XELB - Xcel Brands Inc. Announces Third Quarter and First Nine Months of 2019 Results

• Nine Month Net Revenues of $30.4 Million, up 19% from the Prior Year Period 

• Nine Month GAAP Net Income of $1.9 million, Diluted EPS of $0.10 

• Nine Month Non-GAAP Diluted EPS of $0.20, Adjusted EBITDA $5.6 million

NEW YORK, Nov. 13, 2019 (GLOBE NEWSWIRE) -- Xcel Brands, Inc. (NASDAQ: XELB) (“Xcel” or the “Company”), a media and consumer products company, today announced its financial results for the third quarter and nine months ended September 30, 2019.

Robert W. D'Loren, Chairman and Chief Executive Officer of Xcel commented, “We continue to grow our top-line revenue driven by improvements made in our products.  Although our third quarter results were not in line with our expectations, we expect to achieve our financial goals for the full year.  Overall, I am pleased with our product direction and operating results”.

Third Quarter 2019 Financial Results

Net revenue increased to $10.9 million, a net increase of approximately $2.7 million, or 32% over the prior year quarter, primarily driven by sales from the apparel and jewelry wholesale and e-commerce operations. Gross profit remained flat at approximately $8.0 million for the current and the prior year quarters.

GAAP net loss was approximately ($0.1) million, or ($0.01), per share, compared with a GAAP net income of $1.0 million, or $0.05 per share, for the prior year quarter. After adjusting for certain cash and non-cash items, non-GAAP net income for the current quarter and prior year quarter was approximately $1.2 million or $0.06 per diluted share, and approximately $1.9 million or $0.10 per diluted share, respectively. Adjusted EBITDA was approximately $1.8 million, compared with approximately $2.3 million in the prior year quarter.

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 ("GAAP"). 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.

First Nine Months of Fiscal 2019 Financial Results

Net revenue increased to $30.4 million, a net increase of approximately $4.9 million, or 19% over the prior year nine-month period, primarily driven by sales from the apparel and jewelry wholesale and e-commerce operations.  Gross profit decreased $1.1 million to $23.8 million from $24.9 million in the prior year nine months, primarily attributable to lower net licensing revenue.

GAAP net income was approximately $1.9 million for the nine months ended September 30, 2019, or $0.10 per diluted share, an increase of $0.5 million, or $0.03 per diluted share from the prior year nine months, representing an increase of approximately 38% in GAAP net income and earnings per share from the prior year period.  After adjusting for certain cash and non-cash items, non-GAAP net income for the nine months ended September 30, 2019 was approximately $3.8 million, or $0.20 per diluted share, compared with $5.3 million, or $0.29 per diluted share in the prior year nine months.

Adjusted EBITDA for the nine months ended September 30, 2019 was approximately $5.6 million, a decrease of $1.1 million from the prior year period. 

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 ("GAAP"). 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, 2019 remained strong, with stockholders' equity of approximately $103 million, cash and cash equivalents of approximately $5.9 million, and working capital, exclusive of current portion of operating lease liability, 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 Wednesday, November13, 2019. 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 1-855-327-6837. A replay of the conference call will be available on the Company website for 14 days following the event and can be accessed at 844-512-2921 using replay pin number 10007966.

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. The Company owns and manages the Isaac Mizrahi brands (the "Isaac Mizrahi Brand"), the Judith Ripka brands (the "Ripka Brand"), the Halston brands ("Halston Brand"), the C Wonder brands (the "C Wonder Brand"), and other proprietary brands, pioneering a ubiquitous sales strategy which includes the promotion and sales of products under its brands through interactive television, internet, brick-and-mortar retail, and e-commerce channels. Headquartered in New York City, Xcel 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 product 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.  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, 2018 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

The following table is a reconciliation of net income (loss) (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net income:

Non-GAAP net income and non-GAAP diluted EPS are non-GAAP unaudited terms. We define non-GAAP net income, 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, gain on the reduction of contingent obligations, costs in connection with potential acquisitions and deferred tax provision. 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. Prior to 2019, the Company did not adjust non-GAAP net income and non-GAAP EPS for the amortization of trademarks or costs in connection with potential acquisitions.

Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income before stock-based compensation, costs in connection with potential acquisitions, interest and finance expense, loss on extinguishment of debt, gain on the reduction of contingent obligations, income taxes, other state and local franchise taxes, and depreciation and amortization. Prior to 2019, the Company did not adjust non-GAAP net income and non-GAAP EPS for the amortization of trademarks or costs in connection with potential acquisitions.

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 they provide supplemental information to assist investors in evaluating our financial results. 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 non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures. 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.