iMedia Brands, Inc.

Greetings, and welcome to the iMedia Brands third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Monty Wagman, Chief Financial Officer for iMedia Brands. Please go ahead, sir.

Good morning, everyone, and thank you for joining. This is Monty Wagman, iMedia Brands Chief Financial Officer. We issued our Q3 earnings release earlier this morning. If you do not have a copy, you may access it through the news section of our IR website at imediabrands.com. This release is also an exhibit to the Form 8K filed this morning. I would also like to remind everyone this call will be available for replay through December 1st, 2021, starting today at 1130 a.m. Eastern Time. A webcast replay will also be available via the link provided in today's press release as well as on the IR section of our website. Some of the statements made during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future operating and and financial performance and speak only as of today's date. We undertake no obligation to update or revise these forward-looking statements. We believe the expectations reflected in our forward-looking statements are reasonable but give no assurance such expectations or any of our forward-looking statements will prove to be correct. For additional information, please refer to the Safe Harbor Statement in today's earnings release in our SEC filings. Finally, we will make references to non-GAAP measures on this call, such as adjusted EBITDA. Please refer to our earnings release for further information about these measures, including reconciliations to the most comparable GAAP measures. Now, I would like to turn the call over to the CEO of iMedia Brands, Tim Peterman. Tim?

