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Iconix Brand Group Reports Financial Results For The First Quarter 2016

  • Q1 2016 licensing revenue of $94.6 million, a 1% decline vs. prior year quarter
  • Q1 Non-GAAP EPS of $0.53 vs. $0.54 in the prior year quarter
  • Generated $51.6 million of free cash flow in Q1 2016
  • Recognized a net gain of $11.0 million related to sale of Badgley Mischka and the Company's interest in BBC and IceCream
  • Maintaining 2016 full year guidance

Iconix Brand Group, Inc. ICON, -2.65% ("Iconix" or the "Company") today reported its financial results for the first quarter ended March 31, 2016.

John Haugh, CEO of Iconix Brand Group commented, "I am pleased with our results today and that we remain on track to achieve the guidance that the Company provided last quarter. Overall, our portfolio of brands remains healthy with solid businesses across the women's and home segments, a growing entertainment platform and a stabilizing men's business."

John continued, "In the almost two months I have been at Iconix, I have spent my time understanding our business and each brand in our portfolio, assessing our marketing capabilities and strategy, meeting with many of our customers and our licensees and working toward crafting our go forward strategy. It is clear to me that with a diversified portfolio of over 30 brands, and over 1,700 licenses worldwide, Iconix is well positioned as the industry leader to further leverage and monetize our brands and our global licensing platform."

First Quarter 2016 Financial Results

Licensing Revenue: For the first quarter of 2016, licensing revenue was approximately $94.6 million, a 1% decline as compared to approximately $95.8 million in the first quarter of 2015. Licensing revenue included approximately $1.3 million of revenue related to acquisitions for which there was no comparable revenue in the first quarter of 2015, and was negatively impacted by approximately $1.0 million due to the sale of the Badgley Mischka brand in the first quarter of 2016.

Segment Data:





Q1 2016

Q1 2015(Restated)

% Change

Licensing Revenue by Segment:




Womens

$37,971

$38,381

-1%

Mens

20,228

23,798

-15%

Home

9,477

10,472

-10%

Entertainment

26,956

23,163

16%

Total Licensing Revenue

$94,632

$95,814

-1%





Licensing Revenue by License Type:




Direct-to-retail licenses

$41,976

$43,071

-3%

Wholesale licenses

38,951

41,826

-7%

Other licenses

13,705

10,917

26%

Total Licensing Revenue

$94,632

$95,814

-1%





Licensing Revenue by Geography:




United States

$61,973

$65,443

-5%

Japan

9,998

8,059

24%

Other

22,661

22,312

2%

Total Licensing Revenue

$94,632

$95,814

-1%

SG&A Expenses: Total SG&A expenses were $51.5 million in the first quarter of 2016, a 30% increase as compared to $39.7 million in the first quarter of 2015. In 2016, SG&A included $5.5 million of special charges related to professional fees associated with the continuing correspondence with the Staff of the SEC, the SEC investigation, the previously disclosed class action and derivative litigations, and costs related to the transition of Iconix management, as compared to $0.4 million in the first quarter of 2015. SG&A in the first quarter of 2016 also included an incremental $2.3 million of agent and talent fees associated with increased revenues in the Peanuts brand, $4.0 million related to reserves for doubtful accounts, and $1.8 million related to compensation expense. Stock-based compensation was approximately $2.0 million in the first quarter of 2016 as compared to $2.6 million in the first quarter of 2015.

Gain on Sales of Trademarks: In the first quarter of 2016, the Company recognized a net pre-tax gain of approximately $11.0 million, related to the sales of the Badgley Mischka brand and the Company's interest in BBC and IceCream.

Operating Income: Operating Income in the first quarter of 2016 was approximately $54.2 million including the $11.0 million gain on sales of trademarks, a 3% decline as compared to approximately $56.0 million in the first quarter of 2015. Excluding special charges, operating income grew 6% to approximately $59.7 million in the first quarter of 2016 as compared to approximately $56.3 million in the first quarter of 2015.


Q1 2016

Margin


Q1 2015(Restated)

Margin


% Change

Operating Income:








Womens

$34,015

90%


$33,114

86%


3%

Mens

11,452

57%


15,306

64%


-25%

Home

8,224

87%


8,669

83%


-5%

Entertainment

7,787

29%


8,043

35%


-3%

Corporate

(7,269)



(9,158)



21%

Total Operating Income

$54,209

57%


$55,974

58%


-3%

Interest Expense: Interest expense in the first quarter of 2016 was approximately $21.2 million, as compared to interest expense of approximately $21.3 million in the first quarter of 2015. Our reported interest expense includes non-cash interest related to our outstanding convertible notes, and amortization of deferred financing costs. Excluding the non-cash interest and amortization of deferred financing costs, cash interest paid during the first quarter of 2016 was approximately $11.5 million as compared to approximately $11.3 million in the prior year quarter.

GAAP Net Income and GAAP Diluted EPS: GAAP net income was approximately $18.6 million in the first quarter of 2016, as compared to approximately $65.4 million in the first quarter of 2015. In the first quarter of 2015, the Company's GAAP net income and EPS include a non-cash gain of approximately $50.0 million in Other Income related to the buyout and re-measurement of the Company's investment in Iconix China and an approximate $10.7 million foreign currency translation gain. GAAP diluted EPS in the first quarter of 2016 was approximately $0.37 as compared to $1.26 in the first quarter of 2015.

Non-GAAP Net Income and...


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