ShopNBC (NASDAQ: VVTV), the premium lifestyle brand in electronic
retailing, today announced financial results for its second fiscal
quarter ended August 1, 2009. ShopNBC is available anywhere: cable
and satellite TV, mobile devices (iPhone and iPod Touch), online at
www.ShopNBC.com, and streamed live at www.ShopNBC.TV.
Second Quarter Results
Second quarter revenues were $119.3 million, a 16% decrease from
the same period last year, driven primarily by the intended
reduction of the company's average selling price. EBITDA, as
adjusted, was a loss of ($5.7) million compared to an EBITDA, as
adjusted, loss of ($10.7) million in the year-ago period. Net loss
for the second quarter was ($8.2) million compared to a net loss of
($15.7) million for the same quarter last year.
Second Quarter Highlights
The company noted several key improvements in the quarter:
Leadership. The Board of Directors unanimously appointed TV
shopping and retail veteran Randy Ronning as Chairman of the Board,
and selected direct response veteran Edwin Garrubbo as a Director.
The company also strengthened its senior management team during the
quarter with the appointment of industry veteran Carol Steinberg as
Senior Vice President of E-Commerce.
Suzanne Somers. Renowned TV personality, successful
entrepreneur, and national best-selling author of 19 books joined
the ShopNBC network. Launching September 18, 2009, Suzanne Somers
will bring the full range of her product line and loyal fan base to
ShopNBC's on-air, online and print platforms, which will span the
categories of home, jewelry, fashion & accessories, food,
vitamin supplements, and beauty & personal care.
Customers. Customer trends continued to improve with new and
active customers up by 59% and 32%, respectively, in the second
quarter vs. the same period last year. Return and cancel rates
decreased by double digits vs. last year's same period, reflecting
improvements in delivery time, customer service, product quality,
and lower price points. Customer service inquiries decreased 18% in
the quarter.
Merchandising. Gross profit margin increased to 34.8% vs. 31.5%
in the previous quarter. Improved margins were driven by a higher
percentage of merchandise sold at full margin and a leaner mix of
electronics. The company intends to improve gross margins
throughout the second half of the year, as the company increases
its number of higher margin reorders and expands its merchandise
assortment in higher margin categories.
-- Net average selling price was lowered to $112 during the quarter vs.
$194 in the year-ago quarter.
-- A record 106 new vendors were added to ShopNBC's new and existing
merchandise categories of home, fashion, beauty and jewelry. The company
launched a record 60 new show titles, product categories and brands in the
quarter, such as Intelligent Nutrients organic beauty, Thomas Kinkade
paintings, cosmeceutical pioneer Janson Beckett, Encanto footwear, and a
new show series "Discovering Gourmet Foods." Additionally, a record 32 new
guest experts were added to the network's talent ranks, including TV
shopping veteran Dave King, gem expert Paul Deasy, and fashion expert
Khaliah Ali, to mention a few.
-- Successful sales events and key items wins: "Founders Day" with sales
of $7.5 million; "Must Watch" with sales of $5 million, which included a
finale at midnight with $500,000 in sales in 20 minutes of 1,200 Invicta
Reserve Men's Lupah Watches; "Mid-Year Clearance" with sales of $14 million
and over 1,000 sell-outs; a Toshiba 17" Notebook Package w/HP All-in-One
Printer with sales of $2.1 million; and an Invicta Men's Subaqua Noma III
Swiss Quartz Chronograph Watch with sales of $1.9 million.
-- Net units in the quarter increased a record 40% as lower price points
and new merchandise drove increased customer activity. Net unit successes
include a record 10,200 Grand Suites 600TC Embroidered Egyptian Cotton
Sheet Sets in June; a new record of 14,400 Grand Suites 800TC Egyptian
Cotton Solid Sateen Sheet Sets in July; 6,500 Sterling Silver 8-9mm Colored
Freshwater Cultured Pearl Earrings; and 5,900 TomTom ONE-S 3rd Edition
portable GPS car navigation systems.
Monetized Illiquid Auction Rate Securities. ShopNBC monetized
its portfolio of illiquid auction rate securities for $19.4 million
in cash. The company's auction rate securities portfolio had a
carrying value of $15.7 million and the sale resulted in a
non-operating gain of $3.7 million.
Cash and Securities Balance. Second quarter cash and securities
balance ended at $36.3 million, including $8.5 million of
restricted cash. This cash and securities balance is a decrease of
$18.1 million vs. the prior quarter driven by the EBITDA loss of
($5.7) million and $13.5 million of working capital spend. The
company did not repurchase any shares in the quarter.
