- Total revenue of $23.6 million compared to $28.0
million in the prior year quarter.
- GAAP Operating Income $25.3 million as compared to a
loss of $4.9 million in the prior year quarter.
- Adjusted EBITDA of $11.9 million, compared to $11.6
million in the prior year quarter.
- Continued to improve cost structure, decreasing
SG&A expenses by 24% from prior year quarter.
- Signed 93 license agreements during 2021, representing
$47 million of aggregate minimum royalties over the life of these
contracts.
Iconix Brand Group, Inc. (Nasdaq: ICON) ("Iconix" or the
"Company") today reported financial results for the first quarter
ended March 31, 2021.
Bob Galvin, CEO commented, “While we and our licensees continue
to deal with many pandemic-related challenges, we have continued to
focus on realizing the opportunity that exists for our brands
through building our pipeline of future business. By doing so, we
have had a very strong start to the year. Year to date, we have
signed 93 license agreements representing $47 million of aggregate
minimum royalties over the life of these contracts. This represents
a 127% increase in the numbers of deals signed versus last year to
date and a 98% increase in the amount of minimum royalties. This
performance is due to the continued dedication and hard work of our
team.”
First Quarter 2021 Financial Results (unaudited)
GAAP Revenue by Segment(000’s)
| |
|
For the Three MonthsEnded
March 31, |
|
|
|
|
2021 |
|
|
2020 |
| Licensing
revenue: |
|
|
|
|
| Women's |
|
$ |
3,806 |
|
$ |
6,478 |
| Men's |
|
|
5,612 |
|
|
6,757 |
| Home |
|
|
2,466 |
|
|
3,162 |
| International |
|
|
11,750 |
|
|
11,554 |
| |
|
$ |
23,634 |
|
$ |
27,951 |
For the first quarter of 2021, total revenue was $23.6 million,
a 15% decline, compared to $28.0 million in the first quarter of
2020. The 41% decrease in revenue in our Women’s segment was
principally as a result of a decrease in licensing revenue from our
Mudd, Candies and Joe Boxer brands partially offset by an increase
in our Danskin brand. Revenue from the Men’s segment decreased 17%
mainly due to a decrease in licensing revenue from our Buffalo
brand. Sales in our Home segment decreased by 22% principally due
to a decrease in licensing revenue from our Fieldcrest brand. Our
International segment revenue improved 2% mainly due to an increase
in licensing revenue in Europe.
SG&A Expenses:Total SG&A expenses in
the first quarter of 2021 were $13.1 million, a 24% decline
compared to $17.2 million in the first quarter of 2020. The decline
for the quarter was primarily driven by a decrease in bad debt
expense.
Gain on Sale of Trademarks:The gain on sale of
trademarks in the first quarter of 2021 was $15.0 million, compared
to zero in the first quarter of 2020. The gain for the quarter was
a result of the sale of the Lee Cooper trademark in China.
Trademark Impairment:Trademark Impairment in
the first quarter of 2021 was zero compared to $13.7 million in
first quarter of 2020, which was primarily based on the impact of
the COVID-19 pandemic on the current and estimated future cash
flows on the fair value of the Rampage, Joe Boxer, Waverly,
Fieldcrest and Umbro indefinite-lived trademarks.
Operating Income and Adjusted EBITDA (1):
Adjusted EBITDA is a non-GAAP metric, and a reconciliation table
is included below.
Operating income for the first quarter of 2021 was $25.3
million, as compared to operating loss of $4.9 million for the
first quarter of 2020. The first quarter 2020 results include $13.7
million of charges related to impairments. Adjusted EBITDA in the
first quarter of 2021 was $11.9 million, which represents operating
income of $25.3 million excluding net adjustments of $13.4 million.
Adjusted EBITDA in the first quarter of 2020 was $11.6 million,
which represents operating loss of $4.9 million excluding net
charges of $16.5 million. The change period over period in Adjusted
EBITDA was primarily as a result of reduced revenue largely driven
by the impact of the COVID-19 pandemic on our business, offset by
reduced expenses driven by the Company’s cost reduction initiative
resulting in a higher Adjusted EBITDA margin. Refer to footnote 1
below for a full detailed reconciliation of operating income to
Adjusted EBITDA.
