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Edited Transcript of SQBG.OQ earnings conference call or presentation 16-Nov-20 9:15pm GMT

·7 min read

Q3 2020 Sequential Brands Group Inc Earnings Call NEW YORK Nov 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Sequential Brands Group Inc earnings conference call or presentation Monday, November 16, 2020 at 9:15:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Daniel Hanbridge Sequential Brands Group, Inc. - Senior VP of Finance and Principal Financial & Accounting Officer * William Sweedler Sequential Brands Group, Inc. - Executive Chairman & Principal Executive Officer ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings. Thank you and good afternoon. Before we begin, I'd like to bring to your attention that 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 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 materially differ from the results, performance or achievements expressed or implied by such forward-looking statements. We refer you to our public filings and the press release we issued this afternoon for a summary of such factors. The words believe, anticipate, expect, may, will, should, estimate, project, plan, confident or similar expressions identify forward-looking statements. Listeners are cautioned to not place undue reliance on these forward-looking statements, which may speak only as of the date the statement was made. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, whether as a result of information, future events or otherwise. Additionally, the terms adjusted EBITDA and non-GAAP net income are all non-GAAP metrics, and reconciliation tables for each can be found in the press release distributed today in the Investor Relations portion of our website, www.sequentialbrandsgroup.com. On today's call are Sequential Brands Group's Executive Chairman, William Sweedler; and Principal Financial and Accounting Officer, Dan Hanbridge. I'll now turn the conference call over to Mr. Sweedler. Sir, you may begin when you're ready. -------------------------------------------------------------------------------- William Sweedler, Sequential Brands Group, Inc. - Executive Chairman & Principal Executive Officer [2] -------------------------------------------------------------------------------- Thank you for joining our third quarter 2020 earnings call. I'm pleased to join you today. The team and I have been hard at work to best position Sequential for short- and long-term success, and I have a few updates I wanted to share on our progress. First, while the pandemic continues to impact the business and the industry overall, we've been fortunate that some of our brands have performed well given the recent tailwinds supporting a healthier, more active, fit lifestyle. The AND1, Gaiam, SPRI and Avia brands have proved resilient and have performed well at key retail partners, including Amazon, Kohl's, Walmart and Target. In addition, we continue to explore opportunities across the entire lifestyle and active portfolio to expand our brands into new categories and territories. On a GAAP basis, through continued hard work managing expenses and working closely with our licensing partners, income from continuing operations for the third quarter 2020 was $4.5 million or $2.71 per diluted share. I'm proud of the team and all of their efforts to deliver our first profitable quarter this year. Second, I wanted to take a moment to recap management changes. I have assumed the role of Executive Chairman and Principal Executive Officer, replacing the CEO position going forward. I want to thank former CEO, David Conn, who recently departed the company. Chad Wagenheim remains President and will continue to work closely with me. I'm also excited to share that Lorraine Disanto has joined the company as our new Chief Financial Officer. She brings over 30 years of accounting, finance and operational experience. Previously, she was CFO of Herman Miller Group's Retail segment. And prior to that, she served as CFO of Design Within Reach. Dan Hanbridge, who joins me on today's call, is with us through the middle of the month and then will move on to a new role. We are grateful to Dan for stepping into the Interim CFO role and wish him well with his future endeavors. Third, as briefly mentioned earlier, our team continues to closely manage costs and take steps to maximize our liquidity. We recently signed an agreement to immediately exit our remaining lease obligation from our previous corporate headquarters, which results in a significant savings over the next several years. Exiting the office space was the last piece to complete our wind down of the legacy Martha Stewart business vertical. In addition, on the expense front, we have eliminated a few positions tied to the office space and continue to scrutinize all material, nonessential expenses and to make changes as appropriate. Planning for the worst and hoping for the best in expenses has proved to be a valuable mantra for this team and has resulted in positive profitability. Fourth, as you're aware, late last year, the Board announced that we would be conducting a broad review of strategic alternatives. We continue to actively discuss alternatives with our financial adviser, Stifel, and remain focused on exploring all opportunities that best position the company for long-term success and maximizing shareholder value. And last, we continue to work closely with our lenders who've been supportive as we manage the business through the pandemic. We recently amended our agreement with our second lien lender and look forward to continuing our relationship together. In closing, we have taken many of the critical steps promised this year to best position Sequential and return it to an asset-light brand management company. I'm confident we are on the right path and look forward to keeping you updated. With that, let me turn the call over to Dan to take you through the financials for the third quarter. -------------------------------------------------------------------------------- Daniel Hanbridge, Sequential Brands Group, Inc. - Senior VP of Finance and Principal Financial & Accounting Officer [3] -------------------------------------------------------------------------------- Thank you, Bill. Total revenue from continuing operations for the third quarter ended September 30, 2020, was $24 million compared to $25.4 million in the prior year quarter. On a GAAP basis, income from continuing operations for the third quarter 2020 was $4.5 million or $2.71 per diluted share compared to a loss from continuing operations for the third quarter of 2019 of $18.4 million or $11.31 per diluted share. Non-GAAP net income from continuing operations for the third quarter 2020 was $2.1 million or $1.30 per diluted share compared to a non-GAAP net loss of $0.9 million or $0.53 per diluted share in the prior year quarter. Adjusted EBITDA from continuing operations for the third quarter of 2020 was $18.9 million compared to $13.2 million in the prior year quarter, reflecting the company's continued efforts to reduce expenses. Total revenue from continuing operations for the 9 months ended September 30, 2020, was $66.8 million compared to $77.3 million in the prior year period. On a GAAP basis, loss from continuing operations for the 9 months ended September 30, 2020, was $83.8 million or $50.96 per diluted share compared to $26.4 million or $16.36 per diluted share for the 9 months ended September 30, 2019. Included in the loss from continuing operations for the 9 months ended September 30, 2020, were noncash impairment charges of $85.6 million for indefinite-lived intangible assets related to the trademarks for the Jessica Simpson, Gaiam, Joe's and Ellen Tracy brands, reflecting the financial impacts of COVID-19. Non-GAAP net loss from continuing operations for the 9 months ended September 30, 2020, was $10 million or $6.08 per diluted share compared to $7.7 million or $4.74 per diluted share in the prior year period. Adjusted EBITDA from continuing operations for the 9 months ended September 30, 2020, was $43.7 million compared to $37.7 million in the prior year period, reflecting the work the company has done to reduce its expenses. We closed the third quarter 2020 with $22.2 million of cash, including restricted cash, and $452.2 million of debt, net of cash. Looking ahead, as we have stated previously, due to the unknown outcome of the pandemic, we continue to believe that COVID-19 may continue to impact our operating results, cash flows and financial condition. We continue to monitor it closely and are actively managing relationships and expenses to best position ourselves for long-term success. Thank you for joining us for our call today. I will now turn the call back over to the operator. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, this concludes our call for today. Thank you for your participation and interest. You may disconnect your lines at this time and have a wonderful day.