Good day, and welcome to the Xcel Brands Fiscal Third Quarter 2017 Investor Conference Call. Please be advised that reproduction of this call, in whole or 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 Andrew Berger of SM Berger & Company. Thank you. Andrew, you may now begin.

Thanks, Cynthia. Good evening, everyone, and thank you for joining us tonight. We appreciate your participation and interest. With us on the call today are Chairman and Chief Executive Officer, Robert D'Loren; Chief Financial Officer, Jim Haran; and EVP of Business Development and Treasury, Seth Burroughs. By now, everyone should have had access to the earnings release for the third quarter ended September 30, 2017, which went out earlier today. And in addition, the company plans to file with the Securities and Exchange Commission its quarterly report on Form 10-Q by early next week. A 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 SEC filings. 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. Finally, please note that on today's call, management will refer to certain non-GAAP financial measures, such as 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 operation. 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 be considered -- 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 Part 1, Item 2 of the Form 10-Q for a reconciliation of non-GAAP measures. Now I'm pleased to introduce Robert D'Loren, Chairman and Chief Executive Officer. Bob, please go ahead.

Thank you, Andrew. Good evening, everyone, and thank you for joining us. I'll start this evening with an overview of our 2017 third quarter and then provide some thoughts on the rest of the year. After that, our CFO, Jim Haran, will discuss our financial results in more detail. And then, we will conclude by opening up the call for Q&A. We are encouraged by the direction of our -- we are encouraged by the direction our business is headed and as we proactively manage expenses and increase profitability while reinvesting our operating cash flow in growth-producing initiatives. Xcel's strong balance sheet, growth-oriented strategy and flexible operating structure enable us to navigate a retail landscape that is undergoing unprecedented transformation and make strategic investments in initiatives such as our integrated technologies platform, which I will discuss further on our call today, and which we believe will drive further growth in our business across all channels of distribution. Overall, we believe that Xcel is well-positioned to succeed and now at an inflection point that will demonstrate accelerated momentum in our business and create long-term value for our shareholders. Looking at our third quarter 2017 financial results, Xcel produced improvements in operating income, primarily due to lower operating costs as certain expenses related to organizing, launching and developing our fast-to-market production platform was eliminated. Top line revenues were impacted by the previously reported transition of the C. Wonder brand to our hotel department store platform and the transition of the Judith Ripka hotel business to a new licensee, both of which we expect to generate positive results for the brand in the coming year. Xcel's department store business and fast-to-market production platform continues to grow as we gain market share, improve performance, increase our door count and expand into more product categories.…

Thanks, Bob, and good evening, everybody. The following discussions relate to our financial results for the 2017 third quarter. In the third quarter, net revenues decreased by approximately 5% to $7.9 million, compared with $8.3 million in the prior year quarter. This is primarily attributable to lower revenue from C. Wonder brand, the discontinuance of the LCNY brand on QVC and lower wholesale royalties from our jewelry business as we transitioned to our new licensee. These decreases were partially offset by higher revenues from our wholesale department store business. Our GAAP net income for the quarter was $252,000 or $0.01 per diluted share compared with a GAAP net income of $118,000 or $0.01 per diluted share in the prior year quarter. The increase in net income compared with the prior year was primarily driven by decreased operating costs and expenses as we eliminated some startup costs associated with launching and developing the fast-to-market production platform. Net income further benefited from the declining interest in and finance expenses. Non-GAAP net income for the current quarter was $1.6 million or $0.09 per diluted share, based on approximately 18.9 million of weighted average shares outstanding compared with non-GAAP net income of $1.5 million or $0.08 per diluted share, based on approximately 19.1 million weighted average shares outstanding in the prior year quarter. Adjusted EBITDA in the current quarter was approximately $2.4 million, comparable to the prior year quarter's adjusted EBITDA of $2.3 million. Moving to our 9-month results. Net revenues for the 9 months ended September 30, 2017, decreased by approximately 4% to $24.7 million, compared with $25.8 million in the same period in 2016. The decrease was primarily due to lower revenue associated with the C. Wonder brand and the LCNY brand previously discussed. This decrease were partially offset by an increase…

Thank you, Jim. During the third quarter, we made considerable progress in gaining market share in new channels of distribution and building long-term sustainable growth for the company. While our revenues were impacted by the transition of our C. Wonder brand and near-term challenges within the jewelry industry overall that we are addressing, our brands across all channels of distribution are delivering solid performance. The growth and interest in our fast-to-market production platform positively attest to our expectation of continued double-digit growth rate for the foreseeable future. As we approach the end of the year and head towards 2018, we expect momentum in our business to accelerate because of Xcel's unique and differentiated media design production and technology platform. This concludes our prepared remarks. Jim, Seth and I are now available to take questions. Operator?

