Q2 2020 Qurate Retail Inc Earnings Call

No.

[music].

Ladies and gentlemen, thank you for standing by welcome to the Curie retail incorporated 2020 quarter to earnings call.

During the presentation, all participants will be in listen only mode.

Afterwards, we will conduct a question and answer session.

At that time, if you have a question. Please press star one on your telephone.

As a reminder, this conference is being recorded today August 10th.

I would now like to turn the conference over to Courtney Chen Chief portfolio Officer, and senior Vice President of Investor Relations. Please go ahead.

Thank you before we begin we'd like to remind everyone that Colin could include certain forward looking statements within the meaning of the private Securities Litigation Reform Act with 1995 actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent form 10-K in 10-Q filed by our company and keep.

You see what the FCC. 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 statements contained herein to reflect any change in cure rate retails expectations with regard there too or any change in events conditions or circumstances on which any such statements space.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA adjusted OIBDA 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 that or the earnings presentation, which are about.

Well on our website today speaking on the call reiterate retail executive Chairman Gregg nothing President and CEO, Mike George and curious retail group CFO, Jeff Davis. Please note, we publish slides to accompany the earnings release. The slides are available on our website now I'd like to turn the call over to Greg.

Thank you Corgi and welcome to all of our listening audience.

Historically thinking to jewelry retail two numbers on their exceptional results.

It's really reflective of their dedication of course, you hear us.

Well I can just will be onshore me to provide more details.

Can you give us some corporate doctors.

We know capital return strategy has been ongoing topic among our investors. Thank you clause buybacks last year.

Our historical buybacks have not been successful we'd like.

Largely due to the markets more negative outlook for two or three trails terminal value.

Well, our view may differ on management Board.

Sport alternative approaches for return of capital to deliver sustained benefits to shareholders.

Given the strength and curious free cash flow and our confidence in business fundamentals, we intend to return capital to shareholders via special dividend consisting of two pieces.

A onetime cash dividend it was relative to your share.

And a preferred stock during the $3 this year.

The proposed onetime cash dividend will total approximately 633 million.

And we are right, it's not going live viewing the projected 2020 free cash flow.

The expected proceeds from the sale of Barcelona Green energy assets.

And cash built in part from apartments your buybacks over the past year.

This could be important also because and you're having to fit and now because you like the optimal timing and even tax rate increase in coming years.

The proposed preferred stock dividends will have a total pace of approximately 1.3 building billion.

Why did we choose a preferred stock dividends.

Well effectively were the body choose common stock into a more bomb like adjustment instrument in a more levered common equity.

In line with many other things we've done in terms of providing investor choice, there should increase investor choice as well, but these are tracking stock and spincos have done.

I like that were common or current common dividend, which forces common shareholders received a distribution this provides shareholder flexibility.

You can hold.

I mean compelling security or monetize your preferred stock and maintain a net position in a more levered common equity.

We think that could be an attractive innovative security for those who elect holder.

Generates compelling after tax income at a rate, which is appealing compared to bond choices out there and other alternatives.

In a relatively low levered equity given significant cash generation and coverage as I mentioned the rate is favorable to comparable securities and it will yield a higher after tax yield of all of jewelry retail like instruments. It's a long 10 years maturing into Q1 2031.

This preferred stock will also highlight our management and board directors confidence in strong free cash flow generation accuray's retail.

We also hope it might be able to attracting new investor base, the bird might be should be good fit for income or investors seeking yield.

John and I are both enthusiastic about this preferred stock and intend to be long term holders.

I'd also note for some of you would historical dense liberty you've had some success issuing these preferred in the past, although admittedly with a fair time ago.

Over the longer term, we expect to preferred stock and common equity in aggregate after giving effect to the cash dividend to trade in excess of the current trading price.

As we moved to the balance of 2020 and in future years, we will actively consider additional forms of capital try and give them a substantial cash generation that cure it has.

We retain the ability to deploy just cash mentioned the jury retails past shareholder practices to be clear buybacks are not off the table in 2020 and beyond.

In any future buybacks will be against a more levered.

Upside in a business.

We also intend to manage the detail the deferred tax liability, our exchangeable bond as well in the near and midterm debt maturities.

You should expect some future repurchases of some of the exchangeable bond as we had done in recent years.

Finally, given the ongoing pandemic.

We've decided that Liberty's investor day. This year will be virtual can be broken into two days. So as much as we loved zones no one should have to be on a call that long.

On Thursday November 19th we will cover Liberty media and Liberty trip advisor and on Friday November Twentyth.

Moving to carry retail Liberty broadband and GCR Liberty.

Okay, we'll run from 11 to 12 feature.

More details will be provided on our website. Please mark your calendars and with that I'll turn it over to Mike.

Thank you Greg and good afternoon, everyone. Thank you for joining us.

We are certainly live into a period of unprecedented challenge.

Little by the ongoing and perhaps of the global pandemic.

I mean, the mood outcry situational and economic Justice.

I want to start today's call by summarizing actions, we've taken in response to these extraordinary events.

And then I'll review, our results and our outlook for the future.

Because of our actions are forced to our primary focus remains on protecting the health and the financial well being of our team members.

All team members, who can work from home will continue to do so.

Until at least early next year.

In summary work from home permanently most notably in customer service.

Social gifting team mandatory maps requirements and screens, including the genes aren't affected at all of our sites.

And that we provided a variety of special pay leave the medical and other benefits along with work from home allowances our team members.

Second we continue to support our local communities.

I'm, especially proud of our small business spotlight.

Given the small businesses impacted by told the visibility across QVC and HSN. Similarly.

Total launch a new series focused on plateau in small businesses.

Our record setting beauty with benefits program on QVC and HSN deliver their projected two and half million dollars for cancer and careers with $500000 corrupting supporting cobot related grandson programs.

And we donated over a million dollars pretty equal Justice initiative.

Altogether, because it really commitments facilitated in support of our communities for our team along with our commitments to combat racial injustice total $40 million.

Third we rapidly pivoted, our product programming events and marketing.

The into this will consume was most kills out now.

As far as the whole refuge in a place for advice entertainment and community.

On a source of joy Coke and inspiration.

Fourth you instituted a significant strategic pull back on promotional activity across all businesses.

Provide a better foundation for hoping sustainable long term growth.

Also the manage elevated demand.

Yes, we simplified and streamlined our operating structure and better align resources with the biggest growth opportunities.

Unfortunately, this necessitated separating the 450 value team members.

Additionally, as oppose multiple customer contact centers as we've shifted those positions are permanent work from home.

And finally, we further strengthened our balance sheet.

Prudent inventory reductions more conservative consumer installment payment practices, and our new trade payables program.

We are enormously grateful for 25000 team members, who navigated these changes with the termination and resilience committed to helping our customers and helping each other get through this crisis.

We've also been inspired by the outpouring of care and concern from our team in response to the death of George Floyd and other leases instances of racial and justice.

We are committed to creating a culture of belonging football team members.

And we are redoubling, our efforts to go live multicultural product assortments mature broad representation and our marketing digital on their activities.

And establish a more diverse supplier base.

These actions we took in response to the pandemic coupled with continued progress on our strategic priorities and the favorable macro trends from the stay at home shift like two outstanding results in the quarter.

Revenue and adjusted EBITDA increased 10% with every business unit and every geographic market demonstrating strong revenue growth.

We can't feel grew to $1 billion year to date.

Increases nearly $800 million compared to last year.

And this growth was fueled by record setting new customer gains, we welcomed 2 million new customers to Q arching, 60% increase over the prior year.

Double digit new customer growth in every business unit every market.

We also enjoyed strong growth in reactivated and occasional customers all feeling a 14% growth in the total customer count across the company.

Especially encouraged by the strong performance across our QVC and HSN brands globally.

Well because powered by high demand for home related products in the consumer electronics, partially offset by softness in apparel controlling.

In mid May we made the decision to pull back substantially on a variety of promotional activities to provide a better foundation for healthy long term growth.

While moderating the immediate sales surge, which we were struggling to keep up with.

On an order demand basis.

We saw a low to mid teens growth before the pullback.

And low to mid single digit growth after but at more attractive margins.

The total active customer base increased significantly up 14% of Qxh and 9% QVC International.

We track is record levels of new customers, coupled with strong increases in reactivated and occasional customers.

However, sales from our best customers so to make over 20 purchases per year declined modestly.

They increased their home and electronics purchases, but this was offset by sharp pull back in apparel, where they significantly over index.

Throughout this challenging hobbyist stay committed to advancing our strategic priorities, which we see as critical to long term growth.

First we remain focused on trading special products, a compelling values as we strive to be a source for unique innovative and exclusive merchandise.

Finally, consumers and feeling serendipitous discovery.

These actions include the recent launches are about new Qxh merchandising organization a regional teams. This is international merchandising function.

The growth of our proprietary design development of switching team, including adding additional categories like home.

Highlights from the seamlessly to successful launch of August plus Leo the new home decor brand is giuliana rancic as well as the launch of the human lifestyle brand.

New categories that we flip shifting consumer demand like our new social distancing category, the toughest mass digital marketers in hand sanitizers much in house.

Well rapid expansion includes 37, new offerings in Q2.

And expanding our size inclusive offerings.

Two major launches this quarter all worthy by 100, mcgrady at QVC and sitting pretty bright HSN, along with expanding our size rose to five times projects and all apparel lines.

As a result of our push on product freshness and programming diversity accuse you see what typically U.S.. We introduced 44, new on her brands in Q2, that's up from 18 the prior year.

Devoted how does it those are two programming hours in the quarter. Good news shows up from 80 last year.

Top 25 times, because they represented just under 30% of our sales on the day down from 41% last year.

We're also making great strides on our second strategic priority extending our video reach and relevance.

Across across all the video platforms that matter to today's consumer.

