Xcel Brands, Inc. Announces Second Quarter 2022 Results
Xcel Brands reported a second quarter 2022 GAAP net income of $9.5 million, or $0.48 per diluted share, despite a non-GAAP net loss of $3.6 million.
The company recognized a $20.6 million gain from selling a majority interest in the Isaac Mizrahi brand, using 65% of proceeds to eliminate $4.5 million in debt. Revenue was $8.5 million, a 21% decrease from the prior year, driven by declining wholesale sales and lower licensing revenue due to the Mizrahi sale. Despite ongoing supply chain challenges, Xcel's balance sheet improved with no debt and $10.9 million in cash.
- GAAP net income of $9.5 million for Q2 2022, compared to a net loss in the prior year.
- Gained $20.6 million from the sale of a majority interest in the Isaac Mizrahi brand.
- Used approximately 65% of proceeds to pay off $4.5 million of debt, eliminating debt service expenses.
- Strong balance sheet with $10.9 million in cash and no debt as of June 30, 2022.
- Total revenue decreased by $2.3 million (21%) compared to the same quarter last year.
- Non-GAAP net loss of $3.6 million for Q2 2022 compared to a smaller loss in the prior year.
- Adjusted EBITDA was negative $2.8 million for the current quarter, down from a positive $0.9 million in the prior year.
- Revenue decline attributed to lower wholesale apparel sales and supply chain disruptions.
- Second quarter GAAP net income of
$9.5 million , or$0.48 per diluted share - Second quarter non-GAAP net loss of
$3.6 million , or$(0.18) per diluted share - During the quarter, Xcel sold a majority interest in its Isaac Mizrahi brand and entered into a joint venture and management agreement with the buyer, recognizing a gain of
$20.6 million - Approximately
65% of cash proceeds from the Isaac Mizrahi transaction used to pay off all outstanding debt, eliminating approximately$4.5 million of annual debt service expense - Strengthened balance sheet with
$10.9 million of cash and cash equivalents, no debt, and$16.7 million of working capital at June 30, 2022
NEW YORK, Aug. 15, 2022 (GLOBE NEWSWIRE) -- Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a media and consumer products company with significant expertise in livestream shopping, today announced its financial results for the second quarter ended June 30, 2022.
Robert W. D’Loren, Chairman and Chief Executive Officer of Xcel commented, “Our second quarter results reflect the challenges facing the global apparel industry, which includes continued supply chain issues, inflation, geopolitical events, and cancelled orders by retailers as they prudently manage inventory levels. While we expect these headwinds will continue throughout the remainder of 2022, we believe we will emerge from this period stronger and well positioned to re-accelerate growth and profitability in 2023 and beyond.”
Mr. D’Loren continued “We have developed a powerful platform and growth strategy supported by our compelling lifestyle brands, differentiated livestreaming and interactive TV capabilities, and strong balance sheet. As a result, we have the strongest pipeline of new projects and opportunities in our history, which is driving our optimism as we look forward to 2023.”
“Selling a majority interest in the Isaac Mizrahi brand was a transformative moment in Xcel’s history and represents the first time we have monetized one of our brands. We believe this transaction supports the value of our remaining brands, while significantly improving our balance sheet. With the financial flexibility to support our growth strategies, momentum in our business is expanding and we expect to announce exciting new projects and opportunities soon,” concluded Mr. D’Loren.
Second Quarter 2022 Financial Results
Total revenue was
Net income attributable to Xcel Brands was approximately
Six Month 2022 Financial Results
Total revenue was
Net income attributable to Xcel Brands shareholders for the current six-month period was approximately
Balance Sheet
The Company's balance sheet at June 30, 2022, reflected stockholders' equity of approximately
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 11:00 a.m. Eastern Time on August 15, 2022. 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 1-877-407-3982. A replay of the conference call will be available until August 29, 2022 and can be accessed at 1-844-512-2921 using the replay pin number 13732023.
