Iconix Reports Financial Results for the Second Quarter 2020
Iconix Brand Group reported total revenue of $22.3 million for Q2 2020, a 35% decline from $34.4 million in Q2 2019. GAAP Operating Income fell to $3.5 million, down from $18.6 million year-over-year. Adjusted EBITDA also decreased 44% to $11.4 million. The company improved its cost structure by reducing SG&A expenses by 9%. Following the sale of Umbro China, net proceeds of $59.6 million were utilized to repay $44.7 million of debt. No fiscal 2020 guidance was provided due to COVID-19 uncertainties.
- Reduced SG&A expenses by 9% year-over-year.
- Completed sale of Umbro China, generating $59.6 million in net proceeds.
- Total revenue decreased by 35% year-over-year.
- GAAP net income reflected a loss of $17.4 million, down from a profit of $1.3 million.
- Adjusted EBITDA down 44% from the previous year.
- Total revenue of
$22.3 million compared to$34.4 million in the prior year quarter. - GAAP Operating Income
$3.5 million as compared to$18.6 million in the prior year quarter. - Adjusted EBITDA of
$11.4 million , compared to$20.3 million in the prior year quarter. - Continued to improve cost structure, decreasing SG&A expenses
9% from prior year quarter. - Completed Sale of Umbro China in July 2020 with net proceeds of
$59.6 million and repaid$44.7 million of Senior Secured Term Loan.
NEW YORK, Aug. 12, 2020 (GLOBE NEWSWIRE) -- Iconix Brand Group, Inc. (Nasdaq: ICON) ("Iconix" or the "Company") today reported financial results for the second quarter ended June 30, 2020.
Bob Galvin, CEO commented, “With the onset of COVID-19 during the first quarter, we quickly responded to remove costs and preserve liquidity. During the second quarter while we continued those efforts, we also continued to develop our pipeline of future business, as we have signed 92 deals during 2020 for aggregate guaranteed minimum royalties of approximately
Galvin continued, “In late July, we closed the previously announced sale of Umbro China and realized net proceeds of over
As previously disclosed, on July 10, 2020, the Company’s Board of Directors determined to commence a process to broaden its exploration of strategic alternatives available to the Company to enhance shareholder value. The Board has authorized management and its external advisors to consider a broader range of strategic alternatives, including a potential sale of the Company, merger or other business combination, a recapitalization of its existing capital structure, financings or re-financings of its existing indebtedness, sales of equity and equity-linked securities, dispositions of discrete brands and related assets, licensing or other strategic transactions involving the Company, or any combination of the foregoing. This is in addition to the Company’s previously announced executed definitive agreements to sell the rights to the UMBRO and STARTER brands in China. In connection with such strategic review, the Company retained Ducera Partners LLC as a financial advisor, together with Dechert LLP, its existing legal counsel, to assist in this effort. There can be no assurance that the exploration of strategic alternatives will result in any transaction or specific course of action. The Company does not intend to disclose developments with respect to the exploration of strategic alternatives unless and until its Board of Directors has approved a specific transaction or course of action or the Company has otherwise determined that further disclosure is appropriate or required by law
second Quarter 2020Financial Results
GAAP Revenue by Segment
(000’s)
| For the Three Months | For the Six Months | |||||||||||
| Ended June 30, | Ended June 30, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Licensing revenue: | ||||||||||||
| Women's | $ | 4,409 | $ | 8,171 | $ | 10,887 | $ | 16,538 | ||||
| Men's | 2,957 | 6,614 | 9,713 | 17,550 | ||||||||
| Home | 3,787 | 4,285 | 6,949 | 7,775 | ||||||||
| International | 11,124 | 15,324 | 22,677 | 28,473 | ||||||||
| $ | 22,277 | $ | 34,394 | $ | 50,226 | $ | 70,336 | |||||
For the second quarter of 2020, total revenue was
SG&A Expenses:
Total SG&A expenses in the second quarter of 2020 were
Trademark and Investment Impairment:
In the second quarter of 2020, the Company recorded a non-cash trademark impairment charge of
Operating Income and Adjusted EBITDA (1):
Adjusted EBITDA is a non-GAAP metric, and a reconciliation table is included below.
