Qurate Retail, Inc.

Welcome to the Curate Retail Incorporated's 2024 First Quarter Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, please press star 1 on your telephone keypad. As a reminder, this conference will be recorded May 8, 2024. I would now like to turn the call over to Claire Adams, Senior Manager, Investor Relations. Please go ahead.

Good morning. 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. Please note that we have published slides to accompany the earnings release. On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIVDA, adjusted OIVDA margin, free cash flow, and constant currency. Information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary notes and schedules one through three, can be found in the earnings press release issued today or our earnings presentation, which are available on our website. Today, speaking on the earnings call, we have Curate Retail President and CEO, David Rawlinson, Curate Retail Group CFO, Bill Wofford, and Curate Retail Executive Chairman, Greg Maffei. Now I'll hand the call over to David Rawlinson.

Thank you, Claire, and good morning to everyone. Thank you for joining us today and for your interest in Curate Retail. In Q1, we continued to generate positive results as we executed our transformation strategies. In the past 18 to 24 months, we took actions to improve margins. We elevated our merchandise assortment, reduced supply chain and fulfillment costs by negotiating better rates, created operational efficiencies, and lowered administrative costs. These actions have resulted in continued margin expansion, profitability growth, and free cash flow improvement. In Q1, we sustained gross margin expansion of approximately 400 basis points, which was the fourth consecutive quarter of expansion. We grew consolidated adjusted OIVDA 45 percent as reported, which was the third consecutive quarter of adjusted OIVDA growth. Each of our businesses grew gross margin and adjusted OIVDA in the quarter. We also improved free cash flow for the fifth consecutive quarter of year-on-year improvement. We are pleased with our sustained momentum in the business through the first quarter. Last month, we launched the QVC Age of Possibility, a new marketing initiative that is focused on celebrating our core customer, women over the age of 50. For this campaign, we brought together the quintessential 50, or Q50, a group of 50 celebrities, activists, QVC hosts, and business leaders, including Christina Applegate, Brunch with Babs, Dr. Mary Claire Hader, Donna Kelsey, Billie Jean King, Patti LaBelle, Queen Latifah, Martha Stewart, and Naomi Watts. QVC is partnering with these incredible women on programming, merchandise, and much more to inspire and empower women over 50. The Q50 ambassadors have a total social following of 78 million. Many of our Q50 who attended this event have already expressed interest in signing on with QVC in a larger capacity. I'll speak more to this initiative momentarily. Now allow me to elaborate on each of our businesses, starting with QXH. Revenue declined in line with the overall discretionary retail market. Consumers remained selective in their spending due to inflation and interest rate uncertainty. Given this, in the colder start to spring, we saw customers buying seasonal products closer to when they needed them, such as gardening, spring apparel, tanning, sandals, and swimwear. This resulted in uneven performance in these categories and in today's special value and today's special sales. Strength in other categories, such as ornaments, fashion accessories, and jewelry, partially offset this pressure. We continue to benefit from new merchandise that is exciting our customers. We increased the number of new on-air items by 10%, and demand for new items outperformed the overall business. We had several successful brand launches, including Givenchy, Scarlett Johansson's The Outset, Kim Gravel's Love Who You Are, and Kim Kibble's Full Hair and Beauty, McKenzie Childs and Home Decor, Coldwater Creek, and Gray by Johann Sebastian Gray, and Apparel. While beauty revenue declined at QVC, we sustained strength in beauty at HSN. Now let's review programming highlights. Total minutes viewed on our five channels remain steady in the quarter. Last year, we introduced a limited run series, Over 50 and Fabulous. We aired season three from February to early March and held the first ever two-hour finale. Our customers continue to engage at high levels. The series reached an average of 481,000 households per hour on linear TV, making it one of our top reaching prime time programs of the quarter. Total series sales exceeded 3 million. On social media, the series reached over 10 million followers with more than 18 million impressions. The program continues to engage customers through a monthly live stream on the first Friday of every month, and we plan to air season four in early August. We also held several successful events. In January, we aired a 24-hour event, Now You're Cooking, that was anchored by Le Creuset's Today's Special Value. The day included six hours of additional live stream content featuring several celebrities and food experts, including Carla Hall, Jeffrey Zagatkarin, and our own Vanessa Herring, and David Venable. Over 3 million households tuned in to QVC throughout the day on Linear TV. making it one of the highest Sundays for viewership in the quarter. For the first time since 2020, we focused a full day of programming on International Women's Day. We celebrated the accomplishments of women with special focus on some of the entrepreneurs who inspire us, such as Amy Richter from Lug, Renee Greenstein from Women With Control, and Mally Roncal from Mally Color Cosmetics. This event reached nearly 2.5 million households throughout the day on linear TV. We continue to stabilize the QXH customer ball and grow the number of new customers. On a quarterly basis, QXH customer count declined 3% compared to mid to high single-digit declines in the second half of 2023. On slide eight of our presentation, you can see that our customer count has significantly stabilized. We've moderated the sequential decline of our trailing 12-month