- Q1 Revenue of $6.3 million vs. $1.6 million in the
prior year quarter
- Q1 Adjusted EBITDA of $3.1 million vs. ($1.2) million
in the prior year quarter
- Q1 non-GAAP Net Income of $0.8 million vs. ($1.4)
million in the prior year quarter
- Q1 non-GAAP EPS of $0.03 vs. ($0.20) in the prior year
quarter
- Trailing 12-month revenue of $27.3 million
and adjusted EBITDA of $16.6 million
- Full Year Projected Revenue of $28-$30
million
Sequential Brands Group, Inc. (Nasdaq:SQBG) ("Sequential" or the
"Company") today announced financial results for the first quarter
ended March 31, 2014.
First Quarter 2014 Results:
Total revenue for the first quarter ended March 31, 2014
increased to approximately $6.3 million, compared to approximately
$1.6 million in the prior year quarter. Adjusted EBITDA for the
first quarter was approximately $3.1 million, compared to
approximately ($1.2) million in the prior year quarter. On a
non-GAAP basis, net income for the quarter was approximately $0.8
million, or $0.03 per share, compared to a net loss of
approximately $1.4 million, or ($0.20) per share, in the prior year
quarter. On a GAAP basis, net income for the quarter was
approximately $0.7 million, or $0.03 per share, compared to a net
loss of approximately $21.5 million, or ($2.96) per share, in the
prior year quarter.
Yehuda Shmidman, Sequential's Chief Executive Officer,
commented, "This is an exciting time for Sequential Brands Group.
We achieved record first quarter results since converting to a
licensing and brand management business model, and we continue to
be optimistic about our future ability to grow our portfolio both
organically and through new brand acquisitions. As we continue to
execute on our playbook, we believe our portfolio can achieve
upwards of $100 million in annual royalty revenue in the next three
years."
Financial Update:
The Company projects revenue of $28-30 million for the existing
portfolio of brands for the year ending December 31, 2014,
operating at a 55% adjusted EBITDA margin. The Company expects
margin expansion to continue as the Company acquires additional
brands.
Similar to the Company's 2013 results, the Company expects
revenue for 2014 to be weighted to the fourth quarter due to
seasonality in the businesses of many of the Company's
licensees.
Investor Conference and Webcast:
Management will provide further commentary today, May 1, 2014,
on the Company's financial results via a conference call beginning
at approximately 10:00a.m. EDT. To join the conference call, please
dial (760) 666-3775 or visit the investor relations page on the
Company's website at www.sequentialbrandsgroup.com.
Non-GAAP Financial Measures:
This press release contains certain non-GAAP financial measures.
A reconciliation of these non-GAAP measures to their nearest
comparable GAAP measure is included in the tables following this
press release. As described more fully below, we believe the use of
non-GAAP measures in addition to GAAP measures is an additional
useful method of evaluating our financial condition and results of
operations. The non-GAAP financial measures disclosed should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the expected results
calculated in accordance with GAAP and reconciliations to those
expected results should be carefully evaluated. The non-GAAP
financial measures we use may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used
by other companies.
About Sequential Brands Group, Inc.
Sequential Brands Group, Inc. (Nasdaq:SQBG) owns, promotes,
markets, and licenses a portfolio of consumer brands that presently
includes Ellen Tracy®, William Rast®, Revo®, Caribbean Joe®,
Heelys®, DVS®, The Franklin Mint® and People's Liberation®.
Sequential seeks to ensure that its brands continue to thrive and
grow by employing strong brand management, design and marketing
teams. Sequential has licensed and intends to license its brands in
a variety of consumer categories to retailers, wholesalers and
distributors in the United States and in certain international
territories. For more information, please visit Sequential's
corporate website at: www.sequentialbrandsgroup.com. To inquire
about licensing opportunities, please email:
newbusiness@sbg-ny.com.
