Xcel Brands, Inc

Good day and welcome to the Excel Brand 2020 Q3 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Andrew Berger, Investor Relations. Please go ahead.

Good evening, everyone, and thank you for joining us. We appreciate your participation and interest and hope that all of you are safe in these challenging and uncertain times. With us on the call today are Chairman and Chief Executive Officer Robert DeLauro, Chief Financial Officer Jim Herron, and Executive Vice President of Business Development and Treasury Seth Burroughs. By now, everyone should have access to the earnings release for the third quarter ended September 30, 2020, which went out a short while ago. And in addition, the company plans to file with the Securities and Exchange Commission its quarterly report on Form 10-Q by November 13, 2020. The release and quarterly report will be available on the company's website at www.excelbrands.com. This call is being webcast, and a replay will be available on the company's investor relations website. Before we begin, please keep in mind that this call will contain forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today. These risk factors are explained in detail in the company's most recent annual report filed with the SEC. Excel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, the ongoing COVID-19 pandemic continues to have a significant impact on the company's business, financial condition, cash flow, and results of operations. There is significant uncertainty about the duration and extent of the impact of the virus. The dynamic nature of these circumstances means that what is said today on this call could change materially at any time. Finally, please note that on today's call, management will refer to certain non-GAAP financial measures such as non-GAAP net income, non-GAAP diluted earnings per share, and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the company's results of operations. Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus they provide supplemental information to assist investors in evaluating the company's financial results. These non-GAAP measures should not be considered in isolation or as alternatives to net income, earnings per share, or any other financial measure of financial performance, calculated and presented in accordance with GAAP. You may refer to the attachment on the company's earnings release or Part 1, Item 2 of the Form 10-Q for reconciliation of non-GAAP measures. Now I'm pleased to introduce Robert DeLoren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Andrew. Good evening, everyone, and thank you for joining us. I hope all of you and your families are staying safe and healthy. I will start today's call with some brief opening remarks, followed by an overview of our third quarter financial performance, and then provide some operating highlights. After that, our CFO, Jim Herron, will discuss our financial results in more detail. It has been only eight months since the COVID-19 pandemic first hit the U.S. Yet, in that short time, we have seen an extraordinary amount of business, economic, and social change and retail technology developments. The disruptive forces that have been affecting the retail industry over the past few years have been greatly accelerated by the pandemic. However, we at XL Brands believe that our strategy, which is based upon an agile operating model, omni-channel distribution, integrated technology platform, and social media and live streaming marketing and sales capabilities will enable us to achieve success in this current environment and in the post-COVID world. While we are taking appropriate actions to safeguard our assets, resources, and employees, we are continuing to execute on and invest in our strategy to move forward to emerge from the current crisis even stronger than before. Over the past five months, our interactive TV business with QVC has been back on track. and QVC's business model has proven that it is not only sustainable, but it's right for the moment given recent trends in live streaming as a vehicle to sell products. We believe that we are positioned well for this live streaming trend given our track record of success in generating over $3 billion in retail sales of products via live streaming on QVC over the past 10 years, and we are actively focused on leveraging live streaming technologies across states other lines of business. Our Q3 financial results have been impacted by COVID-19, both in top line revenue and bottom line results, primarily caused by decreased revenues in Excel's wholesale business and our licensees' wholesale businesses. As previously mentioned, our interactive TV business and our direct-to-consumer Judith Ripka e-commerce and Longaberger peer-to-peer social commerce businesses are performing well. We expect to accelerate growth in these direct-to-consumer businesses by launching live streaming capabilities in 2021. Finally, I am extremely excited by the potential of these businesses. Now, I would like to review our operations by channel distribution. Our interactive TV business is fully back on track after two months of soft sales in April and May. This was primarily driven by outstanding performance in our Isaac Mizrahi Live brand and the successful development of more products that are working well in the current environment, including loungewear, sleepwear, face masks, and food and beverage. Recently, we launched our H. Halston brand on HSN, the shopping channel in Canada, TVSN in Australia, and on QVC UK in Italy on a wholesale basis. In our In our non-QVC licensing business, we continue to develop and manage our portfolio of over 70 licensees across our brand. As previously reported, we expected our non-QVC licensees to experience canceled orders and reduced sales in their wholesale businesses from the impact of COVID-19. Accordingly, we experienced a 62% and 39% decrease in non-QVC net licensing income in Q3 and for the nine months ended September 30, 2020, respectively. However, we are up 19% from the second quarter, showing that the beginning of a recovery for many of our licensees is in progress. We have successfully signed over 10 new licenses during the third quarter in various categories and continue to work to identify categories and retail channels that present opportunities in the current environment. As I stated last quarter, based on our plan and our strong order book, we were showing sales growth in our wholesale business in excess of 40% for 2020. Some sales orders resumed during the third quarter, as wholesale dropped significantly from second quarter. Wholesale sales heading into the fourth quarter continue to improve, but will be dependent upon the success of our retail partners in navigating through the pandemic. While our wholesale business was impacted in 2020, we believe we are positioned to resume similar growth levels in 2021 that were shown before we were hit by the pandemic. Like apparel, Our wholesale department store jewelry business was impacted by the pandemic. As previously mentioned, we shifted our sales efforts to the independent retailer or indie channel with great results to date. We expect continued strong growth in this channel of distribution in 2021 and beyond. In our direct-to-consumer businesses, our Judith Ripke e-commerce business was up 17% over last year. We launched several new collections through the pandemic and are working on some exciting new collaborations for this holiday season and have supported it with an aggressive marketing campaign. Also, earlier this year, we launched our new peer-to-peer digital platform for our Longaberger brand and are seeing great early momentum in both sales associates or stylists recruiting as well as product sales. Our product assortments include home furnishings, accessories, food and baskets, We have recruited over 3,500 members to the platform with new stylists joining each week. This is extremely exciting and shows very significant sales potential, particularly in economies like this one where people are seeking ways to make additional income. We are testing new categories and brands in these peer-to-peer models and expect to launch live streaming capability in these businesses in 2021. In conclusion, And as I have stated before, through our true omnichannel approach, we have positioned ourselves with a presence in all forms of distribution so that we can reach our customers everywhere they shop. We've also created a highly flexible model that can supply our retail partners to either a wholesale or vertical retail fee-based working capital life model, and with our integrated technology platform, can do this with great speed and flexibility. I'm extremely excited by the potential of our Judith Rupka jewelry business and Longaberger peer-to-peer social commerce platform, especially given recent trends in live streaming-driven commerce and our deep knowledge and expertise in this form of retail sales. These businesses not only diversify our product offering to jewelry, home, and wellness categories, but give us the potential to harness the power of social commerce through live streaming. Our people, our brand, our flexibility, and our strong balance sheet are our strength. We are doing everything possible to come through this COVID-19 event so that we emerge from it stronger. Now, I'd like to turn the call over to Jim to review our financial results for the quarter and the first nine months. Jim.