, respectively.

 

Adjusted EBITDA for the fourth quarter of 2019 decreased approximately $0.2  million to $1.5  million,  compared with approximately $1.7 million in the prior year quarter.

 

 

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 2

 

Full Year December 31,  2019 Financial Results

 

Net revenue for the year ended December 31,  2019 was $41.7 million, an increase of approximately $6.2 million or 18% over the prior year. The increase in revenue for the current year was primarily attributable to expansion of the Company’s jewelry wholesale and e-commerce sales and wholesale apparel sales.  Gross profit for the year ended December 31,  2019 declined approximately $1.3  million to $31.5 million from $32.8 million in the prior year, primarily attributable to lower net licensing revenue and was partially offset by wholesale margins.

 

GAAP net loss was approximately $3.4 million for the current year, or ($0.18) per basic and diluted share, compared with $1.1 million of net income, or $0.06 per basic and diluted share from the prior year. After adjusting for certain cash and non-cash items, non-GAAP net income for the year ended December 31,  2019 was $4.8 million, and non-GAAP earnings per share was $0.25  per diluted share, compared with $6.5 million, or $0.36 per diluted share in the prior year.

 

Adjusted EBITDA for the year ended December 31,  2019 was approximately $7.1 million, compared with approximately $8.4  million in 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 ("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 December 31,  2019 remained strong, with stockholders' equity of approximately $98.5 million, cash and cash equivalents of $4.6 million, and working capital, exclusive of the current portion of lease obligations and any contingent obligations payable in stock, of approximately $9.5 million. During the current year, the Company made payments on its debt obligations of approximately $4.7 million.

 

The Company currently expects  the impacts of the COVID-19 pandemic are significantly adversely affecting its business, financial condition and operating results and are expected to continue to do so for the near future.  For more information see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Operating Results – Other factors” of our Annual report on Form 10-K for the year ended December 31, 2019.

 

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,  April 13,  2020. 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 1-855-327-6837. 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 10009142.

 

About Xcel Brands

Xcel Brands, Inc. (NASDAQ:XELB) is a media and consumer products company engaged in the design, production, marketing, wholesale, 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.

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 3

 

Xcel was founded by Robert W. D’Loren in 2011 with a vision to reimagine shopping, entertainment, and social as one. Xcel owns the Isaac Mizrahi, Judith Ripka, Halston, and C. Wonder brands, and it owns and manages the Longaberger brand through its controlling interest in Longaberger Licensing LLC,  pioneering a ubiquitous sales strategy which includes the promotion and sale of products under its brands through interactive television, brick-and-mortar retail, e-commerce and peer to peer 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 an experienced team of 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, 2019 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.

 

For further information please contact:

 

Andrew Berger

SM Berger & Company, Inc.

216-464-6400

andrew@smberger.com

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 4

 

Xcel Brands, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

    

December 31, 2019

    

December 31, 2018

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,641 

 

$

8,837 

 

Accounts receivable, net

 

 

10,622 

 

 

11,010 

 

Inventory

 

 

899 

 

 

1,988 

 

Prepaid expenses and other current assets

 

 

1,404 

 

 

2,040 

 

Total current assets

 

 

17,566 

 

 

23,875 

 

Property and equipment, net

 

 

3,666 

 

 

3,202 

 

Operating lease right-of-use assets

 

 

9,250 

 

 

 

Trademarks and other intangibles, net

 

 

111,095 

 

 

108,989 

 

Restricted cash

 

 

1,109 

 

 

1,482 

 

Other assets

 

 

505 

 

 

511 

 

Total non-current assets

 

 

125,625 

 

 

114,184 

 

Total Assets

 

$

143,191 

 

$

138,059 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

4,391 

 

$

5,140 

 

Accrued payroll

 

 

1,444 

 

 

2,011 

 

Current portion of accrued rent liability

 

 

 

 

690 

 

Current portion of operating lease obligation

 

 

1,752 

 

 

 

Current portion of long-term debt

 

 

2,250 

 

 

5,325 

 

Current portion of long-term debt, contingent obligations

 

 

 

 

2,950 

 

Total current liabilities

 

 

9,837 

 

 

16,116 

 

Long-Term Liabilities:

 

 

 

 

 

 

 

Long-term portion of accrued rent liability

 

 

 

 

2,202 

 

Long-term portion of operating lease obligation

 

 

9,773 

 

 

 

Long-term debt, less current portion

 

