Q3 2021 iMedia Brands Inc Earnings Call
Right.
Greetings and welcome to the I'm media brands third quarter 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I'd now like to turn the conference over to your host Mr. Monte Waxman, Chief Financial Officer for I Media brands. Please go ahead Sir.
Good morning, everyone and thank you for joining this is Monte Wagman I media brands, Chief Financial Officer, We issued our Q3 earnings.
<unk> released earlier. This morning, if you do not have a copy you may access it through the news section of our IR website at IR media brands Dot Com. This release is also an exhibit to the form 8-K filed this morning I.
I would also like to remind everyone. This call will be available for replay through December one 2021.
Starting today at 11 30, a M. Eastern time, a webcast replay will also be available via the link provided in today's press release as well as on the IR section of our website. Some of the statements made during this call are considered forward looking and are subject to significant risks and uncertainties. These statements reflect our expectations.
About future operating and financial performance and speak only as of today's date, we undertake no obligation to update or revise these forward looking statements. We believe the expectations reflected in our forward looking statements are reasonable, but give no assurance such expectations or any of our forward looking statements will prove.
To be correct for additional information please refer to the Safe Harbor statement in today's earnings release, and our SEC filings. Finally, we will make references to non-GAAP measures on this call such as adjusted EBITDA. Please refer to our earnings release for further information about these measures including reconciliations to.
Comparable GAAP measures now I would like to turn the call over to the CEO of <unk> media brands, Tim Peterman Tim.
Thank you Marty and good morning, everyone. Thank you for joining we had another strong quarter of financial performance and execution of our growth strategy.
As you know we are moving fast to become the leading.
So the momentum media company capitalizing on the convergence of entertainment E Commerce and advertising.
Our successes are accelerating fast and want to make sure all of our stakeholders remain current with the moves we make while we make them and where we're going.
To help with this beginning with this fourth quarter I mean, you will enhance.
<unk> in our financial reporting for each of its three core growth strategies Entertainment consumer brand and media Commerce services and.
In addition, I am pleased to formally invite you to save the date of February eight 2022.
On that day, we will host our first capital markets day at our corporate offices here in.
<unk> plus <unk>.
This will be a jam packed half day event, where stakeholders can engage with me and my management team and our key vendors about I'm Media's 2022 plan to organically generate $675 million to $725 million in net sales.
Achieving positive quarterly EPS beginning.
Beginning in the back half of 2022.
Most stakeholders know the strong position <unk> media created for itself today didn't happen overnight.
In the middle of 2019, we set out to fix the business model, establishing entrepreneurial culture and pursue a new interactive media strategy and.
And we did in.
In two.
Many and 20, we set out to successfully launch 50, plus merchandising brand and grow our customer file.
And we did.
In 2021, we said, we would significantly grow net sales and adjusted EBITDA and we are.
It's because of the successes and the employees and vendors who produce.
Them that our 2022 plan is so compelling for example, during our capital markets day, we will further explain how the entertainment strategies three owned and operated catalysts shop, HQ123, TV and emerging networks will drive growth over the next three years and how they're.
2000, and tests in turn will accelerate the cross promotion that we believe will drive the outsize growth for our consumer brands.
We will provide additional insight into how the consumer brand strategies three owned and operated catalysts Christopher <unk> banks J W. Hulme in 123 auctions Dot Com will drive.
Their success over the next three years.
We will explain how the media commerce services strategies, three owned and operated catalyst digital advertising services or I M. D. S.
Value pay financing and what to buy services will utilize our entertainment and consumer brands first part.
Five grows shopping data to successfully scale in the converging information layer of E Commerce and advertising. We will also demonstrate why all of our businesses are focused on the same core customer demographics and why the 34% growth over the last 10 years of U S consumers, who are at least 65 years old.
Is creating unmatched spending power and as I immediate scales and becomes the single source partner to brands and advertisers seeking to use interactive video to drive growth.
I mean do you believe it's entertainment networks promotional power will provide key advantages against its competitors like Roku Shopify tabbouleh.
Each in IEC.
We believe hosting an intensive capital markets day.
