XCel Brands, Inc. Aktie

Welcome to Xcel Brands Second Quarter 2026 Earnings Conference Call. [Operator Instructions] And please be advised that reproduction of this call or in part is not permitted without prior written authorization of Xcel Brands. And as a reminder, this conference call is being recorded.

I would now like to turn the call over to Seth Burroughs from the company. Seth, you may now begin.

Good morning, everyone, and thank you for joining us. Welcome to the Xcel Brands Second Quarter of 2026 Earnings Call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer, Robert D'Loren; and Chief Financial Officer, Jim Haran. By now, everyone should have had access to the earnings release for the quarter ending June 30, 2026. In addition, we filed our quarterly report on Form 10-Q with the Securities and Exchange Commission yesterday. The release and the quarterly report will be available on the company's website at www.xcelbrands.com.

This call is being webcast, and a replay will be available on the company's Investor Relations website. Before we begin, please keep in mind that this call will contain forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today. These risk factors are explained in detail in the company's most recent annual report filed with the SEC. Xcel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time. Finally, please note that on today's call, management will refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP diluted EPS and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends related to the company's results of operations.

Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus, they provide supplemental information to assist investors in evaluating the company's financial results. These non-GAAP measures should not be considered in isolation or as alternatives to net income, earnings per share, or any other measures of financial performance calculated and presented in accordance with GAAP. You may refer to the attachment to the company's earnings release or the Form 10-Q for a reconciliation of non-GAAP measures.

And now I'm pleased to introduce Robert D'Loren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Seth. Good morning, everyone, and thank you for joining us today. I would like to start today's call with a brief update on recent developments since the Q1 filing of our quarterly Form 10-Q and our outlook for moving forward. After that, our CFO, Jim Haran, will discuss our financial results for the quarter in more detail. To begin, we continue to work hard with all of our licensing production partners, talented influencers, and strategic retail partners to drive our business.

Also, over the past 12 months, we announced the formation of our new influencer-led brands, with Cesar Millan, Gemma Stafford, Jenny Martinez, Coco Rocha, and Shannen Doherty. As I previously mentioned on our last call, we launched 2 of these brands toward the end of Q1 and expect the balance to launch this fall, except for one that will launch in 2027. These influencer-led brands grew the social media following in our brand portfolio from 5 million to over 46 million in less than 1 year.

Our investor community has asked why is this important? What is the earnings and value potential of influencer-led brands and why are we so excited about influencer-led brands? The answer is AI, is changing a lot in business today. A recent AI-related event came in May of this year: Google changed search and AI mode became the default. Web links are no longer the primary discovery surface. The search box was redesigned for the first time in 25 years. This comes with very broad and significant implications, especially in certain industries.

This has had a dramatic negative impact on informational queries, such as product comparison articles and buying guides like those published by magazines, but left transactional and branded search intact. This means that the middle of the classic marketing funnel has been significantly diminished, perhaps eliminated. Therefore, we are left with just the top of funnel that drives awareness and the bottom of the funnel to drive conversion of sales.

Retail search is absorbing the discovery that the middle of the funnel used to handle. This is a redistribution of where discovery happens, not a disappearance of it. Video content is not being replaced. It is being cited. YouTube accounts for 23% of all AI overview citations, the single largest source. And brands cited inside an AI answer earn about 120% more organic clicks per impression than uncited brands on the same query. So, if the top and the bottom of the funnel survives, then significant awareness comes from video and social sources, and conversion comes from retail search and the retail shelf space.

Also, an AI answer engine can compress an article or text, but it cannot compress a video demonstration.

Attributable authorities, such as YouTube content featuring a credible voice in a category, is highly citable. Anonymous editorial is not, and an AI system builds answers from sources it can attribute. To put this in the context of Xcel's strategy, a named expert with 2 decades of broadcast history and a significant social media following is exactly the kind of source that creates attributable content that AI engines use to answer questions about products.

The game has moved from ranking to being the source the answer is built from. This is exactly why we are creating brands with people like Cesar Millan, Jenny, Gemma Stafford, and others -- and other influencers. Influencers like Cesar and Gemma have names customers associate with expertise and are highly visible to AI platforms. Also, in the case of Cesar and Jenny Martinez, they reach both English and Spanish-speaking consumers, and we build that content bilingually from the start rather than translating it afterward. More than 60 million U.S. residents speak Spanish at home, and we do not see a competitor in these categories that is positioned to match that.

In summary, awareness that already exists is awareness you don't have to buy. We believe that we are now on the ascent as a company. We will continue to build the brands that we launched this year. And based upon our pipeline of new influencer-led brands, we are on track to reach 100 million followers across our brand portfolio. I should be clear, though, a follower count is an input, not a result.

What compounds is what we own: our product designs, the existing awareness of our brands, the content library we produce, our retail search presence, and the licensee supply chain network behind each brand. We began wholesale shipments with our licensees for 2 of our influencer-led brands during the first quarter, and on-air programming commenced for them on QVC and HSN in the second quarter.

The other influencer-led brands will be shipping and launching throughout the rest of 2026 in interactive TV and with e-commerce retailers like Amazon, followed by bricks retailers. It's important to note that there is a product design and development period of approximately 12 to 18 months from the time we execute an agreement with an influencer when products first are offered for the sale, depending upon category and where the goods are produced.

I should add that our TV and streaming content reaches well over 100 million households and generates tens of millions of media impressions per month. All of this generates added top of funnel awareness for our brands. We are pleased with the progress and category diversity of our brand portfolio, and we believe revenue growth is in front of us. I would also remind everyone that this model is capital-light by design. We deploy no manufacturing capital. We carry no inventory, and we take no markdown exposure. Our revenue is derived from a royalty on licensees' or retailers' sales.

Finally, in summary, as mentioned, our investors and licensing partners have asked why we are so excited by the influencer-led brand opportunity. Last quarter, we discussed the size of the influencer-led brand market, which is reported by Goldman Sachs as expected to exceed 2 trillion by 2035. That, coupled with recent changes in search, is why we are focused on these types of brands. As we mentioned last quarter, we believe we have fully entered the fast-growing market and will continue to penetrate it over the coming years.

We believe that each of our 8 existing brands has the potential to generate, on average, 7 million per year in royalty income by the end of 2030, based upon the proven experience of our team and platform, our influencer-led brands, and the macro changes in our industry being driven by AI. Lastly, the revenue and EBITDA exit multiples for fast-ascending influencer-led brands are significantly higher than those associated with legacy brands.

And with that, I would like to turn the call over to our CFO, Jim Haran, to cover our financial results for the quarter. Jim?

Thanks, Bob, and good morning, everyone. I will now briefly discuss our financial results for the quarter ended June 30, 2026. Revenue for the second quarter of 2026 was $1.1 million compared with $1.3 million for the prior year quarter, and were $2.3 million for the first 6 months of this year compared with $2.7 million for the first 6 months of last year. These year-over-year decreases were primarily attributable to the divestiture of the Judith Ripka brand.

We continue to explore opportunities to sell certain of our legacy brands and closed the sale of our Judith Ripka brand at approximately 6x gross royalty income in the second quarter. This is consistent with the sale multiple of our formerly owned brand, Isaac Mizrahi, and is further confirmation of the value of our brands.

Now turning back to our second quarter results. Direct operating cost expenses were essentially flat from the prior year quarter of approximately $1.9 million. And for the current 6-month period, direct operating costs were $4 million, a decrease of $200,000 from the prior year period.

It should be noted that the prior year quarter included an expense reduction of approximately $500,000 for employee retention credit refund. Excluding this prior year nonrecurring expense reduction, direct operating expenses decreased by approximately $500,000 and $700,000 from the prior year quarter and 6-month period, respectively.

Looking at our other costs and expenses, which were all noncash in nature, the prior year quarter and 6-month period notably included approximately a $300,000 and a $500,000 equity method loss and other related charges and adjustments for our equity investment in IM TopCo, which we later disposed of in the fourth quarter of 2025.

