Q2 2023 Qurate Retail Inc Earnings Call

August 4, 2023

Operator 3: Welcome to the Qurate Retail, Inc. 2023 Q2 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, this conference will be recorded. August 4. I would now like to turn the call over to Shane Kleinstein, Vice President of Investor Relations. Please go ahead.

Speaker 1: Welcome to the Curate Retail Inc. 2023 Q2 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star 1 on your telephone.

Welcome to the Q right retail Inc. 2023, Q2 earnings call. During the presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question and answer session at.

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

Speaker 1: As a reminder, this conference will be recorded August 4th. I would now like to turn the call over to Shane Clinestein, Vice President of Emergency Relations. Please go ahead.

Reminder, just conference will be recorded August 4th.

I'd now like to turn the call over to Shane Classy Vice President Investor Relations. Please go ahead.

Shane Kleinstein: Good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K and 10-Q filed by our company and QVC with the SEC. These forward-looking statements speak only as of the date of this call, and Qurate Retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Qurate Retail's expectations with regard thereto, or any change in events, conditions, or circumstances on which any such statement is based. Please note that we have published slides to accompany the earnings release.

Speaker 2: Good morning. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent forms 10-K and 10-Q filed by our company and QVC with the SEC.

Good morning, before we begin we'd like to remind everyone that this call includes certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent Form 10-K, and 10-Q filed by our company and T. D C with the SEC. These.

Speaker 2: These forward-looking statements speak only as of the date of this call, and Curate Retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Curate Retail's expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Please note that we have published slides to accompany...

Forward looking statements speak only as of the date of this call accurate retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statement contained herein to reflect any change in shrimp VITAS expectations with regard there to or any change in events conditions or circumstances on which any such statement is based please note that we are public.

Slides to accompany the earnings release.

Shane Kleinstein: On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA, adjusted OIBDA margin, free cash flow, and constant currency. Information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary notes and schedules 1 through 3, can be found in the earnings press release issued today or our earnings presentation, which are available on our website. Today, speaking on the earnings call, we have Qurate Retail President and CEO, David Rawlinson, Qurate Retail Group CFO, Bill Wafford, and Qurate Retail Executive Chairman, Greg Maffei. Now I'll hand the call over to David Rawlinson.

Speaker 2: On today's call we will discuss certain non-GAAP financial measures including adjusted OIBDA, adjusted OIBDA margin, free cash flow and constant currency. Information regarding the comparable GAAP metrics along with required definitions and reconciliations including preliminary notes and schedules one through three can be found in the earnings press release issued today or our earnings presentation which are available on our website.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA adjusted OIBDA margin free cash flow and constant currency information regarding the comparable GAAP metrics, along with required definitions and reconciliations, including preliminary note and schedules one through three can be found in the earnings press release issued today or our earnings presentation, which are available on our web.

Speaker 2: Today speaking on the earnings call we have Curit Retail President and CEO David Rawlinson, Curit Retail Group CFO Bill Wofford, and Curit Retail Executive Chairman Greg Maffei. Now I'll hand the call over to David Rawlinson.

Today speaking on the earnings call, we have keurig retail president and CEO , David Rawlinson curate retail group's CFO Bill Wafford anchored retail executive Chairman, Greg Maffei, now I'll hand, the call over to David Rawlinson.

David Rawlinson: Thank you, Shane, and good morning, everyone. Thank you for joining us today and for your interest in Qurate Retail. As we've discussed, Project Athens is our strategic multi-year framework to transform Qurate Retail, focused on double-digit growth in OIBDA, free cash flow, and stabilized revenue through 2024 off of a 2022 baseline. We are executing on this plan with a focus on cost and margin initiatives in 2023. Our top-line results in the second quarter were largely in line with the discretionary retail industry. Consumers are still mindful of their budgets. Inflation remains a factor, particularly in Europe and now in Japan, and the home industry continues to be quite promotional, which impacted all of our businesses, most notably Cornerstone. According to the University of Michigan survey, consumer sentiment in the US declined sequentially in Q2 and remained well below the past decades' average.

Thank you Shane.

Speaker 3: Thank you Shane and good morning everyone. Thank you for joining us today and for your interest in Curate Retail.

And good morning, everyone. Thank you for joining us today and for your interest in <unk> retail.

Speaker 3: As we've discussed, Project Athens is our strategic multi-year framework to transform through 8 retail focused on double-digit growth in OIBA. Free cash flow and stabilized revenue through 2024 off of a 2022 baseline. We are executing on this plan with a focus on cost and margin initiatives in 2023.

As we've discussed project Athens is our strategic multiyear framework to transform to a retail focused on double digit growth in OIBDA and free cash flow and stabilized revenue through 2024 off of a 2022 baseline we are executing on this plan with the folk.

Just on cost and margin initiatives in 2020 three.

Speaker 3: Our top line results in the second quarter, where largely in line with the discretionary retail industry. Consumers are still...

Our top line results in the second quarter were largely in line with the discretionary retail industry consumers are still mindful of their budgets and placement remains a factor, particularly in Europe and now in Japan, and the home industry continues to be quite promotional which impacted all of us.

Speaker 3: Inflation remains a factor, particularly in Europe and now in Japan, and the home industry continues to be quite promotional, which impacted all of our businesses, most notably Cornerstone. According to the University of Michigan survey, consumer sentiment in the U.S. declined sequentially in Q2 and remained well below the past decade's average.

And I says most notably cornerstone.

According to the University of Michigan Survey consumer sentiment in the U S declined sequentially in Q2 and remained well below the past decades average this contributed to softened top line result against a difficult retail backdrop offset by a moderation in our adjusted OIBDA decline and.

David Rawlinson: This contributed to softened top-line results against a difficult retail backdrop, offset by moderation in our adjusted OIBDA decline and improved cash flow. We progressed on our turnaround plan and delivered four important points within the Athens framework through Q2. First, we increased free cash flow, $423 million year over year in the first six months of 2023. Approximately half of this increase was from the receipt of insurance proceeds, while the other half was a result of our working capital improvements. Consistent with our communication at Investor Day last November, this cash flow improvement reflects favorable working capital from inventory reduction efforts and the subsequent benefit to our accounts payable. As we look to the second half of 2023, we expect to generate additional gains in adjusted OIBDA from our Athens work streams, which will continue to benefit cash flow.

Speaker 3: This contributed to softened top-line results against a difficult retail backdrop, offset by moderation in our adjusted-oided-odd decline and improved cash flow. We progressed on our turnaround plan and delivered four important points within the Athens framework through Q2.

Improved cash flow, we progressed on our turnaround plan and delivered four important points within the Athens framework through Q2.

Speaker 3: First, we increased free cash flow $423 million year over year in the first six months of 2023. Approximately half of this increase was from the receipt of insurance proceeds, while the other half was a result of our working capital improvement.

First we increased free cash flow $423 million year over year and the first six months of 2023 approximately half of this increase was from the receipt of insurance proceeds while the other half was a result of our working capital improvements.

Speaker 3: Consistent with our communication on the investor they last November , this cash flow improvement reflects favorable working capital from inventory reduction efforts and the subsequent benefit to our accounts pay.

Consistent with our communication at Investor Day last November this cash flow improvement reflects favorable working capital from inventory reduction efforts and the subsequent benefit to our accounts payable.

As we look to the second half of 'twenty to 'twenty, three we expect to generate additional gains and adjusted OIBDA from our Athens work streams, which will continue to benefit cash flow.

Speaker 3: As we look to the second half of 2023, we expect to generate additional gains in adjusted Oi Vadaf from our Athens workstreams, which will continue to benefit cash flow. Second, we expect to generate additional gains in adjusted Oi Vadaf from our Athens workstreams, which will continue to benefit cash flow.

David Rawlinson: Second, we divested Zulily in May. One of the pillars of Athens is to optimize our portfolio. Zulily was challenging from a revenue perspective and was a significant contributor to our OIBDA pressure, with a $97 million OIBDA loss in 2022. The divestiture simplifies our portfolio, allows management to focus on our core business, and benefits our ongoing liquidity profile. Zulily is included in our Q2 results through 23 May. Third, the rate of adjusted OIBDA decline moderated compared to the first quarter, primarily driven by higher gross margins at our video commerce businesses. QXH saw an increase in gross margin for the first time in 24 months, and QVC International for the first time in 18 months. These gains were mostly from increased initial product margins due to higher average selling prices, driven by pricing and better merchandise mix.

Second we divested two Lilly in May.

Speaker 3: One of the pillars of Athens is to optimize our portfolio. Zulily was challenging from a revenue perspective and was a significant contributor to our Oibadah pressure with a $97 million Oibadah loss in 2022. The divestiture simplifies our portfolio, allows management to focus on our core business.

One of the pillars of Athens is to optimize our portfolio. So Lilly was challenging from a revenue perspective and was a significant contributor to our OIBDA pressure with a 97 million dollar OIBDA loss in 2022, the divestiture simplifies our portfolio allows management.

To focus on our core business and benefits our ongoing liquidity profile. So Lilly is included in our Q2 results through May 23.

Speaker 3: and benefits our ongoing liquidity profile. Zulily is included in our Q2 results through May 23rd.

Speaker 3: Third, the rate of adjusted OIBIDA decline moderated compared to the first quarter, primarily driven by higher gross margins at our video commerce business.

Third the rate of adjusted OIBDA decline moderated compared to the first quarter, primarily driven by higher gross margins and our video commerce businesses <unk> saw an increase in gross margin for the first time in 24 months and QVC international for the firm.

Speaker 3: QXH saw an increase in gross margin for the first time in 24 months, and QVC International for the first time in 18 months.

First time in 18 months. These gains were mostly from increased initial product margins due to higher average selling prices driven by pricing and better merchandising mix. We also benefited from lower inventory obsolescence and freight costs because of our inventory reduction and other.

Speaker 3: These gains were mostly from increased initial product margin.

Speaker 3: due to higher average selling prices driven by pricing and better merchandise mix. We also benefited from lower inventory obsolescence and freight costs because of our inventory reduction and other cost management actions.

David Rawlinson: We also benefited from lower inventory obsolescence and freight costs because of our inventory reduction and other cost management actions. Fourth, we retired a portion of our near-term QVC debt maturities. We repurchased $177 million, or 30% of our outstanding 2024 notes, and $15 million of our 2025 notes. We also settled $94 million in principal amounts of exchanges of the Liberty Interactive Charter exchangeable debentures. Now let me discuss each of our businesses, starting with QXH. I'm pleased to report that we finalized our insurance claim related to the December 2021 fire at our former Rocky Mount, North Carolina, fulfillment center. At the end of June, we received $225 million in proceeds, primarily related to business interruption, which takes our total insurance proceeds received to $660 million.

Cost management actions.

Fourth we retired a portion of our near term QVC debt maturities, we repurchased 170 177 million or 30% of our outstanding 2024 notes and 15 million about 2025 notes.

Speaker 3: Fourth, we retired a portion of our near-term QVC debt maturities. We repurchased $177 million, or 30 percent of our outstanding 2024 notes and $15 million of our 2025 notes. We also settled $94 million in principal amounts of exchanges of the Liberty Interactive Charter Exchangeable Defense.

We also settled $94 million and principal amount of exchanges of the Liberty Interactive charter exchangeable debentures.

Speaker 3: Now let me discuss each of our businesses starting with QXA.

Now, let me discuss each of our businesses starting with <unk>.

Speaker 3: I'm pleased to report that we finalized our insurance claim related to the December 2021 fire at our former Rocky Mountain North Carolina fulfillment.

I am pleased to report that we finalized our insurance claim related to the December 2021 fire at our former Rocky Mount North Carolina fulfillment Center at the end of June we received 225 million in proceeds primarily related to business interruption, which takes our total insurance proceeds received to six.

