- Total revenue of $24.5 million compared to $35.5 million in the prior year quarter.
- GAAP Operating Income$66.4 million as compared to a loss of $8.1millionin the prior year quarter.
- Adjusted EBITDA of $13.7 million, compared to $20.9 million in the prior year quarter.
- Continued to improve cost structure, decreasing SG&A expensesby
$16.4 million from prior year quarter. - Completed Sale of Starter China in September 2020 with net proceeds of $15.6 million and in October repaid $11.7 million of Senior Secured Term Loan.
Third Quarter 2020 Financial Results
GAAP Revenue by Segment
(000’s)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Licensing revenue: | ||||||||||||
Women's | $ | 5,919 | $ | 10,317 | $ | 16,805 | $ | 26,855 | ||||
Men's | 5,705 | 7,942 | 15,419 | 25,491 | ||||||||
Home | 3,487 | 3,430 | 10,436 | 11,205 | ||||||||
International | 9,351 | 13,782 | 32,028 | 42,255 | ||||||||
$ | 24,462 | $ | 35,471 | $ | 74,688 | $ | 105,806 |
For the third quarter of 2020, total revenue was
SG&A Expenses:
Total SG&A expenses in the third quarter of 2020 were
Gain on Sale of Trademarks
Gain on sale of trademarks reflect the
Trademark and Investment Impairment:
In the third quarter of 2020, the Company recorded a non-cash trademark impairment charge of
Operating Income and Adjusted EBITDA (1):
Adjusted EBITDA is a non-GAAP metric, and a reconciliation table is included below.
Operating income for the third quarter of 2020 was
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 any non-controlling interest in such entities. Certain numbers may not add due to rounding.
Adjusted EBITDA by Segment (1) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||
(000's) | 2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||
Women's | $ | 6,777 | $ | 10,105 | -33 | % | $ | 16,451 | $ | 26,354 | -38 | % | ||||||||
Men's | 1,522 | 3,303 | -54 | % | 5,857 | 10,847 | -46 | % | ||||||||||||
Home | 3,588 | 2,999 | 20 | % | 9,670 | 9,789 | -1 | % | ||||||||||||
International | 6,593 | 9,022 | -27 | % | 17,669 | 26,321 | -33 | % | ||||||||||||
Corporate | (4,766 | ) | (4,530 | ) | -5 | % | (12,897 | ) | (13,638 | ) | 5 | % | ||||||||
Adjusted EBITDA | $ | 13,714 | $ | 20,899 | -34 | % | $ | 36,750 | $ | 59,673 | -38 | % | ||||||||
Adjusted EBITDA Margin (2) | 56 | % | 59 | % | 49 | % | 56 | % |
Adjusted EBITDA margin in the third quarter of 2020 was 56% as compared to Adjusted EBITDA margin in the third quarter of 2019 of 59%. 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 third quarter of 2020 was
Provision for Income Taxes:
The effective income tax rate for the third quarter of 2020 is approximately 1.9%, which resulted in a
GAAP Net Income and GAAP Diluted EPS:
GAAP net income attributable to Iconix for the third quarter of 2020 reflected income of
Adjusted EBITDA (1):
Adjusted EBITDA for the third quarter of 2020 was
Adjusted EBITDA: (1) | |||||||||
(000's) | |||||||||
For the Three Months Ended September 30, | |||||||||
2020 | 2019 | % Change | |||||||
GAAP Operating Income (Loss) | $ | 66,351 | $ | (8,115 | ) | ||||
Add: | |||||||||
stock-based compensation expense | 196 | 363 | |||||||
depreciation and amortization | 315 | 421 | |||||||
contract asset write offs, net | 581 | 3,634 | |||||||
impairment charges | 21,959 | 17,000 | |||||||
gain on sale of trademarks and investments | (74,105 | ) | - | ||||||
special charges | 460 | 9,084 | |||||||
non-controlling interest | (976 | ) | (1,482 | ) | |||||
non-controlling interest related to D&A and impairment | (1,067 | ) | (7 | ) | |||||
(52,637 | ) | 29,013 | |||||||
Adjusted EBITDA | $ | 13,714 | $ | 20,899 | -34 | % | |||
