Revenue Growth with Strong Profit
Improvement, Margin Expansion and Cash Flow
Paid Special Cash Dividend and Resumed Share
Repurchases
Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB,
QRTEP) today reported fourth quarter and year end 2020
results(1).
“Our strong 2020 performance reflects our agility in a rapidly
changing environment and the accelerated execution of key elements
of our long-term strategy, including extension of our reach across
new platforms to be there for our customers wherever and whenever
they want to engage with our brands. Our teams’ relentless focus on
meeting our customers’ ever-evolving needs generated a record
number of high-value, digitally-driven new customers, and deepened
our existing customer relationships. We ended the year with
sustained topline growth across all business segments as well as
strong profit growth, margin expansion and cash flow from
operations. Our performance enabled us to return additional capital
to shareholders through resumed share repurchases and nearly $1.3
billion paid in special cash dividends in 2020,” said Mike George,
President and CEO of Qurate Retail. “As we look ahead, we believe
the same digitally-driven macro consumer trends will continue, and
we remain focused on long-term growth.”
Fourth quarter and full year 2020 operating results:
- Total Qurate Retail revenue increased 7% to $4.5 billion in Q4,
and increased 5% to $14.2 billion in full year
- In constant currency(2) revenue increased 6% in Q4 and 5% in
full year
- eCommerce revenue increased 12% to $2.9 billion or 65% of total
revenue in Q4, and increased 11% to $8.9 billion or 63% of total
revenue in full year
- Qurate Retail reported diluted EPS of $1.56 in Q4 and $2.86 in
full year
- Adjusted diluted EPS(3) of $1.59 in Q4 and $2.99 in full
year
- QxH revenue increased 1% in Q4 and 3% in full year
- QVC International revenue increased 16% in Q4 and 10% in full
year
- In constant currency, revenue increased 10% in Q4 and 8% in
full year
- Zulily revenue increased 11% in Q4 and 4% in full year
- Cornerstone revenue increased 30% in Q4 and 19% in full
year
Corporate updates:
- From November 25, 2020 through January 31, 2021, repurchased
7.7 million QRTEA shares at an average price per share of $10.77
and total cost of $82 million
- Special cash dividend of $1.50 per common share, for an
aggregate dividend of approximately $625 million, paid in December
2020
Discussion of Results
Unless otherwise noted, the following discussion compares
financial information for the three months and year ended December
31, 2020 to the same periods in 2019.
FOURTH
QUARTER 2020 FINANCIAL RESULTS
(amounts in millions)
4Q19
4Q20
% Change
% Change Constant Currency(a)
Revenue
QxH
$
2,692
$
2,723
1
%
QVC International
775
896
16
%
10
%
Zulily
452
503
11
%
Cornerstone
254
331
30
%
Intersegment eliminations
-
(1
)
NM
Total Qurate Retail Revenue
$
4,173
$
4,452
7
%
6
%
Operating Income
QxH(b)
$
191
$
384
NM
QVC International
115
144
25
%
20
%
Zulily
(13
)
(15
)
(15
)%
Cornerstone
3
34
1,033
%
Unallocated corporate cost
(9
)
(17
)
(89
)%
Total Qurate Retail Operating
Income
$
287
$
530
85
%
Adjusted OIBDA
QxH
$
443
$
486
10
%
QVC International
133
162
22
%
16
%
Zulily
16
9
(44
)%
Cornerstone
12
40
233
%
Unallocated corporate cost
(4
)
(14
)
(250
)%
Total Qurate Retail Adjusted
OIBDA
$
600
$
683
14
%
13
%
____________________
a)
For a definition of constant
currency financial metrics, see the accompanying schedules.
b)
QxH incurred a $147 million
non-cash impairment charge related to HSN’s tradename in the fourth
quarter of 2019.
