Q1 2025 QVC Group Inc Earnings Call

May 7, 2025

I'll put it on.

Welcome to the QVC Group 2025 Q1 Erning's call.

During the presentation all participants will be in OSOMI 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 keypad.

Speaker Change: As a reminder, this conference will be recorded May 7th, 2025. I would now like to turn the call over to Shane Kleinstein, Senior Vice President of Investor Relations. Please go ahead.

Shane Kleinstein: Thank you, and good afternoon. 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 QVC Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in QVC Group'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 Change: Thank you and good afternoon. Before we begin we'd like to remind everyone that this call includes certain foreign-looking statements within the meaning of the private security litigation reform act of 1995.

Speaker Change: Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent forms 10K and 10Q filed by our company and QVC with the SEC.

Speaker Change: These four-looking statements speak only as of the date of this call and QVC group expressly describes any application or undertaking to disseminate any updates or revisions to any four-looking statement contained here and to reflect any change in QVC groups' expectations with regard there too.

Speaker Change: or any change in events, conditions, or circumstances on which any such statement is based.

Speaker Change: Please note that we have published 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 note and schedules one and two, 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 will have QVC Group President and CEO David Rawlinson, QVC Group CFO and CAO Bill Wafford, and QVC Group Executive Chairman Greg Maffei. Now I'll hand the call over to David Rawlinson.

Speaker Change: On today's call, we will discuss certain non-GAAP financial measures, including adjusted oivre, adjusted oivre margin, free cash flow, and constant currency.

Speaker Change: Information regarding the comparable gap metrics along with required definitions and reconciliations including preliminary note and schedules one and two can be found in the earnings press release issue today or our earnings presentation which are available on our website.

Speaker Change: Today's speaking on learnings call we will have QVC Group President and CEO David Rollinson, QVC Group CFO and CAO Bill Wofford, and QVC Group Executive Chairman Greg Messay. Now land the call over to David Rollinson.

David Rawlinson II: Thank you, Shane, and good afternoon, everyone. We appreciate you joining us and your continued interest in the QVC Group. Q1 was a challenging quarter. We're operating in a tough macro environment, facing continued headwinds from declining linear TV viewership, weakening customer sentiment, and a volatile news cycle, most recently exacerbated by escalating tariff concerns. These recent developments intensified the pressure on our business as they did for the broader discretionary retail market. Total revenue declined 10%, driven by sharper than expected pressure on our top line, particularly from accelerated declines in linear TV viewership and reduced consumer confidence that we believe is a result of geopolitical uncertainty across our US and international markets. Our consumer remains heavily distracted by current events. In the US, there was a sharp year-over-year shift on linear television to news and business content consumption, which were both up double digits.

David Rawlinson: Thank you, Shane, and good afternoon, everyone. We appreciate you joining us and your continued interest in the QVC Group. Q1 was a challenging quarter. We're operating in a tough macro environment, facing continued headwinds from declining linear TV viewership, weakening customer sentiment, and a volatile news cycle, most recently exacerbated by escalating tariff concerns. These recent developments intensified the pressure on our business as they did for the broader discretionary retail market. Total revenue declined 10%, driven by sharper than expected pressure on our top line, particularly from accelerated declines in linear TV viewership and reduced consumer confidence that we believe is a result of geopolitical uncertainty across our US and international markets. Our consumer remains heavily distracted by current events. In the US, there was a sharp year-over-year shift on linear television to news and business content consumption, which were both up double digits.

Qur'an

Speaker Change: Thank you, Shane, and good afternoon everyone. We appreciate you joining us and your continued interest in the QVC group.

Q1 was the challenging quarter.

Speaker Change: We're operating in a tough macro environment facing continued headwinds from declining linear TV viewership, weakening customer sentiment, and a volatile news cycle most recently exacerbated by escalating tear of concerns.

Speaker Change: These recent developments intensified the pressure on our business as they did for the broader discretionary retail market.

Total Revenue to climb 10%

driven by sharper domestic pressure on our top line.

Speaker Change: Particularly from accelerated declines and linear TV viewership and reduced consumer confidence that we believe is a result of geophilitical uncertainty across our US and international markets.

Our consumer remains heavily distracted by current events.

Speaker Change: In the US there was a sharp year over year shift on linear television to news and business content consumption which were both up double digits.

David Rawlinson II: Based on Comscore data, overall television viewership was down, led by decreases in general entertainment, shopping, and lifestyle viewing, which were all down between high single digits and mid-teens. QVC International revenue declined 4% in constant currency, experiencing episodic softness not seen in prior quarters, driven by German elections, inflationary pressure in Japan, and compared to a particularly strong Easter in the UK in Q1 2024. Cornerstone was down 13%, driven by continued housing market stagnation. As a result of continued sales deleverage, consolidated Adjusted OIBDA declined 31% in constant currency. While there is still more work to do, we are building on what we've already done. Over the past two years, we've improved gross margins and aggressively managed costs. This includes closing the Fontana, California, fulfillment center, reducing labor expense for non-fulfillment functions, and moving our technology support to a managed services contract.

David Rawlinson: Based on Comscore data, overall television viewership was down, led by decreases in general entertainment, shopping, and lifestyle viewing, which were all down between high single digits and mid-teens. QVC International revenue declined 4% in constant currency, experiencing episodic softness not seen in prior quarters, driven by German elections, inflationary pressure in Japan, and compared to a particularly strong Easter in the UK in Q1 2024. Cornerstone was down 13%, driven by continued housing market stagnation. As a result of continued sales deleverage, consolidated Adjusted OIBDA declined 31% in constant currency. While there is still more work to do, we are building on what we've already done. Over the past two years, we've improved gross margins and aggressively managed costs. This includes closing the Fontana, California, fulfillment center, reducing labor expense for non-fulfillment functions, and moving our technology support to a managed services contract.

Speaker Change: Based on Comscore data, overall television viewership was down, led by decreases in general entertainment, shopping, and lifestyle viewing, which were all down between high single

QBC International Revenue Declan 4% In Constant Currency

Speaker Change: Experiencing episodic softness not seen in prior quarters driven by German elections inflationary pressure in Japan and compared to a particularly strong Easter in the UK in Q1 2024.

Cornerstone was down 13% driven by continued housing market stagnation.

Speaker Change: As a result of continued sales the leverage, consolidated adjusted Oibidah's decline 31% in constant currency.

Speaker Change: While there is still more work to do, we are building on what we've already done. Over the past two years, we've improved gross margins and aggressively managed costs.

This includes closing the Fontana, California, fulfillment center.

Reducing Labor Expense for Non-Fulfillment Functions

and moving our technology support to a managed services contract.

David Rawlinson II: As previously outlined, we are pursuing an additional $100 million of OIBDA opportunity by examining all areas of spending across the company, which is even more critical now in the current macro environment. This work began in late 2024, and we expect that it will continue through 2025 and into 2026. In late March, we announced a global reorganization, which impacted a significant portion of our team members, but is necessary to improve our cost structure. As part of this reorganization, we're completing the closure of the St. Petersburg, Florida, facility and fully transitioning HSN operations to our Studio Park campus in West Chester, Pennsylvania, by Q3 of this year. Some team members have already transitioned out, while others will remain through the end of the year. I want to sincerely thank all affected employees for their professionalism and dedication during this difficult but necessary action.

David Rawlinson: As previously outlined, we are pursuing an additional $100 million of OIBDA opportunity by examining all areas of spending across the company, which is even more critical now in the current macro environment. This work began in late 2024, and we expect that it will continue through 2025 and into 2026. In late March, we announced a global reorganization, which impacted a significant portion of our team members, but is necessary to improve our cost structure. As part of this reorganization, we're completing the closure of the St. Petersburg, Florida, facility and fully transitioning HSN operations to our Studio Park campus in West Chester, Pennsylvania, by Q3 of this year. Some team members have already transitioned out, while others will remain through the end of the year. I want to sincerely thank all affected employees for their professionalism and dedication during this difficult but necessary action.

Speaker Change: As previously outlined, we are pursuing an additional $100 million of Oyadah opportunity by examining all areas of spending across the company, which is even more critical now in the current macro-environment.

Speaker Change: This work began in late 2024 and we expect that it will continue through 2025 and into 2026.

Speaker Change: In late March, we announced the Global Reorganization, which impacted a significant portion of our team members, but is necessary to improve our cost structure.

Speaker Change: As part of this reorganization, we're completing the closure of the St. Petersburg Florida facility and fully transitioning HSN operations to our Studio Park campus in Westchester, Pennsylvania by Q3 of this year.

Speaker Change: Some team members have already transitioned out, while others will remain through the end of the year.

Speaker Change: I want to sincerely thank all affected employees for their professionalism and dedication during this difficult but necessary action.

David Rawlinson II: We also completed the first full quarter under the new IT managed services model I mentioned before. This change has enabled us to reinvest in critical technology upgrades, including fulfillment and order management systems. Cost discipline remains our priority, and we're focused on further reducing our cost to serve. Let me take a minute and give an update on tariffs. Given the inherent uncertainty in ongoing trade negotiations, it is difficult for us to quantify the potential impact of tariffs at this time. This is a challenging and very fluid situation, but we are taking broad-scale action to manage the impact. Five years ago, US goods sourced from China made up over 55% of our product costs. To date, we've reduced that proportion to less than 50%.

