Good day, and welcome to the Xcel Brands' Fiscal 2018 First Quarter Investor Conference Call. Please note that today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Berger. Please go ahead, sir.

Thank you, John. Good evening, everyone, and thank you for joining us. 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 Executive Vice President of Business Development and Treasury, Seth Burroughs. By now, everyone should have had access to the earnings release for the first quarter ended March 31, 2018, which went out earlier today. And in addition, the company plans to file with the SEC its quarterly report on Form 10-Q tomorrow, May 15, 2018. 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 can 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 earnings per share 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 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 an alternative 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 attachments 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, Stan. Good evening, everyone, and thank you for joining us. I'll start with an overview of our recent financial performance 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 the call for Q&A. With that, I'll begin. We showed an improvement in first quarter revenues, which was a result of the commencement of our wholesale and e-commerce jewelry business and a 45% increase in revenues from our department store business compared with the prior year quarter. Our GAAP net income increased 225% from the prior year quarter, and our non-GAAP net income and adjusted EBITDA increased 26% and 11%, respectively, compared with the last year. We are continuing our transition from a licensing company to a technology-based operating company that provides a 360-degree solution for our retail customers. We believe our operating platform, including our fast-to-market production and integrated technologies capabilities, provides us with significant competitive advantages compared with more traditional wholesale and licensing companies. We believe we are well positioned for sustainable long growth. Now taking a closer look at our business by distribution channel. In our interactive television business, we continue to work closely with QVC to engage our existing customers, identify new customers and look for opportunities for expansion in this channel. We remain committed to driving customer engagement with exclusive offerings and collections and through the customer engagement created by our on-air talent. As we grow our audience, we are expanding our apparel collection programs into new categories while consistently adjusting our merchandise mix based on customer feedback. With respect to our Judith Ripka jewelry brand on QVC, we are still experiencing headwinds in the jewelry category. We continue to work…

Thanks, Bob, and good evening, everybody. I will briefly discuss selected financial results for the quarter ended March 31, 2018. Please note that our financial results are described more fully in our quarterly report on Form 10-Q, which will be filed with the SEC tomorrow, May 15, 2018. In the first quarter of 2018, total revenues increased by approximately 4% to $8.8 million compared with $8.4 million in the prior year quarter. Commencing this quarter, we separately present in a condensed consolidated statement of operations, sales and cost of goods sold related to our jewelry wholesale and e-commerce operations. Our jewelry wholesale and e-commerce business contributed $0.29 million to the overall increase in total revenues in the current quarter and $0.11 million to our net revenues. Additionally, our licensing revenue showed an increase of $0.05 million in the current quarter, which was primarily due to higher net revenues from our wholesale and department store business. These increases in revenue were partially offset by lower net revenue from the C. Wonder brand that, as previously disclosed, has transitioned away from QVC. This will be the last quarter we have a negative comparable with 2017 for C. Wonder revenues generated from QVC. Effective January 1, 2018, we adopted the new FASB revenue guidance Accounting Standard Codification 606 under the modified retrospective adoption method by applying the new guidance to contracts that were not completed as of January 1, 2018. The adoption did not result in material differences from the company's prior revenue recognition policies or revenue recognized in the current quarter. On a GAAP basis, our net income was approximately $0.5 million for the quarter ended March 31, 2018, or $0.03 per diluted share. This compares to a GAAP net loss of $0.4 million or approximately negative $0.02 per diluted share in…

Thank you, Jim. Ladies and gentlemen, this concludes our prepared remarks. Jim, Seth and I are now available to take your questions. Operator?

[Operator Instructions] We will take our first question from Larry Leeds from Buckingham Capital Management.

Question, your department store business was up 45%. The extent -- if you eliminate the one line that closed with QVC, was the rest of your business up with QVC, Isaac and H?

Yes. So our Judith Ripka business and our Halston business on interactive television were flat.

But how -- let me ask, how was your Isaac business and how was your H Halston business?

Isaac was up, and Halston was flat from last year.

Say that again? I didn't hear.

Isaac Mizrahi brand was up, and our Halston business was flat from last year.

Okay. And Ripka was down [indiscernible] going away?

No, they were flat. What we were down was with C. Wonder.

So now how do you project for the rest of the year your QVC business from now on through the end of the year compared to last year?

So Larry, Isaac is exceeding plan and Halston is on plan.

Let me repeat my question, Bob. How do you project in total for the next 9 months, how your business for that 9 months will be against your business with the QVC same 9 months last year?

We expect to be up. We expect to be up because Isaac is doing very well for us.