FULL
YEAR 2020 FINANCIAL RESULTS
(amounts in millions)
2019
2020
% Change
% Change Constant Currency(a)
Revenue
QxH
$
8,277
$
8,505
3
%
QVC International(b)
2,709
2,967
10
%
8
%
Zulily
1,571
1,636
4
%
Cornerstone
901
1,070
19
%
Inter-segment elimination
-
(1
)
NM
Total Qurate Retail Revenue
$
13,458
$
14,177
5
%
5
%
Operating Income
QxH(c)
$
973
$
1,128
NM
QVC International(b)
354
439
24
%
22
%
Zulily(d)
(1,091
)
(12
)
NM
Cornerstone
(3
)
64
NM
Unallocated corporate cost
(49
)
(47
)
4
%
Total Qurate Retail Operating
Income
$
184
$
1,572
754
%
Adjusted OIBDA
QxH
$
1,536
$
1,547
1
%
QVC International(b)
446
510
14
%
12
%
Zulily
48
83
73
%
Cornerstone
33
94
185
%
Unallocated corporate cost
(34
)
(36
)
(6
)%
Total Qurate Retail Adjusted
OIBDA
$
2,029
$
2,198
8
%
8
%
____________________
a)
For a definition of constant
currency financial metrics, see the accompanying schedules.
b)
Includes results of QVC France
which terminated its operations on March 13, 2019.
c)
QxH incurred a $147 million
non-cash impairment charge related to HSN’s tradename in the fourth
quarter of 2019.
d)
Zulily incurred a $1.0 billion
non-cash impairment charge related to its tradename and goodwill in
the third quarter of 2019.
FOURTH
QUARTER AND FULL YEAR 2020 NET INCOME AND ADJUSTED NET
INCOME(3)
(amounts in millions)
4Q19
4Q20
% Change
2019
2020
% Change
Net Income(a)
$
141
$
666
372
%
$
(456
)
$
1,204
NM
Adjusted Net Income(b)
$
284
$
680
139
%
$
818
$
1,258
54
%
Basic weighted average shares outstanding
("WASO")
416
416
424
416
Potentially dilutive shares
-
11
-
5
Diluted WASO
416
427
424
421
GAAP EPS(a)
$
0.34
$
1.56
359
%
$
(1.08
)
$
2.86
NM
Adjusted EPS(b)
$
0.68
$
1.59
133
%
$
1.93
$
2.99
55
%
____________________
a)
Represents net income and diluted
net income per share from continuing operations attributable to
Series A and Series B Qurate Retail common stockholders as
presented in Qurate Retail’s financial statements.
b)
See reconciling schedule 3.
QxH
QxH revenue growth in the fourth quarter and full year reflects
continued demand for home products, growth in customers and
favorable customer returns. For the quarter and full year, QxH
reported outstanding growth in home and modest growth in
accessories, partially offset by a decline in electronics primarily
due to supply-related pressures, which was more material in the
fourth quarter, as well as declines in beauty, apparel and
jewelry.
For the quarter and full year, operating income margin increased
primarily due to the absence of a $147 million non-cash impairment
charge related to the fair value of HSN’s tradename, which was
incurred in the fourth quarter of 2019.
For the fourth quarter, adjusted OIBDA margin(3) increased
primarily reflecting increased product margins and lower bad debt
expense, partially offset by higher fulfillment (freight and
warehouse) expense, increased incentive compensation accruals and
higher marketing expense. Product margins expanded primarily due to
strategic sourcing initiatives, pricing actions taken to offset
freight surcharges, reduced promotional intensity and to a lesser
extent category mix with lower electronics sales. For the full
year, adjusted OIBDA margin decreased as higher fulfillment
expenses, incentive compensation accruals and increased marketing
expense more than offset product margin gains and lower bad debt
expense.
QVC International
For the quarter and full year, US Dollar denominated results
were positively affected by exchange rate fluctuations. In the
quarter the US Dollar weakened 8%, 4% and 3% versus the Euro,
Japanese Yen and British Pound, respectively. For the full year,
the US Dollar weakened 2%, 2% and 1% versus the Euro, Yen and
Pound, respectively. The financial metrics presented in this press
release also provide a comparison of the percentage change in QVC
International’s results in constant currency (where applicable) to
the comparable figures calculated in accordance with US GAAP for
the fourth quarter and full year 2020.
QVC International reported constant currency revenue gains and
customer growth in all markets for the quarter and full year. For
the quarter, the business generated gains in nearly every category,
led by home and beauty. For the full year, the business reported
growth in home, beauty and electronics, while apparel and
accessories were essentially flat.
For the quarter and full year, operating income and adjusted
OIBDA margin increased primarily due to revenue growth, improved
product margins, favorable fulfillment expense driven by average
selling price leverage and lower TV commissions, partially offset
by higher incentive compensation accruals and inventory
obsolescence expense.