David Rawlinson: We also completed the first full quarter under the new IT managed services model I mentioned before. This change has enabled us to reinvest in critical technology upgrades, including fulfillment and order management systems. Cost discipline remains our priority, and we're focused on further reducing our cost to serve. Let me take a minute and give an update on tariffs. Given the inherent uncertainty in ongoing trade negotiations, it is difficult for us to quantify the potential impact of tariffs at this time. This is a challenging and very fluid situation, but we are taking broad-scale action to manage the impact. Five years ago, US goods sourced from China made up over 55% of our product costs. To date, we've reduced that proportion to less than 50%.

Speaker Change: We also completed the first full quarter under the new IT managed services model I mentioned before. This change has enabled us to reinvest in critical technology upgrades, including fulfillment and order management systems.

Speaker Change: Cost discipline remains at priority and we're focused on further reducing our cost to serve.

Speaker Change: Let me take a minute and give an update on tariffs.

Speaker Change: Given the inherent uncertainty in ongoing trade negotiations, it is difficult for us to quantify the potential impact of tariffs at this time.

This is a challenging and very fluid situation.

But we are taking broad-scale action to manage the impact.

Speaker Change: Five years ago, US goods, source from China, made up over 55% of our product cogs.

Today, we reduce that proportion to less than 50%.

David Rawlinson II: Still, China remains our largest import exposure, and given the current level of tariffs, we are working quickly to shift even more sourcing to other countries. Depending on where tariffs settle, we are targeting our sourcing mix so that no single country is worth more than 1/3 of our sourced goods by the end of the year. In the immediate term, we've canceled a number of contracts with vendors and will be prudent about placing new orders with vendors from China at the existing tariff levels. We are also actively negotiating with many vendors in an attempt to share the tariff impact and may seek to take price action on certain goods where necessary. Moving to QXH, total customer count declined 10% in the quarter, driven by a 9% decrease in existing customers, a 17% decrease in new, and a 13% decrease in reactivated customers.

David Rawlinson: Still, China remains our largest import exposure, and given the current level of tariffs, we are working quickly to shift even more sourcing to other countries. Depending on where tariffs settle, we are targeting our sourcing mix so that no single country is worth more than 1/3 of our sourced goods by the end of the year. In the immediate term, we've canceled a number of contracts with vendors and will be prudent about placing new orders with vendors from China at the existing tariff levels. We are also actively negotiating with many vendors in an attempt to share the tariff impact and may seek to take price action on certain goods where necessary. Moving to QXH, total customer count declined 10% in the quarter, driven by a 9% decrease in existing customers, a 17% decrease in new, and a 13% decrease in reactivated customers.

Speaker Change: Still, China remains our largest and most important exposure and given the current level of tariffs, we are working quickly to shift even more sourcing to other countries.

Speaker Change: Depending on where terror settles, we are targeting our sourcing mix so that no single country is worth more than one-third of our sourced goods by the end of the year.

Speaker Change: In the immediate term, we've cancelled a number of contracts with vendors and will be prudent about placing new orders with vendors from China at the existing tariff levels.

Speaker Change: We are also actively negotiating with many vendors and an attempt to share the tariff impact and may seek to take price action on certain goods where necessary.

Move in QX-8.

Speaker Change: Total customer count, decline 10% in the quarter, driven by a 9% decrease in existing customers, a 17% decrease in new, and a 13% decrease in reactivated customers.

David Rawlinson II: The decline in linear TV households continues to put pressure on our customer count year-over-year, and QxH TV minutes watched declined approximately 13%. As you can see on Slide 8 in our presentation, on a trailing twelve-month basis, customer count declined on a sequential basis with a decrease of approximately 2.6% versus December 2024. But our existing customers continue to purchase at healthy levels, spending on average $1,635 and purchasing 32 items in the 12 months ending March 31. At QVC, our best customers, who buy 20 or more items annually, also continue to purchase at very attractive levels. In the 12 months ending March 31, they bought 76 items and spent $3,975 on average of 1% year-over-year.

David Rawlinson: The decline in linear TV households continues to put pressure on our customer count year-over-year, and QxH TV minutes watched declined approximately 13%. As you can see on Slide 8 in our presentation, on a trailing twelve-month basis, customer count declined on a sequential basis with a decrease of approximately 2.6% versus December 2024. But our existing customers continue to purchase at healthy levels, spending on average $1,635 and purchasing 32 items in the 12 months ending March 31. At QVC, our best customers, who buy 20 or more items annually, also continue to purchase at very attractive levels. In the 12 months ending March 31, they bought 76 items and spent $3,975 on average of 1% year-over-year.

Speaker Change: The decline in linear TV households continues to put pressure on our customer count year over year in QXH TV minutes watched declined approximately 13 percent.

Speaker Change: As you can see on slide 8 in our presentation on a trailing 12 month basis customer count declined on a sequential basis with a decrease of approximately 2.6% versus December 2024.

Speaker Change: But our existing customers continue to purchase at healthy levels, spending on average $1,635 and purchasing 32 items in the 12 months ending March 31st.

Speaker Change: At QBC, our best customers, who buy 20 and more items annually, also continue to purchase at various attractive levels.

Speaker Change: In the 12 months ending March 31st, they bought 76 items and spent $3,975 on average of 1% year over year.

David Rawlinson II: We experienced strength from the relaunch of Logo by Lori Goldstein brand, and saw continued strength from our well-known brands like Kim Gravel and Diane Gilman. We also had success in the launch of Geoffrey Zakarian's wine, which sold out, and continued interest in floor care from Dyson. And we're seeing new customer growth on social from brands like Tupperware, which added nearly 9,000 new names. While our electronics business experienced lower sales, we continue to see outperformance in portable power, driven by brands EcoFlow and Halo in the hearing aid category. Our customers responded less favorably to handbags, luggage, and footwear and accessories, garden and home decor, and some of our core culinary brands.... Moving to QVC International.

David Rawlinson: We experienced strength from the relaunch of Logo by Lori Goldstein brand, and saw continued strength from our well-known brands like Kim Gravel and Diane Gilman. We also had success in the launch of Geoffrey Zakarian's wine, which sold out, and continued interest in floor care from Dyson. And we're seeing new customer growth on social from brands like Tupperware, which added nearly 9,000 new names. While our electronics business experienced lower sales, we continue to see outperformance in portable power, driven by brands EcoFlow and Halo in the hearing aid category. Our customers responded less favorably to handbags, luggage, and footwear and accessories, garden and home decor, and some of our core culinary brands.... Moving to QVC International.

Speaker Change: We experienced strength from the relaunch of logo by Lori Goldstein brand and saw continued strength from our well-known brands like Kim Gravelle and Diane Gilman. We also had success in the launch of Jeffery Zakaryans 1 which sold out and continued interest in floor care from Dyson.

After we're seeing

Speaker Change: Excuse me, and we're seeing new customer growth on social from brands like Tupperware which added nearly 9,000 new names.

Speaker Change: While our electronics business experience lower sales we continue to see out performance and portable power driven by brands EcoFlow and Halo in the hearing aid category.

Speaker Change: Our customers responded less favorably to handbags, luggage, input wear and accessories, garden and home decor and some of our core culinary brands.

Moving to QVC International

David Rawlinson II: As I mentioned before, we saw a change this quarter internationally, and revenue declined 4% in constant currency compared to prior quarters of broadly stable revenue performance. National elections in Germany, inflationary pressure in Japan, a particularly strong Easter in the UK in Q1 2024, and weakened consumer sentiment led to revenue declines across all markets. Total customer count declined 3% in the quarter, driven by a 2% decrease in existing customers and a 6% and 5% decrease in new and reactivated customers, respectively. Finally, our Cornerstone Brands continue to operate in a depressed housing market, leading to lower consumer demand. Cornerstone revenue declined 13% in the first quarter, with softness across all brands. We have, however, officially kicked off our transformation efforts.

David Rawlinson: As I mentioned before, we saw a change this quarter internationally, and revenue declined 4% in constant currency compared to prior quarters of broadly stable revenue performance. National elections in Germany, inflationary pressure in Japan, a particularly strong Easter in the UK in Q1 2024, and weakened consumer sentiment led to revenue declines across all markets. Total customer count declined 3% in the quarter, driven by a 2% decrease in existing customers and a 6% and 5% decrease in new and reactivated customers, respectively. Finally, our Cornerstone Brands continue to operate in a depressed housing market, leading to lower consumer demand. Cornerstone revenue declined 13% in the first quarter, with softness across all brands. We have, however, officially kicked off our transformation efforts.

Speaker Change: As I mentioned before, we saw a change this quarter internationally and revenue declined 4% in constant currency compared to prior quarters of broadly stable revenue performance.

Speaker Change: National elections in Germany, inflationary pressure in Japan, a particularly strong easter in the UK in Q1 2024, and weakened consumer sentiment led to revenue declines across all markets.

Speaker Change: Total customer clown declined 3% and the quarter driven by a 2% decrease in existing customers and a 6% and 5% decrease in new and reactivated customers respectively.

Finally!

Speaker Change: excuse me finally our cornerstone brands continue to operate in a depressed housing market leading to lower consumer demand.