We of course remains critical our viewership on traditional pay TV with up even as the number of pay TV homes declines were killed safe, we saw strong 10% game in homes being one of our networks on any given day.

We're benefiting from the shift to stay at home and we're rapidly could you know programming. It seems most relevant in this environment, reflecting the agility of our model.

We're also expanding on digital pay TV services or virtual has the pieces instead of like watching us who this quarter.

Following our 18 team now launched late last year.

On track to fly more digital carriers in the back half.

We also added more than 2 million over their households in the quarter.

Altogether now reached 95 million TV problems in the U.S., including 76 million traditional MPB homes, Florida half morning, virtual NBP these homes and 14 million over their homes.

In addition to be gains in TV viewership in distribution highly encouraged by progress on our streaming shopping services that we make available across multiple digital platforms.

Consumer adoption video streaming services has significantly accelerated during the pandemic.

And there is a great deal of Buzz about livestream shopping as an alternative to physical shopping.

We're pleased with this validation of our unique model, we aim to extend our significant leadership position.

We continue to enhance and expand our core screaming shopping service, which brings together, our QVC and HSN networks Wong with a variety of specialized in unique on demand content.

This service is now available and 45 million low crude and fire TV homes over 3.6 million homes have downloaded our path, that's 100% year over year increase with strong growth unique visitors and minutes streamed.

We are accelerating our investments in specialized content because the surface that can attract new audiences, including 10 pull series such as the upcoming launch of our Curtis Stone travel conclude series.

And then progressing on the next generation version of the service, which will feature embedded transactional capabilities.

We're also expanding the reach of our networks to other over the top devices, such as Comcast New obscenity flux streaming service available to their Bob answered subscribers, we don't purchase Comcast video.

It will grow in range of over the top services, including those offered by Samsung TV, plus Cmos and Alger channel plus with more underway.

Finally, we continue to expand our presence on social video sites.

We recently launched a dedicated Facebook page. The features live streaming of all our Cheez. It seemed that works integrated with compelling social content in conversation.

Due to a new collaboration across the water gross 1.3 million minutes viewed in hundreds of new subscribers to our beauty I too new to channel the checkout, Mr waters experts Pips, Mexico tips.

Our third priority is to Reimagine daily digital discovery and brings our ecommerce platforms. The same level of engagement and inspiration that characterizes as video platforms.

We recently launched a new engagement tool, which uses machine learning the present personalized messages on the web sites at key moments in the shopper's journey, creating excitement and emergency while staying true to our brands voice.

We realized strong growth in all E commerce metrics in the quarter.

At Qxh digital sessions grew 36%.

Purchases of our products those that are not through to that day on the video platform grew 24%.

And ecommerce penetration was just shy of 60% of total sales of 440 basis points year over year.

If you could see international experience, even stronger results ecommerce penetration up 650 basis points.

Can you really altria delivered strong revenue growth on record new customer additions.

Which has benefited from an overall macro ship the commerce couple of strong progress on our turnaround initiatives.

In fact in an important strategic pivot the organization refocused all consumer facing activity monitors original target of bottomless with kids at home the team to lead into your little core brand attribute a fresh finds that amazing values, adding more than 800, new vendors in the first half.

Supported by topical events relevance to stay at home customer.

I've looked face mask have been one of their most successful offerings selling over 3 million units.

As the team is able to move quickly the secure supply really in the prices.

She's only also made great strides refocusing its marketing programs.

You know you do subscription plan in place pool.

Improving lookalike targeting and enhanced enhancing outbound marketing.

After a difficult year, we're encouraged to see the team's hard work to reposition is little bit, let's gaining traction buoyed by the E Commerce tailwind.

Enforcing in our view the fundamental attractiveness as is really value proposition.

Cornerstone delivered outstanding results from a strong broker pancake Ballard designs Grandin Road and home segment of product film.

The business benefited greatly from the stay at home trend coupled with significant work over the last two years to develop more updated relevant to proprietary assortments, while shifting resources from catalog to online marketing.

I want to close my comments by directly addressing the question on everyone's mind.

Can we sustain growth and healthy margins will be economy reopens.

While we certainly recognize that the outsized gains that we achieved this quarter or likely not sustainable.

They are more confident than ever that our business can generate healthy long term growth in revenues profits and cash flow.

For a number of reasons.

First we anticipate that many cobot related trends will continue over 2020 and to some extent become part of the new normal including greater consumer engagement.

Live streaming video content.

The accelerated shift the E commerce.

Difficulty of creating engaging experiences and brick and mortars, given the limitations on customer interaction.

And then we focus on a more home center like.

Second.

We believe were uniquely suited to benefit from this environment.

Feature broad and diverse product ranges in the capital influx on methanex co occurrence merchant home categories at QVC and HSN Angela.

In Q2, we were able to be there for her as she moved from clean.

The fitness in self care to hamamoto scheme or payment or puzzles indoor decor to pool and garden, the food the cookware gadgets, but now sanitizers and air Purifiers.

No I focus on niche differentiators and exclusive products.

With compelling personalities and focus on entrepreneur or.

Keep it out of the Commoditized price driven ecommerce right and appeal to the spirit of the times.

Yeah, one of the world's largest shopping platforms and look at home shipping over 220 million packages per year with the benefits of scale experience and efficiency.

And QVC and HSN into really is wrong or centered on relationships.

Unity authenticity and engaging experiences.

Attributes that matter is trying times more than ever.

That's why we enjoy a level of loyalty and purchase frequency that a virtualized unmatched in retail.

Third our confidence in driving long term growth stems from the traction we're seeing our strategic priorities.

Which perfectly intersect with these macro forces.

This progress is reflected in key metrics, we call them for example.

We're seeing games in product duration and programming diversity as measured as a success as the new on your brands and programs I mentioned in the release concentration of top items.

Our video programming accessible and viewed as more and more places to offset cord cutting.

Growth in virtual and be PV, and 88 households unique visitor growth in recruitment fire.

Growth in video views on our web and mobile platforms all up strongly.

As our traditional TV viewership, it's consistently outperformed the underlying erosion and pay TV homes, and that's been going on for many years.

Ecommerce engagement continues to strengthen.

<unk> growth in daily visitors broken off their product Assortments and increased ecommerce penetration metrics that all moving positively propose a pandemic and are now accelerating.

And most importantly, we're seeing growth in our active customer base.

Our strong new and reactivated customer growth benefited significantly by the stay at home Prem.

But if our value proposition was highly attractive to consumers simply would not have seen so many non customers.

Growth from really watching our programming were visiting our web sites to becoming active customers.

Yes, all early indicators pointing because these new customers, having strong lifetime values.

With existing customers were highly encouraged by the surge in spending another occasional customers, but also cautious about that slowed down some thoughts customers.

Expect these two to pay off each other to some extent.

With occasional customer growth continuing through the strength in home, but likely moderating overtime and best customer growth gradually you give me as she eventually reengages with fashion products.

And finally, Jeff will further discuss why we see opportunity to continue improving or better margins and free cash flow yields as we started to the benefits of the investments over the last 18 months.

As a global community.

Guardedly have difficult days ahead of us.

With the pandemic far from over.

The U.S. and election season in full force and economic outlook on certain.

Nonetheless, we are confident that we are and will continue to be one of the winners in this new normal.

And with that I'll turn it over to Jeff.

Thank you, Mike and good morning, good afternoon, everyone.

As Mike mentioned to our eyes net revenue grew 10% for the quarter recalled segments delivering mid single high teens growth.

Or is it off improved 10% and included several discrete items, including an incremental 10 million of severance across all business segments.

And at $5 million inventory provision at cornerstone.

Partially offset by a 10 million dollar reduction and sales tax accrual annually that was originally recorded at the time of acquisition.

Let's start with Qxh.

Your next page returned to net revenue growth on a foundation of new customer growth and strong E Commerce performance.

As Mike said.

We have a broad product portfolio, which enabled us to new customer demand.

As you'll see on slide 11 in the earnings presentation, we experienced a sizable ship and category mix from apparel accessories and jewelry the home electronics.

The team responded well to these changes in customer demand to drive revenue growth.

Fifth deployed.

Substantial growth margin pressure.

For the quarter checks age.

Total customer group.

14% with existing customers up 4% reactivated customers at 29% and new customers growing 74%.

We are encouraged by early indicators of our new customers behave.

30, and 60 day retention rates have been trees.

30, and 60 day post initial purchase spend is largely consistent with prior year levels.

Let me provide an additional detail on individual category performance.

Increased 22%.

Demand for as long they food offerings underway nearly doubling.

We also experienced strong growth in gardening fitness, floorcare cleaning and personal care.

Consumer electronics grew 25%.

And then primarily by increased interest in home office Entertainment and gaming.

Trends moderated later in the quarter as we reduce the installment payment options available to manage fantastic risk.

Really returned to growth.

Up 2%, we continue to see success with our efforts to nurture emerging brands, such as Beekman pilot paralyze Threeq and Lancer.

This was partially offset by continued declines in major national brands.

And apparel accessories enjoyed businesses.

Our highly challenged.

Were down, 12%, 1% kind of 11% respectively.

Customers pulled back significantly on their clothing, handbags and footwear purchases.

The apparel decline.

Female apparel decline.

Moderated through the quarter that remained challenged.

However, we are seeing pockets of strength, including taxes him athleisure, along with loungewear and intimate apparel.

Adjusted OIBDA declined 2%, an adjusted OIBDA margin declined 180 basis points.

Excluding $9 million incremental southern she every year.

Adjusted OIBDA was up modestly.

The show with more of the details behind the margin decline.

First gross margin.

The declined 90 basis points, driven by two that's major components product margin and fulfillment.

This were down 25 basis points, and 60 basis points respectively.

With respect to product margin recall last quarter, Mike indicated the shift and category mix.

250 to 200 basis points decline and initial margin in April.

In the back half through the quarter, we were able to moderate product margin pressures Threed primary reasons.