Thank you, Monty. Good morning, everyone. Thank you for joining. iMedia will enhance its financial reporting for each of its three core growth strategies, entertainment, consumer brands, and media commerce services. In addition, I am pleased to formally invite you to save the date of February 8, 2022. On that day, we will host our first Capital Markets Day at our corporate offices here in Minneapolis. This will be a jam-packed half-day event where stakeholders can engage with me, my management team, and our key vendors about iMedia's 2022 plan to organically generate $675 to $725 million in net sales while achieving positive quarterly EPS beginning in the back half of 2022. As most stakeholders know, the strong position iMedia created for itself today didn't happen overnight. In the middle of 2019, we set out to fix the business model, establish an entrepreneurial culture, and pursue a new interactive media strategy, and we did. In 2020, we set out to successfully launch 50-plus merchandising brands and grow our customer file, and we did. In 2021, we said we would significantly grow net sales and adjusted EBITDA, and we are. It's because of these successes and the employees and vendors who produce them that our 2022 plan is so compelling. For example, during our Capital Markets Day, we will further explain how the Entertainment Strategies' three owned and operated catalysts, ShopHQ, 123TV, and Emerging Networks, will drive growth over the next three years, and how their success, in turn, will accelerate the cross-promotion that we believe will drive the outsized growth for our consumer brands, We will provide additional insights into how the consumer brand strategies three owned and operated catalysts, Christopher & Banks, J.W. Hume, and 123auctions.com, will drive growth over the next three years. We will explain how the media commerce services strategies three owned and operated catalysts, digital advertising services, or IMDS, value pay financing, and what-to-buy services will We utilize our entertainment and consumer brands' first-party shopping data to successfully scale in the converging information layer of e-commerce and advertising. We will also demonstrate why all of our businesses are focused on the same core customer demographics and why the 34% growth over the last 10 years of U.S. consumers who are at least 65 years old, is creating unmatched spending power. And as iMedia scales and becomes the single source partner to brands and advertisers seeking to use interactive video to drive growth, iMedia believes its entertainment network's promotional power will provide key advantages against its competitors like Roku, Shopify, Taboola, and IEC. We believe hosting an intensive capital markets day and providing more financial reporting around our key growth strategies will help give our stakeholders even more insight into our fast-moving corporate story. Now, let's take a closer look at the Q3 performances of our top three growth catalysts today. First, it's ShopHQ. Our flagship national entertainment network reported a 7% growth in gross margin dollars for the third quarter by implementing a new merchandising strategy that yielded a 520 basis point improvement in gross margin rate and a 7% net sales decline on a year-over-year basis. And although we did face logistic cost increases and delivery challenges related to COVID-19 in the third quarter, the procedural changes we established in Q2 minimized the impact of the inventory delays. Our success in Q3 was driven by two factors. First, the quality of ShopHQ's distribution footprint continues to improve. driven by the new 20 million HD homes that have generated increased net sales of about 15% within the respective markets since their launch at the end of July. This is a better growth rate than we expected this early. Second, our Q3 merchandising strategy returned to a focus of offering merchandise that she knows and loves Shop HQ for, and one that continued to maintain higher gross margin disciplines. This assortment was driven by an increased mix of jewelry and fashion and a decreased mix of health and consumer electronics. While ShopHQ continues to offer products that are designed for everyday health and wellness, for example, the Medic Therapeutics Vibrating Fitness Platform, we did shift away from the demand that existed last year for pandemic-related products. We believe this merchandising strategy is a more balanced approach to meeting our demand. For example, two great new beauty brands we launched in Q3 were Oliveta, which is a revolutionary beauty brand that takes an internal and external approach with the use of olive tree leaves. Unlike other skincare brands, their holistic approach means each formula is based on 70 to 100% active ingredients instead of 70% water, which allows for more powerful and regenerative results. MyFacelift, which is a clinically developed resistance training device so you can strengthen and tone your neck, chin, and facial muscles. reducing the visible signs of skin aging by reducing the look of the sagging jawlines and drooping cheeks. Our second growth catalyst, Christopher & Banks, or CBK, is our flagship consumer brand that reported a 50% sequential increase in net sales from Q2 to Q3 and maintains the highest gross margin in the company. This revenue growth was driven by our omni-channel sales strategy that includes television, e-commerce, catalog, and bricks-and-mortar retail. Regarding television, it's official. CBK is a hit on ShopHQ. In the third quarter, CBK's on-air productivity, what we call DPM or dollars per minute, grew by over 50% from Q2 to Q3. CBK's net sales on television grew approximately 250% from Q2 to Q3, and new customers grew six times higher over that same time frame. Quite frankly, we have never seen a brand so well received so quickly on ShopHQ. Regarding brick and mortar retail, our first two CVK stores, one located in Coon Rapids, Minnesota, and the other located in Branson, Missouri, continue to exceed our expectations. Our Branson store has already exceeded $1 million in net sales since opening in May, and we are opening three more CBK stores in the fourth quarter. A first for CBK is a direct-to-consumer catalog, which we introduced this fall. To date, we have created and mailed three CBK catalogs, and each have been well-received by new and existing customers. Our third growth catalyst, iMedia Digital Services, or IMDS, formerly Cinecor's portal advertising business segment that we acquired in July, is a leading video advertising platform that monetizes over 200 million monthly users for its online publishers, MVPDs, and ISPs by utilizing its proprietary technologies, interactive websites to drive engagement, traffic, and conversion for its publishers. I will say this third quarter was a successful and busy time for our seasoned IMDS management team. Wins during the quarter included, number one, IMDS merged Float Left, our OTT app SaaS platform, into its organization. This capitalizes on IMDS's more seasoned product and engineering team's abilities to accelerate Float Left's product innovation and sales growth. Number two, IMDS grew Q3 net sales by 27% over the same period last year, which was driven by a 26% growth in monthly publishers and a double-digit increase in average revenue per publisher compared to the same prior year period. This revenue growth was complemented by a 200 basis point improvement in gross margin in the third quarter compared to the same period last year. A great first quarter within iMedia. I'd like to thank the team there, Ron, Matt, Gabor, and Bill. They're doing a great job as we move this business forward. Now, I'd like to provide some additional color on our most recent acquisition, 123TV. Today, 123TV is the leading interactive media company disrupting Germany's TV retailing marketplace, with its expertise in proprietary live and automated auctions that emotionally engage customers with 123 TV's balanced merchandising mix of compelling products shipped directly to their homes. Our growth strategy focuses on 123 continuing its disruption of TV retailing in Western Europe while exploring how 123's Gamification, really, its gamification expertise and its automated auction technology can disrupt online digital shopping marketplaces here in the United States, particularly in the online shopping for travel and event ticketing. We plan to use our television networks to drive customers to these new 123TV online businesses here in the U.S., which we believe will also generate significant first-party shopping data to further differentiate IMBS's video advertising platform. I was just in Germany last week. I can't say enough about the quality of the management team. It's run by Jorg Simone. He's got a great team. Rita, Christian, Bjorn, Michael, Manuel, Eberhard. I can't say enough good things. We've got a lot to do, and I'm glad that we're partnering with that group. As always, I just want to say that I appreciate your trust on our journey together. We're still in the very early innings. Now I will turn the call back over to Monty to discuss our consolidated financial and operating results and our outlook for Q4 and 2022.