Qurate Retail, Inc. (NASDAQ:QRTEA) Q4 2023 Earnings Conference Call February 28, 2024 8:30 AM ET Company Participants Shane Kleinstein - Senior Vice President, Investor Relations David Rawlinson - Chief Executive Officer Bill Wafford - Group Chief Financial Officer Greg Maffei - Executive Chairman Conference Call Participants Jason Bazinet - Citi William Reuter - Bank of America Carla Casella - JPMorgan Hale Holden - Barclays Karru Martinson - Jefferies Operator Ladies and gentlemen, welcome to the Qurate R ...

Financial Performance - Qurate Retail's Q4 2023 revenue was $3.1 billion, an 11% decrease compared to 2022, but a 4% decrease excluding Zulily[5] - Adjusted OIBDA for Q4 2023 was $340 million, a 73% increase compared to 2022, and a 46% increase excluding Zulily[5] - eCommerce revenue accounted for $2.0 billion, representing 64% of the total revenue, a 1% year-over-year increase excluding Zulily[5] - Qurate Retail's free cash flow for the twelve months ended December 31, 2023, was $577 million, compared to $(9) million in 2022[35] Segment Performance - QxH revenue decreased by 4% in Q4 2023[5] - QVC International revenue increased by 2% in Q4 2023[9] - Cornerstone revenue decreased by 12% in Q4 2023[9] Customer Metrics - QxH had 8,150,000 customers in the last 12 months ended December 2023[22] - Existing customers accounted for 52% of all customers and 90% of shipped sales[30] - New customers represented 24% of all customers and 4% of shipped sales[30] - Reactivated customers also represented 24% of all customers and 6% of shipped sales[30] Gross Margin - Qurate Retail's gross margin increased by 360 basis points year-over-year in Q4 2023[24] - Product margin contributed 215 basis points to the gross margin increase[24] - Fulfillment improvements added 155 basis points to the gross margin increase[24]

Revenue Performance - Qurate Retail's revenue decreased by 4% in Q4 2023 and 5% for the full year, totaling $3,143 million in Q4 and $10,915 million for the year[3][10] - QxH revenue declined by 4% in Q4 and 5% for the full year, with a 5% decrease in units shipped in Q4[16] - QVC International revenue increased by 2% in Q4 but decreased by 3% for the full year, with constant currency revenue flat in Q4[3][21] - Cornerstone revenue decreased by 12% in Q4 and 11% for the full year, reflecting competitive pressure in the home sector[3][23] - Total revenue for 2023 decreased to $10,915 million, down 9.8% from $12,106 million in 2022[66] Earnings and Profitability - The company reported a diluted EPS of $(0.70) in Q4 and $(0.37) for the full year, with an adjusted diluted EPS of $0.22 in Q4 and $0.24 for the year[3][14] - Adjusted OIBDA increased by 46% in Q4 2023, reaching $340 million, while it decreased by 3% for the full year[3][10] - Operating income improved to $590 million in 2023, compared to a loss of $2,041 million in 2022[66] - The company's operating income for Q4 2023 was a loss of $103 million, compared to a profit of $151 million in Q3 2023[54] - Adjusted net income for Q4 2023 was $40 million, a significant recovery from a loss of $18 million in Q4 2022[58] - The diluted earnings per share for Q4 2023 was $0.10, compared to a loss of $0.13 in Q4 2022[58] Debt and Financial Position - The company reduced its principal amount of debt by $956 million in 2023[3] - Total debt for Qurate Retail, Inc. decreased by $215 million in the fourth quarter of 2023, reaching $5,939 million[37] - QVC's leverage ratio improved to 2.4x at the end of 2023, down from 2.6x in the previous quarter[39] - Total liabilities reduced to $10,879 million in 2023, a decrease of 9.4% from $12,046 million in 2022[64] Cash Flow and Assets - Cash and cash equivalents increased by $22 million in the fourth quarter of 2023, totaling $1,121 million[38] - Cash and cash equivalents at the end of the period were $1,136 million, down from $1,285 million at the beginning of the period[68] - Net cash provided by operating activities increased to $919 million in 2023, compared to $194 million in 2022[68] - Total current assets decreased to $3,682 million in 2023, down 13.9% from $4,275 million in 2022[64] Operational Metrics - Operating income margin for QxH improved to 3.9% in 2023 from (24.7)% in 2022, reflecting a significant recovery[30] - Adjusted OIBDA margin for QxH increased to 10.7% in 2023, up 50 basis points from 10.2% in 2022[30] - eCommerce revenue for QxH decreased by 3% to $4,321 million in 2023, while eCommerce as a percentage of total revenue rose to 61.8%[30] - Average selling price for QxH increased by 3% to $53.33 in 2023[30] - Cornerstone's eCommerce revenue declined by 9% to $902 million in 2023, while its eCommerce percentage of total revenue rose to 77.4%[30] Impairment and Divestitures - QxH incurred a $326 million non-cash impairment charge related to goodwill in the fourth quarter of 2023[27] - The company experienced a non-cash impairment charge of $326 million related to goodwill in Q4 2023[54] - The company reported a loss on disposition of Zulily amounting to $64 million in 2023[66] - Qurate Retail divested Zulily on May 24, 2023, impacting revenue figures[7][12] - The company divested Zulily on May 24, 2023, impacting its financial metrics for the year[54] Future Outlook - The company expects to continue its momentum into 2024, aiming for improved results[2] - The company plans to focus on restructuring and cost management strategies to improve future performance[54] - The company plans to focus on restructuring and improving operational efficiency in the upcoming year[66]

