Icon Energy Corp (ICON) 2006 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Iconix Brand Group 2006 Second Quarter earnings conference call. My name is Leticia, and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes.

Before we begin, I would like to read the Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this conference call are forward-looking statements that involve a number of risks, uncertainties and other factors, all of which are difficult or impossible to predict, and many of which are beyond the control of the company.

This may cause the actual results, performance or achievements of the company to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements. The words believe, anticipate, expect, confident, and similar expressions identify forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

At this time, I will now turn the call over to Warren Clamen, Chief Financial Officer. Please proceed, sir.

Good morning, everyone. Thank you very much for joining us this morning to discuss Iconix Brand Group's Second Quarter 2006 earnings. I will take you through the financials and then Neil will take you through the business update.

Revenue for the quarter increased to $18.4 million compared to $4.3 million for the prior year's quarter. Net income for the period also increased, to approximately $8.3 million, compared to approximately $2.5 million in the comparable quarter for the prior year, and fully diluted earnings per share totaled $0.19 compared to $0.08 per fully diluted share in the prior year quarter.

We believe our business model is most accurately measured by looking at a broader set of performance indicators, not solely net income and EPS. Indicators such as EBITDA and free cash flow all show strong improvement as compared to both the prior year quarter as well as the first quarter of 2006.

EBITDA in the quarter was $11.4 million, up from $1.6 million in the prior year quarter, and up over 30% from the $8.4 million we generated in the first quarter of this year. Further, the EBITDA margin also improved versus the prior year's quarter from approximately 38% to 62%, which demonstrates the leverage of our business model and growth strategy.

Our free cash flow has also increased significantly. For the second quarter of 2006 free cash flow, cash flow from operations before any debt servicing, totaled $9.4 million. This compares to approximately $1.2 million from the prior year quarter and approximately $6.6 million in Q1 2006.

Net income for the period was inclusive of a net income tax benefit of approximately $300,000, representing approximately $0.01 in EPS per fully diluted share arising from the realization of our deferred tax asset. Two points I would like to highlight about income taxes and our deferred tax asset.

First is that the deferred tax asset has now been fully realized in Q2 '06. During our last conference call, we were projecting we would realize [technical difficulty] portion of the balance of the deferred tax asset in Q2 and the remaining in Q3 and Q4 of this year. However, due to the current strength of our business, we have assessed that the remaining benefit should be completely realized in Q2 '06.

As a result, at June 30th the entire asset, which is available to us in the form of carry forwards of our prior year's net operating losses, are now fully recognized on our balance sheet. We now should have a predictable effective tax rate of approximately 35% starting in Q3 [technical difficulty].

Secondly, on a full-year basis, we had originally estimated that we would be able to realize approximately $2 million more in these benefits through our income statement than we are now forecasting. The reduced benefit results from the requirement to recognize [technical difficulty] through our shareholders' equity as opposed to through our income statement, which we had originally projected.

Other highlights in the quarter are SG&A, including special charges increased quarter over quarter from $3.1 million in the second quarter of [technical difficulty] 2005 to $7.5 million in the second quarter of this year. Although the total expense has increased, driven by our three acquisitions over the last 12 months, SG&A as a percentage of revenue has declined compared to Q2 2005.

For Q2 2006, SG&A, excluding special charges, was 37% of our revenue versus 64% in the comparable quarter of 2005. This continued improvement demonstrates the [technical difficulty] of our business model as we grow and acquire brands.

Interest expense amounted to approximately $2.9 million in the current quarter, as compared to approximately $504,000 in the prior year's quarter. The [technical difficulty] is driven by our three acquisitions over the last 12 months.

However, although the total expenses increased, if you compare the interest coverage ratio, which is the number of times we could make our interest payments with earnings before interest and taxes, for Q2 2006 [technical difficulty] 3.74 times versus the ratio for Q2 2005, which totals 2.43 times, the improvement is evident.