For the full year, operating income and adjusted OIBDA margin
also benefited from comping an approximate $23 million operating
loss and a $6 million adjusted OIBDA loss incurred in 2019 related
to the closure of QVC France, which terminated its operations on
March 13, 2019.
Zulily
For the quarter and full year, Zulily revenue increased on
customer growth and gains in home and hardlines, which were
partially offset by declines in women’s apparel and footwear.
Operating income and adjusted OIBDA margin decreased in the fourth
quarter primarily due to higher freight costs, incentive
compensation accruals and marketing expense, which were partially
offset by improved product margins and leverage of administrative
expenses. For the full year, operating income and adjusted OIBDA
margin increased primarily reflecting lower marketing expense,
improved product margins and leverage of administrative expenses,
which were partially offset by higher freight costs and incentive
compensation accruals. Zulily recognized a $1 billion non-cash
impairment charge related to its tradename and goodwill in the
third quarter of 2019.
Cornerstone
For the quarter and full year, Cornerstone revenue increased
primarily due to strong demand in its home brands (Frontgate,
Ballard Designs, and Grandin Road). Garnet Hill returned to revenue
growth in the quarter but was down for the full year due to
weakness in apparel. For the quarter and full year, operating
income and adjusted OIBDA margin increased primarily from sales
growth and product margin gains, which were partially offset by
higher freight and administrative costs.
FOURTH
QUARTER 2020 SUPPLEMENTAL METRICS
(amounts in millions unless otherwise
noted)
4Q19
4Q20
% Change
% Change Constant Currency(a)
QxH
Cost of Sales % of Revenue
68.8
%
66.8
%
(200
)bps
Operating Income Margin (%)
7.1
%
14.1
%
NM
Adjusted OIBDA Margin (%)
16.5
%
17.8
%
130
bps
Average Selling Price
$
55.80
$
55.17
(1
)%
Units Sold
-
%
Return Rate(b)
14.3
%
12.0
%
(230
)bps
eCommerce Revenue(c)
$
1,610
$
1,701
6
%
eCommerce % of Total Revenue
59.8
%
62.5
%
270
bps
Mobile % of eCommerce Revenue(d)
66.7
%
65.8
%
(90
)bps
QVC – International
Cost of Sales % of Revenue
63.5
%
62.3
%
(120
)bps
Operating Income Margin (%)
14.8
%
16.1
%
130
bps
Adjusted OIBDA Margin (%)
17.2
%
18.1
%
90
bps
Average Selling Price
10
%
4
%
Units Sold
4
%
eCommerce Revenue(c)
$
336
$
434
29
%
23
%
eCommerce % of Total Revenue
43.4
%
48.4
%
500
bps
Mobile % of eCommerce Revenue(d)
74.5
%
73.3
%
(120
)bps
Zulily
Cost of Sales % of Revenue
76.8
%
77.9
%
110
bps
Operating Income Margin (%)
(2.9
)%
(3.0
)%
(10
)bps
Adjusted OIBDA Margin (%)
3.5
%
1.8
%
(170
)bps
Mobile % of Total Orders
74.3
%
75.0
%
70
bps
Cornerstone
Operating Income Margin (%)
1.2
%
10.3
%
910
bps
Adjusted OIBDA Margin (%)
4.7
%
12.1
%
740
bps
eCommerce Revenue(c)
$
190
$
249
31
%
eCommerce % of Total Revenue
74.8
%
75.2
%
40
bps
____________________
a)
For a definition of constant
currency financial metrics, see the accompanying schedules.
b)
Measured as returned sales over
gross shipped sales.
c)
Based on net revenue.
d)
Based on gross US Dollar
orders.