Part I [Business](index=3&type=section&id=Item%201.%20Business) Qurate Retail operates in video and online commerce through QVC and Cornerstone Brands, emphasizing customer engagement, cost reduction, and human capital development [Description of Business - QVC](index=7&type=section&id=Description%20of%20Business%20-%20QVC) QVC, a global video and e-commerce leader, generated **$5.5 billion** in 2023 e-commerce revenue and is implementing 'Project Athens' for performance improvement - QVC reaches approximately **216 million households** worldwide through broadcast, websites, streaming, and mobile apps[26](index=26&type=chunk) - In 2023, QVC's global e-commerce operations generated **$5.5 billion**, representing **58.6% of its consolidated net revenue**[29](index=29&type=chunk) - Project Athens, a five-point turnaround plan, was initiated in 2022 to stabilize QVC-U.S. and HSN brands, involving inventory reduction and a workforce reduction completed in February 2023[33](index=33&type=chunk) QVC Global Sales Mix by Product Category (2021-2023) | Product category | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Home | 41% | 40% | 40% | | Apparel | 18% | 18% | 16% | | Beauty | 18% | 17% | 18% | | Accessories | 11% | 11% | 11% | | Electronics | 7% | 9% | 10% | | Jewelry | 5% | 5% | 5% | | **Total** | **100%** | **100%** | **100%** | [Description of Business - CBI](index=17&type=section&id=Description%20of%20Business%20-%20CBI) CBI operates a portfolio of home and apparel brands primarily through e-commerce and catalogs, supplemented by 30 retail stores, focusing on proprietary products - CBI's portfolio includes home brands (Ballard Designs, Frontgate, Grandin Road) and an apparel brand (Garnet Hill)[65](index=65&type=chunk) - In 2023, CBI circulated approximately **111 million catalogs** to customers[67](index=67&type=chunk) - CBI operates **30 retail and outlet stores** throughout the U.S. as a marketing tool to increase demand[65](index=65&type=chunk)[71](index=71&type=chunk) [Regulatory Matters](index=19&type=section&id=Regulatory%20Matters) The company faces extensive U.S. and international regulations covering broadcast, e-commerce, data privacy, product claims, and trade policies, as evidenced by recent settlements - QVC is subject to FCC program access and carriage rules due to attributable ownership interests in cable operators[73](index=73&type=chunk)[75](index=75&type=chunk) - E-commerce operations must comply with data privacy laws such as the E.U.'s GDPR and California's CCPA/CPRA, which govern the collection and use of personal data[82](index=82&type=chunk)[83](index=83&type=chunk) - In October 2023, HSN settled with the CPSC for **$16 million** regarding the alleged failure to timely report issues with a clothing steamer product[124](index=124&type=chunk) [Human Capital](index=25&type=section&id=Human%20Capital) Qurate Retail employed approximately 20,300 people as of December 31, 2023, with human capital strategies focused on DE&I, employee engagement, and health and safety - As of December 31, 2023, consolidated subsidiaries had approximately **20,300 full and part-time employees**[93](index=93&type=chunk) - The company is committed to Diversity, Equity, & Inclusion (DE&I) with focuses on leadership representation, education, culture, and community impact[94](index=94&type=chunk) - Based on employee feedback, a flexible distributed workforce model was introduced in 2022, allowing some team members to work from home[95](index=95&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse material risks including 'Project Athens' execution, distribution agreements, intense competition, cybersecurity, supply chain, economic fluctuations, and significant indebtedness - The 'Project Athens' turnaround plan may not realize expected cost savings or business improvements in the anticipated timeframe[113](index=113&type=chunk) - QVC's business depends on maintaining affiliation agreements with television distributors, with the majority expiring between 2024 and 2029[114](index=114&type=chunk) - The company faces intense competition from large retailers like Amazon and Walmart, which have greater resources and brand recognition[127](index=127&type=chunk)[129](index=129&type=chunk) - QVC has significant indebtedness (**$4.364 billion** in secured debt as of Dec 31, 2023), which could limit its operational and financial flexibility[219](index=219&type=chunk) - The business is subject to cybersecurity risks, including threats to personal data, which could lead to liabilities and reputational damage[184](index=184&type=chunk) [Cybersecurity](index=75&type=section&id=Item%201C.