Operating income for the second quarter of 2020 was
Note: All items in the following tables are attributable to the Company’s interest in its subsidiaries and joint ventures, as applicable, and exclude the results related to any non-controlling interest in such entities. Certain numbers may not add due to rounding.
| Adjusted EBITDA by Segment (1) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||
| (000's) | 2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||
| Women's | $ | 4,126 | $ | 8,622 | -52 | % | $ | 9,675 | $ | 16,249 | -40 | % | ||||||||
| Men's | 2,016 | 3,478 | -42 | % | 4,429 | 7,545 | -41 | % | ||||||||||||
| Home | 3,517 | 3,783 | -7 | % | 6,081 | 6,789 | -10 | % | ||||||||||||
| International | 5,165 | 9,306 | -44 | % | 11,075 | 17,299 | -36 | % | ||||||||||||
| Corporate | (3,398 | ) | (4,858 | ) | 30 | % | (8,224 | ) | (9,109 | ) | 10 | % | ||||||||
| Adjusted EBITDA | $ | 11,426 | $ | 20,331 | -44 | % | $ | 23,036 | $ | 38,773 | -41 | % | ||||||||
| Adjusted EBITDA Margin (2) | 51 | % | 59 | % | 46 | % | 55 | % | ||||||||||||
Adjusted EBITDA margin in the second quarter of 2020 was
Interest Expense and Other (Income) Loss, net:
Interest expense in the second quarter of 2020 was
Provision for Income Taxes:
The effective income tax rate for the second quarter of 2020 is approximately
GAAP Net Income and GAAP Diluted EPS:
GAAP net income attributable to Iconix for the second quarter of 2020 reflected a loss of
Adjusted EBITDA (1):
Adjusted EBITDA for the second quarter of 2020 was
| Adjusted EBITDA: (1) | |||||||||
| (000's) | |||||||||
| For the Three Months Ended June 30, | |||||||||
| 2020 | 2019 | % Change | |||||||
| GAAP Operating Income (Loss) | $ | 3,549 | $ | 18,572 | |||||
| Add: | |||||||||
| stock-based compensation expense | 240 | 259 | |||||||
| depreciation and amortization | 306 | 482 | |||||||
| contract asset write offs, net | 117 | - | |||||||
| impairment charges | 5,262 | - | |||||||
| Gain on Sale of Investments | (1,600 | ) | - | ||||||
| special charges | 5,307 | 3,198 | |||||||
| non-controlling interest | (1,755 | ) | (2,174 | ) | |||||
| non-controlling interest related to D&A and impairment | - | (7 | ) | ||||||
| 7,877 | 1,758 | ||||||||
| Adjusted EBITDA | $ | 11,426 | $ | 20,331 | -44 | % | |||
| Adjusted EBITDA Margin (2) | 51 | % | 59 | % | |||||
| Adjusted EBITDA: (1) | |||||||||
| (000's) | |||||||||
| For the Six Months Ended June 30, | |||||||||
| 2020 | 2019 | % Change | |||||||
| GAAP Operating Income (Loss) | $ | (1,303 | ) | $ | 36,971 | ||||
| Add: | |||||||||
| stock-based compensation expense | 412 | 398 | |||||||
| depreciation and amortization | 579 | 974 | |||||||
| gain on sale of investments | (1,600 | ) | - | ||||||
| contract asset write offs, net | 119 | - | |||||||
| impairment charges | 18,995 | - | |||||||
| special charges | 8,843 | 5,978 | |||||||
| non-controlling interest | (2,579 | ) | (5,535 | ) | |||||
| non-controlling interest related to D&A and impairment | (430 | ) | (14 | ) | |||||
| 24,339 | 1,801 | ||||||||
| Adjusted EBITDA | $ | 23,036 | $ | 38,773 | -41 | % | |||
| Adjusted EBITDA Margin (2) | 46 | % | 55 | % | |||||
Balance Sheet and Liquidity:
| (000's) | June 30, 2020 | December 31, 2019 | ||||
| Cash Summary: | ||||||
| Unrestricted Domestic, Canada and China (Wholly Owned) | $ | 28,924 | $ | 29,144 | ||
| Unrestricted Luxembourg (Wholly Owned) | 14,287 | 17,023 | ||||
| Unrestricted in consolidated JV's | 7,440 | 9,298 | ||||
| Restricted Cash | 11,666 | 15,946 | ||||
| Total Cash | $ | 62,317 | $ | 71,411 | ||
| Debt Summary: | ||||||
| Senior Secured Notes due January 2043* | $ | 328,818 | $ | 338,130 | ||
| Variable Funding Note due January 2043 | 100,000 | 100,000 | ||||
| 94,430 | 94,430 | |||||
| Senior Secured Term Loan due August 2022 ** | 165,959 | 175,600 | ||||
| Payroll Protection Plan Loan | 1,307 | - | ||||
| Total Debt (Face Value) | $ | 690,514 | $ | 708,160 | ||
