Q4 2020 Qurate Retail Inc Earnings Call

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Okay.

Please standby.

Ladies and gentlemen, thank you for standing by welcome to the cure rate retail, Inc, 'twenty and 'twenty year and earnings call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please.

Press Star one of your telephone as a reminder of this conference is being recorded February 26th.

I would now like to turn the conference of the Courtney Chun Chief portfolio Officer. Please go ahead.

Thank you.

And we'd like to remind everyone. On this call includes certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual events or results could differ materially due to a number of risks and uncertainties and.

And he knows mentioned and the most recent form 10-K, and 10-Q filed by our company and keeping people.

And the SEC.

Forward looking statements speak only as of the day of this call and curate retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statement contained herein to reflect any change and curate retail's expectations with regard there to or any change in events conditions or circumstances on which any such statement is based on sales.

And because of 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 and so.

And your preliminary note and schedules one through three and can be found and the earnings press release issued yesterday on our issue today excuse me on our earnings presentation, which are available on our website.

Today speaking on the earnings call, we've got carry of retail President and CEO, Mike George Kurian retail group CFO, Jeff Davis and true.

And at retail executive Chairman and break let's say please note we published slides to accompany the earnings release. The slides are available on our website now I'll turn the call over to Mike.

Thank you Courtney and good morning, everyone and people joining us today.

And we had a very strong finish for the year, we sustained top line growth across all business segments and our team responded with the agility to meet our customers' rapidly shifting and the stay at home and Barbara.

The das offerings and events and the face of substantial products for the Joe's and shipment challenges all of significant and pulling back on promotional activity.

We drove robust new customer growth and the good games and a long term strategic priorities and all businesses.

We maintained price clinical management and growth strong overall net revenue was it of a free cash flow growth and.

And the return capital to shareholders, even as and invested the keep crew members safe and provide them with the enhanced pay and benefits.

Additionally, we continue to support our communities walking the innovative.

Programs, such as a small business problem and partnership with the National Retail Federation Foundation the hub.

Small business was challenged by COVID-19.

Including the second phase locked in all of its supporting block of businesses.

We publicly announced new corporate responsibility commitments with the time bound measurable targets focused on protecting our environment for lighting product responsibly, and sharpening and inclusion and empowerment and.

I'm, particularly proud to report the reason you see the 100% weighting on the human rights campaign's 'twenty 'twenty, one corporate equality index.

And for most of that's marketing survey measuring corporate policies and practices.

For the LGBTQ workplace of quality.

This recognition is a credit to our entire team and then.

Their commitment to fostering the culture, where all team members can do the whole selves and do the best work.

We are grateful for the commitment and.

Resilience every member of the demonstrated this past year, while grappling with all of the personal challenges. This pandemic has rock and appreciation and your and we awarded the special one time bonus the all regular and several of our team members who are not eligible for other bonus for success share programs.

Now turning to the numbers and.

Q4, we grew revenue, 6% and OIBDA of 13% and constant currency and for the year, we grew revenue, 5% and or the 8%.

We generated free cash flow of nearly $2 billion for the year of more than 200% supporting our ability for the current cash to shareholders, the special dividends and share buybacks.

The continued to experience rapid new customer growth across all business units and all markets with more than $2 8 million new customers added in Q4, that's up 33% for last year for him.

And the total new customers for the year to seven 6 million and 25% increase.

COVID-19 has pushed millions of consumers interact with retailers and brands online and many will continue to do so long after the pandemic is over.

We believe this is the fundamental long term shift and consumer behavior and.

Given the vast array of online shopping choices consumers now have.

Our record of acquisition and stable retention of new customers speaks possibly because of the relevance and the stickiness of our platforms and our experiences.

And I've taken a closer look at Killik safety performance and the fourth quarter.

And the prior two quarters, we delivered outstanding growth across all of home categories.

Actually offsets like the.

The softness and our fashion businesses, although I'd note that we did gain share and apparel accessories, and beauty and a down market.

And the steep decline and consumer electronics.

Excluding consumer electronics net revenue of two accounts.

The increased 6% and the fourth quarter.

The moderation and revenue growth from the prior two quarters, we put the two main drivers that are unique to Q4.

First of the late season snow storms impacted our northeastern and fulfill them incentives with of course, just to move the cutoff date for guaranteed Christmas delivery cost and that's the final weekend of holiday selling.

Second the significant product shortages and late November and December.

The shortages were driven by vendor challenges keeping up with rising demand compounded by chip shortages of factories delays scarcity of shipping containers and Asia and significant backlog at the West coast ports of.

The business that focuses on key items featured for the day rather than from always on the Assortments of last minute shortages and the key items can be highly disruptive.

While the shortages of parts across many categories, which are the greatest pressure and electronics, which normally represents over 20% of our sales and Q4 about double the normal mix.

As a result, we were unable to meet demand for smart home items tablets and audio products.

Additionally, and certain subcategories, such as gaming the buses that were particularly strong and the market.

We intentionally don't have the meaningful presence given the unaffected.

Unattractive margin profile and the benefit is typically lower lifetime values and our target demographic.

For the electronics challenge of significantly impacted our revenue growth there was not a meaningful impact on OIBDA growth.

The lower margins on electronics.

Looking ahead, the denapoli with the impact of product shortages through 2021 will be nearly as significant as the war in Q4.

That's the global supply chain will begin to stabilize and then.

And you know them, we're taking strong actions to increase the oversight of the inbound product sales from our vendors and.

Additionally, the much smaller and mix of electronics and the first three quarters of the year significantly reduces our exposure.

The growth strong growth and new customers, the culex age of 18% and the quarter.

And especially impressive in light of the consumer electronics decline of that category of things and the largest share of the customers most of holiday seasons exclude.

Excluding electronics, new customer growth was 36%.

And over 60% of new customers and the quarter came in organically you don't go and directly to our websites for customer service agents for finding organic search for organic sofa.

With the remainder of acquired disciplined investment and performance marketing.

These results highlight the combined power of our TV reach of brand and reputation of social presence and word of mouth, coupled with highly effective digital marketing programs.

And we remain highly encouraged by both the quantity and the quality of new customers who are affected.

Looking back at the customers acquired and the second and third quarters.

One and 6% of late at least the second purchase of the 90 days of joining the call.

The above last year's rate.

And the percentage of these new customers, who gets the 20 items closest threshold to be considered by the best customer and just their first 90 days with similar to prior years.

So in addition to the record number of new customers and 2020, we added more new customers, who have already become best customers.

And a year and our company's history.

The advanced our strategic priorities focused on driving sustainable long term growth and a global video commerce business.

As a reminder, our strategic efforts for both two other states and QVC International for focused around five teams Curating special products at compelling values.

And in the video reach and relevance.

Imagining daily digital discovery.

And the and engaging our passionate community.

And delivering joyful customer service.

I'll briefly comment on a few of these priorities.

As part of our focus on expanding and engaging our passionate community.

We need to invest and enhance customer acquisition development and personalization initiatives the dose increase our overall addressable customer base and retain and enhanced the standard of existing customers.

It was concluded successfully put the new advertising programs, such as Youtube and quick time to reach new audiences.

Building on our success with personalized content and and email communications to increase customer engagement and the spend.

And expanding personalization on the website the create calls the action based on shopper browsing behavior.

We continue to expand the video reach and relevance with the addition of new screens and platforms, including the algae Tvs shop Com App and <unk>.

<unk> TV the lead.

And for <unk> TB screening service.

And last month QVC debuted on Youtube TV, because more than three millions of subscribers to be seen as the only large screens and shopping channel on Youtube TV, which is available across smart Tvs. The premium media player smartphone apps tablets computers game consoles and smart displays.

We continue to see strong growth of our own streaming app with.

With the integrates the extensive live on demand and original content from the QVC and HSN.

Downloads of the App on Roku or up 63% on the 'twenty with average monthly viewers of about 47 per cent.

And downloaded on Amazon fire, TV, and we're up over 240%.

Most of the viewers up 75% since the start of 2020.

Even as we see growing interest in of Livestream shopping and offerings. We also continue the benefit from higher engagement and with our traditional linear TV offerings with the number of homes tuning into acute safety network per day are for.

13% year over year and Q4.

The reach and relevance of all the networks and platforms and sophisticated development sourcing and marketing fulfillment and customer service support makes it the highly attractive partner scored and new brands of life.

And we make strides on our strategic priorities Detroit special products at compelling values.

A big find program, which in 'twenty and 'twenty, one and virtual helps us by new brands from up and coming off the nurse with compelling story that we know of customers will love.

From 'twenty 400 entries from 60 different countries 92, exciting new brands across the apparel accessories, and jewelry beauty and home culinary and electronics with selected for launch.

And two thirds of the brands the owners identify this woman or minority owned.

During the fourth quarter and full year were also at many premium brand partners for.

For example, QVC U S expanded its closer relationship with Este Lauder.

And our food Mac, Clinique and too faced and addition to the namesake brand.

Based on the success, we also began and often Este Lauder and the U K and the fourth quarter.

We also launched the new exclusive and timely collaborations with leading designers and entrepreneurs such as Jason wound size of inclusive of fashion line.

And we've created and engaging new types of content such as our original series could of stones travel Cook repeat.

And this contributed to a 33% sales growth for the could've stone.

And this quarter.

