Sequential Updates Guidance After Closing Martha Stewart Deal

Martha Stewart
Martha Stewart.
Getty Images.

After a series of power moves in the M&A space, Sequential Brands Group is updating its financial projections.

Based on the completion of its merger with Martha Stewart Living Omnimedia, closed on Dec. 4, the company has upwardly adjusted the bulk of its financial expectations for FY15.

Sequential said it eventually expects to achieve or surpass $75 million in annual merchandising royalty revenue for the Martha Stewart and Emeril Lagasse brands.

The company recently wrapped a robust third quarter, which saw revenues advance 130 percent year-over-year, while earnings rose 3.1 percent.

Sequential’s stock, however, has experienced marked volatility in recent weeks — its share price hit a 52-week high of $18.59 in July but sank more than 60 percent, to a low of $6.54, on Dec. 17. In early December, Sequential Chairman William Sweedler said short sellers, whose goals are often to facilitate and then capitalize on a stock’s decline, were to blame for the slump.

Read on for the firm’s FY16 and adjusted FY15 guidance.

2015 Guidance

As a result of the merger, Sequential has increased its full-year projections to $85 million to $87 million in revenues and $51 million to $53 million of adjusted EBITDA (from $81 million to $83 million and $50 million to $52 million, respectively).

2016 Guidance

The company is projecting $145 million to $150 million of revenue and $83 million to $87 million of adjusted EBITDA for calendar-year 2016, inclusive of approximately $100 million of guaranteed minimum revenue. Consistent with its prior results, Sequential expects revenue for 2016 to be weighted to the third and fourth quarter due to “seasonality in the businesses of many of its licensees.”

Run Rates

Sequential is increasing its forward-looking 12-month run rate from $98 million to $100 million of revenue and $61 million to $63 million of adjusted EBITDA to a new annual run rate of $150 million to $155 million in revenue and $92.5 million to $95 million adjusted EBITDA following completion of the merger integration. The company currently has approximately $510 million of net debt, inclusive of cash on hand.