Adjusted EBITDA Margin (2) | 56 | % | 59 | % | |||||
Adjusted EBITDA: (1) | |||||||||
(000's) | |||||||||
For the Nine Months Ended September 30, | |||||||||
2020 | 2019 | % Change | |||||||
GAAP Operating Income (Loss) | $ | 65,047 | $ | 28,857 | |||||
Add: | |||||||||
stock-based compensation expense | 608 | 761 | |||||||
depreciation and amortization | 894 | 1,393 | |||||||
gain on sale of trademarks and investments | (75,705 | ) | - | ||||||
contract asset write offs, net | 700 | 3,634 | |||||||
impairment charges | 40,954 | 17,000 | |||||||
special charges | 9,303 | 15,063 | |||||||
non-controlling interest | (3,555 | ) | (7,017 | ) | |||||
non-controlling interest related to D&A and impairment | (1,496 | ) | (19 | ) | |||||
(28,297 | ) | 30,815 | |||||||
Adjusted EBITDA | $ | 36,750 | $ | 59,672 | -38 | % | |||
Adjusted EBITDA Margin (2) | 49 | % | 56 | % | |||||
Balance Sheet and Liquidity:
(000's) | ||||||
Cash Summary: | ||||||
Unrestricted Domestic, | $ | 48,370 | $ | 29,144 | ||
Unrestricted Luxembourg (Wholly Owned) | 14,813 | 17,023 | ||||
Unrestricted in consolidated JV's | 7,347 | 9,298 | ||||
Restricted Cash | 12,760 | 15,946 | ||||
Total Cash | $ | 83,290 | $ | 71,411 | ||
Debt Summary: | ||||||
Senior Secured Notes due | $ | 323,876 | $ | 338,130 | ||
Variable Funding Note due | 100,000 | 100,000 | ||||
5.75% Convertible Notes due | 94,430 | 94,430 | ||||
Senior Secured Term Loan due | 116,420 | 175,600 | ||||
Payroll Protection Plan Loan | 1,307 | - | ||||
Total Debt (Face Value) | $ | 636,033 | $ | 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. Therefore, beginning in | ||||||
**- As a result of the completion of the sale of Starter China, the Company received |
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 year 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
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 occurrence of any strategic transaction and the impact of any potential strategic transaction, including acquisitions or dispositions, 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 10K for the year ended
Media contact:
John T. McClain
Executive Vice President and Chief Financial Officer
jmcclain@iconixbrand.com
212-730-0030
Unaudited Consolidated Statement of Operations
(000’s, except earnings per share data)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Licensing revenue | $ | 24,462 | $ | 35,471 | $ | 74,688 | $ | 105,806 | |||||||||
Selling, general and administrative expenses | 9,915 | 26,318 | 42,043 | 60,846 | |||||||||||||
Depreciation and amortization | 315 | 421 | 894 | 1,393 | |||||||||||||
Equity (earnings) loss on joint ventures | 27 | (153 | ) | 1,455 | (2,290 | ) | |||||||||||
Gain on sale of investment | — | — | (1,600 | ) | — | ||||||||||||
Gain on sale of trademarks | (74,105 | ) | — | (74,105 | ) | — | |||||||||||
Investment impairment | 17,145 | 17,000 | 17,245 | 17,000 | |||||||||||||
Trademark impairment | 4,814 | — | 23,709 | — | |||||||||||||
Operating income (loss) | 66,351 | (8,115 | ) | 65,047 | 28,857 | ||||||||||||
Other expenses (income): | |||||||||||||||||
Interest expense | 18,489 | 14,430 | 52,249 | 43,399 | |||||||||||||
Interest (income) | (1 | ) | (96 | ) | (51 | ) | (259 | ) | |||||||||
Other (income) loss, net | (285 | ) | 11,971 | 1,851 | (6,821 | ) | |||||||||||
Foreign currency translation loss | 531 | 391 | 596 | 760 | |||||||||||||
Other expenses – net | 18,734 | 26,696 | 54,645 | 37,079 | |||||||||||||
Income (loss) before income taxes | 47,617 | (34,811 | ) | 10,402 | (8,222 | ) | |||||||||||