And we expect on directed television, Judith Ripka and Halston to be flat. And we would have a negative comparable with C. Wonder for the rest of the year.

And you said you had a bunch of new products in there, too.

Yes, we do. We've now launched our SoHo line. We're launching Isaac Mizrahi denim on QVC and also Halston denim. So we would expect to finish the year strongly based on…

Now if I heard correctly, which I often don't, you mentioned in your remarks that you were going to speak about the remainder of the year and make your -- you said during this call, you would discuss the rest of this year and we didn't hear you do that.

Larry, this is Seth. As you know, we don't currently give guidance on the remainder of the year. We do have an analyst covering the stock. I'm not sure [indiscernible].

No, I don't think you do anymore. Didn't he leave?

D.A. Davidson?

Yes.

No, in fact, he initiated coverage today.

He moved? Where is he?

At D.A. Davidson.

From D.A. Davidson.

Okay, good. I'm glad you got somebody. But I think you -- I think just from my experience, that you're the only person I know that doesn't give some kind of guidance or reference or discussion to the rest of year. What are we supposed to do with shareholders when you do it first quarter and then you leave it blank? I mean, I've never seen a company not give some kind of at least for the next quarter and talk somewhat generally about the rest of the year. I suggest you do so because everybody does.

Well, we have said to the market various different times that we expect to be up by 25% top and bottom line, and our numbers this quarter are consistent with that so that's where we think we will be.

Yes. And Larry, for the future, we'll certainly take that comment into consideration. The department store business is a new business, but we'll certainly take that into consideration.

Your educated guess should be a lot better than our educated guess.

Understood.

And I point out to you, if you want to talk to your fellow from Davidson. With all the great things you're doing, you made $0.26 last year and you're projecting $0.27 this year. Now what I hear, I think I would be extremely disappointed if going from having so many relative victories that your earnings don't grow. And if your sales are going to grow 25%, your earnings should certainly grow significantly. So no one is going to buy the stock with a $0.27 -- because 10x earnings, you're a 10x earnings company for that -- or 9x for that number. If you do better and people think you're going to do better, they'll be interested in purchasing the stock. So those are my comments. Now I leave you to address why shareholders should hold the stock and why new shareholders should buy the stock.

I'm not sure if that's a question, Larry.

And I know it's a -- well, that's a statement that -- it's a request almost for you to give some kind of explanation as to why you're going to have basically flat earnings with a 25% sales increase and a lot of good things happening.

I don't think we ever said that.

I've said my piece and I leave it to you guys to respond at your convenience.

Okay. Noted.

And our next question comes from Michael Kawamoto from D.A. Davidson.

So first one, just can you elaborate on that Walmart platform you talked about and what that looks like? Is that going to be part of Walmart's current e-commerce site?

Yes, Walmart has created a marketplace very similar to Amazon's marketplace. And one of the first retail participants is Lord & Taylor. So starting May 15, what we will see on Walmart's e-commerce platform is the equivalent of a shop-in-shops on walmart.com offering products at Lord & Taylor. Lord & Taylor will be the retailer of record, and they will offer a variety of brands that they currently carry at Lord & Taylor on walmart.com. What we know is that Walmart currently has 100 million visitors per month come to their website, and it is hard to predict with a high level of certainty what this means. It's -- this is all new. It is changing the industry. We believe it is incredibly innovative and a sign of the times, and stay tuned.

That sounds good. And then can we get an update just on how discussions are going around new programs on that QTR platform?

So we are in discussions with nearly every major department store to either do branded or private label programs for them. In addition to department stores, we're in discussions with many of the digitally native companies that are very interested in the technology and the speed of which we can design and produce garments. So we would expect that those will be revenue drivers for us in the future.

Great. And then you've had to do this Ripka site up for a few months. Is there anything you're learning there? And then are you still on plan to do an apparel site by the end of the year?

I would say the Judith Ripka e-commerce business is going well for us. One of the surprises is the age of the customer base on the e-commerce platform. It is much younger than we anticipated, and we're still learning from the results of the sales on that platform. I would say we'll begin to explore additional direct-to-consumer opportunities with our apparel brands now that we have the supply chain in place. And I would expect that we would begin to really see that type of business in 2019. We'll spend this year perfecting what we're doing for Judith Ripka and then launch additional sites in '19.

Got it. And then on the cost of goods sold, is that inventory that you're holding? Or can you help me understand that dynamics there?

No, the inventory is consigned to us by our manufacturing partners.

And gentlemen, we have no further questions at this time.

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