And providing more financial reporting around our key growth strategies will help give our stakeholders, even more insight into our fast moving corporate story now.
Now, let's take a closer look at the Q3 performances of our top three growth catalysts.
Today first it shop HQ, our flagship National Entertainment Network reported a 7% growth and gross margin dollars for the third quarter by implementing a new merchandising strategy that yielded a 520 basis point improvement in gross margin rate and a 7% net sales decline on.
On a year over year basis, and although we did face logistic cost increases and delivery challenges related to COVID-19 in the third quarter.
The procedural changes we established in Q to minimize the impact of the inventory delays.
Our success in Q3 was driven by two factors first the quality of shop each skus.
Distribution footprint continues to improve driven by the new 20 million HD homes that have generated increased net sales of about 15% within the respective markets since their launch at the end of July this is a better growth rate than we expected. This early.
Second our Q3 merchandising strategy returned.
And two a focus of offering merchandise that she knows and loves shop HQ for and when they continued to maintain higher gross margin discipline.
This assortment was driven by an increased mix of jewelry and fashion and a decreased mix of health and consumer electronics.
I'll shop HQ continues to offer products that are designed for everyday health.
As for example, the medic therapeutics vibrating fitness platform, we did shift away from the demand that existed last year for pandemic related products. We believe this merchandising strategy is a more balanced approach to meeting her demand for example, two great New beauty brands, we launched in Q3 were Oliveira.
Which is a revolutionary beauty brand that takes an internal and external approach with the use of olive tree leaves. Unlike other skincare brand their holistic approach means each formula is based on 70% to 100% active ingredient instead of 70% water, which allows for more powerful and regenerative results.
My.
And wellness, which is a clinically developed resistance training device. So you can strengthen antonio Nick Chin and facial muscles, reducing the visible signs of skin aging by reducing the look of the sagging jaw lines, Andrew kinetics, our second growth catalyst Christopher <unk> banks or CDK is our flagship consumer brand that reported a 50.
My face that sequential increase in net sales from Q2 to Q3 and maintains the highest gross margin in the company.
This revenue growth was driven by our Omnichannel sales strategy that includes TV e-commerce catalog and bricks and mortar retail regarding TV. It's official CDK is a hit on.
Per say HQ.
In the third quarter Cdk's on air productivity, what we call D. P M or dollars per minute grew by over 50% from Q2 to Q3.
She became net sales on TV grew approximately 250% from Q2 to Q3 and new customers grew six times higher over.
On shopping timeframe quite frankly, we have never seen a brand so well received so quickly on shop HQ.
Regarding brick and mortar retail are first to see VK stores.
One located in Coon Rapids, Minnesota, and the other located in Branson, Missouri continue to exceed our expectations.
Our branch and store has already exceeded one.
That scene in net sales since opening in May and we are opening three more CDK stores in the fourth quarter. A first for CDK is a direct to consumer catalog, which we introduced this fall to date, we have created and mailed three CDK catalogs and each have been well received by new and existing customers our third.
One mill catalyst I immediate digital services or I M. D. S. Formerly sent a course portal advertising business segment that we acquired in July is a leading video advertising platform that monetize as over 200 million monthly users for its online publishers Mvpds and Isps by utilizing its proprietary.
Third growth allergies interactive website to drive engagement traffic and conversion for its publishers I will say this third quarter was a successful and busy time for our seasoned I M. D. S management team wins during the quarter included number one I M. D. S merged float left our OTT apps.
Terry take a form into its organization.
This capitalizes on I M D S as more seasoned product and engineering teams abilities to accelerate float less product innovation and sales growth number two I M. D. S grew Q3 net sales by 27% over the same period last year, which was driven by a 26%.
Growth in monthly publishers, and a double digit increase in average revenue per publisher compared to the same prior year period.
This revenue growth was complemented by a 200 basis point improvement in gross margin in the third quarter compared to the same period last year, a great first quarter with Ni media I'd like to thank the team there Ron Matt Gabor.
Bore anvil Theyre doing a great job as we move this business forward.
Now I'd like to provide some additional color on our most recent acquisition 123 television today 123 T V. As the leading interactive media company disrupting Germany's television retailing marketplace with its expertise and proprietary live.