Operating Expenses. Operating expenses decreased $12 million
year-over-year or 19% in the quarter. This decrease was driven by
broad-based reductions in the company's cost structure, including
lower cable and satellite fees, lower headcount vs. the prior-year
period, reduced online marketing spend, and a significant decline
in transactional costs in the areas of order capture, customer
service and fulfillment.
ShopNBC.com. The company's Internet business is attracting new
and returning customers at an increasing rate as online product
assortment expands. Year-to-date conversion is up 36%. Use of live
chat for sales assistance and enhanced email retention programs
allowed for stronger visitor engagement, customer education, and
overall site penetration. Going forward, the company will optimize
ShopNBC.com with the next phase of its mobile strategy, expand its
social networking initiatives, and improve its natural search
presence in key merchandise categories.
"The second quarter was another solid foundation building period
for the company in its turnaround," said Keith Stewart, ShopNBC's
President and CEO. "We have the right leadership team in place. We
are buying the right merchandise and building up our reorder
business. With improved inventory levels, higher margins and lower
price points, positive business metrics continued to take form. The
customer is responding to our new merchandise strategy and to our
new expert guests, all of which can be seen in the positive trends
in new and active customer counts."
Added Stewart: "These are the critical building blocks being
laid, and they are very good signs for this business. I am highly
encouraged about the progress made during the first half of the
year. Year-to-date EBITDA, as adjusted, is $10.5 million better
than last year. These steps are a necessary precursor to improved
sales and profits."
Conference Call Information
The company has scheduled its conference call for 11 a.m. EDT /
10 a.m. CDT on Wednesday, August 19, 2009, to discuss the results
for the fiscal second quarter. To participate in the conference
call, please dial 1-800-369-2172 (pass code: 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 1-800-297-0782 with pass
code 7467622 (keypad: SHOPNBC).
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 8457395 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.
EBITDA and EBITDA, as adjusted
The Company defines EBITDA as net income (loss) from continuing
operations 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-recurring 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 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. 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 small cap,
higher growth 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.
About ShopNBC
ShopNBC is a multi-channel electronic retailer operating with a
premium lifestyle brand. The shopping network reaches 73 million
homes in the United States via cable affiliates and satellite: DISH
Network channel 134 and 228; DIRECTV channel 316. www.ShopNBC.com
is recognized as a top e-commerce site. ShopNBC is owned and
operated by ValueVision Media (NASDAQ: VVTV). For more information,
please visit www.ShopNBC.com/ir.
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 distribution for the Company's
programming and the fees associated therewith; the success of the
Company's e-commerce and rebranding initiatives; the performance of
its equity investments; the success of its strategic alliances and
relationships; the ability of the Company to manage its operating
expenses successfully; risks associated with acquisitions; 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.
VALUE VISION MEDIA, INC.
Key Performance Metrics*
(Unaudited)
Q2 YTD
For the three months ending For the six months ending
8/1/2009 8/2/2008 % 8/1/2009 8/2/2008 %
------- ------- --------- ------- ------- ---------
Program
Distribution
Cable FTEs 43,885 42,988 2% 43,836 42,673 3%
Satellite FTEs 29,524 28,676 3% 29,348 28,528 3%
------- ------- --------- ------- ------- ---------
Total FTEs
(Average 000s) 73,410 71,664 2% 73,183 71,201 3%
Net Sales per FTE
(Annualized) $ 6.50 $ 7.92 -18% $ 6.92 $ 8.32 -17%
Customer Counts
Year-to-Date
New 102,421 64,436 59% 215,448 135,027 60%
Active 351,057 265,323 32% 557,456 431,643 29%
Product Mix
Jewelry 28% 39% 24% 41%
Apparel,
Fashion
Accessories,
Health &
Beauty 12% 9% 11% 10%
Computers &
Electronics 16% 18% 23% 17%
Watches, Coins
& Collectibles 33% 26% 33% 23%
Home & All
Other 11% 8% 9% 9%
Net Units (000s) 980 701 40% 1,832 1,475 24%
Average Price
Point - net
units $ 112 $ 194 -42% $ 127 $ 195 -35%
Return Rate 21.8% 31.5% -9.7 ppt 21.7% 34.0% -12.3 ppt
------- ------- --------- ------- ------- ---------
*Includes ShopNBC TV and ShopNBC.com only.