Forward-Looking Statements
Certain statements in this press release and oral statements
made from time to time by representatives of the Company are
forward-looking statements ("forward-looking statements") within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are made as of the date
hereof and are based on current expectations, estimates, forecasts
and projections as well as the beliefs and assumptions of
management. Our actual results could differ materially from those
stated or implied in forward looking statements. Forward-looking
statements include statements concerning plans, objectives, goals,
strategies, expectations, intentions, projections, developments,
future events, performance or products, underlying assumptions and
other statements that are not historical in nature, including those
that include the words "subject to," "believes," "anticipates,"
"plans," "expects," "intends," "estimates," "forecasts,"
"projects," "aims," "targets," "may," "will," "should," "can," the
negatives thereof, variations thereon and similar expressions. Such
forward-looking statements reflect the Company's current views with
respect to future events, based on what the Company believes are
reasonable assumptions. Whether actual results will conform to
expectations and predictions is subject to known and unknown risks
and uncertainties, including risks and uncertainties discussed in
the reports that the Company has filed with the Securities and
Exchange Commission (the "SEC"); general economic, market, or
business conditions; changes in the Company's competitive position
or competitive actions by other companies; the Company's ability to
maintain strong relationships with its licensees; the Company's
ability to retain key personnel; the Company's ability to achieve
and/or manage growth and to meet target metrics associated with
such growth; the Company's ability to successfully attract new
brands; the Company's ability to identify suitable targets for
acquisitions; the Company's ability to obtain financing for the
acquisitions on commercially reasonable terms; the Company's
ability to integrate successfully the new acquisitions into its
ongoing business; and the ability to achieve the anticipated
results of these and other potential acquisitions; the Company's
ability to comply with government regulations; changes in laws or
regulations or policies of federal and state regulators and
agencies; and other circumstances beyond the Company's control.
Refer to section entitled "Risk Factors" set forth in the Company's
Annual Report on Form 10-K for the year ended December 31, 2013 for
a discussion of important risks, uncertainties and other factors
that may affect our business, results of operations and financial
condition. The Company's stockholders are urged to consider such
risks, uncertainties and factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. Forward-looking
statements are not, and should not be relied upon as, a guarantee
of future performance or results, nor will they necessarily prove
to be accurate indications of the times at or by which any such
performance or results will be achieved. As a result, actual
outcomes and results may differ materially from those expressed in
forward-looking statements. The Company is under no obligation to,
and expressly disclaims any such obligation to, update or alter its
forward-looking statements, whether as a result of new information,
future events or otherwise.
Condensed Consolidated Income
Statements: |
|
|
|
|
|
(in thousands, except earnings per share
data) |
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
|
|
Net Revenue |
$ 6,262 |
$ 1,629 |
Operating expenses |
3,750 |
5,365 |
Income (loss) from
operations |
2,512 |
(3,736) |
Other income |
(2) |
0 |
Interest expense, net |
1,270 |
11,617 |
Income (loss) before income
taxes |
1,244 |
(15,353) |
Provision for income taxes |
397 |
2,264 |
Income (loss) from continuing
operations |
847 |
(17,617) |
Loss from discontinued operations: |
|
|
Loss from discontinued
operations of wholesale business |
0 |
(3,864) |
Loss from discontinued operations, net of
tax |
0 |
(3,864) |
Net income (loss) |
847 |
(21,481) |
Net income attributable to noncontrolling
interest |
(105) |
(26) |
Net income (loss) attributable
to Sequential Brands Group, Inc. and Subsidiaries |
$ 742 |
$ (21,507) |
|
|
|
Basic earnings (loss) per share: |
|
|
Continuing operations |
$ 0.03 |
$ (2.43) |
Discontinued operations |
-- |
(0.53) |
Attributable to Sequential
Brands Group, Inc. and Subsidiaries |
$ 0.03 |
$ (2.96) |
