Liberty Interactive Corporation (“Liberty Interactive”) (Nasdaq:
QVCA, QVCB, LVNTA, LVNTB) today reported fourth quarter and year
end 2017 results. Highlights include(1):
Attributed to QVC Group
- QVC Group to rebrand as Qurate Retail
Group, Inc., containing QVC, HSN, zulily and Cornerstone
Brands
- Consolidated QVC revenue up 1% to $8.8
billion in 2017
- Revenue increased in all QVC markets in
the fourth quarter for the second quarter in a row (in constant
currency(2))
- QVC US revenue grew 4%
- QVC International revenue increased 6%
on a constant currency(2) basis
- QVC consolidated mobile penetration was
64% of QVC.com orders in 2017, a 540 basis point increase
- QVC US mobile penetration was 62% of
QVC.com orders, a 500 basis point increase
- QVC US new customers increased 2% in
2017
- zulily active customers increased 16%
to 5.8 million in 2017
- Completed acquisition of HSN, Inc.
(“HSNi”) on December 29, 2017
- From November 1, 2017 through January
31, 2018, repurchased 8.6 million QVCA shares at an average price
per share of $24.27 and a total cost of $209 million
- Over the twelve months ended December
31, 2017, repurchased 34.8 million QVCA shares at an average price
per share of $22.03 and a total cost of $766 million
Attributed to Liberty Ventures Group
- Planned acquisition of GCI Liberty,
Inc. (formerly General Communication, Inc.) (“GCI”) and subsequent
split-off of combined company expected to close after market on
March 9th
- Received approval from both Liberty
Ventures and GCI shareholders on February 2nd
“QVC US and International posted excellent fourth quarter
results, and we were pleased to complete the acquisition of HSN,”
said Greg Maffei, Liberty Interactive President and CEO. “We
anticipate closing the acquisition of GCI and the subsequent
creation of two asset-backed stocks, Qurate and GCI Liberty, on
March 9th. With the separation, Mike George will become President
and CEO of Qurate. Mike has done a fantastic job building QVC,
delighting customers and driving value for shareholders over the
last twelve years. We look forward to him leading this
innovative set of companies.”
“As we launch Qurate, Greg Maffei will become Executive Chairman
focusing on strategy and capital deployment. The creation of the
two asset-backed stocks is the result of Greg’s skilled deal-making
and determination, and I’m pleased that he will continue to provide
strong leadership and vision,” said John Malone, Liberty
Interactive Chairman. “I am excited to remain on the board and the
Company’s largest shareholder.”
Unless otherwise noted, the following discussion compares
financial information for the three months and year ended December
31, 2017 to the same period in 2016.
QVC GROUP – Approximately $44 million and $74 million of
corporate level selling, general and administrative expense
(“SG&A”) (including stock-based compensation expense, which
increased as a result of the stock option exchange in December
2017) was allocated to the QVC Group for the fourth quarter and
full year 2017, respectively.
Liberty Interactive acquired the 62% of HSNi it didn’t already
own in an all-stock transaction on December 29, 2017. HSNi consists
of two main operating segments, its video commerce business, HSN,
and its interactive lifestyle retail business, Cornerstone. HSNi
shareholders (other than Liberty Interactive) received a fixed
consideration of 1.65 shares of QVCA for each share of HSNi.
Liberty Interactive issued 53.6 million shares of QVCA to HSNi
shareholders, a market value of $1.3 billion as of December 29,
2017. The total equity value of the transaction was $1.9 billion
(including Liberty Interactive’s $605 million ownership interest
previously held in HSNi), based on fair value. With the exception
of $43 million of severance-related costs incurred by HSNi on
December 30, 2017, HSNi’s results of operations are not included in
Liberty Interactive’s consolidated results, as the final two days
of the quarter were considered immaterial. Of the $43 million of
severance-related costs, $38 million were incurred directly by HSN,
including $8 million of stock-based compensation, and $5 million
were incurred by Cornerstone. The standalone results of HSN and
Cornerstone are included later in this press release. We believe
discussions of standalone results for HSN and Cornerstone promote a
better understanding of the overall results of these
businesses.
Following the completion of the proposed transactions between
Liberty Interactive and GCI (described later in this press
release), the QVC Group will cease to trade as a tracking stock and
will effectively become an asset-backed stock. In addition, Liberty
Interactive announced today that it intends to rebrand as Qurate
Retail Group after the closing of the transactions, with the formal
name change to follow. The new Qurate Retail Group will represent a
select group of like-minded retail businesses offering a third way
to shop – beyond traditional brick-and-mortar or transactional
eCommerce. Qurate Retail Group will consist of eight leading retail
brands – QVC, HSN, zulily, Ballard Designs, Frontgate, Garnet Hill,
Grandin Road and Improvements. It will also hold a minority
interest in ILG, various green energy investments and is expected
to include Liberty Interactive’s interest in FTD. As part of the
rebranding to Qurate Retail Group, the QVCA and QVCB tickers are
expected to change to QRTEA and QRTEB, respectively, effective on
the first trading day following the GCI Liberty split-off, which is
expected to be March 12th.
In April, 2016, the Financial Accounting Standards Board
(“FASB”) issued further guidance on revenue from contracts with
customers effective for fiscal years beginning after December 15,
2017, which QVC and zulily adopted as of the start of the first
quarter of 2018. Under the previous accounting guidance, revenue
was recorded when delivery to the customer occurred and deferred
revenue was recorded to account for shipments in-transit. As a
result of this change, beginning in the first quarter of 2018, we
recognize revenue at the time of shipment. Thus, revenue for QVC
and zulily items shipped before the end of 2017 but not delivered
until 2018 will not be recognized in the fourth quarter of 2017 nor
in the first quarter of 2018. An immaterial adjustment in the first
quarter of 2018 will be made to retained earnings using the
modified transition method. HSNi previously recognized revenue at
the time of shipment, so there is no expected change to HSNi’s
reported results.
In addition, under previous accounting guidance, QVC-, HSN- and
zulily-branded credit card income was historically included as an
offset to SG&A expenses. As of the start of the first quarter
of 2018, QVC, HSN and zulily will recognize credit card income for
the QVC-, HSN- and zulily-branded credit cards as part of net
revenue.
QVC
“We generated strong revenue gains across the business, with
strong sales at QVC US, growth in every International market, and
outstanding sales acceleration at zulily during the quarter. This
performance demonstrates our ability to curate compelling products
and events, create engaging customer experiences and aggregate
large shopping audiences across multiple commerce platforms,” said
QVC President and CEO, Mike George. “With our announcement today of
the upcoming launch of the Qurate Retail Group—which consists of
eight powerful brands: QVC, zulily, HSN, Ballard Designs, Garnet
Hill, Grandin Road, Frontgate and Improvements—and the pending
formation of an asset-backed security, we are extremely well
positioned as we distinguish ourselves from other retailers by
combining the best of retail, media and social.”
The following table provides QVC’s consolidated financial and
operating results for the fourth quarter of 2017. US Dollar
denominated results were impacted favorably by exchange rate
fluctuations in the fourth quarter. The Dollar weakened versus the
Euro and British Pound 9% and 7%, respectively, and strengthened
against the Japanese Yen 3%. The following table also provides a
comparison of the year-over-year percentage change in QVC’s results
in constant currency(2) (where applicable) to the comparable
figures calculated in accordance with US GAAP for the fourth
quarter of 2017.
