- Total revenue of $35.9 million, a 26% decline from
prior quarter. Mens segment revenue up 10% from the prior
year.
- Signed 65 license deals year to date, representing $40
million of aggregate guaranteed minimum royalties.
Iconix Brand Group, Inc. (Nasdaq: ICON) ("Iconix" or the
"Company") today reported financial results for the first quarter
ended March 31, 2019.
Bob Galvin, CEO commented, “Results for the first quarter of
2019 were as expected, as we continue to stabilize the
business and our operational cost structure. We also continue
to build the pipeline of our future business, as we have signed 65
deals year to date for aggregate guaranteed minimum royalties of
approximately $40 million.”
First Quarter 2019 Financial Results
GAAP Revenue by
Segment |
Three months ended March 31, |
($, 000's) |
2019 |
2018 |
% Change |
|
|
|
|
Womens |
8,367 |
16,598 |
-50 |
% |
Mens |
10,935 |
9,945 |
10 |
% |
Home |
3,490 |
6,512 |
-46 |
% |
International |
13,150 |
15,493 |
-15 |
% |
Total
Revenue |
35,942 |
48,548 |
-26 |
% |
|
|
|
|
|
For the first quarter of 2019, total revenue was $35.9 million,
a 26% decline as compared to $48.5 million in the prior year
quarter. Such decline was expected, principally as a result of the
transition of our Danskin and Mossimo direct to retail licenses in
our Womens segment, as previously announced. Our revenue for the
first quarter of 2019 was also impacted by the effect of the Sears
bankruptcy on our Joe Boxer and Bongo brands in Womens and the
Cannon brand in Home. Our Mens segment revenue increased 10% in the
first quarter of 2019, compared to the prior year quarter primarily
from the Starter and Buffalo brands. Our International
segment declined 15% in the first quarter of 2019 primarily as a
result of performance of our Diamond Icon joint venture, which was
higher in the prior year due to sales leading up to the World
Cup.
SG&A Expenses:
Total SG&A expenses in the first quarter of 2019 were $18.1
million, a 46% decrease compared to $33.6 million in the first
quarter of 2018. Most of the decline for the quarter was a decrease
in compensation, advertising and professional expenses. The
decrease in compensation was part of the Company’s continued
efforts to reduce costs. Additionally, expenses for the first
quarter of 2018 included $5.4 million in costs associated with a
debt refinancing.
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 2019 was $18.4
million, as compared to operating income of $15.5 million in the
first quarter of 2018. Adjusted EBITDA in the first quarter
of 2019 was $18.4 million which represents operating income of
$18.4 million excluding net charges of less than $0.1
million. Adjusted EBITDA in the first quarter of 2018 was
$22.5 million which represents operating income of $15.5 million
excluding net charges of $6.9 million. The change period over
period in Adjusted EBITDA is primarily as a result of the change in
revenue as outlined above. Refer to footnote 1 below for a
full detailed reconciliation of operating income to Adjusted
EBITDA.
Adjusted EBITDA by
Segment (1) |
Three months ended March 31, |
($, 000's) |
2019 |
2018 |
% Change |
|
|
|
|
Womens |
7,627 |
14,539 |
-48 |
% |
Mens |
4,067 |
3,426 |
19 |
% |
Home |
3,007 |
5,750 |
-48 |
% |
International |
7,993 |
5,901 |
35 |
% |
Corporate |
(4,252) |
(7,147) |
41 |
% |
Adjusted
EBITDA |
18,442 |
22,469 |
-18 |
% |
|
|
|
|
Interest Expense and Other Income:
Interest expense in both the first quarter of 2019 and the first
quarter of 2018 was $14.5 million. In the first quarter
of 2019, the Company recognized a $20.0 million gain as compared to
a $24.3 million gain in the first quarter of 2018. These
gains result 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 income statement.