About Xcel Brands
Xcel Brands, Inc. (NASDAQ:XELB) is a media and consumer products company engaged in the design, production, marketing, livestreaming, wholesale distribution, and direct-to-consumer sales of branded apparel, footwear, accessories, fine jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands. Xcel was founded in 2011 with a vision to reimagine shopping, entertainment, and social media as one thing. Xcel’s brand portfolio – including wholly owned brands and business ventures with others – consists of the LOGO by Lori Goldstein, Halston, Judith Ripka, C. Wonder and owns and manages the Longaberger brand through its controlling interest in Longaberger Licensing LLC and a minority interest in the Isaac Mizrahi brand, pioneering a true omni-channel sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, brick-and-mortar retail, and e-commerce channels. The company’s brands have generated in excess of
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, 2021 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
| Xcel Brands, Inc. and Subsidiaries | |||||||||||||||
| Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenues | |||||||||||||||
| Net licensing revenue | $ | 5,175 | $ | 6,224 | $ | 11,136 | $ | 10,531 | |||||||
| Net sales | 3,292 | 4,540 | 6,078 | 8,042 | |||||||||||
| Net revenue | 8,467 | 10,764 | 17,214 | 18,573 | |||||||||||
| Cost of goods sold | 2,570 | 3,063 | 4,250 | 4,898 | |||||||||||
| Gross profit | 5,897 | 7,701 | 12,964 | 13,675 | |||||||||||
| Operating costs and expenses | |||||||||||||||
| Salaries, benefits and employment taxes | 5,236 | 4,049 | 10,089 | 8,101 | |||||||||||
| Other selling, general and administrative expenses | 3,803 | 3,090 | 7,195 | 6,128 | |||||||||||
| Stock-based compensation | 485 | 431 | 517 | 591 | |||||||||||
| Depreciation and amortization | 1,812 | 1,848 | 3,632 | 3,058 | |||||||||||
| Total operating costs and expenses | 11,336 | 9,418 | 21,433 | 17,878 | |||||||||||
| Other Income | |||||||||||||||
| Gain on sale of assets | 20,608 | - | 20,608 | - | |||||||||||
| Total other income | 20,608 | 20,608 | |||||||||||||
| Operating income (loss) | 15,169 | (1,717 | ) | 12,139 | (4,203 | ) | |||||||||
| Interest and finance expense | |||||||||||||||
| Interest expense - term loan debt | 479 | 522 | 1,187 | 798 | |||||||||||
| Other interest and finance charges (income), net | (1 | ) | 100 | - | 104 | ||||||||||
| Loss on extinguishment of debt | 2,324 | 821 | 2,324 | 821 | |||||||||||
| Total interest and finance expense | 2,802 | 1,443 | 3,511 | 1,723 | |||||||||||
| Income (Loss) before income taxes | 12,367 | (3,160 | ) | 8,628 | (5,926 | ) | |||||||||
| Income tax provision (benefit) | 3,178 | (1,346 | ) | 3,178 | (1,484 | ) | |||||||||
| Net income (loss) | 9,189 | (1,814 | ) | 5,450 | (4,442 | ) | |||||||||
| Net loss attributable to noncontrolling interest | (301 | ) | (256 | ) | (553 | ) | (337 | ) | |||||||
| Net income (loss) attributable to Xcel Brands, Inc. stockholders | $ | 9,490 | $ | (1,558 | ) | $ | 6,003 | $ | (4,105 | ) | |||||
| Loss per share attributed to Xcel Brands, Inc. common stockholders: | |||||||||||||||
| Basic and diluted net loss per share | $ | 0.48 | $ | (0.08 | ) | $ | 0.31 | $ | (0.21 | ) | |||||
| Weighted average number of common shares outstanding: | |||||||||||||||
| Basic and diluted weighted average common shares outstanding | 19,677,243 | 19,449,116 | 19,624,474 | 19,355,795 | |||||||||||
| Xcel Brands, Inc. and Subsidiaries | ||||||||
| Unaudited Condensed Consolidated Balance Sheets | ||||||||
| (in thousands, except share and per share data) | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 10,873 | $ | 4,483 | ||||
| Accounts receivable, net | 9,291 | 7,640 | ||||||
| Inventory | 3,475 | 3,375 | ||||||
| Prepaid expenses and other current assets | 1,975 | 1,681 | ||||||
| Total current assets | 25,614 | 17,179 | ||||||
| Non-Current Assets: | ||||||||
| Property and equipment, net | 2,070 | 2,549 | ||||||
| Operating lease right-of-use assets | 5,876 | 6,314 | ||||||
| Trademarks and other intangibles, net | 50,735 | 98,304 | ||||||
| Equity method investment | 19,797 | - | ||||||
| Restricted cash | - | 739 | ||||||
| Deferred tax assets, net | - | 141 | ||||||
| Other assets | 147 | 555 | ||||||
| Total non-current assets | 78,625 | 108,602 | ||||||
| Total Assets | $ | 104,239 | $ | 125,781 | ||||
| Liabilities and Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 4,759 | $ | 6,169 | ||||
| Accrued income taxes payable | 1,823 | 64 | ||||||
| Accrued payroll | 276 | 577 | ||||||
| Current portion of contingent obligations | 2,800 | - | ||||||
| Current portion of operating lease obligations | 1,094 | 1,207 | ||||||