(amounts in millions unless otherwise noted) 4Q16
4Q17 % Change
% ChangeConstantCurrency(b)
QVC – Consolidated Financial Metrics Revenue $ 2,658
$ 2,817 6 % 5 % Operating Income $ 404 $ 496 23 % 22 % Operating
Income Margin (%) 15.2 % 17.6 %
240 bps
Adjusted OIBDA $ 569 $ 583 2 % 2 % Adjusted OIBDA Margin (%) 21.4 %
20.7 %
(70) bps
Operating Metrics eCommerce Revenue $ 1,331 $ 1,491 12 % 11
% eCommerce % of Total Revenue 50.1 % 52.9 %
280 bps
Mobile % of eCommerce Revenue(a) 59.6 % 64.9 %
530 bps
a) Based on gross US Dollar orders. b) For a
definition of constant currency financial metrics, see the
accompanying schedules.
The following table provides QVC’s consolidated financial and
operating results for the full year 2017. US Dollar denominated
results were unfavorably impacted slightly by exchange rate
fluctuations for the full year. The US Dollar strengthened versus
the British Pound and Japanese Yen 4% and 3%, respectively, and
weakened against the Euro 2%. The following table also provides a
comparison of the year-over-year percentage change in QVC’s results
in constant currency(2) (where applicable) to the comparable
figures calculated in accordance with US GAAP for the full year
2017.
(amounts in millions unless otherwise
noted) 2016 2017 % Change
% ChangeConstantCurrency(c)
QVC – Consolidated Financial Metrics Revenue $ 8,682
$ 8,771 1 % 1 % Operating Income $ 1,203 $ 1,347 12 % 12 %
Operating Income Margin (%) 13.9 % 15.4 %
150 bps
Adjusted OIBDA $ 1,840 $ 1,897 3 % 3 % Adjusted OIBDA Margin (%)
21.2 % 21.6 %
40 bps
Operating Metrics eCommerce Revenue $ 4,047 $ 4,370 8 % 8 %
eCommerce % of Total Revenue 46.6 % 49.8 %
320 bps
Mobile % of eCommerce Revenue(a) 58.4 % 63.8 %
540 bps
LTM Total Customers(b) 12.7 12.7 0 % a) Based on
gross US Dollar orders. b) LTM: Last twelve months. c) For a
definition of constant currency financial metrics, see the
accompanying schedules.
The following table provides QVC US’s financial and operating
results for the fourth quarter of 2017.
(amounts in millions unless otherwise noted)
4Q16 4Q17 % Change
QVC – US Financial Metrics Revenue
$ 1,947 $ 2,029 4 % Cost of Sales % of Revenue 65.9 % 66.4 %
50 bps
Operating Income $ 303 $ 367 21 % Operating Income Margin (%) 15.6
% 18.1 %
250 bps
Adjusted OIBDA $ 438 $ 436 0 % Adjusted OIBDA Margin (%) 22.5 %
21.5 %
(100) bps
Operating Metrics Average Selling Price $ 56.78 $ 55.60 (2
)% Units Sold 7 % Return Rate(a) 15.6 % 15.5 %
(10) bps
eCommerce Revenue $ 1,084 $ 1,198 11 % eCommerce % of Total Revenue
55.7 % 59.0 %
330 bps
Mobile % of eCommerce Revenue(b) 58.6 % 63.5 %
490 bps
a) Measured as returned sales over gross shipped
sales. b) Based on gross US Dollar orders.
In the fourth quarter, QVC US realized year-over-year gains in
all categories except jewelry. The operating income margin and
adjusted OIBDA margin(3) performance primarily reflects higher
fixed costs associated with incentive compensation and HSNi
integration consulting services, as well as higher inventory
obsolescence and marketing expenses, which were partially offset by
lower bad debt and amortization. Adjusted OIBDA(3) for the fourth
quarter includes $7 million of integration costs and a $6 million
increase in management bonuses.
The following table provides QVC US’s financial and operating
results for the full year 2017.
(amounts in millions unless otherwise noted)
2016 2017 % Change
QVC – US Financial Metrics Revenue
$ 6,120 $ 6,140 0 % Cost of Sales % of Revenue 64.4 % 64.6 %
20 bps
Operating Income $ 915 $ 994 9 % Operating Income Margin (%) 15.0 %
16.2 %
120 bps
Adjusted OIBDA $ 1,435 $ 1,446 1 % Adjusted OIBDA Margin (%) 23.4 %
23.6 %
20 bps
Operating Metrics Average Selling Price $ 57.00 $ 55.37 (3
)% Units Sold 4 % Return Rate(a) 17.4 % 17.0 %
(40) bps
eCommerce Revenue $ 3,193 $ 3,421 7 % eCommerce % of Total Revenue
52.2 % 55.7 %
350 bps
Mobile % of eCommerce Revenue(b) 57.4 % 62.4 %
500 bps
LTM Total Customers(c) 8.1 8.1 0 % a) Measured as
returned sales over gross shipped sales. b) Based on gross US
Dollar orders. c) LTM: Last twelve months.
For the full year, QVC US realized year-over-year gains in all
categories except jewelry. The full year operating income margin
and adjusted OIBDA margin(3) performance primarily reflect lower
bad debt expense, higher product margins and lower amortization,
which were partially offset by higher incentive compensation and
inventory obsolescence costs. Adjusted OIBDA(3) in 2017 includes $9
million of HSNi integration costs and a $26 million increase in
management bonuses.
The following table provides QVC International’s financial and
operating results for the fourth quarter of 2017, including the
year-over-year percentage change in QVC’s results in constant
currency(2) (where applicable) to the comparable figures calculated
in accordance with US GAAP due to the net impact of unfavorable
exchange rate fluctuations.
(amounts in millions unless otherwise
noted) 4Q16 4Q17 % Change
% ChangeConstantCurrency(c)
QVC – International(a) Financial Metrics
Revenue $ 711 $ 788 11 % 6 % Cost of Sales % of Revenue 62.1 % 62.8
%
70 bps
Operating Income $ 101 $ 129 28 % 22 % Operating Income Margin (%)
14.2 % 16.4 %
220 bps
Adjusted OIBDA $ 131
$
147 12 % 9 % Adjusted OIBDA Margin (%) 18.4 % 18.7 %
30 bps
Operating Metrics Average Selling Price 6 % 2 % Units Sold 5
% eCommerce Revenue $ 247 $ 293 19 % 16 % eCommerce % of Total
Revenue 34.7 % 37.2 %
250 bps
Mobile % of eCommerce Revenue(b) 63.6 % 69.7 %
610 bps
a) Includes QVC France, QVC Germany, QVC Italy, QVC
Japan and QVC UK. b) Based on gross US Dollar orders. c) For a
definition of constant currency financial metrics, see the
accompanying schedules.
In the fourth quarter, QVC International experienced
year-over-year constant currency(2) growth in all categories except
electronics. The operating income margin and adjusted OIBDA
margin(3) performance primarily reflects fixed cost leverage,
higher product margins and lower amortization, which were partially
offset by higher inventory obsolescence.
The following table provides QVC International’s financial and
operating results for the full year 2017, including the
year-over-year percentage change in QVC’s results in constant
currency(2) (where applicable) to the comparable figures calculated
in accordance with US GAAP due to the net impact of unfavorable
exchange rate fluctuations.
(amounts in millions unless otherwise
noted) 2016 2017 % Change
% ChangeConstantCurrency(d)
QVC – International(a) Financial Metrics
Revenue $ 2,562 $ 2,631 3 % 4 % Cost of Sales % of Revenue 62.4 %
62.1 %
(30) bps
Operating Income $ 288 $ 353 23 % 24 % Operating Income Margin (%)
11.2 % 13.4 %
220 bps
Adjusted OIBDA $ 405
$
451 11 % 13 % Adjusted OIBDA Margin (%) 15.8 % 17.1 %
130 bps
Operating Metrics Average Selling Price (2 )% (1 )% Units
Sold 5 % eCommerce Revenue $ 854 $ 949 11 % 13 % eCommerce % of
Total Revenue 33.3 % 36.1 %
280 bps
Mobile % of eCommerce Revenue(b) 61.7 % 68.2 %
650 bps
LTM Total Customers(c) 4.6 4.6 0 % a) Includes QVC
France, QVC Germany, QVC Italy, QVC Japan and QVC UK. b) Based on
gross US Dollar orders. c) LTM: Last twelve months. d) For a
definition of constant currency financial metrics, see the
accompanying schedules.