FULL
YEAR 2020 SUPPLEMENTAL METRICS
(amounts in millions unless otherwise
noted)
2019
2020
% Change
% Change Constant Currency(a)
QxH
Cost of Sales % of Revenue
65.8
%
65.4
%
(40
)bps
Operating Income Margin (%)
11.8
%
13.3
%
NM
Adjusted OIBDA Margin (%)
18.6
%
18.2
%
(40
)bps
Average Selling Price
$
54.32
$
53.63
(1
)%
Units Sold
2
%
Return Rate(b)
16.3
%
14.3
%
(200
)bps
eCommerce Revenue(c)
$
4,708
$
5,089
8
%
eCommerce % of Total Revenue
56.9
%
59.8
%
290
bps
Mobile % of eCommerce Revenue(d)
67.4
%
65.3
%
(210
)bps
LTM Total Customers(e)
10.6
11.6
9
%
QVC – International
Cost of Sales % of Revenue
62.7
%
62.5
%
(20
)bps
Operating Income Margin (%)
13.1
%
14.8
%
170
bps
Adjusted OIBDA Margin (%)
16.5
%
17.2
%
70
bps
Average Selling Price
3
%
1
%
Units Sold
5
%
eCommerce Revenue(c)
$
1,114
$
1,359
22
%
20
%
eCommerce % of Total Revenue
41.1
%
45.8
%
470
bps
Mobile % of eCommerce Revenue(d)
74.9
%
73.2
%
(170
)bps
LTM Total Customers(e)
4.6
4.9
7
%
Zulily
Cost of Sales % of Revenue
75.0
%
75.1
%
10
bps
Operating Income Margin (%)
(69.4
)%
(0.7
)%
NM
Adjusted OIBDA Margin (%)
3.1
%
5.1
%
200
bps
Mobile % of Total Orders
74.4
%
74.4
%
-
bps
LTM Total Customers(e)
5.4
5.6
4
%
Cornerstone
Operating Income Margin (%)
(0.3
)%
6.0
%
NM
Adjusted OIBDA Margin (%)
3.7
%
8.8
%
510
bps
eCommerce Revenue(c)
$
655
$
811
24
%
eCommerce % of Total Revenue
72.7
%
75.8
%
310
bps
____________________
a)
For a definition of constant
currency financial metrics, see the accompanying schedules.
b)
Measured as returned sales over
gross shipped sales.
c)
Based on net revenue.
d)
Based on gross US Dollar
orders.
e)
LTM: Last twelve months.
Taxes
Qurate Retail estimates that its average annual effective tax
rate through 2021 will be in the range of 15-18% including federal,
state and foreign taxes, net of tax credits generated by Qurate
Retail’s green energy investments. This estimate excludes the
impact of one-time items and is subject to adjustment.
Capital Returns
From November 25, 2020 through January 31, 2021, Qurate Retail
repurchased approximately 7.7 million shares of Series A common
stock (Nasdaq: QRTEA) at an average cost per share of $10.77 for
total cash consideration of $82 million. The remaining repurchase
authorization for Qurate Retail is approximately $414 million as of
February 1, 2021. During the quarter ending December 31, 2020,
Qurate Retail distributed a special cash dividend to holders of
QRTEA and QRTEB common stock in the amount of $1.50 per common
share, for an aggregate dividend of approximately $625 million.
For the year ended December 31, 2020, Qurate Retail returned
over $1.4 billion to shareholders, comprised of (i) $626 million
special cash dividend distributed on September 14, 2020, (ii) $625
million special cash dividend distributed on December 7, 2020,
(iii) $70 million of share repurchases, (iv) $49 million of
repurchases of 3.5% exchangeable senior debentures due 2031 and (v)
approximately $25 million in interest payments on the Preferred
Stock (defined below). On September 14, 2020, Qurate Retail
distributed a special dividend to holders of QRTEA and QRTEB common
stock consisting of 0.03 shares of newly issued 8.0% Series A
Cumulative Redeemable Preferred Stock (the “Preferred Stock”),
having an initial liquidation price of $100 per share of Preferred
Stock, with cash paid in lieu of fractional shares.
FOOTNOTES
1)
Qurate Retail’s President and
CEO, Mike George, and Executive Chairman, Greg Maffei will discuss
these highlights and other matters on Qurate Retail’s earnings
conference call that will begin at 8:30 a.m. (E.S.T.) on February
26, 2021. 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 definitions and applicable
reconciliations of adjusted OIBDA, adjusted OIBDA margin, adjusted
net income and adjusted diluted EPS, see the accompanying
schedules.
NOTES
Cash and Debt
The following presentation is provided to separately identify
cash and debt information.
