GlobeNewswire Inc | Apr 21, 2021 04:14PM EDT

April 21, 2021

-- Fourth quarter net product sales of $2.6 million, rebounding 20% from the third quarter -- Fourth quarter net loss of $10.4 million, or ($0.54) per share, on a GAAP basis; net loss of $0.3 million, or ($0.02) per share, on a non-GAAP basis -- Adjusted EBITDA of $0.2 million for the fourth quarter; $4.1 million for the fiscal year

NEW YORK, April 21, 2021 (GLOBE NEWSWIRE) -- Xcel Brands, Inc. (NASDAQ: XELB) (Xcel or the Company), a media and consumer products company, today announced its financial results for the fourth quarter ended December 31, 2020.

Robert W. D'Loren, Chairman and Chief Executive Officer of Xcel commented, Our fourth quarter financial results reflect the current economic environment brought about by the COVID-19 pandemic. We are encouraged by the opportunities and growth potential we see in digital live-streaming and our recent acquisition of the LOGO Lori Goldstein brand. We expect growth to accelerate and our operating results to improve across our business in 2021.

Fourth Quarter 2020 Financial Results

Total revenue was $7.5 million, a decrease of $3.9 million compared to the prior year quarter, primarily driven by a reduction in net product sales of $3.4 million due to the 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 67% in the prior year quarter to 80% in the current quarter.

Net loss attributable to Xcel Brands was approximately $10.4 million, or ($0.54) per diluted share, compared with a net loss of $5.3 million, or ($0.28) per diluted share, for the prior year quarter. The current quarters net loss is primarily attributable to a $13 million non-cash impairment charge related to the Judith Ripka Brand trademarks, driven by delays and uncertainty in implementing the brick-and-mortar retail store strategy for a portion of the brand, primarily as a result of the COVID-19 pandemic. After adjusting for certain cash and non-cash items, results on a non-GAAP basis were a net loss of approximately $0.3 million, or ($0.02) per diluted share for the quarter ended December 31, 2020, and net income of approximately $0.9 million, or $0.05 per diluted share, for the quarter ended December 31, 2019. Adjusted EBITDA was approximately $0.2 million and $1.5 million for the current quarter and the prior year quarter, respectively.

Full Year 2020 Financial Results

Total revenue was $29.4 million, a decrease of $12.3 million from prior year, driven by lower licensing revenues and lower product sales of $6.2 million and $6.1 million, respectively. Despite the decrease in revenues and gross profit on an absolute dollar basis, overall gross profit margins increased from 75% in the prior year to 81% in the current year, while gross profit margins from product sales increased from 33% in the prior year to 41% in the current year. As with the quarters results, the decrease in revenues was primarily attributable to 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. Additionally, the decline in licensing revenues also reflected changes in certain of our existing licensing arrangements, including lower guaranteed minimum revenues upon renewal, and changes from guaranteed minimum amounts to sales-based royalties.

Net loss attributable to Xcel Brands was approximately $12.9 million, or ($0.68) per diluted share, compared with net loss of $3.4 million, or ($0.18) per diluted share, for the prior year. The current year net loss includes the previously mentioned $13 million impairment charge related to the Judith Ripka Trademarks. The prior year net loss notably included a $2.9 million gain on the reduction of contingent obligations, as well as a $6.2 million impairment charge. After adjusting for certain cash and non-cash items, non-GAAP net income for the year ended December 31, 2020 and 2019 was approximately $1.8 million, or $0.10 per diluted share, and approximately $4.8 million, or $0.25 per diluted share, respectively. Adjusted EBITDA was approximately $4.1 million and $7.1 million for the current year and prior year, 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 December 31, 2020 remained strong, with stockholders' equity of approximately $95 million, cash and cash equivalents of approximately $5.0 million, and working capital, exclusive of the current portion of lease obligations, of approximately $7.9 million.

Conference Call and WebcastThe 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, April 21, 2021. 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 on the Company website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 13719186.