Looking forward, we're leveraging our new merchandising organization with the <unk>.

A lot of resources and structurally putting the product discovery and business development to go after the high growth or emerging products and categories that we believe will be highly relevant for the consumers of this year.

And how long these include new proprietary and exclusive cookware and home the core brands as well.

Build out of our global design development and sourcing some of the Susan increased differentiation and the top trending categories for.

For the enthusiasm increased focus on sporting goods crafts pools, and spas and games for the Cook specialty kitchen electrics from bread makers and ice cream and makers the vacuum sealers pasta maker, and why and sellers along with plant based food and wine products.

And stay healthy connected fitness equipment, and wellness and hygiene products for macro says the pirates blockers cause easy sanitizing products cleaning and disinfecting air purification and sales coverage.

On the fashion side, we're focused on standard of Assortments and comfort at Homeware, athleisure and outdoor apparel and we're awash and go footwear.

And what's happened and the multiple growing beauty segments, including multi cultural beauty and the masstige and so on duty.

Coming out of QVC International the team delivered exceptional performance and the quarter with double digit revenue and OIBDA growth, including revenue and OIBDA growth of every market and across most categories and strong new customer acquisition up nearly 30%.

The broad trends and our international business really of those in the U S with particular strength of the home categories and among new customers.

And if a product shortages were not nearly as significant and.

The most markets can face the same inbound supply constraints and we saw the west coast ports.

Additionally, our international markets and make it much smaller purchase orders and therefore have more flexibility to meet their needs.

I would also note that electronics represents only 5% of the international mix and the fourth quarter.

We continue to see the benefit of cotton.

The strong local teams of each market for <unk>.

Highly tuned the country and regional needs.

Couple of the test and learn mentality of our teams the lean into our global video Commerce strategic priorities with the particular focus on enhancing daily digital discovery, including developing a new live streaming app coker on user generated content the sound data phase.

The point drop ship capabilities to expand digital only assortments and <unk>.

And in digital marketing.

Our international team is also taking the lead on building and deploying new machine learning capabilities, the optimized pricing and maximize the airtime productivity. Among many other applications hit the deliveries we expect the rollout globally as they are developed.

The Lilly is gaining momentum on its great crushed buying strategy, introducing premier brands, London fog honest company, mango and Taylor and her boots Hugo boss bands and Macy's along with over 14, hundreds of new long sales vendors and launched in 2000.

'twenty largely groups trying the direct program.

The team is also making good day diversify and its marketing program for them.

And the new Influencer based affiliate network and strengthening of outbound marketing.

Given the progress we chose the ramp up of our marketing spend and the quarter and outstanding.

Outstanding 74 per cent and new customer growth absolutely.

Providing a strong foundation for continued growth into 2021.

Cornerstone had another outstanding quarter.

Our record revenue and adjusted OIBDA.

Benefiting from the surge and home spending and we are.

We're excited about the long term prospects for this business.

Cornerstone and had strong growth and home office storage outdoor living and home decor.

And with the focus on building highly differentiated for proprietary Assortments and.

Continued strong margin expansion with the <unk>.

And pulled back significantly on promotional activity.

On the improved marketing efficiency.

I'd like to closing for few thoughts on 'twenty and 'twenty one.

We're confident that all of our hard work positions us well successfully navigate this fluid environment.

Given the pace of vaccine and availability and will not reopen our offices of course September at the village.

Our highest priority remains the safety of our team members both of those working on site and those working remotely.

I am excited for the year ahead of us despite the uncertain backdrop.

The macro trends were seeing perfectly aligned with our capabilities and our strategic priorities.

[laughter], increasing focus on livestream shopping from Amazon lives to tick tock demonstrates that our business has never been more relevant than it is today.

However, the key to success is not the latest technology for the floor.

Cash is influencers.

It's building lasting relationships customer by customer the.

Fundamentals of great shopping have not changed it's still about the power of human connection and the joy of discovery.

Wandering into your favorite shop.

On today's world your favorite and virtual shops.

And the interesting conversations learning of the stories behind the products and getting inspired.

Of the pioneers and both livestream shopping and leverage of Influencers and we have the experience expertise and global infrastructure to be the partner of choice for <unk>.

And what's the new grants of like Ctrip, and reach customers and that scale and and engaging way.

And we of the financial strength to support our continuing investment and innovation growth.

And how we reach customers with personalized messages and how we engage with them on new platforms and new technologies.

And I am confident we will emerge from the pandemic stronger.

Well positioned for sustainable long term growth.

And with that I'll turn the call over to Jeff.

Thank you, Mike and good morning to everyone as Mike mentioned, we delivered strong revenue and OIBDA growth venture at retail and both Q4 and the full year. So let's get started with culex age.

Revenue growth through continued momentum and home category.

Expansion of our customer base and reduce customer returns.

E Commerce revenue grew 6% and penetration improved 270 basis points and the quarter.

For the quarter turtle customers grew 6%.

With new growing 18% the activated of 13 and existing up 2%.

While we only have access to comparable Hs and customer data going back five years. We believe this is the largest new customer class and the history of both QVC U S and HSN.

As illustrated on slide eight of our earnings presentation. We continued to have a sizeable shift and category mix into home and away from primarily for electronics and apparel.

Revenue and home increased 17%.

And as consumers maintain their focus on family and wellbeing with strong demand for fitness and wellness products.

Food and kitchen electrics and.

Home decor, and furnishings and household home environment and cleaning products.

Consumer electronics declined 17% primarily from the supply chain pressures that Mike has mentioned.

Yet we were able to satisfy customer demand and several higher price sub categories, such as home office and computers and delivered increased overall product margin.

With respect for our fashion categories.

Accessories grew 6% on the strength of loungewear and.

And non leather handbags.

Judy declined 10%, reflecting lower demand for color cosmetics and the pandemic.

And apparel and jewelry remained challenged in line with general market conditions, but we did see pockets of strength and activewear and outerwear.

Adjusted OIBDA grew 10% and adjusted OIBDA margin expanded for 130 basis points.

Gross margin.

For 200 basis points, which was led by 360 basis point expansion and product margin.

Approximately 50% of this expansion the split between or equally between kind of strategic sourcing initiatives.

And promotional pull back.

And another 20% from reduced customer returns and 15% from pricing to partially offset the freight surcharges and rate increases.

Given the impact of strategic sourcing work.

Wanted to provide some additional background.

The call we initiated this work in 2019 as part of our overall synergy commitments.

By Green and QVC, and HSN and merchandise groups together, we were able to work with our vendors and across both brands on the broad on.

On a broad program to reduce and and supply chain costs on.

The mine's assortments around vendors offering the greatest sales and margin productivity and.

Create new arrangements.

Such as marketing funds to grow the brands.

We started the work and just two categories and expanded across all categories through 2020.

We will begin to anniversary of the benefits of this work towards the middle of 2021.

Finally fulfillment costs increased 150 basis points, primarily due to ongoing productivity challenges and our fulfillment centers from adhering to COVID-19 protocols freight surcharges and rate increases, which were partially offset by improved pack factor.

Operating expense.

The 10 basis points of unfavorable primarily due to higher customer service from longer average call times associated with executing our upsell initiatives and addressing the shipping status of questions, partially offset from favorable conditions.

SG&A for.

The 60 basis points on favorable.

Comprised primarily of 180 basis points, which was split equally across marketing and administrative costs.

Marketing reflects our continued investment to acquire retain and engage customers on.

Total marketing spend while rising we're still only 2% for Q ex age net revenue and.

And 2020.

We expect to increase the spend on average 50 basis points annually, if we see attractive opportunities to further grow had attractive return kind of returns.

Administrative cost of primarily due to our higher incentive compensation accruals.

The marketing and PR.

This marketing and.

And Australia, the pressures the partially offset by 125 basis points of favorable bad debt expense the.

Of course, and which was part of <unk>.

The merrily reflects lower customer default rates.

And fewer offered installment payments associated with the pullback and promotional activities.

In closing Q ex page, we remain on track to deliver 370 to 400 million cumulative HSN synergies.

Through 2022 and.

And we are over 70% complete as of year end.

Moving to QVC International which continues to generate very strong.

Across.

All categories with strong new customer gains and.

And increased e-commerce revenue and penetration and.

The comments will focus on constant currency results.

Revenue grew 10% with strong growth across all markets led by Japan, Germany and the UK.

Total customers for 10% in the quarter with new of 28% reactivated of three and existing of eight.

<unk> 40 year of QVC International attracted $1 2 million new customers. The record member for end of year in the last 10.

E Commerce grew 23% and e-commerce penetration increased 500 basis points.

The business generated broad based gains and nearly every category led by home and beauty.

And adjusted OIBDA increased 16% and adjusted OIBDA margin, expanding 90 basis points.

One of more detail.

So from a gross margin basis, and improved 120 basis points, primarily due to higher product margins, which reflect reduced customer returns and strategic sourcing initiatives.

We also benefited from favorable fulfillment expenses, driven by sales leverage and higher average selling price.

These gains were partially offset the higher inventory obsolescence, primarily due to outlet store closures and proactive inventory management.

Operating expenses were favorable by approximately 50 basis points, primarily due to lower commissions, reflecting higher e-commerce penetration sales leverage on fixed rate contracts and renegotiated carriage contracts.