(amounts in millions)
9/30/2020
12/31/2020
Cash and Cash Equivalents
(GAAP)
$
1,044
$
806
Indemnification Asset(a)
$
310
$
345
Less:
QVC senior secured notes(b)
$
4,450
$
4,450
QVC senior secured bank credit
facility
—
—
Senior exchangeable debentures(c)
—
218
Qurate Retail Group Subsidiary
Debt
$
4,450
$
4,668
Senior notes(b)
791
792
Senior exchangeable debentures(c)
1,413
1,194
Corporate Level Debentures
2,204
1,986
Total Qurate Retail, Inc. Debt
$
6,654
$
6,654
Unamortized discount, fair market value
adjustment and deferred loan costs
212
282
Total Qurate Retail, Inc. Debt
(GAAP)
$
6,866
$
6,936
Other Financial Obligations:
Preferred stock(d)
$
1,248
$
1,249
QVC, Inc. leverage(e)
2.0x
2.0x
____________________
a)
Indemnity from Liberty Broadband,
pursuant to an indemnification agreement with respect to the 1.75%
exchangeable debentures due 2046 (the “Charter exchangeable
debentures”) issued by Liberty Interactive LLC (“LI LLC”), as
described in this press release.
b)
Face amount of Senior Notes and
Debentures with no reduction for the unamortized discount.
c)
Face amount of Senior
Exchangeable Debentures with no reduction for the fair market value
adjustment. In December 2020, Qurate Retail completed a
restructuring of its international operations into a controlled
foreign corporation whereby a subsidiary of QVC International
became a co-obligor on LI LLC’s MSI Exchangeables (defined below),
and accordingly the MSI Exchangeables have been classified as
Qurate Retail Group Subsidiary Debt in the table above as of
December 31, 2020.
d)
Preferred Stock has an 8% coupon,
$100 per share initial liquidation preference plus accrued and
unpaid dividends and is non-voting. It is subject to a mandatory
redemption on March 15, 2031. The Preferred Stock is considered a
liability for GAAP purposes, and is recorded net of capitalized
costs.
e)
As defined in QVC, Inc.’s credit
agreement. Includes QxH, QVC International and Zulily.
Cash at Qurate Retail decreased $238 million in the fourth
quarter as cash from operations were more than offset by the $625
million special cash dividend paid to shareholders and capital
expenditures. Total debt at Qurate Retail was flat in the fourth
quarter.
In December 2020, Qurate Retail completed a restructuring of its
international operations into a controlled foreign corporation with
the primary purpose of improving deployment of foreign earnings
towards debt service. As a result of the restructuring, a
subsidiary of QVC International became a co-obligor of LI LLC’s
$218 million principal amount of 3.5% Exchangeable Senior
Debentures due 2031 (the “MSI Exchangeables”) as well as total
return swaps hedging 94% of Qurate Retail’s exposure to changes in
the MSI share price. The MSI Exchangeables will remain junior in
right of payment to debt issued by QVC, Inc.
Qurate Retail benefits from an indemnification agreement with
Liberty Broadband with respect to its Charter exchangeable
debentures. Following a merger between Liberty Broadband and GCI
Liberty during the fourth quarter of 2020, Liberty Broadband has
assumed the indemnification agreement that was previously held by
GCI Liberty. The indemnification agreement compensates Qurate
Retail for any payments made in excess of the adjusted principal
amount of the debentures to any holder that exercises its exchange
right on or before the put/call date of October 5, 2023. This
indemnity is supported by a negative pledge in favor of Qurate
Retail on the 1.0 million reference shares of Class A common stock
of Charter held at Liberty Broadband that underlie the Charter
exchangeable debentures. The indemnification asset on Qurate
Retail’s balance sheet is valued based on the estimated exchange
feature in the Charter exchangeable debentures. As of December 31,
2020, a holder of the Charter exchangeable debentures has the
ability to exchange and, accordingly, the indemnification asset is
included as a current asset in our consolidated balance sheet as of
that date.
Important Notice: Qurate Retail, Inc. (Nasdaq: QRTEA,
QRTEB, QRTEP) President and CEO, Mike George, and Executive
Chairman, Greg Maffei, will discuss Qurate Retail’s earnings
release on a conference call which will begin at 8:30 a.m. (E.S.T.)
on February 26, 2021. The call can be accessed by dialing (800)
289-0571 or (720) 543-0206, passcode 3812026, 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://ir.qurateretail.com/events-and-presentations.
Links to this press release and replays of the call will also be
available on Qurate Retail’s website.
