Iconix Brand Group (NASDAQ:ICON) licenses, markets, and promotes a portfolio of over 35 well-recognized consumer brands sold at popular retail outlets around the world. Some of its most recognized brands include Rampage, Mudd, Candie's, Lee Cooper, Rocawear, and Joe Boxer.

While the stock logged fresh all-time highs last summer, its performance since the beginning of this year has left a lot to be desired. The stock has performed incredibly well for most of the past decade, far outperforming the S&P 500, but now down over 50% year-to-date, many investors are wondering what's next. 

ICON data by YCharts

A major reason for the drop appears to be the sudden resignation of longtime CEO Neil Cole back in August. Cole had been at the helm since 1993 and was responsible for the complete rebranding and restructuring of the business in 2005, changing its name from Candie's to Iconix Brands and transforming the company from a manufacturer and retailer to a brand management and licensing business. He has yet to be replaced.

Considering the recent downward spiral, I looked at the core of this business to determine whether the stock decline is warranted or whether investors are missing the big picture. While I found several positives, I also came across red flags. Let's take a closer look. 

A healthy licensing business 
Licensing agreements and international joint ventures are at the core of the company's business model. Iconix has over 50 direct-to-retail licenses and more than 1,100 total licenses. The vast majority of the company's licensing agreements include minimum guaranteed royalty revenue over the term of the existing contracts, excluding renewals. As of January, the company had over $800 million of aggregate guaranteed royalty revenue.

Licensing agreements allow the company to eliminate or substantially reduce inventory and operating risk associated with traditional retailers. While Iconix owns the licenses to the brands, the licensees are fully responsible for the cost of manufacturing and selling. The licensing business, as its main source of revenue, has been quite profitable over the years:

Source: 2014 annual report

The company's largest direct-to-retail licensees are Kohl's, Target, and Wal-Mart, which represent approximately 26% of total revenue. Contracts date back to 2004, 2006, and 2007, respectively, and have a consistent history of being renewed. Most of the current contracts extend through 2020, and many of the brands -- like Mossimo at Target -- are exclusive to specific stores.  

During the first half of 2015, Iconix reported licensing revenue of $98.5 million, a 1% year-over-year increase compared with the second quarter of 2014.  

Strategic acquisitions: strengthening the entertainment and sports portfolio  
In June 2010, Iconix acquired an 80% stake in Peanuts Holdings and its popular Charlie Brown characters. Peanuts has a strongly diversified platform at a global level, with over 700 licensing agreements including relationships with ABC Networks, Hallmark, and Universal Studios. In October 2012, an agreement was reached with 20th Century Fox Animation to produce The Peanuts Movie, scheduled for release this month. Iconix should benefit from ticket and merchandise sales after the movie is released in over 70 countries.

Recent acquisitions, announced earlier this year, include Strawberry Shortcake and PONY. The former, acquired from American Greetings for $105 million in cash, is a well-recognized global brand with a diversified network of over 350 licensees. PONY, a footwear and apparel brand, cost Iconix $35 million in cash for a 75% stake in the North American division. PONY joins other profitable brands within the sports sector, including Daskin and Umbro, which generate over $2 billion in global retail sales. 

Multiple resignations, an SEC investigation, and lowered guidance
And now the red flags. In addition to the CEO's resignation, the company also lost its CFO and COO at the beginning of this year. This is all happened in the middle of an ongoing SEC investigation, which is reviewing company records regarding accounting methods and reporting. The complaint alleges Iconix underreported the cost basis of its brands and engaged in irregular accounting practices related to its international joint ventures. Results from the investigation are still pending. 

The financial outlook bears watching, too. As of the most recent quarterly earnings report in August, the fiscal 2015 outlook was notably lower across the board. Revenue guidance has gone from a high of $510 million at the beginning of the year to $425 million. GAAP diluted earnings per share have also been lowered from a high of $3.20 to $2.39, while free cash flow is now expected to be in the range of $190 million, down from the previous forecast of $218 million.

The Foolish bottom line 
Iconix has some well-recognized international brands under its umbrella that will remain popular. The company also has some strong partnerships with top retailers, guaranteeing recurring revenue with a fairly predictable history of renewals. It has also been strategic with acquisitions, bringing in brands that already resonate with consumers. 

Still, I would stay on the sidelines for the time being as I wait for the SEC investigation to conclude and for the company to restore its leadership. Investors do not like uncertainty, and that's obviously reflected in the poor performance of the stock. But if things work out in the company's favor, I can see the company enjoying a healthy rebound.

Mabel Nunez has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.