For the full year, QVC International experienced year-over-year
constant currency(2) growth in all categories except electronics
and jewelry. The operating income margin and adjusted OIBDA
margin(3) performance primarily reflect lower fixed costs, higher
product margins and lower marketing expense and amortization.
CNR Home Shopping Co., Ltd. (“CNRS”), QVC’s joint venture in
China, is being accounted for as an equity method investment. There
was no material impact to QVC’s net income for the quarter. For the
full year, QVC reported a $3 million decrease in net income related
to the CNRS investment.
HSN
HSN’s fourth quarter and full year operating results include
merger-related costs, including investment banking and legal fees,
severance-related costs and additional stock-based compensation
expense due to the acceleration of certain equity awards, which are
included in operating income but excluded in adjusted OIBDA(3) as
presented below. HSN has also reclassified certain costs between
line items to conform with Liberty Interactive’s reporting for ease
of comparability for the periods presented.
HSN’s stand-alone operating results for the fourth quarter of
2017 were as follows.
(amounts in millions unless otherwise noted)
4Q16 4Q17 % Change
HSN Financial Metrics Revenue $
771 $ 712 (8 )% Cost of Sales % of Revenue 69.2 % 67.1 %
(210) bps
Operating Income $ 64 $ (3 ) (105 )% Operating Income Margin (%)
8.3 % NM NM Adjusted OIBDA $ 75 $ 79 5 % Adjusted OIBDA Margin (%)
9.8 % 11.1 %
130 bps
Operating Metrics Average Selling Price $ 58.85 $ 56.88 (3
)% Units Sold (6 )% Return Rate(a) 15.2 % 14.1 %
(110) bps
eCommerce Revenue $ 367 $ 343 (7 )% eCommerce % of Total Revenue
47.6 % 48.1 %
50 bps
Mobile % of eCommerce Revenue(b) 55.4 % 60.6 %
520 bps
a) Measured as returned sales over gross shipped
sales. b) Based on gross orders.
HSN revenue declined in all categories in the fourth quarter.
Average selling price declined, primarily driven by product mix
shift away from electronics, which typically carry higher price
points. Return rate improved due to a continued positive trend in
several categories. Operating income and operating income margin
declined, driven by the aforementioned transaction expenses.
Adjusted OIBDA(3) and adjusted OIBDA margin(3) improved, largely
due to approximately $16 million in incremental costs incurred in
the prior year associated with the implementation of HSN’s
warehouse automation initiative. Additionally, the increase in
adjusted OIBDA margin(3) was driven by higher product margins,
lower selling and marketing costs and a decrease in personnel
expenses.
HSN’s stand-alone operating results for the full year 2017 were
as follows.
(amounts in millions unless otherwise noted)
2016 2017 % Change
HSN Financial Metrics Revenue $
2,479 $ 2,343 (5 )% Cost of Sales % of Revenue 66.1 % 65.4 %
(70) bps
Operating Income $ 215 $ 103 (52 )% Operating Income Margin (%) 8.7
% 4.4 %
(430) bps
Adjusted OIBDA $ 259 $ 220 (15 )% Adjusted OIBDA Margin (%) 10.4 %
9.4 %
(100) bps
Operating Metrics Average Selling Price $ 56.61 $ 54.75 (3
)% Units Sold (3 )% Return Rate(a) 16.3 % 14.9 %
(140) bps
eCommerce Revenue $ 1,119 $ 1,099 (2 )% eCommerce % of Total
Revenue 45.1 % 46.9 %
180 bps
Mobile % of eCommerce Revenue(b) 53.9 % 58.7 %
480 bps
LTM Total Customers(c) 5.1 4.7 (8 )% a) Measured as
returned sales over gross shipped sales. b) Based on gross orders.
c) LTM: Last twelve months.
HSN revenue declined in all categories except home for the full
year 2017. Average selling price declined, primarily driven by
product mix shift away from electronics. The sales return rate
improved due to a continued positive trend in several categories.
The decrease in operating income margin and adjusted OIBDA
margin(3) was due to increases in personnel costs, bad debt expense
and lower shipping margins, partially offset by improved product
margins and lower selling and marketing costs.
zulily
The following table provides zulily’s stand-alone financial and
operating results for the fourth quarter of 2017.
(amounts in millions unless otherwise noted)
4Q16 4Q17 % Change
zulily Financial Metrics Net
Revenue $ 467 $ 520 11 % Cost of Sales % of Revenue 72.8 % 75.9 %
310 bps
Operating Income (Loss) $ (14 ) $ (18 ) (29 )% Operating Income
Margin (%) (3.0 )% (3.5 )%
(50) bps
Adjusted OIBDA $ 40 $ 38 (5 )% Adjusted OIBDA Margin (%) 8.6 % 7.3
%
(130) bps
Operating Metrics Mobile % of Total Orders 66.0 % 68.1 %
210 bps
zulily revenue increased in the fourth quarter, primarily due to
a 12% increase in orders placed. The increase in orders placed was
driven by an increase in active customers. An active customer is
defined as an individual who has purchased at least once in the
last twelve months, measured from the last date of a period.
Operating income margin and adjusted OIBDA margin(3) decreased
primarily due to increased marketing promotions and higher supply
chain expenses resulting from increased international shipping,
higher unit volume at a lower average sales price and ramping up
zulily’s Pennsylvania fulfillment center.
The following table provides zulily’s stand-alone financial and
operating results for the full year 2017.
(amounts in millions unless otherwise noted)
2016 2017 % Change
zulily Financial Metrics Net
Revenue $ 1,547 $ 1,613 4 % Cost of Sales % of Revenue 71.6 % 74.1
%
250 bps
Operating Income (Loss) $ (152 ) $ (129 ) 15 % Operating Income
Margin (%) (9.8 )% (8.0 )%
180 bps
Adjusted OIBDA $ 112 $ 91 (19 )% Adjusted OIBDA Margin (%) 7.2 %
5.6 %
(160) bps
Operating Metrics Mobile % of Total Orders 64.3 % 67.3 %
300 bps
LTM Total Customers(a) 5.0 5.8 16 % a) LTM: Last
twelve months.
zulily revenue increased in the full year 2017, primarily due to
a 5% increase in orders placed. The increase in orders placed was
driven by an increase in active customers year-over-year, coming
from accelerated customer growth in the fourth quarter. Operating
income margin improved, driven primarily by decelerating
amortization of intangible assets related to purchase accounting.
Adjusted OIBDA margin(3) decreased primarily due to increased free
shipping and promotional offers and higher supply chain expenses
resulting from increased international shipping, a shift in product
mix, ramping up zulily’s Pennsylvania fulfillment center, growth in
third party fulfillment services and higher unit volume at a lower
average sales price.
Cornerstone
Cornerstone’s fourth quarter and full year operating results
include merger-related costs which are included in operating income
but excluded in adjusted OIBDA(3) as presented below. Cornerstone
has also reclassified certain costs between line items to conform
with Liberty Interactive’s reporting for ease of comparability for
the periods presented.
Cornerstone’s stand-alone operating results for the fourth
quarter were as follows.