This press release includes certain forward-looking statements,
including statements about business strategies and initiatives and
their expected benefits, market potential, future financial
prospects and performance, Qurate Retail’s estimated ongoing
effective tax rate, market conditions, statements about the
indemnification by Liberty Broadband, 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, competitive issues, regulatory matters
affecting our businesses, continued access to capital on terms
acceptable to Qurate Retail, changes in law and government
regulations, the availability of investment opportunities, general
market conditions (including as a result of COVID-19) and market
conditions conducive to stock repurchases. These forward-looking
statements speak only as of the date of this press release, and
Qurate Retail expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in Qurate Retail's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
Please refer to the publicly filed documents of Qurate Retail,
including the most recent Form 10-K, for additional information
about Qurate Retail and about the risks and uncertainties related
to Qurate Retail's business which may affect the statements made in
this press release.
NON-GAAP FINANCIAL MEASURES
To provide investors with additional information regarding our
financial results, this press release includes a presentation of
Adjusted OIBDA, which is a non-GAAP financial measure, for Qurate
Retail, QVC (and certain of its subsidiaries), Zulily and
Cornerstone together with a reconciliation to that entity or such
business’s operating income, as determined under GAAP. Qurate
Retail defines Adjusted OIBDA as operating income (loss) plus
depreciation and amortization, stock-based compensation, separately
reported litigation settlements, restructuring, acquisition and
other related costs and impairments. Further, this press release
includes Adjusted OIBDA margin which is also a non-GAAP financial
measure. Qurate Retail defines Adjusted OIBDA margin as Adjusted
OIBDA divided by revenue.
Qurate Retail believes Adjusted OIBDA is an important indicator
of the operational strength and performance of its businesses by
identifying those items that are not directly a reflection of each
business’s performance or indicative of ongoing business trends. 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,
Qurate Retail 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 Qurate Retail'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 and adjusted earnings per share, which are non-GAAP
financial measures, for Qurate Retail. Qurate Retail defines
adjusted net income as net income, excluding the impact of
acquisition accounting amortization (net of deferred tax benefit),
mark to market adjustments on certain public debt and equity
securities and other one-time adjustments. Qurate Retail defines
adjusted earnings per share as diluted earnings per share plus the
diluted per share effects of certain adjustments, net of tax.
Qurate Retail believes adjusted net income and adjusted earnings
per share are important indicators of financial performance due to
the impact of purchase accounting amortization, mark to market
adjustments and other one-time items identified in Schedule 3
below. Because adjusted net income and adjusted earnings per share
are used as measures of overall financial performance, Qurate
Retail views net income and diluted earnings per share,
respectively, as the most directly comparable GAAP measures.
Adjusted net income and adjusted earnings per share are not meant
to replace or supersede net income, diluted earnings per share 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) and
adjusted earnings per share to diluted earnings per share, in each
case, calculated in accordance with GAAP for Qurate Retail
(Schedule 3).
This press release also references certain financial metrics on
a constant currency basis, which is a non-GAAP measure, for Qurate
Retail. 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.
Qurate Retail believes constant currency financial metrics are
an important indicator of financial performance, in particular for
QVC, due to the translational impact of foreign currency
fluctuations relating to its subsidiaries in the UK, Germany, Italy
and Japan. 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 Qurate Retail’s
adjusted OIBDA to its operating income calculated in accordance
with GAAP for the three months ended December 31, 2019, March 31,
2020, June 30, 2020, September 30, 2020 and December 31, 2020 and
years ended December 31, 2019 and 2020.
CONSOLIDATED
OPERATING INCOME AND PRO FORMA ADJUSTED OIBDA
RECONCILIATION
(amounts in millions)
4Q19
1Q20
2Q20
3Q20
4Q20
2019
2020
Qurate Retail, Inc. Operating Income
(Loss)
$
287
$
231
$
405
$
406
$
530
$
184
$
1,572
Depreciation and amortization
149
142
144
141
135
606
562
Stock compensation expense
17
11
16
19
18
71
64
Impairment of intangible assets
147
—
—
—
—
1,167
—
Operating company level transaction
related costs
—
—
—
—
—
1
—
Qurate Retail, Inc. Adjusted
OIBDA
$
600
$
384
$
565
$
566
$
683
$
2,029
$
2,198
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries), Zulily and Cornerstone
to that entity or such business’s operating income (loss)
calculated in accordance with GAAP for the three months ended
December 31, 2019, March 31, 2020, June 30, 2020, September 30,
2020 and December 31, 2020 and years ended December 31, 2019 and
2020.
