Xcel Brands Inc (XELB) 2025 Q2 法說會逐字稿

Welcome to Xcel Brand's second quarter 2025 earnings conference call. Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of Xcel Brands, and as a reminder, this conference call is being recorded. I would now like to turn the call over to Seth Burrows from the company. Seth, you may now begin.

Good morning, everyone and thank you for joining us. Welcome to the Xcel Grand second quarter of 2025 earnings call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer, Robert W. D’Loren, and Chief Financial Officer, James. Haran.

By now, everyone should have had access to the earnings release for the quarter end in June 30, 2025, which went out earlier this morning. In addition, the company will file with the Securities and Exchange Commission with its quarterly report on Form 10-Q for the quarter ending June 30, 2025, later today. The release of the quarterly report will be available on the company's website at www.xcelbrands.com.

This call is being webcast, and a replay will be available on the company's investor relations website. Before we begin, please keep in mind that this call will contain forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today.

These risk factors are explained in detail in the company's most recent annual report filed with the SEC. Xcel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The dynamic nature of the current macroeconomic environment means that what is said in this call could change materially at any time.

Finally, please note that on today's call, management will refer to certain non-GAAP financial measures including non-GAAP net income, non-gap diluted EPS, and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis, and to identify business trends related to the company's results of operations.

Our management believes these financial performance measurements 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 they provide supplemental information to assist investors in evaluating the company's financial results.

These non-GAAP measures 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. You may refer to the attachment to the company's earnings releases or the 10-Q for a reconciliation of non-gap measures. And now, I'm pleased to introduce Robert D'Loren, Chairman and Chief Executive Officer. Rob, please go ahead.

Thank you, Seth. Good morning, everyone, and thank you for joining us today. I would like to start today's call with a brief update on recent developments from the most recent quarter and our outlook for the back half of 2025 and next year.

After that, our CFO Jim Heran will discuss our financial results in more detail. But first, I'm happy to report that we have recently closed on a combined public equity offering and management-led private placement equity transaction for combined gross proceeds of approximately $2.6 million.

This equity offering combined with the strategic alliance and financing transaction with United Trademark Group in April has strengthened our balance sheet and provides us with the working capital needed to develop and launch a number of exciting new influencer brands this holiday season and in 2026.

We continue to work with UTG to present the strength of our combined platforms to retailers across multiple channels of distribution and conducting due diligence for potential acquisitions and influence of brand development projects.

Also, as previously mentioned, we believe that this partnership will accelerate our formation of additional creator influencer brands on our platform as we pursue our goal of building the brand portfolio to 100 million social media followers. Also, we are continuing to work hard with all of our production partners to drive our business.

We announced our new creator influencer brands with Cesar Millan, Gemma Stafford, Jenny Martinez, and Coco Rocha in Q2 of 2025. These new brands diversify our brand portfolio into new categories and retail distribution channels and reduce our risk to tariff volatility. We have also announced key category license agreements for these new creator influencer brands.

Our social media reach across our brand portfolio has grown from 5 million followers at the start of the year to 43 million today. We are seeing early results from these new brands given their strong social media currency, C. Wonder and Christie Brinkley remain the two fastest growing brands at HSN. That said, we did see some disruption in these businesses in Q2 due to a change in a wholesale license.

We are working with our new licensee to minimize the impact from this transition. We have a strong pipeline of additional new creator influence of brands. Finally, I should note that we continue to approach Q3 and Q4 this year with caution given the impacts of the tariffs on QVC and HSN and our licensees, including G3 for our Halston brand.

Judith Ripp continues to operate on Planet JTV, and it was up over 65% from the first quarter. As previously reported, the Longaberger brand launches on QVC this fall. In closing, we are excited to be launching all of our new influencer brands and look forward to additional announcements as we move forward. And with that, I'd like to turn things over to Jim, who will cover our detailed financial results for the second quarter.

Jim, Thanks, Bob, and good morning, everyone. I will now briefly discuss our financial results for the quarter and six months ended June 30, 2025. Total revenues of $1.3 million for the current quarter compared with $3 million in the second quarter of last year, and with $2.7 million for the first six months of this year compared with $5.1 million for the first six months of last year.

So both the quarter and year-to-date periods, our revenue decline from the prior year were primarily due to the sale of the Laurie Goldstein brand at the end of the second quarter of 200. Direct operating costs and expenses were $1.9 for the current quarter, down 39% from $3.1 million in the prior year quarter.

For the current year six-month period, direct operating costs of $4.2 million, a decrease of 48% from $7.1 million in the prior year comparable period. For both the quarter and year day periods, the decrease in direct operating costs was primarily attributable to the business transformation and cost reduction actions by the company over the past two years, the elimination of cost associated with the Laurie Goldstein plan and to a lesser extent.

