Sequential Brands Group Inc., the New York, NY-based parent of Avia, And1 and Gaiam, reported first-quarter revenue from continuing operations of $20.2 million, down 20.7 percent from the same period last year.

On a GAAP basis, loss from continuing operations for the first quarter 2020 was $85.3 million, or $1.30 per diluted share, compared to loss from continuing operations for the first quarter 2019 of $4.8 million, or 7 cents per diluted share.

Included in the net loss from continuing operations for the first quarter 2020 were non-cash impairment charges of $85.6 million for indefinite-lived intangible assets related to the trademarks for the Jessica Simpson, Gaiam, Joe’s and Ellen Tracy brands reflecting the financial impacts of COVID-19.

Non-GAAP net loss from continuing operations for the first quarter 2020 was $10.4 million, or 16 cents per diluted share, compared to a net loss of $4.3 million, or 7 cents per diluted share, in the prior-year quarter. See Non-GAAP Financial Measure Reconciliation tables below for a reconciliation of GAAP to non-GAAP measures. Adjusted EBITDA from continuing operations for the first quarter of 2020 was $9.8 million, compared to $11.3 million in the prior-year quarter.

“While the coronavirus pandemic has significantly impacted the U.S. economy and the apparel and accessories industry, we plan to weather the storm by remaining laser-focused on managing cash in-flows, instituting further expense reductions, and negotiating short-term lender relief. I believe that the steps we are taking, coupled with our diversified portfolio of brands and channels of distribution, will assist us in tackling these challenging times while we also explore opportunities that best position the company for long-term success and maximize value,” said Sequential Brands Group CEO David Conn.

Impact of COVID-19
The COVID-19 pandemic has resulted in state-government mandated store closures and social distancing measures throughout most of the U.S. These actions have caused many retailers carrying the company’s products to close in March, April and May, which has affected retailers, as well as Sequential’s licensees who sell to these retailers. As some (but not all) states relax restrictions, the company is unsure when retailers will reopen, at what capacity, or if additional periods of store closures will be needed or mandated.

Accordingly, the COVID-19 pandemic has adversely affected Sequential’s near-term and long-term revenues, earnings, liquidity and cash flows. However, the situation is dynamic, and the company is not currently able to predict the full impact of COVID-19 on its results of operations and cash flows. Sequential ended the first quarter with $13.3 million in cash, including restricted cash.

In response to COVID-19, the company has taken several proactive actions to enhance liquidity including the following:

  • Increasing available cash on hand including utilizing revolver borrowings under the Third Amendment to the Third Amended and Restated First Lien Credit Agreement with Bank of America, N.A. as administrative and collateral agent (the “Amended BoA Credit Agreement”). The company made net revolver borrowings of $14.1 million, excluding lender fees, under the Amended BoA Credit Agreement through May 15, 2020;
  • Implementing temporary salary reductions across the company;
  • Decreasing operating expenses through marketing spend reductions and deferral of non-essential spending; and
  • Proactively partnering with our lender base to provide more flexibility.

Liquidity and Financing Update
Sequential currently believes that cash from operations and our currently available cash (including available borrowings under our existing financing arrangements) will be sufficient to satisfy our anticipated working capital requirements for at least twelve months from today. However, Sequential is not currently able to predict the full impact of COVID-19 on our results of operations and cash flows.

Discontinued Operations
On June 10, 2019, Sequential completed its previously announced sale of 100% of the issued and outstanding equity interests of Martha Stewart Living Omnimedia Inc., a Delaware corporation and a wholly-owned subsidiary of Sequential. The company’s after-tax net loss from discontinued operations was $1.3 million and $120.6 million for the first quarter ended March 31, 2020, and 2019, respectively.