| *- The legal final maturity of the Securitization Notes is in January of 2043, as the Company did not repay or refinance the Securitization Notes prior to the anticipated repayment date. Therefore, beginning in January 2020, the Company is no longer required to make previously designated contractual principal payments. Future principal payments are formulaically based on a percentage of receipts of royalty revenue, and as such are subject to market factors outside of the Company’s control. There can be no assurance that all or any future principal payments projected for the Senior Secured Notes will be made in accordance with the projections provided. | ||||||
| **- As a result of the completion of the sale of Umbro China, the Company received | ||||||
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the globe, and the rapid and continuous economic developments, we are not providing guidance for fiscal year 2020 at this time. The impact of COVID-19 on our business could be material to our operating results, cash flows and financial condition. Due to the evolving and uncertain nature of this situation, we are not able to estimate the full extent of the impact on Iconix’s operating results, cash flows and financial condition. We will provide additional updates as the situation warrants.
About Iconix Brand Group, Inc.
Iconix Brand Group, Inc. owns, licenses and markets a portfolio of consumer brands including: CANDIE'S ®, BONGO ®, JOE BOXER ®, RAMPAGE ®, MUDD ®, MOSSIMO ®, LONDON FOG ®, OCEAN PACIFIC ®, DANSKIN ®, ROCAWEAR ®, CANNON ®, ROYAL VELVET ®, FIELDCREST ®, CHARISMA ®, STARTER ®, WAVERLY ®, ZOO YORK ®, UMBRO ®, LEE COOPER ®, ECKO UNLTD. ®, MARC ECKO ®, ARTFUL DODGER ®, and HYDRAULIC®. In addition, Iconix owns interests in the MATERIAL GIRL ®, ED HARDY ®, TRUTH OR DARE ®, MODERN AMUSEMENT ®, BUFFALO ® and PONY ® brands. The Company licenses its brands to a network of retailers and manufacturers. Through its in-house business development, merchandising, advertising and public relations departments, Iconix manages its brands to drive greater consumer awareness and brand loyalty.
Forward-Looking Statements
In addition to historical information, this press release contains forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include projections regarding the Company's beliefs and expectations about future performance and, in some cases, may be identified by words like "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "future," "will," "seek" and similar terms or phrases. These statements are based on the Company's beliefs and assumptions, which in turn are based on information available as of the date of this press release. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement and could harm the Company's business, prospects, results of operations, liquidity and financial condition and cause its stock price to decline significantly. Many of these factors are beyond the Company's ability to control or predict. Important factors that could cause the Company's actual results to differ materially from those indicated in the forward-looking statements include, among others: the occurrence of any strategic transaction and the impact of any potential strategic transaction, including acquisitions or dispositions, the ability of the Company's licensees to maintain their license agreements or to produce and market products bearing the Company's brand names, the Company's ability to retain and negotiate favorable licenses, the Company's ability to meet its outstanding debt obligations, the impact of COVID-19 on our and our licensees’ business, results of operations, financial condition and liquidity and the impact of COVID-19 on global production, manufacturing, distribution and sales and the events and risks referenced in the sections titled "Risk Factors" in the Company's Annual Report on Form 10‑K for the year ended December 31, 2019 and subsequent Quarterly Reports on Form 10‑Q and in other documents filed or furnished with the Securities and Exchange Commission. Our forward-looking statements do not reflect the potential impact of any acquisitions, mergers, dispositions, business development transactions, joint ventures or investments we may enter into or make in the future. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements are made only as of the date hereof and the Company undertakes no obligation to update or revise publicly any forward-looking statements, except as required by law.
