Xcel Brands, Inc

Hello everyone and welcome to Excel Brands Incorporated fourth quarter and fiscal year 2023 results earnings conference call. Please note that this call is being recorded. You will have an opportunity to ask questions to our speakers for today by pressing star number one on your telephone keypad later in the Q&A session. I'd now like to hand the call over to Craig Gralsford from Red Chip. You may now go ahead, please.

Good evening, everyone, and thank you for joining us. Welcome to the Excel Brands fourth quarter and fiscal year 2023 earnings call. We greatly appreciate your participation and interest. 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 Burrows. By now, everyone should have had access to the earnings release for the fourth quarter and fiscal year ended December 31, 2023, which went out this evening. And in addition, the company has filed with the Securities and Exchange Commission its annual report on Form 10-K. The release and the annual report will be available on the company's website at www.excelbrands.com. This call is being webcast and the 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 environment means that what is said 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, including non-GAAP net income, non-GAAP diluted EPS, 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 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-K for a reconciliation of non-GAAP measures. And now, I'm pleased to introduce Robert DeLoren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Craig. Good evening, everyone, and thank you for joining us. I would like to start today's call with an update on our strategic transformation efforts, a plan that we affectionately refer to internally as Project Fundamentals for May 9th, and I'll also talk a little bit about our core business plan. and how it's performing under this plan. After that, our CFO, Jim Herron, will discuss our financial results in more detail. I am happy to report that we have fully completed our restructuring plan, which included discontinuing all wholesale operating activities and outsourcing these activities to industry-leading licensing partners. As I mentioned in our last earnings call, we are currently tracking annual operating cost reductions of approximately $14 million compared with 2022 and are working hard with all of our new production partners to drive our business. We plan to launch our new brand, Tower Hill by Christie Brinkley, on HSN next month, followed by the launch of additional categories of products outside of HSN starting this fall. We have received strong interest from potential licensing partners for the brand across multiple categories. The recently launched Sea Wonder by Christian Siriano brand is also doing very well and generated 12.5 million of retail sales in its first nine months in 2023. Sea Wonder won the Rising Star Brand Award on HSN in 2023, and we expect to see sales volume ramp up to about 20 to 25 million in 2024. with a goal of over $50 million in 2025, including HSN and other retailers. Also, we expect to announce the launch of another celebrity designer brand on HSN before the end of this year. JTV, our partner for our Judith Ripka brand, launched its first Judith Ripka on-air shows in the fourth quarter of 2023. Sales results were very strong. In fact, we exceeded every business metric they planned. We are working with JTV to offer greater product assortments, including our Judith Ripka couture jewelry products, both on air and on JTV.com. This has the potential to add over 50 million visitors to the Judith Ripka e-commerce business and allows for email marketing campaigns to an additional 2.1 million customers. We look forward to seeing strong sales momentum carry forward. forward through 2024 and beyond. G3 is on schedule to launch Halston for fall of 2024. We expect them to begin shipping shortly after the second quarter. I should note that this launch is a season later than we initially planned. They recently reiterated their three-year forecast for Halston at $500 million wholesale just in apparel, shoes, and bags from their core productions. We expect revenues from this license to begin to pick up later this year, and we will hit our $8 million maximum royalty after they exceed approximately $160 million in annual wholesale sales. We have soft-launched our video and social commerce marketplace, Ormi, with seven vendors. 1,000 users downloaded the app in the first week. As previously mentioned, This is a joint venture with a technology company in which Excel owns a 30% interest in this new video and social commerce marketplace. We believe this marketplace has the potential to transform video and social commerce in the US, and its use and growth potential is virtually unlimited. Based on all of our progress with Project Fundamentals and the organic growth in our brands, we will return to profitability in 2024. I should note that the QVC and HSN business overall was softer than expected in Q1 of 2024. This was caused by continued scheduling conflicts with talent. We continue to work with all on-air talent to get their on-air schedules and the businesses back on track for the remainder of 2024 and beyond. As you know, we closed the credit facility in October of 2023 with Israel Discount Bank. to improve our balance sheet liquidity and recently closed a $2.4 million common stock offering to improve stock liquidity and further improve our balance sheet. Jim will cover the fourth quarter and full year 2023 financial results in more detail. Finally, we are working hard at IR Activity and thank our long-term and new shareholders for their support.