Xcel Brands Announces Fourth Quarter and Fiscal Year 2023 Results
- GAAP net loss of $6.8 million for the quarter, compared with GAAP net loss of $6.0 million in the prior year quarter.
- Adjusted EBITDA of ($1.2) million for the quarter, compared with Adjusted EBITDA of ($5.9) million for the prior year quarter, an improvement of $4.7 million.
- GAAP net loss of $21.1 million for the current year, compared with GAAP net loss of $4.0 million in the prior year, which included a $20.6 million gain on the sale of a majority interest in the Isaac Mizrahi brand.
- Adjusted EBITDA of ($5.7) million for the year, compared with Adjusted EBITDA of ($12.5) million for the prior year, an improvement of $6.8 million.
New York, NY — Xcel Brands announced its financial results for the fourth quarter and fiscal year ended December 31, 2023.
Robert W. D’Loren, Chairman and Chief Executive Officer of Xcel commented, “Throughout 2023, we focused on a restructuring plan that got us focused on our core brand management business. The plan is now complete, and the core business is back on track. We have entered into new licensing agreements with industry leaders in core product categories and reduced salaries and operating costs by $14 million. Also, we strengthened our balance sheet. Recently, we launched Orme, a video and social commerce marketplace with a technology partner that leverages our vast knowledge in video commerce over TV and their technology brilliance. I believe Orme has the potential to transform e-commerce as we know it today.”
Mr. D’Loren continued, “we finished the year as expected and look forward to working with our new licensing partners to grow top line revenue and bottom-line results. Now more than ever, I am excited by the potential of the company.”
Fourth Quarter 2023 Financial Results
Net revenue for the fourth quarter of 2023 was $2.3 million, representing a decrease of approximately $1.8 million (-44%) from the fourth quarter of 2022. The year-over-year revenue decline in the fourth quarter of 2023 was driven by a $2.5 million decrease in net sales, attributable to the exit from the wholesale apparel, fine jewelry and Longaberger sales operations earlier this year as part of our restructuring plan, which was partly offset by an increase in licensing revenues.
Net loss attributable to Xcel Brands for the quarter was approximately $6.8 million, or ($0.34) per share, compared with a net loss of $6.0 million, or ($0.30) per diluted share, for the prior year quarter. The operating loss for the current quarter was approximately $5.6 million, compared with $8.4 million, loss for the prior year quarter.
After adjusting for certain cash and non-cash items, results on a non-GAAP basis were a net loss of approximately $4.7 million, or ($0.24) per share for the current quarter and a net loss of approximately $6.2 million, or ($0.32) per share, for the prior year quarter.
Adjusted EBITDA improved significantly on a year-over-year basis to negative $1.2 million for the current quarter as compared with negative $5.9 million for the prior year quarter, primarily as a result of the restructuring of our business and entry into the new long-term license agreements for our Halston, Judith Ripka, C Wonder and Longaberger brands.
Full Year 2023 Financial Results
Net revenue for the current year was $17.8 million, representing a decrease of approximately $8.0 million (45%) from the prior year. The year-over-year revenue decline from the prior year was driven by a $5.6 million decrease in licensing revenue, primarily attributable to the sale of a majority interest in the Isaac Mizrahi brand in May 2022 and a decrease of $2.4 million in net sales, attributable to the exit from the wholesale apparel, fine jewelry and Longaberger sales operations earlier this year as part of our restructuring plan.
Net loss attributable to Xcel Brands for the current year was approximately $21.1 million, or ($1.07) per share, compared with a net loss of $4.0 million, or ($0.20) per diluted share, for the prior year, which included a $20.6 million gain on the sale of a majority interest in the Isaac Mizrahi brand.
After adjusting for certain cash and non-cash items, results on a non-GAAP basis were a net loss of approximately $12.2 million, or $(0.62) per share for the current year, compared with a net loss of approximately $15.0 million, or $(0.77) per share, for the prior year.
Adjusted EBITDA was negative $5.7 million for the current year, as compared with negative $12.5 million for the prior year, an improvement of $6.8 million or approximately 54%.
Balance Sheet
The Company’s balance sheet at December 31, 2023, reflected stockholders’ equity of approximately $48 million, cash and cash equivalents of approximately $3.0 million, and working capital, exclusive of the current portion of lease obligations, of approximately $2.1 million.