Speaker Change: Cornerstone revenue declined 13% in the first quarter with softness across all brains.

Speaker Change: We have, however, officially kicked off our transformation efforts. We anticipate value from the transformation will be recognized in the last three quarters of the year, although tariffs are likely to have some adverse impact on value.

David Rawlinson II: We anticipate value from the transformation will be recognized in the last three quarters of the year, although tariffs are likely to have some adverse impact on value. One other point to note: Ryan McKelvey, President of Cornerstone Brands, will be retiring after 25 years. We will commence an internal and external search for a new president of Cornerstone. In the interim, Tom Bazone, President of Frontgate, will assume leadership responsibility and report to me, effective immediately. Ryan will remain with the company for a transition period. We thank Ryan for his quarter century of distinguished and capable service to the company, and wish him well in retirement. Despite continued challenges in our core business, exacerbated by macroeconomic changes, we are intently focused on transforming into a live social shopping company and believe we have the assets needed to win in this space.

David Rawlinson: We anticipate value from the transformation will be recognized in the last three quarters of the year, although tariffs are likely to have some adverse impact on value. One other point to note: Ryan McKelvey, President of Cornerstone Brands, will be retiring after 25 years. We will commence an internal and external search for a new president of Cornerstone. In the interim, Tom Bazone, President of Frontgate, will assume leadership responsibility and report to me, effective immediately. Ryan will remain with the company for a transition period. We thank Ryan for his quarter century of distinguished and capable service to the company, and wish him well in retirement. Despite continued challenges in our core business, exacerbated by macroeconomic changes, we are intently focused on transforming into a live social shopping company and believe we have the assets needed to win in this space.

One other point to note.

Speaker Change: Ryan McKelvie, President of Cornerstone Brands, will be retiring after 25 years.

Speaker Change: We will commence an internal and external search for a new president of Cornerstone and the interim Tom Bazone president of Frontgate will assume leadership responsibility and report to me effective immediately.

Ryan will remain with the company for a transition period.

Speaker Change: We beg Ryan for his quarter century of distinguished and capable service to the company and wish him well in retirement.

Despite continued challenges in our core business.

exacerbated by microeconomic changes.

Speaker Change: We are intently focused on transforming into a large social shopping company and believe we have the assets needed to win on this base. I would like to share some additional highlights that demonstrate the progression of our win growth strategy.

David Rawlinson II: I would like to share some additional highlights that demonstrate the progression of our WIN Strategy. First, we signed a strategic agreement with TikTok for the first 24/7 live shopping experience in the US, and we are now live on TikTok 24/7 on our QVC account. We use our host, along with other creators, to sell products directly through TikTok Shop, allowing purchases to be made on platform. The success of our streaming and social businesses is crucial, and we are measuring our progress in a handful of ways. Our most important metric is revenue, and we estimate that the percent of QXH revenue that was generated during Q1 through streaming and social platforms was in the mid- to high-single digits. We're seeing strong platform engagement, another important metric.

David Rawlinson: I would like to share some additional highlights that demonstrate the progression of our WIN Strategy. First, we signed a strategic agreement with TikTok for the first 24/7 live shopping experience in the US, and we are now live on TikTok 24/7 on our QVC account. We use our host, along with other creators, to sell products directly through TikTok Shop, allowing purchases to be made on platform. The success of our streaming and social businesses is crucial, and we are measuring our progress in a handful of ways. Our most important metric is revenue, and we estimate that the percent of QXH revenue that was generated during Q1 through streaming and social platforms was in the mid- to high-single digits. We're seeing strong platform engagement, another important metric.

Speaker Change: First, we signed a strategic agreement with TikTok for the first 24-7 live shopping experience in the US and we are now live on TikTok 24-7 on our QVC account.

Speaker Change: We use our host along with other creators to sell products directly through Tiktok Shop allowing purchases to be made on platform.

Speaker Change: The success of our streaming and social businesses is crucial and we are measuring our progress in a handful of ways.

Speaker Change: Our most important metric is revenue, and we estimate that the percent of QXH revenue that was generated during Q1 through streaming and social platforms was in the mid-to-high

We're seeing strong platform engagement, another important metric.

David Rawlinson II: Combined minutes watched on social and streaming platforms are up 26% over last year, growing to 1.4 billion minutes. Streaming monthly active users grew 131%, and we had our largest non-holiday revenue month ever in March. Back to social. Across all of our social platforms, including TikTok, we now have a combined over 7 million followers. To help you track our progress, we will look to more regularly provide updates on the social and streaming businesses. We now have thousands of items listed on TikTok, and that number continues to grow, and we are working with over 85,000 creators. We continue to add new categories like beauty, and are scaling our processes for working with creators. We are using our newly formed content factory to produce various forms of content for all of our linear and social platforms.

David Rawlinson: Combined minutes watched on social and streaming platforms are up 26% over last year, growing to 1.4 billion minutes. Streaming monthly active users grew 131%, and we had our largest non-holiday revenue month ever in March. Back to social. Across all of our social platforms, including TikTok, we now have a combined over 7 million followers. To help you track our progress, we will look to more regularly provide updates on the social and streaming businesses. We now have thousands of items listed on TikTok, and that number continues to grow, and we are working with over 85,000 creators. We continue to add new categories like beauty, and are scaling our processes for working with creators. We are using our newly formed content factory to produce various forms of content for all of our linear and social platforms.

Speaker Change: Combined minutes watched on social and streaming platforms are up 26% over last year growing to 1.4 billion minutes

Speaker Change: Streaming monthly active users grew 131% and we had our largest non-holiday revenue month ever in March.

Speaker Change: Back to social, across all of our social platforms, including TikTok, we now have a combined over 7 million followers.

Speaker Change: To help you track our progress, we will look to more regularly provide updates on the social and streaming businesses.

We now have thousands of items listed on TikTok.

Speaker Change: And that number continues to grow. In a working we are working with over 85,000 creators.

Speaker Change: We continue to add new categories like beauty and are scaling our processes for working with creators. We are using our newly formed content battery to produce various forms of content for all of our linear and social platforms.

David Rawlinson II: Later this month, we'll kick off the second year of our Age of Possibility campaign with our first TikTok Shop Super Brand Day. We'll offer eight hours of creator and celebrity-led shopping rooted in celebration, empowerment, and connection, all live on TikTok. We have several well-known celebrities who will be joining us. This shows the power of combining our core capabilities and relationships with TikTok's scaled platform, and we are also excited to announce the launch of our partnership with TikTok in the UK in February, using what we are learning from our US partnership to inform how we go to market internationally. We also launched a new experience with American Airlines this week, where customers are now able to watch episodes from our QVC Plus and HSN Plus channels on American's free in-flight entertainment platform. We have strengthened our leadership team.

David Rawlinson: Later this month, we'll kick off the second year of our Age of Possibility campaign with our first TikTok Shop Super Brand Day. We'll offer eight hours of creator and celebrity-led shopping rooted in celebration, empowerment, and connection, all live on TikTok. We have several well-known celebrities who will be joining us. This shows the power of combining our core capabilities and relationships with TikTok's scaled platform, and we are also excited to announce the launch of our partnership with TikTok in the UK in February, using what we are learning from our US partnership to inform how we go to market internationally. We also launched a new experience with American Airlines this week, where customers are now able to watch episodes from our QVC Plus and HSN Plus channels on American's free in-flight entertainment platform. We have strengthened our leadership team.

Speaker Change: And later this month, we'll kick off the second year of our Age of Possibility campaign with our first TikTok shot, Super Brand Day.

Speaker Change: We'll offer 8 hours of creator and celebrity-led shopping rooted in celebration, empowerment, and connection.

All love on tiktok.

We have several well-known celebrities who will be joining us.

Speaker Change: This shows the power of combining our core capabilities and relationships with Tiktok

Speaker Change: And we are also excited to announce the launch of our partnership with TikTok in the UK and February using what we are learning from our US partnership to inform how we go to market internationally.

Speaker Change: We also launched a new experience with American Airlines this week, where customers are now able to watch episodes from our QVC Plus and HSN Plus channels on American's free and flight entertainment platform.

We have strengthen our leadership team.

David Rawlinson II: We hired two new leaders that bring a wealth of industry expertise. Alex Wellen is our new Chief Growth Officer and has already hit the ground running, leading our growth initiatives. With over 20 years of leadership in digital media, product innovation, and strategic growth, Alex will define and lead our growth strategy for the W in win, wherever she shops. He will oversee a multifunctional team, including US social selling, streaming, digital, new business development, and platform distribution.... We also welcomed Toni Williams, our new Chief People Officer, at the end of April. Toni brings more than 25 years of global, strategic, and operational business experience, having led people across a broad range of industries, leading transformation, change management, organizational effectiveness, culture, and other strategies to support increased market share, revenues, and profitability, while ensuring the people experience remains a core enterprise focus.

David Rawlinson: We hired two new leaders that bring a wealth of industry expertise. Alex Wellen is our new Chief Growth Officer and has already hit the ground running, leading our growth initiatives. With over 20 years of leadership in digital media, product innovation, and strategic growth, Alex will define and lead our growth strategy for the W in win, wherever she shops. He will oversee a multifunctional team, including US social selling, streaming, digital, new business development, and platform distribution.... We also welcomed Toni Williams, our new Chief People Officer, at the end of April. Toni brings more than 25 years of global, strategic, and operational business experience, having led people across a broad range of industries, leading transformation, change management, organizational effectiveness, culture, and other strategies to support increased market share, revenues, and profitability, while ensuring the people experience remains a core enterprise focus.