| Current portion of long-term debt | - | 2,500 | ||||||
| Total current liabilities | 10,752 | 10,517 | ||||||
| Long-Term Liabilities: | ||||||||
| Long-term portion of operating lease obligations | 6,661 | 7,252 | ||||||
| Long-term debt, less current portion | - | 25,531 | ||||||
| Contingent obligations, net of short term portion | 4,739 | 7,539 | ||||||
| Deferred tax liabilities, net | 1,244 | - | ||||||
| Total long-term liabilities | 12,644 | 40,322 | ||||||
| Total Liabilities | 23,396 | 50,839 | ||||||
| Commitments and Contingencies | ||||||||
| 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, and 19,571,119 shares issued and outstanding at March 31, 2022 and December 31, 2021 | 20 | 20 | ||||||
| Paid-in capital | 103,490 | 103,039 | ||||||
| Accumulated deficit | (22,776 | ) | (28,779 | ) | ||||
| Total Xcel Brands, Inc. stockholders' equity | 80,734 | 74,280 | ||||||
| Noncontrolling interest | 109 | 662 | ||||||
| Total Equity | 80,843 | 74,942 | ||||||
| Total Liabilities and Equity | $ | 104,239 | $ | 125,781 | ||||
| Xcel Brands, Inc. and Subsidiaries | ||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 5,450 | $ | (4,442 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expense | 3,632 | 3,058 | ||||||
| Amortization of deferred finance costs included in interest expense | 156 | 109 | ||||||
| Stock-based compensation | 517 | 591 | ||||||
| Allowance for doubtful accounts | 90 | 132 | ||||||
| Loss on extinguishment of debt | 2,324 | 821 | ||||||
| Income tax provision (benefit) | 1,384 | (1,484 | ) | |||||
| Net gain on sale of assets | (20,608 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,741 | ) | (2,392 | ) | ||||
| Inventory | (100 | ) | (1,930 | ) | ||||
| Prepaid expenses and other assets | 8 | (174 | ) | |||||
| Accounts payable, accrued expenses and other current liabilities | 328 | 192 | ||||||
| Cash paid in excess of rent expense | (159 | ) | (225 | ) | ||||
| Net cash used in by operating activities | (8,719 | ) | (5,744 | ) | ||||
| Cash flows from investing activities | ||||||||
| Net proceeds from sale of majority interest in Isaac Mizrahi brand | 45,408 | |||||||
| Cash consideration for acquisition of Lori Goldstein assets | - | (1,616 | ) | |||||
| Purchase of other intangible assets | - | (37 | ) | |||||
| Purchase of property and equipment | (85 | ) | (747 | ) | ||||
| Net cash used in investing activities | 45,323 | (2,400 | ) | |||||
| Cash flows from financing activities | ||||||||
| Proceeds from long-term debt | - | 5 | ||||||
| Shares repurchased including vested restricted stock in exchange for withholding taxes | (442 | ) | - | |||||
| Proceeds from revolving loan debt | - | 1,500 | ||||||
| Proceeds from long-term debt | - | 25,000 | ||||||
| Payment of deferred finance costs | - | (1,131 | ) | |||||
| Payment of long-term debt | (29,000 | ) | (17,375 | ) | ||||
| Payment of breakage fees associated with extinguishment of long-term debt | (1,511 | ) | (367 | ) | ||||
| Net cash used in financing activities | (30,953 | ) | 7,632 | |||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | 5,651 | (512 | ) | |||||
| Cash, cash equivalents, and restricted cash at beginning of period | 5,222 | 6,066 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 10,873 | $ | 5,554 | ||||
| Reconciliation to amounts on consolidated balance sheets: | ||||||||
| Cash and cash equivalents | 10,873 | $ | 4,815 | |||||
| Restricted cash | - | 739 | ||||||
| Total cash, cash equivalents, and restricted cash | $ | 10,873 | $ | 5,554 | ||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Consideration payable to seller of Lori Goldstein assets | $ | - | $ | 2,045 | ||||
| Contingent obligation related to acquisition of Lori Goldstein assets at fair value | - | $ | 6,639 | |||||
| Liability for equity-based bonuses | (283 | ) | $ | 62 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | 1,032 | $ | 852 | ||||
| Cash paid during the period for income taxes | $ | - | $ | 15 | ||||
Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income as net income (loss) attributable to Xcel Brands, Inc. stockholders, exclusive of amortization of trademarks, stock-based compensation, certain adjustments to the provision for doubtful accounts related to the bankruptcy of and economic impact on certain retail customers due to the COVID-19 pandemic, gain on the sale of assets and 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) attributable to Xcel Brands, Inc. stockholders, before depreciation and amortization, interest and finance expenses (including loss on extinguishment of debt, if any), income taxes, other state and local franchise taxes, gain on the sale of assets and stock-based compensation.
