NEW YORK, March 06, 2019 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. (“Sequential” or the “Company”) (Nasdaq:SQBG) today announced financial results for the fourth quarter and full year ended December 31, 2018.
“2018 was a productive year for Sequential with strength across our portfolio of brands both with new and existing business,” said Karen Murray, CEO of Sequential Brands Group. “Moving ahead, we continue to execute against our strategy of driving organic growth, improving our cost structure and strengthening our balance sheet.”
As previously disclosed, effective January 1, 2018, the Company adopted a new revenue recognition standard ("ASC 606"), which impacted the Company’s reported revenue. The Company adopted ASC 606 using the modified retrospective method, which means that the total amount of revenue reported for the 2017 periods has not been restated in the current financial statements. In the interest of comparability during the transition year to ASC 606, the Company is providing 2018 revenue, net income and earnings per share information in accordance with both ASC 606 and the prior year’s revenue recognition rules, ASC 605.
Fourth Quarter 2018 Results:
- Revenue for the fourth quarter 2018 was $48.9 million. Under ASC 605, revenue for the fourth quarter 2018 would have been $49.9 million, compared to $46.9 million in the fourth quarter 2017.
- On a GAAP basis, net loss for the fourth quarter 2018 was $(2.2) million or $(0.03) per diluted share. Under ASC 605, GAAP net loss for the fourth quarter 2018 would have been $(1.2) million or $(0.02) per diluted share, compared to the net loss of $(162.9) million or $(2.58) per diluted share in the fourth quarter 2017. Included in the net loss for the fourth quarter 2018 was a $3.2 million expense related to a legacy litigation matter.
- On a non-GAAP basis, net income for the fourth quarter 2018 was $7.8 million, or $0.12 per diluted share. Under ASC 605, non-GAAP net income for the fourth quarter 2018 would have been $9.0 million or $0.14 per diluted share, compared to $7.8 million, or $0.12 per diluted share, in the prior year period. See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures.
- Adjusted EBITDA (defined under “Non-GAAP Financial Measures” below) for the fourth quarter 2018 was $25.0 million. Under ASC 605, Adjusted EBITDA for the fourth quarter 2018 would have been $26.3 million, compared to $27.4 million in the prior year quarter.
Year-to-Date 2018 Results:
- Revenue for the year ended December 31, 2018 was $170.0 million. Under ASC 605, revenue for the year ended December 31, 2018 would have been $173.5 million, compared to $167.5 million in the prior year.
- On a GAAP basis, net loss for the year ended December 31, 2018 was $(10.5) million or $(0.16) per diluted share. Under ASC 605, GAAP net loss for the year ended December 31, 2018 would have been $(7.8) million or $(0.12) per diluted share, compared to the net loss of $(185.7) million or $(2.95) per diluted share in the prior year. Included in the net loss for the year ended December 31, 2018 was a $3.2 million expense related to a legacy litigation matter, a $4.2 million expense related to a settlement with a licensee as part of a strategic shift to a direct-to-retail license with Walmart for the AVIA brand and non-cash impairment charges of $17.9 million related to trademarks of two of the Company’s brands.
- On a non-GAAP basis, net income for the year ended December 31, 2018 was $21.2 million, or $0.33 per diluted share. Under ASC 605, non-GAAP net income for the year ended December 31, 2018 would have been $24.8 million, or $0.38 per diluted share, compared to $27.9 million, or $0.44 per diluted share, in the prior year. Non-GAAP net income for the year ended December 31, 2018 includes a $4.2 million expense as indicated above. See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures.
- Adjusted EBITDA for the year ended December 31, 2018 was $91.5 million. Under ASC 605, Adjusted EBITDA for the year ended December 31, 2018 would have been $95.1 million, compared to $98.4 million in the prior year. Adjusted EBITDA for the year ended December 31, 2018 includes a $4.2 million expense as mentioned above. Excluding this expense, Adjusted EBITDA would have been $99.3 million.
Investor Call and Webcast:
Management will provide further commentary today, March 6, 2019, on the Company’s financial results and financial update via a conference call and webcast beginning at approximately 8:30 am ET. To join the conference call, please dial (877) 407-0789 or visit the investor relations page on the Company’s website www.sequentialbrandsgroup.com. A replay of the conference call is available on the Company’s website.
