Published: August 18, 2010
ShopNBC Q2 Net Sales Rise 6% to $126.2 Million and Adjusted EBITDA Loss Reduced to $1.9 Million From $5.7 Million
ShopNBC (NASDAQ: VVTV)
-- Net sales increase of 6% vs. last year
-- Adjusted EBITDA loss declines to ($1.9) million vs. ($5.7) million last
year
-- Gross Margin increases 260 bps to 37.4% vs. 34.8% last year
-- E-commerce sales penetration rises 860 bps to 39.4%
ShopNBC (NASDAQ: VVTV), the premium lifestyle brand in multi-media
retailing, today announced improved financial results for its fiscal second
quarter ended July 31, 2010. The company will host a conference call to
review its results today at 11:00 a.m. ET; details below.
SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average price points)
Q2 YTD
For the three months ending For the six months ending
----------------------------- -----------------------------
7/31/2010 8/1/2009 Change 7/31/2010 8/1/2009 Change
--------- --------- ------- --------- --------- -------
Net Sales $ 126.2 $ 119.3 5.7% $ 251.2 $ 253.1 -0.8%
EBITDA $ (1.9) $ (5.7) 66.1% $ (6.2) $ (12.5) 50.2%
as adjusted
Net Loss $ (7.7) $ (8.2) 6.6% $ (18.7) $ (20.2) 7.8%
Homes 75,571 73,410 2.9% 75,715 73,183 3.5%
(Average 000s)
Net Shipped 1,195 980 21.9% 2,273 1,857 22.4%
Units (000s)
Average Price $ 97 $ 112 -13.2% $ 103 $ 127 -19.2%
Return Rate % 20.6% 21.8% -120bps 19.9% 21.7% -180bps
Gross Margin % 37.4% 34.8% 260 bps 37.0% 33.1% 390 bps
Internet Net 39.4% 30.8% 860 bps 39.5% 30.4% 910 bps
Sales %
New Customers 573,545 411,029 39.5% N/A N/A
12 month
rolling
Active
Customers 1,089,682 861,080 26.5% N/A N/A
12 month
rolling
"We are pleased with our second quarter progress, reflecting another
consecutive quarter of overall improved performance," said Keith Stewart,
CEO of ShopNBC. "Positive customer activity trends and strong gross margin
rates, along with disciplined execution in merchandising and financial
planning, helped drive the business on the top- and bottom-line. Going
forward, we recognize there is still much work to be done. We continue to
prudently manage our working capital while focusing on increasing the top
line through improved merchandising strategies, aligning price points with
consumer demand, and refining our customer outreach initiatives during the
second half of the year."
Second Quarter 2010 Results
Second quarter revenues rose 5.7% to $126.2 million vs. Q2 of last year. As
part of its on-going strategic initiatives, the company further lowered its
net average selling price to $97 from $112 in the year-ago quarter, while
increasing net shipped units by 22%. E-commerce sales penetration
represented 39.4% of total company sales in the quarter, up 860 basis
points from the prior-year period.
Customer trends continued to improve with new and active customers
increasing 39.5% and 26.5%, respectively, on a 12-month rolling basis vs.
same period last year. Return rates for the quarter declined to 20.6% vs.
21.8% in the year-ago quarter, reflecting improvements in overall customer
satisfaction and the benefit of strategic pricing changes.
Gross profit increased 13% to $47.2 million and gross profit margin
improved 260 basis points to 37.4% vs. 34.8% last year, largely driven by
merchandise margin rate improvements across several key categories.
Adjusted EBITDA was a loss of ($1.9) million compared to an Adjusted EBITDA
loss of ($5.7) million in the year-ago period, driven by improvements in
sales and gross margin.
Operating expenses in the second quarter increased approximately 2% to
$53.4 million, as a result of the company's net sales growth.
Net loss for the second quarter declined to ($7.7) million compared to a
net loss of ($8.2) million for the same quarter last year.