BUSINESS SEGMENT
ADJUSTED OIBDA RECONCILIATION
(amounts in millions)
4Q19
1Q20
2Q20
3Q20
4Q20
2019
2020
QVC
Total QVC operating income
$
306
$
270
$
381
$
388
$
528
$
1,327
$
1,567
Depreciation and amortization
114
114
116
114
109
468
453
Stock compensation
9
6
10
10
11
39
37
Impairment of intangible assets
147
—
—
—
—
147
—
Transaction related costs
—
—
—
—
—
1
—
Total QVC Adjusted OIBDA
$
576
$
390
$
507
$
512
$
648
$
1,982
$
2,057
QxH Adjusted OIBDA
$
443
$
293
$
388
$
380
$
486
$
1,536
$
1,547
QVC International Adjusted
OIBDA
$
133
$
97
$
119
$
132
$
162
$
446
$
510
Zulily
Operating income (loss)
$
(13
)
$
(20
)
$
20
$
3
$
(15
)
$
(1,091
)
$
(12
)
Depreciation and amortization
26
20
20
20
20
104
80
Stock compensation
3
2
5
4
4
15
15
Impairment of intangible assets
—
—
—
—
—
1,020
—
Adjusted OIBDA
$
16
$
2
$
45
$
27
$
9
$
48
$
83
Cornerstone
Operating income (loss)
$
3
$
(11
)
$
13
$
28
$
34
$
(3
)
$
64
Depreciation and amortization
9
8
8
7
6
34
29
Stock compensation
—
1
—
—
—
2
1
Adjusted OIBDA
$
12
$
(2
)
$
21
$
35
$
40
$
33
$
94
SCHEDULE 3
The following table provides a reconciliation of Qurate Retail’s
adjusted net income to its net income and adjusted earnings per
share to diluted earnings per share, in each case, calculated in
accordance with GAAP for the three months ended December 31, 2019,
March 31, 2020, June 30, 2020, September 30, 2020 and December 31,
2020 and years ended December 31, 2019 and 2020.
ADJUSTED NET INCOME
AND ADJUSTED EPS RECONCILIATION
(amounts in millions)
4Q19
1Q20
2Q20
3Q20
4Q20
2019
2020
Qurate Retail, Inc. Net Income (Loss)
(GAAP)
$
141
(20
)
$
220
$
338
$
666
$
(456
)
$
1,204
Purchase accounting amort., net of
deferred tax benefit(a)
33
29
24
28
27
133
108
Impairment of intangible assets, net of
tax impact
113
—
—
—
—
994
—
Non-recurring tax items(b)
(11
)
—
—
—
—
(45
)
—
Gain on transactions, net of tax
impact
—
—
—
(167
)
—
—
(167
)
Loss on extinguishment of debt, net of tax
impact
—
—
—
30
—
—
30
Operating company level transaction
related costs, net of tax benefit
—
—
—
—
—
1
—
Mark-to-market adjustments, net(c)
8
105
(18
)
9
(13
)
191
83
Adjusted Net Income
$
284
$
114
$
226
$
238
$
680
$
818
$
1,258
Diluted earnings per share (GAAP)
$
0.34
$
(0.05
)
$
0.53
$
0.80
$
1.56
$
(1.08
)
$
2.86
Adjustments, net of tax
0.34
0.32
0.01
(0.24
)
0.03
3.01
0.13
Adjusted earnings per share
$
0.68
$
0.27
$
0.54
$
0.57
$
1.59
$
1.93
$
2.99
____________________
a)
Add-back relates to non-cash, non-tax deductible purchase
accounting amortization from Qurate Retail’s acquisitions of QVC,
HSN, Zulily and Cornerstone, net of book deferred tax benefit.
b)
Includes impact of US tax reform and other one-time tax
items.
c)
Add-back includes realized and unrealized gains/losses on
financial instruments, net of tax.
QURATE RETAIL, INC.