<unk> automated auctions that emotionally engage customers with 123, Tvs balanced merchandising mix of compelling products shipped directly to their homes.
Our growth strategy focuses on 123, continuing its disruption of television retailing in western Europe, while exploring how one two threes game.
A vacation really it gamification expertise and its automated auction technology can disrupt online digital shopping marketplaces here in the United States, particularly in the online shopping for travel and event ticketing.
We plan to use our television networks to drive customers to these new 123 TV.
And my businesses here in the U S, which we believe will also generate significant first party shopping data to further differentiate I M. D. S is video advertising platform.
Just in Germany last week, and I can't say enough about the quality of the management team, It's run by York Simone.
Got a great team.
D Arrieta Christian Bjorn, Michael Manwell, Eberhard I can't say enough. Good things, we've got a lot to do and I'm glad that we're partnering with that group.
As always I, just want to say that I. Appreciate your trust on our journey together, we're still in the very early innings now I will turn the call back over to Monty to discuss our consolidated financial and operating results.
And our outlook for Q4 and 2022 Marty.
Thanks, Tim on a consolidated basis, our Q3 12 month rolling active customer file grew by 20% compared to the same prior year period, driven by 65% growth in new customers. This was the best new customer growth and.
10 years, and the highest overall customer file growth in seven years.
Q3, net sales were 130.7 million an increase of about 20% compared to the same prior year period, and about 3.7 million higher than we guided for the quarter. We also improved our Q3.
Over to margins of 41, 6%, which was a 420 basis point improvement over the same prior year period.
Adjusted EBITDA was $10 1 million or 57% improvement over the same prior year period, which is the best performance of the company began reporting adjusted EBITDA.
Gross in 2005.
Our year to date performances through Q3 are equally as strong now.
Net sales were $357 3 million, which was an eight 5% growth compared to the same prior year period, and the strongest year over year net sales growth in the company's first three fiscal quarters.
There's in eight years.
Our operating expenses in Q3 were 60.4 million an increase of 36, 7% or $16 2 million. This increase was comprised primarily of approximately $5 million of one time transaction costs $5 million of additional administrative and selling costs.
EBITDA associated with our new businesses and 2 million of additional variable costs associated with our new businesses.
Regarding our Q3 balance sheet total unrestricted cash was 51.4 million compared to $15 5 million at prior year end as noted previously on September 28 2000.
It's funny, one we closed on our offering of 80 million and eight 5% senior secured notes due 2026.
After deducting underwriting discounts and offering expenses, we received $74 2 million in net proceeds and we used the net proceeds from the offering to fund the closing cash payment.
To acquire 123 T V.
Regarding capital expenditures during the quarter, we spent approximately 2 million on capital projects, primarily reflecting investments and upgrades to our web site infrastructure and facilities regarding our outlook for Q4, we anticipate reporting approximately 13 to 15.
$15 million of adjusted EBITDA, which is a 55% to 79% increase over the same prior year period. Despite continued expectations for unusually high logistics costs due to COVID-19, we anticipate reported Q4 net sales of approximately $175 million to $180 million, which.
It was roughly 40% to 44% growth compared to the same prior year period for the full year 2022, we anticipate reporting net sales of approximately $675 million to $725 million.
And we anticipate reporting adjusted EBITDA of approximately 50 to 60 million.
And reporting positive quarterly EPS, beginning in the back half of 2022.
As a reminder, from a tax perspective, we have approximately $397 million in federal Nols that are available to us to offset future taxable income.
Thank you for your time this morning, I will now.
Now I'll turn the call back over to the operator for Q&A.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from.
Kim for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys are.
Our first question comes from the line of Thomas Forte with D. A Davidson. Please proceed with your question.
Great.
In the quarter. So one question and one follow up for Tim.
Tim you've put together a very.
Very nice set of assets here when you think about your current strategy and you think about potential M&A. How do you feel about the assets you have and are there still pieces that would be attractive to advance your initiatives here.
Tom.
How are you. This morning, thanks for the question so when.
We think about the our model and how they you know the entertainment strategies work with consumer brands in the media Commerce services we.