[Operator Instructions] We will take our question from Eric Beder, B. Riley FBR.

Could you talk a little bit about C. Wonder. I know you've moved it over. What should we be expecting in terms of that brand going forward? When do you think you'll have something to talk about with C. Wonder? What do you think kind of brand it can be?

I think you can expect to see similar distribution to what we have today in the department store channel, Eric. And I would say to look for product beginning to hit the stores in late spring of 2018.

Okay. And when you look at business model that you've set up, are you seeing the leverage you expected now that you're adding Dillard's to the mix and you've gone through basically a year with a year[indiscernible] plus with Lord & Taylor and Hudson's Bay?

Yes. One, we were able to eliminate a lot of startup overhead, we really needed to put more people than we needed for the ongoing operations of the business to get it up and started. We had outside advisers helping us to get the process put in place that we're currently utilizing for the business. So we've been able to reduce operating expenses and now improve the margins on the business as we begin to scale. Dillard's was an important piece of that for us in making it all work. So yes, the answer is we're able to now really begin to scale this.

And Eric, I would add to that, this is Seth, I would add to that, in terms of what we're focused for the future, and Bob mentioned this in his remarks, we're really -- so we are getting leverage as we grow that business in the department store. We are focused. And because we -- as you know, we have very low leverage ratio. We can actually allocate some of our free cash flow towards reinvesting in the growth. So as Bob mentioned, as we grow the platform, we are focused on selectively reinvesting and carefully reinvesting in the integrated technologies platform that he mentioned. So that further positions us to continue to take market share. So yes, we're getting leverage. And as we continue to gain leverage, we're also carefully reinvesting a portion of that leverage that we're obtaining back in the technology and the advanced technology platform that will help us grow.

Great. In terms of QVC, what are you seeing there in terms of growth? And what are the opportunities at QVC? I know you pulled back on C. Wonder, but with Isaac and Halston and some of the other ones, what are your opportunities there for growth? What do you think it should be?

So we had a very good results this year, particularly with Isaac and Halston, quite frankly, in apparel. We see continued improvement with apparel at QVC. We are introducing a denim line for Isaac and for Halston in the spring in '18. So that will be a whole new category for us. Judith Ripka, we are working on changing the product mix. We're adding more gold. There's been a general shift in the consumers' taste for what I would call more sophisticated form of jewelry. There's definitely a trend toward more casual jewelry and we're making that shift. So expect to see more casual jewelry coming from Judith Ripka into 2018. And we think adjusting that product mix will really help the business going forward. So we expect that continued growth in our apparel lines with QVC.

Great. And last question, you guys are -- you have very low debt levels here, you are handling it really well, unlike most of your brethren. What would -- what kind of acquisition do you want that would want you to decide to level up? And what would be the peak that you think you could see for it?

So it's -- we are in an interesting moment in time in the industry, Eric. The pendulum has swung a little bit more to private label and proprietary brands with our retail partners. I think the kinds of things that will come out of this swing in the pendulum are more things like Highline, which has been very successful for us where we created a brand for them and gave them a point of view and are making fast delivery, so that we're kind of right with the product on a monthly basis. So I think there will be more opportunities like that. We are exploring joint ventures with other media partners to exploit their assets, primarily with cable and network television shows. And I would say, on the acquisition front, these are challenging times. There are a lot of companies that are distressed. And with the right opportunity, we'd be opportunistic in making an acquisition that fits our core competencies in women's apparel.

This will conclude our question-and-answer session. I will now turn the call back over to management and Bob D'Loren for closing comments.

So ladies and gentlemen, thank you for joining us tonight. We greatly appreciate your continued interest and support in Xcel Brands. As always, stay fit, eat well and be healthy.

This will conclude today's conference call. We thank you for your participation. And you may disconnect at this time.