One.

Most importantly, we made strategic adjustments to our promotional offers resulting in greater shipping and handling revenue and more products sold at regular price.

Two.

Pressures from category mix lesson as quarter as the quarter progress and our prior year apparel sales were lower in June.

And three we benefited from lower customer returns.

With respect to supplement the 60 basis point decline, primarily associated with premium pay to our fulfillment center team members along with lower productivity.

To covert protocols.

Lower pack factor.

Joel trait rate increases in higher drop shipments.

Mostly offset by reduced returns and sales leverage.

The lower contractor as result of several elements, including delays and the implementation of our common warehouse management system and the ramping of our network optimization efforts.

Operating protocols and product mix shifts.

Moving to operating expenses, which were 20 basis points favorable.

This improvement was predominantly due to 85 basis points a tailwind from commissions.

Barely from increase in digital penetration not subject to variable sales commissions.

As she anyway.

Was unfavorable by 185 basis points with marketing and administrative costs, comprising 55 basis points in 40 basis points respectively.

Marketing reflective expanded support to deliver new customer growth and attention.

But also included one time investments in various brand marketing pilots.

The Ministry of costs benefited from sales leverage this benefit was more than offset by increased incentive compensation accruals and severance.

Now I'd like to share some of the trends, we're seeing as we wrapped up our July results.

However, these trends should not be construed as guidance for the remainder of the court.

In addition of while these references to command sales approximate customer purchases actual ship sales may differ.

Qxh demand sales through July four up low single digits on reduced promotional activity.

We've experienced similar category trends.

This growth and home and softness in apparel.

Throughs enjoy.

Customer growth remained strong double digit growth.

Customers.

Levels below second quarter.

Moving to adjusted OIBDA, We expect sequential quarterly improvement in margins in Q3.

Largely driven by improvements in product margins due to our reductions in promotional activities and vendor negotiations.

We anticipate ongoing margin headwinds Sherman as productivity and rate.

Take rates remain under pressure, we continue to invest in marketing will carefully monitoring returns.

With respect to obsolescence really freshiq inventory levels take advantage of new home and apparel opportunities for fall and winter and we expect to increase obsolescence reserves accordingly.

Finally, we expect to continue tailwind as commissions.

As long as modest improvement in bad debt and fixed cost leverage.

Now to the QVC International.

With accelerated first quarter momentum.

Yes.

Broad based growth across all markets extraordinary new customer growth and retention and the continuation of strong becomes penetration.

On the comments going forward will focus on it on a constant currency results.

We generated growth in all markets led by Germany, UK, which and achieving two year stack growth of 17%.

In the category perspective.

We experienced sales growth from Tronics, which was up 41%.

Home was up 24%.

Really with up to 80%.

Adjusted OIBDA increased 13% with gains in all markets adjusted OIBDA margin increased 10 basis points, it's very similar themes as qxh.

Gross margins.

Were.

Lower primarily due to product margin pressure from category mix shift.

Obsolescence provisions from closure retail stores that provide a sort of outlook for slow moving inventory.

Higher drop ship penetration and premium pay for onsite two numbers.

Favorable trends in operating expenses were primarily coming from commissions.

Customer service, reflecting an expanded ecommerce penetration to sales leverage.

The Ministry of expenses were largely favorable due to sales leverage despite absorbing provisions for increased incentive bonus.

Recall QVC, France terminated operations in March 2001, too.

We recorded a $2 million adjusted OIBDA loss and approximately 17 million.

Operating loss.

Q2, 29 to primarily related to closure costs.

Looking at the second half demand sale through July.

Trended up into the mid to high single digits range.

Strong oh, the strength across Europe and Japan.

As a reminder, last year, we experienced double digit growth in Japan. In Q3 was we saw significant sales pulled forward into Campbell in advance of the consumption tax increase accordingly, we expect to paint sales to moderate significantly in the back half of Q3.

Moving to zero, which delivered exceptional returned to growth.

Total customers grew 15% from new customers grew 54% in the second quarter.

Customer acquisition costs declined more than 50% driven by E commerce tailwind and adjustments to our marketing strategies.

Adjusted OIBDA increased $38 million, which included a $10 million reduction in sales tax accrual I referenced earlier was originally recorded at the time of acquisition.

Gross margin increased primarily from strong product margin gains driven by strategic vendor negotiations.

These gains were partially offset by fulfillment pressure primarily from higher six freight costs.

As well as coated related delivery pressure, which improved by quarter end.

Really also benefited from sales leverage at marketing and administrative costs.

Looking at the second half.

Slide demand sales trended up in the low teens.

Moving to cornerstone brands.

Which delivered a record second quarter performance revenue grew 18%.

But the business experienced strong consumer demand for home furnishing office storage pool and outdoor products.

Hone brands were well positioned to capitalize on increased demand for home furnishings and outdoor products.

Well as designs Graham erodes achieved record second quarter revenue.

Adjusted OIBDA.

Truncate.

Generated 23% revenue growth.

The strong days than home brands were partially offset by declines at Cardinal Hill, mainly in the women's apparel category across your dresses footwear.

Well Mark.

Although cornerstone retail stores and then close through much of the quarter, who is able to offset this pressure. It's online channels to commerce revenue grew 32% continue commerce penetration increased more than 800 basis points.

Adjusted OIBDA increased $7 million.

Gross margins improved primarily due to the strength in the home brands, partially offset currency now so.

Promotional pressure I couldn't tell a $5 million inventory provision of real us.

This is a nascent.

Innovative apparel brands.

Given the general pressures on apparel related posted Garnet sales management team is a decision to focus resources on the core products.

And development of a new strategy for years in this new environment.

SDMA improved primarily from leverage of marketing and administrative expenses, partially offset by higher incentive compensation cool.

The quarter today sales demand is trying to consistent.

Second quarter.

Let's quickly take a look at our balance sheet and cash flow.

That's what $63 million through the quarter and $108 million year to date.

We anticipate our 2020 capex to be in the range of 250 million with $295 million.

The distribution payments are comprised of multiyear carrier contracts.

We have less.

Contract renewal activity this year and year to date to distribution payments for only $10 million, we expected to increase from the second half of the year.

We generated strong free cash flow in the first half of 2020.

As Mike said year to date free cash flow was approximately $1 billion, an increase of nearly $800 million. The strong gains primarily driven by improved working capital.

Lower TV distribution payments to reduce capex.

Additionally, we had favorable timing a tax payments, which were primarily reverse in Q3.

Driven by provisions in the carriers.

Looking at our debt profile, we have them zero balance on the QVC.

And revolver and $2.9 billion available capacity.

We have nearly $960 million and cash cash equivalents and our near term maturities owner senior secured notes.

We do not have within maturing.

He took 2020 to 2023.

From a leverage ratio is combined.

In the QVC revolving credit facility was 2.0 at June 30.

In closing, we are well positioned to continue building on the momentum built into to the strength of our balance sheet and free cash flow, giving a solid base to invest in growth opportunities and continued execution our strategic.

The job. We appreciate your continued interest when you take retail.

I hope you stay safe.

Ill.

Now I'd like to open the call for questions, we send it back the operator.

Thank you if he'd like to ask a question on today's call. Please press star one of your telephone keypad once again that skylanders during the question here.

Your first question from Edward Yruma with Keybanc capital markets. Please go ahead.

Hi, Thank you can't find on for a year and bringing remarks first what plans do you guys have been placed care team in your customers you've acquired and then looking at that cohort and new customers are there any differences and help our consumer behavior you've observed thus far.

Thank you up for the question this is Mike.

We're thrilled with the quality of the new customers, who have seen in India multiple initiatives in weighted underway to tweak them. So when you start with kind of the quality in the profile in a broadly I would say these new customers looking act like new customers in past years now, we just have a lot more them, including new customers in every single.

Got a category.

The new customers, both PNR off their businesses as well as our honor business. So she is engaging new coming to us both with sort of a more traditional TV programming as well as well as of today.

Programming.

A key metrics, we look out to assess value lifestyle propensity to keep those customers at the 14, 30, 60 day, mark well at or above prior year performance.

We even look at what percentage of new customers become that's customers and they're very first couple of months and on that they no major they look as good or better than.

Prior classes.

The only modest defences, she's slightly younger maybe a year to younger than.

We typically see with new customers, but other than that.

It looks like our very strong profile you know that said, we don't want to take for granted so we've got a number of.

Programs underway to market back to her.

Variety of for the poor outbound marketing programs presenter with.

Hi, this is going to be interested in based on a purchase profile, how they're doing some.

Programs to Facebook to expose where the kind of product killer cells of products that would there is any data, which they should be interested in so kind of encouraged by the team's efforts.

I had a full court press on Mark Mckinnies new customers.

And again.

We'll go ahead and take our next question from Oliver Wintermantel with Evercore. Please go ahead.

Yes, thanks, good afternoon guys.

My question was regarding inventory growth or inventory decline I should say.

It was down about 14% for the quarter. So it looks like you inventory is clean heading into the.

Third quarter Mitch.

Probably there's there's not a lot of discounting going on into Opex to school Lord of the second half.

But I was just wondering how did you have problems for acquiring.

Venturi into the third quarter with that deliver it.

Because of what do you expect him to India under for third quarter, So just a little bit commentary about.

The decline in inventory would be helpful.

Oh.

Okay, Holly I would say that decline in such a couple of things like that of course, it's just that the obviously sales exceeded our expectations wheels.

But coming through a lot of inventory.

And then we offer good quarter Halliburton.

Cautious posture I was just to make sure. We won over bought in a very uncertain time, but it was down just because we did want to make sure we expressly suits going through the year at a time when other retailers the pie cutback more substantially.

So I think they can get a really nice job managing those dynamics to Q2 and now we're.

