Sequential Brands Group, Inc.
Q1 2020 Earnings Call Transcript

Published: 15 May 2020

[Operator:]

Thank you, and good morning. Before we begin, I would like to bring 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 difficult or impossible to predict, and many of which are beyond control of the company.This may cause actual results, performance, 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 morning 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 not to place undue reliance on these forward-looking statements, which may speak only as of the date of 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 CEO, David Conn; and interim CFO, Dan Hanbridge.I will now turn the conference over to Mr. Conn. You may begin when you are ready.

[David Conn:]

Thank you for joining our First Quarter 2020 Earnings Call. We started the year with momentum, executing a handful of deals for the Jessica Simpson brand, including hosiery, an endorsement for a consumer product deal as well as new partnerships for Caribbean Joe and Ellen Tracy. We also executed several renewals, extending terms with key licensees for AND1 and GAIAM.However, COVID-19 has significantly impacted our progress. Our licensing partners have been affected by mandatory store closures and shelter-in-place orders. All orders have been cut or put on hold, and there is much uncertainty around consumer spending going forward. We have seen some bright spots in our diversified portfolio of brands. Our active brands, which consist of AND1, AVIA, GAIAM and SPRI, and are sold at mass retailers such as Walmart as well as grocery and drug stores nationwide, have been well positioned in this environment as gyms across the country have been forced to close, and consumers are now working out at home.GAIAM and SPRI exercise equipment as well as AVIA activewear, AND1 underwear and socks have also performed well. Our employees’ health and safety remain the top priority. The team is working efficiently in our new work remote environment to achieve our goals. Nevertheless, as a result of the pandemic and its impact to our business, in addition to the significant savings already achieved over the past year, we are proactively taking the following actions

[Dan Hanbridge:]

Thank you, David. Total revenue from continuing operations for the first quarter ended March 31, 2020, was $20.2 million compared to $25.5 million in the prior year quarter. Of note, the impact from COVID-19, which began at the end of the first quarter, will have a full quarter impact on Q2 results. On a GAAP basis, loss from continuing operations for the first quarter 2020 was $85.3 million or $1.30 per diluted share compared to a loss from continuing operations for the first quarter 2019 of $4.8 million or $0.07 per diluted share.Included in the net loss from continuing operations for the first quarter 2020 were non-cash 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 first quarter 2020 was $10.4 million or $0.16 per diluted share compared to $4.3 million or $0.07 per diluted share in the prior year quarter. Adjusted EBITDA from continuing operations for the first quarter of 2020 was $9.8 million compared to $11.3 million in the prior year quarter. The company continues to be aggressive in cutting SG&A, but bad debt expense may continue to have a negative impact moving forward.We closed the first quarter 2020 with $13.3 million of cash, including restricted cash, and $460.7 million of debt net of cash. As of March 31, we also had availability under our revolver of $7 million, which we fully borrowed subsequent to the end of the quarter. As mentioned on our last earnings call, we will not be providing full year 2020 guidance. We believe COVID-19 will continue to have a material impact to our operating results, cash flows and financial condition and continue to monitor it closely.As David outlined in his remarks, we are actively managing relationships and expenses to best position ourselves for the short and long-term as the economy recovers. Thank you for joining us for our call today. I will now turn the call back over to the operator.

[Operator:]

Thank you. Ladies and gentlemen, this concludes our call for today. Thank you for your participation and interest. You may now disconnect your lines, and have a wonderful day.