Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a media
and consumer products company, today announced its financial
results for the third quarter ended September 30,
2020.
Robert W. D'Loren, Chairman and Chief Executive
Officer of Xcel commented, “Despite the continued impact of the
COVID-19 pandemic on our top and bottom line results, we are very
pleased with our third quarter results and the rapid recovery of
our Interactive TV business and improvement in our wholesale
businesses.”
Third Quarter
2020 Financial
Results
Total revenue was $7.4 million, a decrease of
$3.5 million compared to the prior year period, driven by lower
product sales and lower licensing revenues of $2.3 million and $1.2
million, respectively. Our revenues primarily reflect lower sales
by our licensees and retail partners as a result of an overall
slowdown in economic activity related to the ongoing the COVID-19
pandemic. Despite the decrease in revenues and gross profit on an
absolute dollar basis, overall gross profit margins increased from
73% in the prior year quarter to 83% in the current quarter.
GAAP net loss was approximately $0.5 million, or
($0.02) per diluted share, compared with a GAAP net loss of $0.1
million, or ($0.01) per diluted share, for the prior year quarter.
After adjusting for certain cash and non-cash items, non-GAAP net
income for the quarters ended September 30, 2020 and September 30,
2019, was approximately $0.8 million, or $0.04 per diluted share
and approximately $1.2 million, or $0.06 per diluted share,
respectively. Adjusted EBITDA was approximately $1.4 million and
$1.8 million for the current quarter and the prior year quarter,
respectively.
Nine Month
2020 Financial
Results
Total revenue was $22.0 million, a decrease of
$8.4 million, driven by lower licensing revenues and lower product
sales of $5.7 million and $2.7 million, respectively. Gross profit
decreased by $5.8 million to $18.0 million from $23.8 million in
the prior year nine months, but gross profit margins increased
year-over-year. As with the quarter’s results, the decrease in our
revenues was primarily caused by the COVID-19 pandemic, which
included government ordered stay-at-home policies and retail store
closures during the second quarter, as well as the continued
overall slowdown in economic activity related to the pandemic.
GAAP net loss was approximately $2.6 million, or
($0.13) per diluted share, compared with GAAP net income of $1.9
million, or $0.10 per diluted share, for the prior year nine
months. The prior year nine month’s GAAP net income notably
included a $2.9 million gain on the reduction of contingent
obligations. After adjusting for certain cash and non-cash items,
non-GAAP net income for the nine months ended September 30, 2020
and September 30, 2019, was approximately $2.1 million, or $0.11
per diluted share, and approximately $3.8 million, or $0.20 per
diluted share, respectively. Adjusted EBITDA was approximately $3.9
million and $5.6 million for the current nine months and the prior
year nine months, respectively.
See reconciliation tables below for non-GAAP
metrics. These non-GAAP metrics may be inconsistent with similar
measures presented by other companies and should only be used in
conjunction with our results reported according to U.S. generally
accepted accounting principles. Any financial measure other than
those prepared in accordance with GAAP should not be considered a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP.
The Company's balance sheet at September 30,
2020 remained strong, with stockholders' equity of approximately
$97 million, cash and cash equivalents of approximately $4.8
million, and working capital, exclusive of the current portion of
lease obligations, of approximately $8.7 million.
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 5:00 p.m. Eastern Time on
Thursday, November 12, 2020. 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 1-877-300-8521. A
replay of the conference call will be available on the Company
website for 30 days following the event and can be accessed at
844-512-2921 using replay pin number 10149912.
About Xcel Brands
Xcel Brands, Inc. (NASDAQ:XELB) is a media and
consumer products company engaged in the design, production,
marketing, wholesale, and direct-to-consumer sales of branded
apparel, footwear, accessories, jewelry, home goods and other
consumer products, and the acquisition of dynamic consumer
lifestyle brands. Xcel was founded by Robert W. D’Loren in 2011
with a vision to reimagine shopping, entertainment, and social as
one. Xcel owns the Isaac Mizrahi, Judith Ripka, Halston, and C.
Wonder brands, and it owns and manages the Longaberger brand
through its controlling interest in Longaberger Licensing LLC,
pioneering a ubiquitous sales strategy which includes the promotion
and sale of products under its brands through interactive
television, brick-and-mortar retail, e-commerce and peer to peer
channels. Headquartered in New York City, Xcel Brands is led by an
executive team with significant production, merchandising, design,
marketing, retailing, and licensing experience, and a proven track
record of success in elevating branded consumer products companies.
With an experienced team of professionals focused on design,
production, and digital marketing, Xcel maintains control of
product quality and promotion across all of its product categories
and distribution channels. Xcel differentiates by design.
www.xcelbrands.com
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, 2019 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 BergerSM Berger & Company, Inc.
