Qurate Retail, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Curate Retail 2021 Quarter 1 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star 1 on your telephone. As a reminder, this conference is being recorded May 7th. I would now like to turn the conference over to Courtney Chun, Chief Portfolio Officer. Please go ahead, ma'am.

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent forms, 10-K and 10-Q, filed by our company and QVC with the SEC. These forward-looking statements speak only as of the date of this call. and Curate Retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Curate Retail's expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIVDA margin, free cash flow, and constant currency. Information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary note and schedules one through three, can be found in the earnings press release issued today on our earnings presentations, which are available on our website. Today, speaking on the earnings call, we have Curate Retail President and CEO Mike George, Curate Retail Group CFO Jeff Davis, and available for Q&A, Curate Retail Executive Chairman Greg Maffei. Please note we've published slides to accompany the earnings release. And I'll also point you to our annual report and the letter to shareholders, which provides an overview of the ongoing evolution of the business. It's a great read. Both of these documents are available on our website. Now I'll hand the call over to Mike.

Thank you, Courtney, and good morning, everyone. Thank you for joining us today and for your interest in Curate Retail. I'm delighted to report outstanding results for the first quarter. Our team delivered strong top and bottom line growth across every business unit and every market driving 13% revenue growth and 32% orbital growth in constant currency. This is our best quarterly performance since the formation of Curate Retail in 2018. We built sales momentum through the quarter, driven by the reemergence of the fashion business and improving customer sentiment, aided in part by stimulus actions. We drove broad-based customer gains across all business units, We welcomed 1.6 million new customers in the quarter, up 35% from the prior year, and served 10.8 million total customers, up 9%. We also made important progress on key corporate responsibility initiatives, and this week published our inaugural corporate responsibility report, guided by the United Nations sustainability development goals. It details our commitments and our ambitions to protect the environment curate products responsibly and champion empowerment and belonging. And also includes disclosure aligned with the SASB framework. So please check out the report at the Curate Retail Group website. As part of this work, we're expanding our highly successful small business spotlight in 2021 to support 100 entrepreneurs of diverse backgrounds, providing them with on-air and digital exposure and other pro bono services centered around heritage months, including National Military Appreciation Month, Pride Month, and National Hispanic Month. Now, through the pandemic, our team members' safety and well-being remains our paramount focus. And among other actions, we're providing all team members up to eight hours of paid time off to facilitate vaccine adoption. We anticipate reopening our offices this September employing a hybrid working model for most office-based team members, blending remote and onsite work based on their preferences and the needs of the role. This will enable us to consolidate our global real estate footprint and reduce operating costs in future years. Looking forward, we are encouraged by the macro environment, the strength of overall consumer demand, the rebound in fashion, the positive outlook for retail sales, and the acceleration of digital trends. We continue to closely monitor supply pressures, inflationary challenges, and any shifts in consumer spending patterns. But the unique combination of our extensive digital video ecosystem, highly differentiated customer experiences, and strong and growing base of loyal shoppers is without rival and positions us well for the future as we emerge from the pandemic and adapt to the new realities. Turning to QXH, the team delivered outstanding revenue growth in the first quarter, driven by three key factors. First, we achieved the most balanced growth across categories that we've experienced since the pandemic began, with five of six categories growing or essentially flat. Jeff will provide more details. Second, this balanced category growth grow balanced customer performance. We continue to enjoy strong growth among new customers of 20% in the quarter, and we remain encouraged by the projected lifetime value of these acquired customers. As we gain more experience with a large class of new and reactivated customers who joined us over the course of 2020, we've become even more confident in their stickiness and projected lifetime value. 15% of last year's new class made a purchase in the first quarter of this year. That's a comparable rate to prior years, but with a much larger class. As a result, last year's new and reactivated class drove approximately one-third of our Q1 growth. Additionally, our best customers returned the growth, with sales up 5% year over year. Now, we've shared over the last year that best customer retention remains stable, and we were confident that their sales would turn positive as the fashion business rebounded, and that's exactly what we saw this quarter. Third, we continue to benefit from the strength of our video and digital reach. With a 6% increase in the total minutes viewed on our five networks, more than 25% growth in visitors to our online properties and 20% growth in online sessions. Our Orbit of Margin expansion reflects in part the benefit of our multi-year effort to realize synergies from the HSN acquisition, which is our work on strategic vendor sourcing, along with our disciplined promotional stance. We reinvested