XCel Brands, Inc. Q4 FY2025 earnings call

• In 2025, the company worked with production partners and licensees to prepare for the 2026 business ramp-up, developed a new business strategy with UTG, identified prospective business licensing partners, and explored acquisition opportunities. - New influencer-led brands with Cesar Millan, Jenna Stadford, etc., were announced, growing social media following from $5 million to $46 million. These brands are set to launch in 2026 on interactive television, bricks, and e-commerce retailers. - Sea Wonder and Christie Brinkley are fast-growing on HSN, Judith Ripka on JTV with a 23% year-over-year revenue increase. The Longaberger brand is scheduled to launch in spring 2027 with Shannon Dougherty. - Holston had a strong second half of 2025, and the company is optimistic about Holston's potential in 2026. - Non-GAAP metrics are used by management to compare performance and identify business trends.

For the fourth quarter of 2025, revenue was $1.17 million, down from $1.21 million in the same quarter of 2024, mainly due to a transition to a new supplier causing a gap in wholesale shipments. For the full fiscal year 2025, revenue was $4.94 million, down from $8.26 million in 2024, driven by the divestiture of the Lori Goldstein brand and no comparable residual product inventory sales in 2025. Direct operating costs were $2.2 million in Q4 2025, a 22% decrease from the prior year quarter, and $8.57 million for the full year, a 33% decrease from the prior year, due to business transformation and cost reduction actions. The net loss for Q4 2025 was approximately $2.8 million or -$0.55 per share, with a non-GAAP net loss of approximately $1.6 million or -$0.32 per share. The full-year 2025 net loss was approximately $17.5 million or -$5.08 per share, with a non-GAAP net loss of $5.2 million or -$1.52 per share. The adjusted EBITDA loss for Q4 2025 was approximately $600,000, a 24% year-over-year improvement, and the full-year adjusted EBITDA was -$2.3 million, a 35% improvement from 2024.

• The company believes the new influencer-led and legacy brands have the potential to reach an average annual royalty income of $6 million by 2029, implying a potential portfolio gross value of $375 million at a 7X gross royalty income multiple. - It is expected that 2026 growth in product sales and related royalties for JTV will exceed 2025's actual sales. - Under the term loan, the majority of interest due will be payable in kind, accruing and not requiring cash payments until 2027.

• The dynamic macroeconomic environment, including lingering inflation, the full impact of trade tariffs, the war in Iran, and consumer spending bifurcation, could cause actual results to differ materially from expectations. - Risks are detailed in the company's most recent annual report filed with the SEC. - Higher interest rates and higher average debt balances led to an increase in interest and finance expense in 2025.

Q: Provide additional color around the Halston rollout for spring.

A: Halston's spring 2026 performance has not been reported yet. They had a good second half of 2025 with dresses working well and the sportswear line improving.

Q: Cadence of influencer brands rolling out.

A: Cesar, Gemma, and Jenny Martinez are expected to start on GBC and HSN in the second quarter, with the back half of the year seeing them in brick-and-mortar retailers and on Amazon. Coco Rocha will launch later in the year, with product development taking about a year.

Q: Update on brand adoption.

A: Over 1,000 SKUs were shown at the Pet Expo, there was a great response, licensees are taking orders, and they hope to be in store shelves in August.

Q: Product mix by category and historical performance.

A: Historically, the company was concentrated in apparel and fashion accessories. Now, it is pivoting to consumer categories with less tariff risk, such as food for human consumption and dog products made in the US.

Q: Current influencer pipeline and lead times.

A: Influencers are identified based on having an established voice in a category. It takes about 90 days from starting the conversation to a definitive agreement, and then about a year for product development.

Q: View on 2027 and forward.

A: The goal is to get each brand to $6 million in royalties by 2029, expecting $18 million in top line in 2027 with $8 million in overhead.

Q: Cost of shows for influencer brands.

A: Suppliers bear the product development costs, and the company attends shows to solicit new licensees.

Q: Impact of influencer brands on time and effort.

A: The company is focused on existing influencers but also looking for new talent. Influencer-led brands help with lower customer acquisition cost.

Q: On-track for 100 million follower goal.

A: The company is on track, and is in conversations with potential celebrities and focused on more.

Q: Incremental profitability of next dollar revenue.

A: Operating overhead is not expected to increase dramatically except for variable revenue share with influencers, and AI is being used for efficiency.