216-464-6400andrew@smberger.com
Xcel Brands, Inc. and Subsidiaries |
Unaudited Condensed Consolidated Balance
Sheets |
(in thousands, except share and per share
data) |
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
|
(Unaudited) |
|
|
Assets |
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,783 |
|
|
$ |
4,641 |
|
Accounts receivable, net |
|
|
8,188 |
|
|
|
10,622 |
|
Inventory |
|
|
723 |
|
|
|
899 |
|
Prepaid expenses and other current assets |
|
|
1,426 |
|
|
|
1,404 |
|
Total current assets |
|
|
15,120 |
|
|
|
17,566 |
|
Property and equipment, net |
|
|
3,604 |
|
|
|
3,666 |
|
Operating lease right-of-use assets |
|
|
9,019 |
|
|
|
9,250 |
|
Trademarks and other intangibles, net |
|
|
107,675 |
|
|
|
111,095 |
|
Restricted cash |
|
|
1,109 |
|
|
|
1,109 |
|
Other assets |
|
|
297 |
|
|
|
505 |
|
Total non-current assets |
|
|
121,704 |
|
|
|
125,625 |
|
Total Assets |
|
$ |
136,824 |
|
|
$ |
143,191 |
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Accounts payable, accrued expenses and other current
liabilities |
|
$ |
2,908 |
|
|
$ |
4,391 |
|
Accrued payroll |
|
|
618 |
|
|
|
1,444 |
|
Current portion of operating lease obligation |
|
|
1,917 |
|
|
|
1,752 |
|
Current portion of long-term debt |
|
|
2,850 |
|
|
|
2,250 |
|
Total current liabilities |
|
|
8,293 |
|
|
|
9,837 |
|
Long-Term Liabilities: |
|
|
|
|
|
|
Long-term portion of operating lease obligation |
|
|
9,101 |
|
|
|
9,773 |
|
Long-term debt, less current portion |
|
|
14,523 |
|
|
|
16,571 |
|
Contingent obligation |
|
|
900 |
|
|
|
900 |
|
Deferred tax liabilities, net |
|
|
7,165 |
|
|
|
7,434 |
|
Other long-term liabilities |
|
|
224 |
|
|
|
224 |
|
Total long-term liabilities |
|
|
31,913 |
|
|
|
34,902 |
|
Total Liabilities |
|
|
40,206 |
|
|
|
44,739 |
|
|
|
|
|
|
|
|
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 at
September 30, 2020 and December 31, 2019, respectively, and
19,231,040 and 18,866,417 issued and outstanding at September 30,
2020 and December 31, 2019, respectively |
|
|
19 |
|
|
|
19 |
|
Paid-in capital |
|
|
102,236 |
|
|
|
101,736 |
|
Accumulated deficit |
|
|
(6,198 |
) |
|
|
(3,659 |
) |
Total Xcel Brands, Inc. stockholders' equity |
|
|
96,057 |
|
|
|
98,096 |
|
Noncontrolling interest |
|
|
561 |
|
|
|
356 |
|
Total Equity |
|
|
96,618 |
|
|
|
98,452 |
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
136,824 |
|
|
$ |
143,191 |
|
|
|
|
|
|
|
|
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 Nine
Months Ended |
|
|
September
30, |
|
September
30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Net licensing revenue |
|
$ |
5,236 |
|
|
$ |
6,428 |
|
|
$ |
15,378 |
|
|
$ |
21,094 |
Net sales |
|
|
2,155 |
|
|
|
4,504 |
|
|
|
6,590 |
|
|
|
9,277 |
Net revenue |
|
|
7,391 |
|
|
|
10,932 |
|
|
|
21,968 |
|
|
|
30,371 |
Cost of
goods sold (sales) |
|
|
1,270 |
|
|
|
2,950 |
|
|
|
3,923 |
|
|
|
6,549 |
Gross profit |
|
|
6,121 |
|
|
|
7,982 |
|
|
|
18,045 |
|
|
|
23,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, benefits and employment taxes |
|
|
2,968 |
|
|
|
4,045 |
|
|
|
9,798 |
|
|
|
12,038 |
Other design and marketing costs |
|
|
706 |
|
|
|
797 |
|
|
|
2,336 |
|
|
|
2,352 |
Other selling, general and administrative expenses |
|
|
1,642 |
|
|
|
1,356 |
|
|
|
5,027 |
|
|
|
4,014 |
Costs in connection with potential acquisition |
|
|
(189 |
) |
|
|
126 |
|
|
|
(210 |
) |
|
|
231 |
Stock-based compensation |
|
|
49 |
|
|
|
295 |
|
|
|
780 |
|
|
|
777 |
Depreciation and amortization |
|
|
1,437 |
|
|
|
991 |
|
|
|
4,069 |
|
|
|
2,939 |
Government assistance - Paycheck Protection Program |
|
|
(176 |
) |
|
|
- |
|
|
|
(1,816 |
) |
|
|
- |
Property and equipment impairment |
|
|
31 |
|
|
|
- |
|
|
|
113 |
|
|
|
- |
Total operating costs and expenses |
|
|
6,468 |
|
|
|
7,610 |
|
|
|
20,097 |
|
|
|
22,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income |
|
|
46 |
|
|
|
|
|
|
46 |
|
|
|
2,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(301 |
) |
|
|