(amounts in millions unless otherwise noted)
4Q16 4Q17
% Change(b)
Cornerstone Financial Metrics Revenue $ 305 $ 283 (7
)% Cost of Sales % of Revenue 63.0 % 62.3 %
(70) bps
Operating Income $ 9 $ (11 ) (227 )% Operating Income Margin (%)
2.8 % NM NM Adjusted OIBDA $ 13 $ 12 (5 )% Adjusted OIBDA Margin
(%) 4.2 % 4.3 %
10 bps
Operating Metrics Average Selling Price $ 79.53 $ 82.64 4 %
Units Shipped (9 )% Return Rate(a) 13.5 % 14.6 %
110 bps
a) Measured as returned sales over gross sales. b)
Percentages may not directly calculate due to rounding.
Revenue, operating income and adjusted OIBDA(3) declined in the
fourth quarter. Excluding the prior year impacts of a 53rd week,
the divestiture of TravelSmith and Chasing Fireflies, and
transaction costs, overall revenue declined 1%, driven by softness
in Frontgate offset by growth in Ballard Designs, Grandin Road and
Garnet Hill. Cost of sales as a percent of revenue decreased,
driven by improved product and shipping margins and a combination
of selective price increases and lower promotion. Catalog
circulation decreased, consistent with ongoing efforts to
re-balance investments towards the digital and retail segments to
drive demand.
Cornerstone’s stand-alone operating results for the full year
were as follows.
(amounts in millions unless otherwise noted)
2016(a)
2017
% Change(c)
Cornerstone Financial Metrics Revenue $ 1,096 $ 1,045
(5 )% Cost of Sales % of Revenue 61.0 % 61.3 %
30 bps
Operating Income $ (7 ) $ 8 214 % Operating Income Margin (%) (0.6
)% 0.8 %
140 bps
Adjusted OIBDA $ 41 $ 45 10 % Adjusted OIBDA Margin (%) 3.7 % 4.3 %
60 bps
Operating Metrics Average Selling Price $ 86.12 $ 92.18 7 %
Units Shipped (10 )% Return Rate(b) 13.1 % 13.8 %
70 bps
a) 2016 results include the results of TravelSmith
and Chasing Fireflies, two former Cornerstone brands, divested on
September 8, 2016. b) Measured as returned sales over gross sales.
c) Percentages may not directly calculate due to rounding.
Cornerstone realized revenue declines for the full year 2017.
Excluding the prior year impacts of a 53rd week and the divestiture
of TravelSmith and Chasing Fireflies, overall sales increased 1%.
Cost of sales as a percent of revenue increased, driven by higher
promotional activity, primarily in the home segment. Operating
expenses were tightly controlled and catalog circulation decreased,
improving operating and adjusted OIBDA margins(3) versus the prior
year, partially offset by investments towards the digital and
retail segments to fund overall demand.
Share Repurchases
From November 1, 2017 through January 31, 2018, Liberty
Interactive repurchased approximately 8.6 million Series A QVC
Group shares (Nasdaq: QVCA) at an average cost per share of $24.27
for total cash consideration of $209 million. For the full year
2017, Liberty Interactive repurchased 34.8 million QVCA shares at
an average price per share of $22.03 and a total cost of $766
million. Since the creation of the QVC Group stock (including its
predecessor, Liberty Interactive Group) in May 2006, Liberty
Interactive has repurchased shares for aggregate cash consideration
of $7.8 billion, representing approximately 51% of the shares
outstanding at the time of the creation of the QVC Group stock. All
repurchases up to August 9, 2012, the date on which the QVC Group
stock was recapitalized to create the Liberty Ventures common
stock, were comprised of shares of the combined stocks. The
remaining repurchase authorization for Liberty Interactive as of
February 1, 2018 is approximately $1.3 billion, of which $613
million can be applied to repurchases of either QVC Group or
Liberty Ventures Group stock and $650 million can only be applied
to Liberty Ventures Group stock.
QVC Group has attributed to it Liberty Interactive’s
subsidiaries, QVC, Inc., HSN, Inc. and zulily, llc.
LIBERTY VENTURES GROUP – Approximately $23 million and
$53 million of corporate level SG&A expense (including
stock-based compensation expense, which increased as a result of
the stock option exchange in December 2017) was allocated to the
Liberty Ventures Group for the fourth quarter and full year 2017,
respectively.
On April 4, 2017, Liberty Interactive entered into an agreement
and plan of reorganization with GCI, the largest communications
provider in Alaska, whereby Liberty Interactive will acquire GCI
through a reorganization in which certain Liberty Ventures Group
assets and liabilities will be contributed to GCI in exchange for a
controlling interest in GCI, followed by a subsequent split-off of
the combined company, GCI Liberty. Additional information is
available in the proxy statement filed by Liberty Interactive with
the SEC on December 29, 2017.
On February 2nd, the holders of Liberty Ventures common stock
and GCI common stock approved the proposed transactions between the
two companies. The transactions between Liberty Interactive and GCI
are expected to be completed on March 9th. At closing, Liberty
Interactive will reattribute certain assets and liabilities of the
Liberty Ventures Group to the QVC Group. As a result of the changes
in tax law under the tax reform bill, Liberty Interactive announced
on December 26, 2017 that the total amount of cash expected to be
reattributed from the Liberty Ventures Group to the QVC Group will
increase from the previously disclosed amount of $932 million to
approximately $1.3 billion. Additional information is available in
the 8-K that Liberty Interactive filed with the SEC on December 26,
2017. Final reattribution valuations are expected to be determined
just prior to closing based on closing prices on March 8th, where
applicable. Simultaneous with the closing of the transactions, the
QVC Group, to be renamed Qurate Retail Group, including
wholly-owned subsidiaries QVC, Inc., zulily, llc and HSNi, will
cease to function as a tracking stock and will effectively become
an asset-backed stock.
Share Repurchases
There were no repurchases of Liberty Ventures common stock
(Nasdaq: LVNTA) from November 1, 2017 through January 31, 2018. The
remaining repurchase authorization for Liberty Interactive as of
November 1, 2017 is approximately $1.3 billion, of which $613
million can be applied to repurchases of either QVC Group or
Liberty Ventures common stock and $650 million can only be applied
to Liberty Ventures common stock.
The businesses and assets attributed to the Liberty Ventures
Group are all of Liberty Interactive’s businesses and assets other
than those attributed to the QVC Group, including its interests in
Liberty Broadband Corporation and FTD, Liberty Interactive’s
subsidiary Evite, and minority interests in ILG, LendingTree and
Charter Communications.
FOOTNOTES
1) Liberty Interactive’s President and CEO, Greg Maffei,
will discuss these highlights and other matters on Liberty
Interactive’s earnings conference call which will begin at 11:00
a.m. (E.S.T.) on March 1, 2018. For information regarding how to
access the call, please see “Important Notice” later in this
document. 2) For a definition of constant currency financial
metrics, see the accompanying schedules. Applicable reconciliations
can be found in the financial tables at the beginning of this press
release. 3) For a definition of adjusted OIBDA, adjusted net income
and applicable reconciliations and a definition of adjusted OIBDA
margin, see the accompanying schedules.
