Xcel Brands, Inc · NASDAQ:XELB
Xcel Brands — Investor Presentation (August 2018)
38 slides from Xcel Brands's investor presentation, Aug 15, 2018
Slide 1: Investor Presentation Second Quarter 2018
INVESTOR PRESENTATION SECOND QUARTER 2018 NASDAQ: XELB
Slide 2: Safe Harbor Statement
2 SAFE HARBOR STATEMENT FORWARD LOOKING STATEMENTS Certain statements in this presentation, as well as certain oral statements made by management during the presentation, constitute “forward - looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 199
Slide 3: Index
INDEX OVERVIEW STRATEGY BRANDS PLATFORM FINANCIALS GROWTH SUMMARY Page 4 Page 8 Page 14 Page 21 Page 26 Page 31 Page 35 3
Slide 4: Overview
OVERVIEW 4
Slide 5: Xcel Brands is a consumer products company
5 XCEL BRANDS, INC. (NASDAQ:XELB) IS A CONSUMER PRODUCTS COMPANY ENGAGED IN THE DESIGN, PRODUCTION, LICENSING, MARKETING AND DIRECT - TO - CONSUMER SALES OF BRANDED APPAREL, FOOTWEAR, ACCESSORIES, JEWELRY, HOME GOODS, AND OTHER CONSUMER PRODUCTS, AND THE ACQUISITION OF DYNAMIC CONSUMER LIFESTYLE BRA
Slide 6: Company Snapshot
STRONG BALANCE SHEET EQUITY REVENUE & EBITDA 6 COMPANY SNAPSHOT BUSINESS Founded 5 Owned Brands $420MM Retail Sales of our Brands (1) $32.0MM Revenues (2) 6 - Year Revenue CAGR (5) $8.2MM Adjusted EBITDA (2)(4) 20% $20.3MM Term Debt (2)(6) Cash (2) 1.4x Leverage Ratio (2)(6) $7.6MM $2.65 Share Price
Slide 7: Highlights
7 HIGHLIGHTS Existing business with strong free cash flow Proven historical growth in revenues and EBITDA Fully developed and proven platform built as a solution provider for today’s challenges. Fast - to - Market supply chain and Integrated Technology platforms position Xcel to develop intelligent
Slide 8: Strategy
STRATEGY 8
Slide 9: Disruptive forces are affecting the retail industry
9 DISRUPTIVE FORCES ARE AFFECTING THE RETAIL INDUSTRY 5 CROWDED MARKET Over - distribution, rise of off - price 4 FAST FASHION Customers demand faster supply chains, 52 Seasons 3 CUSTOMER VOICE Marketing changed, customer wants input and controls trend 2 E - COMMERCE Mall traffic is decreasing 1 PRI
Slide 10: Causing extreme headwinds
10 SEARS HOLDINGS TO CLOSE 63 MORE STORES - Wall Street Journal, November 2017 MACY’S TO CLOSE 100 STORES AS E - RIVALS AND DISCOUNTING HIT LEGACY RETAILERS - New York Times, August 2016 WHY J. CREW’S VISION OF PREPPY AMERICA FAILED - The New Yorker, May 2017 22 RETAILERS AT RISK OF BANKRUPTCY - Tim
Slide 11: But there are and will be winners
11 BUT THERE ARE AND WILL BE WINNERS… HOW INDITEX AND ZARA ARE WINNING - Forbes, December 2017 AMAZON APPAREL ZIPS PAST DEPARTMENT STORES - Barron’s, May 2017 WHY STITCH FIX IS THE FUTURE OF CLOTHING - Inverse.com, October 2017 11
Slide 12: The Solution
12 THE SOLUTION 1 Give the customer what they want, when they want it, at a price that they can confirm is fair 2 Drive customer engagement with exclusive, dynamic brands and media content 3 Develop intelligent products by leveraging technology (minimize fashion risk) 4 Deliver superior product qual
Slide 13: Xcel Brands Strategy
• Investments in integrated technologies to advance design and sourcing processes • Current technologies include 3D Design, Consumer Insight Testing, Trend Analytics, and Data Science • Investments in new technologies with a focus on Artificial Intelligence, Machine Learning and Blockchain technolog
Slide 14: Our Brands
OUR BRANDS 14
Slide 15: Our Brands
OUR BRANDS ,, = SAAC MIZ RAB “8
Slide 16: Isaac Mizrahi Brands
16 I S A A C M I Z R A H I B R A N D S TIMELESS COSMOPOLITAN STYLE IS… Wit, irreverence, happiness and fun. Confidence, with a wink and a nod. It’s an infusion of bold color. The unexpected and iconic elements of New York. $2.5BB+ Lifetime Retail Sales 4x CFDA Award Winner Social Followers 240,000+
Slide 17: Judith Ripka Brands
17 J U D I T H R I P K A B R A N D S $2.0BB+ Lifetime Retail Sales TOP 5 Most Trusted Jewelry Brands Social Followers 100,000+ WHEN A WOMAN IS WEARING MY JEWELRY, I WANT HER TO FEEL AS IF SHE IS WRAPPED IN ONE OF LIFE’S GREATEST LUXURIES. - Judith Ripka Recent Retail Partnerships/Distribution: • QVC
Slide 18: H Halston Brands
18 H H A L S T O N B R A N D S $1.0BB+ Lifetime Retail Sales Iconic American Fashion Brand Social Followers 225,000+ YOU ARE ONLY AS GOOD AS THE PEOPLE YOU DRESS. - Roy Halston Frowick Recent Retail Partnerships: • QVC • Lord & Taylor • Hudson’s Bay • Dillard’s
Slide 19: C. Wonder Brands