Speaker Change: We hire two new leaders that bring a wealth of industry expertise.

Speaker Change: Alex Wellen is our new chief growth officer and has already hit the ground running, leading our growth initiatives.

Speaker Change: With over 20 years of leadership in digital media, product innovation, and strategic growth, Alex will define and lead our growth strategy for the W and when, wherever she shops.

Speaker Change: He will oversee a multi-functional team including US social selling, streaming, digital, new business development, and platform distribution.

Speaker Change: We also welcomed Tony Williams, our new Chief People Officer at the

Speaker Change: Tony brings more than 25 years of global strategic and operational business experience, having led people across a broad range of industries.

Speaker Change: Leading transformation, change management, organizational effectiveness, culture, and other strategies to support increased market share, revenues and profitability while ensuring the people experience remains a core enterprise focus.

David Rawlinson II: Finally, I would like to acknowledge that Greg Maffei will continue to serve as our Executive Chairman, and I look forward to continuing to benefit from his leadership and advice. In uncertain times such as these, the core insight that guides our business is more relevant than ever. For a valuable portion of consumers, shopping is an opportunity to explore, dream, and connect. This is why social shopping is exploding on platforms like TikTok and Facebook, and it's why we believe in QVC Group's long-term strategy despite the current headwinds. Now, I'll turn the call to Bill to review the Q1 financial results for each of our businesses.

David Rawlinson: Finally, I would like to acknowledge that Greg Maffei will continue to serve as our Executive Chairman, and I look forward to continuing to benefit from his leadership and advice. In uncertain times such as these, the core insight that guides our business is more relevant than ever. For a valuable portion of consumers, shopping is an opportunity to explore, dream, and connect. This is why social shopping is exploding on platforms like TikTok and Facebook, and it's why we believe in QVC Group's long-term strategy despite the current headwinds. Now, I'll turn the call to Bill to review the Q1 financial results for each of our businesses.

Speaker Change: Finally, I would like to acknowledge that Greg Mfei will continue to serve as our executive chairman. And I look forward to continuing to benefit from his leadership and advice.

Speaker Change: An uncertain time such as these, the core insight that God's our business is more relevant than ever.

Speaker Change: For a valuable portion of consumers, shopping is an opportunity to explore, dream and connect.

Speaker Change: This is why social shopping is exploding on platforms like TikTok and Facebook.

Speaker Change: And that's why we believe in QVC Group's long-term strategy despite the current headwinds. Now I'll turn the call to Bill to review the Q1 financial results for each of our businesses.

Bill Wafford: Thank you, David, and good evening, everyone. Unless otherwise noted, my comments compare financial performance for the three months ended March 31, 2025, to the same period in 2024. Starting with QXH. Revenue declined by 11% due to lower unit volumes, lower average selling price, and less shipping and handling revenue, with a partial offset and favorable returns rate. From a category perspective, home revenue decreased by 9%, driven by reduced demand in culinary, a challenging garden season, and overall reduced demand for today's special value events. We did see some bright spots in the fitness and wellness categories, driven by supplements and Denise Austin, as well as growth in our seasonal decor brands of Valerie Parr Hill, Slatkin & Co., and Mackenzie-Childs. Apparel revenue decreased 9%.

Bill Wofford: Thank you, David, and good evening everyone. Unless otherwise noted, my comments compare an intro performance for the three months ended March 31st, 2025 to the same period in 2024.

Bill Wofford: Starting with QXH. Revenue declined by 11% due to lower unit volumes, lower average selling price, and less shipping and handling revenue, with a partial offset and favorable returns rate.

Bill Wofford: from a category perspective, home revenue decreased by 9% driven by reduced demand in culinary, a challenging garden season, and overall reduced demand for today's special value of X.

Bill Wofford: With this, we did see some bright spots in the fitness and wellness categories driven by supplements and in these Austin.

Bill Wofford: As well as growth in our seasonal decor brands of Valerie Parhill, Fletkin Co., and McKenzie Childs.

Repair Revenue Decreased 9%

Bill Wafford: Beauty revenue fell by 12% in Q1, driven by the bath and body category. We are encouraged by the growth we are seeing with new brands like No Makeup Makeup, and new technology brands like CurrentBody Skin Red Light Therapy. Accessories experienced another challenging quarter with a 14% decline, driven by footwear, loungewear, and handbags. Electronics declined 18% due to lower demand for computers and TVs. Bright spots included audio and portable power at both QVC and HSN. Adjusted OIBDA margin contracted 310 basis points. Gross margin declined approximately 205 basis points, with slightly higher product margins, more than offset by fulfillment pressure and sales deleverage. Product margins increased 10 basis points, driven by a mix shift to higher margin products, improved product COGS, and better return rates, partially offset by lower initial margin.

Bill Wofford: Beauty revenue fell by 12% in Q1, driven by the Bath & Body category. We are encouraged by the growth we are seeing with new brands like No Makeup Makeup and new technology brands like Current Body Skin Red Light Therapy.

Bill Wofford: Accessories experienced another challenging quarter with a 14% decline driven by footwear, loungewear and handbags.

Bill Wofford: Electronics declined 18% due to lower demand for computers and TVs. Brightspots included audio and portable power at both QVC and HSN.

Adjusted over the margin contracted 310 basis points.

Bill Wofford: Gross margin declined approximately 205 basis points with slightly higher product margins more than offset by fulfillment pressure and sales delivery.

Bill Wofford: Product margins increase 10 basis points, driven by mixed shift to higher margin products, improved product cogs, and better return rates. Personally offset by lower initial margin.

Bill Wafford: Fulfillment expenses were unfavorable, 200 basis points due to higher labor costs, increased freight rates, and sales deleverage. On an aggregate dollar basis, operating expenses decreased 11% and SG&A expenses decreased 7%. Operating expenses decreased $14 million, largely driven by lower commissions. SG&A expense decreased $12 million, driven by savings from our new managed IT services contract, but were unfavorable by approximately 110 basis points due to sales deleverage. Moving to QVC International. My comments will focus on constant currency results. Revenue declined 4%, reflecting a 4% decrease in units shipped and a 1% decrease in average selling price. From a category perspective, QVC International experienced growth in jewelry and electronics, offset by softness in apparel, beauty, home, and accessories. Japan net revenue declined 7%, and Germany and the UK declined 1% and 2%, respectively.

Bill Wofford: The film and expenses were unfavorable 200 basis points due to higher labor costs, increased freight rates, and sales

Bill Wofford: on an aggregate dollar basis operating expenses decreased 11% and SGNA expenses decreased 7%.

Operating expenses decrease $14 million, largely driven by lower commissions.

Bill Wofford: S-GNA expense decreased 12 million dollars, driven by savings from our new, managed IT services contract, but were unfavorable by approximately 110 basis points due to

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

Bill Wofford: Revenue Decline 4% Reflecting a 4% decrease in units shipped and a 1% decrease in average

Bill Wofford: From a category perspective, QVC International Xscrains Growth and Jewelry in Electronics, offset by softness in apparel, beauty, home, and accessories.

Bill Wofford: Japan net revenue declined 7% and Germany and the UK declined 1% and 2% respectively.

Bill Wafford: Adjusted OIBDA decreased 13%, and adjusted OIBDA margin declined 140 basis points. Gross margin decreased 80 basis points due to higher fulfillment costs, partially offset by product margin gains. Fulfillment costs increased due to higher variable wage rates in Europe. Product margin strength was due to favorable returns. SG&A expenses decreased 1% due to lower personnel expenses. SG&A margin was unfavorable by approximately 40 basis points due to sales deleverage. Moving to Cornerstone. Revenue declined 13% in the quarter, as we continue to experience soft demand for interior and outdoor furniture and decor in our home brands from continued challenges in the home sector. Adjusted OIBDA margin decreased 460 basis points, driven by costs for outside services related to the transformation plan Cornerstone is implementing, higher personnel costs, and sales deleverage.

Bill Wofford: Adjusted oil but it decreased 13% and adjusted oil but a margin declined 140 basis points.

Bill Wofford: Gross margin decreased 80 basis points due to higher fulfillment costs partially offset by product margin gains. Facilment costs increased due to higher variable wage rates in Europe .

Product margin strength was due to favorable returns.

S-GNA expenses decrease 1% due to the lower personnel expenses.

Bill Wofford: KSGNA margin was unfavorable by approximately 40 basis points due to sales and

Moving to Cornerstone

Bill Wofford: Revenue declined 13% in the corner as we continue to experience soft demand for interior and outdoor furniture and decor in our home brands from continued challenges in the home sector.

Bill Wofford: Adjusted orbit on Mars and decreased 460 basis points driven by costs for outside services related to the Transformation Flame, coordinate stone is implementing, higher personnel costs, and sales de-leverage.

