Good day, and welcome to the Xcel Brands Third Quarter 2016 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 Hunter Wells of ICR. Thank you. Hunter, 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 EVP of Business Development and Treasury, Seth Burroughs. By now, everyone should have had access to the earnings release for the third quarter ended September 30, 2016, which went out today at approximately 4.00 p.m. Eastern time. And in addition, the company will file with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, on November 14, 2016. The release and the Quarterly Report will be available on the company’s Web site at www.xcelbrands.com. This call is being webcast and a replay will be available on the company’s Investor Relations Web site. 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 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. 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 EPS, and adjusted EBITDA. 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 they provide supplemental information to assist investors in evaluating the company’s financial results. These should not be considered in isolation…

Thanks, Bob. I will briefly discuss selected financial results for the third quarter and the nine months ended September 30, 2016. 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 on November 14, 2016. In the third quarter of 2016, revenues increased by 14% to 8.3 million compared with 7.3 million in the prior-year quarter. The increase in revenues from the prior year quarter was primarily due to the combination of higher revenues from our interactive television business, higher revenues in our QTR platform and revenues recognized from new license agreements entered into in 2015 and 2016. These increases were partially offset by a decrease in revenues associated with the management and design of the LCNY brand for which our contract ended in July 2016. While the increase in revenues was somewhat below our expectations, largely due to slower than expected growth we encountered in the interactive television channel and revenue concessions in connection with the startup and implementation of our QTR platform. We have a response judiciously in managing our operating expenses to offset and mitigate this impact as much as possible. Also, we have been working closely with QVC to implement strategies to optimize sales heading into 2017. Net income for the quarter was approximately $120,000 or $0.01 per diluted share compared with net income of $30,000 or $0.00 per diluted share in the prior-year quarter. Non-GAAP net income for the current quarter was 1.3 million or non-GAAP diluted EPS of $0.07 based on approximately 19.1 million weighted average shares outstanding compared with non-GAAP net income of 1.4 million or non-GAAP diluted EPS of $0.08 based on approximately 18.3 million weighted average shares outstanding in the prior-year quarter. Our adjusted EBITDA in the…

Thank you. [Operator Instructions]. Our first question we’ll hear from Eric Beder with Wunderlich Securities.

Good afternoon. Robert D’Loren: Hi, Eric.

Hi. You see now nine months into – excuse me, six months into the HBC rollout. As you are getting more data and the ability to react, how have you seen your ability to pick the trends and react to the trends better as you’re getting kind of more data past six months? Robert D’Loren: So generally speaking, the design process in this program is done in real time. So we’re here designing on a weekly basis. But that said, the strategy is basically we design into three buckets; fashion, fashion core and core. All fashion very short lead and it’s designed to be delivered in small batches where we test. And if we see a positive reaction from the customer and the sell-throughs are at or above where we project them to be, then we get back into it quickly. So we cycle today -- best case, four weeks if we have the fabric position; worst case, if we’re in the market with a fabric that we have but we have to print it, it could be eight weeks. On average, it’s about a six-week cycle.

And are you seeing and is HBC seeing that the customer recognizes what’s going on here and is coming back in more and driving the traffic and we more likely see the full price and traditional thought process [indiscernible]? Robert D’Loren: What we’re seeing in the QTR piece is higher sell-throughs than we are in entire floor sets. So thinking about those three buckets; fashion is moving fast; fashion core, half of it fast, half of it is more long-lead; and then core of course is long-lead. So we set sell-through expectations for all three of those buckets and we’re seeing sell-throughs in the fashion bucket when we’re getting back into things at 2x to 3x where our long-lead product is selling through.

Eric, this is Seth. I think when you look at the customer response, the platform works because we’re designing into what the customer is responding to. That being said, as we go into 2017, we’re looking at a lot of ways we can try to optimize the program. As Bob mentioned, some of those ways are in-store merchandizing to better communicate to the customer about those new products every week. The product shows up on the floor every week. But it’s also a function of marketing and of the sales people in the stores to do that. So we’re looking at ways of being a little bit better at communicating to the customer now that we’ve shown how the structure of the program works.

Great. And rollout [ph] with the men’s will also be going out initially with HBC [indiscernible] Robert D’Loren: I’m sorry, Eric. The men’s rollout --

The men’s rollout [indiscernible] overall to be in HBC and it should rollout with them? Robert D’Loren: Correct. We expect initial shipments for Spring '17.

How do – so you do a significant portion of this HBC rollout with yourself. How do the new licensees fit into this mix? How are they providing – how are they structured in this role? Robert D’Loren: So Xcel is now set up to handle core sportswear and we rely on our licensees for all ancillary categories. So we’re doing sportswear and denim collection. Our licensees do footwear, handbags, jewelry, outerwear, lingerie [ph], all the ancillary categories that you would expect to see in a department store, eyewear. And those products are not fast or they don’t work on fast cycles the way the apparel does. And that’s typical of fashion movement.

Got it. You have a great balance sheet, great numbers in terms of that. What is your appetite to add more brands to the mix to further expand in this Quick Time Response mechanism? What’s your thought process on that position from what you see? Robert D’Loren: So I would say in 2016, we just could not focus on an acquisition. We were extremely focused on building out the QTR platform, getting the HBC business launched. Now that we’ve settled into the new headquarters, IT systems are up and working, the factory base is working and improving every day as we guide them through all of the changes that are necessary to operate this way. We’re more confident looking into '17 about considering new acquisition. That said, we’re always in the market looking for opportunities, brands that are synergistic with the expertise that we have here and that are serving the customer base [indiscernible] which is really that Gen-X and baby bloomer customer. We are now beginning to understand the millennial customer much better with our launch Tie Line. So I would say that in '17 you can expect to see us out more aggressively seeking an acquisition opportunity.

Great. And final question, you mentioned the expansion of the QTR platform to another chain. Now when that happens, should we expect to see that margins will be significantly higher given that you’re not – you’re not going to recreate the infrastructure for this next partner, am I right? How we should think about this? Robert D’Loren: Eric, that is correct. And I would say that a significant portion of the current style to products under our brands that we’re shipping will significantly be similar. There will be some uniqueness related to another retail partner for geography and the individual customer demands within their stores. But for the most part it’s very leverageable. If we take on another retailer and another brand, then of course there’s some ramp up associated with that. But with the current brands that we have in the portfolio, it becomes very leverageable for us.

Great. Good luck in the hottest season. Robert D’Loren: Thank you, Eric.

Thanks, Eric.

At this time, there are no further questions. I would like to turn the call back over to Mr. Bob D’Loren for any additional or closing remarks. Robert D’Loren: Okay. Thank you, everyone, for joining us tonight. As we head into the homestretch, we remain focused on executing our strategy and look forward to sharing our results for the full year with you and Q1 of 2017. We greatly appreciate your continued interest and support in Xcel Brands. And as always, stay fit, eat well and be healthy.

That will conclude today’s call. We thank you for your participation.