Non-GAAP Financial Measures:
This press release contains historical and projected measures of Adjusted EBITDA, non-GAAP net income and non-GAAP earnings per diluted share. The Company defines Adjusted EBITDA as net income attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding provision for (benefit from) income taxes, interest income or expense, non-cash compensation, depreciation and amortization, deal advisory costs, Martha Stewart Living Omnimedia (MSLO) shareholder and pre- acquisition litigation costs, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, loss on sale of assets, net of non-controlling interest, non-cash impairment of trademarks, net of non-controlling interest, realized loss on the sale of equity securities, costs incurred in connection with CEO transition, MSLO pre-acquisition sales tax refunds, other non-cash items and severance. Non-GAAP net income and non-GAAP earnings per share are non-GAAP financial measures which represent net income (loss) attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding deal advisory costs, non-cash mark-to-market adjustments to stock-based compensation provided to non-employees, MSLO shareholder and pre-acquisition litigation costs, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market adjustments to equity securities, loss on sale of assets, net of non-controlling interest, non-cash impairment of trademarks, net of non-controlling interest, realized loss on the sale of equity securities, costs incurred in connection with CEO transition, MSLO pre-acquisition sales tax refunds, other non-cash items and adjustments to taxes. These non-GAAP metrics are an alternative to the information calculated under U.S. generally accepted accounting principles (“GAAP”), as provided in the reports the Company files with the Securities and Exchange Commission, may be inconsistent with similar measures presented by other companies and should only be used in conjunction with the Company’s results reported according to GAAP. Any financial measure other than those prepared in accordance with GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We consider these measures to be useful measures of our ongoing financial performance because they adjust for certain costs and other events that the Company believes are not representative of its core licensing business. See below for a reconciliation of these non-GAAP metrics from the most directly comparable GAAP measure.
About Sequential Brands Group, Inc.
Sequential Brands Group, Inc. (Nasdaq:SQBG) owns, promotes, markets, and licenses a portfolio of consumer brands in the home, active and fashion categories. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, design and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and around the world. For more information, please visit Sequential’s website at: www.sequentialbrandsgroup.com. To inquire about licensing opportunities, please email: newbusiness@sbg-ny.com .
Forward-Looking Statements
Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements ("forward-looking statements") within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date hereof and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. The Company's actual results could differ materially from those stated or implied in forward-looking statements. Forward-looking statements include statements concerning estimates of GAAP net income, non-GAAP net income, Adjusted EBITDA, revenue (including guaranteed minimum royalties), and margins, guidance, plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions and other statements that are not historical in nature, including those that include the words "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," "forecasts," "projects," "aims," "targets," "may," "will," "should," "can," "future," "seek," "could," "predict," the negatives thereof, variations thereon and similar expressions. Such forward-looking statements reflect the Company's current views with respect to future events, based on what the Company believes are reasonable assumptions. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including: (i) risks and uncertainties discussed in the reports that the Company has filed with the Securities and Exchange Commission (the "SEC"); (ii) general economic, market or business conditions; (iii) the Company's ability to identify suitable targets for acquisitions and to obtain financing for such acquisitions on commercially reasonable terms; (iv) the Company's ability to timely achieve the anticipated results of recent acquisitions and any potential future acquisitions; (v) the Company's ability to successfully integrate acquisitions into its ongoing business; (vi) the potential impact of the consummation of recent acquisitions or any potential future acquisitions on the Company's relationships, including with employees, licensees, customers and competitors; (vii) the Company's ability to achieve and/or manage growth and to meet target metrics associated with such growth; (viii) the Company's ability to successfully attract new brands and to identify suitable licensees for its existing and newly acquired brands; (ix) the Company's substantial level of indebtedness, including the possibility that such indebtedness and related restrictive covenants may adversely affect the Company's future cash flows, results of operations and financial condition and decrease its operating flexibility; (x) the Company's ability to achieve its guidance; (xi) continued market acceptance of the Company's brands; (xii) changes in the Company's competitive position or competitive actions by other companies; (xiii) licensees' ability to fulfill their financial obligations to the Company; (xiv) concentrations of the Company's licensing revenues with a limited number of licensees and retail partners; and (xv) other circumstances beyond the Company's control. Refer to the section entitled "Risk Factors" set forth in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a discussion of important risks, uncertainties and other factors that may affect the Company's business, results of operations and financial condition. The Company's stockholders are urged to consider such risks, uncertainties and factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. The Company is not under any obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Readers should understand that it is not possible to predict or identify all risks and uncertainties to which the Company may be subject. Consequently, readers should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.