About Xcel BrandsXcel 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. The companys brands have generated in excess of $3BB US in retail sales through live streaming on TV. Xcel was founded by Robert W. D'Loren in 2011 with a vision to reimagine shopping, entertainment, and social media as one. Xcel owns the Isaac Mizrahi, Judith Ripka, Halston, LOGO Lori Goldstein 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 livestream production, merchandising, design, production, 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 StatementsThis 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, 2020 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 SubsidiariesUnaudited Condensed Consolidated Balance Sheets(in thousands, except share and per share data) December 31, December 31, 2020 2019 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 4,957 $ 4,641 Accounts receivable, net 8,889 10,622 Inventory 1,216 899 Prepaid expenses and other current assets 1,085 1,404 Total current assets 16,147 17,566 Property and equipment, net 3,367 3,666 Operating lease right-of-use assets 8,668 9,250 Trademarks and other intangibles, net 93,535 111,095 Restricted cash 1,109 1,109 Other assets 228 505 Total non-current assets 106,907 125,625 Total Assets $ 123,054 $ 143,191 Liabilities and Equity Current Liabilities: Accounts payable, accrued expenses and other $ 4,442 $ 4,391 current liabilitiesAccrued payroll 973 1,444 Current portion of operating lease obligation 2,101 1,752 Current portion of long-term debt 2,800 2,250 Total current liabilities 10,316 9,837 Long-Term Liabilities: Long-term portion of operating lease 8,469 9,773 obligationLong-term debt, less current portion 13,838 16,571 Contingent obligation 900 900 Deferred tax liabilities, net 3,052 7,434 Other long-term liabilities 224 224 Total long-term liabilities 26,483 34,902 Total Liabilities 36,799 44,739 Commitments and Contingencies Equity: Preferred stock, $.001 par value, 1,000,000shares authorized, none issued and - - outstandingCommon stock, $.001 par value, 50,000,000shares authorized, and 19,260,862 and 19 19 18,866,417 shares issued and outstanding atDecember 31, 2020 and 2019, respectivelyPaid-in capital 102,324 101,736 Accumulated deficit (16,595 ) (3,659 )Total Xcel Brands, Inc. stockholders' equity 85,748 98,096 Noncontrolling interest 507 356 Total Equity 86,255 98,452 Total Liabilities and Equity $ 123,054 $ 143,191

Xcel Brands, Inc. and SubsidiariesUnaudited Condensed Consolidated Statements of Operations(in thousands, except share and per share data) For the Three Months Ended For the Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 Revenues Net licensing $ 4,877 $ 5,341 $ 20,255 $ 26,435 revenueNet sales 2,603 6,015 9,193 15,292 Net revenue 7,480 11,356 29,448 41,727 Cost of goods 1,533 3,723 5,456 10,272 sold (sales)Gross profit 5,947 7,633 23,992 31,455 Operatingcosts and expensesSalaries,benefits and 3,263 3,796 13,061 15,834 employmenttaxesOther designand marketing 998 812 3,334 3,164 costsOther selling,general and 1,540 1,538 6,567 5,552 administrativeexpensesCosts(recovery ofcosts) in 52 1,059 (158 ) 1,290 connectionwith potentialacquisitionStock-based 70 199 850 976 compensationDepreciationand 1,428 963 5,497 3,902 amortizationGovernmentassistance -Paycheck 0 - (1,816 ) - ProtectionProgramAsset 13,000 6,200 13,113 6,200 impairmentsTotaloperating 20,351 14,567 40,448 36,918 costs andexpenses Other income - - 46 2,850 Operating loss (14,404 ) (6,934 ) (16,410 ) (2,613 ) Interest andfinance expenseInterestexpense and 296 317 1,193 1,285 other financechargesLoss onextinguishment - - - 189 of debtTotal interestand finance 296 317 1,193 1,474 expense Loss before (14,700 ) (7,251 ) (17,603 ) (4,087 )income taxes Income tax (4,249 ) (1,922 ) (4,518 ) (642 )benefit Net loss (10,451 ) (5,329 ) (13,085 ) (3,445 )Less: Net lossattributableto (54 ) (19 ) (149 ) (19 )noncontrollinginterestNet lossattributableto Xcel $ (10,397 ) $ (5,310 ) $ (12,936 ) $ (3,426 )Brands, Inc.stockholders Loss per shareattributed toXcel Brands, Inc. commonstockholders:Basic net loss $ (0.54 ) $ (0.28 ) $ (0.68 ) $ (0.18 )per share:Diluted netloss per $ (0.54 ) $ (0.28 ) $ (0.68 ) $ (0.18 )share: Weightedaverage numberof common sharesoutstanding:Basic weightedaverage common 19,233,633 18,911,760 19,117,460 18,857,657 sharesoutstandingDilutedweightedaverage common 19,233,633 18,911,760 19,117,460 18,857,657 sharesoutstanding