Interest and finance expense were approximately $0.9 million for the current quarter compared with $2.3 million in the prior year quarter. For the 6-month period, interest and finance expense was approximately $1.5 million in the current 6-month period compared with $2.9 million in the prior year period. These year-over-year decreases were primarily driven by a $1.9 million loss on the early extinguishment of our debt in the prior year periods relating to the April 2025 refinancing of our term debt.

As previously discussed, a majority of the interest due under our current debt will be paid in kind, meaning that it will accrue and will not require cash payment until 2027. Overall, we had a net loss for the current quarter of approximately $2.5 million, or minus $0.40 per share, compared with a net loss of $4 million, or minus $1.66 per share in the prior year quarter.

After adjusting for certain cash and noncash items, results on a non-GAAP basis were a net loss of approximately $1.3 million, or minus $0.21 per share for the current quarter, and a net loss of approximately $0.9 million, or minus $0.37 per share for the prior year quarter. Adjusted EBITDA loss for the current quarter was approximately $480,000 compared with a loss of $300,000 in the prior year quarter.

The second quarter EBITDA, when excluding the nonrecurring expense reduction in the prior year quarter referenced above, adjusted EBITDA improved by approximately $320,000. For the 6-month period, we had a net loss for the current 6 months of approximately $5 million or minus $0.82 per share, compared with a net loss of $6.8 million or minus $2.84 per share in the prior year period.

After adjusting for certain cash and noncash items, results on a non-GAAP basis were a net loss of approximately $2.7 million, or minus $0.44 per share, for the current 6 months, and a net loss of approximately $2.3 million, or minus $0.95 per share, for the prior year period. Adjusted EBITDA loss for the current 6 months was approximately $1.2 million compared with a loss of $1 million in the prior year period.

And again, the comparison year-over-year will be an improvement of $300,000 when excluding the nonrecurring item mentioned prior. Once again, as a reminder, our earnings press release and Form 10-Q present a full reconciliation of our non-GAAP measures with the most directly comparable GAAP measures.

Now turning to our balance sheet and liquidity. The company's balance sheet on June 30, 2026, reflected stockholders' equity of approximately $12 million, unrestricted cash and cash equivalents of approximately $400,000. In addition, the balance sheet included approximately $12 million of debt. In April, we repaid a portion of our variable interest rate term loan debt and entered into a $3 million of senior secured notes at a fixed interest rate.

During the current quarter, we paid $450,000 of the senior notes, predominantly with the proceeds of the Ripka brand sale. As previously discussed, in January 2026, we entered into a committed equity line facility giving us access up to $15 million of funding over the next 2 years for working capital and potential acquisition opportunities or at our discretion.

And with that, I would like to turn the call back over to Bob. Bob?

Thank you, Jim. This concludes our prepared remarks. Operator?

[Operator Instructions] There are no questions at this time. I will now turn the call back over to Mr. D'Loren for closing remarks.

Thank you, operator. Ladies and gentlemen, thank you all for your time this morning. We greatly appreciate your continued interest and support in Xcel Brands. As always, stay fit, eat well, and be healthy.

Ladies and gentlemen, that does concludes our conference call for today. You may all disconnect, and thank you for your participation.

Hello, and welcome. My name is Ayesha, and I will be your conference operator today. I would like to welcome everyone to the Xcel Brands Quarter 1 2026 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions] Thank you.

Good afternoon, everyone, and thank you for joining us. Welcome to the Xcel Brands First Quarter of 2026 Earnings Call. We greatly appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer, Robert D'Loren; and Chief Financial Officer, Jim Haran.

By now, everyone should have had access to the earnings release for the quarter ended March 31, 2026. In addition, we filed our quarterly report on Form 10-Q with the Securities and Exchange Commission last Thursday. The release and quarterly report will be available on the company's website at www.xcelbrands.com. This call is being webcast, and a replay will be available on the company's Investor Relations website.

Before we begin, please keep in mind that this call will contain forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today. These risk factors are explained in detail in the company's most recent annual report filed with the SEC. Xcel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time.

Finally, please note that on today's call, management will refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP diluted EPS and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period-to-period on a consistent basis and to identify business trends relating to the company's results of operations.

Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus, they provide supplemental information to assist investors in evaluating the company's financial results. These non-GAAP measures should not be considered in isolation or as alternatives to net income, earnings per share or any other measure of financial performance calculated and presented in accordance with GAAP.

You may refer to the attachment to the company's earnings release or the Form 10-Q for a reconciliation of non-GAAP measures.

And now I'm pleased to introduce Robert D'Loren, Chief Executive Officer. Bob, please go ahead.

Thank you, Seth. Good afternoon, everyone, and thank you for joining us today. I would like to start today's call with a brief update on recent developments since the recent filing of our annual Form 10-K and our outlook moving forward. After that, our CFO, Jim Haran, will discuss our financial results for the quarter in more detail.

We continue to work hard with all our licensee production partners, powerful influencers, and strategic retail partners to drive our business. We launched 2 of our influencer or creator-led brands towards the end of the first quarter, and we expect to launch 2 more in the fall and another in spring '27.

As we previously mentioned, we announced our influencer-led brands with Cesar Millan, Gemma Stafford, Jenny Martinez, Coco Rocha and Shannon Doherty. These influencer-led brands grew the social media following in our brand portfolio from 5 million to over 46 million. Based upon our pipeline of new influencer-led brands, we are on track to reach 100 million followers across our brand portfolio.

We began wholesale shipments with our licensees for 2 of our influencer-led brands during the first quarter and on-air programming commenced for them on QVC and HSN in the second quarter. As I mentioned, the other influencer-led brands will be shipping and launching throughout the rest of 2026 on interactive TV and at bricks and e-commerce retailers.

We are very pleased and optimistic given early results and demand for these brands. I should add that our TV and streaming content reaches well over 100 million households and generates tens of millions of media impressions per month. Many of our investors and licensing partners have asked, why we are so excited by the influencer-led brand opportunity?

Please allow me to illuminate this a little. According to a recent report issued by Goldman Sachs, the influencer or creator economy generated $254 billion of sales in 2025 and is expected to grow to over $2 trillion by 2035.

Why is this happening? Marketing dollars are shifting to influencers and influencer-led brands given the relatively high return on ad spend according to statistics from Shopify Influencer Marketing Hub. Industry surveys note that 67% of consumers trust influencer recommendations over legacy brand ads. We believe we have fully entered the fast-growing market and we'll continue to penetrate it over the coming years.

We continue to explore opportunities to sell certain of our legacy brands and closed the sale of our Judith Ripka brand at approximately 6x gross royalty income in Q2. This is consistent with the sale multiple of our formerly owned brand, Isaac Mizrahi and is further confirmation of the value of our brands.

I should note that recent analyst reports report that ascending influencer-led brands are trading at revenue multiples as high as 15x revenue.

We generated an adjusted EBITDA loss of approximately $700,000 in Q1, flat from the prior year quarter, which we expected. During the quarter, we had approximately $100,000 in nonrecurring expenses and lower HSN sales in Q1 caused by a change in the apparel supplier for our C. Wonder and Tower Hill by Christie Brinkley brand. Well, this change disrupted inventory availability in Q1, we have significantly improved product quality, which should drive sales going forward.

C. Wonder and Christie Brinkley remain 2 of the most popular brands on HSN. And the new licensee that supplied product on HSN began shipping during this quarter. With the supplier transition behind us, we expect significant growth in these brands compared to the past 2 quarters.

The Longaberger brand is scheduled to launch in spring of 2027 with new products co-created by Shannon Doherty. Shannon has 3 million followers and is perfect for Longaberger. We are pleased with the progress of our brand portfolio, and we believe revenue growth is now in front of us.

With that, I'd like to turn the call over to our CFO, Jim Haran, to cover our financial results for the quarter. Jim?

