Apex Global Brands Reports First Quarter 2021 Financial Results
Apex Global Brands (Nasdaq: APEX) reported financial results for Q1 Fiscal 2021, with revenues declining to $4.0 million from $5.1 million year-over-year. Adjusted EBITDA fell slightly to $1.1 million, while the net loss improved to $1.8 million from $2.3 million. The company anticipates $9.0 million in tax refunds from the CARES Act and secured a $0.7 million PPP loan. Although facing challenges due to COVID-19 and non-renewed licenses, Apex is refining operations and reducing SG&A expenses. However, it did not provide revenue guidance for Fiscal 2021 due to ongoing uncertainties.
- Expecting $9.0 million in tax refunds from the CARES Act.
- SG&A expenses reduced to $2.9 million, down 25% year-over-year.
- Improved net loss to $1.8 million compared to $2.3 million in the prior year.
- Revenues declined 20% to $4.0 million; impacted by COVID-19 and license non-renewals.
- Operating loss of $9.0 million primarily due to $9.8 million in non-cash impairment charges.
First Quarter Fiscal 2021 Highlights versus First Quarter Fiscal 2020:
- Revenues declined to
$4.0 million from$5.1 million - SG&A expenses declined to
$2.9 million from$3.9 million - Adjusted EBITDA decreased slightly to
$1.1 million from$1.2 million - Net loss of
$1.8 million compared to a loss of$2.3 million
COVID-19 Response Update:
- Expecting tax refunds of
$9.0 million of previously paid federal taxes due to the CARES Act - Received a
$0.7 million Paycheck Protection Program loan under the CARES Act - Extended forbearance agreement with senior secured lender, including a suspension of interest and principal payments
SHERMAN OAKS, Calif., June 16, 2020 (GLOBE NEWSWIRE) -- Apex Global Brands (Nasdaq: APEX), a global brand management and licensing organization that markets a portfolio of high-equity lifestyle brands it owns, creates and elevates, today reported financial results for its first quarter of Fiscal 2021, which ended May 2, 2020.
“The global macro-events of the past three months have been and continue to be challenging. The retail industry is suffering. The fashion industry is suffering, and we are all focused on managing our way through this difficult period,” said Henry Stupp, Chief Executive Officer of Apex Global Brands. “As expected, revenues for the first quarter of Fiscal 2021 declined year-over-year due to a combination of the non-renewal of certain of our license agreements along with the impacts of COVID-19. While much is still uncertain, we can leverage times such as these to refine our operations and find new, innovative solutions to maximize our brand assets and reduce our expenses. We have improved our efficiencies and are now doing more with less, carefully managing our costs to achieve both a sequential and a year-over-year decline in our SG&A expenses.
“While our licensees’ e-commerce businesses saw notable improvements during the quarter, we are also fortunate that many of our global retail partners, who provide essential services such as groceries, have been able to remain open during shelter-at-home orders. Over the past few months, we’ve also begun to see increased consumer interest in our brands, and we continue to sign new licenses for various brands in our portfolio. Consumers are looking beyond private label programs towards brands like ours that evoke purpose and emotion, and they are willing to pay for better designed, better quality products. Our Interceptor tactical boot brand is praised for its higher quality, greater value price point, which allows us to explore category extensions domestically and abroad. Our entire range of Hi-Tec and Magnum products, from footwear to apparel and accessories, is respected for quality and design. This full circle in shopping behavior as consumers return to brands is a positive for our industry. Our wholesale and retail partners are adapting and demonstrating resilience as they continue to support our brands during these challenging times,” Mr. Stupp concluded.