QVC GROUP
FINANCIAL METRICS – QUARTER
(amounts in millions) 4Q16 4Q17 % Change
Revenue QVC US $ 1,947 $ 2,029 4 % QVC International
711 788 11 % Total QVC revenue 2,658 2,817 6 %
HSN(1)
NA
-
NA
zulily 467 520 11 %
Intergroup eliminations
-
-
NA
Total QVC Group Revenue $ 3,125
$ 3,337 7 % Operating
Income QVC US $ 303 $ 367 21 % QVC International 101
129 28 % Total QVC Operating Income 404 496 23
%
HSN(1)
NA
(38
)
NA
zulily (14 ) (18 ) (29 )% Corporate and other(2) (6 )
(49 ) (717 )%
Total QVC Group Operating Income $
384 $ 391 2 %
Adjusted OIBDA QVC US $ 438 $ 436 0 % QVC
International 131 147 12 % Total QVC
Adjusted OIBDA 569 583 2 %
HSN(1)
NA
-
NA
zulily 40 38 (5 )% Corporate and other(2) 1
(17 ) NM
Total QVC Group Adjusted OIBDA $
610 $ 604 (1 )%
Adjusted Net Income Total QVC Group Net Income $ 188
$ 887 372 % Total QVC Group Adjusted Net Income(3) $ 266 $ 917 245
%
China JV(4) Revenue $ 43 $ 50 16 % Adjusted
OIBDA $ (1 ) $ 4 500 %
QVC Shares Outstanding
1/31/2017 1/31/2018 Outstanding A and B shares 455
477
Quarter ended Quarter ended QVCA and
QVCB Basic and Diluted Shares 12/31/2016
12/31/2017 Basic Weighted Average Shares Outstanding
(“WASO”) 464 429 Potentially Dilutive Shares 3
3
Diluted WASO 467 432
(1) HSN’s results of operations are not included in
Liberty Interactive’s consolidated results, with the exception of
$38 million of severance-related costs incurred on December 30,
2017. (2) Includes severance-related costs incurred by Cornerstone
on December 30, 2017. (3) See reconciling schedule 4. (4) This
joint venture is being accounted for as an equity investment.
Fourth quarter 2016 revenue figures include the effects of changes
in presentation of revenue.
QVC GROUP
FINANCIAL METRICS - FULL YEAR
(amounts in millions) 2016 2017 %
Change
Revenue QVC US $ 6,120 $ 6,140 0 % QVC International
2,562 2,631 3 % Total QVC revenue 8,682
8,771 1 %
HSN(1)
NA
-
NA
zulily 1,547 1,613 4 % Intergroup eliminations (10 )
(3 ) 70 %
Total QVC Group Revenue $ 10,219
$ 10,381 2 %
Operating Income QVC US $ 915 $ 994 9 % QVC International
288 353 23 % Total QVC Operating Income
1,203 1,347 12 %
HSN(1)
NA
(38
)
NA
zulily (152 ) (129 ) 15 % Corporate and other(2) (40 )
(80 ) (100 )%
Total QVC Group Operating Income
$ 1,011 $ 1,100 9
% Adjusted OIBDA QVC US $ 1,435 $ 1,446 1 %
QVC International 405 451 11 % Total
QVC Adjusted OIBDA 1,840 1,897 3 %
HSN(1)
NA
-
NA
zulily 112 91 (19 )% Corporate and other(2) (16 ) (35
) (119 )%
Total QVC Group Adjusted OIBDA $
1,936 $ 1,953 1 %
Adjusted Net Income Total QVC Group Net Income $ 473
$ 1,208 155 % Total QVC Group Adjusted Net Income(3) $ 812 $ 1,455
79 %
China JV(4) Revenue $ 158 $ 164 4 %
Adjusted OIBDA $ (6 ) $ 2 133 % (1) HSN’s results of
operations are not included in Liberty Interactive’s consolidated
results, with the exception of $38 million of severance-related
costs incurred on December 30, 2017. (2) Includes severance-related
costs incurred by Cornerstone on December 30, 2017. (3) See
reconciling schedule 4. (4) This joint venture is being accounted
for as an equity investment. 2016 and 2017 annual revenue figures
include the effects of changes in presentation of revenue.
NOTES
The following financial information with respect to Liberty
Interactive’s equity affiliates and available for sale securities
is intended to supplement Liberty Interactive’s consolidated
statements of operations which are included in its Form 10-K for
the year ended December 31, 2017. Liberty Interactive acquired the
62% of HSNi it did not already own on December 29, 2017, making
HSNi a wholly-owned subsidiary, attributed to the QVC Group
tracking stock. Therefore, we no longer have an equity method
investment in HSNi as of December 31, 2017.
Fair Value of Public Holdings
(amounts in millions) 9/30/2017 12/31/2017 HSNi(1) $
782
$
NA
Total Attributed QVC Group $ 782
$
NA
Charter(2) $ 1,947 $ 1,800 Liberty Broadband(2) 4,068 3,635
LendingTree(3) 788 1,098 ILG(2) 445 474 Other public holdings(4)
134 74
Total Attributed Liberty Ventures Group
$ 7,382 $ 7,081 (1)
Represents fair value of the investment in HSNi attributed to QVC
Group prior to the acquisition of HSNi by Liberty Interactive. In
accordance with GAAP, this investment was accounted for using the
equity method of accounting and was included in the attributed
balance sheet of QVC Group at historical carrying value which
aggregated $198 million at September 30, 2017. (2) Represents fair
value of the investments in Charter, Liberty Broadband and ILG
attributed to Liberty Ventures Group, which are accounted for at
fair value. (3) Represents fair value of the investment in
LendingTree attributed to Liberty Ventures Group. In accordance
with GAAP, this investment is accounted for using the equity method
of accounting and is included in the attributed balance sheet of
Liberty Ventures Group at historical carrying values which
aggregated $113 million and $115 million at September 30, 2017 and
December 31, 2017, respectively. (4) Other public holdings includes
fair value of the investment in FTD attributed to Liberty Ventures
Group. In accordance with GAAP, this investment is accounted for
using the equity method of accounting and is included in the
attributed balance sheet of Liberty Ventures Group at historical
carrying values which aggregated $133 million and $73 million at
September 30, 2017 and December 31, 2017, respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information. Balance sheet
items as of December 31, 2017 include HSNi.
(amounts in millions) 9/30/2017 12/31/2017
Cash
and Liquid Investments Attributable to: QVC Group $ 383 $ 330
Liberty Ventures Group 512 573
Total
Liberty Consolidated Cash and Liquid Investments $
895 $ 903 Debt:
Senior notes and debentures(1) $ 791 $ 791 QVC senior notes(1)
3,550 3,550 QVC bank credit facility 1,690 1,763
HSNi revolving credit facility
NA
460
Other 177 170
Total Attributed QVC
Group Debt $ 6,208 $ 6,734
Unamortized discount, fair market value adjustment and deferred
loan costs (33 ) (31 )
Total Attributed QVC Group
Debt (GAAP) $ 6,175 $ 6,703
Senior exchangeable debentures(2) $ 1,949 $
1,947
Total Attributed Liberty Ventures Group Debt
$ 1,949 $ 1,947 Fair market value
adjustment (63 ) (101 )
Total Attributed Liberty
Ventures Group Debt (GAAP) $ 1,886
$ 1,846 Total Liberty
Interactive Corporation Debt (GAAP) $ 8,061
$ 8,549 1) Face amount of
senior notes and debentures with no reduction for the unamortized
discounts. 2) Face amount of senior exchangeable debentures with no
reduction for the fair market value adjustment.
Total cash and liquid investments attributed to the QVC Group
decreased by approximately $53 million during the fourth quarter.
Share repurchases more than offset cash from operations. Total debt
attributed to the QVC Group increased by $526 million primarily due
to the addition of the HSNi revolving credit facility. The QVC,
Inc. leverage ratio, which includes both QVC and zulily, was 2.7x
as of December 31, 2017.
Total cash and liquid investments attributed to the Liberty
Ventures Group increased $61 million in the fourth quarter,
primarily due to intercompany tax payments received. Total debt
attributed to Liberty Ventures Group decreased by $2 million.
Important Notice: Liberty Interactive (Nasdaq: QVCA,
QVCB, LVNTA, LVNTB) President and CEO, Greg Maffei, will discuss
Liberty Interactive’s earnings release on a conference call which
will begin at 11:00 a.m. (E.S.T.) on March 1, 2018. The call can be
accessed by dialing (866) 548-4713 or (323) 794-2093, passcode
9151576, at least 10 minutes prior to the start time. The call will
also be broadcast live across the Internet and archived on our
website. To access the webcast go to
http://www.libertyinteractive.com/events. Links to this press
release and replays of the call will also be available on Liberty
Interactive’s website.
