- Total revenue of $28.0 million compared to $35.9
million in the prior year quarter.
- GAAP Operating Loss - $4.9 million as compared to
income of $18.4 million in the prior year quarter.
- Adjusted EBITDA of $11.6 million, compared to $18.4
million in the prior year quarter.
- Signed 41 license deals during 2020, representing $24
million of aggregate guaranteed minimum royalties over the life of
these contracts.
- Improved cost structure, decreasing SG&A cost 5%
from prior year quarter.
Iconix Brand Group, Inc. (Nasdaq: ICON) ("Iconix" or the
"Company") today reported financial results for the first quarter
ended March 31, 2020.
Bob Galvin, CEO commented, “While we began 2020 focused on the
continued stabilization of our business and our operational cost
structure, the COVID-19 pandemic has had a meaningful near-term
impact on our business and that of our licensees. We quickly
responded to remove costs and preserve liquidity. As of now,
we have achieved over $10.0 million of annualized cost removal
actions, including reductions in headcount and the elimination of
all non-essential operating expenses. However, we will remain
vigilant and will attempt to identify additional cost removal
actions if we experience a slower recovery or in the event of
further disruption later in the year.”
Galvin continued, “Our first priority is always the health and
safety of our team, our communities and our business partners, and
we moved quickly to implement changes to ensure safety, such as the
working from home initiative. Even with this disruption, we
continued to develop our pipeline of future business, as we signed
41 deals during 2020 for aggregate guaranteed minimum royalties of
approximately $24 million. We will continue to focus on the
business and decreasing costs to help improve our Adjusted EBITDA
margin.”
First Quarter 2020 Financial Results
GAAP Revenue by Segment(000’s)
|
|
For the Three MonthsEnded
March 31, |
|
|
2020 |
|
2019 |
Licensing
revenue: |
|
|
|
|
Women's |
|
$ |
6,478 |
|
$ |
8,367 |
Men's |
|
|
6,757 |
|
|
10,935 |
Home |
|
|
3,162 |
|
|
3,490 |
International |
|
|
11,554 |
|
|
13,150 |
|
|
$ |
27,951 |
|
$ |
35,942 |
For the first quarter of 2020, total revenue was $28.0 million,
a 22% decline, compared to $35.9 million in the first quarter of
2019. Revenue across all segments was negatively impacted by the
effects of the COVID-19 pandemic on the global economy. The 23%
decrease in revenue in our Women’s segment was principally as a
result of a decrease in licensing revenue from our Mudd brand.
Revenue from the men’s segment decreased 38% from $10.9 million in
the Prior Year Quarter to $6.8 million in the Current Quarter
mainly due to a decrease in licensing revenue from our Buffalo and
Umbro brands. Sales in our home segment declined 9% principally due
to a decrease in licensing revenue from our Royal Velvet brand as
it transitions from its historical DTR relationship. Our
International segment revenue declined 12% in the current quarter
mainly due to decreases in Latin America and Europe.
SG&A Expenses:
Total SG&A expenses in the first quarter of 2020 were
$17.2 million, a 5% decline compared to $18.1 million in
the first quarter of 2019. The decline for the quarter was
primarily driven by a decrease in advertising and compensation
expense somewhat offset by an increase in bad debt expense.
Trademark, Investment and Asset Impairment:
In the first quarter of 2020, the Company recorded a non-cash
trademark impairment charge of $13.7 million. The charge for the
Current Quarter was based on the impact of COVID-19 pandemic on
current and estimated future cash flows primarily on the fair value
of the Rampage, Joe Boxer, Waverly, Fieldcrest and Umbro
indefinite-lived trademarks.
Operating Income and Adjusted EBITDA (1):
Adjusted EBITDA is a non-GAAP metric, and a reconciliation table
is included below.