C. WONDER IS… where classic gets a fresh spin where luxury is guilt - free and where everything great happens all at once. C. Wonder reveals through discovery, the spontaneous, fun, and indulgent side of our customer, and promises that with each experience, she gets closer to her best self. 19 C W O
Slide 20: Highline Collective Brands
20 H I G H L I N E C O L L E C T I V E B R A N D S Created for Millennials, Highline Collective is an accessible women’s and men’s trend - right, fast - to - market apparel and accessories brand that delivers new styles weekly. This collection is everything you want, now! Recent Retail Partnerships:
Slide 21: Platform
PLATFORM 21
Slide 22: What We Do
22 WHAT WE DO
Slide 23: Fast-to-Market Virtual Vertical Platform
23 FAST - TO - MARKET VIRTUAL VERTICAL PLATFORM Xcel has developed a fast - to - market, technology driven “virtual vertical” design and sourcing platform for its retail partners, designed to create clear advantages over other retail competition, including the ability to: • Disintermediate the tradi
Slide 24: Fast-to-Market Platform
24 FAST - TO - MARKET PLATFORM (1) Initial Mark - Up (IMU) is based margin of initial retail price over landed cost. (1)
Slide 25: Integrated Technology Platform
25 INTEGRATED TECHNOLOGY PLATFORM Xcel’s strong free cash flow and low leverage enables it to invest in infrastructure and technology to drive future growth. Since 2016, Xcel has made substantial investments into the following integrated technologies: • Trend Analytics • Consumer Insight Testing • D
Slide 26: Financial Overview
FINANCIAL OVERVIEW 26
Slide 27: Working Capital Light Revenue Model
27 WORKING CAPITAL LIGHT REVENUE MODEL • Xcel’s business model disintermediates the traditional wholesale vendor model • Xcel generates revenues through the following sources: - Royalties - Design & Sourcing Fees - Sales - Margin Participation - Marketing and other fees • By partnering with retailer
Slide 28: Retail Sales
28 RETAIL SALES 2011 (pro - forma) 2012 2013 2014 2015 2016 2017 ▪ EST. SALES AT RETAIL (1) $114MM $142MM $212MM $380MM $400MM $420MM $420MM $450.0MM 24.3% CAGR (2) (1) Estimated sales at retail based on royalty reports, with retail sales estimated based on wholesale sales. Retail Sales do not re pr
Slide 29: Revenue & EBITDA
(1) Adjusted EBITDA is a non - GAAP unaudited term. For the definition of Adjusted EBITDA and a reconciliation to net income (loss), s ee the Company’s annual report on Form 10 - K. (2) Based on growth in Net Revenues from 2012 through Q2 2018. (3) TTM 6/30/2018 represents the twelve month period be
Slide 30: Strong Balance Sheet
As of June 30 , 2018 , Xcel had $ 7 . 6 MM of cash against $ 18 . 7 MM of Term Debt (excluding debt payable with equity, including contingent obligations), which resulted in Net Debt ( 2 ) of $ 11 . 1 MM • Compared with Adjusted EBITDA of $ 8 . 2 MM for the twelve months ended June 30 , 2018 , this
Slide 31: Growth
GROWTH 31
Slide 32: Organic Growth Drivers
32 ORGANIC GROWTH DRIVERS Growth of Existing Businesses Category Expansion Geographic Expansion Channel Growth ▪ Further expansion of IMNYC, H Halston, and Highline Collective within Hudson’s Bay, Lord & Taylor, and Dillard’s ▪ Continued growth of our Direct - Response Television Brands ▪ Discussion
Slide 33: Brand Acquisition Strategy
33 BRAND ACQUISITION STRATEGY Xcel is seeking to acquire and/or enter into ventures with brands that are Strategic, Synergistic, and Accretive to our existing business and shareholders . We are also working with our partners in China to develop strategies to bring popular Chinese brands to the Unite
Slide 34: Key Drivers for 2018-2020
34 KEY DRIVERS FOR 2018 - 2020 • Continued growth of existing QVC and Department Store Businesses • Launch and growth of key ancillary categories (denim, footwear, handbags, mens ) • Private Label production through Fast - to - Market Platform • Selectively leverage Fast - to - Market Platform acros
Slide 35: Summary
SUMMARY 35
Slide 36: Summary
SUMMARY • Developing innovative solutions to address the changes in our industry. Xcel gives our customers what they want, when they want it, at a price they can confirm as fair. • Dynamic, iconic brands engage customers through media and Ubiquitous - Channel distribution. • Working capital light bu
Slide 37: www.xcelbrands.com
NASDAQ: XELB WWW.XCELBRANDS.COM
Slide 38: Exhibit A Adjusted EBITDA
Exhibit A Adjusted EBITDA: June 30, March 31, December 31, September 30, (amounts in thousands) 2018 2018 2017 2017 Net (loss) income (Unaudited) (9,549)$ (113)$ 500$ (10,188)$ 252$ Goodwill impairment 12,371 - - 12,371 - Depreciation and amortization 1,645 456 411 389 389 Interest and finance expen