SG&A was unfavorable primarily due to incentive compensation and marketing investments to acquire retain and once again engage customers.

The offset by lower administrative expenses and sales leverage.

Moving to the rolling.

Revenue grew 11% driven by outstanding games, and home and hard lines as well as strong customer growth.

Total customers grew 11% and new customers grew 74%.

Adjusted OIBDA declined $7 million and adjusted OIBDA margin.

The decline of 170 basis points, primarily due the higher freight costs from international product mix seasonal wages, and our fulfillment centers as well as incentive compensation accruals and marketing expenses.

These pressures were partially offset by improved product margins and leverage kind of administrative expenses.

Moving the cornerstone once again, delivering outstanding results and record revenue and adjusted and pointed out.

Revenue grew 30% driven by sustained momentum and the home brands on the strength of <unk>.

Core home decor outdoor categories.

And until returned to growth on the strength of home textiles, and its cashmere products.

Adjusted OIBDA increased $28 million, primarily due to product margin gains in the home brands and reduced promotions as well as leverage of the administrative and marketing expenses. These gains were partially offset by higher freight rates and surcharges.

And let's quickly review the balance sheet and cash flow.

Capex was $92 million and Q4 and $257 million for the full year, which is the reduction from our initial 2020 indications.

For 2021, we anticipate capex to range from 265 million to $300 million.

Television distribution payments were $56 million and 2020, reflecting and off here of a two year cycle for multiyear contract renewals, while we do not provide forward guidance.

Fiscal 'twenty, one will be higher than 2020.

On average our amortization of TV distribution payments average of $130 million annually.

And as Mike said, we generated nearly $2 billion of free cash flow and 2020 with outsized growth was driven primarily by improved cash flow from operations for.

And capital benefited from the extension of vendor payment terms pullback of customer installment payments reduced inventories and increased accruals for management incentive bonus and returns from.

And you recall, we also received $267 million of pre tax proceeds from the sale of of Green energy investments and 2020.

We expect to return to a more normalized level of free cash flow conversion and the range of 45% to 55%.

The call, we generated substantial working capital improvements and the first half of 2020 from pulling back on offered installment payments, which reduced.

Accounts receivable.

And the strategic sourcing, which increased accounts payable.

These items are now on our base and will not serve as a source of working capital this year.

Finally, the accruals for incentive and other bonus compensation will be paid and the first half of the year and.

These items will create more difficult compares for free cash flow on the first half of 2021.

Looking at our debt profile at the end of the year, we had nothing drawn under our revolver and $2 9 billion of capacity we.

We had $806 million of cash and cash equivalents and our leverage ratio as defined by our QVC revolving credit facility was two times.

In closing.

We have multiple paths to sustain net revenue and OIBDA growth as we look forward to 2021, we believe the same digitally driven macro consumer trends will continue with elevated home demand supporting new and occasional customer growth and upside with best customers and the <unk>.

For a shift back to fashion.

Moving to margins are reinforced by rebalancing our category mix continued realization of our strategic win and management incentives.

Initiatives and.

And the reduced commissions from increased e-commerce penetration and contract negotiations the.

These positive drivers.

And the partially offset will be partially offset by prevailing increases and freight and competitive labor rates as experienced across the industry and increased marketing to support customer acquisition retention and expanded product audience development.

And now I'll turn the call over to Greg.

Thanks, Mike and Jeff well in addition to a strong operating performance and 2020.

Germany had superior capital returns of the year as well.

And paid out nearly $1 3 billion in two special cash dividends.

Also had a one $3 billion dividend of 8% preferred stock.

Which is.

Trading at par now for the very nicely.

We resumed our buyback and late November.

Adjusted meaningfully higher.

Ranges of our buyback and the material moving the stock grants for our grain and impacted our repurchase volume.

Yes, sometimes called out of high class problem on your stock and with that quickly.

And finally, we also repurchased nearly $50 million of our MSI bonds for liability and tax management.

And 2021, and we anticipate using the of.

<unk> tools.

All of them potentially.

<unk>.

Deploy a substantial portion of the free cash flow debt share it will generate to our shareholders and.

And with that we appreciate your continued interest feature at retail and hope you all stay safe and healthy and with that operator I'd also like to open up the Florida questions. Thank you.

Well thank you.

Like the signal with questions. Please press star one on your Touchtone telephone.

If you are joining us today, you say speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

And that will be star one if you would like the signal with questions.

Star one.

And our first question will come from Ed <unk> with Keybanc capital markets.

Hey, good morning, guys. Thanks for taking the question.

I guess first obviously would be you know looking back of 'twenty and 'twenty would be I think net from a new customers you have the bringing of default how are their behavior and kind of out of the gate and I would guess that they're probably buying different category of the maybe your cohorts from previous years and and kind of how can you continue to encourage them to come back and become habituated users and.

And as a follow up.

I know you had a lot of favorability and 'twenty from a retrans rate perspective, you're able to reduce the amount of easy pay and I know you don't guide for 'twenty, one, but should we assume that where you see some normalization of those trends. Thank you.

Thank you and this is Mike I'll take the the course part of the question and maybe Jeff you can comment on the question of him.

Payables.

But the kind of just to be very encouraged by the new customer performance and I've mentioned on the script growth and the.

Quantity and quality and they're coming in for.

And as if theyre coming in and on every single category.

And and and and they're.

Kind of of exhibiting very similar behavior to prior classes. So what they're buying is aligned with what ever wanted to buy and so it's certainly a more of a shift towards home, but we've been on especially encouraged by the fact that we're actually seeing strong new name growth even in the down trending categories of.

Apparel and beauty, so they're coming in on every category.

And as I've mentioned about a quarter of them and I'll get into a second purchase within 90 days and I'm.

And that metric because it's sort of the one metric that has really stood the test of time as debt.

If the repeat purchase within 90 days of probably going to stick with you and and so we watch that metric carefully that metric is at or above prior year performance of the lifestyle of their re engaging.

And with Us and.

And then even seen a small profit of these new customers get to the 20 purpose threshold, which is that that's what we talk about when you hit that threshold you are absolutely and amazing customer for life.

All of those dimensions, there, they're sticking with us and that's why we don't want to take it for granted and so we are leaning into a lot of marketing programs.

A couple of big categories.

Looking at how do we target new customers.

And so the new Youtube.

And paint for example, so we target that and new customer when she was on Youtube and present.

Really compelling video experience to her thats very much could put the brand and the kind of reminds her.

I should add that per purchase at the QVC or HSN proven very successful, particularly in the base those kinds of programs and then just a lot of personalized outbound marketing, both email and physical mail because we're finding that the others are the physical mail at the little disruptive right now and people enjoy seeing the great culinary catalog the other.

An example, and so on.

And get folks back and through a really core culinary experience because of the catalog. So really pleased with what we're seeing and.

Chuck and want to take the second part.

Sure.

And.

Part of your question was around the.

Hum.

And the promotional activity.

We have the unique opportunity has and some of the pandemic maybe on once in a lifetime opportunity of the kind of reset some of the.

The promotions that we were doing with respect to install them and accounts just being one element of it.

And it's really important to note the debt that's really just one portion of our overall strategic actions of being taken from a promotional element as we move forward as we see customers.

Continue to possibly rotate and back into other categories will continue to evaluate and know how we pulse those.

And the payments in order to continue driving demand overall.

As you may recall that we.

And we really started this promotional pullback if you will and the second quarter of.

2020, so as we kind of go through first quarter and going into the second will start to anniversary some of those items for the one thing I would want to leave you with is that.

A lot of these activities and we were taking was our opportunity to try and protect as much margin as we could.

Given the shift from fashion and beauty into and to home.

As we start to see hopefully that rotation back into some of our fashion and beauty categories will have an opportunity to take a look at our overall maher.

Margin and mix and how we will continue and maintain and grow that said promotional activities may get a little more aggressively and maybe less of it.

Grill decision is around trying to be very disciplined on our actions going forward and then the last piece just to go on and just one moment is around returns while returns have been favorable for us its really reflective of the categories and what she's currently buying which has a lower return rate.

But also if you think about this is they usually have a little lower margin rate associated with it.

And of getting back to my early portion of where I think about the location and back into some of our fashion and beauty categories, which may have a higher return rate and we'll also get higher margin associated with that business to offset that.

Is that the return costs.

Thank you.

Thank you. Our next question will come from Oliver Winter mentor with Evercore ISI.

Hi, good morning, guys.

My question is more regarding culex age and.

On debt with with the strong decline and I think you said the CE was down about 17%.

That must have been the big help for the mix shift perspective for margins and.

On the shift to home.

And probably.

In addition to that so maybe if you could maybe give us some qualitative or quantitative.

The information about what the mix shift due to margin how much did that help.

Mike do on besides just touch on because of that sure.

Sure.

Fair enough.

Interesting enough as the result of the.

Decline in electronics, and the fourth quarter for us and given the overall penetration and the customer mix was actually probably one of the lack of favorable items, but and all.

And our kind of waterfalls, and we think about what we're supporting product margin cut.

Customer mix.

As a result would have been maybe the last item so.

And in our presentation, we outlined that the strategic sourcing and promotional pullback of returns and pricing where some of the major drivers of product margin increase cash.

Category mix would've been.

Far distant for that but if it was modestly favorable for us.

And so on.

I'll leave it.