This press release includes certain forward-looking statements
under the Private Securities Litigation Reform Act of 1995,
including statements about business strategies, market potential,
future financial prospects, the proposed acquisition of GCI by
Liberty Interactive and the proposed split-off of GCI and certain
Liberty Ventures Group assets and liabilities (the “proposed
transactions”), the timing of the proposed transactions, the
renaming of Liberty Interactive and the rebranding of the QVC Group
and the related change in ticker symbols, changes to management and
our board of directors, the future impact of accounting changes,
the monetization of our non-core assets, the continuation of our
stock repurchase program and other matters that are not historical
facts. These forward-looking statements involve many risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statements, including,
without limitation, possible changes in market acceptance of new
products or services, the successful integration of HSN,
competitive issues, regulatory matters affecting our businesses,
continued access to capital on terms acceptable to Liberty
Interactive, changes in law and government regulations that may
impact the derivative instruments that hedge certain of our
financial risks, the availability of investment opportunities, the
satisfaction of conditions to complete the proposed transactions
and market conditions conducive to stock repurchases. These
forward-looking statements speak only as of the date of this press
release, and Liberty Interactive expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in
Liberty Interactive’s expectations with regard thereto or any
change in events, conditions or circumstances on which any such
statement is based. Please refer to the publicly filed documents of
Liberty Interactive, including the most recent Form 10-K, for
additional information about Liberty Interactive and about the
risks and uncertainties related to Liberty Interactive’s business
which may affect the statements made in this press release.
NON-GAAP FINANCIAL MEASURES
This press release includes a presentation of adjusted OIBDA,
which is a non-GAAP financial measure, for Liberty Interactive, the
QVC Group, QVC (and certain of its subsidiaries), zulily, HSN,
Cornerstone and the Liberty Ventures Group together with a
reconciliation to that entity or such businesses’ operating income,
as determined under GAAP. Liberty Interactive defines adjusted
OIBDA as revenue less cost of sales, operating expenses, and
selling, general and administrative expenses, excluding all stock
based compensation, and excludes from that definition depreciation
and amortization and restructuring and impairment charges that are
included in the measurement of operating income pursuant to GAAP.
Further, this press release includes adjusted OIBDA margin which is
also a non-GAAP financial measure. Liberty Interactive defines
adjusted OIBDA margin as adjusted OIBDA divided by revenue.
Liberty Interactive believes adjusted OIBDA is an important
indicator of the operational strength and performance of its
businesses, including each business’ ability to service debt and
fund capital expenditures. In addition, this measure allows
management to view operating results and perform analytical
comparisons and benchmarking between businesses and identify
strategies to improve performance. Because adjusted OIBDA is used
as a measure of operating performance, Liberty Interactive views
operating income as the most directly comparable GAAP measure.
Adjusted OIBDA is not meant to replace or supersede operating
income or any other GAAP measure, but rather to supplement such
GAAP measures in order to present investors with the same
information that Liberty Interactive’s management considers in
assessing the results of operations and performance of its assets.
Please see the attached schedules for applicable
reconciliations.
In addition, this press release includes references to adjusted
net income, which is a non-GAAP financial measure, for QVC Group.
Liberty Interactive defines adjusted net income as net income,
excluding the impact of purchase accounting amortization (net of
deferred tax benefit).
Liberty Interactive believes adjusted net income is an important
indicator of financial performance, in particular for QVC Group,
due to the impact of purchase accounting amortization. Because
adjusted net income is used as a measure of overall financial
performance, Liberty Interactive views net income as the most
directly comparable GAAP measure. Adjusted net income is not meant
to replace or supersede net income or any other GAAP measure, but
rather to supplement such GAAP measures in order to present
investors with a supplemental metric of financial performance.
Please see the attached schedules for a reconciliation of adjusted
net income to net income (loss) calculated in accordance with GAAP
for QVC Group (Schedule 4).
This press release also references certain financial metrics on
a constant currency basis, which is a non-GAAP measure, for QVC
Group. Constant currency financial metrics, as presented herein,
are calculated by translating the current-year and prior-year
reported amounts into comparable amounts using a single foreign
exchange rate for each currency.
Liberty Interactive believes constant currency financial metrics
are an important indicator of financial performance, in particular
for QVC Group, due to the translational impact of foreign currency
fluctuations relating to its subsidiaries in the UK, Germany,
Italy, Japan and France, as well as its JV in China. We use
constant currency financial metrics to provide a framework to
assess how our businesses performed excluding the effects of
foreign currency exchange fluctuations. Please see the financial
tables at the beginning of this press release for a reconciliation
of the impact of foreign currency fluctuations on revenue,
operating income, adjusted OIBDA and average selling price.
SCHEDULE 1
The following table provides a reconciliation of QVC Group’s
adjusted OIBDA to its operating income calculated in accordance
with GAAP for the three months ended December 31, 2016, March 31,
2017, June 30, 2017, September 30, 2017 and December 31, 2017,
respectively, and years ended December 31, 2016 and 2017.
QUARTERLY SUMMARY
(amounts in millions) 4Q16 1Q17
2Q17 3Q17 4Q17
QVC Group Adjusted OIBDA $ 610 $ 445 488 416
$ 604 Depreciation and amortization (208 ) (207 ) (205 ) (180 )
(129 ) Stock compensation expense(1) (18 ) (12 ) (18 ) (18 ) (49 )
Acquisition and restructuring related expenses —
— — — (35 )
Operating Income $ 384 $
226 $ 265 $ 218
$ 391
ANNUAL SUMMARY
(amounts in millions) 2016 2017
QVC Group
Adjusted OIBDA 1,936 1,953 Depreciation and amortization (850 )
(721 ) Stock compensation expense(1) (75 ) (97 ) Acquisition and
restructuring related expenses — (35 )
Operating Income $ 1,011 $
1,100 1) Includes increase in
stock-based compensation expense as a result of the December 2017
stock option exchange.
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries), zulily, HSN and
Cornerstone to that entity or such businesses’ operating income
(loss) calculated in accordance with GAAP for the three months
ended December 31, 2016, March 31, 2017, June 30, 2017, September
30, 2017 and December 31, 2017, respectively, and years ended
December 31, 2016 and 2017. As there are no material reconciling
items between adjusted OIBDA and operating income for the QVC China
joint venture for the referenced periods, no reconciliation has
been provided.
QUARTERLY SUMMARY
(amounts in millions) 4Q16 1Q17
2Q17 3Q17 4Q17
QVC
Group
QVC Adjusted OIBDA QVC US $ 438 $ 336 $ 361 $ 313 $ 436 QVC
International 131 98 107 99 147 Consolidated QVC adjusted
OIBDA 569 434 468 412 583 Depreciation and amortization (157 ) (157
) (154 ) (129 ) (79 ) Stock compensation (8 ) (6 )
(8 ) (9 ) (8 )
QVC Operating Income
$ 404 $ 271 $
306 $ 274 $ 496
zulily Adjusted OIBDA $ 40 $ 15 $ 26 $ 12 $ 38
Depreciation and amortization (51 ) (50 ) (51 ) (51 ) (50 ) Stock
compensation (3 ) (3 ) (4 ) (5 )
(6 )
zulily Operating Income (Loss) $ (14
) $ (38 ) $ (29 )
$ (44 ) $ (18 )
HSN Adjusted OIBDA $ 75 $ 48 $ 50 $ 43 $ 79 Depreciation and
amortization (8 ) (8 ) (8 ) (8 ) (7 ) Stock compensation (4 ) (3 )
1 (3 ) (12 )
Acquisition related costs
— — (4 ) (1 ) (64
)
HSN Operating Income (Loss)(1) $ 64
$ 37 $ 39 $
31 $ (3 )
Cornerstone Adjusted OIBDA $ 13 $ 5 $ 21 $ 7 $ 12
Depreciation and amortization (3 ) (3 ) (3 ) (4 ) (4 ) Stock
compensation (1 ) (1 ) — (1 ) (1 )
Acquisition related costs
— — (2 ) —
(18 )
Cornerstone Operating Income (Loss) $ 9
$ 1 $ 16 $
2 $ (11 ) 1) May
not sum due to rounding.