The Company closed a 5-year term, $5 million term loan during the 4th quarter 2023.
| Xcel Brands, Inc. and Subsidiaries | ||||||||||||||||
| Unaudited 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, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Net licensing revenue | $ | 2,125 | $ | 1,435 | $ | 9,156 | $ | 14,737 | ||||||||
| Net sales | 162 | 2,631 | 8,599 | 11,044 | ||||||||||||
| Net revenue | 2,287 | 4,066 | 17,755 | 25,781 | ||||||||||||
| Cost of goods sold (sales) | 200 | 2,265 | 6,918 | 7,980 | ||||||||||||
| Gross profit | 2,087 | 1,801 | 10,837 | 17,801 | ||||||||||||
| Operating costs and expenses | ||||||||||||||||
| Salaries, benefits and employment taxes | 2,063 | 3,412 | 9,910 | 16,802 | ||||||||||||
| Other selling, general and administrative expenses | 3,443 | 4,950 | 13,361 | 16,280 | ||||||||||||
| Total direct operating costs and expenses | 5,506 | 8,362 | 23,271 | 33,082 | ||||||||||||
| Other expense, including non-cash expenses | ||||||||||||||||
| Depreciation and amortization | 1,694 | 1,816 | 6,954 | 7,263 | ||||||||||||
| Gain on sale of assets | – | – | – | (20,586 | ) | |||||||||||
| Loss from equity method investment | 515 | 925 | 2,060 | 1,202 | ||||||||||||
| Gain on sale of limited partner ownership | (8 | ) | – | (359 | ) | – | ||||||||||
| Gain on Lease Liability | – | – | (445 | ) | – | |||||||||||
| Gain on reduction of contingent obligation | – | (900 | ) | – | (900 | ) | ||||||||||
| Operating loss | (5,620 | ) | (8,402 | ) | (20,644 | ) | (2,260 | ) | ||||||||
| Interest and finance expense | ||||||||||||||||
| Interest expense – term loan debt | 99 | – | 113 | 1,187 | ||||||||||||
| Other interest and finance charges (income), net | 265 | 22 | 268 | 16 | ||||||||||||
| Loss on extinguishment of debt | – | – | – | 2,324 | ||||||||||||
| Total interest and finance expense | 364 | 22 | 381 | 3,527 | ||||||||||||
| Loss before income taxes | (5,984 | ) | (8,424 | ) | (21,025 | ) | (5,787 | ) | ||||||||
| Income tax provision (benefit) | 1,212 | (2,070 | ) | 1,212 | (431 | ) | ||||||||||
| Net loss | (7,196 | ) | (6,354 | ) | (22,237 | ) | (5,356 | ) | ||||||||
| Less: Net loss attributable to noncontrolling interest | (398 | ) | (397 | ) | (1,185 | ) | (1,338 | ) | ||||||||
| Net loss attributable to Xcel Brands, Inc. stockholders | $ | (6,798 | ) | $ | (5,957 | ) | $ | (21,052 | ) | $ | (4,018 | ) | ||||
| Loss per common share attributed to Xcel Brands, Inc. stockholders: | ||||||||||||||||
| Basic net loss per share | $ | (0.34 | ) | $ | (0.30 | ) | $ | (1.07 | ) | $ | (0.20 | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted weighted average common shares outstanding | 19,749,317 | 19,624,860 | 19,711,637 | 19,624,669 | ||||||||||||
| Xcel Brands, Inc. and Subsidiaries | ||||||||
| Unaudited Consolidated Balance Sheets | ||||||||
| (in thousands, except share and per share data) | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 2,998 | $ | 4,608 | ||||
| Accounts receivable, net | 3,454 | 5,110 | ||||||
| Inventory | 453 | 2,845 | ||||||
| Prepaid expenses and other current assets | 398 | 1,457 | ||||||
| Total current assets | 7,303 | 14,020 | ||||||
| Property and equipment, net | 634 | 1,418 | ||||||
| Operating lease right-of-use assets | 4,453 | 5,420 | ||||||
| Trademarks and other intangibles, net | 41,520 | 47,665 | ||||||
| Equity method investment | 17,585 | 19,195 | ||||||
| Deferred tax assets, net | – | 1,107 | ||||||
| Other assets | 165 | 110 | ||||||
| Total non-current assets | 64,357 | 74,915 | ||||||
| Total Assets | $ | 71,660 | $ | 88,935 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 2,608 | $ | 4,854 | ||||
| Deferred revenue | 889 | 88 | ||||||
| Current portion of operating lease obligation | 1,258 | 1,376 | ||||||
| Current portion of long-term debt | 750 | – | ||||||
| Current portion of contingent obligations | 964 | 243 | ||||||
| Total current liabilities | 6,469 | 6,561 | ||||||
| Long-Term Liabilities: | ||||||||
| Long-term portion of operating lease obligation | 4,021 | 5,839 | ||||||
| Deferred revenue | 3,556 | – | ||||||
| Long-term debt, net, less current portion | 3,971 | – | ||||||
| Current portion of contingent obligations | 5,432 | 6,396 | ||||||
| Other long-term liabilities | 40 | – | ||||||
| Total long-term liabilities | 17,020 | 12,235 | ||||||
| Total Liabilities | 23,489 | 18,796 | ||||||
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