Turning to rebuild our inventories to make sure we're fully assorted going into the fall and holiday season, as Jeff mentioned and that does good there will have fresh receipts in small apparel as an example, and tissue does start to want to reengage with propel product, which is the only category that might be out a modest watch.

Now for US is we are seeing the pressures really from the first phase of the pandemic in China with Twitter disrupted a supply in consumer electronics company at the high demand for consumer electronics I would say, we're working hard with our partners to make sure. We've got a full assortment in electronics will holiday season.

A little bit of risk there, but no work referral partner for Maddie and I think we'll be able to navigate that but that would be the one area, where we might have some modest risk otherwise. We do think inventories are clean and will help us sort of maintain this conservative posture on promotions through the year.

Got it and if I may the maybe the second question regarding E Commerce.

Growth there this quarter with a.

Very strong.

If you could maybe talk a little bit about where that growth is coming from ecommerce is this your how much of that is.

Can you guys.

Organic I mean directly through the web site without people watching the program.

For.

The majority really driven by people watching the program and an offering if you could give us.

Literacy skills, there that would be helpful. Thank you.

Yeah sure.

As you know it's hard for us to be able to you know typically ascertain cause and effect between TV and E Commerce, but you know probably hit the metrics. Our most important to us on that question would be I'm looking at the mix of sales.

On E commerce, how much of it with the core products for featuring our video.

How much of it if products that were not feature in our video Soga.

What we call off airport.

As I mentioned in my remarks as popular products were up.

North of 20%.

So grew much faster than the overall business results.

And they represent roughly 40% of totals.

Total sales.

As a criticized for that business unit.

And you know substantial share the sales for E. Commerce. So no. It doesn't mean that the promise customer is going into as you know the TV product that any names, but we're certainly getting a lot of sales a majority of sales on items are on features.

I'll now where sales are growing rapidly, we're certainly seeing disproportionate E commerce percentage with new customers. So we do think we're seeing more new customers come in.

And make the first quick assays to more conventional ecommerce experience in some of them, they're becoming more bloggers customers.

The brand.

Thanks, very much of that list.

And I had one thing here, which is although you say that the ER.

Organic.

It's funny, because I would argue flip around Ted.

Our organic for us with people, who see the TV fixed costs.

Early fixed costs that we run a huge crime builder, a huge loyalty builder and a huge continuous ER or promoter for us.

For us inorganic it where we have to.

By online.

Google Facebook cost per click and frankly, that's where it has a variable costs and select attractive. So I don't know split Brown said, we do we love this upward from promoted from TV rights that we've already paid for that once.

Thank you very much.

Thank you.

Well go ahead and take our next question, Jason Bazinet with Citi. Please go ahead.

So couple of questions from Mr. buffet.

I appreciate fee to choice that you're giving investors with this preferred I.

I suspect a lot of investors are going to look at this move in say that is sort of lays the groundwork for you to go private actually.

So can I just asked three questions Dave one when this preferred if it goes through.

He's the right to say your 4.8 billion market cap.

We'll go down by a billion three for the preferred and incur down 630, some odd million for the special answer that.

The market capture today, let me take that as Jason Cemetery monetize our hope would be no. Our hope is our equity market cap will decline by less than the combined value those because we've shown not only from get go the business, but that we can sustain preferred and that somebody access clinical recruited the common.

Understood.

Second what happens to your basis.

Asset after this preferred units issued introduced or so if I could just add on the first point.

Sure I know you've suggested in the past that actions were taken we were going to take the business private.

Some of them, which would have been illegal and we try not to be finger legal very seriously trial that you can do a legal so again, we certainly didn't do this we won't have to take a private and if you take the first point that I made which we truly dewen Chen with a combined value would go up.

Not in our interest to do this as well with that was our intent to ticket price.

So just wanted to ask that is not our intent on tries to create shareholder value for all shareholders. Sorry go ahead.

That's great to what happens to your basis from asset after the preferred position.

Uh huh.

[music].

Depending on who you are generally it's complicated but it will generally split between the two entities there may be some cases in which it goes to the.

More to the common.

This is one of their would say I would say consult your tax advisor.

Okay and my last one what happened in 2031, when the preferred Sean sets like mechanically what happens at that juncture.

We paid off.

While we issue some other instrument I guess not in exchange for general Youd like most debt securities really paid off.

Okay. Thank you.

Thank you.

Well head and take our next question from Carla Casella with JP Morgan. Please go ahead.

Hi, I'm wondering if you could give us some color on as we're coming out of co that if you're seeing much change in the big business segment.

Meaning a home home purchases personal care et cetera.

Yes, I think probably for the question.

It's been surprisingly consistent so I would say that the categories that are doing well.

Has been largely consistent approved a pandemic.

Yeah, the specifics within those categories, obviously change with the with the seasons, but you know homes remains very dominant you can see that man you know corners, a cornerstone business, which is on home continuing to grow at the same what rates that are going through Q2, so no she shifted from.

Pardon me and outdoor stuff.

Ah to now indoor furniture, and kind of getting ready for the fall.

It's very much a strong focus across Europe, good all home categories.

The only every bit of shifted somewhat is the consumer electronics is much softer for us that's a little bit self imposed because the promotional pullback that I mentioned.

Most severely impacted consumer electronics business, which tends to be the most promotionally driven category just caught a little bit more on Aspen abroad.

Okay that that otherwise, we're seeing pockets of positive performance in apparel and some of the more comfort in casual wear.

But I would say intimate apparel and jewelry remain.

Challenged.

Accessories, and beauty are okay, and enjoy the cost to home if there's an exception consumer electronics, where you're continuing to see strength.

Okay, Great and then just one follow up on and given that the transactions you mentioned with the stock.

Any view any change in your view on how much leverage you're comfortable with it the QVC entity.

Hi.

Yeah, I'd be on a quarter ago, I think sure and I'll like to our advantage Barnard only treasure can comment as well we set forth a ratings at the Q level I believe the two and a half times. We also have some a three and a half times.

Not maintenance Covenant, Scott covenants on our bonds some of our bonds. So those are certainly targets were trying to stay within I'm. Not then what would you at.

Yeah, I would repeat that our stated leverage target for CPC is to run at times.

In addition distribution terrific our aggregate family leverage our ability to draw on our revolver subject to a three and a half times levered. So we currently retain a most if not all of the QVC revolver capacity.

Okay, Great I was reminded her right those are certainly impacted on targets, but we do believe the business could actually maintain higher leverage given its high free cash flow capabilities, but we obviously want to access may want access to first time to that revolver.

Okay, great. Thank you.

Thank you.

Thank you Marty I last question, Sam County, Alper with D.A. Davidson. Please go ahead.

Great. Thanks, or could you talk more about what drove the strong performances, we really for the quarter as well that's what drove the new customer growth curious if you're seeing this new customer being correlated with the continued questions. Your of T. T. Our distribution efforts and then secondly to what extent if at all are you seeing any correlation between.

In geography is that a reopening and traffic trends. Thanks.

Great. Thanks for the question on onto really.

Really proud of that CMC work, you've done after having had a pretty.

Happier and kind of off the attraction of course is going on the team really put upon to use them in all aspects of the value proposition. There just get refocused on the core mom target list, we probably straight away from a little bit in Alaska.

And then in the pursuit of growth.

To refocus marketing I'm going after new customers as opposed to trying to get more out of existing customers and get the numbers innovations across marketing new outbound marketing programs.

Going up a kind of what influence or not more to reach into new audience segments. The influencers.

Lot of hard work with Facebook the move some inefficiencies in the fish Casino case, all of which I think we've seen the benefit of.

Number of sort of reforms to the score from just to make it a little bit more exciting energizing more self service.

Rob capabilities to improve.

Service levels of the of the brand.

And then just a huge focus on new brands and I'm you know well. We're excited about mentioned specific names you know with department stores being closed you know I think the team did a really nice job getting a lot of products that might have more than in the specialty or department store channel.

This is really and we think of that benefit can maintain so clearly isn't overall, you know tail wind up shop ecommerce go in and of the become much retailer is growing but I think the kind of 40 point swing is tied to really from the.

The declines in Q1 to the growth in Q2 is.

Absolutely benefiting from that drive the tail end of E. Commerce that got intersected here just the numbers its fundamental efforts to improve and strengthen the value proposition.

On the question eyes.

Yes, the impact of various states reopening you know we're studying outperformance by geography varies by by stay very carefully as you would expect to try to understand those dynamics.

That's probably true is you know those states that shutdown orally and kind of stayed shut down three day in June the probably early days of the pandemic, we've got a little bit more of the lift some them not early April surge them than other states that have taken a more.

So a posture on shut down but it seems like Bob you know only probably mid June hi to performance is more consistent across states than anything else. So even as some stay Pepsi and Michelle against other states have seen improvement it doesn't seem to be meaningful in the results were seeing.

Yeah, I would even extend that to say they look to Europe, and Asia, which is arguably you know have more success containing the virus not perfectly the more success and scores propane earlier.

You know weve maintained fairly consistent performance across Europe and Asia.

In that mid to high single digit range that Jeff mentioned, so it feels like no kind of got a new level, where these underlying Ah stay at home trends are.

Fairly stable and not that subject to the ups and downs.

With the virus surgeon, let's see how long that laughs, but it's it's one of the things that gives us confidence that you know if we continue to grow this business and there are some staying power to lose.

Because these trends.

[music].

So if not I believe our final question.

So I want to thank everyone for joining us.

I agree this is Greg I want to thank everyone an eye out I know there will surely be questions about the preferred which is a wonderful instrument or we look forward to try and educate you. We think it's a high value instrument and we hope we can convince she was low.

Thank you.

Once again that does conclude today's conference. Thank you very much for your participation you may now disconnect gifts on line.

[music].

And.

[noise] App.

[music] and.

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Ladies and gentlemen, thank you for standing by welcome to victory retail incorporated 2020 quarterly earnings call.