There really arent any missing pieces for that model to work together for the cross promotion from the entertainment networks to drive the growth of consumer brands.
And.
To use the services for media Commerce services.
Engage and really create a data lake of information around customers that we can better get in a better engaging experience because of the information that we have all of those pieces work now with the assets. We have so when we talk about our guidance for.
And 'twenty two that's what we mean by organic we have the the business is in place now to scale very nicely and move the strategy quickly into a scaled position.
Great and then for my follow up question, there were a lot of highlights and the highlights.
Two the thing that struck me. The most is sequentially. It seems like you are managing the supply chain issues are much much better.
How are you able to do that and what gives you confidence you can continue to manage them better in the fourth quarter.
Great question, we like to think of ourselves.
Elves as responsive to a punch in the face so when we got punched in the face in Q2, we reacted quickly with really changing our internal procedures. So the.
We can't avoid or negate what the logistic cost increases might be right. There are surprises we.
Certainly have a range now of what we expect and spike and we incorporate that into our guidance that our models in terms of things. We can control is around the inventory receipts and around what we do with our programming calendar, what we promise to our customer for her or his viewing habits and those are the things that made the biggest.
Impact force it so when we went forth in Q3 with our merchandising strategy and our programming calendars, we made sure that we had enough buffer.
To make sure that we weren't surprising them with delays or advanced orders and those sorts of things that lower productivity and really increase returned.
<unk>.
We focus on what we can control and we feel that's a pretty good recipe as we move through because I do think there'll be spikes.
And supply chain challenges for at least another year.
Great.
For my next question, but I'll, let someone else ask thanks. Thanks.
Thanks, Tom.
Thank you. Our next question comes from the line of Eric Wold with B. Riley. Please proceed with your question.
Hey, good morning Monty.
Thank you taking my questions.
Two questions kind of both somewhat follow ups.
Last one is I guess.
Taken in reverse order I guess so the on.
On the shop HQ side, obviously, you've now.
These headwinds it popped up last quarter, you did a great job drove better gross margins and then followed it up again this past quarter with.
Well again impressive gross margins I guess.
How much of that is reactionary to changing the mix to what you can control during this environment versus.
How much is it can be kind of a permanent shift in where you think margins can be for that segment can you could you be at this level going forward or is there as you bring additional categories back into the mix now that you're going to migrate back back down towards where it was before.
Great question Eric.
Think of think of it this way when we started our journey back in.
We talked about really lowering home and what inside of homeless CE and so what we've been doing is that and really focusing on our strength of.
Our reason for being which are these wearable categories fashion beauty jewelry watches what you see with the.
The evolution over the years as we moved our gross margin up from the 32 to 33 to 37 38 39 40. They the margins. We're at today are certainly sustainable and we think we can even do better than them not materially better that's not a focal point, but when you looked at our Q over Q performance. What you did see was.
There were a lot of health products and other products really related to the pandemic and those were not naturally what we think is the right balance. So you saw us move back to the Wearables strategy, which is what we've always been so it's a combination of last quarter was a little bit out of character and it was certainly.
No more normal than Q2 last year, but Q3 was still a little bit of the pandemic in there and it was pretty much gone in Q4, so the in when we're ever given a choice between margin and revenue growth will always choose margin.
I think we talked about it before with the bigger whereby.
Oh approach to revenue as we just need more scale, we need more profitable scale. So that's that's how you see that balance working with it pretty consistently every single quarter.
Got it helpful and then the other follow up question.
If you think about the acquisitions you've made recently you know sinacore wonder through television.
Yes.
When should we start to see all of these businesses.
In the Mds truly start working together.
And how will those benefits be personally as well I guess another way to ask it is if I look at the 'twenty two guidance.
How much of those kind of revenue.
Your barrels so to speak are baked in that guidance versus what those companies would have done on their own just kind of combined together.
Thanks for the question Eric.
<unk>.
Let's say the best way to do that demonstrate our strategy is just talk about examples right to the first and Best example would be CDK.
You said the remember are our wheel that turns the reason we have these three strategies in place is too they each feed each other and create the synergy. So for example, the C V. K. The we acquired that brand for in partnership with Hilco.
