Xcel Brands (XELB) Q2 2024 earnings summary

Executive summary

• Completed divestiture of Lori Goldstein brand, recognizing a $3.8M net gain and reducing liabilities by $6M, contributing to a return to profitability in Q2 2024.

• Transitioned to a licensing-focused business model, exiting wholesale and direct-to-consumer operations, and liquidating residual inventory.

• Net income for Q2 2024 was $0.2M ($0.01/share), reversing a net loss of $3.5M in Q2 2023, driven by the brand divestiture and cost reductions.

• Direct operating costs and expenses reduced to $3.1M in Q2 2024, down 40% year-over-year.

• Project Fundamentals plan and the shift to a licensing model led to improved bottom-line results and cost structure.

Financial highlights

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

• Net licensing revenue grew 16% year-over-year in Q2 2024, offsetting the decline in product sales.

• Adjusted EBITDA for Q2 2024 was nearly breakeven at -$40K, a significant improvement from -$1.3M in Q2 2023.

• Non-GAAP net loss for Q2 2024 was $0.3M (-$0.01/share), improved from $2.1M (-$0.10/share) in Q2 2023.

• Six-month 2024 net revenue was $5.1M, with a net loss of $6.1M (-$0.28/share), improved from $9.1M loss in 2023.

Outlook and guidance

• Licensing revenues are expected to continue strong growth, with positive quarterly EBITDA anticipated in the second half of 2024.

• Operating expenses projected to decrease to a $10M annual run rate starting Q3 2024 due to the Lori Goldstein Brand divestiture and executive compensation reductions.

• C. Wonder and Tower Hill by Christie Brinkley brands are exceeding sales plans, with further growth and new category launches planned for 2025.

• Halston licensing revenue to ramp up in 2025, with minimum royalties in place for 2024.

• Management expects existing cash and future operating cash flows to be adequate for at least the next twelve months.