And as part of the reason.

And you don't see a bigger benefit of because it was offset by the softness in fashion and beauty. So category mix of guests that turns out to be of relatively minor driver of the margin expansion.

Got it kind of thank you and interest.

The two quick follow ups on on the on the balance sheet.

And and cash flow, So you mentioned <unk>.

Capex of 80 opinion of one eight per cent of sales and I think that was below what you guys were.

Talking about if you are left the analyst day.

And he said it's going to go up.

Ladies and two two per 1% of sales next year.

If you know what.

What is the for like what are you what are you spending on the.

At the.

The fulfillment centers.

The distribution capacity and <unk>.

On the.

Some more color there and then I saw inventories were down eight.

Sales of six or seven.

With that.

And what is the inventory level going into the into the spring selling season. Thank you.

Yeah.

So for all of her I can't necessarily.

For pine.

From a standpoint of for.

<unk> net revenue on.

And we're giving guidance for 2021, but as it relates to the absolute dollar of.

Spend that we're anticipating we continue to continuing to invest and our technology platforms.

And we still have.

A little more work to be done while it's much less and in prior years and our network optimization.

But it's really around continuing to expand capabilities and northern should drive our.

Our strategies, but it's primarily in technology for the.

The vast majority of the spend is.

And then followed up by some of our supply chain and fulfillment centers.

And then kind of as it relates to the inventory.

Coming out of.

2020, our inventories were down.

And part of that is the result of some of the supply chain challenges that we had.

We continue to really be disciplined around how we're.

Growing our inventories and really focused on.

Our supplier base and how we support of our sales growth.

Yes, you would expect to see.

Our inventories start to replenish.

As we go through the.

The first half of the year.

We get away from hopefully some of the supply chain challenges.

Alright, Thank you very much and good luck.

Thank you. Our next question will come from Eric Sheridan with UBS.

Thanks, so much for taking the question and I'll just ask one on international that came and shrunk of and we had forecasted.

You are of interest and more of of countries that are and sort of the various stage of recovery or its still on the mixture of the pandemic any sense of consumer behavior of crusher array of international assets. What do you think that might tell you about how the business by the upward as we go through 'twenty wanted it for 22 I appreciate the color on Scott.

Yeah. Thanks.

Yes, but interest.

Delighted with the broad based strength of the international and every market is performing well and in most categories that are strong clearly.

And as the strongest standard as of the U S.

And especially in Germany and Japan.

We haven't seen the same level of pressure on and the fashion and beauty and even jewelry categories.

Is that better.

Okay, I would say a little more mirrors, what you see in the U S and terms of consumer behavior and the category of shoes selecting some of it.

It's a little hard to draw a lot of conclusions about what that means for the future, but we're certainly focused on making sure we're staying close.

Of course, it to the markets the krotz seen early.

Indicators of Bob.

Change.

Clearly the out of Lockdowns in.

Europe or stronger and more recently than in the U S. So that may have provided some additional benefit for the businesses.

And Europe, but the book.

And more of environment is a little more constrained.

But I think of the main we've just seen.

And sort of a more resilient consumer engaging across a broader array of categories, what that exactly says about the future of little hard to say.

The breadth and strength of the business international and business confidence.

Net debt that they we can sustain pretty thoughtfully and trends over the long term.

And so much.

Thank you.

And moving on to our next question will be Jason Bazinet with Citi.

And just have two questions on the.

On the growth dichotomy between international and domestic on.

The constant currency basis was there any other drugs or other than the the electronics issue that you called out the property for.

That's more of an international and then my second question is.

I think there was a benefit for you guys went the corporate tax rate dropped from the exchangeable debentures.

And if you could just sort of remind us all of that works I think it was of.

Good Guy is the Congress also true that if the tax rates go up because of a slight negative in terms of what you have to pay back the most mature relative to the.

Lower value of the shield.

The other federal tax rate, you're kind of the.

Past few years think I'll, let you and Mike I'll, let you talk about the.

Impact from the U S and and I'm happy to take on the deal.

Alright. Thanks.

Thanks, Jason on other growth driver of differential U S and international So you're right consumer electronics was.

The biggest single component by far of the of the Delta. The other difference is the fact that and Germany and Japan.

Arent seeing the similar pressure in the fashion.

Did you enjoy business so those businesses are.

Growing as strongly as home.

But but but growing and so home pretty consistent globally.

And the fashion and beauty and jewelry challenged and the U S and the U K and to some extent and Italy, and holding up better and in Germany, and Japan. So those would be the true.

I think the dip.

And then if there's also of that they'll call customer bases, and you're seeing sort of good performance across all elements of the customer base.

Greg I'll, let you take the second.

So Jason as you noted the <unk>.

Ladies we issued the series of exchangeable debentures, which have the feature that we deduct interest.

At a rate imputed rate rather than just the cash rate and that deductions for both deductions were taken and higher corporate income tax rates.

And we were building the deferred tax liability, knowing we would have to pay it back weighted.

Cash corporate tax rate was reduced and deferred tax liability was decreased.

And if the corporate tax rate increases, we will have to revalue deferred tax liability and it will likely go up and I will make two points about that first and I have not seen any projections that it will go up to the right and which we deducted illegals there'll be debt ahead of having conducted at higher rates and the corporate tax rate is low.

And to get to.

And two you may have noticed over the last several years, we have been managing some of that D. T. L liability down by repurchasing some of the bonds that generate of the GTO liability and the.

And in fact, and like the MSI bonds and in effect of and reducing that liability already.

Makes perfect sense. Thank you.

And our next question will come from Carla Casella with JP Morgan.

Okay.

Hi, and I know you've been keeping your leverage nights and learn.

QVC and about two times and.

Is that within your target range and how high would you be comfortable taking that and.

Either for the right transaction or for further dividends for the parent.

So Greg you want to pick that out of Jackie I want to do that are happy too.

Got it.

Okay, Our stated corporate leverage target of the Q level of two and a half times.

We are obviously below that probably around the two times.

And so that does create some opportunity.

We had a high quality problem enormous cash generation in 2020 net.

It helps even with our one time cash dividends and our share repurchases helped drive leverage down. So we do have some flexibility and we'll monitor what we can do with that flexibility in the coming quarters and years.

Okay and kind of package.

Besides the one follow up on the and.

And some questions about payables.

And have you extended terms with some of the table and increased permanent versus temporary and would you call. It all the temporary and all going to reverse in the first half of 'twenty one.

So all of the.

Extension of the payables of one component and once again of how we were strategic and working with our vendors and we thought that was all permanent.

And those negotiations and how we put that into place happened over the course of 2020.

So you'll start to see a reverse of that really starting in the second quarter through the end of the year.

And just to put a fine point on it for both that and the and the reduction and on installment payments with the benefit of the accounts receivable and isn't meant to be long term program. So it's not that they reverse it's just that and you don't keep comping them.

And so you get at the end of the base.

And then and then and then you have sort of a normal side of working capital trends off of the newly established base.

Thank you for thinking.

Operator, we're ready for the next question.

Thank you our final question will come from Sean interesting with da Davidson.

Hi, guys. Thank you for very much for taking my question. Just wanted to know if you guys could provide a little bit more color on just the new customer cohort the that youre seeing.

And just in terms of any new demographic of call outs and and also.

Are they being acquired at a.

Kind of of lower customer acquisition costs and historically normal. Thank you.

Yeah. Thanks for the question and Al.

And my comments on.

And until it takes customers just because it's the most valuable customers and there are so many different stories across all of the different businesses, we have so.

I wanted to just focus on that.

Well I trust the demographics of the new customers look.

Literally identical.

The prior years and the new customers tend to be six to seven years on average younger than existing customers on average kind of as you would expect debt.

Isn't changing and so I always emphasize the fact that our businesses can cause of these very stable around age cohorts and and kind of life stage, both for existing customers and new and that's remained true and then the kind of remain true as we've seen lots of new customers coming in for screening services or other forms of digital.

The popcorn and it's the overall profile of those customers, even though they're coming in and out of different platforms.

Very like debt.

Part of your classes and it was one of the reasons that this gives us confidence along with the other more quantitative metrics that these customers and well behaved and similar vein and the past here of classes cause on both Democrats.

Demographic element and on behavioral elements.

And there are remarkably similar there's just there's just more of them.

No.

And just the way I would think about cost of acquisition as you know when you think about the 60% of new customers that come in and organically.

Secondly, the zero marginal cost of bringing the at 60% and so it was a heck of a of bringing in a lot of them.

And zero marginal cost of cigarettes.

The positive story that 40%, where we use paid marketing to bring them in and I would say paid marketing is.

You know about stable.

But what about per lack of efficient and Q4, just because we grew it at a pretty rapid rate and we're still all of my positive, but obviously when you grow faster you kind of get a little bit less efficient.

But if you wait all of that out with the combined organic on the page I think it's safe to say that per core customer of all.

The acquisition prospects.

And down just based on the the volume of new customers that we're bringing in.

And I believe that was our last question. So thanks for all of you for Ya.

And the crime and continued interest and the support and hope all of you and stay safe and well as we go through what we hope is the final stage of this pandemic. Thanks, everyone.

Thank you that does conclude today's conference. We do thank you for your participation have and excellent day.

