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Iconix Reports Financial Results For The Fourth Quarter & Full Year 2017
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PR Newswire
NEW YORK, March 14, 2018
NEW YORK, March 14, 2018 /PRNewswire/ --
- Fourth quarter and full year 2017 licensing revenue of $52.3 million and $225.8 million, respectively
- Completion of refinancing of 1.50% convertible notes
- Reiterates full year 2018 revenue guidance and initiates net income and free cash flow guidance range
Iconix Brand Group, Inc. (Nasdaq: ICON) ("Iconix" or the "Company") today reported financial results for the fourth quarter and full year ended December 31, 2017.
John Haugh, CEO of Iconix commented, "2017 continued to be a year of change as we refinanced our balance sheet and refined our business model. Importantly, we enter 2018 better positioned to leverage our brand portfolio anchored on our strategic focus to actively manage brands with our existing partners, while exploring new opportunities to expand our reach."
Haugh further noted, "The launch of Starter with Amazon in 2017 and our recently announced multiyear agreement with Target for the Umbro brand demonstrates our ability to position our brands with the right long-term partners to maximize market presence and contribution to Iconix.
With our near-term debt obligations satisfied today, we are now able to apply renewed attention to our business initiatives and lay the foundation for sustained, organic growth."
2018 Guidance:
- Previously announced full year revenue guidance of $190 million to $220 million
- On track to deliver approximately $12 million of full year cost-savings aligning expenses with revenue base
- GAAP net income guidance of $7 million to $17 million, and $20 million to $30 million on a Non-GAAP basis
- Full year free cash flow of approximately $50 million to $70 million
Non-GAAP net income and free cash flow are non-GAAP metrics, and reconciliation tables for each are included in this press release.
Unless otherwise noted, the following represents financial results for continuing operations only.
Fourth Quarter & Full Year 2017 Financial Results
Licensing Revenue:
For the fourth quarter of 2017, licensing revenue was $52.3 million, an 11% decline as compared to $58.8 million in the prior year quarter. Revenue in the fourth quarter of 2016 included approximately $4.0 million of licensing revenue from the Sharper Image brand which was sold in the fourth quarter of 2016 and $1.3 million of licensing revenue from the Company's Southeast Asia joint venture which was deconsolidated in the second quarter of 2017. As a result, there was no comparable revenue for these items in the fourth quarter of 2017. Excluding Sharper Image and Southeast Asia, revenue declined approximately 2% for the fourth quarter of 2017.
For the full year 2017, licensing revenue was $225.8 million, an 11% decline as compared to $255.1 million in 2016. Revenue in 2016 included approximately $9.3 million of licensing revenue from the Sharper Image brand, $0.2 million of licensing revenue from the Badgley Mischka brand and $2.6 million of licensing revenue from the Southeast Asia joint venture, for which there was no comparable revenue in 2017. Excluding Sharper Image, Badgley Mischka and Southeast Asia, revenue declined approximately 7% for the full year 2017.
Segment Data (non-GAAP for exclusion of divested brands and deconsolidated territories):
($, 000's)
| Adjusted Revenue by Segment | Three Months ended Dec. 31, | | Year ended Dec. 31, | ||||
| ($, 000's) | 2017 | 2016* | % Change | | 2017 | 2016* | % Change |
| | | | | | | | |
| Womens | 20,013 | 18,763 | 7% | | 96,833 | 106,299 | -9% |
| Mens | 8,212 | 11,807 | -30% | | 39,780 | 48,635 | -18% |
| Home | 6,132 | 6,547 | -6% | | 28,807 | 29,096 | -1% |
| International | 17,942 | 16,358 | 10% | | 60,413 | 59,036 | 2% |
| Total Adjusted Revenue | 52,299 | 53,475 | -2% | | 225,833 | 243,066 | -7% |
| *Revenue is adjusted for revenue from Sharper Image, Badgley Mischka and the Southeast Asia joint venture | | ||||||
SG&A Expenses:
Total SG&A expenses in the fourth quarter of 2017 were $40.9 million, an 11% increase compared to $36.8 million in the fourth quarter of 2016. In the fourth quarter of 2017, SG&A included $2.5 million of special charges related to professional fees associated with the SEC investigation, the class action and derivative litigations, continuing correspondence with the Staff of the SEC, and costs related to the transition of Iconix management, as compared to approximately $3.9 million in the fourth quarter of 2016. These special charges are excluded from the Company's non-GAAP net income and EPS. Excluding special charges, SG&A expenses were up 17% in the fourth quarter of 2017. The increase was primarily related to greater advertising expense in the fourth quarter versus the prior year due to a shift from third to fourth quarter spending in 2017. Stock based compensation was $4.9 million in the fourth quarter of 2017, as compared to $2.1 million in the fourth quarter of 2016.
For the full year 2017, total SG&A expenses were $114.6 million, an 11% decrease as compared to $128.8 million in 2016. In 2017, SG&A included $9.6 million of special charges related to professional fees associated with the SEC investigation, the class action and derivative litigations, continuing correspondence with the Staff of the SEC and costs related to the transition of Iconix management, as compared to $14.3 million in 2016. Excluding special charges, SG&A expenses were down 8% for the full year 2017. Stock based compensation was $8.7 in 2017, as compared to $6.6 million in 2016.
Trademark, Goodwill and Investment Impairment:
In the fourth quarter of 2017, the Company recorded a non-cash trademark impairment charge of $4.1 million in the home segment and a $7.6 million impairment in the international segment which is included in equity earnings on joint ventures. The Company also recorded a non-cash investment impairment charge of $16.8 million related to the MG Icon joint venture which owns the Material Girl brand.
For the full year 2017, the Company recorded a non-cash trademark impairment charge of $525.7 million, comprised of $227.6 million in the women's segment, $135.9 million in the men's segment, $73.5 million in the home segment and $88.7 million in the international segment to reduce various trademarks in those segments to fair value. We also recorded an additional trademark impairment of $7.6 million in the international segment which is included in equity earnings on joint ventures. The Company recorded a non-cash goodwill impairment charge of $103.9 million due to impairment of goodwill in the women's segment, men's segment and home segment of $73.9 million, $1.5 million and $28.4 million, respectively. The Company also recorded a non-cash investment impairment charge of $16.8 million related to the MG Icon joint venture which owns the Material Girl brand.
Operating Income:
| Adjusted Operating Income by Segment* | Three Months ended Dec. 31, | | Year ended Dec. 31, | ||||
| ($, 000's) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |
| | | | | | | | |
| Womens | 16,689 | 15,108 | 10% | | 87,932 | 94,424 | -7% |
| Mens | (957) | 7,366 | NA | | 19,043 | 30,322 | -37% |
| Home | 5,110 | 5,385 | -5% | | 25,271 | 23,902 | 6% |
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