Operating loss for the first quarter of 2020 was $4.9 million,
as compared to operating income of $18.4 million for the first
quarter of 2019. The first quarter 2020 results include $13.7
million of charges related to trademark impairments. Adjusted
EBITDA in the first quarter of 2020 was $11.6 million, which
represents an operating loss of $4.9 million excluding net charges
of $16.5 million. Adjusted EBITDA in the first quarter of
2019 was $18.4 million, which represents an operating income of
$18.4 million. The change period over period in Adjusted
EBITDA is primarily as a result of reduced revenue, somewhat offset
by reduced expenses driven by the Company’s cost reduction
initiative. Refer to footnote 1 below for a full detailed
reconciliation of operating income to Adjusted
EBITDA.
Note: All items in the following tables are attributable to the
Company’s interest in its subsidiaries and joint ventures, as
applicable, and exclude the results related to non-controlling
interest. Certain numbers may not add due to rounding.
Adjusted EBITDA by
Segment (1) |
For the Three Months Ended
March 31, |
|
|
(000's) |
2020 |
|
2019 |
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Women's |
$ |
5,549 |
|
$ |
7,627 |
|
|
-27 |
% |
|
Men's |
|
2,414 |
|
|
4,067 |
|
|
-41 |
% |
|
Home |
|
2,564 |
|
|
3,007 |
|
|
-15 |
% |
|
International |
|
5,911 |
|
|
7,993 |
|
|
-26 |
% |
|
Corporate |
|
(4,826 |
) |
|
(4,252 |
) |
|
-13 |
% |
|
Adjusted
EBITDA |
$ |
11,612 |
|
$ |
18,442 |
|
|
-37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
(2) |
|
42 |
% |
|
51 |
% |
|
|
|
|
Adjusted EBITDA margin in the first quarter of 2020
was 42% as compared to Adjusted EBITDA margin in
the first quarter of 2019 of 51%. The change period
over period in Adjusted EBITDA margin is primarily as a result of
the Company’s decrease in revenue.
Interest Expense and Other (Income) Loss,
net:
Interest expense in the first quarter of 2020 was $16.7 million
as compared to $14.5 million in the first quarter of 2019. The
legal final maturity date of the Securitization Notes is in January
of 2043. The Company did not repay or refinance the Securitization
Notes prior to the anticipated repayment date. Beginning January
2020, the Company accrues additional interest on the Securitization
notes that is not payable until 2043. The increase in interest
expense is primarily the result of the step up in interest for the
securitization. In the first quarter of 2020, Other (income)
loss was a gain of $0.8 million as compared to a $20.0 million gain
in the first quarter of 2019. This gain results primarily
from the Company's accounting for the 5.75% Convertible Notes,
which requires recording the fair value of this debt at the end of
each period with any change from the prior period accounted for as
other income or loss in the respective period's consolidated income
statement.
Provision for Income Taxes:
The effective income tax rate for the first quarter of 2020
is approximately 0.0%, which resulted in a $0.0 million income
tax benefit, as compared to an effective income tax rate of
8.5% in the first quarter of 2019, which resulted in a $2.0
million income tax expense. The change in the effective
tax rate is due to refunds related to prior periods resulting from
the enactment of the CARES act in March 2020, partly offset by to
expenses recorded in the first quarter of 2020 for which no tax
benefit was able to be recognized.
GAAP Net Income and GAAP Diluted EPS:
GAAP net income attributable to Iconix for the first quarter of
2020 reflected a loss of $21.5 million, compared to income of $17.9
million for the first quarter of 2019. GAAP diluted EPS for
the first quarter of 2020 reflected loss of $1.86, compared to a
loss of $0.01 for the first quarter of 2019.
Adjusted EBITDA (1):
Adjusted EBITDA for the first quarter of 2020 was $11.6 million,
compared to $18.4 million for the first quarter of 2019.
