Xcel Brands, Inc

Good day and welcome to Excel Brands' third quarter earnings conference call. Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of Excel Brands. And as a reminder, this conference call is being recorded. I would now like to turn the call over to Andrew Berger of S.M. Berger & Company. Thank you. Andrew, you may now begin.

Good morning, everyone, and thank you for joining us, and welcome to the XL Brands Third Quarter 2022 Earnings Call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer Robert DeLaurin, Chief Financial Officer Jim Herron, and Executive Vice President of Business Development and Treasury, Seth Burrows. By now, everyone should have had access to the earnings release for the third quarter ended September 30, 2022, which went out last evening. And in addition, the company filed with the Securities and Exchange Commission its quarterly report on Form 10-Q yesterday, November 14th. The release and the quarterly report are available on the company's website at www.xlbrands.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. The dynamic nature of the current macroeconomic and geopolitical environment means what is said on today's call could change materially at any time. Finally, please note that on today's call, management will refer to certain non-GAAP financial measures, including 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 the 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 measure of financial performance calculated and presented in accordance with GAAP. You may refer to the attachment to the company's earnings release or to Part 1, Item 2 of the Form 10-Q for reconciliation of non-GAAP measures. And now, I am pleased to introduce Robert DeLoren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Andrew. Good morning, everyone, and thank you for joining us. I'd like to start today's call with some brief opening remarks, followed by some operating highlights and insights. After that, our CFO, Jim Herron, will discuss our financial results in more detail. As we reported last quarter, we completed the sale of a 70% interest in our Isaac Mizrahi brand and entered into a newly formed business venture with WHP Global. We have made a lot of progress with the integration of the venture into WHP's operations and expect to make some announcements soon related to our progress with respect to new business development. That said, the transaction has impacted our revenues and earnings for the third quarter and will continue to have an impact for the remainder of 2022. In addition, near-term retail headwinds caused by a challenging retail and business environment have further impacted revenues and earnings during the year. As discussed on our last quarterly earnings call, we will carefully manage our business by controlling expenses. Despite near-term headwinds, we are pursuing initiatives that we expect to positively impact revenues in EBITDA going into 2023. These initiatives include recent announcement of the appointment of Ken Downing as the creative director and livestream spokesperson for Halston Ken's shows are doing well on HSN and he's having a very positive impact on all creative aspects of the brand I am extremely excited by how Ken is setting the stage for the go forward for Halston under his creative direction I am also excited by the September 2022 appointment of Christian Siriano as the creative director of our Sea Wonder brand, and we are on track for the brand to debut on HSN with Christian as the on-air host starting in the spring of 2023. We are seeing significant interest from potential licensees for the new Sea Wonder by Christian Siriano brand across multiple categories. We are excited to be working with Christian and his significant social media following of nearly 5 million followers. During the current quarter, we also launched QOptics, a multi-branded optical business on HSN and QVC. This business is conducted through a joint venture whereby we leverage inventory and systems of our partner without any material working capital investments. Overall, we expect these new developments to help create growth in our existing brands and expand our relationship with QVC and HSN. Furthermore, we continue to work on several other new initiatives with new talent and celebrities and hope to be able to announce them shortly. Our goal is to build a livestream shopping destination for interactive TV and our proprietary livestream platforms with over 10 million followers through the combined social media reaches, our new creative talent, celebrities, brand, and product launches. We have also continued to see success in our Longaberger business, especially from our livestream shopping perspective, as we regularly sell out products in our livestream shows. We have successfully positioned Excel Brands as a leader in livestream and social commerce, and this has been at least partially responsible for our ability to attract top talent from our new brands and initiatives with GBC and HSN and our livestream platforms. While the Isaac Mizrahi transaction is having a short-term impact on our financial results, we expect the new businesses I discussed and the new projects and opportunities that are currently either planned or being considered to more than offset the lost revenue and earnings in the coming year. From a financial perspective, we continue to maintain a strong debt-free balance sheet and we believe having strong liquidity levels and greater access to capital is critically important in today's complex, challenging business environment. We expect to enhance our capital levels in the coming quarters with a new commercial bank working capital line Also, Jim and I, together with our operating teams, are working hard on a plan for operating efficiency goals for 2023 to offset recent increased costs in operating the business, especially as it relates to logistics, warehouse, and duty costs. We expect that our new warehouse operation in Mexico, coupled with other operating efficiencies that we plan to implement by year-end, can reduce operating costs by over $2.5 million over an annualized period. In closing, we are excited about the growth opportunities for our existing brands, including Halston and Sea Wonder, with respect to announcements for the brands, as well as new business opportunities in our pipeline. We continue to explore new opportunities, including acquisition opportunities and strategic partnerships. We have and will continue to be disciplined in our operating costs, and we are optimistic that the company will return to profitability in 2023. Now, I'd like to turn the call over to Jim to discuss our results and financial highlights for the third quarter.