Highlights from our June 30, 2006 balance sheet are that ending cash [technical difficulty] $22.1 million, including unrestricted and restricted cash, total assets as of June 30, 2006 were $335.1 million, our total long-term debt was approximately $143.7 million, and total liabilities are $162.6 million.

I would like now to turn the call over to our Chief Executive Officer, Neil Cole. Neil?

Thank you, Warren. We are pleased with our second quarter 2006 financial results, which were above our plan and, when compared year over year, demonstrate the growth potential and the scalability of this business model.

Top-line revenue in the quarter was helped by better than anticipated results from our newly acquired Mudd Division, which showed a lot of strength especially in the core denim business as well as footwear, handbags and intimate apparel. Mudd is now fully integrated into our business with a dedicated team, and we have already unveiled a new ad campaign and website, which has been very well received.

Our Candie's business at Kohl's is continuing to perform very well, and our new television commercial featuring Pat Benatar and Cheyenne is in Kohl's media rotation, receiving broad national airplay for the key back-to-school selling season. As we enter our second year with Kohl's, we are anticipating continued growth and comparable store increases in the existing categories, as well as growth from a larger store base as Kohl's continues to aggressively open new stores, moving toward its goal of reaching 1,200 doors by the year 2010.

Of our six brands, Bongo continues to be the one experiencing some softness. However, we have a plan that we believe will restore the brand to growth and are currently negotiating to transfer the core denim license to one of a few prospective new licensees. Our Bongo Kids business is strong and having its best year ever and we have identified a handful of other new licensees we hope to find shortly.

We are pleased with the progression of our growth plan for Badgley Mischka. Our fragrance licensee, Riviera Concepts, was recently purchased by Elizabeth Arden, and we view this as a very positive event for the brand as Elizabeth Arden has substantial greater sales and marketing resources to be dedicated to our fragrance business. They are planning an expanded advertising investment for the launch this fall.

After successfully launching a bridge eveningwear collection this year, our licensee, Group JX, will next year launch a sportswear collection, which will bring the brand to the broadest segment of consumers to date, with a comprehensive collection of accessibly priced daywear.

We are also working on new licensing agreements in categories including intimate apparel, jewelry and home accessories and will shortly be announcing a new ad campaign with a major Hollywood icon.

In the top 100 brands from Women's Wear Daily reported yesterday, Joe Boxer was the No. 32 brand on the list, the highest-ranked brand Iconix has of the four brands that made the survey. Joe Boxer is licensed at K-Mart through the end of '07, and we are currently evaluating opportunities for Joe Boxer in 2008, including moving forward with Sears Holding or pursuing alternative distribution strategies. As we've previously stated, we will be announcing our plans by the end of this year.

Internationally, Joe Boxer is quickly gaining a lot of momentum. This year, Joe Boxer will do over $50 million in retail sales in Canada and we have recently completed new licensing agreements for home accessories, luggage, backpacks and [inaudible]. We have also recently launched the brand in Mexico through our agreement with Grupo Aviara and are currently evaluating several other interesting international licensing opportunities.

The Rampage brand is strong and exceeding our expectations. Our core sportswear business is doing better than ever -- than it ever has at our brand's largest customer, Federated Department Stores, and our licensee is currently on track to do more than twice the guaranteed minimum royalty.

As we have previously stated, we view the recent announcement by Charlotte Russe to sell Rampage Stores as a positive for the brand as it clears up what has been a very confusing distribution strategy for the core customer as Charlotte Russe was not using the Rampage brand on any products within the store.

In addition to sportswear, the Rampage footwear business is exceptionally strong. We have a handbag licensee that is quickly growing their market share. We are very excited about the license we recently signed for Rampage Kids apparel. We expect to sign additional licenses later this year.

With regard to the Mossimo merger, along with a delayed filing, we recently learned that the SEC will be reviewing our S-4 proxy document and based on this, our belief is that the transaction will most likely not close until September. The delay in closing Mossimo will mean lower than anticipated royalty revenues this year to Iconix from Mossimo. However, year over year the Mossimo business at Target is strong and growing and we have been working with the team at Mossimo, Inc. to identify new international licensing opportunities outside of Target, which we hope to announce shortly.