ANNUAL SUMMARY
(amounts in millions) 2016 2017
QVC
Group
QVC Adjusted OIBDA QVC US $ 1,435 $ 1,446 QVC International
405 451 Consolidated QVC adjusted OIBDA 1,840 1,897
Depreciation and amortization (605 ) (519 ) Stock compensation
(32 ) (31 )
QVC Operating Income $
1,203 $ 1,347
zulily Adjusted OIBDA $ 112 $ 91 Depreciation and
amortization (245 ) (202 ) Stock compensation (19 )
(18 )
zulily Operating Income (Loss) $ (152
) $ (129 ) HSN Adjusted
OIBDA $ 259 $ 220 Depreciation and amortization (29 ) (31 ) Stock
compensation (15 ) (17 ) Acquisition and restructuring related
expenses — (69 )
HSN Operating Income
$ 215 $ 103 Cornerstone
Adjusted OIBDA $ 41 $ 45 Depreciation and amortization (13 ) (14 )
Stock compensation (4 ) (3 ) Impairment of intangible assets (31 )
— Acquisition and restructuring related expenses —
(20 )
Cornerstone Operating Income (Loss) $
(7 ) $ 8
SCHEDULE 3
The following table provides a reconciliation of adjusted OIBDA
for QVC Group and the Liberty Ventures Group to the Liberty
Interactive Corporation operating income (loss) calculated in
accordance with GAAP for the three months ended December 31, 2016,
March 31, 2017, June 30, 2017, September 30, 2017 and December 31,
2017, respectively, and years ended December 31, 2016 and 2017.
QUARTERLY SUMMARY
(amounts in millions) 4Q16 1Q17
2Q17 3Q17 4Q17 QVC Group Adjusted OIBDA $ 610 $ 445 $ 488 $
416 $ 604 Liberty Ventures Group Adjusted OIBDA (5 )
(8 ) (7 ) (6 ) (6 )
Consolidated Liberty
Interactive Corp. Adjusted OIBDA $ 605
$ 437 $ 481 $
410 $ 598 Depreciation and
amortization (211 ) (208 ) (206 ) (180 ) (131 ) Stock
compensation(1) (22 ) (16 ) (21 ) (22 ) (64 ) Acquisition and
restructuring related expenses — —
— — (35 )
Consolidated
Liberty Interactive Corp. Operating Income $ 372
$ 213 $ 254
$ 208 $ 368
ANNUAL SUMMARY
(amounts in millions) 2016 2017 QVC Group
Adjusted OIBDA $ 1,936 $ 1,953 Liberty Ventures Group Adjusted
OIBDA 3 (27 )
Consolidated Liberty
Interactive Corp. Adjusted OIBDA $ 1,939
$ 1,926 Depreciation and amortization (874 )
(725 ) Stock compensation(1) (97 ) (123 ) Acquisition and
restructuring related expenses — (35 )
Consolidated Liberty Interactive Corp. Operating Income
$ 968 $ 1,043 1)
Includes increase in stock-based compensation expense as a
result of the December 2017 stock option exchange and $8 million of
HSN stock-based compensation.
SCHEDULE 4
The following table provides a reconciliation of QVC Group’s
adjusted net income to its net income calculated in accordance with
GAAP for the three months ended December 31, 2016, March 31, 2017,
June 30, 2017, September 30, 2017 and December 31, 2017,
respectively, and years ended December 31, 2016 and 2017.
QUARTERLY SUMMARY
(amounts in millions)
4Q16 1Q17 2Q17 3Q17 4Q17 LTM
QVC Group Net income(1) $ 188 $
91 $ 111 $ 119 $ 887 $ 1,208 QVC purchase accounting amort, net
deferred tax benefit (2) 49 49 49 34 2 134 zulily purchase
accounting amort, net deferred tax benefit(3) 29 28
28 29 28 113 QVC Group Adjusted net
income $ 266 $ 168 $ 188 $ 182 $ 917 $ 1,455 QVCA/B shares
outstanding as of January 31, 2018 477 Adjusted LTM earnings per
share $ 3.05
ANNUAL SUMMARY
(amounts in millions) 2016 2017
QVC Group Net
income(1) $ 473 $ 1,208 QVC purchase accounting amort, net deferred
tax benefit (2) 199 134 zulily purchase accounting amort, net
deferred tax benefit(3) 140 113 QVC Group Adjusted
net income $ 812 $ 1,455 1) Net income for the fourth
quarter and full year 2017 includes non-cash gain related to the
HSNi acquisition. 2) Add-back relates to non-cash, non-tax
deductible purchase accounting amortization from Liberty
Interactive’s acquisition of QVC, net of book deferred tax benefit
(gross non-cash, non-tax deductible purchase accounting
amortization was $315 million and $210 million for the twelve
months ended December 31, 2016 and 2017. The purchase accounting
amortization was applied ratably across the four quarters in 2016.
The majority of the intangible assets established in purchase
accounting as a result of the acquisitions were fully amortized as
of the end of the third quarter of 2017). 3) Add-back relates to
non-cash, non-tax deductible purchase accounting amortization from
Liberty Interactive’s acquisition of zulily, net of book deferred
tax benefit.