Speaker 3: At the end of June , we received $225 million in proceeds, primarily related to business interruption, which takes our total insurance proceeds received to $660 million.

<unk> hundred $60 million, the buyer had a material downstream impact at cubic sage that has impacted our financial results over the past 18 months. We have worked through many of these pressures our order to delivery times have improved from pretty rocky Mount levels, but there is still room to improve our <unk>.

David Rawlinson: The fire had a material downstream impact at QXH that has impacted our financial results over the past 18 months. We have worked through many of these pressures. Our order to delivery times have improved from pre-Rocky Mount levels, but there is still room to improve our service promise and operating efficiencies, given Rocky Mount was our most efficient fulfillment center. From a merchandise perspective, our top line performance indexed to the broader industry and was affected by the macro factors I mentioned earlier. Both QXH and other retailers experienced softness from a cold Easter, with the holiday being earlier than in 2022. In addition, QXH inventory was too light in certain areas, like apparel and kitchen electrics in Q2. We have bolstered our inventory position across key categories going into the back half of 2023.

Speaker 3: The fire had a material downstream impact at QXH that has impacted our financial results over the past 18 months. We have worked through many of the events that have impacted our financial results over the past 18 months.

Speaker 3: Our order to delivery times have improved from pre-rock-emount levels.

Speaker 3: but there was still room to improve our service promise and operating efficiencies, given Rocky Mount was our most efficient fulfillment center.

<unk> promise and operating efficiencies given Rocky Mountain was our most efficient fulfillment center.

From a merchandise perspective, our top line performance index to the broader industry and was affected by the macro factors I mentioned earlier, both <unk> and other retailers experienced softness from a cold Easter with the holiday being earlier than in 2022 and <unk>.

Speaker 3: Our top line performance indexed to the broader industry and was affected by the macro factors I mentioned earlier.

Speaker 3: Both QXH and other retailers experienced softness from a cold Easter, with the holiday being earlier than in 2022.

Speaker 3: In addition, QXH inventory was too light in certain areas like the peril and kitchen electrics and Q2. We have bolstered our inventory position across key categories going into the back half of 2023.

<unk> inventory was too like in certain areas like apparel and kitchen electrics in Q2, we have bolstered our inventory position across key categories going into the back half of 2023.

David Rawlinson: At QXH, gross margins expanded 130 basis points in Q2, which was the first quarter of expansion since Q2 2021. Average selling price increased 5%, primarily due to price increases and our elevated product strategy. We continue to act on cost management. QXH reduced its operations direct labor force by 8% in May, which is expected to generate approximately $15 million of savings in the second half of 2023. This is in addition to the headcount reductions we did in February, which are expected to generate $50 million of savings in 2023. In addition, we recently signed a new multi-year agreement with our primary domestic small parcel shipping vendor. The new rates took effect in late July, and based on forecasted volumes, we anticipate significant savings on our delivery and return costs.

Speaker 3: At QXH, gross margins expanded 130 basis points in Q2, which was the first quarter of expansion since Q2 2021. Average selling price increased 5%, primarily due to price increases and our elevated product strategy. We continue to have hike reductions and trends in recent weeks, let alone recommendze

At <unk> gross margins expanded 130 basis points in Q2, which was the first quarter of expansion. Since Q2, 2021 average selling price increased 5%, primarily due to price increases and our elevated product strategy.

We continue to act on cost management <unk> reduced its operations direct labor force by 8% in May which is expected to generate approximately $15 million of savings in the second half of 2023. This is in addition to the head count reductions we did in February .

Speaker 3: QXH reduced its operations direct labor force by 8% in May, which is expected to generate approximately $15 million of savings in the second half of 2023.

Speaker 3: This is in addition to the headcount reductions we did in February , which are expected to generate $50 million of savings in 2023.

Which are expected to generate $50 million of savings in 2023. In addition, we recently signed a new multi year agreement with our primary domestic small parcel shipping vendor the new rates took a pay took effect in late July and based on forecasted volumes we anticipate.

Speaker 3: In addition, we recently found a new multi-year agreement with our primary domestic small parcel shipping vendor.

Speaker 3: The new rates took effect in late July and based on forecasted volumes, we anticipate significant savings on our delivery and return costs.

Paid significant savings on our delivery and return costs.

David Rawlinson: QXH total customer count declined 13% in the last 12 months, while average spend per customer increased 6% in both the last 12 months and in Q2. The growth in average spend per customer reflects our efforts to reengage our existing and most loyal customers. While we undergo efforts to attract and retain customers, we are focusing in the near term on levers to increase spend. As shown on slide 7 in our presentation, QXH existing customers were a little more than half of our customer base, but accounted for nearly 90% of our ship sales. They increased their average spend to more than $1,500, the highest since we formed QXH. At QVC, we defined our best customers as those who purchase 20 or more items in a year.

<unk> total customer count declined 13% in the last 12 months, while average spend per customer increased 6% in both the last 12 months and in Q2.

Speaker 3: QXH total customer count declined 13% in the last 12 months, while average spend per customer increased 6% in both the last 12 months and in Q2.

Speaker 3: The growth and average spend for customer reflects our efforts to re-engage our existing and most loyal customers. While we undergo efforts to attract and retain customers, we are focusing in the near term on leverage to increase spend.

The growth in average spend per customer reflects our efforts to reengage, our existing and most loyal customers, while we undergo efforts to attract and retain customers. We are focusing in the near term on leverage to increase spend.

Speaker 3: As shown on slide seven in our presentation, QXA's existing customers were a little more than half of our customer base, but accounted for nearly 90% of our ship sales. They increased their average spend to more than $1,500, the highest since we formed QXA.

As shown on slide seven in our presentation USA to existing customers were a little more than half of our customer base, but accounted for nearly 90% of our sales they increased their average spend to more than $1500. The highest since we formed <unk>.

Speaker 3: At QVC, we defined our best customers as those who purchase 20 or more items in a year. While their count is down, they have largely performed better than the overall customer file in the last 12 months.

At QVC, we defined our best customers as those who purchased 20 or more items in the year.

David Rawlinson: While their count is down, they have largely performed better than the overall customer file in the last 12 months. As we said on our last call, we have many efforts underway to attract, retain, and reactivate customers, especially these best customers. In June, QVC created its customer hub, a cross-functional task force that comprises the business president and heads of merchandise, programming, planning, marketing, and digital. The team meets weekly to review business performance through the lens of the customer. We completed an in-depth customer segmentation and identified target cohorts across our new, existing, and most loyal customers. We are conducting pilots for engagement, including making proactive calls to reduce churn, providing samples of beauty products,... to prospective customers, mailing letters from popular hosts with special offers to emerging loyal customers, and sending timely emails to incent repeat purchases. While early, we believe we are making progress.

While their count is down they have largely performed better than the overall customer file and the last 12 months.

Speaker 3: As we said on our last call, we have many efforts underway to attract, retain, and reactivate customers, especially these best customers.

As we said on our last call. We have many efforts underway to attract retain and reactivate customers, especially these best customers in June TBC created its customer hub, a cross functional task force that comprises the business presidents and had the merchandise.

Speaker 3: In June , QVC created its Customer Hub, a cross-functional task force that comprises the business president and has a merchandise, programming, planning, marketing, and digital.

Programming planning marketing and digital the team meets weekly to review business performance through the lens of the customer we completed an in depth customer segmentation and identified target cohorts across our new existing and most loyal customers we are conducting pie.

Speaker 3: The team meets weekly to review business performance through the lens of the customer.

Speaker 3: We completed an in-depth customer segmentation and identified target cohorts across our new existing and most loyal customers.

Speaker 3: We are conducting pilots for engagement, including making proactive calls to reduce churn, providing samples of beauty product, to prospective customers, mailing letters from popular hosts with special authors, to emerging loyal customers, and sending timely emails to incent repeat purchases.

Let's for engagement, including making proactive calls to reduce churn providing samples of beauty products to prospective customers mailing letters from popular hosts with special offers to emerging loyal customers and sending timely emails to insert repeat purchases while early.

Speaker 3: While early, we believe we are making progress. HSN is taking a similar approach and developing more sophisticated customer analytics to better service customer cohorts with the right product and offer.

We believe we are making progress hsen is taking a similar approach and developing more sophisticated customer analytics to better service customer cohorts with the right product and offer.

David Rawlinson: HSN is taking a similar approach in developing more sophisticated customer analytics to better service customer cohorts with the right product and offer. Innovative and differentiated content continue to be hallmarks of our QVC and HSN brands. At QVC, we debuted Sizzling Summer with hosts Rick Domeier and Sean Killinger, a six-week series airing on Thursday nights that drove increased productivity and viewership trends. We are planning a fall version that launches this month. We also launched In the Afternoon with David, a five-week series designed to leverage the strength of our popular host, David Venable. Given the success of both, we are creating more limited series to drive excitement, urgency, and sales. At HSN, we collaborated with Wheel of Fortune on a week-long shopping spree that included apparel, accessories, and games broadcast on HSN, HSN.com, and HSN Plus.

Innovative and differentiated content continue to be hallmarks of our CVC and HSN brands.

Speaker 3: Innovative and differentiated content continue to be hallmarks of our QBC and HSN brains.

Speaker 3: At QBC, we debuted Sizzling Summer with host Rick Domeier and Sean Killinger, a six week series airing on Thursday nights that drove increased productivity and viewership trends. We are planning a fall version.

At QVC, we debuted says the sizzling summer with hopes Rick dummy air and Shawn Killinger, a six week series airing on Thursday nights that drove increased productivity and viewership trends.

We are planning a fall version that launches this month.

Speaker 3: We also launched In the Afternoon with David, a five-week series designed to leverage the strength of our popular host, David Venable. Given the success of both, we are creating more limited series to drive excitement, urgency, and sales.

We also launched in the afternoon with David a five week series designed to leverage the strength of our popular host David Venable given the success of both we are creating more limited series to drive excitement urgency and sales.

At HSN, we collaborated with will unfortunately on a week long shopping spree that included a payroll accessories and game broadcast on HSN, HSN Dot com and HSN, plus vanna white or HSN vendor Christian Siriano stress and.

Speaker 3: At HSN, we collaborated with Will Fortune on a week-long shopping spree that included apparel, accessories, and games broadcast on HSN, HSN.com, and HSN Plus.

David Rawlinson: Vanna White wore HSN vendor Christian Siriano's dress, and select HSN signature programs were featured as Wheel of Fortune puzzles. HSN posted its best week of 2023 during this collaboration. We continue to advance our strategic initiative to expand reach across new media and digital platforms. In the second quarter, we initiated our streaming experiences, QVC Plus and HSN Plus, on Vizio Smart TVs, combining the five QVC and HSN linear broadcast channels with three digital-only channels, and original streaming-only content. We also launched QVC and HSN linear channels on Amazon Freevee, offering approximately 40 hours a day of live video commerce programming. We are bringing our first FAST channel to Freevee, called The Big Dish, which will provide more focused experiences for culinary fans.

Speaker 3: Vanna White wore HSN vendor Christian Seriano's dress and select HSN signature programs were featured as Will the Fortune puzzle.

Select HSN signature programs were featured as we look forward to puzzles Hsen posted its best week of 2023 during this collaboration.

Speaker 3: HSN posted its best week of 2023 during this collaboration.

Speaker 3: We continue to advance our strategic initiatives to expand reach across new media and digital platforms.

We continue to advance our strategic initiatives to expand reach across new media and digital platforms.

Speaker 3: In the second quarter, we initiated our streaming experiences QBC Plus and HSN Plus on Vizio Smart TVs. Combining the 5 QBC and HSN linear broadcast channels with three digital only channels and an original streaming only can't.

