Xcel Brands Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 14, 2025

Key Takeaways

  • Positive Sentiment: We recently closed a combined public equity offering and management-led private placement for approximately $2.6 million, bolstering our balance sheet and funding new brand launches.
  • Positive Sentiment: Our strategic alliance and financing with United Trademark Group supports our goal of building a 100 million follower portfolio, with social media reach jumping from 5 million to 43 million year-to-date.
  • Positive Sentiment: We launched new creator influencer brands including Cesar Millan, Gemma Stafford, Jenny Martinez, and Coco Rocha, diversifying categories and distribution to reduce tariff exposure.
  • Negative Sentiment: Second-quarter revenue declined to $1.3 million from $3 million year-over-year, resulting in a net loss of approximately $4 million.
  • Positive Sentiment: Direct operating costs fell 39% year-over-year due to restructuring efforts, and adjusted EBITDA improved by 45% excluding the divested Lori Goldstein brand.
AI Generated. May Contain Errors.
Earnings Conference Call
Xcel Brands Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Operator

Welcome to Axle Brands Second Quarter twenty twenty five Earnings Conference Call. Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of Axle 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.

Speaker 1

Good morning, everyone, and thank you for joining us. Welcome to the Accelerant second quarter of twenty twenty five earnings call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer, Robert DeLoren and Chief Financial Officer, Jim Haran. By now, everyone should have had access to the earnings release for the quarter ended 06/30/2025, which went out earlier this morning.

Speaker 1

In addition, the company will file with the Securities and Exchange Commission with its quarterly report on Form 10 Q for the quarter ended 06/30/2025 later today. The release and 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.

Speaker 1

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 on 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 GAAP 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.

Speaker 1

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 or 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 GAAP measures. And now, I'm pleased to introduce Robert DeLoren, Chairman and Chief Executive Officer. Bob, please go ahead.

Speaker 1

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 2025 and next year. After that, our CFO, Jim Herron, 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 $2,600,000 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.

Speaker 1

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 influencer 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 100,000,000 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 2025. These new brands diversify our brand portfolio into new categories and retail distribution channels and reduce our risk to tariff volatility.

Speaker 1

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 5,000,000 followers at the start of the year to 43,000,000 to date. We are seeing early results from these new brands given their strong social media currency. SeaWonder and Christy Brinkley remain the two fastest growing brands at HSM. That said, we did see some disruption in these businesses in Q2 due to a change in a wholesale licensee.

Speaker 1

We are working with our new licensee to minimize the impact from this transition. We have a strong pipeline of additional new creator influencer brands. Finally, I should note that we continue to approach Q3 and Q4 of this year with caution given the impacts of the tariffs on QVC and HSN and our licensees including G3 for our Halston brand. Judith Rip continues to operate on plan at JTV and it was up over 65% from the first quarter. As previously reported, the Longebarger brand launches on QVC this fall.

Speaker 1

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?

Speaker 2

Thanks, Bob, and good morning, everyone. I will now briefly discuss our financial results for the quarter and six months ended 06/30/2025. Total revenues were $1,300,000 for the current quarter compared with $3,000,000 in the second quarter of last year and were $2,700,000 for the first six months of this year compared with $5,100,000 for the first six months of last year. For both the quarter and year to date periods, our revenue decline from the prior year were primarily due to the sale of the Lori Goldstein brand at the end of the 2020. Direct operating costs and expenses were $1,900,000 for the current quarter, down 39% from $3,100,000 in the prior year quarter.

Speaker 2

For the current year six month period, direct operating costs were 4,200,000.0 a decrease of 48% from $7,100,000 in the prior year comparable period. For both the quarter and year to date 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 costs associated with the Lori Goldstein brand and to a lesser extent, an employee retention cash credit recognized in the second quarter. As a result of the restructuring of our business model, we have reduced our payroll and operating and overhead costs to a run rate of approximately $9,000,000 per annum on a going forward basis. Looking at our other operating cost expenses, which are predominantly noncash in nature, our depreciation and amortization expense have declined significantly year over year for both the quarter and year to date periods, all primarily as a result of the sale of the Lori Goldstein brand. During the current quarter and current six months, we recognized 200,000.0 and $500,000 of losses related to our equity method investments compared to $600,000 of losses in the second quarter and $1,100,000 of losses of the first six months of last year.

Speaker 2

The year over year decrease in losses is primarily attributable to the fact that as of this April, we discontinued the equity method accounting for our investment in ONTAPCO as we now hold less than a 20% ownership interest in that company and therefore, are no longer required under GAAP to record our proportional share of our Antapro's business operations in our own results. During the prior year periods, we also recognized the gain on the divestiture of the Lori Dolce 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 noncash in nature and are excluded from our non GAAP measures of performance. And finally, interest and finance expenses was $2,300,000 for the current quarter compared with $100,000 in the second quarter of last year. On a year to date basis, interest in finance expenses was $2,900,000 for the current six months versus $300,000 in the prior year comparable period.

Speaker 2

These year over year increases were primarily driven by a $1,900,000 loss on the early extinguishment of debt related to the April 2025 refinancing of our term debt. In addition, we recognized higher interest expense in the current year periods as a result of higher average debt balances in the current year compared to last year. 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 2027. Overall, we had a net loss for the current quarter of approximately $4,000,000 minus 1.66 per share compared with net income of $200,000 or positive $08 per share in the prior year quarter. After adjusting for certain cash and noncash items, results on a non GAAP basis were a loss of approximately $900,000 or minus $0.36 per share for the current quarter and a net loss of approximately $300,000 or minus $0.13 per share for the prior year quarter.

