Sequential Brands Group Inc. reported a loss in the third quarter after absorbing an impairment charges related to the trademarks of two of the company’s non-core brands as well as expenses related to a strategic shift to a direct-to-retail license with Walmart for the Avia brand.

“Our third quarter results reflect the progress we’ve made against our strategic initiatives to position our brands for long-term growth,” said Karen Murray, CEO of Sequential Brands Group. “We’ve recently signed several exciting partnerships across our portfolio including a new fashion license for the Martha Stewart brand, and a long-term extension for Jessica Simpson’s core footwear business. We are encouraged by the momentum across our business as we head into the new year, and our strong pipeline of new licenses.”

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 the prior year’s revenue recognition rules, ASC 605.

Third Quarter 2018 Results:

Included in third quarter 2018 results was a $4.2 million expense, to be paid out over several years, 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.

Revenue for the third quarter 2018 was $40.8 million. Under ASC 605, revenue for the third quarter 2018 would have been $41.2 million, compared to $39.0 million in the third quarter 2017.

On a GAAP basis, the net loss for the third quarter 2018 was $9.6 million or 15 cents per share. Under ASC 605, GAAP net loss for the third quarter 2018 would have been $9.3 million or 15 cents per diluted share, compared to the net loss of $24.2 million, or 38 cents per diluted share, in the third quarter 2017. Included in the net loss for the third quarter 2018 were non-cash impairment charges of $17.9 million for indefinite-lived intangible assets related to the trademarks of two of the company’s non-core brands.

On a non-GAAP basis, net income for the third quarter 2018 was $2.7 million, or 4 cents per diluted share. Under ASC 605, non-GAAP net income for the third quarter 2018 would have been $3.1 million or 5 cents per diluted share, compared to $6.5 million, or 11 cents per diluted share, in the prior year period.

Adjusted EBITDA for the third quarter 2018 was $20.5 million. Under ASC 605, Adjusted EBITDA for the third quarter 2018 would have been $21.0 million, compared to $23.3 million in the prior year quarter.

Year-to-Date 2018 Results:

Revenue for the nine months ended September 30, 2018 was $121.1 million. Under ASC 605, revenue for the nine months ended September 30, 2018 would have been $123.6 million, compared to $120.6 million in the prior year period.

On a GAAP basis, net loss for the nine months ended September 30, 2018 was $8.3 million or 13 cents per diluted share. Under ASC 605, GAAP net loss for the nine months ended September 30, 2018 would have been $6.5 million or 10 cents per diluted share, compared to the net loss of $22.8 million or 36 cents per diluted share in the prior year period.

On a non-GAAP basis, net income for the nine months ended September 30, 2018 was $13.4 million, or $0.21 per diluted share. Under ASC 605, non-GAAP net income for the nine months ended September 30, 2018 would have been $15.8 million, or $0.24 per diluted share, compared to $20.1 million, or $0.32 per diluted share, in the prior year period.

Adjusted EBITDA for the nine months ended September 30, 2018 was $66.4 million. Under ASC 605, Adjusted EBITDA for the nine months ended September 30, 2018 would have been $68.8 million, compared to $71.0 million in the prior year period.

The company’s brands include Martha Stewart, And1, Avia, Gaiam, Heelys, DVS, Jessica Simpson, Joe’s, William Rast and Ellen Tracy.