CARES Act Benefits
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was passed by the U.S. federal government in March 2020, allows taxpayers to carryback net operating losses that otherwise could only be carried forward to future tax years. As a result of the carrybacks, Apex Global Brands expects to receive income tax refunds of approximately
During the first quarter of Fiscal 2021, the Company received a
Forbearance
Apex Global Brand and its senior secured lender agreed in April 2020 to a forbearance and amendment of their credit agreement. Apex’s earnings in Fiscal 2020 did not achieve the level of Adjusted EBITDA that was required by the senior secured credit agreement. However, the lender agreed not to enforce its rights through July 27, 2020. The forbearance agreement also has provisions that assist Apex’s cash management as the Company manages through the COVID-19 pandemic, which is expected to continue to have an adverse effect on Apex’s revenues, especially in the near term. Rather than receive interest and loan amortization payments in cash during the forbearance period, the Company’s senior secured lender has agreed to receive its interest payments in the form of additional principal amounts due. Apex’s senior lender also agreed to ease other requirements during the forbearance period by lowering the minimum Adjusted EBITDA, minimum cash and borrowing base requirements. At the conclusion of the forbearance period, these amended items revert to the original terms of the credit facilities. For further information on the forbearance, please refer to the Company’s Form 10-Q for the period ended May 2, 2020, which was filed today with the Securities and Exchange Commission.
Apex Global Brands’ subordinated lenders are also supporting the Company by agreeing to temporarily suspend cash interest payments on subordinated debt through October 1, 2020.
The timing of Apex’s tax refunds is dependent on processing by the Internal Revenue Service and therefore difficult to predict, but when received, a portion of these proceeds is expected to be used to pay the deferred interest and loan amortization payments due to the Company’s lenders.
Revenues
Revenues were
Operating and Non-Operating Expenses
Selling, general and administrative expenses, which comprise the Company’s normal operating expenses, were
The market capitalization of Apex and its revenue projections declined during the first quarter as a result of the COVID-19 pandemic, which necessitated a
Interest expense was
The Company reported an income tax benefit of
Profitability Measures
Primarily due to the
Net loss was
Adjusted EBITDA totaled
Balance Sheet & Liquidity Measures
As of May 2, 2020, the Company had cash and cash equivalents of
The Company had outstanding borrowings at May 2, 2020 of
Steve Brink, the Company’s Chief Financial Officer, commented, “As a result of the COVID-19 pandemic, Nasdaq temporarily suspended its
Fiscal 2021 Outlook
Due to the evolving and uncertain nature of the COVID-19 pandemic and its impact on Apex Global Brand’s business, the Company will not be providing Fiscal 2021 guidance at this time. While revenues are expected to be down year-over-year, so too will the Company’s expenses. In response to the anticipated decline in revenues, Apex Global Brands has implemented cost savings measures whose full effect will be more fully seen in the second quarter of Fiscal 2021. Apex cannot provide assurance that these cost savings measures will be adequate to offset further revenue declines, and COVID-19 may have a material impact on operating results, cash flows and financial condition beyond Apex’s current expectations. The Company has minimum guarantees with many of its licensing partners that can support its royalty revenues, but the full extent to which these minimum guarantees will be maintained throughout the duration of the pandemic cannot be presently determined.
Apex Global Brands 2020 Annual Shareholder Meeting
Due to the evolving and uncertain nature of the COVID-19 pandemic and its impact on Apex Global Brands, the Company is expecting to hold its annual meeting of stockholders in October 2020 using a virtual format. These plans are subject to change.
About Apex Global Brands
Apex Global Brands is a global brand management and licensing organization that markets a portfolio of high-equity lifestyle brands it owns, creates and elevates. The brand portfolio spans multiple consumer product categories and retail tiers around the world and includes Hi-Tec®, Magnum®, 50 Peaks®, Interceptor®, Cherokee®, Tony Hawk®, Point Cove®, Carole Little®, Everyday California® and Sideout®. The Company currently maintains license agreements with leading retailers and manufacturers that span approximately 140 countries in over 20,000 retail locations and digital commerce. For more information, please visit the Company's website at apexglobalbrands.com.