LIBERTY INTERACTIVE CORPORATION
BALANCE SHEET INFORMATION December 31, 2017 -
(unaudited) Attributed QVC
Ventures Consolidated Group
Group Liberty amounts in millions
Assets
Current assets: Cash and cash equivalents $ 330 573 903 Trade and
other receivables, net 1,719 7 1,726 Inventory, net 1,411 — 1,411
Other current assets 122 3 125 Total current assets
3,582 583 4,165 Investments in available-for-sale
securities and other cost investments 3 2,360 2,363 Investments in
affiliates, accounted for using the equity method 40 269 309
Investment in Liberty Broadband measured at fair value — 3,635
3,635 Property and equipment, net 1,340 1 1,341 Intangible assets
not subject to amortization 10,982 29 11,011 Intangible assets
subject to amortization, net 1,244 4 1,248 Other assets, at cost,
net of accumulated amortization 46 4 50 Total assets
$ 17,237 6,885 24,122
Liabilities and Equity
Current liabilities: Intergroup payable (receivable) $ 51 (51 ) —
Accounts payable 1,150 1 1,151 Accrued liabilities 1,097 28 1,125
Current portion of debt 17 979 996 Other current liabilities
167 2 169 Total current liabilities 2,482 959
3,441 Long-term debt 6,686 867 7,553 Deferred income tax
liabilities 994 1,809 2,803 Other liabilities 147 95
242 Total liabilities 10,309 3,730 14,039
Equity/Attributed net assets (liabilities) 6,819 3,165 9,984
Non-controlling interests in equity of subsidiaries 109 (10
) 99 Total liabilities and equity $ 17,237 6,885 24,122
LIBERTY INTERACTIVE CORPORATION STATEMENT
OF OPERATIONS INFORMATION Year ended December 31, 2017 -
(unaudited) Attributed QVC
Ventures Consolidated Group
Group Liberty amounts in millions Revenue: Total
revenue, net $ 10,381 23 10,404 Operating costs and
expenses: Cost of retail sales (exclusive of depreciation shown
separately below) 6,789 — 6,789 Operating expense 648 11 659
Selling, general and administrative, including stock-based
compensation 1,088 65 1,153 Acquisition and restructuring charges
35 — 35 Depreciation and amortization 721 4
725 9,281 80 9,361 Operating
income (loss) 1,100 (57 ) 1,043 Other income (expense):
Interest expense (293 ) (62 ) (355 ) Share of earnings (losses) of
affiliates, net 38 (238 ) (200 ) Realized and unrealized gains
(losses) on financial instruments, net — 618 618 Gains (losses) on
transactions, net 409 1 410 Other, net (3 ) 10 7
151 329 480 Earnings (loss) from
continuing operations before income taxes 1,251 272 1,523 Income
tax benefit (expense) 3 961 964 Net
earnings (loss) 1,254 1,233 2,487 Less net earnings (loss)
attributable to noncontrolling interests 46 —
46 Net earnings (loss) attributable to Liberty Interactive
Corporation shareholders $ 1,208 1,233 2,441
LIBERTY INTERACTIVE CORPORATION STATEMENT
OF OPERATIONS INFORMATION Year ended December 31, 2016 -
(unaudited) Attributed QVC
Ventures Consolidated Group
Group Liberty amounts in millions Revenue: Total
revenue, net $ 10,219 428 10,647 Operating costs and
expenses: Cost of retail sales (exclusive of depreciation shown
separately below) 6,642 266 6,908 Operating expense 653 54 707
Selling, general and administrative, including stock-based
compensation 1,063 127 1,190 Depreciation and amortization
850 24 874 9,208 471
9,679 Operating income (loss) 1,011 (43 ) 968 Other
income (expense): Interest expense (289 ) (74 ) (363 ) Share of
earnings (losses) of affiliates, net 42 (110 ) (68 ) Realized and
unrealized gains (losses) on financial instruments, net 2 1,173
1,175 Gains (losses) on transactions, net — 9 9 Other, net
42 89 131 (203 ) 1,087 884
Earnings (loss) from continuing operations before income
taxes 808 1,044 1,852 Income tax benefit (expense) (297 )
(301 ) (598 ) Earnings (loss) from continuing operations 511 743
1,254 Earnings (loss) from discontinued operations, net of taxes
— 20 20 Net earnings (loss) 511 763
1,274 Less net earnings (loss) attributable to non-controlling
interests 38 1 39 Net earnings (loss)
attributable to Liberty Interactive Corporation shareholders $ 473
762 1,235
LIBERTY INTERACTIVE
CORPORATION STATEMENT OF CASH FLOWS INFORMATION Year
ended December 31, 2017 - (unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 1,254 1,233 2,487 Adjustments to reconcile
net earnings to net cash provided by operating activities:
Depreciation and amortization 721 4 725 Stock-based compensation 97
26 123 Share of (earnings) losses of affiliates, net (38 ) 238 200
Cash receipts from return on equity investments 28 1 29 Realized
and unrealized gains (losses) on financial instruments, net — (618
) (618 ) (Gains) losses on transactions, net (409 ) (1 ) (410 )
Deferred income tax (benefit) expense (421 ) (715 ) (1,136 )
Intergroup tax allocation 266 (266 ) — Intergroup tax payments (288
) 288 — Other noncash charges (credits), net 7 3 10 Changes in
operating assets and liabilities Current and other assets (177 ) 34
(143 ) Payables and other current liabilities 182 43
225 Net cash provided (used) by operating activities
1,222 270 1,492
CASH
FLOWS FROM INVESTING ACTIVITIES: Cash paid for acquisitions,
net of cash acquired 22 — 22 Cash proceeds from dispositions of
investments 2 1 3 Investment in and loans to cost and equity
investees — (159 ) (159 ) Capital expended for property and
equipment (201 ) (3 ) (204 ) Other investing activities, net
(52 ) (1 ) (53 ) Net cash provided (used) by investing activities
(229 ) (162 ) (391 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings of debt 2,469 — 2,469 Repayments of debt
(2,618 ) (13 ) (2,631 ) Repurchases of QVC Group common stock (765
) — (765 ) Withholding taxes on net settlements of stock-based
compensation (43 ) (27 ) (70 ) Other financing activities, net
(57 ) 18 (39 ) Net cash provided (used) by financing
activities (1,014 ) (22 ) (1,036 ) Effect of foreign
currency rates on cash 13 — 13 Net
increase (decrease) in cash and cash equivalents (8 ) 86 78 Cash
and cash equivalents at beginning of period 338 487
825 Cash and cash equivalents at end of period $ 330
573 903
LIBERTY INTERACTIVE
CORPORATION STATEMENT OF CASH FLOWS INFORMATION Year
ended December 31, 2016 - (unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
CASH FLOWS FROM OPERATING ACTIVITIES: amounts in millions
Net earnings (loss) $ 511 763 1,274 Adjustments to reconcile net
earnings to net cash provided by operating activities: (Earnings)
loss from discontinued operations — (20 ) (20 ) Depreciation and
amortization 850 24 874 Stock-based compensation 75 22 97 Cash
payments for stock based compensation — (92 ) (92 ) Noncash
interest expense 3 9 12 Share of (earnings) losses of affiliates,
net (42 ) 110 68 Cash receipts from return on equity investments 28
3 31 Realized and unrealized gains (losses) on financial
instruments, net (2 ) (1,173 ) (1,175 ) (Gains) losses on
transactions, net — (9 ) (9 ) (Gains) losses on extinguishment of
debt (1 ) 7 6 Deferred income tax expense (benefit) (199 ) 672 473
Intergroup tax allocation 360 (360 ) — Intergroup tax payments (301
) 301 — Other noncash charges (credits), net (33 ) (82 ) (115 )
Changes in operating assets and liabilities Current and other
assets 92 44 136 Payables and other current liabilities (68
) (49 ) (117 ) Net cash provided (used) by operating activities
1,273 170 1,443
CASH FLOWS
FROM INVESTING ACTIVITIES: Cash proceeds from dispositions —
353 353 Investments in and loans to cost and equity investees — (86
) (86 ) Capital expended for property and equipment (206 ) (27 )
(233 ) Purchases of short term and other marketable securities —
(264 ) (264 ) Sales of short term investments and other marketable
securities 12 1,162 1,174 Investment in Liberty Broadband — (2,400
) (2,400 ) Other investing activities, net (44 ) 8
(36 ) Net cash provided (used) by investing activities (238
) (1,254 ) (1,492 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings of debt 1,905 1,522 3,427 Repayments of
debt (2,178 ) (2,320 ) (4,498 ) Repurchases of QVC Group common
stock (799 ) — (799 ) Withholding taxes on net settlements of
stock-based compensation (15 ) (1 ) (16 ) Distribution from Liberty
Expedia Holdings — 299 299 Other financing activities, net
(16 ) 31 15 Net cash provided (used) by financing
activities (1,103 ) (469 ) (1,572 ) Effect of foreign
currency rates on cash (20 ) — (20 ) Net cash
provided (used) by discontinued operations: Cash provided (used) by
operating activities — 17 17 Cash provided (used) by investing
activities — — — Cash provided (used) by financing activities — — —
Change in available cash held by discontinued operations —
— — Net cash provided (used) by discontinued
operations — 17 17 Net increase
(decrease) in cash and cash equivalents (88 ) (1,536 ) (1,624 )
Cash and cash equivalents at beginning of period 426
2,023 2,449 Cash and cash equivalents at end of
period $ 338 487 825
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Liberty Interactive CorporationCourtnee Chun, 720-875-5420
Liberty Interactive Corp. - Series A Liberty Ventures (delisted) (NASDAQ:LVNTA)
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