%20Cybersecurity) Qurate Retail manages cybersecurity via LMC and QVC's dedicated functions, utilizing the NIST Framework with Board oversight, and has not identified material threats - Corporate IT and cybersecurity functions are provided by LMC via a services agreement, while QVC operates its own cybersecurity function with corporate oversight[234](index=234&type=chunk) - The cybersecurity risk management program is designed based on the NIST Cybersecurity Framework[236](index=236&type=chunk) - The Board's Audit Committee has primary oversight of cybersecurity risks and receives quarterly updates from management[245](index=245&type=chunk) - As of the report date, no cybersecurity threats have been identified that are reasonably likely to materially affect the company's business, strategy, or financial condition[243](index=243&type=chunk) [Properties](index=79&type=section&id=Item%202.%20Properties) Qurate Retail's properties include leased corporate headquarters, QxH and QVC International facilities, and CBI's offices, fulfillment centers, and 30 retail stores - QxH leases its corporate headquarters in West Chester, PA and owns a multi-functional building in St. Petersburg, FL[254](index=254&type=chunk) - CBI owns an office in New Hampshire and leases fulfillment centers in Ohio and Arizona, in addition to **30 retail and outlet stores**[257](index=257&type=chunk) - In December 2023, QVC agreed to sell its call center in Kassel, Germany, which is classified as held for sale[256](index=256&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=80&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Qurate Retail's common stock trades on Nasdaq, with no cash dividends paid in 2023 or 2022, and no stock repurchases in Q4 2023 - The company's Series A (QRTEA) and Series B (QRTEB) common stock are traded on the Nasdaq Global Select Market[263](index=263&type=chunk) - No cash dividends were paid on common stock during 2023 and 2022. A special cash dividend of **$1.25 per share** was paid in November 2021[266](index=266&type=chunk)[267](index=267&type=chunk) - There were no repurchases of Series A or Series B common stock during the three months ended December 31, 2023[270](index=270&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=82&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, Qurate Retail's revenue declined to $10.9 billion, but operating income significantly improved due to lower impairment charges, while 'Project Athens' and liquidity management remain key focuses [Overview](index=82&type=section&id=MD%26A%20-%20Overview) Qurate Retail's overview highlights the Zulily divestiture, post-COVID retail challenges, the Rocky Mount fire insurance settlement, and strategic sale-leaseback transactions - Zulily, LLC was divested on May 24, 2023, resulting in a **$64 million loss**. Its results are included through that date and are not presented as discontinued operations[274](index=274&type=chunk) - In June 2023, QVC received a final insurance settlement for the Rocky Mount fire, with cumulative proceeds reaching **$660 million**, resulting in a net gain of **$208 million** after accounting for costs[282](index=282&type=chunk) - The company completed sale-leaseback transactions for properties in the U.S. (2022), Germany, and the U.K. (2023), generating significant cash proceeds and gains[285](index=285&type=chunk)[287](index=287&type=chunk) [Strategies and Challenges](index=86&type=section&id=MD%26A%20-%20Strategies%20and%20Challenges) The company's strategy centers on 'Project Athens' to improve QVC and HSN through customer experience, cost reduction, and streaming, while navigating economic and market challenges - Project Athens focuses on five key areas: (i) customer experience, (ii) core process execution, (iii) cost reduction, (iv) brand portfolio optimization, and (v) building high-growth businesses like streaming[288](index=288&type=chunk) - A key challenge is navigating economic uncertainty, as discretionary spending, which drives a substantial portion of revenue, typically falls during periods of instability[296](index=296&type=chunk) - CBI's strategy involves acquiring new customers through direct-to-consumer marketing, expanding its retail footprint, and developing more proprietary products[298](index=298&type=chunk) [Results of Operations—Consolidated](index=90&type=section&id=MD%26A%20-%20Results%20of%20Operations%E2%80%94Consolidated) Consolidated revenue decreased to $10.9 billion in 2023, primarily due to the Zulily divestiture, but operating income significantly improved to $590 million due to lower impairment charges Consolidated Operating Results (2023 vs 2022) | (amounts in millions) | 2023 | 2022 | | :--- | :--- | :--- | | **Revenue** | | | | QxH | $6,995 | $7,359 | | QVC International | $2,454 | $2,528 | | CBI | $1,165 | $1,313 | | Corporate and other | $301 | $906 | | **Consolidated Qurate Retail** | **$10,915** | **$12,106** | | **Operating Income (Loss)** | | | | QxH | $275 | $(1,820) | | QVC International | $370 | $306 | | CBI | $35 | $48 | | Corporate and other | $(90) | $(575) | | **Consolidated Qurate Retail** | **$590** | **$(2,041)** | | **Adjusted OIBDA** | | | | QxH | $746 | $750 | | QVC International | $325 | $358 | | CBI | $67 | $78 | | Corporate and other | $(64) | $(122) | | **Consolidated Qurate Retail** | **$1,074** | **$1,064** | Reconciliation of Operating Income (Loss) to Adjusted OIBDA (2023 vs 2022) | (amounts in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Operating income (loss) | $590 | $(2,041) | | Depreciation and amortization | 407 | 481 | | Stock-based compensation | 53 | 60 | | Restructuring, penalties and fire related costs, net of (recoveries) | (189) | 3 | | Gains on sale of assets and sale leaseback transactions | (113) | (520) | | Impairment of intangible assets | 326 | 3,081 | | **Adjusted OIBDA** | **$1,074** | **$1,064** | [Liquidity and Capital Resources](index=95&type=section&id=MD%26A%20-%20Liquidity%20and%20Capital%20Resources) As of December 31, 2023, Qurate Retail had $1.12 billion in cash and $2.28 billion available under its credit facility, though QVC's debt covenants restrict certain dividend payments Cash and Cash Equivalents by Segment (Dec 31, 2023) | (amounts in millions) | Cash and cash equivalents | | :--- | :--- | | QVC | $307 | | CBI | $86 | | Corporate and other | $728 | | **Total Qurate Retail** | **$1,121** | - As of Dec 31, 2023, QVC's leverage ratio was above 3.5 to 1.0, restricting its ability to pay certain dividends to Qurate Retail, though payments to service parent debt are still permitted[324](index=324&type=chunk) - Projected uses of cash in the next year include **~$330 million** for interest payments, **$235-$250 million** in capital expenditures, and payments for television distribution rights and preferred stock dividends[330](index=330&type=chunk) - On February 27, 2024, QVC issued a notice to redeem all its outstanding **4.85% senior secured notes due 2024**[332](index=332&type=chunk) [Results of Operations—Businesses](index=103&type=section&id=MD%26A%20-%20Results%20of%20Operations%E2%80%94Businesses) QVC's consolidated net revenue decreased to $9.45 billion in 2023, but operating income significantly improved due to lower impairment charges, while CBI's revenue also declined QVC Operating Results (2023 vs 2022) | (amounts in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net revenue | $9,449 | $9,887 | | Adjusted OIBDA | $1,071 | $1,108 | | Operating income (loss) | $645 | $(1,514) | - QxH 2023 revenue decreased **5.0%** due to a **6.3%** drop in units shipped, partially offset by a **3.1%** increase in average selling price[354](index=354&type=chunk) - QVC International 2023 revenue decreased **1.3%** in constant currency, as a **3.1%** decrease in units shipped was partially offset by a **2.3%** increase in average selling price[354](index=354&type=chunk) CBI Operating Results (2023 vs 2022) | (amounts in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net revenue | $1,165 | $1,313 | | Adjusted OIBDA | $67 | $78 | | Operating income | $35 | $48 | [Quantitative and Qualitative Disclosures about Market Risk](index=109&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from interest rate changes, with a mix of fixed and variable rate debt, and foreign currency fluctuations impacting international operations - The company manages interest rate risk through a mix of fixed and variable rate debt. As of Dec 31, 2023, QxH and QVC International had **$857 million** in variable rate debt at a weighted average rate of **7.0%**[373](index=373&type=chunk) - Qurate is exposed to foreign exchange risk from QVC's international subsidiaries. A **1% change** in FX rates relative to the USD would have impacted 2023 Adjusted OIBDA by approximately **$3 million**[375](index=375&type=chunk) [Financial Statements and Supplementary Data](index=111&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Qurate Retail's audited consolidated financial statements for 2021-2023, including balance sheets, income statements, cash flows, equity, and detailed accounting notes [Consolidated Balance Sheets](index=120&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2023, Qurate Retail's total assets decreased to $11.37 billion, while total liabilities also decreased to $10.88 billion, resulting in a slight equity reduction Key Balance Sheet Items (Consolidated) | (amounts in millions) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $3,682 | $4,275 | | Goodwill | $3,164 | $3,501 | | **Total assets** | **$11,368** | **$12,571** | | Total current liabilities | $2,617 | $3,099 | | Long-term debt | $4,698 | $5,525 | | **Total liabilities** | **$10,879** | **$12,046** | | **Total equity** | **$489** | **$525** | [Consolidated Statements of Operations](index=122&type=section&id=Consolidated%20Statements%20of%20Operations) In 2023, Qurate Retail's total revenue decreased to $10.92 billion, but operating income significantly improved to $590 million, leading to a reduced net loss of $145 million Key Income Statement Items (Consolidated) | (amounts in millions, except per share) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total revenue, net | $10,915 | $12,106 | $14,044 | | Impairment of intangible assets | $326 | $3,081 | $363 | | Operating income (loss) | $590 | $(2,041) | $1,087 | | Net earnings (loss) attributable to shareholders | $(145) | $(2,594) | $340 | | Diluted EPS | $(0.37) | $(6.83) | $0.82 | [Notes to Consolidated Financial Statements](index=126&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the Zulily divestiture, impairment charges, debt structure and covenants, lease obligations, and related party transactions - A goodwill impairment of **$326 million** was recorded for the QxH reporting unit in the fourth quarter of 2023. This followed a **$2.54 billion** goodwill impairment for QxH in 2022[501](index=501&type=chunk)[504](index=504&type=chunk) - As of Dec 31, 2023, total consolidated debt was **$5.94 billion** in principal, with carrying value of **$5.34 billion**. This includes various senior secured notes at QVC and exchangeable debentures at the corporate level[506](index=506&type=chunk) - The company has **$1.36 billion** in total future operating lease payments, with a weighted-average remaining lease term of **12.6 years**[548](index=548&type=chunk)[554](index=554&type=chunk) - The company's **8.0% Series A Cumulative Redeemable Preferred Stock** is classified as a liability (**$1.27 billion**) and is subject to mandatory redemption in March 2031[576](index=576&type=chunk)[584](index=584&type=chunk)[588](index=588&type=chunk) [Controls and Procedures](index=111&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023, following remediation of a prior IT general controls material weakness - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[379](index=379&type=chunk) - A material weakness related to IT general controls (ITGC) reported in the 2022 Form 10-K was remediated as of December 31, 2023[384](index=384&type=chunk)[385](index=385&type=chunk) - Remediation actions included enhancing ITGC risk assessment, improving access controls, delivering training, and implementing additional compensating controls[388](index=388&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023. The independent auditor, KPMG LLP, issued an unqualified opinion on the effectiveness of internal control[390](index=390&type=chunk)[392](index=392&type=chunk) Part III [Directors, Executive Compensation, and Corporate Governance](index=189&type=section&id=Items%2010-14) Information for Items 10-14, covering directors, executive compensation, security ownership, and related transactions, is incorporated by reference from the 2024 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Stockholders[661](index=661&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=190&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate documents, debt indentures, and material contracts - This section contains the list of all financial statements, schedules, and exhibits filed with the Form 10-K[664](index=664&type=chunk) - Exhibits include key corporate documents, indentures for debt, material contracts such as executive employment agreements and incentive plans, and required certifications[666](index=666&type=chunk)[668](index=668&type=chunk)[669](index=669&type=chunk)

Qurate Retail, Inc. (NASDAQ:QRTEA) Q3 2023 Earnings Conference Call November 3, 2023 8:30 AM ET Company Participants Shane Kleinstein - Vice President of Investor Relations David Rawlinson - President & Chief Executive Officer Bill Wafford - Chief Financial Officer Greg Maffei - Executive Chairman Ben Oren - Executive Vice President & Treasurer Conference Call Participants Jason Haas - Bank of America Carla Casella - JPMorgan Hale Holden - Barclays Operator Welcome to the Qurate Retail, Inc. 2023 Q3 Earning ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) Presents Qurate Retail, Inc.'s unaudited condensed consolidated financial statements for Q3 2023, covering financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=QURATE%20RETAIL%2C%20INC.%20AND%20SUBSIDIARIES%20Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased as of September 30, 2023, leading to an increase in total equity from **$525 million** to **$693 million** Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $3,485 | $4,275 | | Cash and cash equivalents | $1,099 | $1,275 | | Inventory, net | $1,229 | $1,346 | | **Total assets** | **$11,437** | **$12,571** | | **Total current liabilities** | $2,456 | $3,099 | | Long-term debt | $4,835 | $5,525 | | **Total liabilities** | **$10,744** | **$12,046** | | **Total equity** | **$693** | **$525** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=QURATE%20RETAIL%2C%20INC.