In the second quarter, we initiated our streaming experiences QVC, plus and HST and plus on Vizio Smart Tvs, combining the five QVC and HSN linear broadcast channels with three digital only channels and original streaming only content. We also.

Speaker 3: We also launched QVC and HSN linear channels on Amazon Spreevy, offering approximately 40 hours a day of live video commerce program.

<unk>, TBC and HSE and linear channels on Amazon's freebie offering approximately 40 hours a day of loud video commerce programming, we are bringing our first fast channels, a freebie called the big dish, which will provide a more focused experiences for culinary fans.

Speaker 3: We are bringing our first fast channel to freebie called the Big Dish, which will provide more focused experiences for culinary fans.

David Rawlinson: Moving to QVC International, in Q2, we saw gross margin expansion for the first time since Q4 2021, driven by improved initial product margins that reflect a 5% increase in average selling price and improved product mix. QVC International is implementing a transformation plan similar to Athens, that is anticipated to generate approximately $45 to 55 million of run rate over the dot savings by Q1 2025. One piece of this effort is a workforce reduction in Europe that recently took effect. We expect this will create $9 million of run rate savings, of which $3 million is anticipated to benefit 2023. Additionally, the transformation plan is focused on optimizing the organizational structure, driving margin opportunities, and improving our current broadcast and content strategies. QVC UK launched the integrated experience in April.

Moving to QVC International in Q2, we saw gross margin expansion for the first time since Q4 2021, driven by improved initial project.

Speaker 3: Moving to QVC International, in Q2 we saw Gross Margin expansion for the first time since Q4 2021, driven by improved initial project product margins that reflect a 5% increase in average selling price and improved product.

<unk> margins that reflect a 5% increase in average selling prices and improved product mix.

QVC International it's implementing a transformation plan similar to Athens that is anticipated to generate approximately 45 to 55 million of run rate for EBITDA savings by Q1 2025, one piece of this effort is a workforce reduction in Europe that recently took it back.

Speaker 3: QVC International is implementing a transformation plan similar to Athens that is anticipated to generate approximately 45 to 55 million of run rate over the dot savings by Q1 2025. One piece of this effort is a workforce reduction in Europe that recently took effect. We expect this will create $9 million of run rate saving of which 3 million is anticipated to benefit 2023.

We expect this will create and $9 million of run rate savings of which $3 million is anticipated to benefit 2023.

Additionally, the transformation plan is focused on optimizing the organizational structure driving margin opportunities and improving our current broadcast and content strategies.

Speaker 3: Additionally, the transformation plan is focused on optimizing the organizational structure, driving large opportunities, and improving our current broadcasts and content strategy.

Speaker 3: QBCUK launched the integrated experience in A.

QVC U K launch the integrated experience in April .

David Rawlinson: This scalable initiative aims to turn QVC International into the ultimate shopping destination for specific categories, with the UK's initial focus on gardening. This launch demonstrates our content creation capabilities across platforms, and early signs have been encouraging. In July, QVC Germany began its version of integrated experience with a concentration on kitchen and food. Moving to Cornerstone, the overall home sector remains highly promotional, and demand for most home categories was soft. We also incurred increased fulfillment costs related to opening a new fulfillment center in Arizona, and fixed costs related to opening new retail stores in the past year. While the rate of OIBDA decline moderated compared with Q1, it was below our expectations. The Arizona fulfillment center opened in June, so we are no longer incurring these start-up and duplicate fulfillment center costs. Like our video commerce business, Cornerstone is diligently managing costs.

Speaker 3: This scalable initiative aims to turn QVC International into the ultimate shopping destination for specific categories with the UK's initial focus on gardening. This launch demonstrates our content creation capabilities across platforms and early signs have been encouraging. In July , QVC Germany began its version of integrated experience with a concentration on kitchen and food.

This scalable initiative aims to turn QVC international into the ultimate shopping destination for specific categories with the UK as initial focus on gardening. This launch demonstrates our content creation capabilities across platforms and early signs have been encouraging in July .

QVC, Germany began its version of integrated experience with a concentration on kitchen and food.

Moving to cornerstone the overall home sector remains highly promotional and demand for most home categories with soar.

Speaker 3: Moving to Cornerstone, the overall home sector remains highly promotional and demand for most home categories was thought. We also incurred increased fulfillment costs related to opening a new fulfillment center in Arizona and fixed costs related to opening new retail stores in the past year.

We also incurred increased fulfillment costs related to opening a new fulfillment center in Arizona and fixed costs related to opening new retail stores in the past year.

Speaker 3: While the rate of oibidotacline moderated compared with Q1, it was below our expectations. The Arizona fulfillment center opened in June , so we are no longer incurring the start-up and duplicate fulfillment center call.

While the rate of OIBDA declined moderated compared with Q1 it was below our expectations. The Arizona fulfillment Center opened in June . So we are no longer incurring these startup and duplicate fulfillment center costs.

Speaker 3: Like our video commerce business, Cornerstone is diligently managing costs. In Q2, it eliminated 100 positions, which is expected to draw 10 million in annual savings of which 4.5 million is anticipated to benefit 2023.

Like our video Commerce business cornerstone is diligently managing cost in Q2, and eliminated 100 positions, which is expected to drop $10 million in annual savings of which $4 5 million is anticipated to benefit 2023.

David Rawlinson: In Q2, it eliminated 100 positions, which is expected to drive $10 million in annual savings, of which $4.5 million is anticipated to benefit 2023. In closing, I want to reiterate our Project Athens expectations for stable revenue and a double-digit CAGR for OIBDA and free cash flow through 2024 compared to a 2022 base year. Our 2023 initiatives are primarily cost-driven and weighted towards the back half of the year, reaching run rate in 2024. We do not anticipate incurring the same level of costs for outside services in 2024. We also expect more revenue-driven opportunities in 2024. We are on track with these expectations. Thank you, and now I'll turn the call to Bill to discuss the financial results of each business in more detail.

In closing.

Speaker 3: I want to reiterate our Project Athens expectations for stable revenue in a double-digit CAGR for OIBADOT and free cash flow through 2024 compared to a 2022 base year.

I want to reiterate our project athans expectations for stable revenue and a double digit CAGR for EBITDA and free cash flow through 2024 compared to a 2022 base year. Our 2023 initiatives are primarily cost driven and weighted towards the back half of the year.

Speaker 3: Our 2023 initiative is a primarily cost-driven and weighted towards the back half of the year reaching run rate in 2024.

Reaching run rate in 2024, we do not anticipate incurring at the same level of cost for outside services. In 2024. We also expect more revenue driven opportunities in 2024, we are on track with these expectations. Thank you and now I'll turn the call to Bill.

Speaker 3: We do not anticipate incurring the same level of cost for outside services in 2024. We also expect more revenue-driven opportunities in 2024. We are on track with these expectations.

Speaker 3: Thank you, and now I'll turn the call to Bill to discuss the financial results of each business in more detail.

To discuss the financial results of each business in more detail.

Bill Wafford: Thank you, David, and good morning, everyone. Unless otherwise noted, my comments compare financial performance for the three months ended 30 June 2023 to the same period in 2022. Starting with QxH, revenue declined 8%, primarily on lower unit volume, reflecting fewer customers and reduced shipping and handling revenue. These pressures were partially offset by a 5% growth in average selling price, resulting from price increases and an elevated product assortment. From a category perspective, QxH experienced declines in home, electronics, accessories, and apparel, partially offset by growth in beauty. As David said, QVC US inventory was light in certain categories, such as apparel and kitchen electrics. Home revenue declined 11% as we experienced lower demand, largely for cookware and seasonal. These headwinds were partially offset by continued growth in food. Apparel was down 4%, which was modestly lower than in Q1.

Speaker 4: Thank you, David, and good morning, everyone. Unless otherwise noted, my comments compare financial performance for the three months ended June 30th, 2023 to the same period in 2022.

Thank you David and good morning, everyone.

Unless otherwise noted my comments compare financial performance for the three months ended June 32023 to the same period in 2022.

Speaker 4: Starting with QXH. Reb New Decline 8% primarily on lower unit volume, reflecting fewer customers and reducing shipping and handling revs.

Starting with <unk> X H revenue declined 8%, primarily on lower unit volume, reflecting fewer customers and reduced shipping and handling revenue.

Speaker 4: These pressures were partially offset by a 5% growth in average filling price, resulting from price increases and an elevated product disortment.

These pressures were partially offset by a 5% growth in average selling price, resulting from price increases and an elevated product assortment.

From a category perspective, Q X H experienced declines in home electronics accessories, and apparel, partially offset by growth in beauty.

Speaker 4: QXH experienced declines in home, electronics, accessories, and apparel, partially offset by growth and beauty.

Speaker 4: As David said, QVC US inventory was light in certain categories, such as apparel and kitchen elect-

<unk> said QVC U S inventory was light in certain categories, such as apparel and kitchen electrics.

Home revenue declined 11% as we experienced lower demand largely for cookware and seasonal these headwinds were partially offset by continued growth in food.

Speaker 4: Home revenue declined 11% as we experienced lower demand, largely for cookware and seasonal. These headwinds were partially offset by continued growth in food.

Speaker 4: The pair was down 4%, which was modestly lower than in Q1.

Apparel was down 4%, which was modestly lower than in Q1.

Bill Wafford: In Q2, we experienced softness in classic apparel and swimwear, partially offset by strength in denim and dresses. As I mentioned, we were also light on apparel inventory, which impacted category performance. Beauty grew 4%, which was the first quarter of growth since Q4 2021. This performance was mainly due to gains in bath and body, and color and nails. At QVC, beauty's rebound was driven by TSVs, as well as the successful digital sales event in May. Electronics revenue declined 27%, in part due to category softness in the market. We continue to strategically pull back on electronics airtime as we focus on higher margin fashion categories where our best customers over-index. We were pleased to complete our insurance claim from the Rocky Mount fire.

Speaker 3: In Q2, we experience softness in classic apparel and swimwear, partially offset by strength in denim and dress.

In Q2, we experienced softness in classic apparel, and swimwear, partially partially offset by strength in denim and dresses.

Speaker 3: As I mentioned, we were also light on apparel inventory which impacted category performance.

As I mentioned we.

Were also light on apparel inventory, which impacted category performance.

Beauty grew 4%, which is the first quarter of growth since Q4 'twenty one this.

Speaker 3: Beauty grew 4%, which was the first quarter of growth since Q4-21.

Speaker 3: This performance was mainly due to games in Bath & Body and Colour & Knows.

This performance was mainly due to gains in Bath, <unk> body and color and Niels.

Speaker 3: At QVC, Beauty's rebound was driven by TSPs, as well as the successful digital sales event in May.

At QVC beauty rebound was driven by <unk> as well as the successful digital sales event in May.

Speaker 3: Electronics revenue declined 27%. In part due to categories softness in the market. We continue to strategically pull back on electronics airtime as we focus on higher margin fashion categories where our best customers over in-

Electronics revenue declined 27% in part due to category softness in the market.

We continued to strategically pulled back on electronics airtime as we focus on higher margin fashion categories were our best customers over index.

Okay.

Speaker 3: We were pleased to complete our insurance claim from the Rocky Mount Fire. In late June , we received $225 million of proceeds, which is included in QXH operating income, but excluded from adjusted orbit.

We were pleased to complete our insurance claim from the Rocky Mount Fire in late June we received $225 million of proceeds which is included in <unk> operating income, but excluded from adjusted OIBDA.

Bill Wafford: In late June, we received $225 million of proceeds, which is included in QXH operating income, but excluded from Adjusted OIBDA. As we have said previously, we intend to use excess cash flow and insurance proceeds to reduce debt. In July, we used proceeds from the claim to pay down a portion of the QVC revolver. Adjusted OIBDA declined $47 million or 20%, of which $20 million is Athens transformation-related costs, and $12 million is rent expense from the sale-leaseback transactions for our fulfillment centers and headquarters completed in 2022. We lapped the incremental rent expense headwind after Q2 and expect the transformation-related costs to taper down in the back half of the year.