For Media and Investor Relations inquiries, contact:
Sequential Brands Group, Inc.
Katherine Nash
T: +1 512-757-2566
E: knash@sbg-ny.com
| SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| December 31, | January 1, | |||||||||||||||
| 2018 | 2017 | 2018 | ||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| As Reported ASC 606 | As Reported ASC 605 | ASC 606 Adjustments | ASC 606 Opening Balance Sheet | |||||||||||||
| Assets | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash | $ | 14,106 | $ | 18,902 | $ | - | $ | 18,902 | ||||||||
| Restricted cash | 2,032 | 1,531 | - | 1,531 | ||||||||||||
| Accounts receivable, net | 66,202 | 60,102 | 6,335 | 66,437 | ||||||||||||
| Prepaid expenses and other current assets | 11,224 | 8,635 | - | 8,635 | ||||||||||||
| Total current assets | 93,564 | 89,170 | 6,335 | 95,505 | ||||||||||||
| Property and equipment, net | 8,971 | 7,035 | - | 7,035 | ||||||||||||
| Intangible assets, net | 964,911 | 995,170 | - | 995,170 | ||||||||||||
| Other assets | 11,222 | 5,836 | - | 5,836 | ||||||||||||
| Total assets | $ | 1,078,668 | $ | 1,097,211 | $ | 6,335 | $ | 1,103,546 | ||||||||
| Liabilities and Equity | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 23,527 | $ | 19,126 | $ | - | $ | 19,126 | ||||||||
| Current portion of long-term debt | 28,300 | 28,300 | - | 28,300 | ||||||||||||
| Current portion of deferred revenue | 11,695 | 8,102 | 4,387 | 12,489 | ||||||||||||
| Total current liabilities | 63,522 | 55,528 | 4,387 | 59,915 | ||||||||||||
| Long-term debt, net of current portion | 582,487 | 602,297 | - | 602,297 | ||||||||||||
| Long-term deferred revenue, net of current portion | 8,224 | 11,845 | - | 11,845 | ||||||||||||
| Deferred income taxes | 67,002 | 67,799 | 463 | 68,262 | ||||||||||||
| Other long-term liabilities | 12,789 | 6,204 | - | 6,204 | ||||||||||||
| Total liabilities | 734,024 | 743,673 | 4,850 | 748,523 | ||||||||||||
| Equity: | ||||||||||||||||
| Preferred stock | - | - | - | - | ||||||||||||
| Common stock | 657 | 635 | - | 635 | ||||||||||||
| Additional paid-in capital | 513,764 | 508,444 | - | 508,444 | ||||||||||||
| Accumulated other comprehensive (loss) income | (1,554 | ) | 80 | - | 80 | |||||||||||
| Accumulated deficit | (234,723 | ) | (225,369 | ) | 1,130 | (224,239 | ) | |||||||||
| Treasury stock | (4,226 | ) | (1,799 | ) | - | (1,799 | ) | |||||||||
| Total Sequential Brands Group, Inc. and Subsidiaries stockholders’ equity | 273,918 | 281,991 | 1,130 | 283,121 | ||||||||||||
| Noncontrolling interests | 70,726 | 71,547 | 355 | 71,902 | ||||||||||||
| Total equity | 344,644 | 353,538 | 1,485 | 355,023 | ||||||||||||
| Total liabilities and equity | $ | 1,078,668 | $ | 1,097,211 | $ | 6,335 | $ | 1,103,546 | ||||||||
| SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES | |||||||||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||
| 2018 | 2017 | ||||||||||||||||
| As Reported ASC 606 | Adjustments | ASC 605 | As Reported ASC 605 | ||||||||||||||
| Net revenue | $ | 48,874 | $ | (1,043 | ) | $ | 49,917 | $ | 46,895 | ||||||||
| Operating expenses | 27,753 | 226 | 27,527 | 22,064 | |||||||||||||
| Impairment charges | - | - | - | 304,123 | |||||||||||||
| Income (loss) from operations | 21,121 | (1,269 | ) | 22,390 | (279,292 | ) | |||||||||||
| Other expense | 828 | - | 828 | 30 | |||||||||||||
| Interest expense, net | 15,478 | - | 15,478 | 15,291 | |||||||||||||
| Income (loss) before income taxes | 4,815 | (1,269 | ) | 6,084 | (294,613 | ) | |||||||||||
| Provision for (benefit from) income taxes | 6,144 | (292 | ) | 6,436 | (132,393 | ) | |||||||||||
| Net loss | (1,329 | ) | (977 | ) | (352 | ) | (162,220 | ) | |||||||||
| Net income attributable to noncontrolling interest | (863 | ) | (8 | ) | (855 | ) | (668 | ) | |||||||||