some of these savings in performance marketing and the expansion of our digital ecosystem to support long-term healthy growth. Progress on our strategic priorities has, in fact, been fundamental to both sales and Orbit of Games. Curating special products at compelling values with stories that inspire and excite is the heart of our business. In the first quarter, we built on strong customer followings developed with leading designers, influencers, and entrepreneurs such as Layla Ali and Bethany Frankel, and We by Living in Yellow in the fashion category, and Chef Anne Burrell in culinary. We also continue to expand our product and brand range in on-trend categories, including in apparel, launching Seed to Style, featuring organically sourced cotton, and in beauty, eSalon, a customized home hair color system, along with hair, skin, and nail care brands Balsonic, Spa Ritual, and Finishing Touch Flawless Salon Nails. And I'm pleased the lines of Estee Lauder that I mentioned on the last call performed very well. We also drove strong results on key events, capitalizing on opportunities to offer compelling virtual experiences outside our studios. We broke sales records with our annual St. Patrick's Day event, taking the customer to Ireland for inspiration. In gardening, We took the customer to greenhouses and nurseries and into the backyards of our favorite guests, offering an incredible selection of plants, tools, equipment, and decorative garden accents from our portfolio of national, exclusive, and private label brands. And we educated the viewer on how to achieve the perfect outdoor oasis. These events are just a few examples of our ability to translate our strengths in content and entertainment and in product curation into captivating moments that attract large audiences and drive high sales volumes. We expanded our leadership in multicultural beauty, offering new products, stories, inspirations, and expertise, including premiering the new program Shades of Beautiful on HSN and launching new brands, Butter and Urban Skin RX. We continue to extend video reach and relevance, ensuring we have relevant, fresh content across traditional, new, and emerging platforms. In late March, we teamed with Byrdie, a shoppable online and mobile beauty content platform, to create a year-long livestream collaboration of quarterly programming called the Byrdie Beauty Hour, helping viewers discover the best in skincare and beauty, featuring editorial insights and products curated by Byrdie and QVC. The content is available over multiple platforms including Facebook, YouTube, QVC.com, our QVC2 channel, OTT devices, Birdie.com, and Birdie's social presence. This collaboration is one of many examples of how our strategic initiatives across product curation, digital, video, and social engagement, content creation, and marketing, and community building come together to create a compelling platform for retail brands and content partners alike to access large, attractive audiences. Now turning to QVC International, the team delivered another strong performance with double-digit top-line growth, significant dividend margin expansion, customer growth in all markets, and gains across all categories. The consistent strength of our international markets over many years further reinforces our confidence in the long-term health and vitality of our global shopping platform. Zulily built momentum this quarter with significant new brand launches such as Land's End, Benefit Cosmetics, and Ann Taylor, continued growth of its factory direct platform, strong gains across home, apparel, and beauty, and outstanding new customer growth up 81% supported by more diversified marketing programs. Zulily is uniquely positioned, one of the few scaled, profitable e-commerce pure plays, targeting moms and focused on the burgeoning off-price segment with a loyal following of high-value customers. We're bullish about its long-term growth prospects as the team executes on great fresh finds, daily discovery through frictionalized personalized shopping, frictionless personalized shopping, and diversified marketing to sustain high levels of customer acquisition. At Cornerstone, the team delivered extraordinary revenue growth, topping 40% with the continued surge in home spending benefiting Frontgate, Ballard Designs, and Grandin Road. Barnard Hill also had a terrific quarter on the strength of home textiles and a rebound in apparel. We are especially excited about the long-term prospects at Cornerstone, centered at the sweet spot of the home nesting trend, as the team focuses on building out proprietary assortments and pivoting to a digitally-driven marketing strategy coupled with a strategically placed store network. In summary, I am extremely proud of our Curate retail team, delivering outstanding results with broad-based gains across all businesses and markets, balanced across customer segments, categories, and digital platforms. But more important than what the team achieved is how they achieved it, with an unwavering focus on the customer, with care and concern for each other's well-being through the darkest days of the pandemic, with an unrelenting commitment to driving innovation and advancing our strategic priorities. and with a renewed dedication to creating a culture of belonging, to supporting our communities, to protecting our environment. Now, I recognize that some skeptics may attribute recent strong results exclusively to stay-at-home tailwinds and conclude that we may struggle post-pandemic. So I'd like to take this head-on and recap why we believe our business that exits the pandemic is far enhanced from the one that entered it. Put simply, the environment in which we operate is forever changed, and the progress we've made over many years of strategic investment positions us perfectly for the world we now face. The pandemic has accelerated many long-standing trends in retail and created some new ones. Comfort with online shopping, use of video streaming services, and