372 |
|
|
|
(2,006 |
) |
|
|
4,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense and other finance charges |
|
|
304 |
|
|
|
330 |
|
|
|
897 |
|
|
|
968 |
Loss on
extinguishment of debt |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
189 |
Total interest and finance expense |
|
|
304 |
|
|
|
330 |
|
|
|
897 |
|
|
|
1,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(605 |
) |
|
|
42 |
|
|
|
(2,903 |
) |
|
|
3,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (
benefit) provision |
|
|
(145 |
) |
|
|
137 |
|
|
|
(269 |
) |
|
|
1,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income |
|
|
(460 |
) |
|
|
(95 |
) |
|
|
(2,634 |
) |
|
|
1,884 |
Less: Net loss attributable to noncontrolling interest |
|
|
(26 |
) |
|
|
- |
|
|
|
(95 |
) |
|
|
- |
Net
(loss) income attributable to Xcel Brands, Inc.
stockholders |
|
$ |
(434 |
) |
|
$ |
(95 |
) |
|
$ |
(2,539 |
) |
|
$ |
1,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share attributed to Xcel Brands, Inc. common
stockholders: |
|
|
|
|
|
|
|
|
|
|
Basic net
(loss) income per share: |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.13 |
) |
|
$ |
0.10 |
Diluted net
(loss) income per share: |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.13 |
) |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding |
|
|
19,231,040 |
|
|
|
18,975,265 |
|
|
|
19,078,453 |
|
|
|
18,839,424 |
Diluted
weighted average common shares outstanding |
|
|
19,231,040 |
|
|
|
18,975,265 |
|
|
|
19,078,453 |
|
|
|
18,840,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Xcel Brands,
Inc. and Subsidiaries |
Unaudited
Condensed Consolidated Statements of Cash Flows |
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
For the Nine
Months Ended |
|
|
|
September
30, |
|
|
2020 |
|
2019 |
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2,634 |
) |
|
$ |
1,884 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
4,069 |
|
|
|
2,939 |
|
Property and equipment impairment |
|
|
113 |
|
|
|
- |
|
Amortization of deferred finance costs |
|
|
72 |
|
|
|
114 |
|
Stock-based compensation |
|
|
780 |
|
|
|
777 |
|
Amortization of note discount |
|
|
- |
|
|
|
16 |
|
Allowance for doubtful accounts |
|
|
1,054 |
|
|
|
(144 |
) |
Loss on extinguishment of debt |
|
|
- |
|
|
|
189 |
|
Deferred income tax (benefit) provision |
|
|
(269 |
) |
|
|
1,280 |
|
Net Gain on sale of assets |
|
|
(46 |
) |
|
|
- |
|
Gain on reduction of contingent obligation |
|
|
- |
|
|
|
(2,850 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
1,380 |
|
|
|
1,182 |
|
Inventory |
|
|
176 |
|
|
|
(87 |
) |
Prepaid expenses and other assets |
|
|
187 |
|
|
|
(14 |
) |
Accounts payable, accrued expenses and other current
liabilities |
|
|
(2,403 |
) |
|
|
(1,744 |
) |
Cash paid in excess of rent expense |
|
|
(276 |
) |
|
|
(337 |
) |
Other liabilities |
|
|
- |
|
|
|
(196 |
) |
Net
cash provided by operating activities |
|
|
2,203 |
|
|
|
3,009 |
|
|
|
|
|
|
|
|
Cash
flows from investing activities |
|
|
|
|
|
|
Cash consideration for asset acquisition of the Halston Heritage
assets |
|
|
- |
|
|
|
(8,830 |
) |
Net proceeds from sale of assets |
|
|
46 |
|
|
|
|
Purchase of property and equipment |
|
|
(700 |
) |
|
|
(918 |
) |
Net
cash used in investing activities |
|
|
(654 |
) |
|
|
(9,748 |
) |
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
|
Shares repurchased including vested restricted stock in exchange
for witholdong taxes |
|
|
(187 |
) |
|
|
(24 |
) |
Cash contribution from non-controling interest |
|
|
300 |
|
|
|
- |
|
Payment of deferred finance costs |
|
|
(20 |
) |
|
|
(315 |
) |
Proceeds from long-term debt |
|
|
- |
|
|
|
7,500 |
|
Payment of long-term debt |
|
|
(1,500 |
) |
|
|
(3,742 |
) |
Net
cash (used in) provided by financing activities |
|
|
(1,407 |
) |
|
|
3,419 |
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash, cash equivalents, and restricted
cash |
|
|
142 |
|
|
|
(3,320 |
) |
|
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash at beginning of period |
