Welcome to the Xcel Brands Second Quarter 2018 Earnings Conference Call. 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 is being recorded. I would now like to turn the conference over to Stanley Berger of S.N. Berger & Company. Mr. Berger, you may now begin.

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 access to the earnings release for the second quarter ended June 30, 2018, 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 August 14, 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 risk and uncertainties that could cause actual results to differ materially from certain expectations discussed here today. The 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 related to the company’s results of operations. Our management believes these financial performance measurements are also useful because these measures adjust for certain cost and other events that management believes are not representative of our core business operating results. And thus, they provide supplemental information to…

Thanks, Bob and good evening, everybody. I will briefly discuss selected financial results for the quarter ended June 30, 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 no later than August 14, 2018. In the second quarter of 2018, total revenue increased by approximately $0.1 million to $8.5 million compared with $8.4 million in the prior year quarter. Sales from our jewelry wholesale e-commerce business contributed approximately $0.35 million to the overall increase in total revenue in the current quarter and $0.12 million to net revenues. Net revenues are equal to total revenues less cost of the goods sold. And additionally, our second quarter net licensing revenue decreased approximately $0.23 million compared to the prior quarter as higher licensing revenue from our ongoing interactive business was primarily offset by lower revenue of $0.38 million associated with the termination and transition of the C. Wonder brand from QVC. Our operating expenses decreased by $0.28 million compared with the prior year quarter. The net decrease in operating expenses was primarily attributable to a $0.5 million decrease in total compensation, including a decrease in stock-based compensation of approximately $0.26 million. Interest expense decreased by $0.08 million compared with the prior year quarter. The decrease in interest expense is attributable to lowering our term debt balance. On a GAAP basis, we had a net loss of approximately $0.1 million for the current quarter or negative $0.01 per diluted share. This compares to GAAP net income of $0.2 million or approximately $0.01 per diluted share in the prior year quarter. The swing in the GAAP net income was primarily attributable to an increase in the current quarter’s cash provision from the prior year quarter, impacted by the 2018…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question is from Michael Kawamoto of D.A. Davidson. Please go ahead.

Yes. Hey guys, thanks for taking my questions. Just a had few for you here. First is, last quarter you talked about the Lord & Taylor and the walmart.com partnership. Can you just give an update there, maybe how orders are trending, and what the initial reception of the product has been on the site? Robert D’Loren: Hi Michael, it’s Bob. I think it’s a little early to really get a true read there. Lord & Taylor has been working with Walmart to launch this whole program in stages, and it’s just a little too early to get a true sense of what performance is going to be like going forward.

When do you think you’ll have a better picture? Is that more of a back half… Robert D’Loren: I think as we head into the back end of the year and whatever technical glitches and bugs that they have in the system. Our result – then we’ll really get a true sense of how this might really rollout going forward.

Got it. Now coming to my second question. I think you made a comment that most of your revenue will come in the back half, when I was looking at the last couple of years, it seems like a little bit of change in seasonality, is that just more programs coming on later this year? Or what’s driving that back half and gives you confidence? Robert D’Loren: Yes, it’s more programs coming on. And specifically, some new licenses that we’ve signed and some of the private label brands that we’re launching.

And also in our jewelry business we expect to have a stronger second half than the first half.

And then on that jewelry business, I think you said you saw some new customers coming on, maybe some younger ones. Is that still the case there? And then can you just dive in a little more on your change in strategy to go through a wholesale model versus the licensing model there? Robert D’Loren: So we made a fundamental decision about two years ago, Michael, to transition into more of an operating company as retail became more challenged. As you know, today retailer need more service and more solutions from vendors than perhaps any time before. And we’ve positioned ourselves to be a solution provider in the market. And that includes now delivering product to our retail partners with a much shorter lead time as well as enabling them to manage inventory better than they can from only supply chains. And that’s what really drove us to make this transition. And we did something very similar in the jewelry business as well.

Got it. That’s helpful. And then just on the interactive television business, I’m kind of jumping around here, but can you just highlight maybe which brands or products are really resonating well for you, on QVC? Robert D’Loren: So Isaac is doing extremely well for us. And even though jewelry QVC is not as strong as it was, Judith Ripka had a plan, which is good for us to see. And Halston is on plan, we just introduced new concepts for next year, and merchants and everyone here at Xcel are excited about where we think we can go with the Halston brand next year.

Michael, as – across-the-board, I think, we’re very happy with our businesses, the relationship with QVC. I know Mike George on their conference call talked about apparel being a strong point, and we’re just happy to have such a strong relationship, as we mentioned before. We do believe there are some additional opportunities there that hopefully we can address in future.

Got it. That’s helpful. Just a couple more for me. Just – on the C. Wonder, you say they’re launching in China. Can we just get an update there? And then maybe how big of an opportunity do you think the international businesses is there?

So I can address that, it’s Seth, Michael. So in China, we launched on vip.com, it’s one of the larger direct-to-consumer e-commerce websites in China. We launched in partnership with a local Chinese company who is also one of our manufacturing partners there. It just launched within last quarter, the results are extremely promising. The feedback we’ve gotten, the customers are reacting very strongly to the product which has been adjusted for the Chinese market and so we do believe that, that’s a significant opportunity for us and it’s actually – our partner there is planning to expand it to some other direct-to-consumer networks and some of the other major ones there, although, we can’t yet announce who we’re expanding to. And there is also a plans to open some – potentially open some physical locations. So I would say in the Chinese market specifically, the brand is really resonating with customers. We also are working on a few other things, internationally, with the brands. So we’re excited about it.

Got it. Just last one. I think you’ve targeted $900 million in retail equivalents over the next three years or so. Would you say you’re still on pace to hit those targets? Robert D’Loren: We think we can hit those targets over time now that platform is in place for the faster market production capability. We see opportunities across multiple tiers of distribution, particularly in Bricks, with specialty retailers and some of the off-price retailers as well as the mass merchants. So when you think of it in terms of door count, it’s almost limitless when you have the platform in place that we’ve built. So we think those numbers will be achievable for us.

Yes, how many doors are you in today? Do you have that number? Robert D’Loren: So it’s – what we’ve been talking about on prior conference calls is how many shop-in-shops we have, so just to be clear, we are in about 350 to 400 doors operating out of 700 shop-in-shops. We expect that number will be about 800 shop-in-shops with our branded product by spring of 2019. But we’re seeing a lot of new doors opening within our private label program. So it’s hard to get a true estimate of what that door count will look like. We’ve built a very robust sales team and we’re penetrating virtually every tier of distribution with these programs. And we expect that, that will be driving the business going forward.

Got it. I appreciate the time today and good luck for the rest of the year.

Thanks, Mike. Robert D’Loren: Thank you, Michael.

[Operator Instructions] There are no further questions at this time. I’ll now turn the call back over to Mr. D’Loren for closing remarks. Robert D’Loren: Ladies and gentlemen, thank you all for your time tonight. We greatly appreciate your continued interest and support in Xcel Brands. As always, stay fit, eat well and be healthy.

Ladies and gentlemen, this concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.