Bill Wafford: Let me also provide additional commentary on tariffs. Tariffs are adding additional uncertainty to an already challenged retail environment. We continue to monitor tariff impact, which is difficult to model given the amount of volatility we've seen in tariff rates. As David mentioned, our teams have a number of mitigation strategies underway, including sourcing diversification, limiting purchase orders, vendor negotiations, and may include price changes. If tariffs persist at the current elevated levels, it is our expectation the market will likely see lower consumer demand, particularly in discretionary retail. Turning to cash flow and the balance sheet for the quarter. In Q1, free cash flow was a use of $148 million, compared to a use of $27 million last year. As a reminder, Q1 is traditionally a use of cash due to the seasonal nature of our business.

Let me also provide additional commentary on tariffs.

Bill Wofford: Terrace are adding additional uncertainty to an already challenged retail environment.

Bill Wofford: We continue to monitor tariff impact, which is difficult to model given the amount of volatility we've seen in tariff rates.

Bill Wofford: As David mentioned, our teams have a number of mitigation strategies underway, including sourcing diversification, limiting purchase orders, vendor negotiations.

and may include present, present, and present.

Speaker Change: If tariffs persist at the current elevated levels, it is our expectation the market will likely see lower consumer demand, particularly in discretionary retail.

Turning the cash flow and the balance sheet for the quarter.

Speaker Change: In Q1, pre-cash flow was the use of $148 million, compared to the use of 27 million last year.

Speaker Change: As a reminder, Q1 is traditionally a use of cash due to the seasonal nature of our business.

Bill Wafford: The decrease in cash flow was primarily due to cash used in operations and higher payments for TV distribution rights. Our TV distribution payments fluctuate year-over-year, depending on renewal cycles. Looking at the QVC Group Inc debt profile, as of March 31, 2025, net debt was $4.7 billion, and the QVC Group revolver had $185 billion drawn. QVC Group had total cash of $833 million, of which $295 million was at QVC Inc, $206 million at Liberty Interactive LLC, and $241 million at QVC Group. In February, we paid off the remaining $585 million of QVC Inc's 4.45% 2025 senior notes at maturity, funded with our revolver and cash on hand.

Speaker Change: The decrease in cash flow was primarily due to cash used in operations and higher payments for TV distribution rights.

Our KV distribution payments fluctuate your over-year depending on renewal cycles.

Speaker Change: Looking at the QVC Group Inc. Dept Profile as of March 31st, 2025, net debt was 4.7 billion, and the QVC Group Revolver had 185 billion dollars drawn.

Speaker Change: KVC Group had total cash of 833 million of which 295 million was at KVC Inc. 206 million at Libertary Interactive LLC and 241 million at KVC Group.

Speaker Change: In February , we paid off the remaining $585 million of QVC Inc's 4.45% 2025 senior notes at maturity, funded with our revolver and cash on hand.

Bill Wafford: Our leverage ratio as of March 31, 2025, as defined by the QVC revolving credit facility, was 3.7 times, excluding Cornerstone, compared to our maximum covenant threshold of 4.5 times. Please note that our covenant OIBDA includes adjusted OIBDA of QVC Inc, as Cornerstone was removed as a borrower under the QVC credit agreement as of April 1. We are focused on taking the necessary steps to strengthen our capital structure and enhance long-term value for our business, customers, partners, and investors. We're in the process of evaluating a range of proactive financial and strategic alternatives in light of the changing macroeconomic environment, including continued cord-cutting, headwinds from recently announced tariffs, and company leverage. This review is ongoing and no decisions have been made at this stage. We will provide updates if and when there are material developments that warrant further communication.

Speaker Change: Our leverage ratio, as of March 31, 2025, is defined by the QVC Revolving Credit Facility with 3.7 times, excluding cornerstone.

Compared to our maximum covenant threshold of 4.5 times.

Speaker Change: Please note that our Covenant Oivida includes adjusted Oivida of KVC Inc., as cornerstone was removed as a borrower under the KVC credit agreement as of April 1st.

Speaker Change: We are focused on taking the necessary steps to strengthen our capital structure and enhance long-term value for our business, customers, partners, and investors.

Speaker Change: We are in the process of evaluating a range of proactive financial and strategic alternatives in light of the changing macroeconomic environment, including continued court cutting, headwinds from recently announced tariffs, and company leverage.

Speaker Change: This review is ongoing and no decisions have been made at this stage. We will provide updates if and when there are material developments that warrant further communication.

Bill Wafford: Finally, as mentioned previously, on 2 December 2024, we transferred our stock from the Nasdaq Global Select Market to the Nasdaq Capital Market and began a 180-day calendar period to regain compliance after trading below the $1 minimum. As part of this extension, we have committed to effect a reverse stock split, if necessary, to remain on Nasdaq after the 180-day period. Our annual shareholder meeting is on 12 May 2025, and if we receive stockholder approval for a reverse stock split, we would look to implement as soon as possible with the intent to regain compliance before the expiration of our compliance period in June. Now, I'll turn the call over to Greg.

Speaker Change: Finally, as mentioned previously, on December 2nd, 2024, we transferred our stock from the NASDAQ Global Select Market to the NASDAQ Cabinet Market and began a 180-day calendar period to regain compliance after trading below the $1 minimum.

Thank you.

Speaker Change: As part of this extension, we've committed to affect a reverse stock split, if necessary, to remain on NASDAQ after the 180-day period.

Speaker Change: Our annual shareholder meeting is on May 12th and if we receive stockholder approval for a reverse stock split We would look to implement as soon as possible with the intent to regain compliance before the exploration of our compliance period in June .

Now I'll turn the call over to Greg.

Greg Maffei: Thank you, David and Bill. Well, as you can hear, the Q team is very focused on execution despite the challenging macro environment. Q is now navigating the evolving tariff headwinds along with the rest of retail and recognizing the magnitude of this impact will have on the cost structure of Q and overall consumer sentiment. But Q continues to remain focused on balancing growth under the WIN Strategy and the large opportunity they have in social shopping, with cost actions to better position the operating business for the tough macro environment and the decline in linear television subs. At the same time, we are focused on strengthening capital structure and are proactively evaluating financial and strategic alternatives to do so. With that, operator, I'll open the line for questions.

Thank you David and Bill.

Greg Maffei: Well, as you can hear, the Q-Team is very focused on execution despite.

Greg Maffei: The challenging macro environment. He was now navigating the evolving pair of headwinds along with the rest of retail.

Greg Maffei: and recognizing the magnitude of this impact will have on the cost structure of you and overall consumer sentiment.

Greg Maffei: A few continues to remain focused on balance and growth under the wind strategy and the large opportunities they have in social shopping.

Greg Maffei: With cost actions to better position the operating business for the tough macro environment and the decline in linear television subs.

At the same time.

Greg Maffei: We are focused on strengthening capital structure and are proactively evaluating financial and strategic alternatives to do so.

And with that operator, I'll open the line for questions.

Operator: Thank you. The first question comes from the line of William Rueter with Bank of America. Please proceed.

Thank you.

Speaker Change: The first question comes from the line of William Ruder with Bank of America. Please proceed.

Rob Rigby: Hey, guys. Good evening. Thank you for taking our questions. This is Rob Rigby on for Bill. So, I guess first, regarding the TikTok Shop and social spending, it seems like the current annual run rate is roughly around $400 million for social and streaming spending. I guess, what does that ramp look like over three years? And I guess, what do you expect will drive that growth? Thank you.

Speaker Change: Hey guys, good evening. Thank you for taking our questions. This is Rob Brick beyond her bill.

So I guess first regarding the tiktok shop and

Speaker Change: Social spending. It seems like the current annual run rate is roughly around $400 million per social and streaming spending. I guess what does that grant look like over three years and I guess what do you expect to drive that growth?

Bill Wafford: Yeah, let me start and then let Bill pick up. I think what we've said is that social and streaming today is $hundreds of millions. And then I think what we said in November was that we thought social and streaming together over a three-year period could get to $1.5 billion. And so that dimensionalizes a little bit what the growth rate looks like over the next three years. And we think we're growing fast right now and on track to achieve on that scale. In terms of what drives the growth, a big part of it is just going to be new customer acquisition, as well as some customer transition.

David Rawlinson: Yeah, let me start and then let Bill pick up. I think what we've said is that social and streaming today is $hundreds of millions. And then I think what we said in November was that we thought social and streaming together over a three-year period could get to $1.5 billion. And so that dimensionalizes a little bit what the growth rate looks like over the next three years. And we think we're growing fast right now and on track to achieve on that scale. In terms of what drives the growth, a big part of it is just going to be new customer acquisition, as well as some customer transition.

Speaker Change: Yeah, let me start and then let Bill pick up. I think what we've said is that social and streaming today is hundreds of millions.

Speaker Change: And then I think what we said in November was that we thought social and streaming together over a three-year period.

If you get to a billion and a half

Speaker Change: and so that dimension arises a little bit what the great great looks like over the over the next three years and

Speaker Change: We think we are growing fast right now and on track to achieve on that scale in terms of what drives the growth.

Speaker Change: A big part of it is just going to be a new customer acquisition.

as well as some customer transition, there's...