We have also completed our transition plan for the Mossimo business which will enable us to manage the brand with approximately $1 million in incremental overhead. The '07 projection for Mossimo remains the same at approximately $20 to $25 million in royalty revenue.

As Warren pointed out earlier with regard to our deferred tax asset, we have made a determination to recognize $2 million as equity and not through the income statement. The deferred tax asset, which was the result of losses from when we were previously an operating company, has been a benefit to our newly formed brand management business. However, we have had difficulty in forecasting its realization in large part due to our aggressive acquisition strategy. As a profitable brand management business, we have now completely realized this asset and going forward our earnings will be fully taxed at an effective tax rate of 35%.

The impact of the delay in closing the Mossimo merger and the determination to recognize $2 million of the tax asset as equity and not through the income statement will negatively impact our '06 earnings. However, there are a number of positive factors in our business including significant growth from Mudd, continued strong trends from both Rampage and Candie's and acquisition opportunities that we believe have a strong probability of closing this year that could offset the impact that Mossimo and the tax treatment have.

However, we believe it is prudent to factor Mossimo and our final deferred tax (indiscernible) into our guidance and thus we are expanding the range of our '06 EPS guidance from our current range of $0.75 to $0.80 to a broader range of $0.70 to $0.80. While we are disappointed with the Mossimo delay and the impact of the tax treatment, it is very important to realize that these are both one-time events and neither is symptomatic of any weakness in our fundamentals of our licensing business.

I am more optimistic than ever about our prospects. Our core business is healthy and growing. Our deal flow is stronger and more diverse than ever and is gaining momentum. We believe strongly in licensing our brands around the world and hope to be announcing new international deals later this year in '06.

Looking beyond '06, the average 2007 estimates of the analysts that cover Iconix today is $0.87 per share fully taxed. While we will not be giving official guidance for '07 until later this year, we are comfortable with this consensus estimate and belief that like 2006, 2007 we will again show very strong year-over-year growth and we will continue to lay the foundation to achieve our goal of becoming the world's premier owner of a diversified portfolio of consumer brands.

I'd like to thank you all very much for listening and your interest, and I would like to now open it up to a question-and-answer from myself, Warren Clamen and David Conn.

[OPERATOR INSTRUCTIONS]

And your first question comes from the line of Scott [Coleman], with Prudence Capital. Please proceed.

Hi, guys. I was just wondering about the SG&A line. What do you envision as the business matures, a couple of years down the line, maybe, as a percent of revenue of your SG&A line? Thank you.

Currently, we're running at about 35% to 40%. With the Moss acquisition, we're going to go down to about 25% to 30%. As acquisitions come on, it really all depends on how much revenue is generated. I mean, historically, we add about $1 million per acquisition to SG&A, so it's tough to predict in a year, two years down the road. It all depends. But it is decreasing. And based on the beauty of this business model, it'll only get better each quarter, or each year, going forward with the acquisitions.

Okay, thanks.

Thanks.

And your next question comes from the line of Ronald Bookbinder, with Sterne Agee. Please proceed.

Good morning.

Hi, Ron.

Did the SG&A have any one-time or abnormal event?

Yes. It did, actually. We took a reserve for one of our licensees of approximately $625,000. There was also a buyout of the Badgley interest, the 5%, that was an expense of about $200,000. Special charges quarter-over-quarter versus Q1 were about $200,000 over. Those were pretty much one-time events. For the year we're estimating SG&A to be about approximately $24 million, which translates into slightly lower SG&A for Q3 and Q4 versus Q2.

Did you have any special or abnormal SG&A associated with the recent Mudd acquisition that you could be getting the benefit later on from?

No, I think we-- I mean, we definitely had SG&A related to Mudd, but it was what we had predicted. It was probably about $300,000.

Would that be like a prepaid asset, insurance or advertising, something like that?

No, it's-- yes, it's essentially advertising, a little bit of headcount. So it's just normal SG&A that we would incur going forward based on the Mudd acquisition.

