Market Overview

Iconix Reports Financial Results For The Second Quarter 2019

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NEW YORK, Aug. 08, 2019 (GLOBE NEWSWIRE) --

  • Total revenue of $34.4 million compared with $50.2 million from the prior year quarter.
  • GAAP Operating Income improves to income of $18.6 million from a loss of $94.6 million in the prior year quarter.  Adjusted EBITDA margin improves to 59% from 49% in the prior year quarter.
  • Signed 111 license deals year to date, representing $79 million of aggregate guaranteed minimum royalties.

Iconix Brand Group, Inc. (NASDAQ:ICON) ("Iconix" or the "Company") today reported financial results for the second quarter ended June 30, 2019.

Bob Galvin, CEO commented, "Results for the second quarter of 2019 were as expected, as we continue to stabilize the business and our operational cost structure.  Our focus on the business and costs helped to improve our EBITDA margin to 59% from 49% in the prior year quarter.  We also continue to build the pipeline of our future business, as we have signed 111 deals year to date for aggregate guaranteed minimum royalties of approximately $79 million."

Second Quarter 2019 Financial Results

GAAP Revenue by Segment
(000's)

  For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
  2019     2018     2019     2018
Licensing revenue:                            
Women's $ 8,171     $ 16,871     $ 16,538     $ 33,469
Men's   6,614       10,526       17,550       20,470
Home   4,285       6,961       7,775       13,473
International   15,324       15,854       28,473       31,349
  $ 34,394     $ 50,212     $ 70,336     $ 98,761
                             

For the second quarter of 2019, total revenue was $34.4 million, a 31% decline, compared to $50.2 million in the second quarter of 2018. Such decline was expected, principally as a result of the transition of our Danskin and Mossimo direct to retail licenses in our Women's segment, as previously announced. Our revenue for the second quarter of 2019 was also impacted by the effect of the Sears bankruptcy on our Joe Boxer and Bongo brands in Women's and the Cannon brand in Home. While we recently signed new agreements with the new Sears and Kmart for the Cannon and Joe Boxer brands, the overall revenue for the Cannon and Joe Boxer brands was down year over year. Our Men's segment revenue decreased 37% in the second quarter of 2019, compared to the prior year quarter primarily from the Buffalo brand.  Our International segment declined 3% in the second quarter of 2019 primarily as a result of performance in China.

For the six months ended June 30, 2019, total revenue was $70.3 million, a 29% decline, compared to $98.8 million in the six months ended June 30, 2018.

SG&A Expenses:

Total SG&A expenses in the second quarter of 2019 were $16.4 million, a 43% decline compared to $28.6 million in the second quarter of 2018. Most of the decline for the quarter was a decrease in compensation, advertising, bad debt expense and professional expenses. The decrease in compensation was part of the Company's continued efforts to reduce costs as well as the prior year included severance costs related to the former CEO. Additionally, expenses for the second quarter of 2018 included $2.9 million in costs associated with a debt refinancing. Total SG&A expenses in the six months ended June 30, 2019 were $34.5 million, a 45% decline compared to $62.2 million in the six months ended June 30, 2018.

Operating Income and Adjusted EBITDA (1):

Adjusted EBITDA is a non-GAAP metric, and a reconciliation table is included below. 

Operating income for the second quarter of 2019 was $18.6 million, as compared to operating loss of $94.6 million in the second quarter of 2018.  Adjusted EBITDA in the second quarter of 2019 was $20.3 million which represents operating income of $18.6 million excluding net charges of $1.7 million.  Adjusted EBITDA in the second quarter of 2018 was $24.6 million which represents operating loss of $94.6 million excluding net charges of $119.2 million, which was primarily related to impairment charges of $111.1 million.  The change period over period in Adjusted EBITDA is primarily as a result of the change in revenue as outlined above, which was somewhat offset by the cost reduction initiative. Refer to footnote 1 below for a full detailed reconciliation of operating income to Adjusted EBITDA.     