Speaker 3: As we have said previously, we intend to use excess cash flow and insurance proceeds to reduce debt.

As we've said previously we intend to use excess cash flow and insurance proceeds to reduce debt.

Speaker 3: In July , we used proceeds from the claim to pay down a portion of the QVC revolver.

In July we used proceeds from the claim to pay down a portion of the QVC revolver.

Adjusted OIBDA declined $47 million or 20% of which $20 million is Athens transformation related costs and $12 million is rent expense from the sale leaseback transactions for our fulfillment centers and headquarters completed in 2022.

Speaker 3: Adjusted Oyba-Dead to client $47 million or 20 percent of which $20 million is Athens's transformation related costs and $12 million is rent expense from the sale of these back transactions for our fulfillment centers and headquarters completed in 2022.

We lapped the incremental rent expense headwind after Q2 and expect the transformation related cost to taper down in the back half of the year.

Speaker 3: We laughed the incremental run expense headwind after Q2 and expected transformation related costs to taper down in the back half of the...

Bill Wafford: While adjusted OIBDA margin decreased 180 basis points, it was a significant improvement from the 480 basis point decline in Q1. Looking at the second quarter performance in more detail, gross profit grew 130 basis points, mainly due to favorable product margins, fulfillment, and inventory obsolescence expense. Product margins increased 70 basis points, driven by price increases and a mix shift to higher-margin products. These gains were partially offset by unfavorable returns and reduced shipping and handling revenue due to lower volume. Fulfillment expenses improved 35 basis points due to lower freight costs, reflecting less detention and demurrage costs and lower volume. These gains were partially offset by higher freight and labor rates and approximately $8 million of fulfillment center rent. Inventory obsolescence favorability was a result of a 37% year-over-year inventory reduction at QxH.

Speaker 3: While adjusted oi-vita margin decreased 180 basis points, it was a significant improvement from the 480 basis point decline in Q1.

While adjusted OIBDA margin decreased 180 basis points. It was a significant improvement from the 480 basis point decline in Q1.

Looking at the second quarter performance in more detail.

Speaker 3: Gross profit grew 130 basis points, mainly due to favorable product margins, fulfillment and inventory obstacle lessons.

Gross profit grew 130 basis points, mainly due to favorable product margins fulfillment and inventory obsolescence expense.

Speaker 3: Product margins increase 70 basis points driven by price increases and a makeshift a higher margin product.

Product margins increased 70 basis points, driven by price increases and a mix shift to higher margin products.

These gains were partially offset by unfavorable returns and reduced shipping and handling revenue due to lower volume.

Speaker 3: These gains were partially offset by unfavorable returns and reduced shipping and handling revenue due to lower volume.

<unk> expenses improved 35 basis points due to lower freight costs, reflecting less detention and demurrage costs and lower volume.

Speaker 3: So so many expenses improved 35 basis points due to lower freight costs, reflecting less detention in the mirage costs, and lower volume.

These gains were partially offset by higher freight and labor rates and approximately $8 million of fulfillment center rent.

Speaker 3: These games were partially off-set by higher freight and labor rates, and approximately $8 million of fulfillment center rent.

Speaker 3: Inventory obsolescence favorability was a result of a 37% year-over-year inventory reduction at QX.

Inventory obsolescence favorability favorability was a result of a 37% year over year inventory reduction at <unk>.

Bill Wafford: Operating expenses were unfavorable by approximately 50 basis points due to commissions, which is mostly reflected in expanded linear distribution. SG&A was unfavorable by approximately 270 basis points. The majority of the pressure is from transformation-related costs associated with Project Athens. In addition, we had 65 basis points of sales deleverage. Marketing expenses were essentially flat, but delevered 25 basis points. These headwinds were partially offset by lower bad debt expense, reflecting provisional adjustments and lower installment accounts. Moving to QVC International. My comments will focus on constant currency results. Revenue declined 3%, primarily on lower unit volume and reduced shipping and handling revenue. QVC, Japan, and UK were essentially flat and were offset by declines in Germany and Italy. QVC International increased average selling price 5% due to price increases and favorable product mix.

Operating expenses were unfavorable by approximately 50 basis points due to commissions, which is mostly reflected in expanded linear distribution.

Speaker 3: Operating expenses were unfavorable by approximately 50 basis points due to commissions, which is mostly reflected in expanded linear distribution.

Okay.

Speaker 3: SgNA was unfavorable by approximately 270 basis.

SG&A was unfavorable by approximately 270 basis points.

The majority of the pressure is from transformation related costs associated with project asked Athens.

Speaker 3: Majority of the pressure is from transformation related costs associated with Project Act F.

Speaker 3: In addition, we had 65 basis points of STLD leverage.

In addition, we had 65 basis points of sales deleverage.

Speaker 3: Marketing expenses were essentially flat, but delivered 25 days.

Marketing expenses were essentially flat Delever 25 basis points. These headwinds were partially offset by lower bad debt expense, reflecting provisional adjustments and lower installment counts.

Speaker 3: These headwinds were partially offset by lower bad debt expense, reflecting provisional adjustments and lower installment counts. Moving to QVC International.

Moving to QVC International My comments will focus on constant currency results.

Speaker 3: Revenue to client 3%. Primarily on lower unit volume and reduce shipping and handling revenue.

Revenue declined 3%, primarily on lower unit volume and reduced shipping and handling revenue.

QVC, Japan, and UK were essentially flat and were offset by declines in Germany and Italy.

Speaker 3: QVC Japan and UK were essentially flat and were offset by declines in Germany and...

Speaker 3: QVC International increased average selling price 5% due to price increases and favorable product increase.

QVC International increased average selling prices, 5% due to price increases and favorable product mix.

Bill Wafford: From a category perspective, QVC International experienced declines in electronics, jewelry, and apparel. Beauty grew modestly and home was flat. Adjusted OIBDA decreased 15% and adjusted OIBDA margin declined 220 basis points, primarily driven by higher administrative costs. Gross margin increased 60 basis points, mainly due to improved product margins and lower inventory obsolescence. Fulfillment was unfavorable 35 basis points, primarily due to $4 million of rent from the sale-leaseback transactions in January and increased labor costs. SG&A was unfavorable, mostly due to higher fixed costs from wages, outside services, and management incentive accruals. As David mentioned, QVC International has implemented workforce reductions and is executing a transformation plan that is expected to generate material OIBDA opportunities by Q1 of 2025. Moving to Cornerstone.

Speaker 3: From a category perspective, KVC International experience declines in electronics, jewelry, and apparel. Beauty grew modestly.

From a category perspective, QVC international experienced declines in electronics jewelry and apparel.

<unk> grew modestly and homeless platform.

Adjusted OIBDA decreased 15% and adjusted OIBDA margin declined 220 basis points, primarily driven by higher administrative costs.

Speaker 3: Adjusted orbit had decreased 15% and adjusted orbit of margin declined 220 basis points, primarily driven by higher administrative

Speaker 3: Gross margin increased 60 basis points, mainly due to improved product margins and lower inventory Individual inventory?? Shouldn't E???

Gross margin increased 60 basis points, mainly due to improved product margins and lower inventory obsolescence.

Speaker 3: The fulfillment was unfavorable 35 basis points, primarily due to a $4 million of rent from the sale-easpect transactions in January and increased labor.

Fulfillment was unfavorable 35 basis points, primarily due to a $4 million 4 million of rent from the sale leaseback transactions in January and increased labor costs.

SG&A was unfavorable mostly due to higher fixed costs from wages outside services and management incentive accruals.

Speaker 3: SG&A was unfavorable mostly due to higher fixed costs from wages, outside services, and management incentive accruals.

Speaker 3: As David mentioned, KVC International has implemented workforce reductions and is executing a transformation plan that has expected to generate material over the opportunities like you won a 25.

As David mentioned QVC International has implemented workforce reductions and is executing a transformation plan that is extended expected to generate material OIBDA opportunities by Q1 of 'twenty five.

Moving to cornerstone rare.

Speaker 3: Moving to Cornerstone. Revenue declined 7% in the quarter, which is a moderation in the rate of decline from Q1. The broader home industry remained highly promotional in the second quarter, requiring Cornerstone to offer promotions to stay competitive.

Bill Wafford: Revenue declined 7% in the quarter, which is a moderation in the rate of decline from Q1. The broader home industry remained highly promotional in the second quarter, requiring Cornerstone to offer promotions to stay competitive. We experienced softness in most home categories as well as in apparel at Garnet Hill. Adjusted OIBDA decreased $19 million, mainly due to increased promotional activity, higher fulfillment expenses associated with the opening of its new fulfillment center in June, as well as higher fixed cost overhead, reflecting the opening of three new stores in the past year. Expanding Cornerstone's retail footprint has been successful, and we plan to open three additional retail stores by early 2024 that will bring the total to 32 stores. These headwinds were partially offset by lower inbound logistics costs. Now turning to the balance sheet.

Revenue declined 7% in the quarter, which is a moderation in the rate of decline from Q1.

The broader home industry remained highly promotional in the second quarter, requiring cornerstone to offer promotions to stay competitive.

Speaker 3: We experience softness in most home categories, as well as in a peril at Garner Hill.

We experienced softness and most home categories as well as in apparel at Garnet Hill.

Adjusted OIBDA decreased $19 million, mainly due to increased promotional activity higher fulfillment expenses associated with the opening of its new fulfillment center in June as well as higher fixed cost overhead, reflecting the opening of three new stores in the past year.

Speaker 3: Adjusted OIBA decreased $19 million mainly due to increased promotional activity, higher fulfillment expenses associated with the opening of its new fulfillment center in June , as well as higher fixed cost overhead reflecting the opening of three new stores in the past year.

Speaker 3: Expanding Cornerstone's retail footprint has been successful, and we plan to open three additional retail stores by early 2024 that will bring the total to 32 stores. These headwinds were partially offset by lower-end-

Expanding cornerstones retail footprint has been successful and we plan to open three additional retail stores by early 2024 that will bring the total to 32 stores.

These headwinds were partially offset by lower inbound logistics costs.

Now turning to the balance sheet.

Bill Wafford: Total year-to-date capital expenditures were $105 million. For all of 2023, we continue to expect capital expenditures to be approximately $260 million. We spent $107 million on renewals of our TV distribution contracts in the first half of 2023. Our TV distribution payments can fluctuate year over year, depending on renewal cycles, but we expect the two-year average to be approximately $100 million. We have covered the majority of our 2023 payments already through June. Total free cash flow for the first six months of 2023 was a source of $286 million versus a use of $137 million last year. The year-over-year improvement was primarily attributable to increased cash flow from operations, partially offset by higher TV distribution payments.

Total year to date capital expenditures were $105 million.

Speaker 3: Total year-to-date capital expenditures were $105 million.

Speaker 3: For all of 2023, we continue to expect capital expenditures to be approximately $260 million.

For all of 2023, we continue to expect capital expenditures to be approximately $260 million.

We spent $107 million on renewals of our television distribution contracts in the first half of 2023, our television distribution payments can fluctuate year over year, depending on renewal cycles, but we expect that to your average to be approximately $100 million.

Speaker 3: We spent $107 million on renewals of our TV distribution contracts in the first half of 2020.

Speaker 3: Our TV distribution payments can fluctuate year over year depending on renewal cycles, but we expect the two year average to be approximately $100 million.

Speaker 3: We have covered the majority of our 2023 payments already through June .

We have covered the majority of our 2023 payments already through June .

Total free cash flow for the first six months of 2023 was a source of $286 million versus a use of $137 million last year the.