 

17,471 

 

 

11,300 

 

Deferred tax liabilities, net

 

 

7,434 

 

 

8,139 

 

Other long-term liabilities

 

 

224 

 

 

420 

 

Total long-term liabilities

 

 

34,902 

 

 

22,061 

 

Total Liabilities

 

 

44,739 

 

 

38,177 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding

 

 

 

 

 

Common stock, $.001 par value, 50,000,000 shares authorized at December 31, 2019 and December 31, 2018, respectively, and 18,866,417 and 18,138,616 issued and outstanding at December 31, 2019 and December 31, 2018, respectively

 

 

19 

 

 

18 

 

Paid-in capital

 

 

101,736 

 

 

100,097 

 

Accumulated deficit

 

 

(3,659)

 

 

(233)

 

 Total Xcel Brands, Inc. Stockholders' Equity

 

 

98,096 

 

 

99,882 

 

Non-controlling interest

 

 

356 

 

 

 

Total Stockholders' Equity

 

 

98,452 

 

 

99,882 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

$

143,191 

 

$

138,059 

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 5

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

For the Three Months Ended
December 31,

 

For the Twelve Months Ended
December 31,

 

 

    

2019 

    

2018 

    

2019 

    

2018 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Net licensing revenue

 

$

5,341 

 

$

6,745 

 

$

26,435 

 

$

31,190 

 

Net sales

 

 

6,015 

 

 

3,201 

 

 

15,292 

 

 

4,276 

 

  Net revenue

 

 

11,356 

 

 

9,946 

 

 

41,727 

 

 

35,466 

 

Cost of goods sold (sales)

 

 

3,723 

 

 

2,062 

 

 

10,272 

 

 

2,702 

 

    Gross Profit

 

 

7,633 

 

 

7,884 

 

 

31,455 

 

 

32,764 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, benefits and employment taxes

 

 

3,796 

 

 

3,850 

 

 

15,834 

 

 

16,560 

 

Other design and marketing costs

 

 

812 

 

 

851 

 

 

3,164 

 

 

2,696 

 

Other selling, general and administrative expenses

 

 

1,538 

 

 

1,520 

 

 

5,552 

 

 

5,211 

 

Costs in connection with potential acquisition

 

 

1059 

 

 

 

 

1290 

 

 

 

Facilities exit charge

 

 

 

 

799 

 

 

 

 

799 

 

Stock-based compensation

 

 

199 

 

 

373 

 

 

976 

 

 

1,788 

 

Depreciation and amortization

 

 

963 

 

 

457 

 

 

3,902 

 

 

1,780 

 

Impairment of intangible assets

 

 

6,200 

 

 

 

 

6,200 

 

 

 

Total operating costs and expenses

 

 

14,567 

 

 

7,850 

 

 

36,918 

 

 

28,834 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on reduction of contingent obligation

 

 

 

 

 

 

2,850 

 

 

 

Total other income

 

 

 

 

 

 

2,850 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

 

(6,934)

 

 

34 

 

 

(2,613)

 

 

3,930 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and finance expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense - term debt

 

 

304 

 

 

206 

 

 

1,211 

 

 

912 

 

Other interest and finance charges

 

 

13 

 

 

(5)

 

 

74 

 

 

99 

 

Loss on extinguishment of debt

 

 

 

 

 

 

189 

 

 

 

Total interest and finance expense

 

 

317 

 

 

201 

 

 

1,474 

 

 

1,011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before income taxes

 

 

(7,251)

 

 

(167)

 

 

(4,087)

 

 

2,919 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (benefit) provision

 

 

(1,922)

 

 

114 

 

 

(642)

 

 

1,831 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(5,329)

 

 

(281)

 

 

(3,445)

 

 

1,088 

 

Less: Net loss attributable to non-controlling interest

 

 

(19)

 

 

 

 

(19)

 

 

 

Net (loss) income attributable to Xcel Brands, Inc. stockholders

 

$

(5,310)

 

$

(281)

 

$

(3,426)

 

$

1,088 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net (loss) income per share:

 

$

(0.28)

 

$

(0.02)

 

$

(0.18)

 

$

0.06 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income per share:

 

$

(0.28)

 

$

(0.02)

 

$

(0.18)

 

$

0.06 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

18,911,760 

 

 

18,210,104 

 

 

18,857,657 

 

 

18,280,788 

 

Diluted weighted average common shares outstanding

 