Thanks, Bob, and good afternoon, everyone. I will now briefly discuss our financial results for the quarter ended March 31, 2026. Revenue for the first quarter of 2026 was $1.1 million compared with $1.3 million for the first quarter of 2025. The decrease from prior year was primarily attributable to HSN's transition to a new apparel supplier for our C. Wonder and Christie Brinkley brands in the fourth quarter of 2025, which caused a temporary gap in wholesale shipments and negatively impacted sales for these brands and our associated licensing revenues during the current quarter.

Direct operating cost and expenses were $2.1 million for the current quarter, down from $2.3 million in the prior year quarter. This decrease from prior year was primarily attributable to cost reduction actions taken by management during 2025, which reduced payroll and benefit costs.

Looking at our other operating costs and expenses, which were all noncash in nature, during the current quarter, we recognized a small impairment charge of $61,000 to write down the value of the Judith Ripka trademarks, which we then subsequently sold in April for $2.3 million in cash plus future earn-out consideration.

Our depreciation and amortization expense for the current quarter was essentially flat from the first quarter of last year at approximately $0.9 million. Also on the prior year quarter notably included approximately $0.3 million of equity method losses and other related charges and adjustments for equity investment on IM Topco, which we were to dispose of in the fourth quarter of last year.

Interest and finance expense was approximately $0.59 million in the current quarter, up slightly from $0.56 million in the first quarter of last year. As you may recall, However, under our term loan agreement, a majority of the interest due under our current debt will be paid in kind, meaning that it will accrue and not require cash payments until starting 2027.

Overall, we had a net income loss for the current quarter of approximately $2.5 million or minus $0.42 per share compared with a net loss of $2.8 million or minus $1.18 per share in the prior year quarter. After adjusting for certain cash and noncash items, results on a non-GAAP basis were a net loss of approximately $1.4 million or minus $0.24 per share for the current quarter and a net loss of approximately $1.4 million or minus $0.58 per share for the prior year quarter.

Adjusted EBITDA loss for the current quarter was approximately $700,000, essentially flat from the prior year. Once again, as a reminder, our earnings press release and Form 10-Q present a full reconciliation of our non-GAAP measures of the most directly comparable GAAP measures.

Now turning to our balance sheet and liquidity. As of March 31, 2026, the company's balance sheet reflected stockholders' equity of approximately $13 million, restricted cash of $1.1 million and unrestricted cash of approximately $0.2 million.

I would also like to note that we have significant financing activity during the first quarter of 2026, extending into the month of April.

In January 2026, we entered into a committed equity line facility given us access up to $15 million of funding over the next 2 years for working capital and potential acquisition opportunities at our discretion. To date, we have not utilized any funding under this facility.

In February and March of this year, we executed certain amendments to our term loan debt, which set the stage for a significant debt financing transaction in April. In April, we paid a portion of our variable interest rate term loan debt and entered into $3 million of senior secured notes at a fixed interest rate.

And with that, I'd like to turn the call back over to Bob. Bob?

Thank you, Jim. Ladies and gentlemen, this concludes our prepared remarks. Operator?

[Operator Instructions]

Your first question comes from the line of Thomas Forte with Maxim Group.

So Bob and Jim, congrats on the progress. I have one question and one follow-up question. So Bob, can you talk about your current thoughts on your influencer pipeline? And then remind us on how long it typically takes from the initial conversation to revenue generation?

Yes. That's a good question, Tom. So generally speaking, from the date we signed with an influencer, it's a 12-month process to either get that influencer on-air with QVC or doing live streams on any one of the platforms that are out there today: TikTok, Amazon or any of the others. It all relates to product design and development. That's generally the period that it takes. And that's why you're seeing now many of the influencers that we signed last year are beginning to launch.

And we will be launching the first 5 that we executed with last year through the balance of this year. So Gemma Stafford, Jenny Martinez recently launched, next will be Cesar and then Coco Rocha, and then that will be followed by Shannon Doherty for the Longaberger brand.

Excellent. And then can you talk about your current cost structure and how we should think about the flow-through of incremental revenue dollars to the bottom line?

So we've been working hard to run the company as tight as we can. We were able to find some additional savings. We think that we will be able to continue to run at a lower operating cost. The goal is to get it down to around $7.5 million. And then as we ramp up because there's talent cost, which is all variable, expenses will increase as a percentage of the revenue generated by the influencers.

The next question comes from the line of Michael Kupinski with NOBLE Capital Markets.

It looks like an exciting year is building for you guys. Just a couple of things. I was wondering if you -- Bob, if you can give us an update on maybe some additional detail on the early performance of Mesa Mia by Jenny Martinez on HSN, including maybe sell-through trends, reorder activity, consumer engagement metrics, things like that.

Sure. Both Jenny and Gemma are scheduled throughout this year. And there's always a discovery period, Michael. Part is media discovery, which dayparts work best for a particular influencer or on-air guest. And then there's product discovery. We all do the best to design products that we think the customer wants. But sometimes, you just don't get it right regardless of market research analysis that we do.

And then we adjust. But the first shows I thought were good and as expected. We will make some tweaks to the product mix we found that for both Gemma and Jenny, there was a much stronger response to food products as opposed to hard kitchen products. So for the balance of this year, we'll lean more into food. The good news about food is we don't have long lead times on developing that product. All of that product is made in the United States.

Got you. And then I noticed that social media has kind of stepped up towards Cesar Millan recently. I was just wondering, do you have an update when Cesar Millan products will be launched. I know that you indicated in the fall maybe, but I was wondering if you have a specific date around that?

And then will this be a step rollout? Or will there be a significant number of products introduced all at one time? I'm just kind of curious on how the rollout is going to look like.

So typically, there's a cadence, Michael, to product categories when you build a licensing portfolio for any brand. But for Cesar, we expect there will be many more categories this year. In fact, our licensees are in the market selling as we speak for the fall into brick-and-mortar and e-commerce retailers like Amazon. We do expect to launch Cesars Amazon store in the next 60 days and the first products on the Amazon store will be EcoStrong cleaning products and shampoos and conditioners and collars, leashes and dog apparel and other dog accessories.

And then I know that I was just wondering if you could just talk a little bit about the retail expansion currently planned beyond QVC and HSN for some of your other brands as well.

So all of the brands are planned for distribution in brick-and-mortar and e-commerce retailers as well as on livestream platforms, including QVC and HSN. Today, we believe and we have always believed you have to be everywhere where people are shopping, and you can't exclude any of those distribution points. And we will roll out all the brands across all of those retail categories.

Got you. And then has the disruption from QVC restructuring normalized now? Have you seen any further impact on launch timing, vendor relationships or future distribution plans related to the QVC?

No, there was actually a little disruption from their restructure. I think it was a brilliant job that management did at QVC. They are paying all vendors on time as usual. And I believe that they are in a very, very good place at the moment to move forward into streaming.

Got you. And I know in the past -- I'm sorry, if I can sneak one more question in. I know in the past, you talked a little bit about the potential for acquisitions. Any additional color on the pipeline for future acquisitions, whether or strategic partnerships?

Well, there is -- there is a big strategic partnership that we've been working on for the last year, and we're hopeful that we'll be able to announce that before the end of the second quarter.

And then in terms of acquisitions, we look at many transactions every month, whether they're brand transactions or operating company acquisitions that would help with our distribution efforts. And certainly, if something were to come up along those lines, it would be transformative.

There are no further questions at this time. So I will now turn the call back to Robert D'Loren for closing remarks.

Thank you, operator. Ladies and gentlemen, thank you all for your time this afternoon. We greatly appreciate your continued interest and support in Xcel Brands. As always, stay fit, eat well and be healthy.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and welcome to the Xcel Brands Q4 2025 Earnings Call. [Operator Instructions]

Now I would like to turn the call over to Seth Burroughs. Seth, you may begin.

Good afternoon, everyone, and thank you for joining us. Welcome to the Xcel Brands Fourth Quarter of 2025 Earnings Call. We greatly appreciate your participation and interest. With us today on the call are Chairman and Chief Executive Officer, Robert D'Loren; and Chief Financial Officer, Jim Haran.