Liquidity and Capital Resources
Second quarter cash and cash equivalents balance ended at $22.9 million,
including $5.0 million of restricted cash. The cash and cash equivalents
balance declined $3.0 million from Q1 driven by increased capital
expenditures to support the company's sales growth. On a year-to-date
basis, cash and cash equivalents has increased by $0.9 million.
Additionally, the company currently has up to $20 million available to it
under a 3-year revolving credit facility, of which $12 million of such
availability is subject to meeting certain future financial objectives to
finance working capital investment and fund other company growth
initiatives. To date, the company has no outstanding borrowings on the
facility.
Management Update
The company recently announced the appointment of Mr. William J. McGrath as
Senior Vice President and Chief Financial Officer of ShopNBC. Mr. McGrath
has over 20 years of multi-channel industry expertise as well as global
operations and financial leadership experience. Prior to joining ShopNBC,
Mr. McGrath served as Vice President Global Sourcing Operations and Finance
at QVC.
In addition, the company today announced that Ms. Kris Kulesza, Senior Vice
President of Merchandising, is leaving the company effective August 20 to
pursue other interests. The company currently does not plan to fill this
position, and instead will spread the responsibilities across its current
team of seasoned multi-channel executives.
The company also recently appointed multi-channel retailing veterans
Stephanie Juaire as Director of Consumer Electronics, and Tom Long as
Director of Quality Assurance in the second quarter. Ms. Juaire brings 14
years of consumer electronics experience to the company, previously having
held merchandising and business development roles at Imation, ShopKo,
Circuit City, and Best Buy. Mr. Long brings 25 years of industry experience
to ShopNBC, having held a variety of distribution and manufacturing
leadership roles at QVC, Bentley-Harrison Manufacturing, and Kiwi Brands.
Conference Call Information
To participate in the conference call at 11:00 a.m. ET, please dial
1-800-369-2063 (pass code: 7467622; keypad: SHOPNBC) five to ten minutes
prior to the call time. If you are unable to participate live in the
conference call, a replay will be available for 30 days. To access the
replay, please dial 1-800-294-7483 with pass code 81810.
You also may participate via live audio stream by logging on to
https://e-meetings.verizonbusiness.com. To access the audio stream, please
use conference number 3811097 with pass code: SHOPNBC. A rebroadcast of the
audio stream will be available using the same access information for 30
days after the initial broadcast.
About ShopNBC
ShopNBC is a multi-media retailer operating with a premium lifestyle brand.
Over 1 million customers benefit from ShopNBC as an authority and
destination in the categories of home, electronics, beauty, health,
fitness, fashion, jewelry and watches. As part of the company's "ShopNBC
Anywhere" initiative, customers can interact and shop via cable and
satellite TV in 76 million homes (DISH Network channels 134 and 228;
DIRECTV channel 316); mobile devices including iPhone, BlackBerry and
Droid; online at www.ShopNBC.com live streaming at www.ShopNBC.TV and
social networking sites Facebook, Twitter and YouTube. ShopNBC is owned and
operated by ValueVision Media (NASDAQ: VVTV). For more information, please
visit www.ShopNBC.com/IR.
EBITDA and EBITDA, as adjusted
EBITDA represents net loss for the respective periods excluding
depreciation and amortization expense, interest income (expense) and income
taxes. The company defines Adjusted EBITDA as EBITDA excluding
non-operating gains (losses); non-cash impairment charges and write-downs;
restructuring and chief executive officer transition costs; and non-cash
share-based compensation expense. The company has included the term
"Adjusted EBITDA" in our EBITDA reconciliation in order to adequately
assess the operating performance of our "core" television and internet
businesses and in order to maintain comparability to our analyst's coverage
and financial guidance, when given. Management believes that Adjusted
EBITDA allows investors to make a more meaningful comparison between our
core business operating results over different periods of time with those
of other similar companies. In addition, management uses Adjusted EBITDA as
a metric measure to evaluate operating performance under its management and
executive incentive compensation programs. Adjusted EBITDA should not be
construed as an alternative to operating income (loss) or to cash flows
from operating activities as determined in accordance with generally
accepted accounting principles and should not be construed as a measure of
liquidity. Adjusted EBITDA may not be comparable to similarly entitled
measures reported by other companies.
