Xcel Brands, Inc. Q2 FY2026 earnings call

• Strategic Shift to Influencer-Led Brands • Over the past 12 months, the company formed 5 new influencer-led brands with Cesar Millan, Jenna Stafford, Jenny Martinez, Coco Rocha, and Shannon Dougherty. Two of these brands launched in late Q1 2026, most of the remaining will launch in fall 2026, and one is scheduled for 2027 launch. • The influencer-led brand strategy has grown total social media following across the company's portfolio from 5 million to over 46 million in less than one year. • Management notes the influencer-led brand market is projected by Goldman Sachs to exceed $2 trillion by 2035, and fast-growing influencer-led brands command significantly higher revenue and EBITDA exit multiples than legacy brands.

• Adaptation to AI-Driven Search Changes • Google's May 2026 update made AI mode the default search setting, eliminating ranked links as the primary discovery surface. This change significantly reduced the middle of the traditional marketing funnel (originally filled by product comparison content and buying guides), leaving only top-of-funnel awareness and bottom-of-funnel conversion. • Credible, attributable influencer video content is the most commonly cited source in AI search overviews: YouTube accounts for 23% of all AI overview citations, and brands cited in AI answers earn 120% more organic clicks per impression than uncited brands. The company's influencer-led brands align perfectly with this new search ecosystem, as established expert influencers produce the attributable citable content AI systems prioritize. • Many of the company's influencers create bilingual (English and Spanish) content from launch, allowing access to the over 60 million U.S. residents that speak Spanish at home, a segment management notes few competitors serve adequately in relevant categories.

• Operational Updates • Wholesale shipments for the first two launched influencer-led brands began in Q1 2026, with on-air programming launched on QVC and HSN in Q2 2026. Remaining brands will roll out through the rest of 2026 across interactive TV, e-commerce (including Amazon), and eventually brick-and-mortar retail. • The company's content model reaches over 100 million households and generates tens of millions of monthly media impressions, driving organic top-of-funnel awareness. The company uses an asset-light, capital-light model: it deploys no manufacturing capital, carries no inventory, has no markdown exposure, and earns revenue from royalties on licensee and retailer sales. • The company closed the sale of the Judith Rivka legacy brand in Q2 2026 at approximately 6x gross royalty income, matching the exit multiple for the previously divested Isaac Mizrahi brand, confirming the value of the company's brand portfolio.

• Financial Performance Summary • Q2 2026 direct operating costs were flat year-over-year at ~$1.9 million. Excluding a $500,000 non-recurring prior-year employee retention credit refund, direct operating expenses decreased $500,000 year-over-year for the quarter, and $700,000 year-over-year for the first half 2026. • Interest and finance expense fell to $0.9 million in Q2 2026 from $2.3 million in Q2 2025, driven by the removal of a $1.9 billion non-recurring loss on early debt extinguishment from the 2025 refinancing, which impacted the prior year period. Most interest on current debt is paid-in-kind, accruing until 2027 with no near-term cash requirement. • GAAP net loss for Q2 2026 was ~$2.5 million (-$0.40 per share), and adjusted EBITDA improved ~$320,000 year-over-year when excluding prior-year non-recurring items. Year-to-date GAAP net loss was $5 million (-$0.82 per share), down from a $6.8 million (-$2.84 per share) loss in the prior year period. • As of June 30, 2026, the company had $400,000 in unrestricted cash, $12 million in total debt, and $12 million in stockholders' equity. The company has a $15 million committed equity-aligned facility available for the next two years for working capital and acquisitions, at the company's discretion.

The transcript does not provide separate financial performance data for distinct product segments. Only consolidated company-level results are reported: Q2 2026 total revenue was $1.1 million, down from $1.3 million in Q2 2025; year-to-date (first half 2026) total revenue was $2.3 million, down from $2.7 million in the first half of 2025. The year-over-year revenue decline is primarily attributable to the divestiture of legacy brands, including the closed sale of the Judith Rivka brand in Q2 2026.

• Management expects all but one of the 5 new influencer-led brands to launch by the end of fall 2026, with the remaining brand launching in 2027. • The company projects it is on track to reach $100 million in total revenue across its brand portfolio, driven by the growth of its new influencer-led portfolio. • Management forecasts each of its 8 existing brands has the potential to generate an average of $7 million per year in royalty income by the end of 2030, based on the company's platform, team experience, and industry shifts driven by AI search changes.

• Management disclosed that all forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, with detailed risk factors available in the company's most recent annual SEC filing. • The company operates in a dynamic macroeconomic environment, which could cause current expectations and plans to change materially at any time. • As of June 30, 2026, the company held only $400,000 in unrestricted cash, creating near-term liquidity dependence on the $15 million committed equity facility and proceeds from future legacy brand divestitures.

No questions were submitted by call participants during the question and answer session, so no exchanges occurred.