| Net loss attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (2,192 | ) | $ | (985 | ) | $ | (1,207 | ) | $ | (162,888 | ) | |||||
| Loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries: | |||||||||||||||||
| Basic and diluted | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (2.58 | ) | |||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic and diluted | 64,061,983 | 64,061,983 | 64,061,983 | 63,055,188 | |||||||||||||
| Year Ended December 31, | |||||||||||||||||
| 2018 | 2017 | ||||||||||||||||
| As Reported ASC 606 | Adjustments | ASC 605 | As Reported ASC 605 | ||||||||||||||
| Net revenue | $ | 169,956 | $ | (3,553 | ) | $ | 173,509 | $ | 167,464 | ||||||||
| Operating expenses | 87,767 | 226 | 87,541 | 79,443 | |||||||||||||
| Impairment charges | 17,899 | - | 17,899 | 340,628 | |||||||||||||
| Loss on sale of assets | 7,117 | - | 7,117 | - | |||||||||||||
| Income (loss) from operations | 57,173 | (3,779 | ) | 60,952 | (252,607 | ) | |||||||||||
| Other expense | 693 | - | 693 | 1,583 | |||||||||||||
| Interest expense, net | 62,152 | - | 62,152 | 59,891 | |||||||||||||
| Loss before income taxes | (5,672 | ) | (3,779 | ) | (1,893 | ) | (314,081 | ) | |||||||||
| (Benefit from) provision for income taxes | (694 | ) | (869 | ) | 175 | (132,535 | ) | ||||||||||
| Net loss | (4,978 | ) | (2,910 | ) | (2,068 | ) | (181,546 | ) | |||||||||
| Net income attributable to noncontrolling interest | (5,506 | ) | 177 | (5,683 | ) | (4,172 | ) | ||||||||||
| Net loss attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (10,484 | ) | $ | (2,733 | ) | $ | (7,751 | ) | $ | (185,718 | ) | |||||
| Loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries: | |||||||||||||||||
| Basic and diluted | $ | (0.16 | ) | $ | (0.04 | ) | $ | (0.12 | ) | $ | (2.95 | ) | |||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic and diluted | 63,700,081 | 63,700,081 | 63,700,081 | 62,861,743 | |||||||||||||
| SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| Year Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| Cash Provided By Operating Activities | $ | 32,900 | $ | 28,210 | ||||
| Cash (Used In) Provided By Investing Activities | (172 | ) | 2,863 | |||||
| Cash Used In Financing Activities | (37,023 | ) | (31,294 | ) | ||||
| Net Decrease In Cash and Restricted Cash | (4,295 | ) | (221 | ) | ||||
| Balance — Beginning of year | 20,433 | 20,654 | ||||||
| Balance — End of year | $ | 16,138 | $ | 20,433 | ||||
| Non-GAAP Financial Measure Reconciliation | |||||||||||||||||
| (in thousands, except earnings per share data) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||
| 2018 | 2017 | ||||||||||||||||
| ASC 606 (1) | Adjustments (2) | ASC 605 (2) | ASC 605 (2) | ||||||||||||||
| Reconciliation of GAAP net loss to non-GAAP net income: | |||||||||||||||||
| GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (2,192 | ) | $ | (985 | ) | $ | (1,207 | ) | $ | (162,888 | ) | |||||
| Adjustments: | |||||||||||||||||
| Deal advisory costs (a) | 315 | - | 315 | 347 | |||||||||||||
| Non-cash mark-to-market adjustments to stock-based compensation (b) | (298 | ) | - | (298 | ) | (124 | ) | ||||||||||
| MSLO shareholder and pre-acquisition litigation (c) | 2,894 | - | 2,894 | (38 | ) | ||||||||||||
| Debt refinancing costs (d) | 43 | - | 43 | - | |||||||||||||
| Non-cash mark-to-market adjustments to equity securities (e) | 858 | - | 858 | - | |||||||||||||
| Non-cash impairment of trademarks, net (f) | - | - | - | 302,818 | |||||||||||||
| Other non-cash items (g) | - | - | 230 | ||||||||||||||
| Adjustment to taxes (h) | 6,144 | (292 | ) | 6,436 | (132,518 | ) | |||||||||||
| Total non-GAAP adjustments | 9,956 | (292 | ) | 10,248 | 170,715 | ||||||||||||