An employee retention tax credit recognized in the second quarter. As a result of the restructuring of our business model, we have reduced our payroll and operating in an overhead cost to a run rate of approximately $9 million per annum on a going forward basis.

Looking at our other operating cost expenses, which are predominantly non-cash in nature, our depreciation and amortization expenses have declined significantly year over year for both the quarter and year to day periods, all primarily as a result of the sale of the Lori Goldstein brand.

During the current quarter and current six months, we recognize $0.2 million and $0.5 million of losses related to [agcreme] investments compared to $0.6 million of losses in the second quarter and $1.1 million losses of the first six months of last year.

The year over year decrease in losses is primarily attributable to the fact that as of this April, we discontinued the equity method of accounting for our investment on Taco as we now hold less than 20% ownership interest in that company and therefore are no longer required on the GAAP to record our proportional share of our [Taco's] business operations in our own results.

During the prior year periods, we also recognized the name on the divestiture of the Lori Goldstein brand, and an asset impairment charges related to the exit from and sublease of our prior office location. I'd like to reiterate that all of these charges are described within other operating costs and expenses are predominantly non-cash in nature and are excluded from our non-GAAP measures of performance.

And finally, interest and finance expenses was $2.3 million, for the current quarter compared with $0.1 million in the second quarter of last year. On a year-to-date basis, interest and finance expenses was $2.9 million for the current six months versus $0.3 million in a per year comparable period.

These year over year increases were primarily driven by a $1.9 million dollar loss on the early extinguishment of debt related to the April 2025 refinancing of that term debt. In addition, we recognize higher interest expenses in the current year periods as a result of higher average debt balances in the current year compared to last year.

With that being said, it is important to remember that under the April amendment, the majority of the interest due under our current debt will be paid in kind, meaning that will accrue, not required cash payments until starting at the end of 2027. Overall, we had a net loss for the current quarter of approximately $4 million minus $6.66 per share compared with net income of $0.2 million or positive $0.08 per share in the current year quarter.

After adjusting for certain cash and non-cash items, results on a non-GAAP basis were a loss of approximately $0.9 million or minus $0.36 per share for the current quarter and a net loss of approximately 0.3 million or minus $0.13 per share for the prior year quarter.

Adjusted EBITDA for the current quarter was negative $300000 and negative $40,000 in the second quarter of last year. The prior year quarter included an adjusted EBITDA contribution of $510,000 from the Lori Goldstein brand. If this contribution is adjusted from the prior year results, there's a $250,000 or 45% year over year improvement and adjusted EBITDA, and there was a $400,000 improvement in the first quarter of this year.

For the current six months, we had a net loss of approximately $6.8 million or minus $2.84 per share on a GAAP basis, compared with a net loss of $6.1 million or minus $2.70 per share in the prior year six months. On a non-GAAP basis, we had a net loss of $2.2 million or minus $0.95 per share, roughly comparable to a non-GAP loss in the prior year period of $2.1 million or minus $96 per share.

Our year-to-date EBITDA for the current year was $1 million, 38% improvement to EBITDA of $1.6 million for the prior year comparable period. Once again, as a reminder, our earnings press release Form 10-Q to present a full reconciliation of our non-GAAP measures with the most directly comparable GAAP measures, turn out to a balance sheet and quickly.

As of June 30, 2025, the company's balance sheet reflected stockholders' equity of approximately $22 million and unresented cash of approximately $1 million. It also reflected $12.3 million of long-term debt, of which $0.5 million is due over the next 12 months. And subsequent to quarter end in August 2025, the company closed on public equity offering and concurrent management-led private placement equity transaction for combined gross proceeds of approximately $2.6 million, which further increased the company's liquidity.

This provides us with the adequate to fund their operations as we launch a number of exciting new brands later this year and into 2026. And with that, I'd like to turn the call back over to Bob. Bob?

Thank you, Jim. This concludes our prepared remarks, operator.

(Operator Instructions)

Anthony Lebiedzinski, Sidoti & Company, LLC

Good morning, everyone, and thank you for taking the questions. So first, I may have missed this, but as far as the Lori Goldstein divestiture, can you guys just quantify the impact of not having Lori as part of your revenue? How much that was, as par how much did that contribute to the sales decline on a year over year basis?

Sure. Jim, you can take that.

Yeah, take that. So the revenue was, I believe in the, during the quarter, roughly $5000000 and even that contribution. There's a little over $500,000. That's when you compare the quarters, quarter two year over year back out to Lori Goldstein, you'll see that we actually are even approved, not on, not as the financials are presented.

So, that makes it. Yes, so thanks.

All right, so just in summary, our retained brands have improved year by year.

Right, okay, that sounds terrific. Okay. And so Bob, you mentioned that you're approaching 3Q and I guess, 4Q with some caution. So, right now we're about halfway done with the third quarter. How do we think about, revenue and profitability for the third quarter and or if you, and if you have any comments that are more specific about the fourth quarter, that would be certainly very helpful as we look to update our models?