By now, everyone should have had access to the earnings release for the quarter and fiscal year ended December 31, 2025. In addition, we plan to file our annual report on Form 10-K with the Securities and Exchange Commission later this week. The release and the annual report will be available on the company's website at www.xcelbrands.com. This call is being webcast, and a replay will be available on the company's Investor Relations website.

Before we begin, please keep in mind that this call will contain forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today. These risk factors are explained in detail in the company's most recent annual report filed with the SEC. Xcel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time.

Finally, please note that on today's call, management will refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP diluted EPS and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends related to the company's results of operations.

Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not presented of our core business operating results. And thus, they provide supplemental information to assist investors in evaluating the company's financial results. These non-GAAP measures should not be considered in isolation or as alternatives to net income, earnings per share or any other measure of financial performance calculated and presented in accordance with GAAP. You may refer to the attachment to the company's earnings release or the 10-K for a reconciliation of non-GAAP measures.

And now I'm pleased to introduce Robert D'Loren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Seth. Good afternoon, everyone, and thank you for joining us today. I would like to start today's call with a brief update on recent developments from Q4 2025. And the full calendar year 2025 and our outlook moving forward. After that, our CFO, Jim Haran, will discuss our financial results in more detail.

In 2025, we worked hard with all our production partners and licensees to drive our business for 2026 ramp-up of the business. Also, we are -- also, we worked with UTG on a new business development strategy identifying prospective business licensing partners and continue to explore acquisition opportunities with them. 2025 was a year of getting back to basics and laying the foundations of growth for the future. after enduring 3 years of setbacks caused by COVID and the bankruptcy of the Lord & Taylor, which alone cost us over $3 million in related losses.

To start with building for the future in 2025, we announced our new influencer-led brands with Cesar Millan, Gemma Stafford, Jenny Martinez, Coco Rocha and Shannon Doherty. This grew the social media filing in our brand portfolio from $5 million to $46 million. we identified key category license opportunities for all these new influencer-led brands. Now all of these influencer-led brands will be launching throughout 2026.

And on interactive television and at bricks and e-commerce retailers. Interest in these brands has exceeded our expectations. We are on track with wholesale shipments by our licensees beginning in the first quarter of 2026 and on-air programming on QVC and HSN commencing in the second quarter. followed by distribution in other channels later this year. We believe that these new influence have led and our legacy brands each have the potential of reaching our goal of achieving annual royalty income on average of $6 million per year by 2029. We believe this would imply assuming royalty exit multiples remain at the current market average of 7x gross royalty income, a potential portfolio gross value for all of our existing influencer-led and legacy brands of $375 million.

As I mentioned, our social media reach across our portfolio is now $46 million and based on our pipeline of new influencer-led brand opportunities. We are well on our way to achieving our goal of 100 million social media followers across our brand portfolio. I should add that our TV and streaming content distribution is well over 100 million households. We believe the social media and broadcast and streaming reach of our brand portfolio is driving demand for our brands and products across all categories.

C. Wonder and Christie Brinkley remains some of the fastest-growing brands on HSN, and we have a new licensee that is designing and selling outstanding apparel products for these brands. Judith Ripka continues to operate on plan on TV revenues from JTV were up 23% from the prior year and we expect 2026 growth in product sales and related royalties to exceed 2025's actual sales. We expect that our Longaberger brand will launch in spring of 2027 with new products co-created by Shannon award. Shannon has 3 million social media followers and is perfect for the longer burger brand.

We generated an adjusted EBITDA loss of approximately $600,000 in Q4 and a $2.3 million loss for the full year 2020 and which is $187,000 improvement over the prior year quarter and a $1.2 million improvement over the full year 2024. Although our results improved year-over-year, it was less than our expectations. This was primarily attributable to a combination of a transition to a new apparel supplier for our C. Wonder and Tower Hill by Christie Brinkley brands and our pulse business not materializing as expected for the full year.

That said, Holston had a strong second half of 2025, and we are optimistic about Hulton's potential in 2026. Although we are pleased with the progress of our legacy and new influencer-led brands, we believe the worst is now -- and we believe the worst is now behind us. We remain cautious for the near term given the macroeconomic outlook for 2026, which has been shaped by lingering inflation, the full impact of trade tariffs, the war in Iran and, to some extent, a bifurcation in consumer spending.

With that, I would like to turn the call over to our CFO, Jim Haran, to cover our financial results for the fourth quarter and full calendar year 2025, Jim?

Thanks, Bob, and good afternoon, everyone. I will now briefly discuss our financial results for the quarter, fiscal year ended December 31, 2025.

Revenue was $1.17 million for the fourth quarter of 2025 compared with $1.1 million in the fourth quarter of 2024. This decline was primarily attributable to a transition to a new supplier for our HSN business during the quarter, causing a gap in wholesale shipments. On a full year basis, revenue was $4.94 million for the current year compared with $8.26 million for the prior year. This decrease was primarily driven by the June 2024 divestiture of the Lori Goldstein brand and the subsequent loss of the licensing revenues associated with our brand. Also, approximately $350,000 of the decline in revenue was attributable to the fact that in the prior year, we recognized revenue from the final sale of certain residual product inventory with no comparable announced in 2025.

Direct operating costs and expenses were $2.2 million for the current quarter, down 22% from the prior year quarter. For the current year, our direct operating costs were $8.57 million, a decrease of 33% from the prior year. For both the quarter and full fiscal year, the decrease in direct operating costs was primarily attributable to the business transformation and cost reduction actions taken by the company over the past 2 years.

The full year decline was partially attributable to the divestiture of the Lori Goldstein brand and the subsequent elimination of cost associated with that brand. As a result of the restructuring of our business model, we have reduced our payroll, operating and overhead costs to a run rate of approximately $8 million on an ongoing forward basis.

Looking at our other operating cost expenses, which are predominantly noncash in nature. Our depreciation and amortization expense was relatively flat from the fourth quarter of 2024 to the fourth quarter of this year. On a full year basis, depreciation and amortization expense declined from $4.9 million in 2024 to $3.6 million in 2025, which was a result of the sale of the Lori Goldstein business.

Interest and finance expense was $800,000 for the current quarter compared with $500,000 in the fourth quarter of last year. On a full year basis, interest and finance expense was $4.3 million for the current year versus $900,000 in 2024. These year-over-year increases primarily led to higher interest expense as a result of higher interest rates and higher average debt balances in the current year compared to last year. And in addition, during the current year, we recognized a $1.9 million loss on early extinguishment of debt from the April 2025 financing of our term loan.

Now that being said, it's important to remember that under our term loan, a majority of the interest due under our current debt will be payable in-kind media that will accrue and that required is until starting 2027. Overall, we had a net loss for the current quarter of approximately $2.8 million or minus $0.55 per share compared with a net loss of $7.1 million or minus $3 per share in the prior year quarter.

After adjusting for certain cash and noncash items, results on a non-GAAP basis were a net loss of approximately $1.6 million or $0.32 per share for the current quarter and a net loss of $1.6 million or minus $0.69 per share for the prior year quarter. Adjusted EBITDA loss for the current quarter was approximately $600,000 compared to a loss of $792,000 in the prior year quarter. This represents a 24% year-over-year improvement in EBITDA, which continues the trend and continue to make year-over-year EBITDA improvements over the past few quarters.

For the full fiscal year, we had a net loss of approximately $17.5 million or minus $5.08 per share on a GAAP basis compared with a net loss of $22.4 million or minus $9.84 per share in 2024. The net loss for the current year includes a $6 million loss under the divestiture of the equity investing [indiscernible] and a $1.9 million loss from extinguishment of debt. As a result, we had fully down our investment in the [ Mizrahi ] brand to 0 and divested all of our main equity interests in the brand, and therefore, will not incur any sub charges and losses going forward.

