XCel Brands, Inc. Q1 FY2026 earnings call

• Inorganic Growth & Brand Portfolio Strategy
  • Xcel Brands is executing a strategic shift into fast-growing influencer-led branded products, building on a portfolio of legacy licensed brands
  • Two influencer-led brands launched near the end of Q1 2026, with two more launches planned for fall 2026 and one additional launch planned for spring 2027
  • The company's five announced influencer partnerships (with Cesar Millan, Gemma Statford, Jenny Martinez, Coco Rocha, and Shannon Dougherty) grew total social media followers across the brand portfolio from 5 million to over 46 million, and the company is on track to reach 100 million total followers
  • Wholesale shipments began for two influencer brands in Q1 2026, with on-air programming launching on QVC/HSN in Q2 2026; all remaining influencer brands will launch across interactive TV, brick-and-mortar, and e-commerce channels through the end of 2026
  • Management divested the legacy Judith Ripka brand in Q2 2026 for approximately 6x gross royalty income, consistent with the valuation multiple of a prior divestiture of the Isaac Mizrahi brand
  • The Longaberger legacy brand is scheduled for a spring 2027 re-launch with new products co-created by influencer Shannon Dougherty, who has 3 million social media followers
• Market Opportunity Rationale
  • The global influencer economy generated $254 billion in 2025 sales and is projected to grow to over $2 trillion by 2035; marketing budgets are shifting to influencers due to higher return on ad spend, and 67% of consumers trust influencer recommendations more than legacy brand ads
  • The company's existing TV and streaming content reaches over 100 million households and generates tens of millions of monthly media impressions, supporting new influencer brand launches
• Operational Updates
  • A supplier transition for Sea Wonder and Christie Brinkley brands caused inventory shortages and lower HSN sales in Q1 2026, and added $100,000 in non-recurring Q1 expenses; the transition is complete, product quality has improved, and the new supplier began shipping in Q1, with growth expected for these brands going forward
  • The company completed a $61,000 impairment write-down for the Judith Ripka brand prior to its sale, which closed in April 2026 for $2.3 million in cash plus future earn-out consideration
• Balance Sheet & Liquidity
  • As of March 31, 2026, the company had $13 million in stockholders' equity, $1.1 million in restricted cash, and $0.2 million in unrestricted cash
  • In January 2026, the company secured a $15 million committed equity line facility available over two years for working capital and acquisitions; no funds have been drawn to date
  • In April 2026, the company completed a debt refinancing, repaying a portion of its variable rate term loan and issuing $3 million in fixed-rate senior secured notes

Xcel Brands does not break out performance for distinct product segments in this call. Aggregate total GAAP revenue for Q1 2026 was $1.1 million, a decrease from $1.3 million in Q1 2025. The revenue decline was driven by temporary inventory disruption from a supplier transition for the company's Sea Wonder and Tower Hill by Christie Brinkley legacy apparel brands, which are sold primarily through HSN. Direct operating expenses for Q1 2026 were $2.1 million, down from $2.3 million in Q1 2025 due to 2025 cost-cutting that reduced payroll and benefit costs. GAAP net loss for Q1 2026 was $2.5 million, or -$0.42 per diluted share, compared to a GAAP net loss of $2.8 million, or -$1.18 per diluted share, in Q1 2025. Non-GAAP adjusted net loss was $1.4 million (-$0.24 per share) in Q1 2026, versus a non-GAAP adjusted net loss of $1.12 million (-$0.58 per share) in Q1 2025. Adjusted EBITDA loss was $700,000 in Q1 2026, flat compared to Q1 2025.

• Management expects that revenue growth will accelerate starting in the second half of 2026 as newly launched influencer brands begin contributing revenue, and as the legacy Sea Wonder and Christie Brinkley brands recover from the Q1 supplier disruption
• The company's long-term operating cost target is $7.5 million annually; variable talent costs will increase in line with revenue growth from new influencer brands, so operating margins are expected to scale with incremental revenue
• The company expects to close a large strategic partnership that it has been developing for one year and announce it before the end of Q2 2026
• The five influencer partnerships signed in 2025 will all launch by the end of 2026, in line with the company's 12-month average timeline from signing to revenue generation

• All forward-looking statements around influencer brand growth, new launches, and profitability are subject to macroeconomic and market risks that could cause actual results to differ materially from expectations; the company does not have an obligation to update forward-looking statements
• New influencer brand launches carry inherent risk: product and media demand discovery is required after initial launch, and initial product designs may not match consumer demand, requiring adjustments that could impact near-term revenue
• The company has relatively low unrestricted cash ($0.2 million as of Q1 end 2026) and relies on external financing sources (the committed equity line and new senior secured debt) to fund operations and growth
• Early stage influencer brand development requires upfront investment before revenue is generated, creating a period of operating losses as the company scales its new portfolio

Q: How long does it take to generate revenue after signing an influencer partnership, and what is management's target for annual operating costs as revenue scales? / A: From contract signing to commercial launch and revenue generation is typically a 12-month process, driven by the timeline for product design and development. This explains why the five partnerships signed in 2025 are launching through the end of 2026. Management has cut costs to run the business tightly and targets an annual operating cost base of approximately $7.5 million. Talent costs for influencer brands are fully variable, so expenses will rise in line with revenue generated by new brands.

Q: What is the early performance data for the newly launched Jenny Martinez brand, and what product adjustments are you making based on initial consumer response? / A: Initial launch results are in line with expectations, and a discovery period for media scheduling and product fit is normal for all new influencer brands. Initial results showed much stronger consumer demand for food products than hard kitchen goods for both Jenny Martinez and Gemma Stafford's new brands. The company will shift product mix to lean further into food for the rest of 2026; food products have short lead times and are manufactured domestically, making the adjustment fast and low-cost.

Q: What is the timeline and rollout plan for the upcoming Cesar Millan influencer brand launch, and what are your retail expansion plans beyond QVC and HSN? / A: Cesar Millan's products are already being marketed to brick-and-mortar and e-commerce retailers for fall 2026, with an Amazon store launch expected within 60 days. Initial products on Amazon will include pet cleaning products, pet grooming supplies, collars, leashes, and dog apparel. All new influencer brands will be distributed across every relevant retail channel: brick-and-mortar, e-commerce, live streaming, and QVC/HSN, to reach consumers wherever they shop.

Q: Are there updates on potential acquisitions or strategic partnerships, and what impact did QVC's recent restructuring have on Xcel's operations? / A: Xcel has been working on one large strategic partnership for a year and expects to be able to announce it before the end of Q2 2026. The company evaluates multiple potential brand and operating company acquisitions monthly that would support distribution growth, and would pursue transformative opportunities if they arise. QVC's recent restructuring caused almost no disruption to Xcel's operations; QVC continues to pay all vendors on time, and the restructuring positions QVC well for future streaming growth, with no impact to Xcel's launch or distribution plans.