| Non-GAAP net income (3) | $ | 7,764 | $ | (1,277 | ) | $ | 9,041 | $ | 7,827 | ||||||||
| Non-GAAP weighted-average diluted shares (i) | 64,316 | 64,316 | 64,316 | 63,086 | |||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||
| 2018 | 2017 | ||||||||||||||||
| ASC 606 (1) | Adjustments (2) | ASC 605 (2) | ASC 605 (2) | ||||||||||||||
| Reconciliation of GAAP Diluted EPS to non-GAAP Diluted EPS: | |||||||||||||||||
| GAAP loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (2.58 | ) | |||||
| Adjustments: | |||||||||||||||||
| Deal advisory costs (a) | 0.00 | - | 0.00 | 0.00 | |||||||||||||
| Non-cash mark-to-market adjustments to stock-based compensation (b) | (0.00 | ) | - | (0.00 | ) | (0.00 | ) | ||||||||||
| MSLO shareholder and pre-acquisition litigation (c) | 0.05 | - | 0.05 | (0.00 | ) | ||||||||||||
| Debt refinancing costs (d) | 0.00 | - | 0.00 | - | |||||||||||||
| Non-cash mark-to-market adjustments to equity securities (e) | 0.01 | - | 0.01 | - | |||||||||||||
| Non-cash impairment of trademarks, net (f) | - | - | - | 4.80 | |||||||||||||
| Other non-cash items (g) | - | - | - | 0.00 | |||||||||||||
| Adjustment to taxes (h) | 0.09 | (0.01 | ) | 0.10 | (2.10 | ) | |||||||||||
| Total non-GAAP adjustments | $ | 0.15 | $ | (0.01 | ) | $ | 0.16 | $ | 2.70 | ||||||||
| Non-GAAP earnings per share (3) | $ | 0.12 | $ | (0.02 | ) | $ | 0.14 | $ | 0.12 | ||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||
| 2018 | 2017 | ||||||||||||||||
| ASC 606 (1) | Adjustments (2) | ASC 605 (2) | ASC 605 (2) | ||||||||||||||
| Reconciliation of GAAP net loss to Adjusted EBITDA: | |||||||||||||||||
| GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (2,192 | ) | $ | (985 | ) | $ | (1,207 | ) | $ | (162,888 | ) | |||||
| Adjustments: | |||||||||||||||||
| Provision for (benefit from) income taxes | 6,144 | (292 | ) | 6,436 | (132,393 | ) | |||||||||||
| Interest expense, net | 15,478 | - | 15,478 | 15,291 | |||||||||||||
| Non-cash compensation | 325 | - | 325 | 2,068 | |||||||||||||
| Depreciation and amortization | 1,033 | - | 1,033 | 1,244 | |||||||||||||
| Deal advisory costs (a) | 315 | - | 315 | 347 | |||||||||||||
| MSLO shareholder and pre-acquisition litigation (c) | 2,894 | - | 2,894 | (38 | ) | ||||||||||||
| Debt refinancing costs (d) | 43 | - | 43 | - | |||||||||||||
| Non-cash mark-to-market adjustments to equity securities (e) | 858 | - | 858 | - | |||||||||||||
| Non-cash impairment of trademarks, net (f) | - | - | - | 302,818 | |||||||||||||
| Other non-cash items (g) | - | - | - | 230 | |||||||||||||
| Severance (j) | 121 | - | 121 | 706 | |||||||||||||
| Total Adjustments | 27,211 | (292 | ) | 27,503 | 190,273 | ||||||||||||
| Adjusted EBITDA (4) | $ | 25,019 | $ | (1,277 | ) | $ | 26,296 | $ | 27,385 | ||||||||
| Non-GAAP Financial Measure Reconciliation | ||||||||||||||||||||
| (in thousands, except earnings per share data) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||
| ASC 606 (1) | Adjustments (2) | ASC 605 (2) | ASC 605 (2) | |||||||||||||||||
| Reconciliation of GAAP net loss to non-GAAP net income: | ||||||||||||||||||||
| GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (10,484 | ) | $ | (2,733 | ) | $ | (7,751 | ) | $ | (185,718 | ) | ||||||||
| Adjustments: | ||||||||||||||||||||
| Deal advisory costs (a) | 1,402 | - | 1,402 | 1,262 | ||||||||||||||||
| Non-cash mark-to-market adjustments to stock-based compensation (b) | (321 | ) | - | (321 | ) | (549 | ) | |||||||||||||
| MSLO shareholder and pre-acquisition litigation (c) | 4,740 | - | 4,740 | 521 | ||||||||||||||||
| Write-off of deferred financing costs (k) | 148 | - | 148 | - | ||||||||||||||||
| Debt refinancing costs (d) | 1,174 | - | 1,174 | - | ||||||||||||||||
| Non-cash mark-to-market adjustments to equity securities (e) | 858 | - | 858 | - | ||||||||||||||||