Speaker 3: Total free cash flow for the first six months of 2023 was a source of $286 million versus a use of $137 million last.

Speaker 3: The year-over-year improvement was primarily attributable to increased cash flow from operations, partially offset by higher TV distribution.

The year over year improvement was primarily attributable to increased cash flow from operations, partially offset by higher TV distribution payments.

Bill Wafford: The operating cash flow increase was largely driven by working capital improvements from inventory and payables, as well as insurance proceeds. In the second half of the year, we anticipate generating additional year-over-year OIBDA gains, which will continue to benefit cash flow. Looking at our debt profile. On June 30, we had $1.4 billion drawn on the QVC revolver, with $1.8 billion in available capacity. Looking at our cash balances, as of June 30, 2023, Qurate Retail had total cash of $1.5 billion, of which $649 million was at QVC Inc., $442 million was at Liberty Interactive LLC, and $358 million was at Qurate Retail Inc. We reduced debt at Qurate Retail Inc.

Speaker 3: The operating cash flow increase was largely driven by working capital improvements from inventory and payables, as well as insurance pros.

The operating cash flow increase was largely driven by working capital improvements from inventory and payables as well as insurance proceeds.

Speaker 3: In the second half of the year, we anticipate generating additional year-over-year OIBA gains, which will continue to benefit cash flows.

In the second half of the year, we anticipate generating additional year over year, OIBDA gains, which will continue to benefit cash flow.

Looking at our debt profile on June 30, we had $1 4 billion drawn on the QVC revolver with $1 $8 billion in available capacity.

Speaker 3: looking at our debt profile. On June 30th, we had $1.4 billion drawn on the QVC Revolver with $1.8 billion in available capacity.

Speaker 3: looking at our cash balances as of June 30th, 2023. Curate retail had total cash of $1.5 billion, of which $649 million was a QBC ink. $442 million was at Liberty Interactive LLC, and $358 million was a curate retail.

Looking at our cash balances as of June 32023, CRE retail had total cash of $1 5 billion.

Of which $649 million or is it QVC, Inc. $442 million was it Liberty Liberty Interactive LLC and $358 million was accurate retailing.

Speaker 3: We reduced debt at curate retailing by $201 million in the second quarter while we increased cash $197.

We reduced debt accurate retailing by $201 million in the second quarter, while we increased cash $197 million.

Bill Wafford: by $201 million in the second quarter, while we increased cash $197 million. Our leverage ratio, as defined by the QVC revolving credit facility, is 2.3 times. As a reminder, pursuant to Zulily's divestiture, it is no longer a co-borrower under the credit facility. Zulily repaid its $80 million of outstanding borrowings in the quarter using cash contributed by Qurate Retail. The removal of Zulily will benefit liquidity and leverage going forward. Note that covenant OIBDA includes the adjusted OIBDA of QVC and Cornerstone, as well as the gains on sale-leaseback transactions for the four quarters following such transactions, and as of the beginning of this year, also include the portion of the next twelve months of expected cost savings.

Speaker 3: our leverage ratio as defined by the QVC Revolving Credit Facility 2.3 TOT.

Our leverage ratio as defined by the QVC revolving credit facility was two three times.

Speaker 3: As a reminder, pursuant to Zulu Lee's divestiture, it is no longer a co-borrow or under the credit facility.

As a reminder, pursuant to pursuant to Zulu divestiture. It is no longer a co borrower under the credit facility.

Speaker 3: Doolilly repaid its $80 million of outstanding borrowings in the quarter using cash contributed by Curate Recon.

So you literally repaid $80 million of outstanding borrowings and <unk> in the quarter using cash contributed by keurig retail.

Speaker 3: The removal of Zulu Lake will benefit liquidity and leverage going forward.

The removal of the Lilly will benefit liquidity and leverage going forward.

Speaker 3: Note that Covenant, Oibeda, includes the adjusted Oibeda of QVC and Cornerstone, as well as the games on sale-respect transactions for the four quarters following such transactions. And as of the beginning of this year, also includes the portion of the next 12 months of expected costs.

Note that covenant OIBDA includes the adjusted OIBDA of QVC and cornerstone as well as the gains on sale leaseback transactions for the four quarters following such transactions and as of the beginning of this year also includes a portion of the next 12 months of expected cost savings.

Bill Wafford: During Q2, we repurchased $177 million of the QVC senior secured notes due in 2024, and $15 million of the QVC senior secured notes due in 2025. We made open market purchases at a discount, totaling $182 million of cash spent. We took action throughout 2022 and 2023 to create liquidity and position ourselves to execute Project Athens. We are making significant progress towards improving OIBDA and cash flow, and feel confident in delivering OIBDA growth in the balance of the year. With that, I'll turn the call over to Greg.

During Q2, we repurchased $177 million as of QVC senior secured notes due in 2024 and $15 million of the QVC senior secured notes due in 2025, we made open market purchases at a discount totaling $182 million of cash spent.

Speaker 3: During Q2, we repurchased $177 million of the QVC Senior Secured Notes due in 2024 and $15 million of the QVC Senior Secured Notes due in 2025. We made open market purchases at a discount totaling $182 million of cash.

We took action throughout 2022, and 2023 to create liquidity and position ourselves to execute project assets, we are making significant progress towards improving OIBDA and cash flow and feel confident in delivering OIBDA growth in the balance of the year.

Speaker 3: We took action throughout 2022 and 2023 to create liquidity and position ourselves to execute Project S.

Speaker 3: we are making significant progress towards improving Oibita and cashflow and feel confident in delivering Oibita growth in the balance of the year. With that, I'll turn the call.

With that I'll turn the call over to Greg.

Greg Maffei: Thank you, Bill. I hope, as you can see, Athens initiatives are benefiting the financial results, and we believe there is more to come. We saw improvements in cash flow year-over-year, largely, though, due to working capital benefits plus insurance proceeds. As OIBDA losses moderate, consistent with the plan David and team outlined, we expect more OIBDA-related operating cash flow in the second half. We did divest Zulily, which we think will benefit future liquidity and focus management on our core operations. We continue to assess incremental opportunities to improve the balance sheet. As was noted, we repaid $192 million of near-term QVC bonds at 97% to 95% of par, picking up some discount there. We settled $94 million of exchanges on the 1.75% Charter bonds.

Thank you Bill.

Speaker 5: I hope as you can see, Athens' initiatives are benefiting the financial results, and we believe there's more to come.

I hope as you can see Athens initiatives are benefiting the financial results and we believe theres more to come.

We saw improvements in cash flow year over year, largely due to working capital benefits plus insurance proceeds.

Speaker 5: We saw improvements in cash flow year over year, largely though, due to working capital benefits plus insurance proceeds.

Speaker 5: But as all the losses moderate consistent with plan David and team outlined, we expect more orbiter related operating cash flow in the second.

But as OIBDA losses moderate consistent with the plan, David and team outlined we expect more OIBDA related operating cash flow in the second half.

We did divest a little Lilly, which we think will benefit future liquidity and focused management on our core operations.

Speaker 5: We did the best to do it. If we think we'll benefit future liquidity and focus management on our core operations.

Speaker 5: We do continue to assess incremental opportunities to improve the balance sheet. As was noted, we repayed $192 million of near-term QBC bonds at 95% of part picking up some discount there. We settled $94 million of exchanges on the one and three quarter charter bonds. These bonds have an October 23 put call date.

We do continue to assess incremental opportunities to improve the balance sheet. As was noted we repaid $192 million of near term QBC bonds at 90, 795% of par picking up some discount there we settled $94 million of exchanges on the one and three quarter charter bonds.

Greg Maffei: These bonds have an October 23 put call date, and the exchange was pulled forward into this timing when we settled those recent exchanges. We have $77 million of principal remaining on those, including a $2 million additional exchange, which was done subsequent to quarter end. As was noted, we closed out our insurance claims on our warehouse fire with the $225 million final payment received in June, and that was applied to our revolver paydown in July. Our current leverage is running 2.3x, and that's a sufficient cushion relative to the 4.5x covenant and revolver. We do expect to maintain long-term leverage target of 2.5x, and in the near term, we expect free cash flow will be applied to debt repayment. With that, operator, I'd like to open it up for questions.

These bonds have an October 23 put call date.

Speaker 5: what's pulled the exchange was pulled for rent at this timing when we settled those recent exchange.

Which pulled the exchange was pulled forward into this timing when we settle those recent exchanges.

We have $77 million of principal remaining on those including a 2 million additional exchange, which was done subsequent subsequent to quarter end.

Speaker 5: We have $77 million of principal remaining on those, including a $2 million additional exchange, which was done subsequent to quarter-end.

Speaker 5: As was noted, we closed out our insurance claims on our warehouse fire with the 225 final payment received in June , and that was applied to our revolver pay down in July .

As was noted we closed out our insurance claims on our warehouse fire with the 225 final payment received in June and that was applied to our revolver pay down in July our current leverage is running two three times and that's a sufficient cushion relative to the four five times covenant in our revolver, we do expect to maintain.

Speaker 5: Our current leverage is running 2.3 times, and that's a sufficient cushion relative to the 4.5 times covenant in the revolver. We do expect to maintain long-term leverage target of 2.5 times.

Long term leverage target of two five times.

Speaker 5: And in the near term, we expect free cash flow will be applied to debt repayment. And with that, I'll...

And in the near term, we expect free cash flow will be applied to debt repayment.

And with that operator, I'd like to open it up for questions.

Bill Wafford: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Elle Holden with Barclays. Please proceed with your question.

Speaker 1: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

At this time, we'll be conducting a question and answer session.

We would like to ask a question. Please Chris Star one on your telephone keypad.

Take some time.

Indicate.

Question Keith.

You May press Star two if you would actually move your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Our first question comes from the line of.

Speaker 1: Our first question comes in line of El Alden with Barclays. Please proceed with your question.

Yes, Holden with Barclays.

Please proceed with your question.

Elle Holden: ... Hi, good morning. I had two questions. The first one is, I guess, you alluded to it in your final comments there, but as you're thinking about the back half or a typical seasonal Q4, there isn't any reason to expect that, you know, you shouldn't have a more normalized margin and sort of Free Cash Flow profile drop down this year, like we would've seen historically?

Elle Holden: Hi, good morning. I had two questions. The first one is, I guess, you alluded to it in your final comments there, but as you're thinking about the back half or a typical seasonal Q4, there isn't any reason to expect that, you know, you shouldn't have a more normalized margin and sort of Free Cash Flow profile drop down this year, like we would've seen historically?

Hi, Good morning, I had two questions. The first one is.

Speaker 6: Good morning. I had two questions. The first one is

I guess you alluded to it in your final comments, there, but as youre thinking about the back half or is that a typical seasonal fourth quarter. There isn't any reason to expect that you shouldnt have a more normalized margin and sort of free cash flow profile Dropdowns. This year.

Speaker 6: I guess you alluded to it in your final comments there, but as you're thinking about the back half or a typical seasonal fourth quarter, there isn't any reason to expect that you shouldn't have a more normalized margin and sort of free cash flow profile drop down this year like we would have seen in store.

Like we would have seen historically.

Yeah.

David Rawlinson: Yeah, it's David. Thank you for the question. Yeah, we don't, we, we think you've seen some of the gross margin and cost work. Obviously, the fourth quarter last year was relatively exceptional, both because of downstream supply chain impact, and because we were working through a fair amount of inventory reduction efforts through clearance. And so, we had some, I would call them, extraordinary margin headwinds in the fourth quarter of last year that we don't expect to, that we don't expect to repeat. So we, we do think there are some margin opportunity as we go through the second half.

Yes, it's David Thank you for the question.

Speaker 7: Yeah, David, thank you for the question. Yeah, we don't, we think...

Yes, we don't.

We think.

Speaker 7: You've seen some of the gross margin and cost work.