The net loss in the prior year included $11.8 million loss related to the equity investor on Taco, a $3.5 million asset impairment charge related to the company's former office lease and partially offset by a $3.8 million gain from the denture of the Lori Goldstein business.

On a non-GAAP basis, we had a net loss of $5.2 million or minus $1.52 per share, roughly comparable to a non-GAAP net loss in the prior year of $5.1 million or minus $2.23 per share. Our EBITDA for the current fiscal year was negative $2.3 million, a 35% improvement for EBITDA of negative $3.5 million for the prior fiscal year.

I'd like to reiterate that all of these charges are described within other operating cost expenses are product noncash in nature and nonrecurring and are excluded from our non-GAAP measures of performance. Once again, as a reminder, our earnings press release and Form 10-K present a full reconciliation of our non-GAAP measures with the most directly comparable GAAP measures.

Now turning to our balance sheet and our liquidity. In the very busy past few months as we have entered into a number of transactions to ensure we have the right capital structure in place to ensure appropriate liquidity to successfully execute on our business plan. In December 2025, the company closed on a private investment in a public equity transaction with net proceeds of approximately $1.8 million.

In January 2026. We entered into a committed equity line facility, giving us up to $15 million of funding over the next 2 years for working capital and potential acquisition opportunities at our discretion. As of December 31, 2025, the company's balance sheet reflected stockholders' equity of approximately $16 million, unrestricted cash of approximately $1.2 million and restricted cash of $1.7 million. Also as of December 31, 2025, we had $12.7 million of long-term debt.

And with that, I would like to turn the call back over to Bob. Bob?

Thank you, Jim. Ladies and gentlemen, this concludes our prepared remarks. Operator?

[Operator Instructions] And our first question comes from the line of Michael Kupinski with Noble Capital Markets.

It's Jacob Mutchler on for Michael today. I was just curious if you could provide a little bit of additional color around the Halston rollout for spring. I believe you mentioned on the last call that G-III was making some tweaks to merchandising. So any color on the spring role that would be appreciated.

So they haven't reported to us. So we don't know how their Spring '26 is going for them. They did have a good second half of '25 that we were happy to see. We believe that dresses are working well for them and that they're continuing to improve the sportswear line. But we were happy to see the second half of '25 perform really well. So that's what we know now. They usually report to us 45 days after the quarter. So we'll know. We'll know soon.

Got you. All right. And if you could also just briefly touch upon the cadence of those -- the influencer brands that are rolling out? Are they all expected to start selling in the first quarter? Are they going to be spread out throughout the year? And my apologies if you touched upon this in your prepared remarks.

So Cesar, Gema Jenny Martinez will launch now in this Q2 period on QVC and HSN. And by the back half of the year, we expect to be in some brick-and-mortar retailers and on Amazon. Starting on Amazon with Cesar, we're building an Amazon store. That will be the first of its kind in the pet category where Xcel will control what the store looks like. and oversee how each of the licensees market within the seasonal on trust respect store.

So we're excited about that. And then we'll follow with similar Amazon stores for the rest of our brands. Coco Rocha, will be launching later in the year. And when you think about the time it takes to go through design, product development, sample reviews, it usually takes about a year and Coco is the newest of the brands. So she'll be on the back half of the year.

Got you. And then just one last question. Could you provide any update on how or the adoption for the brands is going -- just curious if there's been any recent wins or progress with signing conditional brands?

So Olin Lancaster and I just finished the Pet Expo, which was 1.5 weeks ago in Orlando. We showed between 2 licensees, over 1,000 SKUs. And a lot of it was consumer-facing products, collars, leases, hydration systems, bowls, toys. And then some of it was deodorizers dog shampoo, conditioners detergents. And we had a great, great show great response to the product. And those are the first of the ether products to really be shown at a trade show. And we had great response from specialty retail as well as some of the big boxes. And our licensees over the next 30 to 60 days are taking orders, and we hope to be in store on shelves in August.

And then just to add to that for you, so you understand the cadence of this. Those are the first categories by design that we designed and launched, but now more categories will go into development like cheese and treat and hopefully, soon supplement and food containment systems, cages, dog beds, all of those are in the pipeline.

And our next question comes from the line of Thomas Forte with Maxim Group.

Great. So first off, Bob and Jim, congrats on the progress you made in '25. And Bob, thanks for sharing the $375 million opportunity for Xcel brands. I appreciated that. So 1 question, 1 follow-up. From a product standpoint, can you provide a high-level view on your mix by category including apparel, food, jewelry and pet and maybe give a sense of how that compares with your historical performance.

Sure. So historically, Tom, we've been concentrated in and fashion accessories like jewelry with Judith Ripka and custom jewelry with some of our other brands. Generally speaking, a majority of that production through our licensees and some of our retail partners that imported products under our brands themselves. We're severely disrupted because of tariffs. And we were still dealing with it in '25 in the apparel categories.

And we realized that one, we needed to pivot into consumer categories that were growing at a better rate than apparel. And two, we needed to focus on things where the major categories are produced in America. So when you think about food for human consumption, most of it is made here in America. It's not really a product that is important to a large degree. And the same thing holds true for dog food supplements.

Most of that product is made here in the U.S. So lead times are shorter. There's no tariff issues, and we viewed that as one, a hedge against tariffs because even in '25 where some of our factories, say, Cesar Millan, [indiscernible] things like that, are typically made in China, they had to pivot to India and then India, with a 50% duty, it caused delays and it's just the nature of dealing with what's happening politically in the world at the moment. And we will continue to look for brands and consumer categories that have less of this risk. We're not going to be able to reduce that 100%, but we will be leaning into more things that are made here.

Excellent. And then for my follow-up, you did a good job of explaining that historically, when you sign an influencer, there can be often a 1-year period for product design and things of that nature. But how would you characterize your current influencer pipeline? And are those the type -- is the -- are lead times on the pipeline such where you start conversations with the influencer? And then how long does it take for those conversations to turn into agreements and things of that nature?

So generally, when we start, when we identify an influencer that we're interested in. And the criteria for that, Tom, is they need to have and established credible voice in a category and unimpeachable credentials. And if they have those things, they are the types that we're interested in. We're less focused on celebrity brands where a celebrity that may be an actor or an actress is interested in promoting apparel or some other category beauty.

If there were a mega influencer of that type, we would look at it. But for the most part, when you think about people that have 10 million to 20 million, 30 million followers if they don't have that authenticity in the category, it's not something we would be interested in. And when we identify someone like a Cesar Millan or [ Gena, Stopford ], we generally -- that period of starting the conversation to draft an LOI and getting it into a definitive agreement is about 90 days.

And then from there, we start product development conceptual designs initially and then allow and find licensees that can develop the product communicate with factories, prepare tech packs, product samples are sent to us. We do the initial review. We may make changes and we go through another round and then it goes to the talent for review. There may be tweaks after that. The whole process is about a year. And while that is all happening, the licensees and Xcel are working with retailers to sell product into those retailers.

So that's approximately how the cycle works. Sometimes -- it could take a little longer. But for the most part, it's a year. And that's why in the licensing business, generally all license agreements have an 18-month first year for that very reason.

Excellent. I'm going to get back in the queue with potential follow-up questions. .

And our next question comes from the line of Howard Brous with Wellington Shields. .

I'm getting a good sense of a churn. How do we look like for 2027 and going forward?

So Howard, I would say the way to think about this is the goal here internally is to get each of the brands to $6 million of royalties on average by -- heading into 2029. So if you think about million spread over the next 3 years, I would put some of it into 2026. But then I would start to model in $2 million per year, say, per brand going into '27, '28, '29. And if you run out that model, what you might find in 2027 is $18 million of top line.

Jim covered expenses, we're running just about $8 million in overhead. That's what we think we could look like in the near term based on everything we have in the pipeline today in terms of license agreements and all the negotiations that are happening across all the brands, including cocoa, we think she is going to be great for what she does. And if there's anything more that you want to know about that, how would let me know, but I think that's how you should look at it.