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Ladies and gentlemen, thank you for standing by welcome to the cure rate retail, Inc, 2020 year and earnings call. During the presentation, all participants will be in a listen only.

Mode.

Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press star one on your telephone.

As a reminder of this conference is being recorded February 26th.

I'd now like to turn the conference of the Courtney Chun Chief portfolio Officer. Please go ahead.

Thank you.

And you kind of we'd like to remind everyone that this call includes certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual events or results could differ materially due to a number of risks and uncertainties and push.

And as mentioned and the most recent form 10-K, and 10-Q filed by our company and QVC with the SEC and forward looking statements speak only as of the day of this call and curate retail expressly disclaims any obligation or undertaking at the time.

And any updates or revisions of any forward looking statement contained herein to reflect any change in retail the expectation with regard there and to R&D.

Changing the events conditions or circumstances on which any such statement is based on.

Think of it because of certain non-GAAP financial measures, including adjusted OIBDA, adjusted OIBDA margin free cash flow and constant currency information regarding the comparable GAAP metrics of all of required definitions and reconciliations and putting.

And preliminary note and scheduled one for three and can be found and the earnings press release issued yesterday on our or issue today and excuse me on our earnings presentation, which are available on our website.

And I think you're on the earnings call. We've got curate retail the president and CEO, Mike George Curate retail group CFO, Jeff Davis, and credit retail executive Chairman and break and say. Please note we published slides to accompany the earnings release and slides are available on our website now I'll turn the call over to Mike.

Thank you Courtney and good morning, everyone and people joining us today.

And we had a very strong finish for the year interest.

And topline growth across all business segments of that.

<unk> responded with the agility to meet our customers' rapidly shifting needs and the stay at home environment and do it.

And that's operating and events and the pace of substantial product for the JV and chip and challenges all of significantly pulling back and off the muscle activity.

We got robust new customer growth and the good games and our long term strategic priorities and all businesses.

And then putting pipe fanatical management and growth strong overall net revenue was it on a free cash flow growth and.

Turning to capital the shareholders, even as of invested the keep crew member of safe and provide them with the enhanced pay and benefits.

Additionally, we continue to support that's one of these wealthy.

The other programs such as the small business problem and partnership with the National Retail Federation Foundation will help small businesses challenged by COVID-19.

The second phase locked in all of its supporting block of businesses.

We publicly announced new corporate responsibility commitments at the time bound and measurable targets focused on protecting our environment for lighting products responsibly and sharpening of inclusion and the problem.

I'm, particularly proud to report the reason you see the 100% weighting on the human rights campaign's 'twenty 'twenty, one corporate equality index the.

The mentioned almost petsmart and survey maker and corporate policies and practices related to the LGBTQ workplace equality.

This recognition is the credit to our entire team and then.

Their commitment to fostering the culture, where all team members can do the whole selves and do the best for work.

We are grateful for the commitment and the resilience every member of the demonstrated this past year.

Well the grappling with all of the personal challenges the pandemic has rock and <unk>.

Jason and you're on.

And we were awarded the special one time bonus the all regular and because of our team members who are not eligible for other targets for success share programs.

Now turning to the numbers.

All of the grew revenue, 6% and all of it of 13% and constant currency and for the year, we grew revenue, 5% and or the 8%.

We generated free cash flow nearly $2 billion for the year upward of 200% supported our ability for the current cash to shareholders and special dividends and share buybacks.

We continue to experience the rapid new customer growth across all business units and all markets with more than two 8 million new customers added in Q4, that's up 33 clicks on collapsed and here for him.

The total from customers for the year to seven 6 million and 25% increase.

COVID-19, and have put nodes of the consumer interact with retailers and brands online and many will continue to do so long after the pandemic.

We believe that the the fundamental long term shift and consumer behavior and.

And the vast array of online shopping choices consumers now have on.

And our record of acquisition and stable retention of new customers speaks possibly because of the relevance and the stickiness of our platform and our experiences.

And I've taken a closer look like he'll take the performance in the fourth quarter.

And then the prior two quarters, we delivered outstanding growth across all of home categories, partially offset.

And the softness in our fashion businesses, although I'd note that we did gain share and apparel accessories and beauty and the down market.

And the steep decline and consumer electronics.

Excluding consumer electronics that revenue and Phillips 60.

The increased 6% from the fourth quarter.

The moderation and revenue growth from the prior two quarters and put the two main drivers that are unique for Q4.

First of the late season snow storms impacted our northeastern and fulfillment centers. The core system move up the cutoff date for guaranteed Christmas delivery cost and that's the final weekend of holiday selling.

Second we had significant product shortages and late November and December.

And shortages of equipment vendor challenges, keeping up with Verizon and demand compounded by chip shortages of factory delays screening for.

Of the excipient containers in Asia, and significant backlog at the West Coast ports.

The business that focuses on key items for the day, rather than broad always on assortments of last minute shortages and the key items can be highly disruptive.

While the shortages of parts across many categories, which are the greatest pressure and electronics, which normally represents over 20% of our sales in Q4 about double the normal mix.

The result, we were unable to meet demand for smart home items tablets and audio calls for.

Additionally, the children sub categories, such as gaming the balances that were particularly strong and the market. We unfortunately don't have the meaningful projects given the unexpected margin profile and stuff.

The benefit of typical lower lifetime value and our target demographic.

For the electronics challenges significantly impacted our revenue growth it was not a meaningful impact on OIBDA growth little bit lower margins on our products.

Looking ahead and do not believe it.

Cost of product shortages through 'twenty and 'twenty, one we'll be doing of significance is the war and Q4.

We expect the global supply chain and begin to stabilize and and you know them.

And we're taking scrub of actions to increase the oversight of the inbound product flow from our vendors.

Additionally, the much smaller mix of electronics and the first three quarters of the year significantly reduces our exposure.

The growth strong growth and new customers of true ups age of 18% and the quarter.

Especially impressive in light of the consumer electronics declined is that category of things and the largest share of the customers' most holiday seasons, excluding all the products new customer growth was 36 per cent.

And it was 60% of new customers and the quarter here and then organically you don't go and directly to our websites or customer service agents.

And the organic search for organic sofa.

The remainder of acquired disciplined investment and the performance marketing.

And just I'll highlight the combined power of lot of TV reach our brand and reputation of our social presence and word of mouth, coupled with highly effective digital marketing programs.

And we remain highly encouraged by both the quantity and the quality of new customers who are attractive.

Looking back at the past much acquired and the second and third quarters.

One of 6%, albeit at least the expected purchase of the 90 days of Jordan the quantity of above last year's rate.

And the percentage of the new customers, who picked the quantity items closest threshold and we considered the best customer and the jester.

And just there for 90 days is similar to prior years.

So in addition to the record number of new customers and 2020, we added more new customers, who have already become the best customers. The.

And of year and our company's history.

The advanced our strategic priorities focused on driving sustainable long term growth and a global video commerce through the mess.

As a reminder of our strategic efforts for both Q other states and keeps the international for focused around five teams surety and special products at compelling values.

And in the video reach and relevance.

And bad getting daily digital discovery.

And then and engaging a passionate community.

And delivering thoughtful customer service.

I'll briefly comment on a few of these priorities.

As part of our focus on expanding and engage and a passionate community.

We need to invest and enhance the customer acquisition development and personalization initiatives for both increase our overall addressable customer base, and we paid and and parents the standard of existing customers.

For concluded successfully put the new advertising programs, such as Youtube and quick time to reach new audiences.

And I'll get out of a success with personalized content and email communications to increase customer engagement and expand.

And of expanding personalization on the website the create calls the action based on shopper browsing behavior.

We continue to expand the video reach and relevance with the addition of new screens and platforms, including the algae Tvs shop Com App and.

Okay.

Green cuisine, screamed and surface and.

And last month is it true debuted on Youtube TV and it took more than three millions of subscribers can be seen as the only large screens and shopping channel on Youtube TV.

The available across smart Tvs streaming media player smartphone apps tablets computers and consoles and smart displays.

We continue to keep growing growth of our own screen media with the integrates the extensive live on demand and original content from QVC and HSN.

Both of the App on Roku or up 63% in 'twenty and 'twenty with average monthly ignores the 47% and.

And download of the Amazon fire, TV, and we're up over 240%.

Most of the viewers up.

75 per cent since the start of 2020.

Even as we see growing interest in a livestream shopping and often we also continued to benefit from high engagement of our traditional linear TV offerings with the number of homes tuning and to acute <unk> and that work per day up 14% year over year and Q4.

The reach and relevance of all the networks and platforms and stuff.

And just to kind of development of sourcing marketing and fulfillment and customer service support and makes it the highly attractive partner the scored and new grants of life as we make strides on our strategic priorities Detroit special products at compelling values.

A big find program, which in 'twenty and 'twenty, one virtual helps us by new grants from up and coming up for those with compelling story that we know of customers will love.

From 2400 and increased from 60 different countries 92, exciting new growth across apparel accessories, and jewelry beauty and home culinary and electronics.

And the prelaunch.

And two thirds of the brands the owners of identify this woman or by holding on.

During the fourth quarter and full year. We also had many premium brand partners. For example tickets in the U S expanded its closer relationship of Este Lauder.

The old food, Mac, Clinique, and too faced and the addition to the namesake brand.

Based on the success, we also began and often Este Lauder and the U K and the fourth quarter.

