Company Overview Sequential Brands Group (NASDAQ: SQBG) is a brand manager that owns the rights to a myriad niche global brands with more than $4 billion in worldwide revenue once its recent acquisitions close. Most of these brands acquired over the past two years. Their goal is to expand this portfolio and license a large-scale and diversified portfolio of consumer brands across multiple industries. The company has a market capitalization of just over $400 million and its stock trades for approximately $7.00 a share.
Sequential is somewhat unique in the industry as it is purely a brand manager that gains by purchasing brands and revitalizing their sales. Manufacturers and retailers buy up the rights to produce the goods under these brands and guarantee a minimum level of royalties; this is a dramatically mitigated risk for Sequential.
Under the licensing arrangements, Sequential’s partners are responsible for designing, manufacturing and distributing the company's licensed products, which means Sequential can essentially focus only on brand image and marketing aspects. Sequential’s “asset-light” model has a variety of benefits. They do not have to manage inventory, invest in working capital, deal with manufacturing or logistics, and this is a very high margin business with high returns on capital. They manage a fairly substantial global portfolio with fewer than 50 overall employees.
The company has been very active in making strategic acquisitions in recent years. Sequential concentrates on improving the image of the brands it acquires. The company also adds value and boosts sales growth by adding e-commerce channels to established brands, opening distribution in new countries, as well making logical brand extensions that can increase sales in tertiary categories.
Since Sequential decided to commit fully to this business model in 2012 and move from the OTC markets to the NASDAQ, the results have been dramatic, and the company is in the early innings of its growth trajectory.