Provision for Income Taxes:
The effective income tax rate for the first quarter of 2019 is
approximately 8.5%, which resulted in a $2.0 million income
tax provision, as compared to an effective income tax rate of 5.1%
in the prior year quarter, which resulted in a $1.7 million income
tax provision. The increase in the effective income tax rate
resulted from a decrease in pretax income resulting from mark to
market adjustments for the Current Quarter, for which there is no
tax expense. The Company’s tax expense and effective tax rate
is also impacted by taxes based on sources other than pretax income
which remained consistent with the prior year.
GAAP Net Income and GAAP Diluted EPS:
GAAP net income attributable to Iconix for the first quarter of
2019 reflects income of $17.9 million, compared to income of $27.8
million for the first quarter of 2018. GAAP diluted EPS for the
first quarter of 2019 reflects a loss of $0.01, compared to income
of $1.09 for the first quarter of 2018.
Adjusted EBITDA (1):
Adjusted EBITDA for the first quarter of 2019 was $18.4 million,
compared to $22.5 million for the first quarter of 2018.
Adjusted EBITDA:
(1) |
|
|
|
($, 000's) |
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2019 |
2018 |
% Change |
|
|
|
|
GAAP Operating Income |
18,398 |
15,534 |
18 |
% |
|
|
|
|
Add: |
|
|
|
stock-based compensation expense |
140 |
1,019 |
|
depreciation and amortization |
492 |
654 |
|
costs associated with debt financings |
- |
5,439 |
|
special charges |
2,780 |
2,706 |
|
non-controlling interest |
(3,361) |
(2,857) |
|
non-controlling interest related to D&A |
(7) |
(26) |
|
|
44 |
6,935 |
|
|
|
|
|
Adjusted
EBITDA |
18,442 |
22,469 |
-18 |
% |
|
|
|
|
|
|
|
|
Balance Sheet and Liquidity:
($, 000's) |
March 31, 2019 |
|
December 31, 2018 |
Cash
Summary: |
|
|
|
Unrestricted Domestic Cash (wholly owned) |
33,424 |
|
45,936 |
Unrestricted Domestic Cash (in
consolidated JV's) |
9,116 |
|
8,460 |
Unrestricted International
Cash |
13,408 |
|
12,213 |
Restricted Cash |
13,490 |
|
16,026 |
|
|
|
|
Total Cash |
$69,438 |
|
$82,635 |
|
|
|
|
Debt Summary: |
|
|
|
Senior Secured Notes due January 2043* |
358,079 |
|
365,481 |
5.75% Convertible Notes due August 2023 |
105,745 |
|
109,715 |
Variable Funding Note due January 2043 |
100,000 |
|
100,000 |
2017 Senior Secured Term Loan due August 2022 |
188,457 |
|
189,421 |
|
|
|
|
Total Debt (Face Value) |
$752,281 |
|
$764,617 |
|
|
|
|
*- The Company’s
Senior Secured Notes include a test that measures the amount of
principal and interest required to be paid on the debt to the
approximate cash flow available to pay such principal and interest;
the test is referred to as the debt service coverage ratio
(“DSCR”). As a result of a decline in royalty collections
during the twelve months ended March 31, 2019, the DSCR fell below
1.10x as of March 31, 2019. Beginning April 1, 2019, the Senior
Secured Notes are in a Rapid Amortization Event pursuant to the
Securitization Notes indenture. In rapid amortization, the
residual will immediately be used to pay down the principal.
Iconix will continue to receive its management fee from the
Securitization Notes and the Company does not believe the loss of
our residual, if any, will have a significant impact on our
operations. |
The Company currently projects compliance with its financial
covenants under its senior secured term loan and the interest only
DSCR under the Securitization Notes indenture for 2019.
Conference Call
The Company will host a conference call today at 10:00 AM ET.
The call can be accessed on the Company's website at
www.iconixbrand.com or by telephone at 844-286-1555 or 270-823-1180
(conference ID: 8556614). A written transcript will be posted
online as soon as available.