 

18,911,760 

 

 

18,210,104 

 

 

18,857,657 

 

 

18,281,638 

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 6

 

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

For the Year Ended
December 31,

 

 

    

2019 

    

2018 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,445)

 

$

1,088 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

3,902 

 

 

1,780 

 

Impairment of intangible assets

 

 

6,200 

 

 

 

Amortization of deferred finance costs

 

 

146 

 

 

169 

 

Stock-based compensation

 

 

976 

 

 

1,788 

 

Amortization of note discount

 

 

16 

 

 

41 

 

Allowance for doubtful accounts

 

 

(50)

 

 

172 

 

Loss on extinguishment of debt

 

 

189 

 

 

 

Deferred income tax provision

 

 

(705)

 

 

1,764 

 

Gain on reduction of contingent obligation

 

 

(2,850)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

438 

 

 

(2,653)

 

Inventory

 

 

1,089 

 

 

(1,988)

 

Prepaid expenses and other assets

 

 

(59)

 

 

(373)

 

Accounts payable, accrued expenses and other current liabilities

 

 

(1,454)

 

 

4,382 

 

Deferred revenue

 

 

(266)

 

 

256 

 

Cash paid in excess of rent expense

 

 

(431)

 

 

 

     Other liabilities

 

 

(196)

 

 

167 

 

Net cash provided by operating activities

 

 

3,500 

 

 

6,593 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Cash consideration for asset acquisition of the Halston Heritage Brand

 

 

 

 

 

 

 

Cost to acquire intangible assets

 

 

(8,830)

 

 

 

Investment in joint venture

 

 

(375)

 

 

 

Purchase of property and equipment

 

 

(1,133)

 

 

(1,476)

 

Net cash used in investing activities

 

 

(10,338)

 

 

(1,476)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Shares repurchased including vested restricted stock in exchange for

 

 

 

 

 

 

 

withholding taxes

 

 

(174)

 

 

(1,033)

 

Payment of deferred finance costs

 

 

(315)

 

 

 

Proceeds from long-term debt

 

 

7,500 

 

 

 

Payment of long-term debt

 

 

(4,742)

 

 

(5,459)

 

Net cash provided by (used in) financing activities

 

 

2,269 

 

 

(6,492)

 

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(4,569)

 

 

(1,375)

 

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

10,319 

 

 

11,694 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash at end of period

 

$

5,750 

 

$

10,319 

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 7

 

 

 

For the Year Ended
December 31,

 

 

    

2019 

    

2018 

 

 

 

 

 

 

 

 

 

Reconciliation to amounts on consolidated balance sheets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,641 

 

$

8,837 

 

Restricted cash

 

 

1,109 

 

 

1,482 

 

Total cash, cash equivalents, and restricted cash

 

$

5,750 

 

$

10,319 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

Operating lease right-of-use asset

 

$

10,409 

 

$

-

 

Operating lease obligation

 

$

13,210 

 

$

-

 

Reduction of accrued rent

 

$

2,801 

 

$

-

 

Settlement of seller note through offset to receivable

 

$

600 

 

$

-

 

Settlement of contingent obligation through offset to note receivable

 

$

100 

 

$

100 

 

Issuance of common stock in connection with Halston Heritage assets acquisition

 

$

1,058 

 

$

-

 

Contingent obligation related to acquisition of Halston Heritage assets at fair value

 

$

900 

 

$

-

 

Liability for equity-based bonuses

 

$

220 

 

$

(345)

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

  Cash paid during the period for income taxes

 

$

136 

 

$

302 

 

  Cash paid during the period for interest

 

$

1,176 

 

$

969 

 

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 8

 

 

 

 

Three Months Ended

 

Year Ended

 

($ in thousands)

 

December 31,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

 

 

    

(Unaudited)

    

(Unaudited)

    

(Unaudited)

    

(Unaudited)

 

Net (loss) income

 

$

(5,329)

 

$

(281)

 

$

(3,445)

 

$

1,088 

 

Amortization of trademarks

 

 

796 

 

 

260 

 

 

3,105 

 

 

1,031 

 

Impairment of intangible assets

 

 

6,200 

 

 

 

 

6,200 

 

 

 

Non-cash interest and finance expense

 

 

 

 

10 

 

 

16 

 

 

41 

 

Stock-based compensation

 

 

199 

 

 

373 

 

 

976 

 

 

1,788 

 