<unk> seen some of the gross margin and cost work.

Speaker 7: Obviously the fourth quarter last year was relatively

<unk>.

Obviously, the fourth quarter last year was relatively exceptional both because of the downstream supply chain impact and because we were working through a fair amount of inventory reduction efforts through clearance.

Speaker 7: Exceptional both because of downstream supply chain impact and because

Speaker 4: we were working through a fair amount of inventory reduction efforts through clearance. And so we had some, I would call them, extraordinary margin headwinds in the form.

So we had some I would call them extraordinary margin headwinds in the fourth quarter of last year that we don't expect to.

Speaker 4: quarter of last year that we don't expect to uh... that we don't expect to repeat so we we do think there's a margin opportunity as we go through the second half.

But we don't expect to repeat so we do think there is some margin opportunity as we go through the second half.

Elle Holden: Great. And the second question I had was, you know, on some of the recent weakness in Japan, I was just hoping maybe you could give us some puts and takes there in terms of what we should be thinking about and how that business performs in QVC International generically.

Great.

Speaker 6: Great and the second question I had was um, you know on some of the recent weakness in japan

The second question I had was.

Some of the recent weakness in Japan.

I was just hoping maybe you could give us some puts and takes there in terms of what we should be thinking about how that business performs from QVC International generically.

Speaker 6: as just hoping maybe if you give us some puts and takes there and in terms of what we should be thinking about and how that business performs in the QVC International Generic.

David Rawlinson: Yeah, we've seen some elevated inflation in Japan that's come a little bit later than it has for the rest. We've had some merchandising hits and misses that have been perhaps a little less consistent than we've seen previously. But we're mostly continuing to see strength in that business, and we don't see any reason going forward, why we should have be off the long-term trend in terms of the strong performance of the Japanese business. And nothing structural or underlying that's very concerning there.

Yes, we've seen some.

Speaker 4: Yeah, we've seen some elevated inflation in Japan that's come a little bit later than it has for the rest. We've had some merchandising hits and misses that have been perhaps a little less.

Elevated inflation in Japan, that's come a little bit later than than it has for the rest we have had some.

Merchandising hits and misses that had been perhaps.

A little less consistent than we've seen previously.

Speaker 4: consistent that we've seen previously. But we're mostly continuing to see strength in that business and we don't see any reason going forward what we should have.

We're mostly continuing to see strength in that and that business and we don't see any reason going forward, while we should have.

Speaker 4: be off the long-term trend in terms of the strong performance of the Japanese business. Nothing structural or underlying that's very concerning there. And that's historically been one of our strong...

Be off the long term trend in terms of the strong performance of the of the Japanese business.

Structural or underlying that's very concerning there.

Elle Holden: Great. Thank you.

David Rawlinson: And that's historically been one of our strongest performers.

And that's historically been one of our strongest performers.

Elle Holden: Thank you, David. I appreciate it.

Thank you David I appreciate it.

Okay.

Operator 3: Our next question comes from the line of Jason Hobbs with Bank of America. Please proceed with your question.

Speaker 1: Our next question comes from the line of Jason Hobbs with Bank of America. Beautiful, see what you're a question.

Our next question comes from the line, Jason Haas with Bank of America. Please proceed with your question.

Jason Hobbs: Hey, good morning, and thanks for taking my questions. I was curious, David, if you could talk about what pressures continue to weigh on customer count and when you see that, improving?

Speaker 8: Hey, good morning and thanks for taking my questions. As sure as David, if you could talk about what pressures continue to weigh on customer count and when you see that improving. strict?ing Sami Fayghir school. Of DRUVANG.urgintz.com

Hey, good morning, and thanks for taking my questions. Just curious David if you could talk about what pressures continue to weigh on customer count and when you see that improving.

David Rawlinson: Yeah, thank you. So, a few things. The first is, we reiterated Athens objectives today. There's nothing I see happening in our customer file, that would preclude that. Just a reminder, and I know you know this, Jason, the last 12-month data that we report, both reflects lower quality customers who came in during the pandemic, who are still falling out of the file. The other thing is that it still has in it a lot of the Rocky Mount buyer impact, where I think, we frankly didn't have the capacity to serve some of our customers, the way they deserve. What we have seen is a stabilization in the average daily customer counts, which is what we spend most of our time looking at, how many purchasing customers do we have, every day?

Yes. Thank you so.

A few things the first is <unk>.

Speaker 4: A few things. The first is we reiterated Athens' objectives today. There's nothing I see happening in our customer files that would preclude that. Just a reminder, and I know you know this, in the last 12 month data that we report.

Reiterated Athens objectives today, there is nothing I see happening in our customer file that would preclude that just a reminder, and I know you know this case in the last 12 month data that we report.

Speaker 4: Both reflect lower quality customers who came in during the pandemic who are still falling out of the file. The other thing is that it still has in it a lot of the Rocky Mount fire impact where I think we frankly didn't...

Both reflects lower quality customers, who came in during the pandemic, who are still falling out of the file. The other thing is that it's still hasn't had a lot of the rocky Mount fire impact, where I think we frankly didn't have the capacity to serve some of our customers.

Speaker 4: have the capacity to serve some of our customers the way they deserve. What we have seen is a stabilization in the average daily customer count.

The way they deserve while we have seen is a stabilization in the average daily customer accounts, which is what we spend most of our time looking at how many purchasing customers that we have.

Speaker 3: what we spend most of our time looking at, how many purchasing customers do we have every day? And that's actually...

David Rawlinson: That's actually been pretty stable as we've gone throughout this year. One way to start to see that in the reported figures is, I think if you look at the last quarter versus this quarter, we're just down low single digits from Q1 to Q2. You are starting to see very real stabilization in the customer count as we reset, having shed some of the excess pandemic customers. I would also tell you that 35 to 40% of our new customers we acquire in the fourth quarter, so we're putting a lot of effort into what the fourth quarter will look at. Then, finally, just a reminder about the way our customer file works, right?

Every day, if that's actually been pretty stable as we've gone throughout this year, one way to start to see that in the reported figures as I think if you look at the last quarter versus this quarter. We're just down low single digits for Q1 to Q2. So you are starting to.

Speaker 3: pretty stable as we've gone throughout this year. One way to start to see that in the reported figures is

Speaker 3: I think if you look at the last quarter versus this quarter, we're just down low single digits from Q1 to Q2. So you are starting to see very real stabilization in the customer count as we reset having shed some of the excess pandemic customers.

Very real stabilization in the.

And the customer count as we reset having shed some of the excess pandemic customers.

I would also tell you that 35% to 40% of our new customers, we acquire in the fourth quarter. So we're putting a lot of effort into what the fourth quarter will look at and then finally, just a reminder, about the way our customer file works right. Our existing customers are half of the count of 90%.

Speaker 3: I would also tell you that 35 to 40% of our new customers we acquire in the fourth quarter. So we're putting a lot of effort into what the fourth quarter will look at. And then finally, just a reminder about the way our customer file works, right? Our existing customers are half of the count and 90%.

David Rawlinson: Our existing customers are half of the count and 90% of the sales, so how they perform matters a lot more than the total aggregate customer file. And when you look at our existing customers, they've continued to be extraordinarily strong. Their average spend was up to more than $1,500. That's the best since QXH was formed in 2018. They increased their average spend 6% in the last trailing 12 months, ending 30 June. And in Q2, our retention rate for our existing customers was 87%. They're still extraordinarily strong, one of the strongest numbers you can find in retail. And then if you double-click on our existing customers, what we call our best customers at QVC. So a best customer is somebody who purchases more than 20 times a year.

Of the sale so how they perform matters a lot more than the total aggregate customer file and when you look at our existing customers.

Speaker 3: of the sales, so how they perform matters a lot more than the total aggregate customer file. And when you look at our existing customers, they...

Speaker 3: continued to be extraordinarily strong. Their average spend was up to more than $1,500. That's the best since QX8 was formed in 2018.

<unk> continues to be extraordinarily strong their average spend was up to more than $500. That's the best since <unk> was formed in 2018, they increase their average spend 6% in the last trailing 12 months ending June 30, and in Q2 our retention.

Speaker 3: They increased their average spin 6% in the last...

Speaker 3: trailing 12 months and being June 30th and in Q2 our retention rate.

<unk>.

Speaker 3: for our existing customers was 87 percent, but still extraordinarily strong, one of the strongest numbers you can find in retail. And then if you double click on our existing customers, what we call our best customers at QVC. So a best customer is somebody who purchases more than 20 times a year. Our best customers are about 18 percent of our count and about 75 percent of our sales. And when you look at the best customers,

For our existing customers was 87% so still extraordinarily strong one of the strongest numbers you can you can find in retail and then if you double click on our existing customers, what we call our best customers at QVC, So our best customers somebody who purchases more than 20 times a year.

David Rawlinson: Our best customers are about 18% of our count and about 75% of our sales. And when you look at the best customers, our retention rate with them is in the high 90s. If you count them in our total file, it's in the very high 90s, and their spend has continued to grow as well. So we're doing a lot to concentrate on our existing customers and our best customers, and we think that gives us, in addition to the sequential moderation you're seeing in the customer file, we think that the strength with those customers gives us a lot of the strength we need as we seek to deliver the second half of 2023 and as we go through 2024.

Our best customers are about 18% of our talent at about 75% of our sales.

And when you look at the best customers, our retention rate with them.

Speaker 3: our retention rate with them is in the 90s.

Hi, it's in the nineties, if you count them in our total file it in the very high Ninety's and their spend has continued to grow as well. So we're doing a lot to concentrate on our existing customers and our best customers and we think that gives us in addition to the sequential moderation.

Speaker 3: If you count them in our total fall, it's in the very high 90s, and their spend has continued to grow as well. So we're doing a lot to concentrate on our existing customers and our best customers, and we think that gives us, in addition to the sequential moderation you're seeing in the customer file, we think that the strength with those customers.

And you are seeing in the customer file we think that the.

The strength with those customers gives us a lot of the strength, we need as we seek to deliver the second half of 2023 and as we go through 2024. Finally, just on new I mentioned, a little bit of this in my prepared remarks, but we.

Speaker 3: gives us a lot of the strength we need as we seek to deliver the second half of 2023 and as we go through uh 2024. Finally just on new I mentioned a little bit of this in my prepared remarks but we have a April

David Rawlinson: Finally, just on new, I mentioned a little bit of this in my prepared remarks, but we have a lot of efforts going, again, how we attract new customers. Our streaming service is continuing to grow. We've seen some good results from new streaming episodes and new streaming programs, bringing in some new customers. We've formed the customer hub at QVC. That hub is focusing on 17 different focus customer segments, prioritized into seven different groups by new, existing, and our most loyal customers. We're doing proactive calls out to customers who have seen churn. We're sending letters from hosts with special offers. We have an all hands on deck, full scale effort going against our customer file in the second half.

We have a lot of efforts going against how we.

Speaker 3: going again how we attract new customers. Our streaming service is continuing to grow. We've seen some good results from new streaming, episodes and new streaming programs bringing in some new customers. We've formed the customer hub at TBC. That hub is focusing on 17 different focus.

Track New customers are streaming service is continuing to grow we've seen some good results from new streaming episodes and new streaming programs, bringing in some new customers.

The customer hub at QVC that hub is focusing on 17 different focus customer segment segment is prioritized in the seven different groups by.

Speaker 3: customer segments, prioritized in seven different groups by new existing and our most loyal customers. We're doing proactive calls out to customers who we've seen churn. We're sending letters from hosts with special authors. So we have a all-hand on deck full scale effort going against our customer file in the second half. And like I said, I think you can already start to see

New existing and our most loyal customers, we're doing proactive calls out to customers, who we've seen churn we're sending letters from host with special offers so we have all hands on deck.