During the presentation, all participants will be in listen only mode.

Afterwards, we will conduct a question and answer session.

At that time, if you have a question. Please press star one on your telephone.

As a reminder, this conference is being recorded today August.

I would now like turn the conference over to Courtney tried chief portfolio Officer, Senior Vice President Investor Relations. Please go ahead.

Thank you before we begin we'd like to remind everyone. Let's call. It could include certain forward looking statement within the meaning of the private Securities Litigation Reform Act that 1995 actual events or results could differ materially due to a number of risks and uncertainties, including north much into our most recent form 10-K, and 10-Q filed by our company.

We see what the FCC its forward looking statements speak only of the date of this call accurate retail expressly disclaims any obligation or undertaking.

Disseminate any updates or revisions to any forward looking statements contained herein to reflect any change in carry each sales expectations with regard there too or any change in events conditions or circumstances on which any such things.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA adjusted OIBDA margin free cash flow in constant currency information regarding the comparable GAAP metrics, along with required definitions and reconciliation, including preliminary no. It's scheduled one through three can be found in earnings press release issued today.

Or the earnings presentation, which are available on our website today speaking on the call. We upped your eight retail executive Chairman Gregg Buffet, President and CEO, Mike George cured retail group CFO, Jeff Davis. Please note we publish slides to accompany the earnings release. These slides are available on our website now I'd like to turn the call over to Greg.

Thank you Corgi and welcome all the while listening audience.

We also looked like banking mature we jumped your numbers on their exceptional results.

Well, we will fluctuate up your dedication of course users.

I can just will be onshore me to provide more details.

Can you give us some corporate doctors.

No cap overtime strategy has been ongoing topic among investors. Thank you pause buybacks last year.

Our historical buyback suboptimal successful we'd like.

Largely because the markets more negative outlook for <unk> trauma.

Well our.

Board.

Sport alternative approaches for toward capital to deliver sustained benefits to shareholders.

Given the strength injury free cash flow on our confidence in business fundamentals, we intend to work on capital to shareholders via special dividend consisting of two pieces.

A onetime cash dividend of $1.50 this year.

And it works dr. than the $3 this year.

Oh onetime cash dividend will total approximately six or enbridge reside.

And we like it's not going with the projected 2020 free cash flow.

Expected proceeds from the sale of Barcelona Green energy assets.

Cash built in park <unk> pardon share buybacks over the past year.

This could be important also because.

I'm jobs, they didn't know because you like the optimal tightening and youve attach rate increase in coming years.

[noise] propose before I talk to them, we'll have a total page of approximately 1.3 building Doug.

Why Didnt you true preferred stock.

Well effectively what are the body Jews common stock into a more bomb like interest, but instrument in a more levered common equity.

In one, but let me do other things we've done in terms of providing dr. choice that should increase investor choice as well Mckee backtracking sockets than calls a dog.

I like there were common brokering common dividend, which forces common shareholders, you'll see the distribution this provides children's flexibility.

You can hold.

Income from security or monetize your preferred stock and maintaining that position in a more levered common equity.

We think that could be an attractive into dave's security, but those who elect holder.

Generates compelling after tax income.

Which is appealing compared to bond choices out there and other alternatives.

In a relatively low levered at any given significant cash generation and coverage.

The rate is favorable to comparable securities edible yield.

After tax yield all of <unk> retail like instruments, it's a long 10 years maturing into Q1 2031.

Yes preferred stock will also highlight on board workers Kaufman strong free cash flow generation a jury we killed.

We also hope it might be able to attracting new investor base, the bird might be should be a good fit income or investors seeking yield.

John and I are both do do you asked about this preferred stock and intend to be long term holders.

I'd also note for some of you would historical that Liberty had some successes issuing these preferred in the past although admittedly. It was that there are trying to go.

Over the longer term, we expect the preferred stock and common equity in aggregate after giving effect to the cascade of them to trade in excess of the current trading price.

As we moved through the balance of 2020 and in future years, we will actively consider additional forms of capital try and give them a substantial cash generation the cure it has.

We retain the ability to deploy just cash metro Detroit retails cast shareholder practices to be clear buybacks are not off the table in 2020 <unk> and beyond.

And it gives you a buybacks will be against a more elaborate.

Upside in the business.

We also intend to manage the DTA all the deferred tax liability our exchangeable bond.

As well in the near and midterm debt maturities.

Some future repurchases of some of the exchangeable bond that's being done in recent years.

Finally, given the ongoing pandemic.

We've decided that Liberty's investor day, this year will be virtual.

Can be broken into two days.

So as much as we loved deal no one should have to be I called that long.

On Thursday November Nike, we will cover Liberty media and Liberty Tripadvisor and on Friday November 20 ships will employ a jury retail liberty broadband and you see I Liberty both baseball run from 11 to 12 Easter.

More details will be provided on our website. Please mark your calendars.

With that I'll turn it over to Mike.

Thank you Greg Good afternoon, everyone like you control units.

Yes, certainly live into appeal Univar, plus another challenge.

Your body ongoing they perhaps of the global pandemic.

I need to acquire palatial economic justice.

Want to start today's call by summarizing actions, we've taken in response to these extraordinary events.

And then I'll review, our results and our outlook for the future.

Because of our actions forestall the primary focus remains on could have been held in the financial well being of our team members.

All team members, who can work from home will continue to do so.

Until at least early next year.

It's somewhat from home Fortunately, most notably in customer service.

Well that's been team mandatory maps requirements, that's going to including the teams aren't affected at all of our sites.

Yes, we provided a variety of special pay <unk> medical and other benefits along with work from home allowances our team members.

Second we continue to support our local communities.

We're especially proud of our small business spotlight didnt small business is impacted by told that visibility across cheese and see it just generally.

And we'll go to watch the new series focused on block those small businesses.

Our record setting beauty itself, it's called them on QVC and HSN.

Well, that's objected to the $1 million for cancer and careers that $500000 grew up in supporting cobot related grandson programs.

Let me donated over a million dollars pretty equal Justice initiative.

Altogether.

Over the lease commitments consolidated and supportive all communities, where our team along with arc limits to combat Marshall and justice totaled $40 million.

Thirdly rapidly pivoted, our product program them and marketing.

Moving to the consumer most kills out now.

As far as the whole refuge place for advice Entertainment community.

On a source of draws hope and inspiration.

Fourth we executed a significant strategic pulled back a promotional activity across all businesses.

A lot of better foundation for helping sustainable long comes out and also to manage elevated demand.

[laughter] simplified and streamlined our operating structure.

Better align resources with the biggest growth opportunities.

Unfortunately, that's that's got to pay it it's up waiting for and put these values to numbers.

Additionally, because multiple customer contracts, and that's where should because those positions and put a minute walk from home.

Finally, before discussing our balance sheet.

Crude inventory reductions more conservative consumer installment payment practices.

New trade payables program.

We are more must be grateful for 25000 team members navigated these changes with the termination and resilience committed to help you know customers and helping each other get through this crisis.

We've also been inspired by the outpouring of county concern from our team in response to the depth of George Floyd.

A recent that's because of waste let me just this.

We are committed.

Ladies and a culture of belong in football team members.

And we are redoubling, our efforts worldwide multicultural why does this woman's mature bottoms up in patient marketing digital on their activity.

Well establish a more diverse supplier beds.

These actions we took in response to the pandemic coupled with continued progress on our strategic priorities and the favorable back well trends come to stay at home shift like.

Two outstanding results in the quarter.

Revenue and adjusted well good luck nucleus tempus, though.

Business unit and every geographic market demonstrated strong revenue growth.

You can feel grew the $1 billion no today.

Increases really $800 million because the last year.

And this growth was fueled by record setting new casino games welcome to more new customers because luxury.

<unk> increased over the prior year.

Double digit new customer growth catalyst business units have been market.

He also enjoyed strong smoking reactivated and occasional customers.

Appealing 14% growth in the total customer count across the company.

What especially encouraged by the strong performance across our QVC and HSN brands globally.

Welcome to college by high demand home delayed it ought to the consumer electronics, partially offset by softness in apparel and jewelry.

No we made the decision to pull back substantially I like the widest promotional activities, but a lot of better foundation for healthy long term growth.

Well moderating media sales surge, which we were struggling to keep up with.

On a warrant the man basis.

We saw a low to mid teens growth for the pullback.

And low to mid single digit go after but at more attractive margins.

The total active customer base increased significantly up 14% of Qxh life was that because it's the international.

Good luck with love this new customers, coupled with strong increases in reactivated and occasional customers.

However, sales from our customers go to make over 20 purchases per year declined modestly.

It includes the home and electronics purchases, but this was offset by shop pull back in apparel, where they significantly over index.

Lots is geology in cardiac stay committed to that's you know strategic priorities.

We see as critical Polycom club.

First we remain focused on trading special products, a compelling values as we strive to be a source the unique benefits of an exclusive merchandise, it's filings consumers and feeling serendipitous discovery.

He watches in two weeks of launches over the ball, new Qxh merchandising organization, a regional teams, which is international merchandise this function.

Great football proprietary design development of switching team, including adding additional categories like home.

I like from the team, which is the successful launch of August pets, Liam the new homes, a core brand that Giuliano ratchet as well as the launch of the mob lifestyle brand.

New categories flux shifting consumer demand like a new social distancing category, It's office maps digital marketers and hats yellow pages and much else.

Rapid expansion of.

Dozens of new offerings that you too.

Expanding our size inclusive offerings.

Maybe the watches this quarter all worthy, but I couldn't mcgrady at QVC in Citicorp, just like it took them along with expanding our size rose to five times was actually in all apparel ones.

As a result of all push on product freshness and programming Fortunately acute and see what you. Just you asked me because it's 44, new auto brands in Q2, that's up from 18 the prior year.

Devoted how does it those are two programming hours in the quarter. Good news shows up from Hayden last year.