Forward-Looking Information
This release contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and accordingly
are subject to uncertainty and changes in circumstances. Actual results may
vary materially from the expectations contained herein due to various
important factors, including (but not limited to): consumer spending and
debt levels; interest rates; competitive pressures on sales, pricing and
gross profit margins; the level of cable and satellite distribution for the
company's programming and the fees associated therewith; the success of the
company's e-commerce and new sales initiatives; the success of its
strategic alliances and relationships; the ability of the company to manage
its operating expenses successfully; the ability of the Company to
establish and maintain acceptable commercial terms with third party vendors
and other third parties with whom the Company has contractual
relationships; changes in governmental or regulatory requirements;
litigation or governmental proceedings affecting the company's operations;
and the ability of the company to obtain and retain key executives and
employees. More detailed information about those factors is set forth in
the company's filings with the Securities and Exchange Commission,
including the company's annual report on Form 10-K, quarterly reports on
Form 10-Q, and current reports on Form 8-K. The company is under no
obligation (and expressly disclaims any such obligation) to update or alter
its forward-looking statements whether as a result of new information,
future events or otherwise.
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
July 31, January 30,
2010 2010
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 17,952 $ 17,000
Restricted cash and investments 4,961 5,060
Accounts receivable, net 52,382 68,891
Inventories 47,156 44,077
Prepaid expenses and other 4,545 4,333
----------- -----------
Total current assets 126,996 139,361
Property and equipment, net 27,443 28,342
FCC broadcasting license 23,111 23,111
NBC Trademark License Agreement, net 2,541 4,154
Other Assets 1,262 1,246
----------- -----------
$ 181,353 $ 196,214
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 50,695 $ 58,777
Accrued liabilities 38,591 26,487
Deferred revenue 728 728
----------- -----------
Total current liabilities 90,014 85,992
Deferred revenue 789 1,153
Long Term Payable - 4,841
Accrued Dividends - Series B Preferred Stock 7,454 4,681
Series B Mandatorily Redeemable Preferred Stock 11,954 11,243
$.01 par value, 4,929,266 shares authorized;
4,929,266 shares issued and outstanding
----------- -----------
Total liabilities 110,211 107,910
Commitments and Contingencies
Shareholders' equity:
Common stock, $.01 par value, 100,000,000
shares authorized; 32,726,077 and 32,672,735
shares issued and outstanding 327 327
Warrants to purchase 6,022,115 shares of
common stock 637 637
Additional paid-in capital 318,223 316,721
Accumulated deficit (248,045) (229,381)
----------- -----------
Total shareholders' equity 71,142 88,304
----------- -----------
$ 181,353 $ 196,214
=========== ===========
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
For the Three Month For the Six Month
Periods Ended Periods Ended
---------------------- ----------------------
July 31, August 1, July 31, August 1,
2010 2009 2010 2009
---------- ---------- ---------- ----------
Net sales $ 126,177 $ 119,345 $ 251,154 $ 253,147
Cost of sales 79,021 77,785 158,261 169,398
(exclusive of depreciation
and amortization shown
below)
Operating expense:
Distribution and selling 45,021 43,885 91,063 89,124
General and
administrative 4,795 4,309 9,562 8,936
Depreciation and
amortization 3,527 3,427 7,218 7,216
Restructuring costs 50 485 426 589
CEO transition costs - 223 - 300
---------- ---------- ---------- ----------
Total operating expense 53,393 52,329 108,269 106,165
---------- ---------- ---------- ----------
Operating loss (6,237) (10,769) (15,376) (22,416)
