Sequential Brands Group reported strong earnings gains on an adjusted basis with the the help of healthy contributions from core brands Jessica Simpson, William Rast and Heelys as well as a few recent acquisitions.
Third Quarter 2016 Results:
Total revenue for the third quarter ended September 30, 2016 increased 83 percent to $42.0 million, compared to $23.0 million in the prior year comparable quarter. On a GAAP basis, Sequential reported net income of $1.3 million for the third quarter of 2016, or $0.02 per diluted share, compared to $2.7 million, or $0.06 per diluted share, in the prior year comparable quarter. On a non-GAAP basis, Sequential reported net income for the quarter ending September 30, 2016 of $7.5 million, or $0.12 per diluted share, compared to $5.0 million, or $0.12 per diluted share, in the prior year comparable quarter. Adjusted EBITDA for the third quarter of 2016 was $24.9 million, compared to $15.7 million in the prior year comparable quarter.
In addition, the company ended the quarter with approximately $20 million of cash on hand, net of approximately $32 million of balance sheet cash used to help finance the Gaiam acquisition.
Yehuda Shmidman, Sequential’s Chief Executive Officer, commented, “Our business activation team is executing and our portfolio brand health is solid, driven by strong contributions from our core brands Jessica Simpson, William Rast and Heelys, as well as from recently acquired brands including Joe’s Jeans, Martha Stewart, Chef Emeril and Gaiam.”
He added, “Looking ahead, we will invest in strategic areas that we believe are essential to our long term growth. These include building on our international momentum, expanding our digital presence by aligning with e-commerce partners that can significantly propel our brands forward, and continuing to invest in our brands to develop products and support key partnerships so that they remain at the top of consumers’ minds.”
Year-to-Date 2016 Results:
Total revenue for the nine months ended September 30, 2016 increased 94 percent to $110.1 million, compared to $56.8 million in the prior year comparable period. On a GAAP basis, net income was $0.2 million for the nine months ended September 30, 2016, or $0.00 per diluted share, compared to $2.8 million, or $0.07 per diluted share, in the prior year comparable period. On a non-GAAP basis, net income for the nine months ended September 30, 2016 was $13.7 million, or $0.22 per diluted share, compared to $9.6 million, or $0.23 per diluted share, in the prior year comparable period.
Adjusted EBITDA for the nine months ended September 30, 2016 was $58.9 million, compared to $36.1 million in the prior year comparable period.
Financial Update:
For the full year ending December 31, 2016, Sequential is reiterating its revenue guidance of $155 million to $160 million. The company is now expecting GAAP net income of $7.7 million to $11.0 million and Adjusted EBITDA for 2016 of $83 million to $88 million primarily due to costs associated with its headquarter lease, which were expected to be partially offset, and augmented investment in operating resources in targeted areas of the company.
For the year ending December 31, 2017, Sequential expects $175 million to $180 million in revenue, GAAP net income of $22.1 million to $25.4 million and $100 million to $105 million of Adjusted EBITDA. The company’s contractual guaranteed minimum royalties for 2017 are approximately $120 million. Consistent with the company’s historical quarterly results, the company expects revenue for 2017 to be weighted to the third and fourth quarters due to seasonality in the businesses of many of the company’s licensees.
Additionally, the company expects to end 2017 with approximately $600 million of net debt.