We are basically talking about $84 million for the next getting -- this year '27, '28. You're talking about 2x EBITDA based on based on today's value. Is that your comment?

Yes. And if you think about -- if everything happens the way we believe it will, based on where we are with all of these new brands. And you think about $18 million times 7 in '27, that would imply $126 million value. And I think certainly, we've demonstrated that we sell our brands or those kinds of multiples. And if you back into what that would mean less our debt, the stock price does not reflect in any way, the value of the portfolio.

[Operator Instructions] And our next question comes from the line of Walter Schenker with MAZ Capital Advisors.

Just since we're using Cesar Millan and you gave a bunch of information about cadence for Cesar Millan and so how it goes forward. When you go to a show, and you show 1,000 different items, the cost of that's been borne by the suppliers?

Yes. Yes. the suppliers bear the product development costs. We're in there with advice and guidance on design, but we don't order samples from factories, Walter. And we don't incur the cost of setting up significant boots at these shows we attend the shows, and we solicit new potential licensees in categories that we're targeting. There may be a point where we do shared presentation booths when we have, say, when someone like Cesar Millan gets to 7 or 8, 10 signed license agreement, well, then we might make the world of Caesar. But at that point, revenues will be ramping up and sharing in the cost of a booth with 7 or 8 licensees, certainly something we would be willing to do.

You took us through the year and getting on the shelves in the latter part of the year, you collect a royalty when the and retailer sells it when the supplier you're dealing with sells it to a retailer question?

Both. So it depends what the channel is. So if it's a wholesaler if it's one of our licensees, we are paid when they ship in the quarter that they ship. So the goods that are going to be launching on QVC this month and next month and in June, for the most a lot of those goods have already been shipped into QVC's warehouses. And then as the wholesalers begin to ship, Amazon and other retailers will be paid. For a business that happens on QVC because the royalties are also tied to retail sales on QVC. When the goods are sold on QVC, then we're paid the royalties.

Okay. And so Cesar Millan is just since it seems to be sort of leading and maybe bigger as an opportunity at this point, you are expecting some revenue to be generated in the second quarter but more in the third quarter and even more in the fourth quarter. some seasonality maybe to some of the stuff you're selling. So Cesar will be generating revenues through the balance second half of the year shortly?

Yes, Cesar, Gemma and Jenny, Yes, because products are shipping, and we're out in the market with them. And if you recall, we signed Cesar Millan, Jenny and Gemma in the early part of last year. So they're the ones that -- products being delivered to the market now. Coco is more recent for us and she will begin to deliver products to the market or we will together for the second half of this year. And I would say more holiday just given the time line it takes to get product into the market. And then with Shannon Doherty for Longaberger because she is the most recent -- it will be a 27th product for us.

As a big picture, you have a handful of different brands and influencers all in what I would call a start-up phase where you're really getting going getting working with suppliers.

Yes, just the input. Holston, that's different. Wonder is different. Christie Brinkley is different. Those that are established brands. .

How does that affect your view, personally, maybe with the company's time and effort would adding further influences or adding and expanding business versus really concentrating on those in getting those start-ups, again, my term you term getting those startups off to a good start with your help?

So we are focused on the ones that we have -- but we are also, at the same time, looking for new talent in new categories. We do have a goal to get the brand portfolio to 100 million followers. QVC has been, I think, making a lot of the right decisions about pivoting to streaming. I don't know if you saw this, but last quarter, they were TikTok Jobs #1 seller. They are leaning into streaming now in a big way. And I think hopefully, they'll get through whatever restructure they have to do. and continue doing what they're doing because it's the right thing. And we are -- we are 5 for 5 with them on launching influencer-led brands on the network because this is their future, too.

So -- and we're seeing that even with the bricks retailers and Amazon Today, customer acquisition cost is extremely expensive. -- if you're doing it the traditional way and influencers change that dynamic. They come with a lot of reach, take someone like syndicated TV shows in 80 countries and 21 million highly engaged followers. If you speak with those followers in the right way, which we are very good at, we've been putting celebrities on television for many years. you can really help your retail partners to develop new customers at a much lower customer acquisition cost. And that's the whole point of what we're doing.

And now we have additional questions from Thomas Forte from Maxim Group.

Great. So last 2 for me, Bob. So you just talked about a 100 million follower goal by year-end. Can you talk about if you're on track for that?

We are. And we're in conversations with, I'll call it a celebrity for the moment, that could get us there, just that one, but there are more that we're focused on, another big one in the pet space and some additional ones in the food space.

And then my last question. I think you said that you have your associate operating costs at $8 million per. Does that mean that the incremental profitability of each extra dollar revenue is essentially 100%? How should we think about the profitability of the next dollar revenue?

I don't think the operating overhead will increase dramatically, except for the rev share that we have with the influencers but that's variable. It goes up only if the products are making sales and we're generating royalties. So we like where the overhead is now. Of course, we're working every day to try to find more efficient ways to do things. And AI is helping us to do that. Quite frankly, we're using it in design. We're using it in concepting. We're using it for strategic plans. I sat down with some of our younger, smarter people that really understand AI, and I think soon we'll be able to leverage Quad and Claw to do a lot of manual things that we've been doing in the office. So we're excited about what AI can do for the business, including using it for design.

There's no further questions at this time. I will now turn the call back over to Robert D'Loren for closing remarks. Bob?

Thank you. Ladies and gentlemen, in concluding, we have not been more excited about our business in several years. I want to thank every one of you for your support and for your time this afternoon. We greatly appreciate all of you. And as always, they fit, eat well and be healthy.

That concludes today's conference call. You may now disconnect.

Hello, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Xcel Brands Third Quarter 2035 Earnings Conference Call. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of Xcel Brands. And as a reminder, this conference call is being recorded.

I would now like to turn the call over to Seth Burroughs from the company. Seth, you may begin.

Good afternoon, everyone, and thank you for joining us. Welcome to the Xcel Brands Third Quarter of 2025 Earnings Call. We greatly appreciate your participation and interest. .

With us on the call today are Chairman and Chief Executive Officer, Robert D'Loren; and Chief Financial Officer, Jim Haran. By now, everyone should have had access to the earnings release for the quarter ended September 30, 2025, which went out this afternoon. In addition, the company will file with the Securities and Exchange Commission with this quarterly report on Form 10-Q for the quarter ended September 30, 2025, the release and the quarterly report will be available on the company's website at www.xcelbrands.com.

This call is being webcast and a replay will be available on the company's Investor Relations website. Before we begin, please keep in mind that this call will contain forward-looking statements. All forward-looking statements are subject to risks and uncertainties and that could cause actual results to differ materially from certain expectations discussed here today.

These risk factors are explained in detail in the company's most recent annual report filed with the SEC. Xcel does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time.

Finally, please note that on today's call, management will refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP diluted EPS and adjusted EBITDA. Our management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends related to the company's results of operations.

Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results. And thus, they provide supplemental information to assist investors in evaluating the company's financial results.

These non-GAAP measures should not be considered in isolation or as alternatives to net income, earnings per share or any other measure of financial performance calculated and presented in accordance with GAAP. You may refer to the attachment to the company's earnings release or to the 10-Q for a reconciliation of non-GAAP measures.

And now I'm pleased to introduce Robert D'Loren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Seth. Good afternoon, everyone, and thank you for joining us today. I would like to start today's call with a brief update on recent developments from the most recent quarter and our outlook moving forward. After that, our CFO, Jim Haran, will discuss our financial results in more detail. .

As you know, we closed a $2 million net equity offering in Q3, of which one of our directors, UTG and I together invested $935,000. This brings the total investment in financing the past 18 months by management and other insiders to approximately $2 million. $250,000 of the cash proceeds of the aforementioned equity offering were used to pay down our loan with First Eagle with the balance being used for general working capital purposes. We have been working with UTG on new business opportunities, which include leveraging UTG's sourcing platform to supply products to our retail partners leveraging their retail distribution in China and conducting continued due diligence on potential acquisitions.