Top 25, I'm just because they represented just under 30% of ourselves in the break down from 41% last year.

We're also making great strides on second strategic priority, extending our video reach and relevance.

<unk> all the video platforms that matters to today's consumer.

He of course remains critical or viewership on traditional pay TV it up.

The number of pay TV homes to ponds with joke sake, we saw strong kept pushing gain in homes viewing one the one that looks like in any given that.

Benefiting from the ship to stay at home and we're rapidly because you know programming. It seems most relevant this environment the subpoena agility of all model.

We're also expanding on digital pay TV services or virtual have the PD is most notably watch enough who this quarter.

Following up 18 team now launched late last year.

On track to fly more digital carriers in the back out.

We also added one a two month over the hill households in the quarter.

Altogether now reached 95 million TV homes in the U.S., including 76 million traditional MPPD homes, Florida half more virtual and the PV and 14 million over their problems.

In addition to be gains in TV viewership and distribution.

I wouldn't close by progress now excluding shopping services like available across multiple digital platforms.

The tumor adoption video students over to cut significantly accelerated during the pandemic.

And there was a great deal of Buzz about large screen shopping as an alternative the physical shopping.

We're pleased with this validation of our new model.

And extend our significant leadership position.

We continue to have to expand our pool screaming shopping childress, which brings together, our QVC and HSN networks Wong with a variety of specialized leap onto that content.

The children's Al Billabong, 45 million low crude and fire TV homes, well, the 2.6 million homes closed download about path with 100% walls. In your includes the strong growth unique visitors and limits trained.

We're accelerating our investments in specialized concept for the surface that can attract new audiences, who come post foods such as the upcoming launch about code of stone travel foods is.

And we're watching it on the next generation version of the service.

Feature embedded transactional capabilities.

We're also expanding the reach of our networks to other over the top devices such as Comcast me, that's gonna be flux screaming surplus.

They'll both be there Bob answered subscribers, you don't purchase Comcast video.

You know grows range over the top services.

Hitting those offered by Samsung TV, plus Cmos and Alger chattel playoffs more on the way.

Finally, we continue to expand our president Joko video sites.

Recently lost a dedicated Facebook page that features watch the me all that she's a team that works integrated with compelling shaping Costco and conversation.

Now need to a new cooperation with the water go 1.2 million limits food and hundreds of new subscribers to our beauty I choose not to channel the check out that the waters exports tips, that's the tips.

A third priority was to Reimagine daily digital discovery and brings our ecommerce platforms. The same levels engage the exploration the characterizes our video platforms.

We recently launched a new engagement tool, which uses machine learning because of the slides messages on the web sites. It seemed moments in the shopper's journey.

We have excitement that wouldn't see while staying true to our brands voice.

We realized strong smoking all E commerce, not cooks in the quarter.

At Qxh digital session grew 36%.

Well she says Oh no products those that are not feature that day on the video platform grew 24%.

And ecommerce penetration was just shy of 60% of put itself.

Hi, This is 40 basis points year over year.

If you could see international experience, even stronger results ecommerce penetration up 650 basis points.

Do you really altria delivered strong revenue growth on record new customer additions.

As we benefited from an overall that book ship E Commerce, coupled with strong progress not all kinda labs initiatives.

The second in accordance strategic pivot the organization refocused all consumer replacement activity, while it's a religion at target bottomless with kids at home the team believes and as little as core brand attributes.

Yes, fives that amazing value.

Adding more than 800, new vendors in the first half.

Supported by topical events Waldman stay at help customers.

The placemats have been one or the most successful offices selling over 3 million units.

As a team was able to move quickly that's what's your supply really in the prices.

She will also made great strides with focusing its marketing programs.

Well you do she looks quite have the baseball.

Could you know look alike targeting and it helps it had to help out marketing.

After a difficult year, we're encouraged to see the team's hard work, but repositioned this was only business getting traction.

And by the college tailwind.

Enforcing then I'll do the fundamental attractiveness as is lower value proposition.

Cornerstone delivered outstanding results.

As long as broke up I'm, good Ballard designs Grandin road and home segments have gone itself.

The business benefited greatly from to stay at home clan, coupled with significant work over the last two years to develop more updated relevant and proprietary assortments, while shifting resources from catalog the online marketing.

I want to close my comments by directly addresses a question on everyone's mind.

Can we sustain growth and healthy margins at the economy reopens.

While we certainly recognize that the outsized gains that we achieved this quarter or likely not sustainable.

They are more confident than ever that our business can generate healthy long cold gross revenue profit and cash flow.

A number of reasons.

Well, yeah, that's a place that many hold it related trends will continue over 2020 them at some extra become part of the new novel, including greater consumer engagement.

Live streaming video content.

The accelerated shift the commerce.

Difficulty of gradient engaging experiences and brick and mortar given the limitations on customer interaction.

And the we focus on a more home center like.

Second.

We believe were uniquely suited to benefit from this involvement.

Feature broad and diverse product ranges you can rapidly flux, one but looks like I don't know merchant home categories at QVC and HSN Angela.

In Q2, we were able to do that for her what she moved from clean.

Mr himself care to home office getting their payment of puzzles, the inboard acorda pool and garden.

The cookware gadgets, but now Sanitizers and help your fives.

Well focus on Mitch differentiated and exclusive products.

With compelling personalities like just want to know.

[laughter] out of the Commoditized twice driven E commerce right.

Appeal, because the spirit of the times.

Yeah, one of the world's largest flopping platform to look at home shipping over 220 million packages per year with the benefits of scale experience and efficiency.

But you didn't see an interest again.

It really is wrong or centered on relationships.

Community authenticity and engaging experiences.

Give me that matter is flying times more than <unk>.

That's why we enjoy a level of loyalty and pushes puts into that a virtually on matched in retail.

And third more confidence to broadly long term growth stems from the traction we're seeing all our strategic priorities.

Hopefully intersect with these macro forces.

This progress is reflected in two MCO truth column for example.

In games, and fluctuation and programming diversity as measured by the success of the new on her brands and programs I mentioned.

It is concentration of top items.

Video programming accessible and viewed it more and more places to offset cord cutting.

Well the books will then be PD and OTN households.

Instead of growth and what could find.

Growth in video views on our web and mobile platforms all up strongly.

As our traditional TV viewership, it's consistently outperformed <unk> otherwise, what we can pay TV homes, and that's been going on because many years.

Ecommerce engagement continues to strengthen.

She has opened daily visitors, both an offer product assortments.

Ecommerce penetration muck up so all moves in part because it will depend on it and are now accelerating.

And most importantly machine growth in our active customer base.

Our strong new and reactivated customer growth benefited significantly by the stay at home Prem.

But for value proposition was highly attractive to consumers simply would not have seen so many large customers.

Work from really watching our programming visiting our website to becoming active customers. It's all really indicators pointing to these new customers, having strong lifetime values.

With existing customers were highly close by the surgeon spending another occasional customers.

It's just cautious about that slowed down that's customers.

That's used to pay off each other to some extent.

Occasional customer growth continuing through the strength in home, but likely moderating overtime and best customer growth gradually who really actually eventually reengages with fashion products.

And finally, Jeff whether just that's why we see opportunity to continue improving well get on margins that's free cash flow yields as we start get to the benefits of investments with the last 18 months.

The global community.

Guardedly have difficult days ahead of us.

And then the fossil mobile.

Lessened election season in full force.

Economic outlook on certain.

Nonetheless, we are confident we are and will continue to be one of the winners let's move on.

Now with that I will turn it over to Jeff.

Thank you, Mike and good morning, good afternoon, everyone.

As Mike mentioned Q, our eyes net revenue grew 10% for the quarter, but called segments delivering mid single high to low.

Well get off improved 10% can include several discrete items, including incremental 10 million of suckers across all business segments.

$5 million inventory provision at cornerstone.

Partially offset by a 10 million dollar reduction in sales tax accrual and really it was originally recorded at the time of acquisition.

Let's start with Qxh.

Your next page, we turn to net revenue growth on a foundation of new customer growth and strong through Congress performance.

As Mike said.

We have a broad product portfolio, which enabled us to meet customer demand.

As you'll see on slide 11, <unk> earnings presentation.

Experienced quite sizable ship in category mix from apparel accessories, and jewelry the home electronics.

Well the team responded well to these transit and customers demand to drive revenue growth.

Good.

Caused because substantial growth margin pressure.

For the quarter Qxh total customer group.

14%.

Existing customers up 4% reactivated customers at 29% and new customers growing 74%.

Yeah, I'm encouraged by early indicators, our new customers behave.

30, and 60 day retention rates have been trees.

30, 60 day ghosts initial purchase.

Then as largely consistent with prior year levels.

Let me provide an additional detail on individual category performance.

Home increased 22%.

Man for as long they food offerings lumber way nearly doubled.

We also experienced strong growth in gardening fitness, floorcare cleaning and personal care.

Consumer electronics grew 25%.

Primarily by increased interest in home office Entertainment ending.

Trends moderated later in the quarter has reduced the installment payment options available manage bad debt risk.

Really returned to growth.

Up 2%.

We continue to see success with our efforts to nurture emerging brands, such as Beekman pilot paralyzed sleep and Lance.

This was partially offset by continued declines in major national brands.

The apparel accessories enjoyed businesses.

Our highly challenged.

Were down, 12%, 1% kind of 11% respectively.

That's most pulled back significantly on their clothing handbags and footwear purchases.

The apparel decline.

Hi apparel decline.

Moderated through the quarter that remain challenged.

However, we are seeing pockets of strength, including taxes, and athleisure, along with lounge wear intimate apparel.

Adjusted OIBDA declined 2% kinda adjusted OIBDA margin declined 180 basis points.

Excluding $9 million incremental southern she every year.

Adjusted OIBDA was up modestly.

The show up more of the detail behind the margin decline.

First gross margin.