Adjusted EBITDA:
(1) |
|
|
|
|
(000's) |
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
March 31, |
|
|
|
2020 |
|
|
2019 |
|
% Change |
|
|
|
|
|
|
GAAP Operating Income
(Loss) |
$ |
(4,850 |
) |
$ |
18,398 |
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
stock-based compensation expense |
|
172 |
|
|
139 |
|
|
|
depreciation and amortization |
|
273 |
|
|
492 |
|
|
|
contract asset write offs, net |
|
2 |
|
|
- |
|
|
|
other impairment charges |
|
13,733 |
|
|
- |
|
|
|
special charges |
|
3,536 |
|
|
2,780 |
|
|
|
non-controlling interest |
|
(825 |
) |
|
(3,361 |
) |
|
|
non-controlling interest related to D&A and impairment |
|
(429 |
) |
|
(8 |
) |
|
|
|
|
16,462 |
|
|
42 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
11,612 |
|
$ |
18,441 |
|
-37 |
% |
|
Adjusted EBITDA Margin
(2) |
|
42 |
% |
|
51 |
% |
|
|
|
|
|
|
|
Balance Sheet and Liquidity:
(000's) |
March 31, 2020 |
|
December 31, 2019 |
|
Cash Summary: |
|
|
|
|
|
|
Unrestricted Domestic, Canada
and China (Wholly Owned) |
$16,494 |
|
|
$29,144 |
|
|
Unrestricted Luxembourg
(Wholly Owned) |
9,486 |
|
|
17,023 |
|
|
Unrestricted in consolidated
JV's |
14,409 |
|
|
9,298 |
|
|
Restricted Cash |
9,052 |
|
|
15,946 |
|
|
|
|
|
|
|
|
|
Total Cash |
$49,441 |
|
|
$71,411 |
|
|
|
|
|
|
|
|
|
Debt
Summary: |
|
|
|
|
|
|
Senior Secured Notes due
January 2043* |
$330,551 |
|
|
$338,130 |
|
|
Variable Funding Note due
January 2043 |
100,000 |
|
|
100,000 |
|
|
5.75% Convertible Notes due
August 2023 |
94,430 |
|
|
94,430 |
|
|
Senior Secured Term Loan due
August 2022 |
170,779 |
|
|
175,600 |
|
|
|
|
|
|
|
|
|
Total Debt (Face Value) |
$695,760 |
|
|
$708,160 |
|
|
|
|
|
|
|
|
|
*- The legal final
maturity of the Securitization Notes is in January of 2043. As the
Company did not repay or refinance the Securitization Notes prior
to the “anticipated repayment date, beginning in January 2020, the
Company is no longer required to make previously designated
contractual principal payments. Future principal payments are
formulaically based on a percentage of receipts of royalty revenue,
and as such are subject market factors outside of the Company’s
control. There can be no assurance that all or any future principal
payments projected for the Senior Secured Notes will be made in
accordance with the projections provided. |
|
|
|
|
|
|
|
|
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the globe, and
the rapid and continuous economic developments, we are not
providing guidance for fiscal 2020 at this time. The impact of
COVID-19 on our business could be material to our operating
results, cash flows and financial condition. Due to the evolving
and uncertain nature of this situation, we are not able to estimate
the full extent of the impact on Iconix’s operating results, cash
flows and financial condition. We will provide additional updates
as the situation warrants.
About Iconix Brand Group, Inc.
Iconix Brand Group, Inc. owns, licenses and markets a portfolio
of consumer brands including: CANDIE'S ®, BONGO ®, JOE
BOXER ®, RAMPAGE ®, MUDD ®, MOSSIMO ®, LONDON
FOG ®, OCEAN PACIFIC ®, DANSKIN ®, ROCAWEAR ®,
CANNON ®, ROYAL VELVET ®, FIELDCREST ®,
CHARISMA ®, STARTER ®, WAVERLY ®, ZOO YORK ®,
UMBRO ®, LEE COOPER ®, ECKO UNLTD. ®, MARC
ECKO ®, ARTFUL DODGER ®, and HYDRAULIC®. In addition,
Iconix owns interests in the MATERIAL GIRL ®, ED HARDY ®,
TRUTH OR DARE ®, MODERN AMUSEMENT ®, BUFFALO ® and
PONY ® brands. The Company licenses its brands to a network of
retailers and manufacturers. Through its in-house business
development, merchandising, advertising and public relations
departments, Iconix manages its brands to drive greater consumer
awareness and brand loyalty.