Media contact:
John T. McClain
Executive Vice President and Chief Financial Officer
Iconix Brand Group, Inc.
jmcclain@iconixbrand.com
212-730-0030
Unaudited Consolidated Statement of Operations
(000’s, except earnings per share data)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Licensing revenue | $ | 22,277 | $ | 34,394 | $ | 50,226 | $ | 70,336 | ||||||||
| Selling, general and administrative expenses | 14,978 | 16,435 | 32,128 | 34,528 | ||||||||||||
| Depreciation and amortization | 306 | 482 | 579 | 974 | ||||||||||||
| Equity (earnings) loss on joint ventures | (218 | ) | (1,095 | ) | 1,427 | (2,137 | ) | |||||||||
| Gain on sale of investment | (1,600 | ) | — | (1,600 | ) | — | ||||||||||
| Investment impairment | 100 | — | 100 | — | ||||||||||||
| Trademark impairment | 5,162 | — | 18,895 | — | ||||||||||||
| Operating income (loss) | 3,549 | 18,572 | (1,303 | ) | 36,971 | |||||||||||
| Other expenses (income): | ||||||||||||||||
| Interest expense | 17,047 | 14,465 | 33,760 | 28,970 | ||||||||||||
| Interest income | (10 | ) | (90 | ) | (50 | ) | (162 | ) | ||||||||
| Other (income) loss, net | 2,933 | 1,140 | 2,136 | (18,795 | ) | |||||||||||
| Foreign currency translation (gain) loss | 130 | (258 | ) | 66 | 369 | |||||||||||
| Other expenses (income) – net | 20,100 | 15,257 | 35,912 | 10,382 | ||||||||||||
| Income (loss) before income taxes | (16,551 | ) | 3,315 | (37,215 | ) | 26,589 | ||||||||||
| (Benefit) Provision for income taxes | (871 | ) | (130 | ) | (876 | ) | 1,838 | |||||||||
| Net income (loss) | (15,680 | ) | 3,445 | (36,339 | ) | 24,751 | ||||||||||
| Less: Net income attributable to non-controlling interest | 1,755 | 2,174 | 2,579 | 5,535 | ||||||||||||
| Net income (loss) attributable to Iconix Brand Group, Inc. | $ | (17,435 | ) | $ | 1,271 | $ | (38,918 | ) | $ | 19,216 | ||||||
| Earnings (loss) per share: | ||||||||||||||||
| Basic | $ | (1.46 | ) | $ | 0.12 | $ | (3.32 | ) | $ | 2.04 | ||||||
| Diluted | $ | (1.46 | ) | $ | 0.12 | $ | (3.32 | ) | $ | 0.08 | ||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 11,859 | 10,377 | 11,816 | 9,426 | ||||||||||||
| Diluted | 11,859 | 10,377 | 11,816 | 44,779 | ||||||||||||
Footnotes
(1) Adjusted EBITDA is a non-GAAP financial measure, which represents operating income excluding stock-based compensation (benefit) expense, depreciation and amortization, impairment charges, costs associated with financings, special charges related to potential settlement and professional fees incurred as a result of cooperation with the Staff of the SEC, the SEC and related SDNY investigations, internal investigations, the previously disclosed class action and derivative litigations, costs related to the transition of Iconix management, but including gains on sales of trademarks and non-controlling interest. The Company believes Adjusted EBITDA is a useful financial measure in evaluating its financial condition because it is more reflective of the Company's business purpose, operations and cash expenses. Uses of cash flows that are not reflected in Adjusted EBITDA include interest payments and debt principal repayments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide Adjusted EBITDA information may calculate EBITDA and Adjusted EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.