We believe some of these transactions have the potential to be transformative for Xcel. Changes coming fast in our core business of video content distribution over linear TV as it moves to digital streaming and social commerce, in fact, just last week, TikTok Shops announced that their quarterly volume now exceeds that of eBay. We believe that we are positioned well to capitalize on this change given our investments in social commerce technology and our portfolio of influencer-led brands.

We continue to work hard with our production partners to drive our business. Earlier in the year, we announced our new influenza brands with Caesar Millan, Gemma Stafford, Jenny Martinez, Coco Rocha, and expect to announce a new influencer transaction for our Longaberger brand shortly.

These new influencer-led brands have diversified our product categories into food, kitchen, home and pet products and transitioned our supply chains to be more reliant on domestic production, especially in the human food and pet food and supplements categories. Also, we have identified key category license opportunities for all of these new influenza brands.

Our social media reach across our brand portfolio is now 46 million people with a strong pipeline of new influencer-led brands. We are on track to reach 100 million followers across our brand portfolio in 2026. C. Wonder and Christie Brinkley remain amongst the fastest-growing brands on HSN. We expect category and distribution expansion in both of these brands in 2026. Our pipeline of licensing activities is strong for all of our brands, especially the influencer-led brands.

All that said, we are approaching Q4 of this year with caution given the impacts of the tariffs on QVC, HSN and our licensees, including G-III for our Halston brand. I should note, that HSN's moved to OVC's Pennsylvania studios did disrupt our sales in both Tower Hill by Christie Brinkley and C. Wonder.

Judith Ripka continues to operate on plan and is up 6% over last year in retail sales on JTV, our Longaberger brand launches on QVC this fall and will be guessed and promoted by a strong, very talented influencer in the home and crafting space with over 3 million highly engaged followers. We believe she is perfect for our Longaberger brand.

We generated an adjusted EBITDA loss of $653,000 in Q3 and that is $400,000 or approximately a 38% improvement over Q3 2024. While we forecasted a range of $1 million to $2.5 million of adjusted EBITDA for 2025, much of it was weighted in the second half results of this year driven by the Halston business, which has not materialized as we had hoped. G-III remains committed to the Halston brand and is adjusting merchandising and design to get the brand back on plan. We believe that this is a timing issue and that we'll see further growth in 2026.

Finally, given the softness in the Halston business, we have entered into an amendment to our credit facility with our lender that provides, amongst other things, certain modifications to our loan covenants, elimination of certain early payment fees a release of a $1 million loan liquidity reserve as partial payment on the gross $3.2 million first Eco Term A loan balance and in exchange for repayment, the net First Eagle Term A balance of $2.2 million on or before February 2026. It is our intent to refinance this net First Eagle Term A $2.2 million portion of the loan as a stand-alone financing or in connection with another transaction we are considering.

With that, I would like to turn the call over to our CFO, Jim Haran, to cover our financial results for the third quarter. Jim?

Thanks, Bob, and good afternoon, everyone. I will now briefly discuss our financial results for the quarter and 9 months ended September 30, 2025. Net licensing revenues were $1.1 million for the current quarter compared with $1.5 million in the third quarter of 2024. This decline was primarily attributable to the more cautious consumer spending in the current economic environment and the lower-than-expected performance in our wholesome license as well as lower revenue recognized from a service agreement with[ An Topco ], which is signed.

On a year-to-date basis, net licensing revenues were $3.8 million for the current 9-month period compared with $6.5 million for the comparable period in the prior year. The decrease in licensing revenue was primarily attributable to the 2024 divestiture of the Lori Goldstein brand. Direct operating cost expenses were $2.2 million for the current quarter, down 23% from the prior year quarter. For the current mine, month period, direct operating costs was $6.3 million, a decrease of 36% from the prior year comparable period.

For both the quarter and year-to-date periods, the decrease in direct operating costs was primarily attributable to the business transformation and cost reduction actions taken by the company over the past 2 years as well as expenses related to the Lori Goldstein brand in the first half of 2024. As a result of the restructuring of our business model, we have reduced our payroll operating over cost to run rate of under $8 million on a per annum basis. Looking at our other operating cost and expenses, which are predominantly noncash in nature.

Our depreciation and amortization expense was relatively flat from the prior year quarter. On a year-to-date basis, depreciation and amortization expense declined from $4 million in the prior year to $2.7 million in the current 9-month period, a result of the sale of Lori Goldstein brand. We recognized noncash losses related to our equity method investment in the past 2 years. These amounts were related to our noncontrolling interest in the Isaac Mizrahi brand and were based upon a combination of our proportionate share of operating losses recognized impairment charges to write down the value of our investment and recorded similar noncash charges as we reduced our interest in the brand over time.

As a result, we have fully written down our investment in the Misrali brand. And going forward, we will not have to incur these charges and losses anymore. During the prior year 9-month period, we also recognized a $3.8 million gain on the divestiture of the Lori Goldstein brand. And in finessing that were impairment charges of $3.5 million related to the exit from and the sublease from our prior office location. I'd like to reiterate, however, that all these charges are described within the other operating costs and expenses are predominantly noncash in nature and are not recurring and are excluded from our non-GAAP measures of performance.

Turning to our interest and finance expense. Our interest and funding expense was $0.5 million for the current quarter compared with $0.1 million for the third quarter of last year. On a year-to-date basis, interest and finance expense was $3.4 million for the current 9 months versus $0.4 million in the prior year comparable period. These year-over-year increases primarily reflect higher interest expense a result of higher interest rates and higher average debt balance.

And in addition, during the current 9-month period, we recognized a $1.9 million loss on the early extinguishment of debt from the April 2025 refinancing of our term loan. And keep in mind, under our term loan agreement, a majority of the interest due under our current debt will be paid in time. Meaning they will recruit and not require cash payments until starting 2027.

Overall, we had a net loss for the current quarter of approximately $7.9 million or minus $2.02 per share compared with a net loss of $9.2 million or minus $3.92 per share in the prior year quarter. After adjusting for certain cash and noncash items, results on a non-GAAP basis or a net loss of approximately $1.3 million or minus $0.34 per share for the current quarter and a net loss of approximately $1.3 million or minus $0.57 per share for the prior year quarter.

Adjusted EBITDA for the current quarter was approximately negative $650,000 compared to negative $1 million in the third quarter of 2024. This represents a 38% year-over-year improvement in EBITDA, which is roughly comparable to the year-over-year EBITDA improvements we have been showing over the past few quarters. For the current 9 months, we had a net loss of approximately $14.7 million or minus $5.06 per share on a GAAP basis compared with a net loss of $15.3 million or minus $6.82 per share in the prior year 9 months.

On a non-GAAP basis, we had a net loss of $3.6 million or minus $1.24 per share, roughly comparable to a non-GAAP net loss in the prior year period of $3.4 million or minus $1.53 per share. Our year-to-date EBITDA for the current quarter was negative $1.65 million, a 38% improvement from EBITDA of negative 2.7% for the prior year comparable period. Once again, as a reminder, our earnings press release and Form 10-Q present a full reconciliation of our non-GAAP measures with the most directly comparable GAAP measures.

Now turning to our balance sheet and liquidity. During the current quarter, in August 2025, the company closed on a public equity offering and concurrent management-led private placement equity transaction for combined net proceeds of approximately $2 million. And as of September 30, 2025, the company's balance sheet reflected stockholders' equity of approximately $17 million and unrestricted cash of approximately $1.5 million and also reflected $12.5 million of long-term debt.

And with that, I would like to turn the call back over to Bob.

Thank you, Jim. This concludes our prepared remarks. Operator.

[Operator Instructions] Our first question comes from the line of Thomas Forte with the Maxim Group.