Operating income for the six months ended June 30, 2019 was $37.0 million, as compared to operating loss of $79.1 million in the six months ended June 30, 2018.  Adjusted EBITDA for the six months ended June 30, 2019 was $38.8 which represents operating income of $37.0 million excluding net charges of $1.8 million.  Adjusted EBITDA for the six months ended June 30, 2018 was $47.1 million which represents operating loss of $79.1 million excluding net charges of $126.0 million. The change period over period in Adjusted EBITDA is primarily as a result of the change in revenue as outlined above.  Refer to footnote 1 below for a full detailed reconciliation of operating income to Adjusted EBITDA.     

             
Adjusted EBITDA by Segment (1) For the Three Months Ended
June
 30,
      For the Six Months Ended
June
 30,
 
(000's) 2019   2018   % Change       2019   2018   %
Change
 
                                         
Women's $ 8,622   $ 15,481     -44 %     $ 16,249   $ 30,020     -46 %
Men's   3,478     3,259     7 %       7,544     6,684     13 %
Home   3,783     6,596     -43 %       6,790     12,347     -45 %
International   9,306     6,806     37 %       17,300     12,707     36 %
Corporate   (4,860 )   (7,516 )   35 %       (9,109 )   (14,663 )   38 %
Adjusted EBITDA $ 20,329   $ 24,626     -17 %     $ 38,774   $ 47,095     -18 %
                                         
Adjusted EBITDA Margin (2)   59 %   49 %             55 %   48 %      
                                         

Adjusted EBITDA margin in the second quarter of 2019 was 59% as compared to adjusted EBITDA margin in the second quarter of 2018 of 49%.  The change period over period in adjusted EBITDA margin is primarily as a result of the Company's decrease in expenses which outpaced the decrease in revenues. 

Adjusted EBITDA margin in the six months ended June 30, 2019 was 55% as compared to adjusted EBITDA margin in the six months ended June 30, 2018 of 48%.  The change period over period in adjusted EBITDA margin is primarily as a result of the Company's decrease in expenses which outpaced the decrease in revenues. 

Interest Expense and Other Income:

Interest expense in the second quarter of 2019 was $14.5 million as compared to $14.8 million in the second quarter of 2018.  In the second quarter of 2019, the Company recognized a $0.3 million gain as compared to a $32.1 million gain in the second quarter of 2018.  These gains result 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 income statement.

Interest expense in the six months ended June 30, 2019 was $29.0 million as compared to $29.4 million in the six months ended June 30, 2018.

Provision for Income Taxes:

The effective income tax rate for the second quarter of 2019 is approximately -4%, which resulted in a $0.1 million income tax benefit, as compared to an effective income tax rate of 4% in the second quarter of 2018, which resulted in a $2.8 million income tax benefit.  The change in the effective tax rate was due to trademark impairment recorded in the Prior Year Quarter, for which the Company recognized a tax benefit against a pretax loss.

The effective income tax rate for the six months ended June 30, 2019 is approximately 7%, which resulted in a $1.8 million income tax provision, as compared to an effective income tax rate of 3% in the six months ended June 30, 2018, which resulted in a $1.2 million income tax benefit.  The increase in tax expense is due to trademark impairment recorded in the Prior Year Six Months, for which the Company recognized a tax benefit.

GAAP Net Income and GAAP Diluted EPS:

GAAP net income attributable to Iconix for the second quarter of 2019 reflects income of $ 1.3 million, compared to loss of $79.4 million for the second quarter of 2018. GAAP diluted EPS for the second quarter of 2019 reflects income of $0.04, compared to loss of $12.55 for the second quarter of 2018.

GAAP net income attributable to Iconix for the six months ended June 30, 2019 reflects income of $19.2 million, compared to a loss of $51.7 million for the six months ended June 30, 2018.  GAAP diluted EPS for the six months ended June 30, 2019 reflects income of $0.10 compared to a loss of $ 9.06 for the six months ended June 30, 2018.

Adjusted EBITDA (1):

Adjusted

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