So I think we're on target for where we thought we would be, Anthony, and we're launching Caesar, Gemma, and Jenny Martinez, earlier than we had expected. We thought those would start to ramp up in Q1 of '26, but given that Jenny and Gemma are launching with food where we have domestic production, we were able to launch those this year.

And we had a little bit more lead time on Cesar Millan, because he was the first influencer brand that we started with, and we were able to launch with him for holiday, so. And we think we will come in, where we've been forecasting.

Okay, that sounds promising. So it sounds like a third quarter should see some sequential improvement, just to clarify that as far as your comments about being on target. So, it sounds like there should be some improvement, from the second quarter could be seen also on a year-to-year basis as well.

Yeah. The only variability that we have there is we did change the wholesale licensee that is, that was manufacturing products for our C. Wonder and Christie Brinkley brand. And there was a bit of a delay in delivery from the new licensee for August deliveries and we had to pull a September line into August and move the August line into September.

So, we won't know the impact on that September line sales until it goes on air. So, we're optimistic. The product all looks good, but the customer will tell us that goes on air.

Of course. Okay. Gotcha. Okay. And then, yeah, so after your recent stock offering here, is, can you just provide an update as far as, what your liquidity is now and also just curious whether you think, you will need to raise additional capital or do you think you're pretty much set it with in terms of what your capital needs are?

I'll let Jim review liquidity, but I think we're good, with where we are, the capital that we raised is, being used, primarily to launch all of these new brands, and with that, Jim, maybe you can give an update on liquidity, post-closing.

Yeah, so we picked up additional $2.2 million of cash, and as always at the end of our quarters, we're at a low point of cash for the period as we, as our collections come in right after the quarter ends. So, we should be more than stable in terms of our liquidity in our business, our ability to execute on our new business ventures.

That's definitely reassuring it, okay. And then lastly for me before I pass it on to others, can you guys provide an update on the ORMIE, where you are with that initiative?

Yes, and the ORMIE team is doing a great job, improving UX/UI. They've added some new features. They continue to grow the user base, and, of course, of their influencer base. At some point, we will develop products for people like Coco Rocha in the beauty category, and then bring her over when there, Coco would add 5 million followers to their platform.

So we're happy with what the ORMIE team is doing, and they have not yet done their capital raise, and we expect that, and when they feel they're ready for that, they'll do it.

Understood. Okay. Well, thank you very much and best of luck.

Thank you, Anthony.

Michael Kupinski, Noble Capital Markets, Inc.

Hi, it's Jacob Mutchler on for Michael Kapinski. Thank you for taking my question. I was just curious, could you provide any updates on Halston? I know there's not a lot of visibility with that relationship, but just curious if there are any updates to speak of?

So, we did meet with the Halston, the new President at Halston, over at G3 last week. They gave us their plans going into '26. They're making substantial investments in people, and the brand and we are waiting for a report and a forecast from them, so we don't have visibility into the back half of the year or, what their plans are for '26 and going forward.

But they were very excited about where they're going, very excited about where the new collection is, and we left the meeting feeling that they have it on track now, after having launched it and needed to adjust the way they were designing the apparel category, based on retailer and of course, customer feedback. So, we had a great meeting with them on where they're going.

Okay, great. Thank you for that and when you were mentioning that you know some of the new brands that were signed this year were coming in a little bit earlier than expected, did you reference which brands you were you were mentioning there that are going to be impacting '25?

So the brands are Cesar Millan, Gemma Stafford, and Jenny Martinez. And when you think about, Gemma and Jenny, we were planning to launch small appliances, kitchen gadgets, things like that first, but we flipped it and we launched food first because food is sourced domestically and it was a perfect way to accelerate the launch on those two brands.

And Caesar, we just got to have, design and production, and we have a perfect item to launch on QVC in the fall. So those are the three.

Gotcha. Well, thank you for that, Robert. And then last question here, as you're, looking to build that 100 million social media followers, are there any product categories or sector of influencers or stars that as attractive to the company?

So, we do have a strong pipeline of influencers and the fashion sector and we are working on one that. I'm very excited about for our Longa Burger brand. We are launching Longaberger on TVBC this year and we've been searching for someone that has a good following, credibility in the home space, and conversations on that as well.

Gotcha. Well, thank you. That's all I had.

Thank you.

There are no further questions at this time. I will now turn the call back over to Mr. D'Loren for closing remarks.

Thank you, Bella. Ladies and gentlemen, thank you all for your time this morning. We greatly appreciate your continued interest and support in Xcel brands. As always, stay fit, eat well, and be healthy.

Ladies and gentlemen, that does conclude our conference call for today. You may all disconnect and thank you for your participation.