Welcome to the Xcel Brands Fourth Quarter and Annual 2019 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 Andrew Berger of SM Berger & Co. Thank you. Andrew, you may now begin.

Good evening, everyone, and thank you for joining us. We appreciate your participation and interest and hope that all of you are safe in these difficult times. 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 fourth quarter and fiscal year ended December 31, 2019, which went out after the market closed today. And in addition, the company plans to file with the Securities and Exchange Commission its annual report on Form 10-K. Please note that given the events associated with COVID-19, the company needed to extend the final date of its annual report on Form 10-K. 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 on 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. Also and significantly at this time the COVID-19 pandemic is now having a significant impact on the company's business financial condition, cash flow and results of operations. And there are significant uncertainty about the duration and expense of the impact of the virus. The dynamic nature of these circumstances means what is said on this call continues materially at any time. Finally,…

Thanks, Bob, and good evening, everyone. I will briefly discuss financial results for the quarter and year ended December 31, 2019. Please note that our financial results are described more fully in our annual report on Form 10-K, which will be filed with the SEC by April 14. Total revenue for the fourth quarter of 2019 was $11.4 million, a net increase of approximately $1.4 million or 40% over the prior year quarter, primarily driven by wholesale and e-commerce sales. Current quarter gross profit decreased approximately $0.3 million to $7.6 million from $7.9 million in the prior year quarter, primarily attributable to lower net licensing revenue. Operating expenses were $14.6 million and $7.1 million in the current and prior quarters, respectively. This increase is primarily attributable to a $6.2 million impairment charge related to the Ripka brand trademarks driven by the timing of the continued transition of this brand from a licensing model to a wholesale model and direct-to-consumer model. The current quarter also includes $1.3 million of transition expenses incurred for potential acquisition that we worked on, but did not close. Other recurring operating costs were generally flat, were down slightly from the prior year quarter. Total interest and finance expenses increased by $0.1 million from the prior year quarter attributable to the increase in our term debt from our February 2019 acquisition of the Halston and Halston Heritage trademarks. GAAP net loss was approximately $6.2 million for the fourth quarter, or negative $0.28 per basic and diluted share compared with a GAAP net loss of $0.3 million or negative $0.02 per basic and diluted share for the prior year quarter. And as previously mentioned, the current quarter's net loss includes $6.2 million non-cash impairment charge. After adjusting for certain cash and non-cash items, non-GAAP net income for the…

Our very first question comes from John Morris with Davidson. Please go ahead.

Thanks. Good afternoon, everybody. And hope everybody is safe and well. Just looking out ahead in over the valley of the COVID crisis here, no matter -- obviously, we don't know how long that's going to be, but if you’re looking at your long-term gross margin target, I’m trying to get a feel for where you would expect that to settle out in terms of your target, where you would see that coming out a year or two years? Thanks. Robert D’Loren: I'll take that one. John, it's Bob. How are you? Hope you’re …

Hey, Bob. Yes, good. Thank you. Robert D’Loren: … safe and healthy. So we don’t -- generally, our approach to margins is we tend to structure our purchase orders with a high IMU that we offer our retail partners. We don't see a lot of dilution as a result of doing that, of course, or going in. Wholesale margins are lower. But our strategy has been to offer our retail partners enough to cover what we think will result in final margins for them. How that plays out through the rest of the year, I think that remains to be seen. A lot of this will depend upon how long this goes on, how long will the retailers need to remain closed. As I did say on the call, we are experiencing some cancellations. But even with the canceled orders, we've been able to push a lot of the product forward to June, July, August with our partners. So we've been working nicely with the majority of our retail partners. So I think it's a little early to tell what the real margin compression will be through the year. I think it really depends upon what happens and how long this goes on.

Great. Bob, that's helpful. And then my follow-up is, Longaberger and prior to the disruptions, it sounds like you all were off on a good start with that acquisition. Just want to know -- just want to get a little bit of extra color from you on how that had ramped up relative to your expectations? What the high points been thus far prior to the disruption? Robert D’Loren: So Longaberger is an interesting opportunity for this moment in time because, as you know, it's a peer-to-peer model where salespeople sell products for us and all of them are independent contractors, if you will. Actually, they're members of the Longaberger family, that's what we call them. And in times like this, people are often looking for ways to earn additional income. And these kinds of businesses tend to do well in these kinds of cycles. The launch was very successful. It exceeded our expectations in terms of sales. We are about to launch within the next 30 days of the recruiting module for the former Longaberger sales associates to sign up. And through this module we can track them and what they're selling and pay commissions. And we feel very optimistic that we'll be able to recruit thousands of former 77,000 person sales force that they had onto the new platform. We continue to load new products every day. If you go to the site, you can see the kinds of things that we're offering the customers and the members there. It's primarily home products. We have offered a small selection of Judith Ripka jewelry to this family of Longaberger saleswomen and men. So we'll see how our other brands translate onto this platform over time. But so far, so good. We're very excited about this.

Great. Thank you.

Our next question comes from Walter Schenker with MAZ Partners. Please go ahead.

I was pleased to see along with many other companies, the Xcel brands is reducing compensation during this very trying period. Could you give us some sense just thinking about the cost structure? What type of percentage change there might be, if not for the broadly, at least the top few executives? Robert D’Loren: So we -- one, we reduced 2019 bonus income to senior executives that was payable at the end of March; and two, we made and across the board reduction of all employees, including our on-air guest. We will continue to look at this based upon where we're forecasting our cash flows. And the good news for us is 75% or approximately 75% of our overhead is variable and we will adjust as needed. But based on the cash flow analysis that we've been looking at, we've made the appropriate level of cuts across the board and treated everyone as fairly as we could.

Thank you. Robert D’Loren: Thank you.

[Operator Instructions] There are no further questions at this time. I will 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 this evening. We greatly appreciate your continued interest and support in Xcel brands. The retail industry overall continues to be challenged and recently this business got harder due to the COVID-19 pandemic. We believe the challenges will continue for the next several years as perhaps retail consolidation and store closures continue and/or accelerate. Notwithstanding these challenges, we continue to believe that Xcel's infrastructure makes us an industry leading platform, both from an operational as well as a technological standpoint, and that we are uniquely positioned to capture significant market share during this enormous time of disruption. As always and most importantly now, stay fit, eat well and be healthy.

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