%20AND%20SUBSIDIARIES%20Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2023 saw **net earnings of $12 million**, a significant turnaround from a **$2,736 million net loss** in Q3 2022, despite declining revenue Q3 2023 vs Q3 2022 Statement of Operations (in millions, except per share) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Total revenue, net | $2,479 | $2,744 | | Operating income (loss) | $151 | $(2,607) | | Net earnings (loss) | $12 | $(2,736) | | Diluted EPS | $0.00 | $(7.21) | Nine Months Ended Sep 30, 2023 vs 2022 Statement of Operations (in millions, except per share) | Metric | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Total revenue, net | $7,772 | $8,580 | | Operating income (loss) | $693 | $(2,083) | | Net earnings (loss) | $164 | $(2,502) | | Diluted EPS | $0.33 | $(6.69) | - The significant improvement in operating and net income year-over-year is primarily due to the absence of the **$3.08 billion** impairment of intangible assets recorded in Q3 2022[17](index=17&type=chunk) [Condensed Consolidated Statements of Comprehensive Earnings (Loss)](index=6&type=section&id=QURATE%20RETAIL%2C%20INC.%20AND%20SUBSIDIARIES%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Earnings%20(Loss)) The company reported a **comprehensive loss of $34 million** for Q3 2023, a substantial improvement from a **$2,847 million loss** in the prior year Comprehensive Earnings (Loss) Summary (in millions) | Period | Net earnings (loss) | Other comprehensive earnings (loss) | Comprehensive earnings (loss) | | :--- | :--- | :--- | :--- | | **Q3 2023** | $12 | $(46) | $(34) | | **Q3 2022** | $(2,736) | $(111) | $(2,847) | | **YTD 2023** | $164 | $(1) | $163 | | **YTD 2022** | $(2,502) | $(140) | $(2,642) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=QURATE%20RETAIL%2C%20INC.%20AND%20SUBSIDIARIES%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly improved to **$602 million** for the nine months ended September 30, 2023, with overall cash decreasing by **$173 million** Nine-Month Cash Flow Summary (in millions) | Cash Flow Activity | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $602 | $(37) | | Net cash provided (used) by investing activities | $18 | $704 | | Net cash provided (used) by financing activities | $(776) | $(571) | | **Net increase (decrease) in cash** | **$(173)** | **$37** | [Condensed Consolidated Statement of Equity](index=8&type=section&id=QURATE%20RETAIL%2C%20INC.%20AND%20SUBSIDIARIES%20Condensed%20Consolidated%20Statement%20of%20Equity) Total equity increased from **$525 million** to **$693 million** as of September 30, 2023, primarily due to **$164 million** in net earnings Changes in Total Equity (in millions) | Description | Amount | | :--- | :--- | | Balance at January 1, 2023 | $525 | | Net earnings (loss) | $164 | | Other comprehensive earnings (loss) | $(1) | | Stock-based compensation | $36 | | Distribution to noncontrolling interest | $(35) | | **Balance at September 30, 2023** | **$693** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=QURATE%20RETAIL%2C%20INC.%20AND%20SUBSIDIARIES%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Zulily divestiture, Rocky Mount fire settlement, debt status, and segment performance, showing improved Adjusted OIBDA despite revenue declines - Zulily, LLC was divested on May 24, 2023, resulting in a recognized loss of **$64 million** in the second quarter. Zulily's results are included in 'Corporate and other' through May 23, 2023[39](index=39&type=chunk) - In June 2023, QVC reached a final insurance settlement for the Rocky Mount fulfillment center fire. For the nine months ended Sep 30, 2023, the company received **$280 million** in insurance proceeds and recorded net gains of **$208 million** related to the fire[106](index=106&type=chunk) - As of September 30, 2023, QVC's consolidated leverage ratio was greater than **3.5 to 1.0**, restricting its ability to make certain dividends or other restricted payments under its senior secured notes, though payments to service parent debt are still permitted[74](index=74&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2023 financial performance, highlighting a **9.7% revenue decrease** but a **54.1% increase in Adjusted OIBDA**, and the **'Project Athens,'** turnaround plan - The company's five-point turnaround plan, **'Project Athens,'** is focused on stabilizing core businesses (QxH, QVC International) by improving customer experience, executing core processes, lowering costs, optimizing the brand portfolio, and building new high-growth streaming commerce businesses[142](index=142&type=chunk) Consolidated Revenue by Segment - Q3 2023 vs Q3 2022 (in millions) | Segment | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | QxH | $1,617 | $1,663 | (2.8)% | | QVC International | $577 | $554 | 