Forward Looking Statements
This news release may contain forward-looking statements regarding future events and the future performance of Apex Global Brands. Forward-looking statements in this press release include, without limitation, express or implied statements regarding: the Company’s forecasted operating results; the Company’s anticipated receipt of federal income tax refunds, including the timing thereof; the effects of the Company’s cost saving efforts; the anticipated and ongoing impacts of the COVID-19 pandemic; the Company’s expectations regarding its new and existing license agreements and the performance of its licensees thereunder; the Company’s ability to sustain necessary liquidity and grow its business; and anticipated market developments and opportunities. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and is based on currently available market, operating, financial and competitive information and assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expected or projected, including, among others, risks that: the Company will not receive the anticipated federal income tax refunds in a timely manner or at all; the Company and its partners will not achieve the results anticipated in the statements made in this release; the impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers and the Company, on its business, financial condition and results of operations is more adverse than currently predicted; that anticipated revenues will be lower than anticipated or that expenses will be higher than anticipated, which could cause the Company to fail to meet the financial covenants in its credit facility and thereby give its lender the right to terminate the forbearance and declare an event of default and to exercise its rights under the credit facility; global economic conditions and the financial condition of the apparel and retail industry and/or adverse changes in licensee or consumer acceptance of products bearing the Company’s brands may lead to reduced royalties; the ability and/or commitment of the Company’s licensees to design, manufacture and market Cherokee®, Hi-Tec®, Magnum®, 50 Peaks®, Interceptor®, Carole Little®, Tony Hawk® and Hawk Brands®, Everyday California® and Sideout® branded products could cause our results to differ from our anticipations; the Company’s dependence on a select group of licensees for most of the Company’s revenues makes us susceptible to changes in those organizations; our level of indebtedness and restrictions under our indebtedness; and the Company’s dependence on its key management personnel could leave us exposed to disruption on any termination of service. A more detailed discussion of such risks and uncertainties are described in the Company’s annual report on Form 10-K filed on April 30, 2020, its periodic reports on Forms 10-Q and 8-K, and subsequent filings with the SEC the Company makes from time to time. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including Adjusted EBITDA, may be considered non-GAAP financial measures. Apex believes this information is useful to investors as a measure of profitability, because it helps them compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization, and the cost of acquiring or disposing of businesses and restructuring our operations. In addition, the Company’s management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company’s operating performance and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies. A reconciliation of net loss from continuing operations as reported in our consolidated statements of operations is reconciled to Adjusted EBITDA in tabular form later in this release under the heading “Reconciliation of GAAP to Non-GAAP Financial Data”.
Investor Contacts:
Apex Global Brands
Steve Brink, CFO
818-908-9868
Addo Investor Relations
Kimberly Esterkin/Patricia Nir
310-829-5400
APEX GLOBAL BRANDS INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share and per share amounts)
| May 2, 2020 | February 1, 2020 | |||||||||
| 74%; width: | 1%; width: | 1%; width: | 1%; width: | 9%; width: | 1%; width: | 1%; width: | 1%; width: | 1%; width: | 9%; width: | 1%; width: |
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 1,259 | $ | 1,209 | ||||||
| Accounts receivable, net | 3,319 | 4,962 | ||||||||
| Income tax and other receivables | 8,869 | 157 | ||||||||
| Prepaid expenses and other current assets | 1,077 | 1,431 | ||||||||
| Total current assets | 14,524 | 7,759 | ||||||||
| Property and equipment, net | 316 | 319 | ||||||||
| Intangible assets, net | 54,547 | 59,110 | ||||||||
| Goodwill | 6,752 | 12,152 | ||||||||
| Accrued revenue and other assets | 3,505 | 3,582 | ||||||||
| Total assets | $ | 79,644 | $ | 82,922 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable and other current liabilities | $ | 5,225 | $ | 6,282 | ||||||