Hi, 90 basis points, driven by two that's major components product margin control Selman.

Yes were down 25 basis points, and 60 basis points respectively.

With respect to product margin recall last quarter, Mike indicated the shift and category mix.

That's 150 to 200 basis points decline mission margin in April.

In the back half of the corridor, we were able to moderate product margin pressures.

The primary reasons.

One.

Most importantly, we made strategic adjustments to our promotional offers resulting in greater shipping and handling revenue and more products sold.

Yes.

True.

Pressures from category mix less than a quarter over quarter, Congrats and acquire year apparel sales were lower in June.

Thanks, Ray we benefited from lower customer returns.

With respect to supplement the 60 basis point decline, primarily associated with premium pay to Oklahoma Center team members, along with lower productivity.

To cope with protocols.

Lower pack factor.

Joel trait rate increases in higher drop shipments.

Partially offset by reduced returns and sales leverage.

The lower cost factor was the result of several elements, including delays and the implementation of our common warehouse management system and the ramping of our network optimization efforts.

Operating protocols and product mix shifts.

Really to operating expenses, which were 20 basis points favorable.

This improvement was predominately due to 35 basis point, a tailwind from commissions, primarily from increased digital penetration not subject comparable sales commissions.

SGN AG was unfavorable by 105 basis points with marketing and administrative cost comprising 55 basis points 40 basis points respectively.

Marketing reflected expanded support to deliver new customer growth and attention.

Also included one time investments in various brand marketing.

Ministry to costs benefited from sales leverage this benefit was more than offset by increased incentive compensation accruals and settlements.

I would like to share some of the trends, we're seeing as we wrapped up our July results.

However, these trends should not be construed as guidance.

The remainder of the quarter.

In addition of while these references to command sales approximate customer purchases actual ships sales may differ.

Qxh demand sell through July four up low single digits on reduced promotional activity.

His experience similar category trends.

With growth in home and softness in apparel accessories enjoy.

That's well go through made strong double digit growth.

Customers.

At levels below second quarter.

Moving to adjusted OIBDA, We expect sequential quarterly improvement in margins in Q3.

Largely driven by improvements in product margins due to our reductions and promotional activities.

Under negotiations.

We anticipate ongoing margin patent license of Shellman, that's productivity and rate.

Take rates remain under pressure, we continue to invest in marketing will carefully monitoring returns.

With respect to it obsolescence really fresh inventory levels take advantage of new home and apparel opportunities for fall in Warner.

We expect to improve obsolescence reserves accordingly.

Finally, we expect that continue tailwind as conditions.

As was modest improvement in bad debt.

Fixed cost leverage.

Now to be able to see international.

With accelerated first quarter momentum.

Broad based growth across all markets extraordinary new customer retention and the continuation of strong becomes penetration.

On the comments going forward will focus on that on a constant currency results.

We generated growth in all markets led by Germany UK.

And achieving two year stack was up 17%.

And the category perspective.

We experienced sales growth animatronics, which was up 41%.

Home was up 24%.

With up to 2%.

Just before the dot increased 13%.

Games in all markets adjusted OIBDA margin increased 10 basis points very similar themes as qxh.

Gross margins.

Were.

Lower primarily due to product margin pressure from category mixture.

Obsolescence provisions from closure retail stores that provide it sort of outlook.

Now moving inventory.

Drop ship penetration, improving and pay for onsite two numbers.

Favorable trends in operating expenses were primarily coming from commissions.

Customer service, reflecting an expanded two comments penetration it says one which.

Ministry of expenses were largely favorable due to sales leverage despite absorbing provisions for increased incentive bonus.

The call QVC, France terminated populations in March 2000 them too.

Quoted a $2 million adjusted OIBDA loss, and approximately 17 million operating loss.

Q2, 29 to primarily related to closure costs.

Looking at the second crop.

Man sell through July.

Trended up.

To that mid to high single digits range.

The strong relative strength across Europe and Japan.

As a reminder, last year, we experienced double digit growth in Japan. In Q3 was we saw significant sales pull forward in September in advance of the consumption tax increase accordingly, we expect paint sales to moderate significantly and the backbone of Q3.

Moving to dual which delivered exceptional returned to growth.

Total customers grew 15% from new customers grew 54% <unk> second quarter.

How small acquisition costs declined more than 50% to them by E commerce tailwind and adjustments to our marketing strategies.

Adjusted OIBDA increased $38 million, which included a 10 million dollar reduction in sales tax accrual I referenced earlier.

Originally recorded at the time of acquisition.

Gross margin increased primarily from strong product margin gains driven by strategic vendor negotiations.

These gains partially offset by for some of the pressure.

I always higher six freight costs.

As well as close as it relates locally pressure, which improved by quarter end.

Really also benefited from self leverage up marketing and administrative costs.

Looking at the second part.

A lot of demand sales trended up in the low.

[music].

Moving to cornerstone brands.

Which delivered a record second quarter performance, Luckily we were 18%.

But the business experienced strong consumer demand for home furnishing office storage pool in older products.

Home brands will walk position to capitalize on increased demand for home furnishings and outdoor products.

Designs going in roads, and she record second quarter revenue and adjusted OIBDA.

And truncate.

Generated 23% revenue growth.

The strong days in home brands were partially offset by decline at Cardinal Hill, mainly in the women's apparel category across your guess is put war swimwear.

Although cornerstone retail stores and then close through much of the quarter. He was able to offset this pressure to its online channels to call. Much revenue grew 32% come to commerce penetration increased more than 800 basis.

Yes of course, it out increased $7 million.

Gross margins improved primarily due to the strength in the home brands, partially offset seasonal so.

Notional crusher, according to a $5 million inventory provision of Realex.

Neil This is amazing.

Innovative apparel brands.

Given the general pressures on apparel related posted Garnet Hill replenishing. The team has a decision to focus resources on the core products.

And development of a new strategy for real estate investment environment.

SDMA improved primarily from leverage of marketing and administrative expenses, partially offset by higher incentive compensation cool.

The quarter today sales demand is trying to consistent.

Second quarter.

Let's quickly take a look at our balance sheet and cash flow.

Box that $63 million for the quarter hundred $8 million year to date.

We anticipate our 2025 folks to be in the range of 260 million to $295 million.

The distribution payments are comprised a multiyear carrier contracts.

We have less contract the deal activity this year.

Year to date to distribution payments will only $10 million, we expected to increase from the second half of the year.

The generating strong free cash flow in the first half the 2020.

As Mike said year to date free cash flows with approximately $1 billion, an increase of nearly $800 million.

The strong gains primarily driven by improved working capital.

Lower TV distribution payments and reduce capex.

Additionally, we had favorable timing and tax payments, which will primarily reverse the two through.

Driven by provisions the carriers.

Looking at our debt profile, we have a zero balance on the QVC.

Hey, revolver and $2.9 billion variable cost me.

We have nearly $960 million and cash cash equivalents no near term maturities owner senior secured notes.

We do not obviously maturing.

Until 2020 to 2023.

From a leverage ratio at the buying.

QVC revolving credit facility was 2.0 at June 30.

In closing, we are well positioned to come to building on the momentum built into to the strength of our balance sheet and free cash flow. There was a solid base to invest in growth opportunities and continued execution our strategic.

The shot we appreciate your continued interest maybe to agree to.

Oh piece they say.

<unk>.

Now I'd like to open the call for questions, We kinda talk real quick.

Thank you if he'd like to ask a question on today's call. Please press star one of your telephone keypad once again that Scott ones. During the question can you.

Your first question from Edward Yruma with Keybanc capital markets. Please go ahead.

Right, but that he can't find on spread here at rainy River.

What plans do you guys haven't played care came in your question like you've acquired and then looking at that cohort and new customers are there any differences in profile are concerned behavior, you've observed thus far.

Thank you up for the question. This is my.

Well I told him that the quality of the new customers, who have seen any of multiple initiatives and weighted underway to teach them. So in the starwood kind of the quality and the profile and the broadly I would say these new customers look impact like new customers in past years now, we just have a lot more them.

Good new customers in every single product category.

The new customers, both you know off their businesses as well as our honor business. So she is engaging new coming to us both what sort of the more traditional TV programming as well has really been today programming.

The key metrics, we look out to assess value like the capacity to keep those customers at the port utilities 60 day, more Walt I had or above well probably yield performance, even look at what percentage of new customers become that's customers and then they're very first couple of months yet on what they may.

Well look as good or better than.

Prior classes are probably the only modest defences shoes slightly younger maybe a year to younger than.

We typically see with new customers, but other than that.

Looks like I was very strong profile that said, we don't want to take it to grant until we've got a number of.

Programs underway to market back at her a variety of for the pool outbound marketing programs to present or what you know price is going to be interested in based on a purchase profile.

There's been some.

Programs to Facebook to expose where the kind of product killer cells. The products that would though is in the data, which they should be interested and so kind of encouraged by the Pmiers capital It's Paul.

Had a full court press on that continues to customers.

Thank you.

I will go ahead and take our next question from Oliver Wintermantel with Evercore. Please go ahead.

Thanks, Good afternoon, guys, but my question was regarding inventory growth or inventory decline I should say.

It was done about 14% in the quarter. So it looks like your inventory is clean heading into the.

Third quarter Mitch.

Probably there's does not a lot of discounting going on into the back to school or to the second half.

But I was just wondering you know did you have problems or acquiring a inventory into the third quarter with that live with or because of what do you expect them to Indiana for third quarter. So just a little bit commentary about.

The decline inventory would be helpful.

[laughter] Holly I would say that decline in such a couple of things of course, it's just that the odds who failed exceeded our expectations. So we will.

But at least through a lot of inventory.

But then we opted their colleagues and you know a cautious posture.

So we won over bought in a very quite uncertain time, but it was down just because we did want to make sure we expressly suits going through the year at a time when other retailers because probably picked up more substantially.