---------- ---------- ---------- ----------
Other income (expense):
Interest income 9 146 51 363
Interest expense (2,095) (1,235) (3,945) (1,978)
Gain on sale of
investments - 3,628 - 3,628
---------- ---------- ---------- ----------
Total other income
(expense) (2,086) 2,539 (3,894) 2,013
---------- ---------- ---------- ----------
Loss before income taxes (8,323) (8,230) (19,270) (20,403)
Income tax (provision)
benefit 630 (5) 606 157
---------- ---------- ---------- ----------
Net loss (7,693) (8,235) (18,664) (20,246)
Excess of preferred stock
carrying value over
redemption value - - - 27,362
Accretion of redeemable
Series A preferred stock - - - (62)
---------- ---------- ---------- ----------
Net income (loss) available
to common shareholders $ (7,693) $ (8,235) $ (18,664) $ 7,054
========== ========== ========== ==========
Net income (loss) per
common share $ (0.24) $ (0.26) $ (0.57) $ 0.22
========== ========== ========== ==========
Net income (loss) per
common share
---assuming dilution $ (0.24) $ (0.26) $ (0.57) $ 0.21
========== ========== ========== ==========
Weighted average number of
common shares outstanding:
Basic 32,703,164 32,272,841 32,691,334 32,688,289
========== ========== ========== ==========
Diluted 32,703,164 32,272,841 32,691,334 33,391,279
========== ========== ========== ==========
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
Reconciliation of EBITDA, as adjusted, to Net Loss:
For the Three Month For the Six Month
Periods Ended Periods Ended
-------------------- --------------------
July 31, August 1, July 31, August 1,
2010 2009 2010 2009
--------- --------- --------- ---------
EBITDA, as adjusted (000's) $ (1,943) $ (5,733) $ (6,234) $ (12,521)
Less:
Non-operating gain on sale
of investments - 3,628 - 3,628
Restructuring costs (50) (485) (426) (589)
CEO transition costs - (223) - (300)
Non-cash share-based
compensation (717) (901) (1,498) (1,790)
--------- --------- --------- ---------
EBITDA (as defined) (a) (2,710) (3,714) (8,158) (11,572)
--------- --------- --------- ---------
A reconciliation of EBITDA to
net loss is as follows:
EBITDA, as defined (2,710) (3,714) (8,158) (11,572)
Adjustments:
Depreciation and amortization (3,527) (3,427) (7,218) (7,216)
Interest income 9 146 51 363
Interest expense (2,095) (1,235) (3,945) (1,978)
Income taxes 630 (5) 606 157
--------- --------- --------- ---------
Net loss $ (7,693) $ (8,235) $ (18,664) $ (20,246)
========= ========= ========= =========
(a) EBITDA as defined for this statistical presentation represents net
income (loss) for the respective periods excluding depreciation and
amortization expense, interest income (expense) and income taxes. The
Company defines EBITDA, as adjusted, as EBITDA excluding non-operating
gains (losses); non-cash impairment charges and writedowns, restructuring
and CEO transition costs; and non-cash share-based compensation expense.
Management has included the term EBITDA, as adjusted, in its EBITDA
reconciliation in order to adequately assess the operating performance of
the Company's "core" television and Internet businesses and in order to
maintain comparability to its analyst's coverage and financial guidance
when given. Management believes that EBITDA, as adjusted, allows investors
to make a more meaningful comparison between our core business operating
results over different periods of time with those of other similar
companies. In addition, management uses EBITDA, as adjusted, as a metric
measure to evaluate operating performance under its management and
executive incentive compensation programs. EBITDA, as adjusted, should not
be construed as an alternative to operating income (loss) or to cash flows
from operating activities as determined in accordance with GAAP and should
not be construed as a measure of liquidity. EBITDA, as adjusted, may not
be comparable to similarly entitled measures reported by other companies.
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