Iconix Misses Street’s Q1 Forecasts; CEO Addresses Executive Departures

Iconix Brand Group Inc. posted Q1 earnings today that missed the expectations of market watchers for revenues and earnings per share. The New York-based brand-management company behind Bongo, Candie’s and Badgley Mischka also saw its share price dip today following its pre-market earnings release.

Despite a disappointing first-quarter performance, the company — which acquired full ownership and control of its Iconix China joint venture earlier this year — said it anticipates double-digit international growth. And while many companies have reported losses due to foreign-exchange pressure, Iconix said it recognized a $10.5 million pre-tax foreign-currency translation gain.

The company has been the subject of much industry chatter following the departure of both its COO and CFO in a two-week time span. During the conference call today, CEO Neil Cole addressed the resignations.

“As a matter of policy, we do not comment on personnel matters, but would like to tell you that these departures were completely unrelated to one another. And while they took place in close proximity, each executive left the organization for their own reasons,” said Cole.

Net Income: GAAP net income attributable to Iconix for the first quarter, ended March 31, 2015, was approximately $62.8 million, a 5 percent increase over the $59.8 million earned in the prior year’s first quarter.

EPS: Diluted EPS for the first quarter of 2015 rose approximately 17 percent, to $1.21, compared with $1.03 in the prior year’s first quarter.

Adjustments: Earnings, adjusted for non-recurring gains, were 54 cents per share.

Net Revenue: Net revenues for Q1 totaled $95.4 million, down 15 percent from the prior year’s Q1 revenues of $112.2 million.

Hit, Miss or Beat: The company missed Wall Street’s estimates for revenue and EPS. Analysts polled by Yahoo Finance had predicted EPS of 68 cents; Iconix missed that by 14 cents. Market watchers had expected revenues of $112.3 million, which the company missed by 15 percent,

Executive Insights: “In the first quarter, we continued to execute on our global strategy and remain focused on international, entertainment and sports as key drivers of our growth. Our international business continued to grow in the first quarter, with our joint ventures in Australia, India, Southeast Asia and the Middle East, as well as our Latin America business, each delivering double-digit gains. Our Peanuts brand had a strong quarter, and we are excited about the opportunities around the global release of the ‘Peanuts’ movie in the fourth quarter.

We expect our Strawberry Shortcake and PONY acquisitions to generate increasing value throughout the year for our entertainment and sports platforms, and our core licensing business remains healthy. Reflecting these drivers, and the strong results we expect to achieve in the second half of the year, we believe we are on track to deliver on the 2015 guidance we provided earlier this year.”
– Iconix CEO Neil Cole

 Looking Ahead: Iconix is maintaining its revenue, non-GAAP diluted EPS and free cash flow guidance for full-year 2015. However, the company has increased its 2015 GAAP diluted EPS guidance to $3.65-$3.79, from $3.06-$3.20, to reflect the gain in the first quarter of 2015 related to the company’s acquisition of full ownership and control of its Iconix China joint venture.

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