Bill Wafford: There's some cord-cutting capture that's happening with former customers, but we're also seeing good rates of being able to acquire new customers with reasonable economics on the social and streaming platform. One of the things that's really great, especially about the social strategy, is that it's a pre-aggregated audience. There are already tens of millions, in some cases, hundreds of millions of people, and billion, if not billions, on those platforms. And so you get to play in a very growing, large stream of potential customers who are increasingly used to seeing shopping content in their social feeds and who are increasingly converting.

David Rawlinson: There's some cord-cutting capture that's happening with former customers, but we're also seeing good rates of being able to acquire new customers with reasonable economics on the social and streaming platform. One of the things that's really great, especially about the social strategy, is that it's a pre-aggregated audience. There are already tens of millions, in some cases, hundreds of millions of people, and billion, if not billions, on those platforms. And so you get to play in a very growing, large stream of potential customers who are increasingly used to seeing shopping content in their social feeds and who are increasingly converting.

Some cord cutting

Speaker Change: Capture that's happening with former customers, but we're also seeing good rates of being able to acquire new customers with reasonable economics on the social and streaming.

platform.

Speaker Change: One of the things that's really great, especially about the social strategy, is that it's a pre-aggregated audience. They're already tens of millions, in some cases hundreds of millions of people. It's not billions on those platforms, and so you get to play in a very...

Speaker Change: Growing large stream of potential customers who are increasingly used to seeing shopping content.

and their social feeds and who are increasingly converting.

David Rawlinson II: ... over to purchases within their social experience. And so, that's the magnitude of the opportunity. Anything you'd add, Bill?

David Rawlinson: ... over to purchases within their social experience. And so, that's the magnitude of the opportunity. Anything you'd add, Bill?

Speaker Change: Over to purchases within their social experience and so that's the magnitude of the opportunity. Anything you'd add to. No, and I think to run rate I mean you're kind of taking what the pro-rata percentage is now and just carrying that across I think we're obviously our aspiration is you know David said you know over the three year period but you know probably put us on a little bit higher trajectories than that when you're directly in the right ballpark there.

Bill Wafford: No, and I think the run rate, I mean, you're kind of taking what the pro rata percentage is now and just carrying that across. I think we've, obviously, our aspiration is, you know, David said, you know, over the three-year period, would, you know, probably put us on a little bit higher trajectory than that, but you're directionally in the right ballpark there.

Rob Rigby: Great, thank you. Appreciate that color. And then second one, from us, would just be, regarding capital allocation. Appreciate the, the commentary around evaluating, strategic alternatives and financial alternatives. But is the plan near term to, to still use Free Cash Flow to, to repay the revolver balance? And then if you have any updated color, regarding, what the use of proceeds would be on, on the potential sale of the St. Petersburg facility. Thank you.

Speaker Change: Great. Thank you. Appreciate that color. And then second one, I would just be regarding capital allocation. Appreciate the commentary around evaluating strategic alternatives and financial alternatives. But is the plan near term to still use free cash flow to repay the revolver balance?

Speaker Change: and then if you have any updated color regarding what the use of proceeds would be on the potential sale of the St. Petersburg facility. Thank you.

Bill Wafford: Yeah, I think, potential sale of the St. Petersburg facility is, you know, obviously not gonna be, you know, in the next quarter or two. And don't expect that to be largely material to the overall size of the enterprise. So I don't think there's, you know, a big windfall, that we're looking on that. In terms of, you know, how we've managed capital structure and free cash flow, I mean, no change right now, but like we said, you know, we're evaluating what our, you know, opportunities are going forward.

Speaker Change: Yeah, I think potential sale of the St. Petersburg facilities, you know, obviously not going to be, you know, in the next quarter or two, and don't expect that to be largely material to the overall size of the enterprise, so I don't think there's, you know, a big windfall.

Speaker Change: that we're looking on that in terms of you know how we've managed to have a short-term fee cash flow I mean no change right now but like we said you know we're evaluating what are you know opportunities are going forward

Rob Rigby: Great. That's all for me. Thank you.

Great, that's all from me. Thank you.

Bill Wafford: Thanks, Rob.

Thanks, Rob.

Operator: The next question comes from the line of Karru Martinson with Jefferies. Please proceed.

Speaker Change: The next question comes from the line of Kuru Martinson with Jeffries, please proceed.

Karru Martinson: Good afternoon. Just in terms of that proactive financial option review, does this mean that, you know, the RCF renewal is off the table? You know, can you kind of elaborate where we are in terms of the liquidity needs of the company, and where would we access that from?

Good afternoon. Um

Speaker Change: Just in terms of that proactive financial option review, does this mean that the RCF renewal is off the table, can you kind of elaborate where we are in terms of the liquidity needs of the company, and where would we access that from?

Bill Wafford: So, I mean, we've given you our, you know, kind of where we are in terms of the leverage ratio and, you know, kind of what that gives us in current liquidity right now.

Speaker Change: So, I mean, we've given you where we are in terms of the leverage ratio and what that gives us in current liquidity right now. We haven't said anything is off the table right now, but that's why we're evaluating what all options are given what the current headwinds are and where the business is today.

Karru Martinson: Mm-hmm.

Bill Wafford: We haven't said anything is off the table, you know, right now, but. That's why we're evaluating, you know, what all options are, you know, given, you know, kind of what the current headwinds are and where the business is today.

Karru Martinson: And then when you look at kind of your customer count, and while recognizing your social is growing nicely, but, you know, losing, call it 200,000 customers with the linear minutes down, I mean, is that just kind of the new run rate that we have to work through here for the next, you know, year while social ramps up? Or how should we think about kind of that sales deleveraging that we saw in the first quarter?

Speaker Change: and then when you look at kind of your customer count

and while recognizing that social is growing nicely

Speaker Change: But, you know, losing, call it 200,000 customers with the linear minutes down.

Speaker Change: Is that just kind of the new run rate that we have to work through here for the next year while social ramps up?

Speaker Change: or how should we think about kind of that sales de-leveraging that we saw in the first quarter.

David Rawlinson II: Yeah, it's a great question. There certainly is some underlying run rate that is just, the structural pace of Cord-Cutting that's impacting, the business. If you look at our linear TV households, I think we said, versus 2018 or 2019, we're down something like 40%. And so there just is, some, degradation of the core linear households, and I think it's fair to... I think it's, it's fair to expect that we'll, we'll have to eventually outrun that with streaming and, and social, growth. I do think there are a number of things that made, this quarter a particularly challenged quarter from a customer count perspective.

David Rawlinson: Yeah, it's a great question. There certainly is some underlying run rate that is just, the structural pace of Cord-Cutting that's impacting, the business. If you look at our linear TV households, I think we said, versus 2018 or 2019, we're down something like 40%. And so there just is, some, degradation of the core linear households, and I think it's fair to... I think it's, it's fair to expect that we'll, we'll have to eventually outrun that with streaming and, and social, growth. I do think there are a number of things that made, this quarter a particularly challenged quarter from a customer count perspective.

Yeah, it's a great question.

There certainly is some underlying run rate that is just

The structural pace of court-cutting that's impacting.

Speaker Change: The business if you look at our linear TV households I think we said.

versus 2018 or 2019. We're down something like 40%.

Speaker Change: And so there just is some degradation of the core linear households and I think it's fair to expect that we'll have to eventually outrun that with streaming and social growth.

Speaker Change: I do think there are a number of things that made this quarter a particularly challenge quarter from a customer count perspective.

David Rawlinson II: First, you did see, really in February, a real change in consumer sentiment, and I think a real pullback in the market, and I think that had an impact. You certainly had some of the trends in viewership that were really pronounced in the first quarter. I gave some of those statistics in the beginning, where-

1st

David Rawlinson: First, you did see, really in February, a real change in consumer sentiment, and I think a real pullback in the market, and I think that had an impact. You certainly had some of the trends in viewership that were really pronounced in the first quarter. I gave some of those statistics in the beginning, where-

Speaker Change: You did see really in February a real change in consumer sentiment.

and I think a real pullback.

Speaker Change: in the market. And I think that had an impact. You certainly had some of the trends in viewership that were really pronounced in the first quarter. I gave some of those statistics in the beginning where total television viewership were down. You saw real spikes in news and business coverage and almost everything else in the television universe.

Karru Martinson: Mm-hmm

David Rawlinson II: ... total television viewership were down. You saw real spikes in news and business coverage and almost everything else in the television universe being down, much of it being down double digits. And so you really did see very strong diversion from normal television watching patterns, and given the fact that we have to have eyeballs to show products, to get sales, that has a real, that has a real impact on our business. The other thing I would say is, given what we saw in terms of consumer sentiment, it didn't feel like a very responsible time to invest as heavily as we otherwise might have in new customer acquisition.

David Rawlinson: ... total television viewership were down. You saw real spikes in news and business coverage and almost everything else in the television universe being down, much of it being down double digits. And so you really did see very strong diversion from normal television watching patterns, and given the fact that we have to have eyeballs to show products, to get sales, that has a real, that has a real impact on our business. The other thing I would say is, given what we saw in terms of consumer sentiment, it didn't feel like a very responsible time to invest as heavily as we otherwise might have in new customer acquisition.

Speaker Change: being down, much of it being down double digits and so you really did see very strong.

Speaker Change: a diversion from normal television watching patterns and given the fact that we have to have eyeballs to show products to get sales that has a real impact on our business.

Speaker Change: The other thing I would say is given what we saw in terms of consumer sentiment.