|
|
5,750 |
|
|
|
10,319 |
|
|
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash at end of period |
|
$ |
5,892 |
|
|
$ |
6,999 |
|
|
|
|
|
|
|
|
Reconciliation to amounts on consolidated balance
sheets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
4,783 |
|
|
$ |
5,890 |
|
Restricted cash |
|
|
1,109 |
|
|
|
1,109 |
|
Total cash, cash equivalents, and restricted cash |
|
$ |
5,892 |
|
|
$ |
6,999 |
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash
activities: |
|
|
|
|
|
|
Operating lease right-of-use asset |
|
$ |
797 |
|
|
$ |
10,409 |
|
Operating lease obligation |
|
$ |
797 |
|
|
$ |
13,210 |
|
Accrued rent offset to operating lease right-of-use assets |
|
$ |
- |
|
|
$ |
2,801 |
|
Settlement of seller note through offset to receivable |
|
$ |
- |
|
|
$ |
600 |
|
Settlement of contingent obligation through offset to note
receivable |
|
$ |
- |
|
|
$ |
100 |
|
Issuance of common stock in connection with Halston Heritage assets
acquisition |
|
$ |
- |
|
|
$ |
1,058 |
|
Contingent obligation related to acquisition of Halston Heritage
assets at fair value |
|
$ |
- |
|
|
$ |
900 |
|
Liability for equity-based bonuses |
|
$ |
93 |
|
|
$ |
168 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
Cash paid during the period for income taxes |
|
$ |
58 |
|
|
$ |
91 |
|
Cash paid during the period for interest |
|
$ |
1,092 |
|
|
$ |
1,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
September
30, |
|
September
30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
Net
(loss) income attributed to Xcel Brands, Inc. stockholders |
$ |
(434 |
) |
|
$ |
(95 |
) |
|
$ |
(2,539 |
) |
|
$ |
1,884 |
|
|
Amortization
of trademarks |
|
1,107 |
|
|
|
786 |
|
|
|
3,323 |
|
|
|
2,309 |
|
|
Non-cash
interest and finance expense |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
Stock-based
compensation |
|
49 |
|
|
|
295 |
|
|
|
780 |
|
|
|
777 |
|
|
Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
189 |
|
|
Costs in
connection with potential acquisition |
|
(189 |
) |
|
|
126 |
|
|
|
(210 |
) |
|
|
231 |
|
|
Certain
adjustments to allowance for doubtful accounts |
|
385 |
|
|
|
- |
|
|
|
971 |
|
|
|
- |
|
|
Property and
equipment impairment |
|
31 |
|
|
|
- |
|
|
|
113 |
|
|
|
- |
|
|
Gain on
sale of assets |
|
(46 |
) |
|
|
- |
|
|
|
(46 |
) |
|
|
- |
|
|
Gain on
reduction of contingent obligation |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,850 |
) |
|
Deferred
income tax provision (benefit) |
|
(145 |
) |
|
|
137 |
|
|
|
(269 |
) |
|
|
1,280 |
|
|
Non-GAAP net
income |
$ |
758 |
|
|
$ |
1,249 |
|
|
$ |
2,123 |
|
|
$ |
3,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
September
30, |
|
September
30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
Diluted
(loss) earnings per share |
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.13 |
) |
|
$ |
0.10 |
|
|
Amortization
of trademarks |
|
0.06 |
|
|
|
0.04 |
|
|
|
0.17 |
|
|
|
0.12 |
|
|
Non-cash
interest and finance expense |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Stock-based
compensation |
|
- |
|
|
|
0.01 |
|
|
|
0.04 |
|
|
|
0.04 |
|
|
Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
Costs in
connection with potential acquisition |
|
(0.01 |
) |
|
|
0.01 |
|
|
|
(0.01 |
) |
|
|
0.01 |
|
|
Certain
adjustments to allowance for doubtful accounts |
|
0.02 |
|
|
|
- |
|
|
|
0.05 |
|
|
|
- |
|
|
Property and
equipment impairment |
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
- |
|
|
Gain on
sale of assets |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gain on
reduction of contingent obligation |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.15 |
) |
|
Deferred
income tax provision (benefit) |
|
(0.01 |
) |
|
|
0.01 |
|
|
|
(0.02 |
) |
|
|
0.07 |
|
|
Non-GAAP
diluted EPS |
$ |
0.04 |
|
|
$ |
0.06 |
|
|
$ |
0.11 |
|
|
$ |
0.20 |
|
|
Non-GAAP
weighted average diluted shares |
|
19,291,275 |
|
|
|
19,559,816 |
|
|
|
19,092,828 |
|
|
|