We also launched the new exclusive and timely collaborations with leading designers and us and others such as Jason wound size of inclusive of fashion line.

And we created the engaging the types of content such as our original series Curtis Stone and travel Cook repeat.

Which contributed to a 33% sales growth for the critics don't put for brand this quarter.

Looking forward, we're leveraging our new merchandising organization with the <unk>.

What are the resources and structure, we put into the product discovery and business development.

The go after of high growth or emerging products and categories and we believe will be highly relevant for the consumers of this year.

And how long these include new proprietary and exclusive cookware and home decor brands.

Buildout of our global design development and sourcing some of it to the increased differentiation and the top trend and the categories.

For the enthusiasm increased focus on sporting goods crafts pools, and spas and games for the Cook specialty kitchen electrics from bread makers and ice cream the makers the vacuum sealers possible maker and wide sellers, along with plant based food and wine products.

And stay healthy and connected fitness equipment, and wellness and hygiene products and the macro says the pirates walkers cause music sanitizing products cleaning and disinfecting air purification and things of coverage.

On the fashion the slide we're focused on standard Assortments and comfort at home wear athleisure and outdoor apparel and we're awash and go footwear.

And what's happened and the multiple growing beauty segments liquidity and multicultural beauty and the last piece and philosophy.

Turning now to QVC International the team delivered exceptional performance of the quarter of double digit revenue and OIBDA growth, including revenue and OIBDA growth and every market and across most categories and strong new customer acquisition up nearly 30%.

The God President of International business Mirror those of the U S with particular strength of the home categories and among the customers.

All of our product shortages were not nearly as significant and.

The most markets can face the same inbound supply constraint and we saw at the West Coast ports.

Additionally, our international markets and make it much more of a purchase orders and therefore have more flexibility to meet their needs.

And I would also note that electronics represents only 5% of the international mix and the fourth quarter.

The continued to see the benefit of.

Strong local teams of each market for.

Highly accretive and the country and regional needs.

A couple of the test and learn mentality as our teams the lean into our global video Commerce strategic priorities for the particular focus on enhancing the daily digital discovery, including developing a new live streaming app vocal on the user generated content, it's now and beta phase the.

The point drop ship capabilities to expand digital only assortments and expanding digital marketing.

Our international team is also taking the lead on building and deploying new machine learning capabilities, the optimized pricing and maximize the airtime productivity among many other applications keep the salaries and we expect the rollout globally of developed.

The Lilly is gaining momentum on its great press bond strategy and tradition Premier brands, London fog honest, the company mango and color and two of boots.

<unk> bands and Macy's along with the 14 hundreds of new long sales and there was launched in 'twenty and 'twenty largely keeps trying to direct program.

The team is also making good day diversify and its marketing program for dinner.

The new Influencer based affiliate network and its growth of and it's outbound marketing.

Given the progress we chose the ramped up our marketing spend and the quarter yoga and outstanding, 74% and new customer growth and similarly, and providing a strong foundation for continued growth into 2021.

Cornerstone had another outstanding quarter record revenue and adjusted OIBDA growth.

Net income and the surge and home spending and we are excited about the long term prospects for this business.

Of course, they all had strong growth and home office storage outdoor living and home decor.

Coupled with the focus on building highly differentiated core proprietary of Assortments.

We saw continued strong margin expansion with the twin pull back significantly on promotional activity along.

How long of improved marketing efficiency.

I'd like to close and for P thoughts on 'twenty and 'twenty one.

We're confident that all of our hard work positions us well successfully navigate the fluid environment.

Given the pace of vaccine and availability.

And we opened our offices before September at the ropes.

And our highest priority remains the safety of our team members both of those working on site and it does.

Working remotely.

I am excited for the year ahead of us despite the uncertain backdrop.

The macro trends were seen perfectly aligned with our capabilities and our strategic priorities.

Increasing and increasing focus on livestream shopping from Amazon lots of Pitcock demonstrates that our business has never been more relevant than it is today.

But for the fruit of success is not the latest technology of the flashes of Influencers.

It's building lasting relationships customer by customer.

The fundamentals of great shopping have not changed it's still about the power of human connection and the joy of discovery.

Wandering into your favorite shop.

On today's world your favorite and virtual shops.

And the interesting conversations learning of the stories behind the products and getting inspired.

For the pioneers and both livestream shopping and leverage and Influencers and he has the experience expertise and global infrastructure to be the partner of choice for us.

That was the new grants the life, she can play with the customers that scale and and and engaging way.

And we of the financial strength, the support our continuing investment and innovation.

And how we reach customers with personalized messages and how we engage with them on new platforms and new technologies.

And I'm confident we will emerge from the pandemic stronger.

Well positioned for sustainable long term growth.

And with that I'll turn the call over to Jeff.

Thank you, Mike and good morning to everyone as Mike mentioned, we delivered strong revenue and OIBDA growth and curate and retail and both Q4 and the full year. So let's get started with culex age.

Revenue grew through continued momentum and home category.

Expansion of our customer base and reduce customer returns.

E Commerce revenue grew 6% and penetration of improved 270 basis points and the quarter.

For the quarter turtle customers grew 6%.

And with new growing 18% the activated of 13 kind of existing up 2%.

While we only have access to comparable interest and customer data of going back five years. We believe this is the largest new customer class and the history of both QVC U S and HSN.

As illustrated on slide eight of our earnings presentation. We continued to have a sizeable shift and category mix and to your home and away from primarily electronics and apparel.

Revenue and home increased 17% and.

<unk> maintained their focus on family and wellbeing with strong demand for fitness and wellness products food and kitchen electrics.

Home decor and furnishings and.

And household home environment and cleaning products.

Consumer electronics declined 17% primarily from the supply chain pressures that Mike has mentioned.

Yet we were able to satisfy customer demand and several higher price sub categories, such as home office and computers and delivered increased overall product margin.

With respect for our fashion categories accessories grew 6% on the strength of loungewear and and.

And non leather handbags.

Judy declined 10%, reflecting lower demand for color cosmetics and the pandemic.

And the apparel and jewelry remained challenged in line with general market conditions, but we did see pockets of strength and activewear and outerwear.

Adjusted OIBDA grew 10% and adjusted OIBDA margin expanded 130 basis points.

Gross margin improved 200 basis points, which is led by 360 basis point expansion and product margin.

Approximately 50% of this expansion, we split between or equally between.

Strategic sourcing initiatives and promotional pullback.

And another 20% from reduced customer returns and 15% from pricing to partially offset the freight surcharges and rate increases.

Given the impact of strategic sourcing work.

Wanted to provide some additional background.

The call we initiated the work in 2019 as part of our overall synergy commitments.

By bringing QVC and HSN and merchandise groups together, we were able to work with our vendors and across both brands on the broad.

On a broad program to reduce the end to end supply chain costs on.

Optimize the assortments around vendors offering the greatest sales and margin productivity and.

And create new arrangements.

Such as marketing funds to grow the brands.

We started the work and just two categories and expanded across all categories through 2020.

We will begin to anniversary and the benefits of this work towards the middle of 2021.

Finally.

Fulfillment costs increased 150 basis points, primarily due to ongoing productivity challenges and our fulfillment centers for maturing the COVID-19 protocols freight surcharges and rate increases, which were partially offset by improved pack factor.

Operating.

Expense.

The 10 basis points unfavorable primarily due to higher customer service from longer average call times associated with executing our upsell and initiatives and addressing shipping status of questions, partially offset from favorable conditions.

SG&A.

The 60 basis points on favorable.

Comprised primarily of the 180 basis points, which was split equally across marketing and administrative costs.

Marketing reflects our continued investment to acquire retain and engage customers.

Of total marketing spend while rising will still only 2% for Q ex H net revenue and.

And 2020.

We expect the increase the spend on average 50 basis points annually, if we see attractive opportunities to further grow at attractive returns and returns.

Administrative cost of primarily due to our higher incentive compensation accruals.

The marketing and PR.

And.

This marketing and.

Ministry of the pressures, the partially offset by 125 basis points of favorable bad debt expense.

The first and which was <unk>.

The merrily reflects lower customer default rates and.

And fewer offered installment payments associated with the pullback and promotional activities.

And clothing cubic page and we remain on track and delivered 370 to 400 million cumulative HSN synergy.

Through 'twenty and 'twenty two and.

And we are over 70% complete as of year end.

Moving to QVC International which continued to generate very strong.

Across nearly all categories with strong new customer gains and increased e-commerce revenue and penetration.

And my comments will focus on constant currency results.

Revenue grew 10% with strong growth across all markets led by Japan, Germany and the UK.

The total customers grew 10% and the quarter with new of 28% reactivated of three and existing on the paid.

For the year QVC International attracted $1 2 million new customers a record number for end of year in the life of 10.

E Commerce grew 23% and e-commerce penetration increased 500 basis points.

The business generated broad based gains and nearly every category led by home and beauty.

And adjusted OIBDA increased 16% and adjusted OIBDA margin, expanding 90 basis points.

One of more detail.

So from a gross margin basis, it improved 120 basis points, primarily due the higher product margins, which reflects the reduced customer returns and strategic sourcing initiatives.

We also benefited from favorable fulfillment expenses, driven by sales leverage and a higher average selling price.

These gains were partially offset the higher inventory obsolescence, primarily due to outlet store closures and proactive inventory management.