They were very big retail.
Tipped over for all the obvious reasons, but a great loyal reason for being the proprietary fabrics focus on the same customers and hilco really campuses, but listen you guys have all the assets to really grow this quickly and so when you look at the Kpis. We reported this quarter you can see that TV.
Hello vision is driving the bus on the AR increased awareness on the new customer acquisition, and it's filling the void of what brick and mortar used to be for that brand that's why quarter over quarter. The CDK customer who is used to shopping at retail engaged on shop HQ and shop.
HQ customers engage with CDK and that that created that lift that also drove E. Commerce and then also gave us the opportunity because of the.
This what I call. The data mining, we're doing we were able to focus where we should ship our first direct to consumer catalog.
Really never been done by CDK, and we've done our third now and they've been very successful because of that the data we know about the customers.
What we're learning about them today, what historically they've done. So we've opened up three sales channels really that didnt werent real drivers of the business before with TV.
E Com and direct to consumer catalog and that is complementing we believe the existing brick and mortar retail that will slowly roll out as a thoughtful add on to the primary three rather than making brick and mortar the traditional model of driving driving the bus that's.
I think it's already an evidence for CDK and when you see Q4, we hope to talk to you about tangible examples of how <unk> is driving value within our ecosystem.
Capitalizing on the entertainment assets, we have as well as the consumer brands.
In terms of one to three.
It's very early we've owned them 43 hours and I can tell you I'm very excited about it and as I talked about before it's really every single time, we we make an acquisition.
It is about the business model is about the strategic fit it's also about the culture of.
The team in place and the.
The team at 1% to three television not only can execute what they are doing today in western Europe. We think the game of vacation secret sauce that they have is something that we will work well here in the U S and you'll you'll see more of that and we have not built those kind of opportunities.
Into the guidance that we've provided we wanted to provide a very sturdy guidance that we know we can and I like to say it beaten raise we want to make sure that we over deliver on the promises.
Perfect. Thanks, Jim.
Yep Thanks, Eric.
<unk>. Thank you. Our next question comes from the line of Mark Argento with Lake Street Capital Partners. Please proceed with your question.
Okay.
Hey, Tom and Mark.
A quick one on <unk>.
Our prepared remarks, you had mentioned you saw the travel and entertainment vertical is a consensual sex.
For that platform, maybe talk a little bit more about that and how quickly we could see that come from them in the U S.
Potentially.
Yeah. Thanks, Mark if it is when we think of the engaging experience consumers enjoy they do enjoy the gamification of how they can compete and win for the best prices.
For the most scarce quantity and that's something that we do hear choppy SKU, but the format and the technology and what they do at 123 is a level above and something that we think as you move here to the U S and look at online only digital shopping marketplace. So then you look at.
What I call product that is in the information layer airline tickets hotels tick all those types of things. We are very focused on that because our again our core demographic all the businesses that we talk about and I really want to emphasize this is focused on that consumer who is 50 and.
And older and the like.
Talked about the baby Boomer coming into that age group of 65 and older back in 2011, and driving very big growth over these last 10 years with spending power. They like I talked about is unmatched again those are also the areas where our consumers are spending.
Ending our customers are spending money and so as we know when we take traditional.
Scaled media like shop, HQ National networks, and you cross promote to online marketplaces, not only you said new customers there, but you also capture the attention of customers that are even customers.
Okay skewed because youre on National TV. This is back in.
In my early days I was at IAC I ran the USA network and Syfy channel those are big National networks that again, we're at the same time that IAC was acquired hotels dot com and ticketmaster and driving promotion to those emerging.
I'm shocked at places at that time, it's something that we are excited about and we think is a very big opportunity for us.
Great and then just one quick follow up on.
Regarding center core have you guys started that cross sell at this point I know, it's kind of a.
The whole idea was the great job.
One stop solution for.
<unk> monitoring.
<unk>.
For a brand or a customer you guys started that process in terms of cross sell and kind of what it was.
Enrollment.
So the so when <unk>, what we'll treat Singapore the name more like Voldemort, right that well well shall not be named.