18,840,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
September
30, |
|
September
30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
Net
(loss) income attributed to Xcel Brands, Inc. stockholders |
$ |
(434 |
) |
|
$ |
(95 |
) |
|
$ |
(2,539 |
) |
|
$ |
1,884 |
|
|
Depreciation
and amortization |
|
1,437 |
|
|
|
991 |
|
|
|
4,069 |
|
|
|
2,939 |
|
|
Interest
and finance expense |
|
304 |
|
|
|
330 |
|
|
|
897 |
|
|
|
1,157 |
|
|
Income tax
provision (benefit) |
|
(145 |
) |
|
|
137 |
|
|
|
(269 |
) |
|
|
1,280 |
|
|
State and
local franchise taxes |
|
41 |
|
|
|
38 |
|
|
|
124 |
|
|
|
159 |
|
|
Stock-based
compensation |
|
49 |
|
|
|
295 |
|
|
|
780 |
|
|
|
777 |
|
|
Costs in
connection with potential acquisition |
|
(189 |
) |
|
|
126 |
|
|
|
(210 |
) |
|
|
231 |
|
|
Certain
adjustments to allowance for doubtful accounts |
|
385 |
|
|
|
- |
|
|
|
971 |
|
|
|
- |
|
|
Property and
equipment impairment |
|
31 |
|
|
|
- |
|
|
|
113 |
|
|
|
- |
|
|
Gain on
sale of assets |
|
(46 |
) |
|
|
- |
|
|
|
(46 |
) |
|
|
- |
|
|
Gain on
reduction of contingent obligation |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,850 |
) |
|
Adjusted
EBITDA |
$ |
1,433 |
|
|
$ |
1,822 |
|
|
$ |
3,890 |
|
|
$ |
5,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income and non-GAAP diluted EPS are
non-GAAP unaudited terms. We define non-GAAP net income as net
income (loss), exclusive of amortization of trademarks, stock-based
compensation, non-cash interest and finance expense from discounted
debt related to acquired assets, loss on extinguishment of debt,
costs in connection with potential acquisitions, certain
adjustments to allowances for doubtful accounts, asset impairments,
gain on sale of assets, gain on reduction of contingent
obligations, and deferred 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) before depreciation and
amortization, interest and finance expense (including loss on
extinguishment of debt, if any), income taxes, other state and
local franchise taxes, stock-based compensation, costs in
connection with potential acquisitions, certain adjustments to
allowances for doubtful accounts, asset impairments, gain on sale
of assets, and gain on the reduction of contingent obligations.
Both non-GAAP net income and Adjusted EBITDA for
the current quarter and current nine months include certain
adjustments related to allowances for doubtful accounts for account
debtors that have filed for bankruptcy protection triggered by the
impact of COVID-19. In addition, included in net income was $1.8
million of government assistance received through the Paycheck
Protection Program under the CARES Act, which was recognized as a
reduction to current quarter and current nine months expenses for
which the program was intended to compensate, in the amount of $0.2
million and $1.8 million, respectively. The expense reduction from
the PPP is not considered a reconciling item for purposes of the
computation of non-GAAP net income and Adjusted EBITDA due to the
fact that the PPP represents a cash benefit and is directly related
to the Company’s operating expenses incurred. Such treatment is
also consistent with the calculation of EBITDA for financial
covenant compliance purposes under the Company’s term debt.
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. The Company has incurred certain costs which
it could have eliminated but elected not to do so in light of
government assistance received through the Paycheck Protection
Program under the CARES Act (the “PPP Benefit”), which represents a
cash benefit directly related to the Company’s operating expenses
incurred. Accordingly, the PPP Benefit is not considered a
reconciling item for purposes of the computation of non-GAAP net
income and Adjusted EBITDA. Adjusted EBITDA is the measure used to
calculate compliance with the EBITDA covenant under the Xcel Term
Loan. 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.
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