| Loss on sale of assets, net (l) | 6,402 | - | 6,402 | - | ||||||||||||||||
| Non-cash impairment of trademarks, net (f) | 17,899 | - | 17,899 | 336,689 | ||||||||||||||||
| Realized loss on the sale of equity securities (m) | - | - | - | 1,916 | ||||||||||||||||
| Costs incurred in connection with CEO transition (n) | - | - | - | 6,713 | ||||||||||||||||
| MSLO pre-acquisition sales tax refunds (o) | - | - | - | (115 | ) | |||||||||||||||
| Other non-cash items (g) | 88 | - | 88 | 230 | ||||||||||||||||
| Adjustment to taxes (h) | (694 | ) | (869 | ) | 175 | (133,035 | ) | |||||||||||||
| Total non-GAAP adjustments | 31,696 | (869 | ) | 32,565 | 213,632 | |||||||||||||||
| Non-GAAP net income (3) | $ | 21,212 | $ | (3,602 | ) | $ | 24,814 | $ | 27,914 | |||||||||||
| Non-GAAP weighted-average diluted shares (i) | 64,992 | 64,992 | 64,992 | 63,093 | ||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||
| ASC 606 (1) | Adjustments (2) | ASC 605 (2) | ASC 605 (2) | |||||||||||||||||
| Reconciliation of GAAP Diluted EPS to non-GAAP Diluted EPS: | ||||||||||||||||||||
| GAAP loss per share attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (0.16 | ) | $ | (0.04 | ) | $ | (0.12 | ) | $ | (2.95 | ) | ||||||||
| Adjustments: | ||||||||||||||||||||
| Deal advisory costs (a) | 0.02 | - | 0.02 | 0.02 | ||||||||||||||||
| Non-cash mark-to-market adjustments to stock-based compensation (b) | (0.00 | ) | - | (0.00 | ) | (0.01 | ) | |||||||||||||
| MSLO shareholder and pre-acquisition litigation (c) | 0.07 | - | 0.07 | 0.01 | ||||||||||||||||
| Write-off of deferred financing costs (k) | 0.00 | - | 0.00 | - | ||||||||||||||||
| Debt refinancing costs (d) | 0.02 | - | 0.02 | - | ||||||||||||||||
| Non-cash mark-to-market adjustments to equity securities (e) | 0.01 | - | 0.01 | - | ||||||||||||||||
| Loss on sale of assets, net (l) | 0.10 | - | 0.10 | - | ||||||||||||||||
| Non-cash impairment of trademarks, net (f) | 0.28 | - | 0.28 | 5.34 | ||||||||||||||||
| Realized loss on the sale of equity securities (m) | - | - | - | 0.03 | ||||||||||||||||
| Costs incurred in connection with CEO transition (n) | - | - | - | 0.11 | ||||||||||||||||
| MSLO pre-acquisition sales tax refunds (o) | - | - | - | (0.00 | ) | |||||||||||||||
| Other non-cash items (g) | 0.00 | - | 0.00 | 0.00 | ||||||||||||||||
| Adjustment to taxes (h) | (0.01 | ) | (0.01 | ) | 0.00 | (2.11 | ) | |||||||||||||
| Total non-GAAP adjustments | $ | 0.49 | $ | (0.01 | ) | $ | 0.50 | $ | 3.39 | |||||||||||
| Non-GAAP earnings per share (3) | $ | 0.33 | $ | (0.05 | ) | $ | 0.38 | $ | 0.44 | |||||||||||
| (Unaudited) | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||
| ASC 606 (1) | Adjustments (2) | ASC 605 (2) | ASC 605 (2) | |||||||||||||||||
| Reconciliation of GAAP net loss to Adjusted EBITDA and Adjusted Free Cash Flow: | ||||||||||||||||||||
| GAAP net loss attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | (10,484 | ) | $ | (2,733 | ) | $ | (7,751 | ) | $ | (185,718 | ) | ||||||||
| Adjustments: | ||||||||||||||||||||
| (Benefit from) provision for income taxes | (694 | ) | (869 | ) | 175 | (132,535 | ) | |||||||||||||
| Interest expense, net | 62,004 | - | 62,004 | 59,891 | ||||||||||||||||
| Non-cash compensation | 3,842 | - | 3,842 | 3,852 | ||||||||||||||||
| Depreciation and amortization | 3,366 | - | 3,366 | 4,787 | ||||||||||||||||
| Deal advisory costs (a) | 1,402 | - | 1,402 | 1,262 | ||||||||||||||||
| MSLO shareholder and pre-acquisition litigation (c) | 4,740 | - | 4,740 | 521 | ||||||||||||||||
| Write-off of deferred financing costs (k) | 148 | - | 148 | - | ||||||||||||||||
| Debt refinancing costs (d) | 1,174 | - | 1,174 | - | ||||||||||||||||
| Non-cash mark-to-market adjustments to equity securities (e) | 858 | - | 858 | - | ||||||||||||||||