engagement on social platforms are at all-time highs. These in turn are fueling a steady rise in live stream shopping, one of the most talked about retail trends of the last year. At the same time, the pandemic has brought about a renewed focus on creating a comfortable, productive, and inspiring home life as work becomes more flexible and less office-based. This is fueling demand for home-related merchandise and further increasing consumer engagement with live TV, with live streaming, and on-demand digital video content. The rule of trusted personalities and social influencers in discovery and purchase decisions continues to expand. And an ever-growing portion of consumers demand that retailers and brands be everywhere they are with relevant, engaging, video-rich experiences seamlessly integrated across virtual and physical touchpoints. These massive shifts in consumer behavior perfectly align with the strengths of our business model and with the strategic investments we've made. We bring four unique and expanding capabilities to this evolving digital and home-based lifestyle. I want to take a moment to comment on each of these four capabilities. First, we've built an expansive and innovative digital video ecosystem. One of the fundamental keys to the adoption of live stream shopping in the West is overcoming the fragmentation of video platforms and the cost of video reach. Our unique state-of-the-art video platform reaches hundreds of millions of potential customers in a highly cost-effective manner through pay TV, with attractive channel placement on nearly all major cable and satellite providers across seven countries and 14 networks, reaching 81 million homes in the U.S. and 124 million homes outside the U.S. Free over-the-air TV, including an incremental 15 million cord cutting or cord never homes in the U.S. Digital live streaming TV, And in the last 18 months alone, we've added placement on paid services like YouTube TV, Hulu Plus Live TV, and AT&T Now, and free services like Zumo, and smart TV streaming services such as Samsung TV+, LG Channel+, and Vizio Smartcast. Our interactive streaming shopping app features multiple QVC and HSN networks and extensive on-demand content available on Roku and Amazon Fire TV, among other places with cumulative downloads of 68% and 280% respectively in the last year, and on the LG Shoptime app reaching 12 million devices. Extensive social streaming presence on Facebook Live, YouTube, Instagram, and TikTok, and the ability to move quickly to trial relevant new technologies and platforms when they emerge. And our own QVC and HSM websites and apps which integrate extensive live feeds and on-demand videos throughout the shopping experience. Second, our scale and resources provide powerful benefits and tangible value and savings to our customers, including thousands of buyers around the world on the hunt for amazing curated discoveries and an organization restructured over the last 18 months to significantly expand the resources focused on new product discovery. Extensive global design, development, and sourcing capabilities to translate great ideas into compelling merchandise for our own brands and in partnership with leading celebrities and influencers with a significant expansion in the product categories brands and influencers supported in the last 18 months. Multiple state-of-the-art studios in five countries producing more high-quality live content than any other television programmer in the world. A fulfillment network nearing the completion of a multi-year restructuring in the U.S. to reduce delivery times and improve efficiency, all supported by a treasure trove of customer data we're increasingly deploying to create more personalized marketing and shopping experiences. Third, our unique content and customer experience. We have spent 40 years refining the art and science of telling engaging stories through live video shopping in ways that inform and inspire, drive impulse and urgency, build trust and lasting relationships, and bring customers back to our platforms nearly every day. This stands in stark contrast to most live stream shopping today which is focused on one-off marketing events that build no relationships, and will struggle to create enduring value. And fourth, this experience drives remarkable customer longevity and engagement, more akin to the stability of a subscription business than a typical retail model. As a result, we can promise any brand who comes to our platforms the opportunity to tell their story directly to the world's most engaged shoppers. In 2020, our best customers at QVC US represented 69% of our sales. They visited our websites or apps 36 times per month. They watched our TV programming 19 days per month. They engaged extensively on our social platforms. They purchased 69 items. And they retained at an astounding rate of 99%. And these metrics have been remarkably stable year after year. Yes, customer loyalty and frequency has always been the foundation of our business, and we've demonstrated through the pandemic that this experience is also relevant to historic numbers of new customers who are showing the same stickiness as prior generations, equally likely as their forebears to become best customers. Now, critics suggest that we are challenged with an aging customer base. It's a refrain we have heard for decades. But the facts are clear. Though I have regrettably aged 16 years since taking on this role, our average customer hasn't aged one darn bit. In fact, the average age of our customer at QVC has actually declined slightly. We are uniquely well-positioned at this inflection point. As a leader in video commerce, e-commerce, mobile commerce, and social commerce, with a unique combination of capabilities and assets present everywhere our customers, prospects, and partners want us to be, confident we can deliver sustainable growth and generate strong cash flow for our investors for years to come. And with that, I'll turn the call over to Jeff.