Dec full scale effort going against our customer file in the second half and like I said I think you can already start to see some of that working if you just look sequentially at the customer file.

David Rawlinson: Like I said, I think you can already start to see some of that working if you just look sequentially at the customer file.

Speaker 3: Some of that working if you just look sequentially at the customer file.

Jason Hobbs: That's great, thank you. Can you talk about the relative performance of HSN versus QVC?

Speaker 8: That's great. Thank you. And can you talk about the relative performance of HSN versus QVC?

That's great. Thank you and can you talk about the relative performance of HSN versus QBC.

David Rawlinson: Yeah. So HSN, I would say, is if you really have to start the story going back to last year. We started with the inventory efforts. HSN was a much bigger part of that effort than QVC on a percentage basis. And so that business has had the more significant swings, both in terms of clearance and margin, and in terms of inventory and getting the right inventory for the right time. And so I would say they lagged QVC. We've had some real inventory and merchandise improvements at QVC in the first half. I think HSN is on a similar path, but tracking a little bit behind because it took them a little bit longer to get clean on inventory and so to bring in new inventory.

Yes, so HSN I would say is.

Speaker 3: Yeah, so HSN, I would say, is, if you really have to start the story going back to last year, we started with the inventory efforts. HSN was a much bigger part of that effort than QBC on a percentage basis.

A few.

We have to start the story going back to last year, we started with the inventory efforts HSN with a much bigger part of that effort and QVC on a percentage basis, and so that that business has had.

Speaker 3: And so that business has had the more significant swings, both in terms of clearance and margin and in terms of inventory and getting the right inventory for the right time. And so I would say they lagged QVC. We've had some real inventory and merchandise improvements.

The more significant swings both in terms of.

Clearance in margin and in terms of inventory and getting the right inventory for the right time, and so I would say they lagged.

<unk>.

QVC.

We've had some real inventory and merchandise improvements.

Speaker 3: at TBC in the first half, I think. HSN is on a similar path, but tracking a little bit behind because it took them a little bit longer to get clean on inventory and sort of bring in new inventory, and so we're expecting.

At QVC in the first half I think hsen is on a similar path, we're tracking a little bit behind because it took them a little bit longer to get clean on inventory and so to bring in new inventory and so we're expecting HSN had stronger performance in the back half.

David Rawlinson: We're expecting HSN to have stronger performance in the back half, both on a margin perspective and also on a sales perspective, as we get to the type of merchandise we want. The other thing that's been true about HSN is we've seen bigger positive variation when we do large events. I talked about the Wheel of Fortune event. We had a Foodie Fest event. We've had some nice celebrity collaborations, Lionel Richie, Debbie Gibson, that we're going to continue in the second half. We actually feel pretty good. Though it's been a bit weaker than QVC in the first half, we actually feel pretty good about the momentum going into the second half of HSN.

Speaker 3: HSN to have stronger performance in the back half, both on a margin perspective, but also on a sales perspective as we get to the type of merchandise we want. The other thing that's been true about HSN.

Both.

On a margin perspective, but also on a on a sales perspective as we get to the type of merchandise. We want the other thing thats been true about HSN as we've seen bigger positive variation when we do large events I talked about will it fortune event, we had a foodie.

Speaker 3: as we've seen bigger positive variation.

Speaker 3: when we do large events. I talked about the will-advortune event. We had a foody best event. We've had some nice celebrity collaborations, line of richy, David Gibson, that we're going to continue in the second half. So we actually, we actually feel pretty good, though it's been a bit weaker than QVC in the first half. We actually feel pretty good about the momentum going into the second half of HSN.

First is that we've had some nice celebrity collaboration line of Ritchie Debbie Gibson.

That we're going to continue in the second half. So we actually we actually felt pretty good though it was it's been a bit weaker than QVC and the first half we actually feel pretty good about the momentum going into the second half with HSN.

Jason Hobbs: Great to hear. Thank you.

Great to hear thank you.

Operator 3: Our next question comes from the line of Carla Casella with JP Morgan. Please proceed with your question.

Our next question comes from the line of Carla Casella with Jpmorgan. Please proceed with your question.

Speaker 1: Our next question comes from the line of Carla Cacela with JP Morgan. Please proceed with your question.

Carla Casella: Hi, thank you. So cash at Liberty Interactive moved up about $67 million this quarter. Is that from the Zulily sale, or was there some other source of cash at that entity?

Hi, Thank you.

Speaker 9: Hi, thank you. So packet liberty interactive moved up about 67 million this quarter. Is that from the Zoolily sale? Or was it some other source of cash at that end? It's a-

So cash at Liberty Interactive moved up.

$7 million this quarter is that from the Lilly sale or was it some other source of cash at that entity.

Ben Oren: That was from the sale of our stake in Comscore.

That was from the sale of our stake in Comscore.

Speaker 10: That was from the sale of our stake in Comscore.

Carla Casella: Okay. Then it sounds like this is the final insurance payment. Is that correct?

Okay.

Speaker 9: And then it sounds like this is the final insurance payment. Is that correct?

And then it sounds like this is the final insurance payment is that correct.

David Rawlinson: Correct.

Correct Okay.

Carla Casella: Okay. And then you mentioned that you'd use some proceeds after quarter end to pay down the revolver. Can you give us how much that was and let us know if you bought it back any bonds after the quarter end?

Okay, and then you mentioned that you do some proceeds after quarter end to pay down the revolver can you give us how much that was and let us know.

Speaker 9: And then you mentioned that you'd use some proceeds after quarter end to pay down the revolver. Can you give us how much that was and let us know if you bought it back any bonds after the quarter end?

Have you bought back any bonds after the quarter end.

David Rawlinson: It was immaterial, Carla.

It was immaterial Carla.

Carla Casella: Okay.

Ben Oren: Well, Bill, I'll let you answer on the revolver, but it was the insurance claim proceeds that were applied to the revolver paydown, Carla.

Speaker 8: Okay. Well, Bill, I'll let you answer on the revolver, but it was the insurance

Okay.

Bill I'll, let you.

Answer on the revolver, but it was the insurance.

Speaker 10: claim proceeds that were applied to the revolving pay down car. Okay, but with it on, did you use?

Claim proceeds that were were applied to the revolver pay down.

Carla Casella: Okay, but was it all? Did you use all of the proceeds?

Okay that was it.

All of the proceeds.

David Rawlinson: No, we paid the revolver down by, I think it was, what? In the $177 million range.

No the revolt, we paid the revolver down.

Speaker 4: No, we paid the revolver down by any was with the $175 million range.

I think it was.

$177 million range.

Carla Casella: Okay, that's great. Well, there was some comment about the, the... Well, on the media rights spend, there was some comment about one, one, I guess, right or agreement that you exited. Can you just give us any more color on that proceeds and/or why, why exit? Is the way you think about that media rights changing?

Okay, that's great.

And then there was some comment about that the well on the media rights than.

Speaker 9: And then there was some comment about that, well on the media rights spend, there was some comment about one, one I guess right or agreement that you exit. Can you just give us any more color on that proceeds and or why exit is the way you think about that media rights?

There was some comment about.

One one I guess right are our agreement that you exited can you just give us any more color on that proceeds and or Y O y.

The way you think about that media rates changing.

Ben Oren: Can you say that again, Carla?

You say that again Carla.

Carla Casella: I thought I heard comments about there was a media, well, when your-- in your discussion in the media rights, there was one contract that sounded like you exited and took in some proceeds from. Did I misunderstand that? And if there's any-- and just wondering if there's any change in how you think about that media business, just given the increased move to online, spending or online, you know, consumer spending.

Speaker 9: I thought I heard comments about there's a media, what, in your discussion on the media rights, there was one contract that sounded like you exited and took in some proceeds from. Did I misunderstand that?

I thought I heard comments about there was a media what when you're in your discussion on the media rights. There was one contract it sounded like you exited and took into proceeds from.

Did I misunderstand that.

Speaker 9: And just wondering if there's any change in how you think about that media business, just given the increased move to online spending.

And if theres any and just wondering if there's any change in how you think about the media business just given the increased move too.

On line.

Spending our online consumer spending.

David Rawlinson: Yeah, I'm not exactly sure what you're referring to. Maybe we can clarify if you send us a note. We haven't – our basic go-to-market on the media rights side hasn't changed substantially. Our commission structure remains the same. There's some variability now that streaming's becoming a bigger part of that, and we have some variability in the go-to-market now that e-commerce remains a big part of our go-to-market. So we have digital marketing spend variations, but no big changes to sort of structurally, our commission structure with our carriers and that sort of thing.

Speaker 3: Yeah, I'm not exactly sure what you're referring to. Maybe we can clarify if you send us a note. We haven't, our basic go to market on the media right side hasn't changed.

Yes im not.

I'm not exactly sure what you referred to maybe maybe we can we can clarify if you send us a note we haven't our basic go to market.

On the media rights side Hasnt changed.

Speaker 3: So, Spancially, our commission structure remains the same. There's some variability now that's dreaming, becoming a bigger part of that. And we have some variability in the go-to-market. Now that e-commerce remains a big part of our go-to-market. So, we have digital marketing, span variations, but no big changes to...

Substantially our commission structure remains the same there is some variability now the streaming becoming a big part a bigger part of that and we have some variability in the go to market now that e-commerce.

<unk> remains a big part of our.

Our go to market and so we have digital marketing spend variations, but.

No no big changes too.

Sure.

Speaker 3: sort of structurally our commission structure with our carriers and that sort of

Sort of structurally our commission structure with our carriers and that sort of thing.

Carla Casella: Okay, great. That's actually what, what I was looking for, even though my question was very poorly worded. Just one last one. International and the domestic seems to be a lot of similarities between the business. I'm just wondering how intertwined each of your international businesses are. Do you do all of your programming in each market? Or are they-- do you use a lot of the shared resources between the US and international markets?

Speaker 9: Okay, great. That's actually what I was looking for, even though my question was very poorly worded. Just one last one. International and the domestic, there seems to be a lot of similarities between the business. I'm just wondering how intertwined

Okay, great. Thank you very much.

No. My question was very poorly worded.

Just one last one.

National and the domestic seems to be a lot of similarities between the business I'm just wondering how intertwined each of your international businesses or do you do all of your programming in each market are they do you use a lot of the shared resources between the U S and international markets.

Speaker 9: your international businesses are, do you do all of your programming in each market? Or do you use a lot of the shared resources between the U.S. and international markets?

David Rawlinson: Yeah, thank you for that. I'd say it's a mixture. So we're doing a lot more with how we understand our programming, how we understand our pricing, how we view things like product strategy. Obviously, in the context of Project Athens, we've built substantial amounts of new analytical capability across all of those. And so we have multiple ways of sharing, learning, both across QVC and HSN in the US, and with all of the international businesses. And so that's why you've seen, I think, some things like gross margins going up and basket content, average sale price going up and basket content. Each market has a number of things that make it differentiated.

Yes. Thank you for that I'd say, it's a mixture. So we're doing a lot more.

Speaker 3: Yeah, thank you for that. That's a mixture. So we're doing a lot more with how we...

With how we.

Speaker 3: Understand our programming, how we understand our pricing, how we view things like product strategy, obviously in the context of project Athens, we've built.

Understand our programming, how we understand our pricing how we view things like product strategy, obviously in the context of project assets, we've built substantial amounts of new analytical capability.

Speaker 3: substantial amounts of new analytical capability across all of those.

Across all of those and so we have multiple ways of sharing learning both across QVC and HSN and the U S and with all of the international businesses and so that's why you've seen I think some things like gross margins going up in basic time sort of average sell price going up and base.

Speaker 3: And so we have multiple ways of sharing learning both across QVC and HSN in the US and with all of the international businesses. And so that's why you've seen, I think, some things like gross margins going up and basic concert, average sale price going up and basic concert.