| Loss on sale of assets, net (l) | 6,402 | - | 6,402 | - | ||||||||||||||||
| Non-cash impairment of trademarks, net (f) | 17,899 | - | 17,899 | 336,689 | ||||||||||||||||
| Realized loss on the sale of equity securities (m) | - | - | - | 1,916 | ||||||||||||||||
| Costs incurred in connection with CEO transition (n) | - | - | - | 6,713 | ||||||||||||||||
| MSLO pre-acquisition sales tax refunds (o) | - | - | - | (115 | ) | |||||||||||||||
| Other non-cash items (g) | 88 | - | 88 | 230 | ||||||||||||||||
| Severance (j) | 706 | - | 706 | 920 | ||||||||||||||||
| Total Adjustments | 101,935 | (869 | ) | 102,804 | 284,131 | |||||||||||||||
| Adjusted EBITDA (4) | $ | 91,451 | $ | (3,602 | ) | $ | 95,053 | $ | 98,413 | |||||||||||
| Adjustments: | ||||||||||||||||||||
| Cash Interest | (58,681 | ) | - | (58,681 | ) | (55,755 | ) | |||||||||||||
| Cash Taxes | (90 | ) | - | (90 | ) | (163 | ) | |||||||||||||
| Capital Expenditures | (4,233 | ) | - | (4,233 | ) | (3,061 | ) | |||||||||||||
| Adjusted Free Cash Flow (5) | $ | 28,447 | $ | (3,602 | ) | $ | 32,049 | $ | 39,434 | |||||||||||
| (1 | ) | Financial information identified as ASC 606 has been prepared in accordance with the new revenue recognition guidance adopted as of January 1, 2018. | ||||||||||||||||||
| (2 | ) | The Company adopted ASC 606 using the modified retrospective basis, which means that the revenue reported for 2017 has not been restated. For comparability during the transition from ASC 605 to ASC 606, financial information for 2018 is also shown as adjusted to the previous accounting guidance. The ASC 605 information for current year should be considered in addition to, not as a substitute for, the financial information prepared in accordance with ASC 606. There was no change to prior year presentation; financial information for prior year was prepared in accordance with ASC 605. | ||||||||||||||||||
| (3 | ) | Non-GAAP net income and non-GAAP earnings per share are non-GAAP financial measures which represent net income attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding deal advisory costs, non-cash mark-to-market adjustments to stock-based compensation provided to non-employees, Martha Stewart Living Omnimedia (MSLO) shareholder and pre-acquisition litigation costs, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market on equity securities, loss on sale of assets, net of non-controlling interest, non-cash impairment of trademarks, net of non-controlling interest, realized loss on the sale of equity securities, costs incurred in connection with CEO transition, MSLO pre-acquisition sales tax refunds, other non-cash items and adjustments to taxes. Management uses this information to measure performance over time on a consistent basis and to identify business trends relating to the Company's financial condition and results of operations. Management believes that these non-GAAP measures are useful measures of ongoing financial performance because they adjust for certain costs and other events that the Company believes are not representative of its core licensing business. | ||||||||||||||||||
| (4 | ) | Adjusted EBITDA is defined as net income attributable to Sequential Brands Group, Inc. and Subsidiaries, excluding (benefit from) provision for income taxes, interest income or expense, non-cash compensation, depreciation and amortization, deal advisory costs, MSLO shareholder and pre- acquisition litigation costs, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market on equity securities, loss on sale of assets, net of non-controlling interest, non-cash impairment of trademarks, net of non-controlling interest, realized loss on the sale of equity securities, costs incurred in connection with CEO transition, MSLO pre-acquisition sales tax refunds, other non-cash items and severance. Management uses Adjusted EBITDA as a measure 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 financial condition and results of operations. | ||||||||||||||||||