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. Adjusted EBITDA is the measure used to calculate compliance with the EBITDA covenant under our term loan agreement.
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 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.
| Three Months Ended | Six Months Ended | ||||||||||||||
| ($ in thousands) | June 30, | June 30, | June 30, | June 30, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Net income (loss) attributable to Xcel Brands, Inc. stockholders | $ | 9,490 | $ | (1,558 | ) | $ | 6,003 | $ | (4,105 | ) | |||||
| Amortization of trademarks | 1,525 | 1,520 | 3,039 | 2,396 | |||||||||||
| Stock-based compensation | 485 | 431 | 517 | 591 | |||||||||||
| Loss on extinguishment of debt | 2,324 | 821 | 2,324 | 821 | |||||||||||
| Certain adjustments to provision for doubtful accounts | - | - | - | 132 | |||||||||||
| Gain on the sale of assets | (20,608 | ) | - | (20,608 | ) | - | |||||||||
| Income tax provision (benefit) | 3,178 | (1,346 | ) | 3,178 | (1,484 | ) | |||||||||
| Non-GAAP net loss | $ | (3,606 | ) | $ | (132 | ) | $ | (5,547 | ) | $ | (1,649 | ) | |||
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | June 30, | June 30, | ||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Diluted earnings (loss) per share | $ | 0.48 | $ | (0.08 | ) | $ | 0.31 | $ | (0.22 | ) | |||||
| Amortization of trademarks | 0.08 | 0.08 | 0.16 | 0.12 | |||||||||||
| Stock-based compensation | 0.02 | 0.02 | 0.03 | 0.03 | |||||||||||
| Loss on extinguishment of debt | 0.12 | 0.04 | 0.12 | 0.04 | |||||||||||
| Certain adjustments to provision for doubtful accounts | - | - | - | 0.01 | |||||||||||
| Gain on the sale of assets | (1.05 | ) | - | (1.05 | ) | - | |||||||||
| Income tax provision (benefit) | 0.16 | (0.07 | ) | 0.16 | (0.08 | ) | |||||||||
| Non-GAAP diluted EPS | $ | (0.18 | ) | $ | (0.01 | ) | $ | (0.28 | ) | $ | (0.09 | ) | |||
| Non-GAAP weighted average diluted shares | 19,571,119 | 19,261,436 | 19,418,469 | 19,092,828 | |||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| ($ in thousands) | June 30, | June 30, | June 30, | June 30, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Net income (loss) attributable to Xcel Brands, Inc. stockholders | $ | 9,490 | $ | (1,558 | ) | $ | 6,003 | $ | (4,105 | ) | |||||
| Depreciation and amortization | 1,812 | 1,848 | 3,632 | 3,058 | |||||||||||
| Interest and finance expense | 478 | 622 | 1,187 | 902 | |||||||||||
| Income tax provision (benefit) | 3,178 | (1,346 | ) | 3,178 | (1,484 | ) | |||||||||
| State and local franchise taxes | - | 33 | 36 | 72 | |||||||||||
| Stock-based compensation | 485 | 431 | 517 | 591 | |||||||||||
| Loss on extinguishment of debt | 2,324 | 821 | 2,324 | 821 | |||||||||||
| Certain adjustments to provision for doubtful accounts | - | - | - | 132 | |||||||||||
| Gain on the sale of assets | (20,608 | ) | - | (20,608 | ) | - | |||||||||
| Adjusted EBITDA | $ | (2,841 | ) | $ | 851 | $ | (3,731 | ) | $ | (13 | ) | ||||
FAQ
What were Xcel Brands' financial results for Q2 2022?
How did the sale of the Isaac Mizrahi brand affect Xcel Brands financially?
What were the revenue trends for Xcel Brands in the first half of 2022?
What challenges did Xcel Brands face in Q2 2022?
What is Xcel Brands' current financial position?