Okay.

But, Ron, just to clarify the question, to your question, there was about $1 million of what we would call one-timers, having taken a $600,000 reserve on our receivable and another $200,000 on the buyout of the financing on Badgley Mischka, our partner there, and also there was an extra $200,000--

In special charges.

In special charges on our litigation.

Okay, well, that explains a lot of the SG&A being higher than I know I had modeled. And just on that Bongo jeanswear licensing--

Yes.

What's going on there? You mentioned that in your text.

We're having-- we hope to have a replacement of our jeans company in place sometime probably in the next 30 to 60 days.

And do you think that this is-- I guess this is initiated by you, so this could be a benefit going forward with a better licensee?

Yes. The current licensee was definitely not performing and doing a good job and we definitely felt it was time to move on and I think it was mutual and they just weren't really junior jeans people. So I think it's going to be wonderful for the business and we're pretty excited about getting the change and getting some fresh blood into Bongo.

Okay, great. Thank you.

Thanks, Ron.

And your next question comes from the line of Kevin Foley, with Constitution Research. Please proceed.

Hi, guys.

Hi, Kevin.

Can you give me a little more granularity on by brand how the revenues broke out?

Sure. The total revenues were around $18 million. The big drivers were obviously Joe Boxer at approximately $5 million, Candie's at around $4. Mudd was about 4.5. And then the balance was the other brands. Those were the big ones, the big drivers.

Okay.

Okay?

And Warren also, on your EPS assumption, what's the share count assumption for the year, to get to your EPS?

It's between $45 and $46 million for the year, fully diluted.

Which accounts for the Mossimo closing shares.

Correct.

Okay. Actually, just one, going back to the brand. Rampage, did you say that?

We didn't really break the smaller brands out. I just highlighted the three big ones.

Okay. And then, Neil, can you talk a little bit about the M&A environment out there, what you're seeing?

Yes. We're really seeing a lot of very interesting, exciting deals. More than we ever have, because I think we've broadened our blinders outside of fashion, and we're seeing some great opportunities in areas like the home area and the sporting goods area. And so we're pretty excited and we're pretty encouraged that we're going to get something done this year.

And over the last 12 months we've acquired four brands or once Mossimo closes, and about $70 million of royalty income, and I don't know if we can stay at that pace, but we're going to do our best to continue to be acquisitive. But at the same time, we're going to make sure that they're phenomenal brands.

I think the key to what we've built today is our intellectual property and how strong it is. So we're going to continue looking for great iconic brands to add to our portfolio, and we're pretty confident we will continue to grow at the pace we've been doing.

Are you feeling like you're seeing more competition for brands?

Not really. There are just so many great brands out there whether it be here or around the world. And there's just a lot of deal flow and I think in this changing retail environment it's causing a lot of uncertainty and I think our business model is so attractive that we are-- that's why we're seeing a lot of deal flow.

What would you say, if you sort of looked through your pipeline, how much will sort of the split between what is sort of auction-like situations versus you just approaching someone?

I'd say it's more the latter. I mean, we are looking at a lot of deals that bankers have and that are in an "auction" process, but we're kind of identifying what we think. We've got a great team out there and a great set of bankers that are identifying brands that we think that have great opportunities and we've been pursuing, and--

One of the things, Kevin, it's David, we're finding is sometimes in the auction process that's more endemic to kind of distressed brands, and the brands that kind of fit our acquisition profile are probably more often outside of that process.

Okay. And just a final question on pricing. Are you seeing much change there?

Well, when we close them, you'll be able to see it.

But what are you seeing now?

We hope not. I mean, we've been negotiating -- we're pretty close with a couple of great opportunities and we're hoping to stay at our matrix.

Okay. Thank you.

Thanks, Kevin.

And your next question comes from the line of Todd Slater, with Lazard. Please proceed.

Hi, Todd.

Hello. Can you hear me?

Yes, we can.