Speaker 2

Adjusted EBITDA for the current quarter was negative $300,000 and negative $40,000 in the second quarter of last year. The prior year quarter included an adjusted EBITDA contribution of 5 and $10,000 from the Lloyd Goldstein brand. If this contribution was adjusted from the prior year results, there's a $250,000 or 45 percent year over year improvement in 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 6,800,000.0 or minus $2.84 per share on a GAAP basis compared with a net loss of $6,100,000 or minus $2.7 per share in the prior year six months. On a non GAAP basis, we had a net loss of 2,200,000.0 or minus $0.95 per share, roughly comparable to a non GAAP loss in the prior year period of $2,100,000 or minus $0.96 per share.

Speaker 2

Our year to date EBITDA for the current year was negative 1000038% improvement to EBITDA of negative $1,600,000 for the prior year comparable period. Once again, as a reminder, our earnings press release, Form 10 Q, present a full reconciliation of our non GAAP measures with the most directly comparable GAAP measures. Turning now to our balance sheet and liquidity. As of 06/30/2025, company's balance sheet reflected stockholders' equity of approximately $22,000,000 and unrestricted cash of approximately $1,000,000 and also reflected $12,300,000 of long term debt, of which $500,000 is due over the next twelve months. And subsequent to quarter end in August 2025, the company closed on a public equity offering and concurrent management led private placement equity transaction for a combined gross proceeds of approximately $2,600,000 which further increased the company's liquidity.

Speaker 2

This provides us with the adequate liquidity to fund our 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.

Speaker 1

This concludes our prepared remarks. Operator?

Operator

Thank you. Your first question comes from the line of Anthony Lebiedzinski with Sidoti.

Speaker 3

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 how much did that contribute to the sales decline on a year over year basis?

Speaker 1

Sure. Jim, you can take that.

Speaker 2

Yes. So, the revenue was, believe, during the quarter roughly $1.5 and the EBITDA contribution was a little over $500,000 That's when you compare the quarters, quarter two year over year and back out to Lori Goldstein, you'll see that we actually our EBITDA improved not as the financials are presented. That makes sense. Just in summary, our retained brands have improved year over year.

Speaker 3

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.

Speaker 3

How do we think about revenue and profitability for the third quarter? 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?

Speaker 1

So I I think we're on target for where we we thought we would be, Anthony, and we're launching Cesar, Gemma, and Jenny Martinez earlier than we had expected. We thought those would start to ramp up in '26. But given that Jenny and, Gemma are are launching with food where we have domestic production, we were able to launch those this year. And we we had a little bit more lead time on Cesar Malan because he was the first influencer brand that we started with, and we were able to launch with him, for holiday. So we think we will come in where we've been forecasting.

Speaker 3

Okay. That sounds promising. So, it sounds like 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 we see also on a year over year basis as well?

Speaker 1

Yes. The only variability that we have there is we did change the wholesale licensee that was manufacturing products for our SeaWonder and Christy Brinkley brand. And, there was a bit of a delay in delivery from the new licensee for August deliveries. We had to pull a September line into August and and and move the August line into September. So we won't know the impact on that September line sales until until it goes on air.

Speaker 1

So we're optimistic. The product all looks good, but the customer will tell us that it goes on air.

Speaker 3

Of course. Okay. Got you. Okay. And then, so after your recent stock offering here, can you just provide an update as far as what your liquidity is now?

Speaker 3

And also just curious whether you think you will need to raise additional capital? Or do you think you're pretty much set in terms

Speaker 1

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? Yes.

Speaker 2

So we picked up additional $2,200,000 of cash. And as you know, 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 and our ability to execute on our new business ventures.

Speaker 3

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

Speaker 1

Yes. The Ormy team is doing a great job improving UXUI. They've added some new features. They continue to grow the user base and of course 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 you know, Coco would add 5,000,000 followers to their platform.

Speaker 1

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

Speaker 3

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

Speaker 1

Thank you, Anthony. Thanks, Anthony.

Operator

Your next question comes from the line of Michael with NOBLE Capital Markets. Please go ahead.

Speaker 4

Hi. It's Jacob Mutzler on for Michael Kupinski. 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.

Speaker 1

So we did meet with the Halston, the new President at Halston over at G III 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.

Speaker 1

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

Speaker 4

Okay, great. Thank you for that. And when you were mentioning that some of the new brands that were signed this year were coming in a little bit earlier than expected, Could you reference which brands you were mentioning there that are going to be

Speaker 1

impacting So 20 the brands are Cesar Merlon, Gemma Stafford and Jenny Martinez. And when you think about, you know, 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 it was a perfect way to accelerate the launch on those two brands. And Caesar, we just gotta have design and production, we have a perfect item to launch on QVC in the fall. So those are the three.

Speaker 1

Got you.

Speaker 4

Well, thank you for that, Robert. And then last question here. As you're looking to build about 100,000,000 social media followers, are there any product categories or sector of influencers or stars that is attractive to the company?

Speaker 1

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

Speaker 4

There

Operator

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

Speaker 1

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

Operator

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

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