So now we call it <unk> so it immediate digital services and the arm that that digital services really plays around the programmatic advertising opportunity and really helping us joined together the consumer profiles that we have in place all the data that we have in.
Organizing that in a way that can be mined very efficiently to improve the experience for the customer that is underway and moving quickly the team.
Matt's team there is doing a great job and we're getting getting to the two actionable items quickly. When you mentioned, though mark of the idea of us being a one stop shop.
As I have frequently talked about it when we become the single source partner, that's really a step above that that's where we're saying we will use our entertainment assets, our consumer brand technology, whether that's the pick pack and ship or the E comm platform or the customer service.
And the media Commerce services remember.
Media Commerce services comprised primarily today of immediate digital services. The advertising video advertising platform. We also do pick pack and ship for G. III. We also do some loyalty services that we want to again scale. So.
Think of it that way that our single source partnerships.
Is that the.
Entertainment Media Commerce services, and consumer brand level and the the example, again of that transaction or that strategy working is CDK really in partnership with Hilco. The reason Hilco came to US and said you have the assets in place to grow this.
More.
To grow it and more efficiently and more profitable is because of that level of single source partnership and very similar quite frankly with shack, we havent talked about shaq, yet he's a big Guy Big name Big brand for US We did I think over four $4 million in sales on chat alone in the last couple of months.
More than outstanding response to his smokeless grill and we're excited about that but that's also if you think about it.
<unk> partnership with <unk>, which is a great partner of ours with shack and we're very excited about the using our TV platforms to again.
Five a scaled retail opportunity for shack. This is obviously slowed down a little bit was shut because of the.
Just the logistics of getting the products at retail the pandemic was very very difficult on small kitchen appliances, and other types of electronics, but it.
<unk> big opportunity for Us and that's another example of that strategy in place working today and as I talked about before in Q4, we will have tangible examples of <unk>.
<unk> ability to data mine into improving customer engagement, which ultimately.
<unk> produces higher conversion.
Great.
Good luck Bureau score.
Thanks Mark.
Thank you. Our next question comes from the line of Alex Fuhrman Craig.
Craig Hallum Capital Group. Please proceed with your question.
Hi, guys. Thanks for taking my question and congratulations on another really nice quarter here.
As we think about the early 2022 outlook what are going to be the biggest drivers of EBITDA you would see next year between shop, HQ and 123 television in some of your emerging asset.
Good morning, Alex Thanks for the question.
Would really revolve the conversation around our what I call. Our catalysts right. So think about the we talked about three on the call today, and obviously 123, which closed in Q4 technically will be added to that.
You have shop HQ than we talked about CDK, then we talked about <unk>.
And we'll be quickly talking about 1% to three television so with context to us producing the $675 to $725 million in revenue next year those are going to revolve around those four catalysts there are smaller ones.
That talk about more on our capital markets day, but those are drivers and if you think about each of them. The big profitability is around shop HQ is to capture the upside that we're creating with the new 20 million HD homes. It took us two and a half years to get into position.
Physician to have our programming and merchandising at the level to take advantage of the.
More expensive HD carriage and we love what we're seeing as we talked about 15% growth is much higher than we expected the maturity of the upside of HD to happen.
And these eight of the top 10 markets. So youll see that HD carriage as a driver for shop HQ on CDK Youll see we've introduced all sorts of virtual engagement with the CDK customers not just on television, but on the online as well in mobile so youll see the digital drive.
Driving the growth around CDK complemented again by thoughtful accent in brick and mortar as I've mentioned, we're opening three brick and mortar stores.
In Q4. This Q4, one is in Canton, Ohio, one is in Fort Wayne, Indiana, and the third is in Greenburgh, Pennsylvania.
Outside of Pittsburgh. These are all locations that we have through an extensive research of their historical performance opened back up and they've been there before and we expect them to be well received in those locations very quickly in Q4. So that that growth will also mature we didn't talk about J W. Hulme at.
Can you just touch that's a smaller brand, but we expect big things from that similar to what we're doing with CDK.
And where you can read a lot into that.
Alex the last part would be.
And I just want to emphasize that whats in our models today from a guidance perspective. It is really just what I call the sausage, making and that's actually.
