Sequential Brands Group Inc. (SQBG, Financial) is a brand management organization with a portfolio of consumer brands generating $2 billion in global retail sales. Through its in-house licensing platform, it partners with retailers and manufacturers to maximize long-term brand equity.
It owns a diversified global portfolio of prominent brands across all consumer sectors.
Strong second quarter
Total revenue during the second quarter was $20.2 million ($7.0 million in the prior year quarter).
Adjusted EBITDA for the second quarter was $12.4 million ($3.7 million in the prior year quarter).
On a non-GAAP basis, net income for the second quarter was $3.3 million, or 8 cents per diluted share ($1.1 million, or 4 cents per diluted share, in the prior year quarter).
On a GAAP basis, net loss for the second quarter was $1.3 million, or 3 cents per diluted share ($0.6 million, or 2 cents per diluted share, in the prior year quarter).
Expectations for 2015
The company expects the following for 2015:
- Revenue to be in the range of $78.0 million to $81.0 million.
- Adjusted EBITDA to be in the range of $48.5 million to $50.5 million.
- The company expects revenue for the full year 2015 to be weighted to the third and fourth quarters, with the fourth quarter being higher than the third quarter, due to seasonality in the businesses of many of the company's licensees.
Expansion plans
The company recently planned to expand its active lifestyle brand AVIA with the introduction of a full line of wearable fitness accessories at major retailers nationwide. Avis (for its athletic footwear and activewear apparel) caters to the customers’ innovative line of wearable products. The company will benefit from this expansion and will increase its product offering with incredible retailer partners. The company also introduced Avia Ascend, a state-of-the-art app that supports its new line of fitness trackers. These will significantly add to the company’s returns.
Being in the news
SQBG recently announced that it has signed a definitive merger agreement to acquire 100% of the outstanding shares of Martha Stewart Living Omnimedia Inc. (MSO, Financial) for aggregate consideration valued at $6.15 per share, payable 50% in stock and 50% in cash.
The Merger adds a new vertical to Sequential's platform, which is expected to generate nearly $3.75 billion in annual global retail sales from a combined portfolio of consumer brands in the Home, Fashion, Lifestyle & Active categories.
It recently announced a partnership with Delivery Agent Inc., the market leader in turning audiences into customers for leading global brands, to power digital commerce for the Jessica Simpson brand.
SQBG recently announced that it closed the acquisition of the Joe's Jeans brand (the "Brand" or "Joe's"). In tandem with the closing, the long-term license agreement for the Brand's core categories with Global Brands Group became effective. Financing for the acquisition was provided under the company's existing credit facilities with Bank of America (BAC, Financial) and GSO Capital Partners LP, an affiliate of Blackstone Group (BX, Financial).
The company is increasing its forward looking 12-month royalty revenue projection to $98 million to $100 million and $61 million to $63 million of Adjusted EBITDA, from its previous projection of $88 million to $90 million in royalty revenue and $53.5 million to $55 million of Adjusted EBITDA. The company anticipates that the financial impact to the balance of the current fiscal year will be immaterial as the new core license agreement is expected to have most of its impact in Fiscal 2016.
Plans
The company is focused on ecommerce and international expansion. Its business model is acutely focused on identifying and licensing brands to the top retailers, wholesalers and manufacturers worldwide. Through acquisitions, the company expects to earn revenue of around $30 million this year itself. It recently bought stakes in the Jessica Simpson brand. With this partnership, the company wants to expand beyond the U.S. market. Available globally, the growing brand offers footwear, apparel, fragrance, fashion accessories, maternity apparel, girls’ clothing and accessories and a home line.
On a concluding note
SQBG owns, promotes, markets and licenses a portfolio of consumer brands that presently includes Avia, Ellen Tracy, William Rast, Revo, Caribbean Joe, Heelys, DVS, The Franklin Mint, Nevados, People's Liberation and Linens 'N Things. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, design and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and in certain international territories.
SQBG is a good growth stock and investors may add this company to their portfolio. According to me, this company is going to create shareholder returns. This company may garner investors’ attention in the long run. It has good growth potential as it is activating owned brands into new geographies and categories with the help of accretive acquisitions. It has to offer plenty of opportunities to its valued investors.
It is currently focused on promoting, protecting a solid portfolio of consumer brands through partnerships with best-in-class licensees. The company embarked on a bright 2015 by reporting strong second quarter results. It is in a good position and investors may consider adding this company to their portfolio.