| (5 | ) | Adjusted Free Cash Flow is calculated as Adjusted EBITDA less cash interest, cash taxes, and capital expenditures. Adjusted Free Cash Flow excludes items that are not core to our business, such as balance sheet changes and costs related to prior acquisitions. | ||||||||||||||||||
| (a | ) | Represents deal advisory costs including legal, financial and accounting services that are not representative of the Company's day-to-day licensing business. | ||||||||||||||||||
| (b | ) | Represents the non-cash mark-to-market adjustments to stock-based compensation provided to non-employees. | ||||||||||||||||||
| (c | ) | Represents legal costs related to shareholder and pre-acquisition litigation matters associated with the Martha Stewart Living Omnimedia, Inc. acquisition. | ||||||||||||||||||
| (d | ) | Represents expenses for professional fees associated with the Company's efforts toward and the refinancing of its debt facilities for the year ended December 31, 2018. | ||||||||||||||||||
| (e | ) | Represents the non-cash mark-to-market adjustments to equity securities. | ||||||||||||||||||
| (f | ) | Represents non-cash impairment charges, net of non-controlling interest, related to the Company’s indefinite-lived intangible assets for certain brands. | ||||||||||||||||||
| (g | ) | Adjustments to estimated accruals previously recorded in conjunction with acquisitions. | ||||||||||||||||||
| (h | ) | The Company does not expect to pay material cash income taxes in 2018 as the Company's net operating losses and other tax benefits are expected to reduce any additional tax obligation. Adjustments in 2017 reflect that the Company expected to pay annual cash income taxes of $0.5 million as the Company's net operating losses and other tax benefits are expected to reduce any additional tax obligation. | ||||||||||||||||||
| (i | ) | Represents weighted-average diluted shares the Company reported or would have reported if the Company had GAAP net income in the periods presented. | ||||||||||||||||||
| (j | ) | Represents costs and adjustments to previously recorded costs associated with employee terminations not representative of the Company’s day-to-day compensation costs. | ||||||||||||||||||
| (k | ) | Represents the write-off of deferred financing costs as a result of the extinguishment treatment of a portion of the Company’s refinanced debt facilities. | ||||||||||||||||||
| (l | ) | Represents loss on sale of assets related to the sale of Revo trademark completed in April 2018, recognized in the first quarter of 2018, and the sale of FUL trademark completed in May 2018, net of non-controlling interest for the year ended December 31, 2018. | ||||||||||||||||||
| (m | ) | Represents the realized loss in connection with the sale of the Company's equity securities. | ||||||||||||||||||
| (n | ) | Represents $3.2 million in severance expense and $3.5 million in non-cash stock-based compensation expense in connection with the CEO transition for the six months ended June 30, 2017. The non-cash stock based compensation expense represents the accelerated vesting of previously granted stock awards, and was calculated based on the stock’s April 2015 grant-date fair value of $14.33 per share in accordance with GAAP. The fair value of the shares on the termination date was $3.95 per share, or approximately $1.1 million total. | ||||||||||||||||||
| (o | ) | Represents sales tax refund received related to years prior to the acquisition of MSLO. | ||||||||||||||||||