count down to less than 50,000 from Q1, compared to down over 300,000 for the same period last year. We continue to see strength in the purchasing behavior of our existing customers. While only comprising half of the customer count, QXH existing customers still account for 90% of the total spend. On average, they purchased 32 items and spent more than $1,600, and the 12 months ended March 31st, up 6% and 10% year over year, respectively. QXH grew new customers 23% in Q1, marking the third consecutive quarter of new customer growth. We also saw new customer growth on a trailing 12-month basis for the first time since the pandemic ended. with new customers of 7% and the 12 months ended March 31st. I will now touch on streaming. Our streaming business is still small, but growing well. Revenue, total minutes viewed, and monthly average users all increased well into the double digits in Q1. We anticipate similar growth rates for the full year. We're excited to announce that New York Times bestselling author, activist, actor, and writer Busy Phillips, who has more than two million followers on Instagram, is returning to late night to host the talk show Busy This Week, exclusively on our QVC Plus streaming platform. She's bringing celebrity interviews, laugh out loud moments, personal stories, and her favorite curated shopping fonts. The show will premiere tonight at 10 p.m. Eastern. The show will premiere tonight at 10 p.m. Eastern. The first 10 episodes will be released weekly, and we will air four holiday-themed episodes in November and December. Busy Show will be a shop the set, shop the look series, which means everything you see on the show, such as clothing, decor, and props, is easily shoppable on QVC.com. Now moving to QVC International, which continues to be our most consistent business unit. We have grown adjusted OIDA and delivered stable revenue for three consecutive quarters. These results reflect our successful efforts to improve product margins, lower fulfillment and administrative expenses, and incubate growth streams like integrated experiences, which we previously discussed. QVC International's Q1 revenue declined slightly, down 1%. Performance was led by our operations in the UK, which experienced gains across its merchandise assortment, with demand growth in all categories, and particular strife within home. The sales growth in the UK, combined with gross margin expansion and disciplined manage of operating and administrative expenses, resulted in strong adjusted OEBDA improvement. QVC-UK's Integrated Experience Initiative, which is focused on gardening, generated incremental sales, customers, and spend per customer in Q1. In Q2, QVC-UK will conduct testing and learnings to scale its integrated experience. These actions include deploying an AI shopping assistant to increase discoverability of content and give customer advice, participating at the BBC Gardeners World Live event, and partnering with our vendors to bring customers winning flower varieties from the Chelsea Flower Show. Moving to Cornerstone. Cornerstone revenue declined due to soft housing starts and consumer demand for home furnishings. We also experienced a shift to lower ticket products such as textiles and decor in light of the challenging macro backdrop. Cornerstone remained focused on profitability. and grew gross margin 410 basis points in Q1, which was fueled by lower supply chain costs. Finally, I would like to close with the exciting new initiative we launched in April, the Age of Possibility, to celebrate the limitless potential of women over the age of 50. For nearly four decades, QVC has served women 50-plus as our core customer group. This demographic has high discretionary income and controls 95% of household purchase decisions. Women 50 plus are also a large population with approximately 64 million in the U.S., and the population is growing twice as fast as the 20 to 49 group. However, women 50 plus are overlooked by brands and marketers. We conducted a survey of over 3,700 respondents, and found that only 31% of women ages 50 to 70 feel supported by brands. Even fewer feel visible in brand marketing and advertising. These women are often made to feel that society views entering 50 as a stage of decline. To reverse this misconception, we've gathered a powerful group called the Q50, comprising 50 modern women Over the age of 50, that includes celebrities, activists, QVC hosts, entrepreneurs, business leaders, and extraordinary everyday people who have no plans to slow down, and they're living their next chapter in all sorts of inspiring ways. With the age of possibility, these women will provide input and tell their stories through curated new merchandise, on-air programming, remote broadcasts, social media content, podcasts, advertising and national publications such as U.S. Weekly and Woman's World and Vogue, as well as in targeted growth markets on radio, YouTube, Meta, out of home, and display. In late April, QVC convened a first-of-its-kind summit at the Sphere in Las Vegas Grand Prix Plaza, bringing together our Q50 brand ambassadors for a day of compelling conversations on this next stage of growth. keynote speeches on navigating menopause, and Rita Wilson's first time performance of her new song, Set You Free. Coverage of the event was broadcasted across our QVC channels and across social platforms. And the weekend after launch, new customer count grew 110% compared to the same weekend in the year prior. This month, we're starting the Age of Possibility Tour to further engage our existing customers and attract prospective customers. We're taking our show on the road to cities across the country. In some destinations, we will broadcast live. In others, we will conduct panel discussions with some of our Q50 brand ambassadors and customers. We are excited about our mission to lead the way in changing how retail and entertainment see women over 50, empowered and full of possibility. In conclusion, Q1 shows the relevance star power, and new customer momentum in our brands, and it is still early. Now I'll turn the call to Bill to discuss the financial results of each of our businesses in more detail.