Okay, great. Thank you. I guess my first question is on the comfort level you have with next year, at around, I'm assuming, $0.87 a share. Can you tell us a little bit about how you get there, at least in terms of how much from acquisition and how much is organic? What do you need to do to hit that kind of level of earnings?

Right. Well, first of all the $0.87 is not ours. I think it's you guys. And we're going to give you ours, I think, probably at the end of the third quarter. But we are very comfortable with it.

Looking at the numbers out there, we see $0.87 as almost no acquisitions in it. There may be one, I think. I think maybe you have $10 million in there, which at the rate we've been going, is pretty small. So we're very comfortable with it, and we think there's a big upside.

And based on how we perform, then-- the other really encouraging factor which might get lost hopefully or maybe is getting lost today is how powerful our present organic brands are. And Candie's is just explosive, if anybody picks up the Kohl's circular this weekend or watches television and sees what-- or, more importantly, walks into a Kohl's.

And the other thing is Rampage at Federated is just explosive, almost double plan, and just really doing phenomenal, and the same thing with Mudd. So our organic brands are going strong, and I think $0.87, obviously fully taxed, does not have near what we can do based on how we've been running this business over the last 18 months.

Well, maybe you could distill it down one more level. What kind of sort of revenue number would that assume?

Once again, I'd rather not comment specifically, but looking at yours and others, I think you guys are thinking 115, 120, and, once again, we should do a lot better. I mean, if we can-- just looking at the fact today our seven brands based on a pro forma basis are doing about 100 without the organic growth of next year; and then add in the acquisition rate that we're going, we should far exceed what's out there at the 120, 125 range.

Okay, good. That's helpful. And then, I maybe should've started with this year, in the 70 to 80 range now that you're-- $0.70 to $0.80 range you're talking now, if you make an acquisition in addition to Mossimo, which it sounds like-- I mean, you mentioned in the release that you seem to think that you will, does that put you towards the low end, the mid end or the high end of that range?

It's a combination of factors that, again, take us there. Number one, the timing of the acquisition, realizing if it's late in the game for the year, it won't have much of an impact, just a couple of pennies. If it's-- if we get it done in the next 30 days, it could be a lot better. So the timing of the acquisition is important.

The performance of our six brands today is important, as they continue to grow. The closing of the Mossimo deal, each month is a little over a penny. And if we get that deal closed, hopefully sooner rather than later, that could definitely help.

So there's three or four or five factors where we decided to broaden. Because the last thing we like to do is lower guidance and then 30 days from now beat it or raise it again. So we just thought it was prudent to expand it based on the acquisition pipeline and the Moss closing and a few other small factors.

Okay. And then I just want to turn to the Bongo issue for a second. When you look at that licensing situation with the jeans, you said you expect to sign or change out that licensee, what quarter do you begin to actually receive royalty revenue if you sign a new one in the next 30 to 60 days? Do you have to wait for them to start shipping revenue sometime in '07 or '08, or do they start paying immediately?

And then, also, how long does the-- again, if you sign it some time this quarter, does the $625,000 reserve that you're taking now, which is hitting SG&A, how long does that go on for? I guess that would essentially come off. Is there any chance for a recovery on any of those revenues that you're not being paid on by your former or current licensee?

Right. We have, we think, a very strong contract, and hopefully we believe we will get paid, and we have no reason to believe we're not going to. We just thought it was prudent to take the reserve. So hopefully we will get paid over the next couple of quarters, but we did-- it was definitely one of our factors in going down to the 70 is if we don't get paid over the next two or three quarters.

Presently, we're talking to the present licensee and a new licensee about a smooth transition that could happen as good as next week, at market week, and we wouldn't miss anything, and we would try to keep the flow and transition a new licensee. But we're thinking on a worst case scenario the new licensee would start at the October market in LA and start shipping product in December-January. So we put in probably about a million and a half cushion between the reserve we've taken and going forward, in case-- that we could lose in the last six months, on a worst case scenario.

Okay. And then kind of a sort of similar question, the issue with the Rampage store closings, are they-- are you entitled to a termination fee from Charlotte Russe, or is that a negotiable item, or could somebody perhaps step in and perhaps be interested in opening their own Rampage specialty stores? What are the issues regarding that royalty stream?

