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Sequential Brands Group Announces First Quarter 2019 Results

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NEW YORK, May 08, 2019 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. ("Sequential" or the "Company") (NASDAQ:SQBG) today announced financial results for the first quarter ended March 31, 2019.

"While first quarter results came in below expectations, we are excited to now focus on our active and fashion brands, which we believe have significant growth opportunities in the health, wellness and beauty space. Last month, we announced a definitive agreement to sell the Martha Stewart and Emeril Lagasse brands, which is on track to close in the second quarter. After the close, we expect to have an improved net leverage profile and additional cash on our balance sheet," said Karen Murray, CEO of Sequential Brands Group.   

First Quarter 2019 Results:

Total revenue for the first quarter ended March 31, 2019 was $36.9 million, compared to $38.1 million in the prior year quarter. On a GAAP basis, net loss for the first quarter 2019 was $(125.3) million or $(1.95) per diluted share compared to a net loss for the first quarter 2018 of $(2.3) million or $(0.04) per diluted share.  Included in the net loss for the first quarter 2019 was a $161.2 million impairment related to the sale of the Martha Stewart and Emeril Lagasse brands.  Non-GAAP net loss for the first quarter 2019 was $(0.8) million, or $(0.01) per diluted share, compared to non-GAAP net income of $3.6 million, or $0.06 per diluted share, in the prior year period. See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures.  Adjusted EBITDA (defined under "Non-GAAP Financial Measures" below) for the first quarter of 2019 was $16.8 million, compared to $21.2 million in the prior year quarter.

Investor Call and Webcast:

Management will provide further commentary today, May 8, 2019, on the Company's financial results and financial update via a conference call and webcast beginning at approximately 8:30 am ET. To join the conference call, please dial 1-877-407-9208 or visit the investor relations page on the Company's website www.sequentialbrandsgroup.com. A replay of the conference call is available on the Company's website.

Non-GAAP Financial Measures:

This press release contains historical and projected measures of Adjusted EBITDA, non-GAAP net income and non-GAAP earnings per diluted share. The Company defines Adjusted EBITDA as net income attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding provision for (benefit from) income taxes, interest income or expense, non-cash compensation, depreciation and amortization, deal advisory costs, Martha Stewart Living Omnimedia (MSLO) shareholder and pre- acquisition litigation costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, loss on asset held for sale, non-cash impairment of trademarks,  other non-cash items and severance. Non-GAAP net income and non-GAAP earnings per share are non-GAAP financial measures which represent net income (loss) attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding deal advisory costs, non-cash mark-to-market adjustments to stock-based compensation provided to non-employees, MSLO shareholder and pre-acquisition litigation costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, loss on asset held for sale, non-cash impairment of trademarks, other non-cash items and adjustments to taxes. These non-GAAP metrics are an alternative to the information calculated under U.S. generally accepted accounting principles ("GAAP"), as provided in the reports the Company files with the Securities and Exchange Commission, may be inconsistent with similar measures presented by other companies and should only be used in conjunction with the Company's results reported according to GAAP. Any financial measure other than those prepared in accordance with GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We consider these measures to be useful measures of our ongoing financial performance because they adjust for certain costs and other events that the Company believes are not representative of its core licensing business. See below for a reconciliation of these non-GAAP metrics to the most directly comparable GAAP measure.

About Sequential Brands Group, Inc.

Sequential Brands Group, Inc. (NASDAQ:SQBG) owns, promotes, markets, and licenses a portfolio of consumer brands in the active and fashion categories. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, design and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and around the world. For more information, please visit Sequential's website at: www.sequentialbrandsgroup.com. To inquire about licensing opportunities, please email: newbusiness@sbg-ny.com.

Forward-Looking Statements

Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements ("forward-looking statements") within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date hereof and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. The Company's actual results could differ materially from those stated or implied in forward-looking statements. Forward-looking statements include statements concerning the consummation and timing of the Martha sale, the use of proceeds from the Martha sale, our leverage and cash position after the Martha sale, estimates of GAAP net income, non-GAAP net income, Adjusted EBITDA, revenue (including guaranteed minimum royalties), and margins, guidance, plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions and other statements that are not historical in nature, including those that include the words "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," "forecasts," "projects," "aims," "targets," "may," "will," "should," "can," "future," "seek," "could," "predict," the negatives thereof, variations thereon and similar expressions. Such forward-looking statements reflect the Company's current views with respect to future events, based on what the Company believes are reasonable assumptions. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including: (i) risks and uncertainties discussed in the reports that the Company has filed with the Securities and Exchange Commission (the "SEC"); (ii) general economic, market or business conditions; (iii) the Company's ability to identify suitable targets for acquisitions and to obtain financing for such acquisitions on commercially reasonable terms; (iv) the Company's ability to timely achieve the anticipated results of recent acquisitions and any potential future acquisitions; (v) the Company's ability to successfully integrate acquisitions into its ongoing business; (vi) the potential impact of the consummation of recent acquisitions or any potential future acquisitions on the Company's relationships, including with employees, licensees, customers and competitors; (vii) the Company's ability to achieve and/or manage growth and to meet target metrics associated with such growth; (viii) the Company's ability to successfully attract new brands and to identify suitable licensees for its existing and newly acquired brands; (ix) the Company's substantial level of indebtedness, including the possibility that such indebtedness and related restrictive covenants may adversely affect the Company's future cash flows, results of operations and financial condition and decrease its operating flexibility; (x) the Company's ability to achieve its guidance; (xi) continued market acceptance of the Company's brands; (xii) changes in the Company's competitive position or competitive actions by other companies; (xiii) licensees' ability to fulfill their financial obligations to the Company; (xiv) concentrations of the Company's licensing revenues with a limited number of licensees and retail partners; (xv) risks that the Martha sale may not be completed; (xvi) risks related to the effects of the Martha sale and (xvii) other circumstances beyond the Company's control. Refer to the section entitled "Risk Factors" set forth in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a discussion of important risks, uncertainties and other factors that may affect the Company's business, results of operations and financial condition. The Company's stockholders are urged to consider such risks, uncertainties and factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. The Company is not under any obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Readers should understand that it is not possible to predict or identify all risks and uncertainties to which the Company may be subject. Consequently, readers should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.

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SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands)  
           
    March 31,   December 31,  
      2019       2018    
    (Unaudited)      
           
Assets          
Current Assets:          
Cash    $   14,925     $   14,106    
Restricted cash       2,036         2,032    
Accounts receivable, net       56,465         66,202    
Prepaid expenses and other current assets        9,290         11,224    
Total current assets        82,716         93,564    
           
Property and equipment, net        8,528         8,971    
Intangible assets, net        803,194         964,911    
Right-of-use assets - operating leases       49,317         -    
Other assets       12,953         11,222    
Total assets    $   956,708     $   1,078,668    
           
Liabilities and Equity          
Current Liabilities:          
Accounts payable and accrued expenses    $   21,844     $   23,527    
Current portion of long-term debt       28,300         28,300    
Current portion of deferred revenue       12,013         11,695    
Current portion of lease liabilities - operating leases       2,761         -    
Total current liabilities        64,918         63,522    
           
Long-term debt, net of current portion       576,737         582,487    
Long-term deferred revenue, net of current portion       7,319         8,224    
Deferred income taxes       27,914         67,002    
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