4.2% | | CBI | $285 | $327 | (12.8)% | | Corporate and other | $0 | $200 | (100.0)% | | **Total** | **$2,479** | **$2,744** | **(9.7)%** | Consolidated Adjusted OIBDA by Segment - Q3 2023 vs Q3 2022 (in millions) | Segment | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | QxH | $201 | $143 | 40.6% | | QVC International | $77 | $62 | 24.2% | | CBI | $11 | $10 | 10.0% | | Corporate and other | $(4) | $(30) | 86.7% | | **Total** | **$285** | **$185** | **54.1%** | [Results of Operations—Businesses](index=55&type=section&id=Results%20of%20Operations%E2%80%94Businesses) Detailed review of Qurate's business segments shows QVC's revenue decreased **1.0%** in Q3 2023, with QxH declining **2.8%** and QVC International growing **4.2%** - QxH's Q3 revenue decreased **2.8%** due to a **2.7%** decline in units shipped, though ASP increased by **1%**. Shipped sales grew in accessories, jewelry, and home but declined in other categories[209](index=209&type=chunk) - QVC International's Q3 revenue grew **4.2%** (**1.5%** in constant currency), driven by a **2.7%** increase in units shipped, particularly in the U.K[208](index=208&type=chunk)[210](index=210&type=chunk) - CBI's Q3 revenue declined **12.8%** due to a **7%** decrease in ASP from higher promotions and a **5%** drop in units shipped, reflecting softness in home and apparel categories[224](index=224&type=chunk) [Material Changes in Financial Condition](index=51&type=section&id=Material%20Changes%20in%20Financial%20Condition) The company maintains strong liquidity with **$1,099 million** in cash and **$2,145 million** credit facility availability, despite recent debt credit rating downgrades Liquidity Position as of Sep 30, 2023 (in millions) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $1,099 | | Credit Facility borrowing capacity | $2,145 | - During the first nine months of 2023, the company's credit ratings were downgraded by **Fitch**, **S&P Global**, and **Moody's**, reflecting business challenges[190](index=190&type=chunk)[192](index=192&type=chunk) - Projected uses of cash for the remainder of 2023 include **$80-$110 million** in capital expenditures and approximately **$50 million** for interest payments[195](index=195&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) The company manages market risks from interest rate and foreign currency fluctuations, holding **$995 million** in variable rate debt and **$5,159 million** in fixed rate debt Debt Structure by Interest Rate Type (in millions) | Debt Type | Principal Amount | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Variable Rate | $995 | 6.8% | | Fixed Rate | $5,159 | ~5.4% | - The company is exposed to foreign exchange risk from QVC's international operations. A hypothetical **1%** change in foreign currency exchange rates relative to the U.S. Dollar would have impacted the nine-month 2023 Adjusted OIBDA by approximately **$2 million**[231](index=231&type=chunk) [Controls and Procedures](index=64&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2023, due to a material weakness, with a remediation plan underway - The CEO and Principal Financial Officer concluded that disclosure controls and procedures were **not effective** as of September 30, 2023, due to a **material weakness** in internal control over financial reporting identified in the 2022 10-K[235](index=235&type=chunk) - A remediation plan is underway to address the **material weakness**, focusing on enhancing **IT general controls (ITGC)**, risk assessment, training, and implementing user activity monitoring[237](index=237&type=chunk)[238](index=238&type=chunk) PART II—OTHER INFORMATION [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reported **no repurchases** of its Series A or Series B common stock during Q3 2023, nor any share surrenders for tax payments - There were **no repurchases** of QRTEA or QRTEB common stock during the three months ended September 30, 2023[240](index=240&type=chunk) [Other Information](index=67&type=section&id=Item%205.%20Other%20Information) **No directors or officers adopted or terminated** Rule 10b5-1 trading arrangements during the fiscal quarter ended September 30, 2023 - **No directors or officers adopted or terminated** a Rule 10b5-1 trading arrangement during the third quarter of 2023[241](index=241&type=chunk) [Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the quarterly report, including CEO and CFO certifications and various Inline XBRL documents

Qurate Retail, Inc. (NASDAQ:QRTEA) Q2 2023 Earnings Conference Call August 4, 2023 8:30 AM ET Company Participants Shane Kleinstein - Vice President, Investor Relations David Rawlinson - President and Chief Executive Officer Bill Wafford - Chief Financial Officer Greg Maffei - Executive Chairman Ben Oren - Executive Vice President and Treasurer Conference Call Participants Hale Holden - Barclays Jason Haas - Bank of America Carla Casella - JPMorgan William Reuter - Bank of America Operator Welcome to the Qu ...