BALANCE SHEET
INFORMATION
(unaudited)
December 31, 2020
December 31, 2019
amounts in millions
Assets
Current assets:
Cash and cash equivalents
$
806
673
Trade and other receivables, net
1,640
1,854
Inventory, net
1,301
1,413
Indemnification agreement receivable
345
202
Other current assets
473
434
Total current assets
4,565
4,576
Property and equipment, net
1,300
1,351
Intangible assets not subject to
amortization
9,806
9,744
Intangible assets subject to amortization,
net
779
955
Other assets, at cost, net of accumulated
amortization
549
679
Total assets
$
16,999
17,305
Liabilities and Equity
Current liabilities:
Accounts payable
$
1,305
1,091
Accrued liabilities
1,418
1,173
Current portion of debt
1,750
1,557
Other current liabilities
231
180
Total current liabilities
4,704
4,001
Long-term debt
5,186
5,855
Deferred income tax liabilities
1,359
1,716
Preferred stock
1,249
—
Other liabilities
768
761
Total liabilities
13,266
12,333
Equity/Attributed net assets
(liabilities)
3,598
4,840
Non-controlling interests in equity of
subsidiaries
135
132
Total liabilities and equity
$
16,999
17,305
QURATE RETAIL, INC.
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Years ended December
31,
2020
2019
amounts in millions
Revenue:
Total revenue, net
$
14,177
13,458
Operating costs and expenses:
Cost of retail sales (exclusive of
depreciation shown separately below)
9,291
8,899
Operating expense
867
844
Selling, general and administrative,
including stock-based compensation
1,885
1,758
Impairment of intangible assets and
long-lived assets
—
1,167
Depreciation and amortization
562
606
12,605
13,274
Operating income (loss)
1,572
184
Other income (expense):
Interest expense
(408
)
(374
)
Share of earnings (losses) of affiliates,
net
(156
)
(160
)
Realized and unrealized gains (losses) on
financial instruments, net
(110
)
(251
)
Gains (losses) on transactions, net
224
(1
)
Tax sharing income (expense) with Liberty
Broadband
(39
)
(26
)
Other, net
(32
)
6
(521
)
(806
)
Earnings (loss) from continuing operations
before income taxes
1,051
(622
)
Income tax benefit (expense)
211
217
Earnings (loss) from continuing
operations
1,262
(405
)
Less net earnings (loss) attributable to
the noncontrolling interests
58
51
Net earnings (loss) attributable to Qurate
Retail, Inc. shareholders
$
1,204
(456
)
QURATE RETAIL, INC.
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Years ended December
31,
2020
2019
amounts in millions
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings (loss)
$
1,262
(405
)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
562
606
Impairment of intangible assets
—
1,167
Stock-based compensation
64
71
Noncash interest expense
7
5
Share of (earnings) losses of affiliates,
net
156
160
Realized and unrealized gains (losses) on
financial instruments, net
110
251
(Gains) losses on transactions, net
(224
)
1
(Gains) losses on extinguishment of
debt
40
(1
)
Deferred income tax (benefit) expense
(356
)
(243
)
Other noncash charges (credits), net
8
9
Changes in operating assets and
liabilities
Decrease (increase) in accounts
receivable
232
(18
)
Decrease (increase) in inventory
133
62
Decrease (increase) in prepaid expenses
and other assets
39
15
(Decrease) increase in trade accounts
payable
185
(122
)
(Decrease) increase in accrued and other
liabilities
237
(274
)
Net cash provided (used) by operating
activities
2,455
1,284
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash proceeds from dispositions of
investments
271
—
Investment in and loans to cost and equity
investees
(119
)
(141
)
Capital expenditures
(257
)
(325
)
Expenditures for television distribution
rights
(56
)
(134
)
Net cash provided (used) by investing
activities
(161
)
(600
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings of debt
1,300
3,161
Repayments of debt
(2,079
)
(3,274
)
Repurchases of Qurate Retail common
stock
(70
)
(392
)
Withholding taxes on net settlements of
stock-based compensation
(7
)
(7
)
Dividends paid to noncontrolling
interest
(62
)
(40
)
Dividends paid to common and preferred
shareholders
(1,251
)
—
Other financing activities, net
(12
)
(109
)
Net cash provided (used) by financing
activities
(2,181
)
(661
)
Effect of foreign currency rates on cash,
cash equivalents and restricted cash
20
(2
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
133
21
Cash, cash equivalents and restricted cash
at beginning of period
681
660
Cash, cash equivalents and restricted cash
at end of period
$
814
681
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