Xcel Brands (XELB) Q2 2024 earnings summary

Executive summary

• Completed divestiture of the Lori Goldstein brand, resulting in a $3.8 million net gain and $6 million reduction in liabilities, contributing to a net income of $0.2 million in Q2 2024 versus a $3.5 million loss in Q2 2023.

• Transitioned to a licensing-focused business model, exiting wholesale and direct-to-consumer operations, and reducing annualized direct operating costs from $8 million to $2.5 million per quarter.

• Net licensing revenue grew 16% year-over-year in Q2 2024, driven by new and expanded brand agreements.

• Qurate Retail Group accounted for 60% of Q2 2024 net licensing revenue.

• Achieved significant improvement in bottom-line results, with adjusted EBITDA nearly breakeven at -$40,000, a 95% improvement year-over-year.

Financial highlights

• Q2 2024 total revenue was $3 million, down from $6.8 million in Q2 2023, mainly due to the exit from wholesale and direct-to-consumer operations.

• Direct operating costs and expenses fell 40% year-over-year to $3.1 million in Q2.

• Cost of goods sold was under $0.1 million in Q2 2024, down from $3.8 million in Q2 2023.

• Year-to-date net loss improved to $6.1 million from $9.1 million in the prior year.

• Gross profit for Q2 2024 was $2.9 million, down from $6.8 million in Q2 2023.

Outlook and guidance

• Management anticipates positive quarterly EBITDA in the second half of 2024 and strong growth heading into 2025.

• Expects continued licensing revenue growth, especially from C. Wonder, Tower Hill by Christie Brinkley, and Halston.

• Operating expenses projected to decrease to a $10 million annual run rate starting Q3 2024.

• New celebrity designer and kitchen/food brands to launch on HSN in late 2024 and early 2025.

• Qurate is expected to remain a key licensee, though its proportional share of revenue will decrease.