Speaker Change: It didn't feel like a very responsible time to invest as heavily as we otherwise might have in new customer acquisition.

David Rawlinson II: In terms of our new customer count, we weren't spending to go after new customers in the way that we might have if the consumer sentiment and macro environment had been different. I think that may have slightly artificially depressed our new customer count year over year and new customer acquisition within the quarter. So I do think there were some things that were idiosyncratic within the quarter that had an effect on the customer count, but I also wouldn't deny that there's just an underlying reality to cord-cutting and linear television that we're also seeing and will continue to have to face into.

Speaker Change: And so, in terms of our new customer count, we weren't spending to go after new customers in the way that we might have if the consumer sentiment and macro environment had been different. And so, I think that may have slightly artificially depressed.

David Rawlinson: In terms of our new customer count, we weren't spending to go after new customers in the way that we might have if the consumer sentiment and macro environment had been different. I think that may have slightly artificially depressed our new customer count year over year and new customer acquisition within the quarter. So I do think there were some things that were idiosyncratic within the quarter that had an effect on the customer count, but I also wouldn't deny that there's just an underlying reality to cord-cutting and linear television that we're also seeing and will continue to have to face into.

our new customer account year-over-year and new customer acquisition.

Speaker Change: within the quarter. So I do think there were some things that were idiosyncratic within the quarter that had an effect on the on the customer count. But I also would deny that there's there's just an underlying reality to court cutting and linear television that we're also seeing and we'll continue to have to face into.

Karru Martinson: Just lastly, does the de minimis exemption ending change anything from a competitive landscape for you guys?

Speaker Change: Maybe just lastly, does the diminimus exemption ending change anything from a competitive landscape for you guys?

Bill Wafford: Good question.

David Rawlinson II: Yeah, it's a great question. I would say observe a couple of things. I think around the edges, the de minimis exemption was unhelpful. I think particularly unhelpful to some of our digital businesses. I think not having the de minimis exemption probably is a slight tailwind to our social push, because that's where I think in digital channels, you saw a lot of players taking advantage of it. I think the primary places where you saw big businesses built around de minimis exemption tended to target consumers who were younger than our average consumer. So I don't know that it provides an immediate massive target that we'll wanna go after.

David Rawlinson: Yeah, it's a great question. I would say observe a couple of things. I think around the edges, the de minimis exemption was unhelpful. I think particularly unhelpful to some of our digital businesses. I think not having the de minimis exemption probably is a slight tailwind to our social push, because that's where I think in digital channels, you saw a lot of players taking advantage of it. I think the primary places where you saw big businesses built around de minimis exemption tended to target consumers who were younger than our average consumer. So I don't know that it provides an immediate massive target that we'll wanna go after.

Good question.

Yeah, it's a great question.

Speaker Change: I would say observe a couple of things I think around the edges.

The minimum exception was unhelpful.

I think particularly unhelpful to some of our digital businesses.

I think not having this diminishment exception.

Probably is a slight tailwind.

Speaker Change: to our social push because that's where I think in digital channels you saw a lot of

Speaker Change: Players taking advantage of it. I think the primary places where you saw big businesses built around

Minimum Exception [inaudible]

Tended to target

Consumers who were younger than our average consumer.

Speaker Change: So I don't know that it provides in a immediate massive target that we'll want to go after. I think in terms of average cell price, in terms of age, those both tended to be well below where we tend to target. But I think net net on the margins. It was the positive thing to have happened for the business.

David Rawlinson II: I think, in terms of average sale price, in terms of age, those both tended to be, well below where we tend to target. But I think, net net on the margins, it was a positive thing to have happen for the business.

David Rawlinson: I think, in terms of average sale price, in terms of age, those both tended to be, well below where we tend to target. But I think, net net on the margins, it was a positive thing to have happen for the business.

Karru Martinson: Thank you very much. Appreciate it.

Thank you very much. Appreciate it.

Operator: Thank you. The last question comes from the line of Hale Holden with Barclays. Please proceed.

Speaker Change: Thank you in the last question comes from the line of care holding with black lace. Please proceed.

Hale Holden: Thanks for taking my question. I had a, I guess, three really quick ones for you. The 2021, 2022 supply chain hit the company pretty hard, just on today's special value. So I was wondering, in regards to tariff mitigation, if you're actually shipping from China, given the higher tariffs, or if there was the potential for a slowdown in goods flow in the back half of this year?

Hale Holden: Thanks for taking my question. I had a, I guess, three really quick ones for you to.

The

Speaker Change: 2021-2022 supply chain is a company pretty hard just on today's special value so is wondering in regards to tariff mitigation if you're actually shipping from China given the higher tariffs or if there was the potential for a slowdown and good flow in the back half of this year.

David Rawlinson II: Yeah, I can start with that, and maybe Bill will wanna chip in. I would say we're being very deliberate with what, given current levels of tariff, of what we would potentially bring over. We've canceled a fair amount out of China. We are very actively sourcing from places outside of China. Like I said in my prepared comments, we would think we can target being no more than 1/3 of product costs exposed out of any one country, which will be much more diversified than we have been historically, and we're making good daily progress on getting there.

David Rawlinson: Yeah, I can start with that, and maybe Bill will wanna chip in. I would say we're being very deliberate with what, given current levels of tariff, of what we would potentially bring over. We've canceled a fair amount out of China. We are very actively sourcing from places outside of China. Like I said in my prepared comments, we would think we can target being no more than 1/3 of product costs exposed out of any one country, which will be much more diversified than we have been historically, and we're making good daily progress on getting there.

Speaker Change: I can start with that and maybe build what I want to chip in. I would say we're being very deliberate.

Speaker Change: with what given current levels of terror of what we would potentially bring.

bring over we've we've canceled a fair amount.

Alachina we are very actively sourcing from

Speaker Change: Places outside of China, like I said in my prepared comments.

We would...

Speaker Change: I think we can target being no more than one-third of product caused exposed out of anyone.

Speaker Change: Country will which will be much more diversified than we have been historically and we're making good daily progress on getting there. I would say that we will not immediately be able to like for like replay every purchase we would have made. I would say that we will not immediately be able to like for like replay every purchase we would have made.

David Rawlinson II: I would say that we will not immediately be able to like for like replace every purchase we would have made, as we go into the back half of the year. So, we will have to do some reprogramming. There are some plans that we had made where we will make choices not to bring in goods, given the current tariff rates, and will cause us to go to plan B, and in some cases, plan C. And so, that's certainly a dynamic we'll have to, we'll have to navigate. You made the reference back to the supply chain crisis.

David Rawlinson: I would say that we will not immediately be able to like for like replace every purchase we would have made, as we go into the back half of the year. So, we will have to do some reprogramming. There are some plans that we had made where we will make choices not to bring in goods, given the current tariff rates, and will cause us to go to plan B, and in some cases, plan C. And so, that's certainly a dynamic we'll have to, we'll have to navigate. You made the reference back to the supply chain crisis.

Speaker Change: as we go into the back half of the year. So we will have to do some reprogramming. There are some plans that we had made where we will make choices not to bring in goods given the current tariff rates and will cause us to go to plan B and in some cases plan C and so that's certainly a dynamic we'll have to we'll have to navigate. You made the...

Speaker Change: The reference back to the supply chain crisis, I would not say that currently we're seeing the level of impact in terms of

David Rawlinson II: I would not say that currently we're seeing the level of impact in terms of planned programming changes that we saw in the course of the supply chain challenges, and we have far more visibility. One of the things that was very disruptive about the previous supply chain challenges is you just didn't know what was coming when. Here, we know that there is a structural change in the economics of certain goods, depending on where they come from, and so we are able to be more proactive in our planning than we were able to in light of the, in light of the prior, the prior challenges. So hopefully, that's some helpful color. Bill, anything to add?

David Rawlinson: I would not say that currently we're seeing the level of impact in terms of planned programming changes that we saw in the course of the supply chain challenges, and we have far more visibility. One of the things that was very disruptive about the previous supply chain challenges is you just didn't know what was coming when. Here, we know that there is a structural change in the economics of certain goods, depending on where they come from, and so we are able to be more proactive in our planning than we were able to in light of the, in light of the prior, the prior challenges. So hopefully, that's some helpful color. Bill, anything to add?

Plan Programming Changes [inaudible]

Speaker Change: that we saw in the course of the supply chain challenges.

and we have far more visibility.

One of the things that was

very disruptive about the

Speaker Change: Previous supply chain challenges as you just didn't know what was coming when.

Speaker Change: Here we know that there is a structural change in the economics of certain goods, depending on where they come from. And so we are able to be more proactive in our planning than we were able to in light of the prior challenges.

Speaker Change: So hopefully that's some helpful color building thing you dad. Yeah anything hail. I mean in the near term, you know, we

Bill Wafford: Yeah, I think, Hale, I mean, in the near term, you know, we're largely a larger inventory position than we did this year, last year at this time on, you know, a smaller revenue base. Gave us a little bit of a buffer coming as we're in Q2, you know, from a inventory position. Obviously, what we're trying to solve is back half of the year now, holiday, as most discretionary retailers, heavily penetrated in China. And so that's the work that the teams have been doing right now on diversification to moving, and especially when you see apparel, apparel and other things where we've made really good strides so far. So it's really chopping wood on the rest of it right now.