Hey, Todd, it's David. We've been talking to the people at Charlotte Russe; and to your first point, contractually they would owe us two years of guaranteed minimum royalties if they terminated the license. But one of the things they've talked to us about is selling the license to another third party, another retailer, which could be very interesting. And we're kind of collaboratively exploring that at the moment.

Okay, but would that be something that you would have to approve?

Yes.

You would have right of first refusal on that particular retailer?

Yes. We would have to approve it, and we're working with them on it.

And obviously we'd want to make sure that the distribution is similar to where the Rampage brand is today, and we would work closely with them on it.

Okay, and then, lastly, what's the timing of the new spokesperson for Badgley?

Well, we've already shot her, and she's quite a lady. And we'll be announcing in the next few weeks. And it could-- it's going to be great follow-up to the Olsen Twins and show diversity within Badgley Mischka.

Okay. Are we talking about a little bit more mature type of spokesperson?

Yes, one could-- she's definitely a little more mature than the Olsen Twins.

All right. Thanks, guys.

Thanks, Todd.

And your next question comes from the line of Jeremy Hellman with Thompson Davis. Please proceed.

Hi, guys. I apologize. I had a couple of interruptions. I just wanted to touch back on that SG&A and make sure that I got all the information there. Warren, was I right in understanding like once you take out the one-timers, not counting special charges, SG&A would've been around about $6 million?

Probably slightly less, about $5.8.

About $5.8? Okay, and then, we can look for a million of incremental cost related to Mossimo on that line?

On an annualized basis.

On an annualized, okay. And then, for special charges, I had been expecting that to wind down throughout the year. Is that still going to be the case, where looking into '07, that's a zero, or is that something that's changed?

We're expected-- we've been told we're going to trial in October, so we're very hopeful that it will be concluded within '06.

Okay. And then, talking about new brands, it seems-- can you put any kind of-- quantify in probability terms the likelihood of getting a non-apparel brand within the next one or two acquisitions?

I'd rather not comment because we have so many good-- we're going to choose the best brand, and the best deal we could make, and that continues to diversify our portfolio, and I'd rather not be limited. But we are-- I'd say out of our deal flow, probably about half of them are outside of what I would call fashion.

Okay.

Which we think is very important, to diversify as we continue to build our portfolio.

Okay. And then, lastly, looking at EBITDA margin, and I don't know if this is asking you to divulge internal modeling, but is EBITDA margin something that we can expect to get over 70% at a point?

Again, I definitely think that you'll see improvement. Whether it gets over 70% all depends on the number of acquisitions, the revenue associated with the acquisition. I mean, it's definitely-- we're going to try to get there.

Okay.

You can definitely say it's a goal of management, and we believe the way our business model works we should be able to get there.

Okay, great. Thanks.

Thanks, Jeremy.

And your next question comes from the line of Jim Chartier, with Moness, Crespi. Please proceed.

Good morning.

Hey, Jim.

On Rampage, I was wondering, when you talked about double the guaranteed minimums, is that due to increased merchandise in the remerchandised May stores, or is that another source of potential upside?

Well, our core sportswear licensee, Jim, his business is on fire at Federated. It's better than it's ever been. He's got more floor space. The product's checking better than it ever has. And he's currently tracking to do twice his guaranteed minimum royalty this year.

Does he have an indication at this point if Federated is going to expand the Rampage assortment in the former May stores?

Yes, it's happening. It's happening as we speak. And it's actually also with our footwear licensee is doing it. We have a brand new handbag licensee who opened up Macy's West within two months and is shipping product into all their doors this month. And we have a strong business at Federated today, pretty much across the board.

That's great. So that's in your numbers then for your EPS guidance?

As Neil mentioned earlier, there's a lot of moving parts in our guidance, and that is definitely part of the upside, is that Rampage right now has a tremendous amount of momentum.