| Adjusted EBITDA Reconciliation For the Three Months Ended June 30, (1): | ||||||||||||||||||||||||||
| GAAP Operating Income | Impairment | Special Charges | Gain on sale of Investments | Depreciation & Amortization | Stock Compensation | Contract Asset Impairment | Non-controlling Interest, net | Adjusted EBITDA | ||||||||||||||||||
| Charges | ||||||||||||||||||||||||||
| ($, 000s) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||
| Women's | 686 | 8,622 | 3,380 | - | - | - | - | - | - | - | - | - | 60 | - | - | - | 4,126 | 8,622 | ||||||||
| Men's | 2,036 | 4,952 | - | - | 124 | - | - | - | - | 13 | - | - | 16 | - | (160) | (1,487) | 2,016 | 3,478 | ||||||||
| Home | 1,735 | 3,782 | 1,782 | - | - | - | - | - | - | - | - | 1 | - | - | - | - | 3,517 | 3,783 | ||||||||
| International | 6,173 | 10,766 | - | - | - | - | - | - | 64 | 72 | - | 3 | 41 | - | -1,113 | -1,535 | 5,165 | 9,306 | ||||||||
| Corporate | (7,081) | (9,550) | 100 | - | 5,183 | 3,198 | (1,600) | - | 242 | 397 | 240 | 255 | - | - | -482 | 842 | (3,398) | (4,858) | ||||||||
| Total Income | 3,549 | 18,572 | 5,262 | - | 5,307 | 3,198 | (1,600) | - | 306 | 482 | 240 | 259 | 117 | - | (1,755) | (2,180) | 11,426 | 20,331 | ||||||||
| Adjusted EBITDA Reconciliation For the Six Months Ended June 30, (1): | ||||||||||||||||||||||||||
| GAAP Operating Income | Impairment Charges | Special Charges | Gain on sale of Investments | Depreciation & Amortization | Stock Compensation | Contract Asset Impairment | Non-controlling Interest, net | Adjusted EBITDA | ||||||||||||||||||
| ($, 000s) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2019 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||
| Women's | -457 | 16,249 | 10,069 | - | - | - | - | - | - | - | - | - | 63 | - | - | - | 9,675 | 16,249 | ||||||||
| Men's | 5,842 | 12,498 | 104 | - | 731 | - | - | - | 4 | 26 | - | - | 16 | - | (2,268) | (4,979) | 4,429 | 7,545 | ||||||||
| Home | 924 | 6,787 | 5,151 | - | - | - | - | - | - | - | 1 | 2 | 5 | - | - | - | 6,081 | 6,789 | ||||||||
| International | 8,013 | 19,189 | 3,548 | - | - | - | - | - | 131 | 161 | 2 | 6 | 35 | - | (654) | (2,057) | 11,075 | 17,299 | ||||||||
| Corporate | (15,625) | (17,752) | 123 | - | 8,112 | 5,978 | (1,600) | - | 444 | 787 | 409 | 390 | - | - | (87) | 1,488 | (8,224) | (9,109) | ||||||||
| Total Income | (1,303) | 36,971 | 18,995 | - | 8,843 | 5,978 | (1,600) | - | 579 | 974 | 412 | 398 | 119 | - | (3,009) | (5,548) | 23,036 | 38,773 | ||||||||
(2) Adjusted EBITDA margin is a non-GAAP financial measure, which represents Adjusted EBITDA as a percentage of revenue. The Company believes Adjusted EBITDA margin is a useful financial measure in evaluating its financial condition because it is more reflective of the Company's business purpose, operations and cash expenses. Uses of cash flows that are not reflected in Adjusted EBITDA margin include interest payments and debt principal repayments, which can be significant. As a result, Adjusted EBITDA margin should not be considered as a measure of our liquidity. Other companies that provide Adjusted EBITDA margin information may calculate EBITDA margin and Adjusted EBITDA margin differently than we do. The definition of Adjusted EBITDA margin may not be the same as the definitions used in any of our debt agreements.
FAQ
What were Iconix's total revenues for Q2 2020?
How much did Iconix's revenue decline in Q2 2020 compared to the previous year?
What was Iconix's GAAP net income for Q2 2020?
What initiatives did Iconix take to reduce expenses?
Did Iconix provide guidance for fiscal 2020?
