Sequential Brands Group Inc. reported a steep loss in the fourth quarter after absorbing charges connected to the recent federal tax reform legislation and the company’s goodwill.
Fourth Quarter 2017 Results:
Total revenue for the fourth quarter ended December 31, 2017 increased 3 percent to $46.9 million compared to $45.4 million in the prior year quarter.
On a GAAP basis, the net loss for the fourth quarter 2017 was $(162.9) million or $(2.58) per diluted share, which includes one-time, net charges of $171.7 million related to both the recent federal tax reform legislation and the company’s goodwill. The tax reform impact was a $132.4 million non-cash positive benefit in the fourth quarter. Specifically, the company revalued its deferred tax liabilities based on the new lower federal tax rates and released the valuation reserves on its federal deferred tax assets. The goodwill adjustment represents a one-time, non-cash charge of $304.1 million that was driven by the company’s stock price during the fourth quarter–as well as the increase in the company’s book value related to tax reform–which resulted in an assessed fair value of equity that was significantly below its net book value. This compares to a GAAP net loss in the prior year’s quarter of $(1.0) million, or $(0.02) per diluted share.
Non-GAAP net income for the fourth quarter 2017 was $7.8 million, or $0.12 per diluted share, compared to $7.3 million, or $0.12 per diluted share, in the prior year period. Adjusted EBITDA (defined in the accompanying Non-GAAP Financial Measures) for the fourth quarter of 2017 was $27.4 million compared to $24.2 million in the prior year quarter.
“We ended the full year with 8 percent revenue growth, strong organic growth and an improved Adjusted EBITDA margin which reflect the power of our unique portfolio of brands,” said Sequential Brands Group CEO Karen Murray. “We are encouraged by the momentum so far in 2018 and are focused on driving revenue through both existing partnerships as well as executing against our robust new business development pipeline. Our refinancing efforts continue to progress and we remain on track with an early 2018 refinancing.”
Full Year 2017 Results:
Total revenue for the year ended December 31, 2017 increased 8 percent to $167.5 million, compared to $155.5 million in the prior year.
On a GAAP basis, the net loss for the year ended December 31, 2017 was $(185.7) million, or $(2.95) per diluted share, which includes one-time, net charges in the fourth quarter of $171.7 million related to both the recent federal tax reform legislation and the goodwill adjustment previously described. Also reflected in the net loss for 2017 were non-core charges of $45.1 million highlighted in the company’s third quarter 2017 earnings release. This compares to a net loss in the prior year ended December 31, 2016 of $(0.8) million or $(0.01) per diluted share. Non-GAAP net income for the year ended December 31, 2017 was $27.9 million, or $0.44 per diluted share, compared to $21.0 million, or $0.33 per diluted share, in the prior year. Adjusted EBITDA for the year ended December 31, 2017 was $98.4 million, compared to $83.1 million in the prior year.
Appointment of Chief Financial Officer:
In conjunction with today’s earnings release, the company announced the appointment of Peter Lops as chief financial officer. Mr. Lops joins Sequential from Viacom Media Networks where he served as the chief financial officer and chief operating officer for the Distribution and Business Development division. Andrew Cooper, president and interim chief financial officer, will continue to serve as President.
The company’s brands include Jessica Simpson, William Rast, Heelys, Joe’s Jeans, Martha Stewart, Chef Emeril, Gaiam, And1, Avia, Revo, DVS and Ellen Tracy.