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 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 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, 2018 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) |
|
|
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
% Change |
|
|
|
|
Licensing revenue |
35,942 |
|
48,548 |
|
-26 |
% |
|
|
|
|
Selling, general and
administrative expenses |
18,094 |
|
33,599 |
|
-46 |
% |
Depreciation and
amortization |
492 |
|
654 |
|
|
Equity earnings on joint
ventures |
(1,042) |
|
(96) |
|
|
Gain on sale of
trademarks |
- |
|
(1,143) |
|
|
|
|
|
|
Operating income |
18,398 |
|
15,534 |
|
18 |
% |
|
|
|
|
Other (income) expenses |
|
|
|
Interest expense |
14,504 |
|
14,549 |
|
|
Interest income |
(72) |
|
(122) |
|
|
Other income, net |
(19,935) |
|
(26,132) |
|
|
Gain on extinguishment of debt |
- |
|
(4,473) |
|
|
Foreign currency translation loss (gain) |
627 |
|
(551) |
|
|
Other expenses - net |
(4,876) |
|
(16,729) |
|
-71 |
% |
|
|
|
|
Income before income
taxes |
23,274 |
|
32,263 |
|
-28 |
% |
|
|
|
|
Provision for income
taxes |
1,968 |
|
1,650 |
|
19 |
% |
|
|
|
|
Net income |
21,306 |
|
30,613 |
|
-30 |
% |
|
|
|
|
Less: Net income attributable
to non-controlling interest |
3,361 |
|
2,857 |
|
18 |
% |
|
|
|
|
Net income attributable to
Iconix Brand Group, Inc. |
17,945 |
|
27,756 |
|
-35 |
% |
|
|
|
|
Earnings (loss) per
share: |
|
|
|
Basic |
2.12 |
|
4.28 |
|
-50 |
% |
Diluted |
(0.01) |
|
1.09 |
|
-101 |
% |
|
|
|
|
Weighted average number of
common shares outstanding: |
|
|
|
Basic |
8,465 |
|
5,912 |
|
43 |
% |
|
|
|
|
Diluted |
44,786 |
|
8,235 |
|
444 |
% |
|
|
|
|
Footnotes
(1) Adjusted EBITDA is a non-GAAP financial measure which
represents operating income excluding stock-based compensation
(benefit) expense, depreciation and amortization, costs associated
with recent financings, special charges related to professional
fees incurred as a result of the correspondence 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 Mar 31 (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income |
|
Special Charges |
|
Costs associated with debt financings |
|
Depreciation & Amortization |
|
Stock Compensation |
|
Non-controlling Interest, net |
|
Adjusted EBITDA |
|
2019 |
|
2018 |
|
|
2019 |
2018 |
|
2019 |
2018 |
|
2019 |
2018 |
|
2019 |
2018 |
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
Womens |
7,627 |
|
14,628 |
|
|
- |
- |
|
- |
- |
|
- |
- |
|
- |
28 |
|
- |
|
(117 |
) |
|
7,627 |
|
14,539 |
|
Mens |
7,546 |
|
5,874 |
|
|
- |
- |
|
- |
- |
|
13 |
53 |
|
- |
- |
|
(3,492 |
) |
(2,501 |
) |
|
4,067 |
|
3,426 |
|
Home |
3,006 |
|
5,743 |
|
|
- |
- |
|
- |
- |
|
- |
- |
|
1 |
7 |
|
- |
|
- |
|
|
3,007 |
|
5,750 |
|
International |
8,423 |
|
6,486 |
|
|
- |
- |
|
- |
- |
|
89 |
138 |
|
3 |
74 |
|
(522 |
) |
(797 |
) |
|
7,993 |
|
5,901 |
|
Corporate |
(8,204 |
) |
(17,197 |
) |
|
2,780 |
2,706 |
|
- |
5,439 |
|
390 |
463 |
|
136 |
910 |
|
646 |
|
532 |
|
|
(4,252 |
) |
(7,147 |
) |
Total
Income |
18,398 |
|
15,534 |
|
|
2,780 |
2,706 |
|
- |
5,439 |
|
492 |
654 |
|
140 |
1,019 |
|
(3,368 |
) |
(2,883 |
) |
|
18,442 |
|
22,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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