Concert each market has a number of things that may get.

Speaker 3: Each market has a number of things that may get differentiated, and so most of the day-to-day operating decisions are made closer to the customer within the market while we continue on the big...

Differentiated and so.

David Rawlinson: And so, most of the day-to-day operating decisions are made closer to the customer, within the market, while we continue on the big structural strategic choices and moves, to operate across to make sure we're getting scale across the full franchise, and we're getting best practices spread throughout all of the markets. The only other thing I would say is, one thing we've started doing a lot more of that I think has proven effective, is using some of the smaller markets as a test bed. AI is a good example of where we're doing that. And then as we see success and as we perfect whatever the new discipline is, then scaling that back across the US. And so that's been the other way we've tried to use some of the international markets, especially the UK.

First of the day to day operating decisions are made closer to the customer.

The market, while we continue on the big structural strategic choices and moves.

Speaker 3: structural strategic choices and moves to operate across, to make sure we're getting scale across the full franchise and we're getting best practices spread throughout all of the markets. All the other things.

To operate across to make sure we're getting scale across the pole franchise, and we're getting best practices spread throughout all of the markets.

Only other thing I would say is one thing we've started doing a lot more of that I think has proven effective as using some of the smaller markets as a test bed.

Speaker 3: One thing we've started doing a lot more of that I think is proven effective is using some of the smaller markets as a test bed AI is a good example of where we're doing that and then as we see success and as we Perfect whatever the new discipline is then scaling that back across the

AI is a good example of where we're doing that and then as we see success and as we perfect whatever the new discipline has been scaling that back across the U S.

Speaker 3: And so that's been the other way we've tried to use some of the international markets, especially the UK.

And so that's been the other.

Other way, we've tried to use some of the international markets, especially the U K.

Carla Casella: Great. Thank you very much.

Great. Thank you very much.

Operator 3: Our next question comes from the line of William Rueter with Bank of America. Please proceed with your question.

Speaker 1: Our next question comes from the line of William Rutter with Bank of America. Please proceed with your question.

Our next question comes from the line of William Reuter with Bank of America. Please proceed with your question.

William Reuter: Good morning. The first is, you did some bond repurchases during the quarter. You mentioned opportunities for the balance sheet. Do you expect that you'll continue to complete open market repurchases of those? Do you have hopes of refinancing those if financial results improve? What are your thoughts for the 2024s?

Good morning.

Speaker 11: Good morning. The first is you did some bond repurchases during the quarter. You mentioned opportunities for the balance sheet. Do you expect that you'll continue to complete open market repurchases of those? Do you have hopes of refinancing those if financial results improve? What are your thoughts for the 2020 pores?

The first is you did some bond repurchases during the quarter you mentioned the opportunities for the balance sheet.

Do you expect that you'll continue to complete open market repurchases of does do you have hopes of refinancing those financial results improve what are your thoughts for the for the 2020 quarters.

David Rawlinson: Ben, do you wanna, do you wanna answer that?

Dan do you want to hit do you want to answer that.

Ben Oren: Yeah, sure. It's Ben Oren. I think we'll be consistent with what we've said in the past, which is that we expect to handle those with, you know, some mixture of free cash flow and, revolver. And as we, kinda move forward into 2024, see where rates are and where, funding costs are. At this time, we've got very attractive coupons. And so to the extent the cash can handle those maturities or revolver draw, which is our best funding source, we're gonna lean towards that, and, and then term out when things get better.

Speaker 10: Yes, sure. It's been orange. I think we'll be consistent with what we've said in the past, which is that we expect to handle those with you know, some mixture of free cash flow and revolver. And as we kind of move forward into 2024, see where rates are and where funding costs are at this time. We've got very attractive coupon.

Sure it's been R&D.

I think it will be consistent with what we've said in the past, which is that we expect will handle that.

Yeah, So I'm not sure our free cash flow and revolver.

And as we kind of move forward into 2024 see where rates are.

Funding costs are at this time, we've got very attractive coupons.

Speaker 10: And so to the extent that cash can handle those maturities or revolver draw, which is our best funding source, we're going to lean towards that and then turn out one thing.

Simple cash can handle those maturities or revolver draw, which is our best funding source were going to lean towards that end.

And then term out when things get better.

William Reuter: Great. And then, there's clearly some pretty massive divergence of category performance. I guess, can you talk a little bit about your lead times, and your ability to shift your inventory mix to areas like beauty that are doing better, and away from categories like home that are suffering right now?

Great and then.

Speaker 11: Great. And then there's clearly some pretty massive divergence of category performance. I guess can you talk a little bit about your lead times and your ability to shift your inventory mix to areas like beauty that are doing better and away from categories like home that are suffering right now.

There is clearly some pretty massive divergence of category performance.

I guess can you talk a little bit about your lead times.

And your ability to shift your inventory mix to areas like beauty that are doing better and away from categories like home that are that are suffering right now.

David Rawlinson: Yeah, thank you. It's a great question. General lead times in this business are 6 to 9 months. I think we're in some categories, we're able to do a bit better than that. I think the good thing about where we are going into the second half is we've actually the larger trends are not a surprise. So beauty's been relatively strong in the broader market all of this year. And so we've been able to see that as it's developed. Likewise, electronics has been relatively weaker as we've gone through this year. So while there is variability, it's not at this point, it's not unpredictable variability and differentiation. I think we, we've seen relative stability in how the categories have performed relative to each other.

Yes. Thank you. It's a great question General lead times in this business. There are six to nine months I think we're in some categories, we're able to do a bit better than that I think the good thing about where we are going into the second half as we've actually.

Speaker 3: Yeah, thank you. It's a great question. General lead times in this business are six to nine months. I think we were in some categories. We're able to do a bit better than that. I think the good thing about where we are going into the second half is we've actually the larger trend. We are a community who would still be for person to be having money about.

The larger trends are not a surprise so beauty has been relatively strong and the broader market all of this year and so we've been able to see that as it develops likewise electronics has been relatively weaker as we've gone through.

Speaker 3: are not a surprise. So, beauty's been relatively strong in the broader market all of this year. And so, we've been able to see that as it's developed. Likewise, electronics has been relatively weaker as we've gone through this year. So, while there is variability, it's not at this point, it's not unpredictable. Variability and differentiation, we've seen relative stability.

<unk> this year. So while there is variability it's not at this point it is not unpredictable unpredictable variability and differentiation I think we we've seen relative stability and.

Speaker 3: and how the categories have performed relative to each other. And so we think we have a fair amount of...

And how the categories have performed relative to each other and so we think we have a fair amount of.

David Rawlinson: So we think we have a fair amount of insight going into the second half about what's happening in the broader market. The one other thing I'd say is that you probably can't pick up on just by looking at the category performance. There's actually much more variation going in within categories than across categories. So part of what we're seeing is a trade down to necessities, where people care a lot about price, but then a trade up if people still really want things. It's the hollowing out of the middle within categories, this sort of barbell effect, that's probably been the most notable thing we've seen as we've gone throughout the first half.

Speaker 3: insight going into the second half about what's happening and what's happening in the broader market. I would the one other thing I'd say is that you probably can't pick up on just by looking at the category performance. There's actually much more variation going in within categories of the cross categories. So part of what we're seeing is a trade down to

Inside going into the second half about what's happening and what's happening in the broader market.

The one other thing I'd say is that you probably can't pickup on just by looking at the category performance, there's actually much more variation going in within categories or across categories. So part of what we're seeing is a trade down to <unk>.

Speaker 3: where people care a lot about price, but then a trade up if people still really want things. It's the hollowing out of the middle within categories, this sort of barbell effect that's probably been the most notable thing we've seen as we've gone throughout the first half.

Necessities, where people care a lot about price, but then a trade up if people still really want things. It's the Halloween out of the middle within categories. This sort of barbell effect, that's probably been the most notable thing we've seen as we've gone throughout.

The first half.

William Reuter: All right. And then just lastly for me, David, you gave some helpful commentary on stabilization of customers and those COVID cohorts starting to roll off. I guess, you also talked a little bit about what you're doing in terms of new customer acquisition. Do you expect that we will be at a-- Is there a date when you believe maybe we will see an increase in the number of actively engaged customers? Do you think that, you know, by the end of the year, we could actually see growth?

Alright, and then just lastly for me David You gave some helpful commentary on stabilization of customers in those COVID-19 cohorts starting to roll off.

Speaker 11: All right, and then just lastly for me, David, you gave some helpful commentary on stabilization of customers and those COVID cohorts starting to roll off. I guess you also talked a little bit about what you're doing in terms of new customer acquisition. Do you expect that we will be at a, is there a date when you believe maybe we will see an increase in the number of actively engaged customers? Do you think that, you know, by the end of the year, we could actually see growth?

I guess, you also talked a little bit about what youre doing in terms of new customer acquisition.

Do you expect that we will be at or is there a date. When you believe maybe we will see an increase in the number of actively engaged customers do you think that you know by the end of the year, we could actually see growth.

David Rawlinson: ... Yeah, it's a good question. I would certainly expect to see moderation over the next quarter or two on the type of decline that you're seeing in the 12-month. It makes it a little bit hard to get you full detail in the full 12-month trailing because things just have to cycle through. I would say what we have seen is a real ability to move the needle across specific initiatives with new customers. Some of those are still relatively small, and so we're just beginning to scale some of them.

Yes, it's a good question I would certainly expect to see moderation over the next quarter or two on the type of design.

Speaker 3: Yeah, it's a good question. I would certainly expect to see moderation over the next quarter or two on the type of design that you're seeing in the 12 months. It makes it a little bit hard to get you full detail in the full 12-month trailing.

Yes.

You are seeing in the 12 months it.

It makes it a little bit hard to get your full detail on that in the full 12 months.

Trailing.

Speaker 3: because things just have to cycle through. I would say what we have seen is a real ability to move the needle across the Pacific initiatives with new customers. Some of the

Because things just have to cycle through.

I would say, what we have seen as a real ability to move the needle.

Across specific initiatives with new customers.

Some of those are still relatively small and so we're just beginning to.

Speaker 3: are still relatively small and so we're just beginning to scale some of them.

Scale some of them.

David Rawlinson: But there's no reason to believe, based on the data we're seeing and the reaction we're having to some of our early initiatives, that we can't eventually get to new customer growth. I think in all brands, but especially in the QVC and HSN US brands.

Speaker 3: But there's no reason to believe based on the data we're seeing in the reaction we're having to some of our early initiatives.

But there is no reason to believe based on the data we are seeing and the reaction, we're having to some of our.

Early initiatives that we can't eventually get to new customer growth.

Speaker 3: that we can eventually get to new customer growth, I think in all brands, but especially in the QVC and HSN US brands.

I think in all brands, but especially in the QVC and HSN U S brands.

William Reuter: Great. That's all for me. Thank you.

Great. That's all for me thank you.

Greg Maffei: All right, operator, I think we're done with those questions. Thank you, investors, for your interest in Qurate, and we look forward to speaking with you next quarter, if not sooner.

All right operator, I think we are.

Speaker 4: All right operator, I think we're done with those questions. Thank you, investors for your interest in curing. And we look forward to speaking with you next quarter, if not sooner.

John with those questions. Thank you investors for your interest in jewelry and we look forward to speaking with you next quarter if not sooner.

David Rawlinson: Excellent. Thank you.

Okay.

Excellent. Thank you. Thank you everyone.

Operator 2: Thank you, everyone.

Operator 3: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Speaker 1: And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.?

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Speaker 12: Oh.

Speaker 12: Good Le.

Speaker 12: Oh.

Mhm.

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Speaker 12: Father my father.

Okay.

[music].

Speaker 12: So what?

Hello.

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Oh.

[music].

Q2 2023 Qurate Retail Inc Earnings Call

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