Sequential Brands Group Hits Q2 Income Target, Beats On Revenue

Sequential Brands Group Inc. reported net income for the second quarter ended June 30 of $7.2 million, or 11 cents per diluted share. Under the company’s previous ASC 605 revenue reporting standard, however, non-GAAP net income for the second quarter 2018 would have been $7.8 million or 12 cents per diluted share, flat compared to second quarter 2017 but hitting the Wall Street target.

The company reported revenue of $42.2 million. Under ASC 605, revenue for the second quarter 2018 would have been $43 million, compared to $42.1 million in the second quarter 2017, also beating analysts’ estimates.

“We’re pleased with our second quarter results and the solid performance of our core brands,” said Karen Murray, CEO of Sequential Brands Group. “The completion of our refinance strengthens our capital structure as we focus on executing on our growth strategy. We thank our lenders for their ongoing support.”

The company also announced the completion of its debt refinancing. On August 7, 2018, the company entered into amended credit agreements with its existing lenders, led by Bank of America and certain funds managed by FS/KKR Advisor LLC. This refinancing extends the first lien debt maturities to 2023 and the second lien to 2024, and improves capital structure by shifting over $100 million of debt into the first lien credit facility, thereby meaningfully reducing the company’s weighted average interest rate.

Second Quarter 2018 Results

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 will provide revenue, net income and earnings per share information in accordance with both ASC 606 and revenue recognition rules in effect prior to the adoption of ASC 606 (“ASC 605”).

Revenue for the second quarter 2018 was $42.2 million. Under ASC 605, revenue for the second quarter 2018 would have been $43 million compared to $42.1 million in the second quarter 2017.

On a GAAP basis, net income for the second quarter 2018 was $3.6 million or 6 cents per diluted share. Under ASC 605, GAAP net income for the second quarter 2018 would have been $4 million, or 6 cents per diluted share, compared to $2.5 million, or 4 cents per diluted share, in the second quarter 2017.

Adjusted EBITDA for the second quarter 2018 was $24.7 million. Under ASC 605, Adjusted EBITDA for the second quarter 2018 would have been $25.3 million compared to $24.7 million in the second quarter 2017.

Year-to-Date 2018 Results

Revenue for the six months ended June 30 was $80.3 million. Under ASC 605, revenue for the six months ended June 30 would have been $82.4 million, compared to $81.5 million in the prior year period.

On a GAAP basis, net income for the six months ended June 30, 2018 was $1.3 million or 2 cents per diluted share. Under ASC 605, GAAP net income for the six months ended June 30 would have been $2.8 million, or $04 per diluted share, compared to $1.4 million, or 2 cents per diluted share, in the prior year period.

On a non-GAAP basis, net income for the six months ended June 30 was $10.8 million, or 17 cents per diluted share. Under ASC 605, non-GAAP net income for the six months ended June 30 would have been $12.7 million, or 20 cents per diluted share, compared to $13.6 million, or 21 cents per diluted share, in the prior year period.

Adjusted EBITDA for the six months ended June 30 was $45.9 million. Under ASC 605, Adjusted EBITDA for the six months ended June 30 would have been $47.8 million compared to $47.7 million in the prior year period.