Forward-Looking Statements
In addition to historical information, this press release
contains forward-looking statements within the meaning of the
federal securities laws. Such forward-looking statements include
projections regarding the Company's beliefs and expectations about
future performance and, in some cases, may be identified by words
like "anticipate," "assume," "believe," "continue," "could,"
"estimate," "expect," "intend," "may," "plan," "potential,"
\"predict," "project," "future," "will," "seek" and similar terms
or phrases. These statements are based on the Company's beliefs and
assumptions, which in turn are based on information available as of
the date of this press release. Forward-looking statements involve
known and unknown risks and uncertainties, which could cause actual
results to differ materially from those contained in any
forward-looking statement and could harm the Company's business,
prospects, results of operations, liquidity and financial condition
and cause its stock price to decline significantly. Many of these
factors are beyond the Company's ability to control or predict.
Important factors that could cause the Company's actual results to
differ materially from those indicated in the forward-looking
statements include, among others: the ability of the Company's
licensees to maintain their license agreements or to produce and
market products bearing the Company's brand names, the Company's
ability to retain and negotiate favorable licenses, the Company's
ability to meet its outstanding debt obligations, the impact of
COVID-19 on our and our licensees’ business, results of operations,
financial condition and liquidity and the impact of COVID-19 on
global production, manufacturing, distribution and sales and the
events and risks referenced in the sections titled "Risk Factors"
in the Company's Annual Report on Form 10‑K for the year ended
December 31, 2019 and subsequent Quarterly Reports on
Form 10‑Q and in other documents filed or furnished with the
Securities and Exchange Commission. Our forward-looking statements
do not reflect the potential impact of any acquisitions, mergers,
dispositions, business development transactions, joint ventures or
investments we may enter into or make in the future. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. These forward-looking statements are
made only as of the date hereof and the Company undertakes no
obligation to update or revise publicly any forward-looking
statements, except as required by law.
Media contact: John T. McClain Executive Vice
President and Chief Financial Officer Iconix Brand
Group, Inc. jmcclain@iconixbrand.com212-730-0030
Unaudited Consolidated Statement of
Operations(000’s, except earnings per share data)
|
|
For the Three Months Ended
March 31, |
|
|
|
|
2020 |
|
|
2019 |
|
|
Licensing revenue |
|
$ |
27,951 |
|
|
$ |
35,942 |
|
|
Selling, general and
administrative expenses |
|
|
17,150 |
|
|
|
18,094 |
|
|
Depreciation and
amortization |
|
|
273 |
|
|
|
492 |
|
|
Equity (earnings) loss on
joint ventures |
|
|
1,645 |
|
|
|
(1,042 |
) |
|
Trademark impairment |
|
|
13,733 |
|
|
|
— |
|
|
Operating income (loss) |
|
|
(4,850 |
) |
|
|
18,398 |
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
16,713 |
|
|
|
14,504 |
|
|
Interest income |
|
|
(40 |
) |
|
|
(72 |
) |
|
Other (income) loss, net |
|
|
(795 |
) |
|
|
(19,935 |
) |
|
Foreign currency translation (gain) loss |
|
|
(65 |
) |
|
|
627 |
|
|
Other expenses (income) – net |
|
|
15,813 |
|
|
|
(4,876 |
) |
|
Income (loss) before income
taxes |
|
|
(20,663 |
) |
|
|
23,274 |
|
|
(Benefit) Provision for income
taxes |
|
|
(5 |
) |
|
|
1,968 |
|
|
Net income (loss) |
|
|
(20,658 |
) |
|
|
21,306 |
|
|
Less: Net income attributable
to non-controlling interest |
