Sequential Brands Group, Inc. reported Friday that total revenue from continuing operations for the third quarter ended September 30 was $25.4 million, compared to $29.5 million in the year-ago quarter. On a GAAP basis, the net loss from continuing operations for Q3 was $18.4 million, or a loss of 28 cents per diluted share, compared to a net loss from continuing operations $10.5 million, or 16 cents per diluted share, in Q3 2018.
“We feel great about the progress we’ve made to lay the groundwork for 2020 as we transition to a nimbler, leaner and higher-margin operation. We have strong brands spanning across the lifestyle and active categories and the financial flexibility to execute against our long-term strategy,” said Sequential’s Chairman Bill Sweedler.
Included in the net loss from continuing operations for Q3 2019 were non-cash impairment charges of $33.1 million for indefinite-lived intangible assets related to the trademarks for the Jessica Simpson and Joe’s brands. Non-GAAP net loss from continuing operations for Q3 2019 was $0.9 million, or a loss of 2 cents per diluted share, compared to a non-GAAP net loss from continuing operations of $0.3 million, or $0.00 per diluted share, in Q3 2018. Adjusted EBITDA from continuing operations for the third quarter was $13.2 million, compared to $15.1 million in the prior-year quarter.
On June 10, 2019, Sequential completed its previously announced sale of 100-percent of the issued and outstanding equity interests of Martha Stewart Living Omnimedia, Inc., a Delaware corporation and a wholly-owned subsidiary of Sequential, for approximately $166 million in cash consideration at closing, plus additional amounts in respect of pre-closing accounts receivable that are received after the closing, subject to certain adjustments, to Marquee Brands LLC. The sale was made pursuant to the equity purchase agreement entered into on April 16, 2019. In addition, the Purchase Agreement provides for an earn-out of up to $40 million if certain performance targets are achieved during each of the three calendar years ending December 31, 2020, December 31, 2021 and December 31, 2022.
Sequential’s after-tax net loss from discontinued operations was $0.3 million and $122.2 million for the three and nine months ended September 30, 2019, respectively.
Regarding the company’s recent announcement on its exploration of strategic alternatives, SQBG has been contacted by several interested parties, and the process is moving forward as planned. At the same time, as previously announced and as of November 8, 2019, the company said it continues to evaluate potential acquisitions that fit well in its brand portfolio and would be both de-levering and accretive.
Sequential Brands has not set a timetable for the conclusion of its review of strategic alternatives and said it does not expect to comment further or update the market with additional information on this matter, including as to whether any interest from third parties is continuing or has terminated, unless and until the Board of Directors has approved a specific transaction or otherwise deems disclosure necessary or appropriate. SB’s said there is no certainty that the review of strategic alternatives, including such inbound interest in the company’s brands, would result in the company pursuing a particular transaction or completing any such transaction.
Photo courtesy Sequential Brands