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 March 31, |
|
| (000's) |
2021 |
|
2020 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
| Women's |
$ |
3,772 |
|
$ |
5,549 |
|
|
-32 |
% |
| Men's |
|
3,285 |
|
|
2,414 |
|
|
36 |
% |
| Home |
|
1,829 |
|
|
2,564 |
|
|
-29 |
% |
| International |
|
6,343 |
|
|
5,911 |
|
|
7 |
% |
| Corporate |
|
(3,309 |
) |
|
(4,826 |
) |
|
31 |
% |
| Adjusted
EBITDA |
$ |
11,920 |
|
$ |
11,612 |
|
|
3 |
% |
| |
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA Margin
(2) |
|
50 |
% |
|
42 |
% |
|
|
|
Interest Expense and Other Income (Loss),
net:
Interest expense in the first quarter of 2021 was $14.7 million
as compared to $17.1 million in the first quarter of 2020. The
decrease in interest expense was primarily the result of the year
over year reduction in debt as a result of repayments required upon
the sale of certain trademarks of the Company. In the first
quarter of 2021, Other income (loss) was s loss of $2.8 million as
compared to income of $0.8 million in the first quarter of 2020.
This result is primarily from the Company's accounting for the
5.75% Convertible Notes, which requires recording the fair value of
this debt at the end of each period with any change from the prior
period accounted for as other income or loss in the respective
period's consolidated income statement.
Provision for Income Taxes:
The effective income tax rate for the first quarter of 2021 was
24.6%, which resulted in a $2.3 million income tax expense, as
compared to an effective income tax rate of 0.0% in the first
quarter of 2020, which resulted in a $0.0 million income tax
benefit. The increase in income tax expense is a result of an
increase in foreign taxes for the first quarter of 2021 and a tax
benefit in the first quarter of 2020 related to the CARES Act.
GAAP Net Income (Loss) and GAAP Diluted
EPS:
GAAP net (income)loss attributable to Iconix for the first
quarter of 2021 reflected a net income of $4.2 million, compared to
a net loss of $21.8 million for the first quarter of 2020. GAAP
diluted EPS for the first quarter of 2021 reflected income of $0.26
per share, compared to a loss of $1.89 per share for the first
quarter of 2020.
Adjusted EBITDA (1):
Adjusted EBITDA for the first quarter of 2021 was $11.9 million,
compared to $11.6 million for the first quarter of 2020.
| Adjusted EBITDA:
(1) |
|
|
|
| (000's) |
For the Three Months Ended March 31, |
| |
|
2021 |
|
|
2020 |
|
% Change |
| |
|
|
|
| GAAP Operating Income
(Loss) |
$ |
25,273 |
|
$ |
(4,850 |
) |
|
| Add: |
|
|
|
|
stock-based compensation expense |
|
139 |
|
|
172 |
|
|
|
depreciation and amortization |
|
298 |
|
|
273 |
|
|
|
contract asset write offs, net |
|
29 |
|
|
2 |
|
|
|
impairment charges |
|
- |
|
|
13,733 |
|
|
|
gain on sale of trademarks and investments |
|
(14,959 |
) |
|
- |
|
|
|
special charges |
|
3,894 |
|
|
3,536 |
|
|
|
non-controlling interest |
|
(2,751 |
) |
|
(825 |
) |
|
|
non-controlling interest related to D&A and impairment |
|
(3 |
) |
|
(429 |
) |
|
|
|
|
(13,353 |
) |
|
16,462 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
11,920 |
|
$ |
11,613 |
|
3 |
% |
| Adjusted EBITDA Margin
(2) |
|
50 |
% |
|
42 |
% |
|
| |
|
|
|
Balance Sheets and Liquidity: (unaudited)
| (000's) |
March 31, 2021 |
|
December 31, 2020 |
| Cash
Summary: |
|
|
|
|
Unrestricted Domestic, Canada and China (Wholly Owned) |
$ |
32,941 |
|
$ |
29,477 |
| Unrestricted Luxembourg
(Wholly Owned) |
|
8,159 |
|
|
12,832 |
| Unrestricted in consolidated
JV's |
|
7,084 |
|
|
7,488 |
| Restricted Cash |
|
14,166 |
|
|
9,380 |
| Total Cash |
$ |
62,350 |
|
$ |
59,177 |
| |
|
|
|
| Debt
Summary: |
|
|
|
| Senior Secured Notes due
January 2043* |
$ |
315,566 |
|
$ |
317,856 |
