Iconix Brand Group, Inc. (ICON)
Q3 2012 Earnings Call
November 1, 2012 9:00 am ET
Neil Cole – Chairman, President and Chief Executive Officer
Warren Clamen – Executive Vice President and Chief Financial Officer
Eric Beder – Brean Murray, Carret
Jessica Anne Schoen – Barclays Capital Inc.
Jim Chartier – Monness, Crespi, Hardt & Co.
Steve Marotta – C.L. King & Associates, Inc.
Diana Katz – Lazard Capital Markets
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Before we begin, the company has asked me to read the following statement, Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this conference call are forward-looking statements that involve a number of risks, uncertainties and other factors, all of which are difficult or impossible to predict and many of which are beyond the control of the company.
This may cause the actual results, performance or achievements of the company to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements.
The words believe, anticipate, expect, confident and similar expressions identify forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.
I would like to welcome today Mr. Neil Cole, Chief Executive Officer, and Mr. Warren Clamen, Chief Financial Officer.
I would like to turn the presentation over to your host for today’s call, Mr. Warren Clamen, Chief Financial Officer. Please proceed, sir.
Thank you. Good morning everyone, and welcome to the Iconix Brand Group third quarter 2012 earnings conference call. On today’s call, we will review our third quarter financial results, provide an update on our existing portfolio of brands, and discuss our recent announcement to acquire the Umbro brand, as well as our outlook for 2012 and 2013.
Reviewing results for the third quarter ended September 30, 2012, revenue was $86.6 million, as compared to $92.7 million in the third quarter of 2011. As anticipated, healthy trends across the majority of our portfolio continued to be offset by the transition of Royal Velvet license and the year-over-year declines in our Men’s businesses.
In the third quarter, we generated $43.2 million of free cash flow or $0.61 per diluted share, compared to $44.6 million or $0.59 per diluted share in the prior year quarter.
EBITDA in the third quarter was approximately $51.8 million as compared to $55.3 million in the prior year quarter, and our EBITDA margin in the third quarter was approximately 60%.
Non-GAAP net income, which excludes non-cash interest related to our convertible notes, was $28.7 million as compared to $30.1 million in the prior year quarter. Diluted non-GAAP earnings per share was $0.41 compared to $0.40 in the prior year quarter.
GAAP net income in the third quarter was approximately $27.1 million, a 4% increase, as compared to approximately $26 million in the prior year quarter and GAAP diluted EPS was $0.38 compared to $0.34 in the prior year quarter.
Reviewing our results for the nine months ended September 30, 2012, our revenue was approximately $268.7 million. We generated free cash flow of approximately $142.6 million, or $1.97 per diluted share. Our EBITDA was approximately $167 million, and our EBITDA margin for the nine months was approximately 62%. Our non-GAAP net income was approximately $93.1 million and our non-GAAP earnings per share was $1.28.
EBITDA, free cash flow, non-GAAP net income and non-GAAP diluted EPS are all non-GAAP metrics and reconciliation tables for each can be found in the press release sent earlier this morning and on our website iconixbrand.com.
Moving on to our balance sheet, as we announced yesterday, we intend to launch a new $1.1 billion securitization program during this quarter. However, due to securities law restrictions related to private placements we will not be discussing the proposed securitization, or answering any questions regarding that on the call today.
As for share repurchases, since initiating our $200 million program a year ago, we have already bought back $107 million, and plan to continue to evaluate share repurchases as an effective use of our cash. Today, we have approximately $93 million remaining under the current share repurchase program.
With that, I will turn the call over to Neil Cole, our Chief Executive Officer. Neil.
Thank you, Warren. Good morning everyone. Over the past few weeks we have announced several exciting initiatives, including the acquisition of Umbro and the launch of a new movie, that we believe positions our company for long-term growth.
While 2012 has had certain challenges for us with the transition of the Royal Velvet license and a tough Men’s business, we were excited about our growth prospects heading into 2013 as we further expand our international footprint, and begin to see stabilization in some of our Men’s brands.
For our Men’s brands, we expect to see an improvement in 2013 as we focus on expanding distribution, specifically for our Rocawear brand. Earlier this month, our licensee opened its first Rocawear store at the Barclays Center, in coordination with Jay-Z’s historic Eight Night Shows, and we expect an additional 4 to 6 stores to be open in time for this year’s Black Friday.