|
|
825 |
|
|
|
3,361 |
|
|
Net income (loss) attributable
to Iconix Brand Group, Inc. |
|
$ |
(21,483 |
) |
|
$ |
17,945 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.86 |
) |
|
$ |
2.12 |
|
|
Diluted |
|
$ |
(1.86 |
) |
|
$ |
(0.01 |
) |
|
Weighted average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
11,772 |
|
|
|
8,465 |
|
|
Diluted |
|
|
11,772 |
|
|
|
44,786 |
|
|
Footnotes
(1) Adjusted EBITDA is a non-GAAP financial measure, which
represents operating income excluding stock-based compensation
(benefit) expense, depreciation and amortization, impairment
charges, costs associated with financings, special charges related
to potential settlement and professional fees incurred as a result
of cooperation with the Staff of the SEC, the SEC and related SDNY
investigations, internal investigations, the previously disclosed
class action and derivative litigations, costs related to the
transition of Iconix management, but including gains on sales of
trademarks and non-controlling interest. The Company believes
Adjusted EBITDA is a useful financial measure in evaluating its
financial condition because it is more reflective of the Company's
business purpose, operations and cash expenses. Uses of cash
flows that are not reflected in Adjusted EBITDA include interest
payments and debt principal repayments, which can be
significant. As a result, Adjusted EBITDA should not be
considered as a measure of our liquidity. Other companies
that provide Adjusted EBITDA information may calculate EBITDA and
Adjusted EBITDA differently than we do. The definition of Adjusted
EBITDA may not be the same as the definitions used in any of our
debt agreements.
Adjusted EBITDA Reconciliation For the
Three Months Ended March 31,
(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income |
|
ImpairmentCharges |
|
Special Charges |
|
Depreciation & Amortization |
|
Stock Compensation |
|
Contract Asset Impairment |
|
Non-controlling Interest, net |
|
Adjusted EBITDA |
($, 000s) |
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
Women's |
(1,143) |
7,627 |
|
6,689 |
- |
|
- |
- |
|
- |
- |
|
- |
- |
|
3 |
- |
|
- |
- |
|
5,549 |
7,627 |
Men's |
3,807 |
7,546 |
|
104 |
- |
|
607 |
- |
|
4 |
13 |
|
- |
- |
|
- |
- |
|
(2,108) |
(3,492) |
|
2,414 |
4,067 |
Home |
(811) |
3,006 |
|
3,369 |
- |
|
- |
- |
|
- |
- |
|
1 |
1 |
|
5 |
- |
|
- |
- |
|
2,564 |
3,007 |
International |
1,841 |
8,423 |
|
3,548 |
- |
|
- |
- |
|
67 |
89 |
|
2 |
3 |
|
(6) |
- |
|
459 |
(522) |
|
5,911 |
7,993 |
Corporate |
(8,544) |
(8,204) |
|
23 |
- |
|
2,929 |
2,780 |
|
202 |
390 |
|
169 |
135 |
|
- |
- |
|
395 |
646 |
|
(4,826) |
(4,253) |
Total
Income |
(4,850) |
18,398 |
|
13,733 |
- |
|
3,536 |
2,780 |
|
273 |
492 |
|
172 |
139 |
|
2 |
- |
|
(1,254) |
(3,368) |
|
11,612 |
18,441 |
(2) Adjusted EBITDA margin is a non-GAAP financial measure,
which represents Adjusted EBITDA as a percentage of revenue.
The Company believes Adjusted EBITDA margin is a useful financial
measure in evaluating its financial condition because it is more
reflective of the Company's business purpose, operations and cash
expenses. Uses of cash flows that are not reflected in
Adjusted EBITDA margin include interest payments and debt principal
repayments, which can be significant. As a result, Adjusted
EBITDA margin should not be considered as a measure of our
liquidity. Other companies that provide Adjusted EBITDA
margin information may calculate EBITDA margin and Adjusted EBITDA
margin differently than we do. The definition of Adjusted EBITDA
margin may not be the same as the definitions used in any of our
debt agreements.
Iconix Brand (NASDAQ:ICON)
Historical Stock Chart
From Apr 2024 to May 2024
Iconix Brand (NASDAQ:ICON)
Historical Stock Chart
From May 2023 to May 2024