Operating expenses were favorable by approximately 50 basis points, primarily due to lower commissions, reflecting higher e-commerce penetration sales leverage on fixed rate contracts and renegotiated carriage contracts.

SG&A was unfavorable primarily due to incentive compensation and marketing investment to acquire retain and once again engage customers, partially offset by lower administrative expenses and sales leverage.

Moving to zeroing.

Revenue grew 11% driven by outstanding games, and home and hard lines as well as strong customer growth.

It'll customers grew 11% and new customers grew 74%.

Adjusted OIBDA declined $7 million and adjusted for the margin.

The decline of 170 basis points, primarily due the higher freight costs from international product mix seasonal wages, and our fulfillment centers as well as incentive compensation accruals and marketing expenses.

These pressures were partially offset by improved product margins and leverage for the administrative expenses.

And the cornerstone of once again, delivering outstanding results and record revenue and adjusted pointed out revenue grew 30% driven by sustained momentum and the home brands on the strength of.

Core home decor.

The door categories.

And until returned to growth on the strength of home textiles, and its cash from your products.

Adjusted OIBDA increased $28 million, primarily due to product margin gains and the home brands and reduced promotions as well as leverage of administrative and marketing expenses. These gains were partially offset by higher freight rates and surcharges.

So let's quickly review the balance sheet and cash flow.

Capex was $92 million and Q4 and $257 million for the full year, which is the reduction from our initial 2020 indications.

For 2021, we anticipate capex to range from 265 million to $300 million.

PV distribution payments were $56 million and 2020, reflecting and off here, how about two year cycle for multiyear contract renewals, while we do not provide forward guidance.

Fiscal 'twenty, one will be higher than 2020 on.

On average our amortization of TV distribution payments average of $130 million annually.

And as Mike said, we generated nearly $2 billion of free cash flow and 2020 with outsized growth was driven primarily by improved cash flow from operations.

Working capital benefited from the extension of the payment terms pullback of customer installment payments reduced inventories and increased accruals for management incentive bonus and returns.

Separately you recall, we also received $267 million of pre tax proceeds from the sale of of Green energy investments and 2020.

We expect to return to a more normalized level of free cash flow conversion and the range of 45% to 55%.

The call, we generated substantial working capital improvements and the first half of 2020 from pulling back on the offered installment payments which reduced.

Accounts receivable.

And the strategic sourcing, which increased accounts payable.

These items are now on our face he will not serve as a source of working capital this year.

Finally, the accruals for incentive and other bonus compensation will be paid and the first half of the year and.

And these items will create more difficult compares for free cash flow on the first half of 2021.

Looking at our debt profile at the end of the year, we had nothing drawn under our revolver and $2 9 billion of capacity we.

We had $806 million of cash and cash equivalents and our leverage ratio as defined by our QVC revolving credit facility was two times.

In closing.

We have multiple paths to sustain net revenue and OIBDA growth.

And we look forward to 2021, we believe the same digitally driven macro consumer trends will continue with elevated home demand supporting new and occasional customer growth and upside with debt to customers and be at behavior of shift back to fashion.

Moving to margins are reinforced by rebalancing our category mix continued realization of our strategic revenue management incentives and.

Initiatives.

And reduced commissions from increased e-commerce penetration and contract negotiations.

These positive drivers.

And the partially offset will be partially offset by prevailing increases and freight and competitive labor rates and experienced across the industry and increased marketing to support customer acquisition retention and expanded product.

And for the government.

And now I'll turn the call over to Greg.

Thanks, Mike and Jeff.

In addition to a strong operating performance and 2020.

Sure and had superior capital returns of the year as well.

And paid out nearly $1 3 billion.

And two special cash dividends.

We also had a $1 $3 billion dividend of 8% preferred stock.

Which is.

The trading at par and outfitting very nicely.

And we resumed our buyback and late November the <unk>.

Got it.

And we hire.

And of our buyback and the material moving the stock ranch for a grid and impacted our repurchase volume.

Yes, sometimes called out of high class problem on your stock of loans that quickly.

And finally, we also repurchased nearly $50 million of our MSI bonds for liability and tax management.

And 2021, and we anticipate using the of.

<unk> tools.

All of them potentially too.

Deploy a substantial portion of the free cash flow debt jewelry will generate to our shareholders and.

And with that we appreciate your continued interest feature at retail and hope and waltzing safe and healthy and with that operator I'd also like to open up the Florida questions. Thank you.

Well thank you.

Like the signal with questions. Please press star one on your Touchtone telephone.

And if youre joining us today use a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

And that will be star one if you would like the signal with questions.

Star one.

And our first question will come from Ed <unk> with Keybanc capital markets.

Hey, good morning, guys. Thanks for taking the question.

And I guess first obviously would be looking back at 2020, it would be I think Nick for about new customers you have the bringing of default how are the behavior and kind of out of the gate and I would get the said probably buying different categories and maybe your cohorts from previous years and and kind of how can you continue to encourage that they come back and become habituated users and.

And as a follow up.

And I know you had a lot of favorability and 'twenty from a retrans rate perspective, you're able to reduce the amount of easy pay and I know you don't guide for 'twenty, one, but should we assume that wait and see some normalization of those trend. Thank you.

Thank you and this is Mike I'll take the the first part of the question and maybe Jeff you can comment on the question around.

Payables.

And just to be very encouraged by the new customer performance and I've mentioned on the script and the quantity and quality and now theyre coming in the first thing is that they're coming in on every single category.

And and and the kind.

And kind of exhibiting very similar behavior at the prior classes. So what they're buying is aligned with what everyone is buying and so it's certainly a more of a shift towards home, but we've been and especially encouraged by the fact that we're actually seeing strong lunar and growth even in the down trending categories of.

Apparel and beauty, so they're coming in on every category.

And as I've mentioned about a quarter of them on getting to a second purchase within 90 days and I met.

And that metric because it's sort of the one metric that has really stood the test of time most of that.

The repeat purchase within 90 days, because that's probably going to stick with you and and so we watch that metric carefully that metric is at or above prior year of performance over the life out of there we are engaging.

With us and.

And you won't see a small cost of these new customers get to the 20 purpose threshold, which is that that's what we talk about and you hit that threshold you are absolutely and amazing customer for life.

All of those dimensions, there for sticking with us and that's why we don't want to take it for granted and so we are leaning into a lot of marketing programs.

A couple of big categories, we're looking and how are we target new customers.

And from the new Youtube.

And paying for example, so well, while we target that and new customer when she was on Youtube and present.

Really compelling video experience to her that very much fits with the brand and kind of reminds her.

Why should they that per purchase at the QVC or HSN cool and very successful and those kinds of programs and then just a lot of personalized outbound marketing, both email and physical mail, because we're finding and others are the physical mail at the little disruptive right now and people enjoy seeing the great culinary catalog as of.

The example, and so it will get pushed back and clearly a really cool culinary experience. The catalog. So we're pleased with what we're seeing.

And Chuck and I'll take the second part.

Sure.

And.

Part of your question was around the.

And the promotional activity.

We have the unique opportunity has and some of the pandemic maybe on once in the lifetime opportunity of the kind of reset some of the.

Promotions that we were doing with respect to install them and accounts just being one element of it.

And it's really important to note is that that's really just one portion of our overall strategic actions of being taken from a promotional element as we move forward as we see customers.

Continue to possibly rotate and back into other categories will continue to evaluate how we pulse those and <unk>.

And the payments in order to continue driving demand overall.

As you may recall that.

And we really started this promotional pullback if you will and the second quarter of.

2020, so as we kind of go through first quarter and going into the second will start to anniversary some of the items, but the one thing I'd want to leave you with is that.

A lot of these activities and we were taking was and our opportunity to try and protect as much margin as we could.

Given the shift from fashion and beauty into the home.

And as we start to see hopefully and that rotation back into some of our fashion and beauty category will have an opportunity to take a look at our overall.

Margin mix and how we will continue to maintain and grow the upside promotional activities may get a little more aggressively and it may be less but all of them.

Real <unk>.

And as around trying to be very disciplined and our actions going forward and then the last piece just to go on just one moment is around return while returns have been.

Well for us and it's really reflective of the categories and what she's currently buying which has a lower return rate.

But also.

If you think about this is they usually have a little low margin rate associated with it and just kind of getting back from my early portion of where I think about the rotation back into some of our fashion and beauty categories, which may have a higher return rate will also get higher margin associated with that business to offset that.

On the.

The return costs.

Thank you.

Thank you. Our next question will come from all of her went from rental with Evercore ISI.

Hi, good morning, guys.

And my question is more of a doubling culex age and.

On debt with the strong decline and I think he said the CE was down about 17%.

So that's the theme of the.

The hope for the mix shift perspective for margins and then the shift to home.

Probably.

In addition to that so maybe if you could maybe give us some qualitative or quantitative.

For information about what the mix shift due to larger and so how much did that help.

Mike do you want me kind of just checked on price that sure.

Sure.

Okay.

Interesting enough as a result of the dike.

The decline in electronics, and the fourth quarter for us and given the overall penetration.

Customer mix was actually probably one of the lots of favorable items, but and.

And our kind of waterfalls, and we think about what we're supporting product margin.

Customer mix.

As a result would have been maybe the last items so in our.

Our presentation, we outlined that the street.