Loss on extinguishment of debt

 

 

 

 

 

 

189 

 

 

 

Gain on reduction of contingent obligations

 

 

 

 

 

 

(2,850)

 

 

 

Costs in connection with potential business combinations

 

 

1,059 

 

 

 

 

1,290 

 

 

 

Non-recurring facility exit charges

 

 

 

 

799 

 

 

 

 

799 

 

Deferred income tax (benefit) provision

 

 

(1,985)

 

 

47 

 

 

(705)

 

 

1,764 

 

Non-GAAP net income

 

$

940 

 

$

1,208 

 

$

4,776 

 

$

6,511 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

 

 

    

(Unaudited)

    

(Unaudited)

    

(Unaudited)

    

(Unaudited)

 

Diluted (loss) earnings per share

 

$

(0.28)

 

$

(0.02)

 

$

(0.18)

 

$

0.06 

 

Amortization of trademarks

 

 

0.04 

 

 

0.02 

 

 

0.16 

 

 

0.06 

 

Impairment of intangible assets

 

 

0.33 

 

 

 

 

0.33 

 

 

 

Non-cash interest and finance expense

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

0.01 

 

 

0.02 

 

 

0.05 

 

 

0.10 

 

Loss on extinguishment of debt

 

 

 

 

 

 

0.01 

 

 

 

Gain on reduction of contingent obligations

 

 

 

 

 

 

(0.15)

 

 

 

Costs in connection with potential acquisition

 

 

0.05 

 

 

 

 

0.07 

 

 

 

Non-recurring facility exit charges

 

 

 

 

0.04 

 

 

 

 

0.04 

 

Deferred income tax (benefit) provision

 

 

(0.10)

 

 

0.01 

 

 

(0.04)

 

 

0.10 

 

Non-GAAP diluted EPS

 

$

0.05 

 

$

0.07 

 

$

0.25 

 

$

0.36 

 

Non-GAAP weighted average diluted shares

 

 

18,913,476 

 

 

18,210,883 

 

 

18,858,379 

 

 

18,281,638 

 

 

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 9

 

 

 

Three Months Ended

 

Year Ended

 

($ in thousands)

 

December 31,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

 

 

    

(Unaudited)

    

(Unaudited)

    

(Unaudited)

    

(Unaudited)

 

Net (loss) income

 

$

(5,329)

 

$

(281)

 

$

(3,445)

 

$

1,088 

 

Impairment of intangible assets

 

 

6,200 

 

 

 

 

6,200 

 

 

 

 

Depreciation and amortization

 

 

963 

 

 

457 

 

 

3,902 

 

 

1,780 

 

Interest and finance expense

 

 

317 

 

 

201 

 

 

1,285 

 

 

1,011 

 

Income tax (benefit) provision

 

 

(1,922)

 

 

114 

 

 

(642)

 

 

1,831 

 

State and local franchise taxes

 

 

38 

 

 

33 

 

 

197 

 

 

113 

 

Stock-based compensation

 

 

199 

 

 

373 

 

 

976 

 

 

1,788 

 

Loss on extinguishment of debt

 

 

 

 

 

 

189 

 

 

 

Gain on reduction of contingent obligations

 

 

 

 

 

 

(2,850)

 

 

 

Costs in connection with Potential business combinations

 

 

1,059 

 

 

 

 

1,290 

 

 

 

Non-recurring facility exit charges

 

 

 

 

799 

 

 

 

 

799 

 

Adjusted EBITDA

 

$

1,525 

 

$

1,696 

 

$

7,102 

 

$

8,410 

 

 

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 intangible asset impairments, amortization of trademarks, stock-based compensation, non-cash interest and finance expense from discounted debt related to acquired

assets, loss on extinguishment of debt, gain on reduction of contingent obligations, costs in connection with potential acquisitions, non-recurring facility exit charges, and deferred income taxes. 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 (loss) before interest and finance expenses (including loss on extinguishment of debt, if any), income taxes, other state and local franchise taxes, depreciation and amortization, intangible asset impairments, stock-based compensation, gain on reduction of contingent obligations, costs in connection with potential acquisitions, and non-recurring facility exit charges.

 

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 these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus these non-GAAP measures 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 these measures in a different manner than we do. 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

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM

Page 10

 

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.

1333 Broadway,  10th floor • new york, new york • 10018

Phone: 347-727-2474 • INFO@XCELBRANDS.COM