Okay. And then now that you're developing a sizable cash balance, are you thinking about changing the financing mix for acquisitions going forward and maybe doing some more cash and less equitant?

It's something we consider and it's part of our negotiations, and a lot of it depends on who the seller is and if they're going to be part of the company and the equity play. But it's something we do run numerous scenarios with our bankers and ourselves trying to look at the best way to finance the transactions.

Okay. And you mentioned some international licenses that you're exploring in the press release. Could you give us any more color on that? Does that include any potential exclusive with retailers?

Yes, it does. And we've had-- Gail, our new person who does international business, has gotten more frequent flyer mileage than I've had for the last five years in this last two months. We've had just, I think, a tremendous amount of demand for our brands, and negotiations are going on. So we're pretty excited, and we hope to be announcing some very exciting deals over the next few months.

Okay. And then, on that front, what kind of incremental SG&A expense would be associated with that? Would you open up any-- would you add to your international licensing department?

Yes, but I don't think it's-- once again, it's one of the beauties of this business model, it won't be a lot. And as we continue to grow, we have such a strong platform of great marketing people and branding people and deal people that we get the leverage, the synergy of the business inside.

And as we grow the business both domestically and internationally, we do not see dramatically increasing overhead when we-- a good example, I think, is what we're doing with Mossimo and what we've done with Mudd. We get to add large amounts, close to $20 million of royalty income about $1 million of overhead. And we can see that trend continuing as we continue to diversify and build the portfolio.

All right. Great. Thanks a lot.

Thanks, Jim.

[OPERATOR INSTRUCTIONS]

And your next question comes as a follow-up from the line of Scott Coleman with Prudence Capital. Please proceed.

Hi, guys. Just to focus in on two points that you've kind of touched around so far. If you could talk about the organic growth that you've seen already, something that we can look at and say, "Okay, this is what we can expect going forward the organic growth in some of the brands"; as well as if you could just talk about going outside your really core competency in marketing and brand management of apparel, and particularly juniors apparel, and talk about besides diversification your thoughts on leveraging the model into newer areas.

Okay. I'll answer the second question first because quite honestly the details of the first question eluded me. But first of all, I think a misnomer that I've heard over the last week or two is that our brands are focused on the junior apparel area. And I think when you look at Mossimo and you go into a Target and you look at Rampage and Badgley Mischka, you'll see that-- and you add those volume including Joe Boxer, I think probably 75% of our revenue is coming outside of "juniors," where Candie's, Bongo and Mudd are because Mossimo and Joe Boxer are such large demographic brands, along with Rampage and Badgley. So I don't think our concentration in juniors is really a factor--

Okay.

As much as I've heard. And going back to the first question about the organic growth, we're worrying-- each of our agreements do ramp up every year, but we will have issues that are happening now in Bongo. I mean, it's a fact of the world. We have close to 80 license agreements, and not every one of them are going to work out.

And the beauty of our business model is the diversity of it and the fact we'll continue to still make a lot of money and continue to grow when and if we have to change out licensees. So today I think we have five out of our seven brands are booming ahead. We do have to take into factors when other brands do not do as well.

So I would say a conservative estimate of organic growth would be 10%. Where maybe I used to think 15% or 20%, I would take it now to 10% to align for situations that could happen within the brands because they're always not all going to be cooking at all the same time, which is why we want diversity.

Okay, great. Thanks.

At this time there are no more questions. I will now turn the call over to management for closing remarks.

Okay. Once again, I'd like to thank everyone. I think what's-- we were talking over the last few days as you always reflect on it, and it's really been an amazing 12 months for this company, considering we just closed Joe Boxer 12 months and two days ago, and having done four or hopefully when we close Mossimo it'll be our fourth major deal and brought in $70 million of royalty income and more than five times increased our market cap.

We're pretty excited with what we have accomplished. But more importantly we believe that there's so much more to go and that's what we've done. We've just started, and we continue growing at this pace. We're seeing great opportunities. And, once again I thank you all for your interest, and we will talk to you soon. Thank you.

Thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation. You may all disconnect and have a good day.