Provision (Benefit) for income taxes | 915 | (585 | ) | 39 | 1,253 | ||||||||||||
Net income (loss) | 46,702 | (34,226 | ) | 10,363 | (9,475 | ) | |||||||||||
Less: Net income attributable to non-controlling interest | 976 | 1,482 | 3,555 | 7,017 | |||||||||||||
Net income (loss) attributable to | $ | 45,726 | $ | (35,708 | ) | $ | 6,808 | $ | (16,492 | ) | |||||||
Earnings (loss) per share: | |||||||||||||||||
Basic | $ | 3.66 | $ | (3.07 | ) | $ | 0.55 | $ | (1.62 | ) | |||||||
Diluted | $ | 1.51 | $ | (3.07 | ) | $ | 0.37 | $ | (1.62 | ) | |||||||
Weighted average number of common shares outstanding: | |||||||||||||||||
Basic | 12,517 | 11,631 | 12,051 | 10,169 | |||||||||||||
Diluted | 31,189 | 11,631 | 33,801 | 10,169 |
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, special charges related to potential settlement and professional fees incurred as a result of cooperation with the Staff of the
Adjusted EBITDA Reconciliation For the Three Months Ended September 30, (1): | ||||||||||||||||||||||||||||||||||
GAAP Operating Income | Impairment Charges | Special Charges | Gain on sale of Trademarks & Investments | Depreciation & Amortization | Stock Compensation | Contract Asset Impairment | Non-controlling Interest, net | Adjusted EBITDA | ||||||||||||||||||||||||||
($, 000s) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Women's | 6,207 | 9,988 | 570 | - | - | - | - | - | - | - | - | - | - | 117 | - | - | 6,777 | 10,105 | ||||||||||||||||
Men's | (1,249 | ) | 5,277 | 4,244 | - | - | - | - | - | - | 13 | - | - | - | (144 | ) | (1,473 | ) | (1,843 | ) | 1,522 | 3,303 | ||||||||||||
Home | 3,588 | 2,990 | - | - | - | - | - | - | - | - | 1 | - | 8 | - | - | 3,588 | 2,999 | |||||||||||||||||
International | 6,556 | 6,243 | - | - | - | - | - | - | 67 | 69 | - | 4 | 581 | 3,653 | (611 | ) | (947 | ) | 6,593 | 9,022 | ||||||||||||||
Corporate | 51,249 | (32,613 | ) | 17,145 | 17,000 | 460 | 9,084 | (74,105 | ) | - | 248 | 339 | 196 | 358 | - | - | 41 | 1,302 | (4,766 | ) | (4,530 | ) | ||||||||||||
Total Income | 66,351 | (8,115 | ) | 21,959 | 17,000 | 460 | 9,084 | (74,105 | ) | - | 315 | 421 | 196 | 363 | 581 | 3,634 | (2,043 | ) | (1,488 | ) | 13,714 | 20,899 | ||||||||||||
Adjusted EBITDA Reconciliation For the Nine Months Ended September 30, (1): | ||||||||||||||||||||||||||||||||||
GAAP Operating Income | Impairment Charges | Special Charges | Gain on sale of Trademarks & Investments | Depreciation & Amortization | Stock Compensation | Contract Asset Impairment | Non-controlling Interest, net | Adjusted EBITDA | ||||||||||||||||||||||||||
($, 000s) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Women's | 5,750 | 26,237 | 10,638 | - | - | - | - | - | - | - | - | - | 63 | 117 | - | - | 16,451 | 26,354 | ||||||||||||||||
Men's | 4,593 | 17,775 | 4,348 | - | 637 | - | - | - | 4 | 37 | - | - | 16 | (144 | ) | (3,741 | ) | (6,821 | ) | 5,857 | 10,847 | |||||||||||||
Home | 4,512 | 9,777 | 5,152 | - | - | - | - | - | - | - | 1 | 4 | 5 | 8 | - | - | 9,670 | 9,789 | ||||||||||||||||
International | 14,569 | 25,432 | 3,548 | - | - | - | - | - | 198 | 230 | 2 | 10 | 616 | 3,653 | (1,264 | ) | (3,004 | ) | 17,669 | 26,321 | ||||||||||||||
Corporate | 35,623 | (50,364 | ) | 17,268 | 17,000 | 8,666 | 15,063 | (75,705 | ) | - | 692 | 1,126 | 605 | 747 | - | - | (46 | ) | 2,789 | (12,897 | ) | (13,639 | ) | |||||||||||
Total Income | 65,047 | 28,857 | 40,954 | 17,000 | 9,303 | 15,063 | (75,705 | ) | - | 894 | 1,393 | 608 | 761 | 700 | 3,634 | (5,051 | ) | (7,036 | ) | 36,750 | 59,672 | |||||||||||||
(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.
Source:
2020 GlobeNewswire, Inc., source