| Variable Funding Note due
January 2043 |
|
100,000 |
|
|
100,000 |
| 5.75% Convertible Notes due
August 2023 |
|
94,430 |
|
|
94,430 |
| Senior Secured Term Loan due
August 2022 |
|
83,191 |
|
|
99,862 |
| Payroll Protection Plan
Loan |
|
1,307 |
|
|
1,307 |
| Total Debt (Face Value) |
$ |
594,494 |
|
$ |
613,455 |
| |
|
|
|
| *- 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. |
Fiscal 2021 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 2021 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, 2020 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. McClainExecutive Vice President and Chief
Financial OfficerIconix Brand Group,
Inc.jmcclain@iconixbrand.com212-730-0030
Unaudited Consolidated Statements of
Operations(000’s, except earnings per share data)
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
2021 |
|
|
2020 |
|
|
Licensing revenue |
|
$ |
23,634 |
|
|
$ |
27,951 |
|
| Selling, general and
administrative expenses |
|
|
13,094 |
|
|
|
17,150 |
|
| Depreciation and
amortization |
|
|
298 |
|
|
|
273 |
|
| Equity (earnings) loss on
joint ventures |
|
|
(72 |
) |
|
|
1,645 |
|
| Gain on sale of
trademarks |
|
|
(14,959 |
) |
|
|
— |
|
| Trademark impairment |
|
|
— |
|
|
|
13,733 |
|
| Operating income (loss) |
|
|
25,273 |
|
|
|
(4,850 |
) |
| Other expenses (income): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
14,655 |
|
|
|
17,056 |
|
|
Interest income |
|
|
— |
|
|
|
(40 |
) |
|
Other loss (income), net |
|
|
2,777 |
|
|
|
(795 |
) |
|
Foreign currency translation gain |
|
|
(1,359 |
) |
|
|
(65 |
) |
|
Other expenses – net |
|
|
16,073 |
|
|
|
16,156 |
|
| Income (loss) before income
taxes |
|
|
9,200 |
|
|
|
(21,006 |
) |
| Provision (Benefit) for income
taxes |
|
|
2,261 |
|
|
|
(5 |
) |
| Net income (loss) |
|
|
6,939 |
|
|
|
(21,001 |
) |
| Less: Net income attributable
to non-controlling interest |
|
|
2,751 |
|
|
|
825 |
|
| Net income (loss) attributable
to Iconix Brand Group, Inc. |
|
$ |
4,188 |
|
|
$ |
(21,826 |
) |
| |
|
|
|
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.30 |
|
|
$ |
(1.89 |
) |
|
Diluted |
|
$ |
0.26 |
|
|
$ |
(1.89 |
) |
| Weighted average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,805 |
|
|
|
11,772 |
|
|
Diluted |
|
|
31,628 |
|
|
|
11,772 |
|
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, 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 and costs related to the exploration of
strategic alternatives. 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
March 31, (1): |
|
|
GAAP Operating Income |
|
ImpairmentCharges |
|
Special Charges |
|
Gain on sale of Trademarks & Investments |
|
Depreciation & Amortization |
|
Stock Compensation |
|
Contract Asset Impairment |
|
Non-controlling Interest, net |
|
Adjusted EBITDA |
|
($, 000s) |
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
| Women's |
3,772 |
(1,143) |
|
- |
6,689 |
|
- |
- |
|
- |
- |
|
- |
- |
|
- |
- |
|
- |
3 |
|
- |
- |
|
3,772 |
5,549 |
| Men's |
4,812 |
3,807 |
|
- |
104 |
|
- |
607 |
|
- |
- |
|
- |
4 |
|
- |
- |
|
- |
- |
|
(1,527) |
(2,108) |
|
3,285 |
2,414 |
| Home |
1,829 |
(811) |
|
- |
3,369 |
|
- |
- |
|
- |
- |
|
- |
- |
|
- |
1 |
|
- |
5 |
|
- |
- |
|
1,829 |
2,564 |
| International |
7,780 |
1,841 |
|
- |
3,548 |
|
- |
- |
|
- |
- |
|
69 |
67 |
|
- |
2 |
|
29 |
(6) |
|
(1,535) |
459 |
|
6,343 |
5,911 |
| Corporate |
7,080 |
(8,544) |
|
- |
23 |
|
3,894 |
2,929 |
|
(14,959) |
- |
|
229 |
202 |
|
139 |
169 |
|
- |
- |
|
308 |
395 |
|
(3,309) |
(4,826) |
| Total
Income |
25,273 |
(4,850) |
|
- |
13,733 |
|
3,894 |
3,536 |
|
(14,959) |
- |
|
298 |
273 |
|
139 |
172 |
|
29 |
2 |
|
(2,754) |
(1,254) |
|
11,920 |
11,612 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
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