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
---------------------- ----------------------
August 1, August 2, August 1, August 2,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net sales $ 119,345 $ 141,927 $ 253,147 $ 298,215
Cost of sales 77,785 94,046 169,398 200,378
(exclusive of
depreciation
and amortization shown
below)
Operating expense:
Distribution and selling 43,885 53,827 89,124 110,910
General and
administrative 4,309 5,682 8,936 12,017
Depreciation and
amortization 3,427 4,246 7,216 8,565
Restructuring costs 485 - 589 330
CEO transition costs 223 553 300 830
---------- ---------- ---------- ----------
Total operating expense 52,329 64,308 106,165 132,652
---------- ---------- ---------- ----------
Operating loss (10,769) (16,427) (22,416) (34,815)
---------- ---------- ---------- ----------
Other income (expense):
Interest income 146 761 363 1,586
Interest expense (Series
B Preferred Stock) (1,235) - (1,978) -
Gain on sale of
investments 3,628 - 3,628 -
---------- ---------- ---------- ----------
Total other income
(expense) 2,539 761 2,013 1,586
---------- ---------- ---------- ----------
Loss before income taxes (8,230) (15,666) (20,403) (33,229)
Income tax (provision)
benefit (5) (18) 157 (33)
---------- ---------- ---------- ----------
Net loss (8,235) (15,684) (20,246) (33,262)
Excess of preferred stock
carrying value
over redemption value - - 27,362 -
Accretion of redeemable
Series A preferred stock - (73) (62) (146)
---------- ---------- ---------- ----------
Net income (loss)
available to
common shareholders $ (8,235) $ (15,757) $ 7,054 $ (33,408)
========== ========== ========== ==========
Net income (loss) per
common share $ (0.26) $ (0.47) $ 0.22 $ (0.99)
========== ========== ========== ==========
Net income (loss) per
common share
---assuming dilution $ (0.26) $ (0.47) $ 0.21 $ (0.99)
========== ========== ========== ==========
Weighted average number of
common shares outstanding:
Basic 32,272,841 33,574,131 32,688,289 33,576,015
========== ========== ========== ==========
Diluted 32,272,841 33,574,131 33,391,279 33,576,015
========== ========== ========== ==========
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
August 1, January 31,
2009 2009
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 27,869 $ 53,845
Restricted cash 8,461 1,589
Accounts receivable, net 56,770 51,310
Inventories 48,834 51,057
Prepaid expenses and other 4,942 3,668
----------- -----------
Total current assets 146,876 161,469
Long term investments - 15,728
Property and equipment, net 29,998 31,723
FCC broadcasting license 23,111 23,111
NBC Trademark License Agreement, net 5,768 7,381
Other Assets 491 2,088
----------- -----------
$ 206,244 $ 241,500
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,232 $ 64,615
Accrued liabilities 36,785 30,657
Deferred revenue 725 716
----------- -----------
Total current liabilities 83,742 95,988
Deferred revenue 1,510 1,849
Accrued Dividends (Series B Preferred Stock) 2,067 -
Series B Mandatorily Redeemable Preferred Stock 11,013 -
$.01 par value, 4,929,266 shares authorized;
4,929,266
shares issued and outstanding
Commitments and Contingencies
Series A Redeemable Convertible Preferred Stock,
$.01 par value, 5,339,500 shares authorized; - 44,191
Shareholders' equity:
Common stock, $.01 par value, 100,000,000
shares authorized;
32,317,620 and 33,690,266 shares issued and
outstanding 323 337
Warrants to purchase 6,029,487 shares of
common stock 671 138
Additional paid-in capital 314,547 286,380
Accumulated deficit (207,629) (187,383)
----------- -----------
Total shareholders' equity 107,912 99,472
----------- -----------
$ 206,244 $ 241,500
=========== ===========
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
Reconciliation of EBITDA, as adjusted, to Net Loss:
Six-Month Six-Month
Second Second Period Period
Quarter Quarter Ended Ended
1-Aug-09 2-Aug-08 1-Aug-09 2-Aug-08
--------- --------- --------- ---------
EBITDA, as adjusted (000's) $ (5,733) $ (10,666) $ (12,521) $ (23,059)
Less:
Gain on sale of
investments 3,628 - 3,628 -
Restructuring costs (485) - (589) (330)
CEO transition costs (223) (553) (300) (830)
Non-cash share-based
compensation (901) (962) (1,790) (2,031)
--------- --------- --------- ---------
EBITDA (as defined) (a) (3,714) (12,181) (11,572) (26,250)
--------- --------- --------- ---------
A reconciliation of EBITDA to
net loss is as follows:
EBITDA, as defined (3,714) (12,181) (11,572) (26,250)
Adjustments:
Depreciation and amortization (3,427) (4,246) (7,216) (8,565)
Interest income 146 761 363 1,586
Interest expense (1,235) - (1,978) -
Income taxes (5) (18) 157 (33)
--------- --------- --------- ---------
Net loss $ (8,235) $ (15,684) $ (20,246) $ (33,262)
========= ========= ========= =========
(a) EBITDA as defined for this statistical presentation represents net
income (loss) from continuing operations 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-recurring 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.
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 small cap,
higher growth 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.
Contacts: Frank Elsenbast Chief Financial Officer 952-943-6262
Anthony Giombetti Media Relations 612-308-1190
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