Xcel Brands, Inc. and SubsidiariesUnaudited Condensed Consolidated Statements of Cash Flows(in thousands) For the Twelve Months Ended December 31, 2020 2019 Cash flows from operating activities Net loss $ (13,085 ) $ (3,445 )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization expense 5,497 3,902 Asset impairment charges 13,113 6,200 Amortization of deferred finance costs 95 146 Stock-based compensation 850 976 Amortization of note discount 16 Allowance for doubtful accounts 1,042 (50 )Loss on extinguishment of debt - 189 Deferred income tax benefit (4,382 ) (705 )Net gain on sale of assets (46 ) Gain on reduction of contingent obligation - (2,850 )Changes in operating assets and liabilities: Accounts receivable 691 438 Inventory (317 ) 1,089 Prepaid expenses and other assets 597 (59 )Accounts payable, accrued expenses and other (496 ) (1,720 )current liabilitiesCash paid in excess of rent expense (374 ) (431 )Other liabilities - (196 )Net cash provided by operating activities 3,185 3,500 Cash flows from investing activities Cash consideration for asset acquisition of - (8,830 )the Halston Heritage assetsInvestment in Longaberger Licensing, LLC - (375 )Net proceeds from sale of assets 46 - Purchase of property and equipment (748 ) (1,133 )Net cash used in investing activities (702 ) (10,338 ) Cash flows from financing activities Shares repurchased including vestedrestricted stock in exchange for withholding (190 ) (174 )taxesCash contribution from non-controlling 300 interestPayment of deferred finance costs (27 ) (315 )Proceeds from long-term debt - 7,500 Payment of long-term debt (2,250 ) (4,742 )Net cash (used in) provided by financing (2,167 ) 2,269 activities Net increase (decrease) in cash, cash 316 (4,569 )equivalents, and restricted cash Cash, cash equivalents, and restricted cash 5,750 10,319 at beginning of period Cash, cash equivalents, and restricted cash $ 6,066 $ 5,750 at end of period Reconciliation to amounts on consolidated balance sheets:Cash and cash equivalents 4,957 $ 4,641 Restricted cash 1,109 1,109 Total cash, cash equivalents, and restricted $ 6,066 $ 5,750 cash 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 $ - $ 2,801 right-of-use assetsSettlement of seller note through offset to $ - $ 600 receivableSettlement of contingent obligation through $ $ 100 offset to note receivableIssuance of common stock in connection with $ - $ 1,058 Halston Heritage assets acquisitionContingent obligation related to acquisition $ - $ 900 of Halston Heritage assets at fair valueLiability for equity-based bonuses $ 71 $ 220 Supplemental disclosure of cash flow information:Cash paid during the period for income taxes $ 58 $ 136 Cash paid during the period for interest $ 1,128 $ 1,176