<unk> sourcing and promotional pullback and returns and pricing where some of the major drivers of the product margin increased category.

The category mix would've been a farce.

Far distance of that but if it was modestly favorable for us.

And all of it.

The thought of it.

You don't see a bigger benefit as because it was offset by the softness in fashion and beauty, so kind of got it makes sense.

Turns out to be of relatively minor driver of the margin expansion.

Got it got it thank you.

And then just.

Two quick follow ups on the other.

The balance sheet.

And and cash flow.

You mentioned.

Capex I think the opinion about one eight per cent of sales and I think there was below what you guys were.

Talking about at the last analyst day.

And you said, it's going to go up it looks like it's two two per 1% of sales next year.

And is what is this for like what are you what are you spending on there.

Is it.

The fulfillment centers.

Distribution capacity and for IP.

And some more color there and then I saw inventories were down eight.

Sales up six or seven.

With that.

What is the and.

The toy level going into the into the spring selling season. Thank you.

Yes.

So to all of her I can't necessarily.

Opine on.

From the standpoint of the percentage of net revenue on it.

The will be giving guidance for 2021, but as it relates to the absolute dollar of.

Spend that we're anticipating we continue to continuing to invest and our technology platforms.

We still have of a.

A little more work to be done while it's much less and in prior years and our network optimization.

But it's really around continuing to expand capabilities in order to drive on.

Our.

The strategies, but it's primarily in technology, where the.

And the vast majority of the spend is.

And then followed up by sort of our supply chain and fulfillment centers.

Oh, and then kind of as it relates to the inventory.

Coming out of.

2020, our inventories were down.

Part of that is the result of some of the supply chain challenges that we've had.

We continue to really be disciplined around how we are.

The growing our inventories and really focused on.

Our supplier base and how we support our sales growth.

You would expect to see.

Our inventories start to replenish.

And you go through the.

The first half of the year.

As we get away from hopefully some of the supply chain challenges.

Got it thank you very much and good luck.

Thank you. Our next question will come from Eric Sheridan with UBS.

Thanks, so much for taking the question and I'll just ask one on international that came and shrunk and we had forecasted.

Interest and more of of countries that are and sort of earlier stage of recovery or its still in the midst of the pandemic any sense of consumer behavior across your range of international assets. What do you think that might tell you about how the business by the upward as we go through 'twenty one 'twenty two I appreciate the color. Thanks guys.

Yeah. Thanks.

Yeah, we've been delighted with the broad based strength of the international and every market is performing well and in most categories that are strong clearly home as the strongest as it is and the U S price.

And especially in Germany and Japan.

We haven't seen the same level of pressure on the fashion and beauty and jewelry categories.

Hold up better and.

U K I would say a little more mirrors, what you see in the U S and terms of consumer behavior in the category of she is selected.

It's a little hard to draw a lot of conclusions about what that means for the future of but we're certainly focused on making sure we're staying close.

Across each of the market the crowd of people in Italy.

Indicators of Bob.

[noise] change.

Clearly the Lockdowns in.

And Europe or stronger and more recently than in the U S. So that may have provided some additional benefit for the businesses.

And Europe that the brick and mortar environment is a little more constrained.

But I think of the main we've just seen.

And sort of a more resilient consumer engaging across a broad array of categories what that exactly is.

About the future of little hard to say.

The breadth and strength of the business internationally and gives us confidence.

And we can sustain pretty frothy and trends over the long term.

And so much.

Thank you.

And moving on to our next question will be Jason Bazinet with Citi.

And just have two questions on the.

On the growth dichotomy between international and domestic.

On a constant currency basis was there any other drugs or other than the the electronics issue that you called out the the coffee.

For U S smiled and international and then my second question is.

I think there was a benefit for you guys when the corporate tax rate dropped from the exchangeable debentures.

And if you can just sort of remind us all of that works I think it was a good guy is the Congress also true that if the tax rates go up because of a slight negative in terms of what you have to pay back for those mature relative to the.

Lower value of the shield.

The lower federal tax rate because of the.

That's three years, thanks, and I'll, let you and Mike I'll, let you and talk about the.

Impact on the U S and and I'm happy to take on the details.

Right now so if I can think.

Thanks, Jason and other growth driver of differential U S and international so you'll like consumer electronics was.

The biggest single component by far of the of the Delta. The other difference is the fact that and Germany and Japan.

The team with similar pressure in the fashion.

The the enjoy businesses so those businesses are.

And that's gone away as home.

And so home pretty consistent globally.

On fashion beauty, and jewelry challenged and the U S and the UK and the.

And some extend of Italy, and holding up better and Germany, and Japan, So those would be the true.

The big difference other than as a result of that they'll call customer bases, and you're seeing sort of a good performance across all elements of the customer base and Greg I'll have to take the second.

So Jason as you noted the way. These we issued the series of exchangeable debentures, which have the feature that we deduct interest.

At a rate the imputed rate rather than just the cash rate and that deductions from those deductions were taken and higher corporate income tax rates.

We were building the deferred tax liability, knowing we would have to pay it back when the cash.

Corporate tax rate was reduced and deferred tax liability was decreased.

And if the cash corporate tax rate increases, we will have to revalue of deferred tax liability and it will likely go up and I will make two points about that first day as I have not seen any projections that it will go off to the right and which we deduct and illegal there'll be debt ahead of having conducted at higher rates than the corporate tax rate is low.

And to get to.

And two you may have noticed over the last several years, we have been managing some of that DTA L liability down by repurchasing some of the bonds that generate of the GTO liability and the.

And in fact, like the MSI bonds, and an effective and reducing that liability already.

Makes perfect sense. Thank you.

And our next question will come from Carla Casella with JP Morgan.

Yeah.

Hi, I know, she and keeping your leverage nice and low.

QVC and about two times and is.

Is that within your target range and how high would you be comfortable taking that and either for the right transaction or for further dividends for the parent.

So Greg you want to pick that Jackie and when I do that I'm happy to.

Okay, all right, great and corporate leverage target of the Q level of two and a half times.

We are obviously below that probably around the two times.

And so that does create some opportunity.

The.

We have a high quality problem enormous cash generation in 2020 that helps even with our.

One time cash dividend and our share repurchases helps drive leverage down. So we do have some flexibility and we'll monitor what we can do with that flexibility in the coming quarters and years.

Okay, and if I could just ask one follow up on the.

And some questions about payables.

Have you extended terms on some of the table and increased permanent versus temporary or would you call. It all the temporary and I'll go into reverse in the first half of 'twenty one.

So all of the.

Extension of the payables of one component once again is on how we were strategic and working with our vendors and that was all permanent.

And those negotiations and how we put that in the place happened over the course of 2020.

So you'll start to see a reverse of that really starting in the second quarter through the end of the year.

And just to put a fine point on it and so both that and the and the reduction in on installment payments with the benefit of the accounts receivable and isn't meant to be long term program. So it's not that they reverse it's just that and you don't keep copying them.

Debt at the end of the base.

And then and then and then you have to sort of a normal side of working capital trends off of that newly established base.

Thank you for thinking.

Operator, we're ready for the next question.

Thank you our final question will come from Sean interesting with da Davidson.

Hi, guys. Thank you for very much for taking my question. Just wanted to know if you guys could provide a little bit more color on just the new products from a cohort that you guys are seeing.

Just in terms of any new demographic call outs, and and also or are they being acquired at the.

Kind of of lower customer acquisition costs and historically normal. Thank you.

Yeah. Thanks for the question and I'll Oh.

Because of my comments on.

Until the customers just because it's the most valuable customers and and there's so many different stories across all of the different businesses. We have so wanted to just focus on that.

Well I trust the demographics of the new customers look.

And literally identical.

For the prior years, and our new customers tend to be six to seven years on average younger.

And the existing customers on average kind of as you would expect.

That isn't changing so I always emphasize the fact that our businesses can cause for the very stable around age cohorts and and.

Kind of the life stage, both for existing customers and new that's remained true and then the kind of to remain true.

We've seen lots of new customers come in through streaming services or other forms of digital platforms and the overall profile of those customers, even though they're coming in and out of different platforms.

Right.

And prior year classes and it was one of the reasons. The just gives us confidence all of the other more quantitative metrics that day.

And as customers will behave and similar vein the path of your classes cause on both.

Demographic element of and on behavioral elements.

And there are remarkably similar there's just there's just more of them.

No.

And the way I would think about cost of acquisition as you know when you think about the 60% of new customers that come and organically.

Secondly, the zero marginal cost of bringing the at 60% and so it was a heck of a of bringing in a lot of them.

And zero marginal cost with absolute debt.

The positive story that 40%, where we use paid marketing to bring them in and I would say paid marketing is on.

And.

You know about stable.

Her lack of fishing and Q4, just because of the crude at a pretty rapid rate and we're still all of like positive, but obviously when you grow the faster you tend to get a little bit less efficient.

But if you wait all of that out and you combine the organic on the page I think it's safe to say that core customer of all acquisition.

The acquisition costs on that.

On down and just based on the the volume of new customers that we're bringing in.

And I believe that was our last question. So thanks for all of you for Ya.

The Crown and continued interest and the support and all of you and stay safe and well as we go through what we hope is the final stage of this pandemic except for one.

Thank you that does conclude today's conference. We do thank you for your participation have an excellent day.