So I think because there really about chavez managing those dynamics to Q2 and now we're.

But I guess, they're buying bunkers culture will fully assorted going into the fall and holiday season, as Jeff mentioned and I feel good that we'll have fresh receipts and fall apparel as an example, and tissue does start to want to reengage with apparel product, which is only category that might be out a modest watch.

<unk> for US. He is we are seeing the pressures really from the first phase of a pandemic in China. The 20 disrupted a supply in consumer electronics, coupled with the high demand for consumer electronics I would say, we're working hard with our partners to make sure. We've got a full assortment in electronics for the holiday season.

A little bit of risk well, but you know where a preferred partner for Maddie and I think we'll be able to navigate that without would be that the one area, where we might have some modest but otherwise we do have been inventories are clean and will help us sort of maintain this conservative posture on promotions through the year.

Got it and if I may the maybe the second question regarding E Commerce.

Growth there this quarter with Ah, it's very strong.

If you could maybe talk a little bit about where that growth is coming from ecommerce.

It's your how much or if that is organic.

Okay, I think I mean directly through the website without people watching the program or is the majority really driven by people working to program and an offering if you could give us.

Okay, there that would be helpful. Thank you.

Yes, I'm not sure.

As you know, it's hard for us to be able to you know perfectly ascertain causing accept the 22, the and we call most but yeah, probably that that was our most important to us on that question would be lucky in half the mix of sales one E commerce, how much of it.

Core products for countries on video.

How much of it is products that were not featuring our video still got.

If we call up off airport.

As I mentioned in my remarks was popular products were up.

North of 20 push that out so.

Uhhuh much faster than your vault business results.

Can move up as young roughly 40% of told us.

Total sales.

Yeah. The total fell short of that business unit.

And no substantial showed the sales force E com. So no. It doesn't mean that the promise pets, what you're going into as you know the TV product that any names, but we're certainly getting a lot of sales a majority of sales on items that are featured.

I know where sales are growing rapidly will show it to disproportionately telling us to finish with new customers. So they do think we're seeing what a new customers come in.

And make that such purchases could more conventional dethomas experience when they come to them they are becoming more bloggers.

The brand.

Thanks, very much of it less.

And I had one thing here, which is although you say that the ER.

No organic.

It's funny, because I would argue flip it on its head.

Organic barrage of people, who see the TV fixed costs.

Charlie fixed cost that we run a huge crime builder a huge loyalty building on a huge continue which are promoter for US you know for us inorganic it where we have to buy online.

Google Facebook cost per click and frankly, that's where it has a variable costs and into less attractive. So I don't know split that out and said we do we love. This upward from promoted from TV rights that we've already paid for that wants.

Thank you very much.

Thank you.

Well go ahead and take our next question, Jason Bazinet with Citi. Please go ahead.

[noise] shut a couple of questions from mystery say.

I appreciate feed to choice that you're giving investors with this preferred.

I suspect a lot of investors are going to look at this movie and say that it sort of lays the groundwork for you to go private actually.

So can I just asked three questions Dave one when this preferred if it goes through.

He's the right to say your 4.8 billion market cap.

We'll go down by 1 billion three for the preferred an anchor down 630, some odd million for the special in soda.

The market capture the big 11, because I know that Jason.

Let me take to monetize our hope would be no.

Oh, because our equity market capital declined by less than the combined value those because we've shown not only the from get go the business.

So we can sustain preferred and what some of the excess banquet recruited the comp.

Understood.

Second what happens to your basis in the asset. After this preferred good fishing introduced there. So if I could just adamant first point.

Sure I know you've suggested in the past that when actions were taken was going to take the business private.

Some of them, which would have been illegal and we try not to keeping their legal very seriously try how about you can do illegal. So again, we certainly didn't do that for won't have to take a private and if you take the first point that I made which we truly do and Ted the combined why you would go up probably not in our interest to do this as well with that was on the ticket price.

So just wanted to add to that as long term contract was to create shareholder value for all shareholders. Sorry go ahead.

Good so what happens to your basis, a massive after the preferred position.

Uh huh.

[music].

Depending on who you are generally it's complicated but it will generally split between the two entities there may be some cases in which it goes to the.

More to the common Oh. This is why they would say I would say consult your tax advisor.

Okay got it in my last one what happens in 2031, when they prefer or some such like mechanically what happens at that juncture.

We pay it off.

Where would issue some other I didn't see when I get small and extended the general you like most debt securities They would pay at all.

Okay. Thank you.

Thank you.

Well I didn't take our next question from Carla Casella with JP Morgan. Please go ahead.

Hi, I'm wondering if you could give us some color on as we're coming out of Cove. It if you're seeing much changing in the big business segment.

Eating.

At home purchases personal care et cetera.

That's a pension cost for the question.

It's been surprisingly consistent so I would say that good categories that are doing well had been largely consistent through the pandemic.

No the specifics within those categories, obviously change with the with the seasons, but you know homes remains very dominant you can see that you and you know corners, a cornerstone business, which is all home continuing to grow at the same weights that a good through Q2. So you know she shipped the problem.

Pardon me I mean outdoor stuff.

Ah Tabalumab indoor furniture, and kind of getting ready for the fall.

But very much a strong focus across Europe with all home categories.

The only there that have shifted somewhat is the consumer electronics is much softer for us that's a little bit self imposed because the promotional pullback that I've mentioned, most severely impacted the consumer electronics business, which tends to be the most promotionally driven category, just probably little bit more on Austin abroad.

Waltrip, but otherwise no see pockets of positive performance in apparel and some of the more comfort in casual wear.

But I would say intimate apparel and jewelry remain a challenge accessories and beauty are okay, and Lloyd cost at home.

The exception of consumer electronics will continue this is Chris.

Okay, Great and then just one follow up on given that the transactions you mentioned with the stock age view any change in your view on how much leverage you're comfortable with it the QVC entity.

Hi.

Greg you want to put a lot of again I think shirt and I'll, let go out and then or an art on new treasure can problem as well, we set forth a ratings at the two level I believe two and a half times. We also have some a three and at times.

Not maintenance problems, but covenants on our bonds some of our bonds. So those are certainly targets were trying to stay within I'm. Not then what would you at.

Yeah, I would repeat that our stated leverage target for CPC is too and at times.

In addition distribution terrific are a aggregate family leverage our ability to draw on our revolver subject to a three and a hot times Levered. So we currently entertain a most if not all of the.

QVC revolver capacity.

Okay, great, thanks, very much but for right.

It's certainly impacted on targets, but we do believe the business could actually maintain higher leverage given its high free cash flow capabilities, but we obviously want to access may want access at various types of that with all.

Okay, great. Thank you [laughter].

Thank you.

Thank you I'm Lucky I last question, Sam only alper with D.A. Davidson. Please go ahead.

Great. Thanks Art could you talk more about what drove the strong performances, we really color corridor as well on its what drove the new customer growth curious if you're seeing.

New customer being correlated with the continued questions here a few to our distribution efforts and then secondly to what extent if at all are you seeing any correlation between geography is that a reopening in traffic trends. Thanks.

So that's where the question I'm I'm, just really really proud of that seems to walk you know you've been having had a pretty.

Copier until the opposite crop equipped with good on the to really put upon to re examined all aspects of the value proposition. There just get refocused on the core mom targeted just who probably straight away from a little bit in the last but [noise].

Right.

Pursuit of growth.

Really we focused marketing I'm going after new customers as opposed to kind of get more out of existing customers and with a number of innovations across marketing new outbound marketing programs.

Moving up a kind of that influence or nothing more to reach into new audience segments grew into Chile as.

Lot of hard work with Facebook to of the move some inefficiencies in the physical interface all of which I think we're seeing the benefit of.

And number of several reforms to the school from just to make it a little bit more excited and energized in more self service.

<unk> capabilities to improve.

Service levels of the of the brand.

And then just a huge focus on new brands and Dallas.

Well, we're excited about known to the specific names that are with the public schools being closed you know the team did a really nice job getting a lot of product that might have more than in the specialty or the public script channel because it really and bad because good that benefit can maintain so clearly isn't overall they'll tell.

With that South ecommerce go in another become much retailer is growing but I think the kind of 40 point swing is thought to really from the declines in Q1 to the growth in Q2 is.

Absolutely benefited from that God tailwind of ecommerce, but got intersected the up just put numbers its fundamental efforts to improve and it's going to the value proposition.

On the question eyes.

That's the impact of various states. We opened the you know we're studying outperformance by geography very buyback stayed very carefully as you would expect to try to understand those dynamics I think whats broadly crew is you know those states that shutdown orally I'm kind of stayed shut down Tuesday.

In June the probably early days as a pandemic, we've got a little bit more of the lift from them that really April sewage them than other states that have taken a more well slower posture on how to shut down but since about you know only probably mid June I took performance is more consistent across.

Offtake them, but anything else so even have some state Pepsi and they show against other states have seen improvement it doesn't seem to be meaningful communities all to worsen.

I would even extend that to say, we look to Europe, and Asia, which is arguably you know have more success containing the virus not perfectly the more success and schools cooking earlier.

No we maintain sell a consistent performance across Europe and Asia.

In that mid to high single digit range that Jeff mentioned, so it feels like what kind of that a new level, where these underlying ah stay at home trends are set up fairly stable and not that subject to the ups and downs.

Was that the virus surgeon well, let's see how long that laughs, but it's it's one of the things that gives us confidence that you know there because if you need to grow this business and there are some staying power disease.

Because these trends.

So that I believe that final question.

So I want to thank everyone for joining us.

I agree this is Greg thank everyone at <unk> I know there will truly be questions about a preferred which is when people instrument or we look forward to try to educate you. We think it's a high volume instrument and we hope we can convince you as well.

Thank you.

Once again that does conclude today's conference. Thank you very much for your participation you may now disconnect.