Basic weighted average common
shares outstanding |
24,701 |
7,268 |
|
|
|
Diluted earnings (loss) per share: |
|
|
Continuing operations |
$ 0.03 |
$ (2.43) |
Discontinued operations |
-- |
(0.53) |
Attributable to Sequential
Brands Group, Inc. and Subsidiaries |
$ 0.03 |
$ (2.96) |
Diluted weighted average common
shares outstanding |
26,227 |
7,268 |
|
|
|
Select Balance Sheet
Items: |
|
|
|
|
|
(in thousands) |
(Unaudited) |
|
|
Mar. 31, 2014 |
Dec. 31, 2013 |
|
|
|
|
|
|
Total Assets |
$ 151,679 |
$ 153,605 |
Total Liabilities |
$ 69,196 |
$ 72,436 |
Total Stockholders' Equity |
$ 82,483 |
$ 81,169 |
|
|
|
Non-GAAP Financial Measure
Reconciliation |
|
|
|
|
|
(in thousands, except earnings per share
data) |
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
|
|
GAAP net income (loss) |
$ 742 |
$ (21,507) |
|
|
|
Adjustments: |
|
|
Loss from discontinued
operations (a) |
0 |
3,865 |
Deal costs (b) |
54 |
2,357 |
Non-cash income tax related to
the amortization of intangibles (c) |
0 |
2,264 |
Non-cash interest related to
beneficial conversion feature (d) |
0 |
11,614 |
Non-cash mark-to-market
restricted stock expense (e) |
63 |
0 |
Tax effect of above items |
(40) |
0 |
Total non-GAAP adjustments |
77 |
20,100 |
|
|
|
Non-GAAP net income (loss) (1) |
$ 819 |
$ (1,407) |
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
DILUTED EPS: |
2014 |
2013 |
|
|
|
GAAP earnings (loss) per share |
$ 0.03 |
$ (2.96) |
|
|
|
Adjustments: |
|
|
Loss from discontinued
operations (a) |
$ -- |
0.53 |
Deal costs (b) |
$ 0.00 |
0.32 |
Non-cash income tax related to
the amortization of intangibles (c) |
$ -- |
0.31 |
Non-cash interest related to
beneficial conversion feature (d) |
$ -- |
1.60 |
Non-cash mark-to-market
restricted stock expense (e) |
$ 0.00 |
-- |
Tax effect of above items |
$ (0.00) |
-- |
Total non-GAAP adjustments |
$ 0.00 |
$ 2.76 |
|
|
|
Non-GAAP earnings (loss) per share (1) |
$ 0.03 |
$ (0.20) |
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
|
|
GAAP net income (loss) |
$ 742 |
$ (21,507) |
|
|
|
Adjustments: |
|
|
Interest expense, net |
1,270 |
11,617 |
Depreciation and
amortization |
205 |
76 |
Taxes |
397 |
2,264 |
Deal costs |
54 |
2,357 |
Restructuring charges |
0 |
0 |
Discontinued operations |
0 |
3,865 |
Non-cash compensation |
464 |
170 |
|
2,390 |
20,349 |
|
|
|
Adjusted EBITDA (2) |
$ 3,132 |
$ (1,158) |
|
|
|
|
|
|
(1) Non-GAAP net income / (loss)
and non-GAAP net income / (loss) per share are non-GAAP financial
measures which represent net income / (loss) excluding discontinued
operations, deal costs, non-cash interest and taxes, restructuring
charges and mark to market adjustments to non-cash stock-based
compensation provided to consultants. Management uses this
information to measure performance over time on a consistent basis
and to identify business trends relating to the Company's financial
condition and results of operations. Management believes that
these non-GAAP measures provide investors with information
regarding the underlying performance of the Company's core business
operating results on a cash basis. Amounts may not foot due to
rounding. |
(2) Adjusted EBITDA is defined as
net income / (loss), excluding interest income or expense, income
taxes, depreciation and amortization, and excluding discontinued
operations, deal costs, restructuring charges, and non-cash
compensation. Management uses Adjusted EBITDA as a measure of
operating performance to assist in comparing performance from
period to period on a consistent basis and to identify business
trends relating to the Company's financial condition and results of
operations. The Company believes EBITDA provides additional
information for determining its ability to meet future debt service
requirements and capital expenditures. |
(a) Represents the wind down of
legacy wholesale and retail businesses. |
(b) Represents deal related costs
related to the 2013 acquisitions of Heelys, Ellen Tracy, and
Caribbean Joe. |
(c) Represents the non-cash
deferred tax liability the Company recognizes as it amortizes
certain trademarks for tax, but not book purposes. |
(d) Represents one-time non-cash
interest charges related to the conversion of the Tengram
convertible notes to equity. |
(e) Represents the mark-to-market
adjustments to non-cash stock-based compensation provided to
consultants. |
CONTACT: Sequential Brands Group, Inc.
Gary Klein, Chief Financial Officer
646-564-2577
gklein@sbg-ny.com
ICR
Rachel Schacter/John Rouleau
203-682-8200
Rachel.schacter@icrinc.com
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