Great. So Bob and Jim, congrats on the quarter. I have 1 question and 1 follow-up. I'll go 1 at a time. Bob, in September, you announced what we thought was a pretty significant hire in addition to the company with the addition of Olin Lancaster's Chief Revenue Officer. Can you talk about the importance of that move and how you're able to attract him to Xcel brands?

Sure. Olin and I have long-standing relationship that took over 2 years for the stars to line up for him to come to Xcel. I'm very happy that he has joined us. brings over 25 years of experience to Xcel, having run very big divisions within Ralph Lauren and other companies.

And we have been working closely together traveling a great deal of the last couple of months to various different trade shows to get all of these new influencer brands launched with good licensing partners, and I look forward to working hard in '26 with Olin.

Great. And then for my follow-up, last quarter, you talked about having influencer brand products focused on domestic items such as food. Can you talk about things you've done in that area as a way to mitigate some of the tariff impact.

Yes. It's interesting that our timing was perfect and been signing Caesar, Gemma and Jenny, particularly, Gemma and Jenny because at QVC and other retailers are eager to make room for products that are sourced domestically, which the majority of food is.

So we're very excited about the prospects with Jenny and Gemma. We have begun signing licenses with various different licensees. And the same is true with Caesar for dog food and a majority of pet supplements are made here domestically. So timing was good with those. And to some extent, it mitigates tariff risk with a lot of the concentrations that we have in apparel and goods that are made in other countries.

That said, most of our licensees have been shifting out of China to other places that are a little more tower friendly. QVC is still working on that transition in some of their categories. But we're excited for Gemma and for Jenny and Caesar. They are all launching on QVC coming up in Q1. So timing was good for us.

Your next question comes from the line of Michael Kupinski with NOBLE Capital Markets.

Just a couple of quick questions. In terms of the disruption with the C. Wonder and Christie in the fourth quarter. I was just wondering, have those issues been resolved? Are they still lingering? I was just wondering if it's a temporary situation? Or is it something that still needs to be resolved?

No, it has been resolved, Mike. It was really related to the vendor that was supplying to OVC they just couldn't get the costing to work with the tariffs. And we since then replaced that vendor and they're sourcing from different countries where the economics work for QVC. So that was part of it. .

And the other part of it was there was disruption when HSN, which Christie and C. Wonder HSN brands move from Tampa to Westchester PA. It just caused delays and shows, but all of that has been resolved. It was actually remarkably good in terms of how QVC did the transition. But there was some programming challenges.

Great. And then in terms of G-III, I think you mentioned that they're taking some merchandising. Is that weak going to be able to be done for the spring line? Or is that going to be more of a fall line?

I think there will be some adjustments for spring because they've been making them all along. But I think it's really more a fall adjustment for them. And Olin and Joe Falco have been working very closely with the G-III team. .

Got you. And then obviously, you have a lot of new brands that are coming out. I was just wondering if you have any updates on the product road map like maybe when the rollout for these brands? Any updates on when they are going to start hitting the market?

All of them will start hitting the market that start beginning Q1 of '26. So it will start with all the food products, some small electronics devices that were not were vendor was able to source competitively despite the tariff situation, and then they'll continue to roll out into different categories.

Caesar, we had a big pet accessories program that we signed last year, and there were delays we thought that could get out for this holiday season, but because of tariffs, they had to move to different factories, and we shifted. But that all should really be in the market by fall next year.

Got you. Bob, I don't want you to say anything you can't -- obviously can't say, but you did allude to an acquisition that you're contemplating. It might be kind of good to remind investors what types of acquisitions you've been kind of contemplating in the past?

And what will you -- what those acquisitions might bring to the table that you might be more -- most excited about?

So over the last 3 years or so, we've been looking for brand acquisitions and transformative transactions. And we continue to look at opportunities, I would say, in the general course of our business, we're looking at opportunities. There are a few that we are very interested in, and we're working very hard to try to make them happen.

Your next question comes from the line of Walter Schenker with MAZ Partners.

Bob, It is admirable to cut costs. However, you can cut cost to profitability if you don't have revenues. The questions that were asked sort of address some of the issue, which is you need to get your revenues meaningfully higher than they are now to break even, even on a cash flow basis.

Can you sort of lay out how you look at the next 12 months and the revenue ramp without specific -- can be specific as you feel comfortable. But that sort of give us some sense of what we should be looking to as a road map to get the revenues to a few million a quarter?

Yes. So the road map is we're launching 5 new influencer-led brands that we think will drive revenue going into '26. And also, we now believe that some of the difficulties we experienced with both Christie Brinkley and our C. Wonder brand because of tariffs and the move are behind us. And we think we have great upside. We also plan this going into '26 to expand new categories, particularly with the Christie brand into home and garden and beverage. And with C. Wonder, we believe that '26 will be the year that we can also diversify into new sales channels. So that's the road map, and that's what Olin and I are working on a day-to-day basis to maximize the opportunity with all of the brands in the portfolio.

And then, of course, we do have a pipeline of additional brands that we are working on with influencers to bring to the market, hopefully as soon as fall next year. So that's the road map.

And therefore -- and again, you addressed some of this already, as we get into next year, each quarter should sequentially show higher revenues. I realize there's some seasonality. But each quarter should given the ramp in the 5 new influences, additional people and straightening out some of the issues you've had with your existing lines would pretty much sequentially show growth?

Correct, correct because they're all coming online. And hopefully, we can work with the team that is running the Halston brand, and we can help them to really accelerate growth in that brand as well. .

Your next question comes from the line of Howard Brous with Wellington Shields.

Just a follow-up, Walter's question. Can you give us a sense of how we can look at 2026 in terms of potential revenue?

Howard, there's -- we haven't given guidance, but there are 2 analyst reports out there, 1 that I think is a conservative view. And the other that is consistent, I believe, with our internal goals for what we think we can do with the brands. And I would look to those 2 reports to get a sense of where we think that can be, for us. The important metric for us is top line royalty revenue, royalties in the marketplace, Howard. They've been trading at higher values recently, particularly in the PE world, they're trading today for between 7 and 8x royalty, top line royalty 15x EBITDA.

And with royalties trading at that level, there's a massive disconnect even with where we are today with the market cap of the company because if you take the worst case base of $6 million, times 7 or 8x, that would imply we have $45 million to $50 million of asset value in the IP. And I've been saying this for years, there's always this disconnect.

And certainly, we proved that with the sale of our Isaac Mizrahi brand in 2022. So if you look at where the analysts have us if we are successful in achieving our goal and getting all these categories with the new brands launched it would imply $100 million of value on the royalty flows. And that's an important metric for us to look at.

Another question from Walter Schenker with MAZ Partners.

probably to end on a high note. Bob, you have previously been talking to investors indicated over a multiyear time frame that the opportunities that you have lined up now could potentially get $50 million of royalty income happen, again, my numbers, half of that to you so that you could have $25 million, we look at your share count earn a lot of money. That is still a potential target out a few years?

Yes. Yes. These brands are very powerful, particularly Caesar Millan. These are his -- the biggest voice in the pet world. There is a lot of interest in him with 20 million followers and syndicated TV shows in 80 countries. There's a global opportunity with him. So we're very excited about that. And Jenny Martinez, she could be the Latin Martha Stewart. And Gemma and when you think about the magnitude of 500 million people having downloaded our recipes, it's the potential with them is enormous.

Okay. Just again, I want to reaffirm that a few years you're still looking for especially relative to where we're now very big numbers, at least on a per share basis.

That's the goal.

Good Well, hopefully, we'll always be achieve it.

At this time, there are no further questions. I would now like to turn the call back over to Mr. D'Loren for closing remarks.

Okay. Guys, before I give you my closing remarks. I do want to extend a special thanks to Seth Burroughs for joining us on this call at midnight his time. And with that, ladies and gentlemen, thank you all for your time this evening. We greatly appreciate your continued interest and support in Xcel Brands. As always, we stay fit, eat well and be healthy.

Ladies and gentlemen, that does conclude our conference call for today. You may all disconnect your lines, and we would like to thank you for participating.