| Current portion of long-term debt | 56,786 | 56,044 | ||||||||
| Deferred revenue—current | 2,580 | 3,551 | ||||||||
| Total current liabilities | 64,591 | 65,877 | ||||||||
| Long-term liabilities: | ||||||||||
| Long-term debt | 491 | — | ||||||||
| Deferred income taxes | 8,781 | 9,515 | ||||||||
| Long-term lease liabilities | 1,309 | 1,389 | ||||||||
| Other liabilities | 792 | 794 | ||||||||
| Total liabilities | 75,964 | 77,575 | ||||||||
| Commitments and Contingencies | ||||||||||
| Stockholders’ Equity: | ||||||||||
| Preferred stock, $.02 par value, 1,000,000 shares authorized, none issued | — | — | ||||||||
| Common stock, $.02 par value, 10,000,000 shares authorized, shares issued 5,570,530 (May 2, 2020) and 5,570,530 (February 1, 2020) | 111 | 111 | ||||||||
| Additional paid-in capital | 78,723 | 78,541 | ||||||||
| Accumulated deficit | (75,154 | ) | (73,305 | ) | ||||||
| Total stockholders’ equity | 3,680 | 5,347 | ||||||||
| Total liabilities and stockholders’ equity | 79,644 | $ | 82,922 |
APEX GLOBAL BRANDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
| Three Months Ended | ||||||||||
| May 2, 2020 | May 4, 2019 | |||||||||
| 69%; width: | 6%; width: | 1%; width: | 1%; width: | 9%; width: | 1%; width: | 1%; width: | 1%; width: | 1%; width: | 9%; width: | 1%; width: |
| Operating expenses: | ||||||||||
| Selling, general and administrative expenses | 2,896 | 3,855 | ||||||||
| Stock-based compensation | 150 | 208 | ||||||||
| Business acquisition and integration costs | — | 66 | ||||||||
| Restructuring charges | — | 42 | ||||||||
| Intangible assets and goodwill impairment charges | 9,800 | — | ||||||||
| Depreciation and amortization | 202 | 257 | ||||||||
| Total operating expenses | 13,048 | 4,428 | ||||||||
| Operating (loss) income | (9,014 | ) | 624 | |||||||
| Other income (expense): | ||||||||||
| Interest expense | (2,181 | ) | (2,245 | ) | ||||||
| Other (expense) income, net | (34 | ) | 1 | |||||||
| Total other expense, net | (2,215 | ) | (2,244 | ) | ||||||
| Loss before income taxes | (11,229 | ) | (1,620 | ) | ||||||
| (Benefit) provision for income taxes | (9,380 | ) | 638 | |||||||
| Net loss | $ | (1,849 | ) | $ | (2,258 | ) | ||||
| Net loss per share: | ||||||||||
| Basic loss per share | $ | (0.33 | ) | $ | (0.44 | ) | ||||
| Diluted loss per share | $ | (0.33 | ) | $ | (0.44 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||
| Basic | 5,571 | 5,128 | ||||||||
| Diluted | 5,571 | 5,128 |
APEX GLOBAL BRANDS INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL DATA
(In thousands)
We define Adjusted EBITDA as net income before (i) interest expense, (ii) other expense (income), (iii) (benefit) provision for income taxes, (iv) depreciation and amortization, (v) intangible assets and goodwill impairment charges, (vi) restructuring charges, (vii) business acquisition and integration costs and (viii) stock-based compensation and stock warrant charges. Adjusted EBITDA is not defined under generally accepted accounting principles (“GAAP”) and it may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA, along with GAAP measures, as a measure of profitability, because Adjusted EBITDA helps us compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization, and the cost of acquiring or disposing of businesses and restructuring our operations. We believe it is useful to investors for the same reasons. Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our long-term debt, non-operating income or expense items, our provision for income taxes, the effect of our expenditures for capital assets and certain intangible assets, the costs of acquiring or disposing of businesses and restructuring our operations, or our non-cash charges for stock-based compensation and stock warrants. A reconciliation from net loss as reported in our condensed consolidated statement of operations to Adjusted EBITDA is as follows:
| Three Months Ended | ||||||||||
| (In thousands) | May 2, 2020 | May 4, 2019 | ||||||||
| 74%; width: | 1%; width: | 1%; width: | 1%; width: | 9%; width: | 1%; width: | 1%; width: | 1%; width: | 1%; width: | 9%; width: | 1%; width: |
| (Benefit) provision for income taxes | (9,380 | ) | 638 | |||||||
| Interest expense | 2,181 | 2,245 | ||||||||
| Other expense (income) | 34 | (1 | ) | |||||||
| Depreciation and amortization | 202 | 257 | ||||||||
| Intangible assets and goodwill impairment charge | 9,800 | — | ||||||||
| Restructuring charges | — | 42 | ||||||||
| Business acquisition and integration costs | — | 66 | ||||||||
| Stock-based compensation | 150 | 208 | ||||||||
| Adjusted EBITDA | $ | 1,138 | $ | 1,197 |
FAQ
What were Apex's revenues for Q1 Fiscal 2021?
How much did Apex's net loss improve in Q1 Fiscal 2021?
What tax benefits is Apex expecting due to the CARES Act?
What challenges did Apex face in Q1 Fiscal 2021?
Did Apex provide guidance for Fiscal 2021?