Financial Performance - Qurate Retail's eCommerce revenue reached $1.6 billion, representing 61% of total revenue in Q2 2023[3] - Total Qurate Retail revenue decreased by 10% as reported in Q2 2023 compared to 2022[5] - Excluding Zulily, Total Qurate Retail revenue decreased by 7% in Q2 2023 compared to 2022[5] - As Reported Total Qurate Retail decreased 22%[6] - As Reported Total Qurate Retail A decreased 21%[6] - Adjusted OIBDA decreased by 22% compared to 2022, reaching $270 million[23] - Adjusted OIBDA (excluding Zulily) decreased by 23% compared to 2022, reaching $280 million[23] Segment Performance - QxH revenue decreased by 12% in Q2 2023[8] - QVC International revenue decreased by 19% in Q2 2023[26] - Cornerstone revenue increased by 4% in Q2 2023[26] Customer Metrics (QxH) - Existing customers accounted for 54% of all customers[32] - New customers represented 22% of all customers[32] - Reactivated customers made up 24% of all customers[32] - Existing customers accounted for 89% of shipped sales[32] - New customers accounted for 5% of shipped sales[32] - Reactivated customers accounted for 6% of shipped sales[32] - QxH Customer Count Last 12 Months Ended June 2023: Existing 4,448 ('000s), New 1,995 ('000s), Reactivated 1,816 ('000s)[14]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-33982 QURATE RETAIL, INC. (Exact name of Registrant as specified in its charter) State of Delaware (State or other jurisd ...

Financial Data and Key Metrics Changes - Adjusted OIBDA declined by $86 million or 38%, with the adjusted OIBDA margin decreasing by 470 basis points [3][60] - Free cash flow improved by $174 million year-over-year, mainly due to increased cash from operations reflecting working capital improvements [21][95] - Total capital expenditures were $54 million in Q1, with $38 million spent on renewals of TV distribution contracts, an increase of $36 million over the prior year [97] Business Line Data and Key Metrics Changes - QxH revenue declined by 5%, primarily due to lower unit volume, but was partially offset by a 2% growth in average selling price [50][54] - Cornerstone revenue declined by 13% in the first quarter, but grew 4% on a two-year basis [8] - Zulily revenue declined by 17%, mostly due to lower unit volume and reduced shipping and handling revenue, although average selling price increased by 9% [90] Market Data and Key Metrics Changes - QVC International revenue declined by 3%, primarily due to lower unit volume and reduced shipping and handling revenue [5] - QVC Japan experienced flat revenue, impacted by high inflation and reduced viewership [5] - The largest European markets, Germany and the UK, saw mid-single-digit declines attributed to soft consumer sentiment due to historic inflation [9] Company Strategy and Development Direction - The company is focused on Project Athens, a three-year plan aimed at establishing revenue stability, margin expansion, and incremental free cash flow generation [19][26] - There is a strategic pullback on electronics airtime to focus on higher-margin fashion categories [54] - The company is enhancing its merchandise strategy, focusing on higher-priced subcategories and improving customer service metrics [22][23] Management's Comments on Operating Environment and Future Outlook - Management noted that the retail environment remains highly promotional, with elevated inflation and low consumer sentiment [14][19] - There is an expectation for material improvement in profitability in the second half of the year, driven by pricing and merchandising efforts [21][70] - Management acknowledged the impact of the Rocky Mount Fire on customer satisfaction and is focused on reactivating customer groups [27][28] Other Important Information - The company has eliminated approximately 400 positions, expected to generate $60 million in annual run-rate savings [24] - The average spend per existing customer increased to $1,500, with existing customers generating nearly 90% of sales [28][29] - The company is actively renegotiating import freight contracts, resulting in a 30% year-over-year decline in rates [25] Q&A Session Summary Question: Can you discuss the cadence through the quarter and any insights for April? - Management noted moderate levels of improvement throughout the quarter, with consistent performance at QVC U.S. and QVC International, and some improvement at HSN [116] Question: How do you expect to achieve stable revenue and double-digit OIBDA growth this year? - Management expressed confidence in achieving stable revenue and double-digit OIBDA growth, citing improvements in pricing and merchandising strategies [70][71] Question: What percentage of sales comes from your best customers and what is the retention rate? - Approximately 90% of sales come from existing customers, with strong retention rates in line with historical trends [85] Question: How are you planning to address the 2024 and 2025 maturities? - The company plans to use a combination of cash on hand and borrowings under the revolver to address upcoming maturities [125] Question: Can you provide details on the $50 million in savings mentioned? - The $50 million in savings is expected to come primarily from QxH, related to the reduction in force [130]