Three Months Ended Twelve Months Ended($ in December 31, December 31, December 31, December 31,thousands) 2020 2019 2020 2019 (Unaudited) (Unaudited) (Unaudited) (Unaudited)Net lossattributableto Xcel $ (10,397 ) (5,329 ) $ (12,936 ) $ (3,426 )Brands, Inc.stockholdersAmortization 1,109 796 4,432 3,105 of trademarksNon-cashinterest and - - - 16 financeexpenseStock-based 70 199 850 976 compensationLoss onextinguishment - - - 189 of debtCosts(recovery ofcosts) in 52 1,059 (158 ) 1,290 connectionwith potentialacquisitionCertainadjustments toallowance for - - 971 - doubtfulaccountsAsset 13,000 6,200 13,113 6,200 impairmentsGain on sale - - (46 ) - of assetsGain onreduction of - - - (2,850 )contingentobligationDeferredincome tax (4,113 ) (1,985 ) (4,382 ) (705 )benefitNon-GAAP net $ (279 ) $ 940 $ 1,844 $ 4,795 income Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019 (Unaudited) (Unaudited) (Unaudited) (Unaudited)Diluted lossper shareattributable $ (0.54 ) $ (0.28 ) $ (0.68 ) $ (0.18 )to XcelBrands, Inc.stockholdersAmortization 0.06 0.04 0.23 0.16 of trademarksNon-cashinterest and - - - - financeexpenseStock-based - 0.01 0.04 0.05 compensationLoss onextinguishment - - - 0.01 of debtCosts(recovery ofcosts) in - 0.05 (0.01 ) 0.07 connectionwith potentialacquisitionCertainadjustments toallowance for - - 0.05 - doubtfulaccountsAsset 0.67 0.33 0.69 0.33 impairmentsGain on sale - - - - of assetsGain onreduction of - - - (0.15 )contingentobligationDeferredincome tax (0.21 ) (0.10 ) (0.22 ) (0.04 )benefitNon-GAAP $ (0.02 ) $ 0.05 $ 0.10 $ 0.25 diluted EPSNon-GAAPweighted 19,323,078 18,913,476 19,152,569 18,858,379 averagediluted shares Three Months Ended Twelve Months Ended($ in December 31, December 31, December 31, December 31,thousands) 2020 2019 2020 2019 (Unaudited) (Unaudited) (Unaudited) (Unaudited)Net lossattributableto Xcel $ (10,397 ) $ (5,310 ) $ (12,936 ) $ (3,426 )Brands, Inc.stockholdersDepreciationand 1,428 963 5,497 3,902 amortizationInterest andfinance 296 317 1,193 1,474 expenseIncome tax (4,249 ) (1,922 ) (4,518 ) (642 )benefitState andlocal 21 38 145 197 franchisetaxesStock-based 70 199 850 976 compensationCosts(recovery ofcosts) in 52 1,059 (158 ) 1,290 connectionwith potentialacquisitionCertainadjustments toallowance for - - 971 - doubtfulaccountsAsset 13,000 6,200 13,113 6,200 impairmentsGain on sale - - (46 ) - of assetsGain onreduction of - - - (2,850 )contingentobligationAdjusted $ 221 $ 1,544 $ 4,111 $ 7,121 EBITDA

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, non-cash interest and finance expense from discounted debt related to acquired assets, loss on extinguishment of debt, gain on sales of assets, gain on reduction of contingent obligations, costs (recoveries) in connection with potential acquisitions, certain adjustments to allowances for doubtful accounts related to debtors that have filed for bankruptcy protection triggered by the impact of COVID-19, asset impairments, 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 Companys 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, stock-based compensation, gain on reduction of contingent obligations, gain on sale of assets, costs (recoveries) in connection with potential acquisitions, asset impairments, and certain adjustments to allowances for doubtful accounts related to debtors that have filed for bankruptcy protection triggered by the impact of COVID-19.

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.

Non-GAAP net income for the current year includes 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, the Company incurred certain costs during the year which it could have eliminated but elected not to do so in light of $1.8 million of government assistance received through the Paycheck Protection Program under the CARES Act (the PPP Benefit). The PPP Benefit was recognized as a reduction to current year expenses for which the program was intended to compensate, in the amount of $1.8 million. Accordingly, the PPP Benefit 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 Benefit represents a cash benefit and is directly related to the Companys operating expenses incurred. Such treatment is also consistent with the calculation of EBITDA for financial covenant compliance purposes under the Companys term debt.

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.