As mud Bavaria because.
I use that analogy before Bavaria in Germany, but the sausage, making of what 123 TV does every day in Germany in Austria as it moves through into maybe other territories in Western Europe is what we look at for our guidance for the revenue we.
We talked about next year the upside to that is how successful we are in the opportunities we talked for the digital shopping marketplaces online digital shopping marketplace here in the U S very exciting not baked into any of our upside because we always want to make sure that our our guidance is at the at the bottom of our expectations.
That's really helpful. Thanks, a lot.
And then if I could just ask another question on your guidance.
It looks like Youre looking for a positive EPS beginning in the second half of the year next year. So there's presumably some.
Sequential ramp up we're going to see in profitability as the year moves on.
That's just because the second half of the year tends to have more revenue than the first half of the year, given the holidays and everything or are there. Some other drivers that are going to be accelerating as the year progresses.
Alex Thank you for asking that question. So I didn't have to mention it again.
<unk>.
It is precedent.
That.
Established a track record of.
Delivering what we promise and it is precedent that we're promising EPS growth in the back half of next year that to me is a very significant.
Shifting and something that we're very proud to be able to do and it's taken us some time to get there in terms of why the back half.
Of the year is just the way, we modeled and the way we believe things are going to move we want to make sure that we deliver on everything we say so there's there's no magic to the back half of the year being or the first half of the year I just want to make sure that we did.
Deliver on everything we say.
Great. That's really helpful. Thank you very much.
Thanks, Alex.
Thank you. Our next question is a follow up from Thomas Forte with D. A Davidson. Please proceed with your question.
Great. Thanks, Good morning, so for follow up questions to longer to shorter I will go one at a time.
The drivers of that.
File improvement what are they and what gives you confidence or sustainable.
So what can we do these one at a time, where you're going to list them. All out you know I've got a 10, but I'll start with that one.
One at a time, yeah alright.
Alright, so the customer file growth think about 20% I would say that that's only going to accelerate so.
Think back to Q1 before see VK and before these other businesses.
We were growing at 8% organically in that 8% remember because you've been with US Tom It took us a couple of years to fix the things that we did and move it from a mid teen decline to a single single digit declines.
Customer and we broke through in Q4 of last year with growth in Q1 accelerated from there so.
That trend will continue just organically with the shop HQ as we add and grow distributions for our emerging networks also in the entertainment strategy.
Those will pick up new customers 123.
<unk>, certainly now inorganic but soon to be.
Included in organic.
It is going to make that even bigger so it's.
You've got you're really just firing on all cylinders in the 20% growth is really around the.
The engagement and the popularity and.
The surprising growth of Christopher at banks, starting out as quickly as they are remember that brand has been around a long time and re engaging those customers with fresh product and engaging marketing opportunity, we havent tuck ins.
Enough about our our technologies that we're using to engage.
TV customers, we have a sales force shot here. So we have salesforce marketing, we use sales force sales and service that we're actually upgrading this year to make sure that we have everything at our disposal to make sure. The customer experience is strong. So the idea is that you grow the customers and keep them. This.
<unk>, which is a novel thing that we want to make sure that we do better at and so I would say that youre going to see our customer file growth accelerate that would be my projections.
Great and then second follow up before so.
Been a lot of things you've done 10 since returning that are not currently reflected in the share price but.
As Todd talked about at a high level.
Significant improvements you've made to your capital structure.
From when you first returned to where you are today.
Well, so our capital structure to think of it we think of.
Our growth strategies around three principal areas.
But can you just right. There is the enterprise thesis, which is the interactive media strategy, we've been talking about there's obviously the financing and balance sheet.
That is very important in how we.
Make that a sturdy as possible and overtime and I think that's what you're referring to and there is also our shareholder growth strategy, which.
As we grow how do we attract and maintain the right type of shareholders, who are going to grow with us.
And the over the first step on any of these three journeys we talked about we have to fix the business, which we did in 19 and 20 and then we had the opportunity.
To gain trust and go out to the marketplace.
And raise equity several times that escalating.
<unk> with bringing in new investors that liked our track record and trusted division of where we're going and that's been a game changer for us to be able to then accelerate the roadmap that we have from our enterprise.