Speaker Change: We're a largely a large inventory position that we did this year last year at this time on a smaller revenue base gave us a little bit of buffer coming as we're in Q2 you know from a inventory position. Obviously what we're trying to solve is back half of the year now. Holiday as most discretionary retailers have been penetrated in China and so that's the work that the teams have been doing right now on diversification to moving and especially when you see parallel parallel and other things where we've made really good strides so far so it's really chopping wood on the rest of it right now. [inaudible]

Hale Holden: Got it. And then, I wanted to follow back to Karru's question. With regards to the revolver extension, that's still something you guys are working towards and planning as part of this liquidity solve? And then in connection with that, was curious if you could give us some color, why Cornerstone was dropped off the revolver collateral pledge.

Speaker Change: Got it and then with I wanted to follow back to Kuru's question.

Umm...

Speaker Change: With regards to the revolver extension that's still something you guys are working towards and planning as part of this liquidity solve and then in connection with that was curious if you could give us some color why cornerstone was dropped off the revolver collateral pledge.

Bill Wafford: Sure. I mean, so we're, Hale, we're looking at, you know, all options on it. We've the revolver doesn't mature until October 2026, right? And so we had, you know, obviously, time and, you know, are using that to make sure that we're doing the right thing for the business. Cornerstone was removed, wasn't material to the calculation, also, ample cash on hand to manage that business and wasn't needed in the facility.

Speaker Change: Sure, I mean so we're making it how we're looking at you know all options on it we've revolver doesn't mature until October of twenty six right and so we had you know obviously time and you know using that to make sure that we're doing the right thing for the business cornerstone was removed wasn't material to the calculation also an apple cash on hand to manage that business and wasn't needed in the facility. So that's all for today.

Hale Holden: Okay. And then my last question is, you know, David, your comments were sort of relative to first quarter consumer weakness, but it does feel like things have gotten a little softer since then. So, any macro thoughts on where you think the consumer is or might be going would be helpful to level set?

Okay, and then my last question is.

You know, David, your comments were sort of relative to...

Speaker Change: First quarter, consumer weakness, but it does feel like things have gotten a little softer.

Speaker Change: Since then, so any macro thoughts on where you think the consumer is or might be going would be helpful the level set?

David Rawlinson II: Yeah, it's a good question. We saw a January, which, I would say was basically on trend from Q4. I think you saw real impacts on consumer sentiment and consumer behavior in February, which tended to be where we saw real change in consumer behavior. Also, you had a couple of things going on there. We didn't put too much on it, but of course, you had a little bit of leap year impact as well as an Easter shift impact. And so, we did see a real change in the overall discretionary consumer environment in February. That, I would say, got back onto something like the Q4 trend as we went through February into March, or at least stopped the descent.

David Rawlinson: Yeah, it's a good question. We saw a January, which, I would say was basically on trend from Q4. I think you saw real impacts on consumer sentiment and consumer behavior in February, which tended to be where we saw real change in consumer behavior. Also, you had a couple of things going on there. We didn't put too much on it, but of course, you had a little bit of leap year impact as well as an Easter shift impact. And so, we did see a real change in the overall discretionary consumer environment in February. That, I would say, got back onto something like the Q4 trend as we went through February into March, or at least stopped the descent.

Yeah, it's a good question.

Speaker Change: We saw a January which I would say was basically on trend from the fourth quarter. I think you saw real.

Speaker Change: Impacts on consumer sentiment and consumer behavior in February tended to be where we saw real change in consumer behavior also you had a couple of things going on there we didn't

Speaker Change: Put too much on it, but of course you had a little bit of leap year impact as well as an Easter shift impact

and so we did see a real change.

in the overall discretionary consumer environment in February .

Speaker Change: That I would say got back on to something like the fourth quarter trend.

Speaker Change: as we went through February into March or at least stop the

Speaker Change: stop the descent and so I would I would say now it feels like we're at

David Rawlinson II: And so I would say now it feels like we continue to be at a very depressed and challenged level in terms of consumer sentiment, but it feels more stable at that lower level than it was feeling in February. I would say for us, in terms of how we view the consumer in the back half of the year, we're trying not to, given the level of volatility, make too many predictions. Structurally, we have a couple of things that should be somewhat helpful. The first is, social and streaming at their current growth rates will continue to become a larger and larger portion of the business as we go through the year, given some of the investments and the progress we're seeing there.

David Rawlinson: And so I would say now it feels like we continue to be at a very depressed and challenged level in terms of consumer sentiment, but it feels more stable at that lower level than it was feeling in February. I would say for us, in terms of how we view the consumer in the back half of the year, we're trying not to, given the level of volatility, make too many predictions. Structurally, we have a couple of things that should be somewhat helpful. The first is, social and streaming at their current growth rates will continue to become a larger and larger portion of the business as we go through the year, given some of the investments and the progress we're seeing there.

Speaker Change: and continue to be at a very depressed and challenged level in terms of consumer sentiment, but it feels more stable at that lower level than it was feeling.

Speaker Change: in February . I would say for us in terms of how we view the consumer in the back half of the year, we're trying not to given the level of volatility make too many predictions.

Speaker Change: Structurally we have a couple of things that should be somewhat helpful. The first is social in streaming at the current growth rates.

Speaker Change: We'll continue to become a larger and larger portion of the business as we go through the year given some of the investments in the progress we're seeing there. And then second.

David Rawlinson II: And then second, we did a number of things in terms of costs in the business in the first quarter that were not in time to impact first quarter results, including the reduction in force and some of the other cost actions that we took that will have an opportunity to be better reflected in the operating results as we go into the second half, which should give us some additional cushion given where the consumer sentiment in the market may trade.

David Rawlinson: And then second, we did a number of things in terms of costs in the business in the first quarter that were not in time to impact first quarter results, including the reduction in force and some of the other cost actions that we took that will have an opportunity to be better reflected in the operating results as we go into the second half, which should give us some additional cushion given where the consumer sentiment in the market may trade.

Speaker Change: We did a number of things in terms of costs in the business in the first quarter that were not in time to impact first quarter results including the reduction in force and

Speaker Change: Some of the other cost actions that we took that will have an opportunity to be better reflected in the operating results as we go into the second half which should give us some additional cushion.

given where the consumer sentiment in the market may trade.

Hale Holden: All right. Thank you. On a lighter note, I'll, I'll do my best to buy something on my next American flight.

Okay.

Speaker Change: Alright, thank you on a letter note. I'll do my best to buy something on my next American plate.

Rob Rigby: Thank you. Thank you.

Speaker Change: Thank you. It does environment every purchase is useful. We're really excited about that partnership. You know, when we announced the wind strategy, the W and W-I-N was wherever she shops.

David Rawlinson II: Andy, in this environment, every purchase is useful. We're really, we're really excited about that, about that partnership. You know, when we announced the WIN Strategy, the W in WIN, W-I-N, was, wherever she shops. And part of that is just recognizing that our consumers' attention is increasingly divided across platforms. And so, hopefully, what you're starting to see is, we know she's in social, and so you're seeing a different sort of presence on TikTok and Facebook. We know that she's a very captive audience when she's on an airplane, and so that's another place we think is a potential for shopping, and so, we wanted to get there. So we will, we will continue to try to live out our, strategy of, being wherever a potential customer eyeball is.

David Rawlinson: Andy, in this environment, every purchase is useful. We're really, we're really excited about that, about that partnership. You know, when we announced the WIN Strategy, the W in WIN, W-I-N, was, wherever she shops. And part of that is just recognizing that our consumers' attention is increasingly divided across platforms. And so, hopefully, what you're starting to see is, we know she's in social, and so you're seeing a different sort of presence on TikTok and Facebook. We know that she's a very captive audience when she's on an airplane, and so that's another place we think is a potential for shopping, and so, we wanted to get there. So we will, we will continue to try to live out our, strategy of, being wherever a potential customer eyeball is.

Speaker Change: And part of that is just recognizing that our consumers attention is increasingly divided across platforms and so.

Speaker Change: Hopefully what you're starting to see is we know she's in social until you're seeing a different sort of presence on TikTok and Facebook. We know that she's a very captive audience when she's on an airplane and so that's another place we think of the potential for shopping and so we wanted to get there.

Speaker Change: So we will continue to try to live out our strategy of being wherever a potential customer eyeball is.

David Rawlinson II: With that, I think that was the last question. I want to thank everybody for joining us and for your continued interest. We will continue to try to do a reasonable job of keeping you updated, given the volatile environment, and always a very helpful questions and continue to be thankful for the interest in the company.

David Rawlinson: With that, I think that was the last question. I want to thank everybody for joining us and for your continued interest. We will continue to try to do a reasonable job of keeping you updated, given the volatile environment, and always a very helpful questions and continue to be thankful for the interest in the company.

Speaker Change: With that, I think that was the last question. I want to thank everybody for joining us and for your continued interest. We will continue to try to do a reasonable job of keeping you updated given the volatile environment and always a very helpful questions and continue to be thankful for the interest in the company.

Speaker Change: Thank you. This concludes today's conference. You may disconnect your lines at this time.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time.

Thank you.

Q1 2025 QVC Group Inc Earnings Call

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