Pieces perspective, so the balance sheet.
As they say you wage war with your balance sheet, our balance sheet has improved dramatically around the equity raises that we were able to do with bringing in great new investors to the to the story also even on the on the bond side for the 1% to three television.
Transaction very important for us to make sure that we do.
Not only fix the business, but also fixed the balance sheet, which I think we've done a really great job at it.
And then it's about the shareholder growth as we move from a microcap to a small path and the attractive <unk>.
Aspects of our business with EPA.
That's really where the.
Those are the three <unk> strategy is working in harmony.
Excellent article last refresh.
So on the.
The performance of the HD.
I feel like an argument could be made that there was pent up demand.
Customer was saying what took you so long to give us the nature of the offering.
Do you think that part of it and then do you have an opportunity to go even more markets since it's doing so well.
Great question, Tom we do have that opportunity.
I do think there's pent up demand.
Remember the we couldnt really afford from a balance sheet perspective, because the payment terms are so much shorter.
<unk> four HD to do that and that was one of the things you were talking about they all work together so the HD that we have with that 15% growth.
In eight of the top 10 markets. It has just been outstanding and it is a pleasure to see that.
All the hard work you put it.
On the merchandising.
Cassie and her team around the merchandising and it doesn't just an amazing job of really producing the products the new products.
Reinvigorating the existing products from isomers, two and Victor we've got all sorts of opportunities with consult we've got great jewelry brands.
Witness Stefano.
Stefano.
I could go on and on about why it's so exciting to get better distribution to showcase our reason for being in our reason for being isn't about nationally available.
Products that you can get anywhere we're not selling ninja.
Air Fryers, we are.
<unk> about the discovery of brands the discovery of stories, we go on air and what our reason for being is is that we tell the story with the person that brought the product we talk about.
The unique selling proposition to those products and customers love that opportunity too.
Our cover and to engage in that and then to participate in that discovery by buying our product.
Very clear clean reason for being and I think the more HD carriage, we get which again worked with our core customer 50, plus who are lower than the dial and still are watching.
Two hours of linear TV and Theyre doing anything else as it relates to OTT. So it's a opportunity to reach our core customer and the other thing that you want to think about here is our core customer is that already initiatives initiated into television retailing.
Being a customer of QVC or HSN or about 9 billion.
In annual revenue and we are.
I have $1 billion, so the opportunity to to attract customers that haven't seen this before that our already initiated into the television retailing experience is gigantic.
That's my last question I promise can you talk about the repeatability of the Christopher <unk> banks strategy it.
Seems like you have a real winning strategy here, which is the final physical retailer.
Resonates with your core customer.
We add stores.
And that's to the offline online strategy.
Sure thing, Tom and listen I appreciate the question.
We partner with so there's a couple of.
Very important criteria about what brands that we would partner with to grow and the answer is absolutely. Yes. There are all sorts of opportunities we turned down more opportunities today than we're saying, yes to because the model really works and we want to make sure that all of the all of our criteria are in place number one it has to be.
And that has done things and has reached an inflection point for one reason or another but the bones of the brand are strong and that inflection point, meaning that a technology innovation, which you could call CDK a variety of things, but a shift in buying retail taking the hits that it has over.
A decade right so.
It has to have a brand that means something it has to be focused on our core demographics, a 50 plus.
Men and women, we do both that fits our customer base is both and those two things alone are the initial lens that we look at and.
And there are many like that and so when you think about how they come across our plate.
It really isn't just about us going out and finding them. It's really about the partners. We already have hilco is an amazing partner. They are in the middle of the entire retail consumer experience and they they have opportunities all the time and that's really.
The lesson, our best our best source and I think we'll continue to be our best source for partnerships in the future that will take advantage of this entertainment consumer brands and media Commerce services spinning the wheel to provide outsource.
Returns for our partners.
Great. Thanks for taking my questions.
Thank you Tom.
Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to Mr. Peterman for any final comments.
Thanks Melissa.
Wanted to say thank you everybody for your time. This morning, we are very excited here at <unk> media and we look forward to talking to everybody again come February.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.