Qurate Retail(QRTEA) - 2024 Q3 - Quarterly Results

Qurate Retail, Inc. Third Quarter 2024 Financial Results Financial and Operational Highlights The company faced revenue headwinds from macroeconomic pressures but successfully reduced debt and extended its maturity profile through a tender offer - CEO David Rawlinson cited the challenging macroeconomic climate and current headline events as impacting viewership and consumer behavior more than expected, leading to revenue underperformance[2] Q3 2024 Key Performance Indicators | Metric | Result | Change (YoY) | | :--- | :--- | :--- | | Total Revenue | $2,344 million | -5% | | Adjusted OIBDA | $250 million | -12% | | Operating Income | $152 million | +1% | | QxH Revenue | $1,521 million | -6% | | QVC International Revenue | $571 million | -1% | | Cornerstone Revenue | $252 million | -12% | - The company proactively managed its balance sheet by completing a tender offer for 89% of QVC, Inc.'s 2027 and 2028 notes, partially funded with new 6.875% senior secured notes due 2029, improving QVC's credit profile[2][3][17] - The company is nearing the end of its multi-year 'Project Athens' initiative, which has focused on improving margins and free cash flow, and is now transitioning to a new strategic growth phase focused on social and streaming platforms[3] Consolidated Financial Performance Total revenue decreased 5% to $2.34 billion and Adjusted OIBDA declined 12% to $250 million, while operating income saw a slight 1% increase Q3 2024 vs. Q3 2023 Financial Performance (in millions) | Metric | Segment | 3Q23 | 3Q24 | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | Total Qurate Retail | $2,479 | $2,344 | (5)% | | | QxH | $1,617 | $1,521 | (6)% | | | QVC International | $577 | $571 | (1)% | | | Cornerstone | $285 | $252 | (12)% | | Operating Income | Total Qurate Retail | $151 | $152 | 1% | | | QxH | $91 | $107 | 18% | | | QVC International | $63 | $57 | (10)% | | | Cornerstone | $4 | $(2) | NM | | Adjusted OIBDA | Total Qurate Retail | $285 | $250 | (12)% | | | QxH | $201 | $182 | (9)% | | | QVC International | $77 | $70 | (9)% | | | Cornerstone | $11 | $6 | (45)% | Segment Performance Analysis QxH QxH revenue declined 6% due to lower unit volume, and while operating income grew, Adjusted OIBDA margin contracted due to higher fulfillment costs - The revenue decline was primarily caused by a 6% decrease in units shipped, with declines reported across all product categories[8] - Adjusted OIBDA margin decreased due to fulfillment pressure from higher warehouse wages and freight rates, despite increased productivity efficiencies and lower commissions[9] QxH Key Metrics (Q3 2024 vs. Q3 2023) | Metric | 3Q23 | 3Q24 | Change | | :--- | :--- | :--- | :--- | | Adjusted OIBDA Margin | 12.4% | 12.0% | (40) bps | | Units Sold | - | - | (6)% | | eCommerce Revenue | $996 M | $967 M | (3)% | | eCommerce % of Total Revenue | 61.6% | 63.6% | 200 bps | | LTM Total Customers (millions) | 8.2 | 7.9 | (4)% | QVC International QVC International's revenue fell 1% as a lower average selling price offset higher unit volume, with margins declining due to increased fulfillment costs - Constant currency revenue decreased due to a 3% drop in average selling price, which was partially offset by a 1% rise in units shipped and favorable returns[10] - Margins were negatively impacted by increased fulfillment costs from higher freight rates and wages, as well as lower product margins due to product mix and higher ocean freight rates[11] QVC International Key Metrics (Q3 2024 vs. Q3 2023) | Metric | 3Q23 | 3Q24 | Change | | :--- | :--- | :--- | :--- | | Adjusted OIBDA Margin | 13.3% | 12.3% | (100) bps | | Units Sold | - | - | 1% | | eCommerce Revenue | $283 M | $297 M | 5% | | eCommerce % of Total Revenue | 49.0% | 52.0% | 300 bps | | LTM Total Customers (millions) | 4.2 | 4.0 | (5)% | Cornerstone Cornerstone's revenue dropped 12% amid softness in the home sector, leading to declines in both operating income and Adjusted OIBDA margin - The revenue decline was attributed to softness and competitive promotional pressure within the home sector, and the company is implementing a transformation plan to improve performance[13] Cornerstone Key Metrics (Q3 2024 vs. Q3 2023) | Metric | 3Q23 | 3Q24 | Change | | :--- | :--- | :--- | :--- | | Revenue | $285 M | $252 M | (12)% | | Adjusted OIBDA Margin | 3.9% | 2.4% | (150) bps | | eCommerce Revenue | $218 M | $188 M | (14)% | Balance Sheet and Liquidity The company reduced total debt by $299 million to $5.58 billion through a tender offer, ending the quarter with $873 million in cash and a leverage ratio of 3.1x Cash and Debt Summary (in millions) | Item | 6/30/2024 | 9/30/2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,210 | $873 | | Total Qurate Retail, Inc. Debt | $5,882 | $5,583 | - In September 2024, QVC completed a tender offer for 89% of its 4.75% notes due 2027 and 4.375% notes due 2028, funded with $605 million of new notes and $352 million of cash[17] - As of quarter-end, QVC's leverage ratio, as defined by its revolving credit facility, was 3.1x, and the company had $1.8 billion of incremental availability under its bank credit facility[18] Consolidated Financial Statements Condensed Consolidated Balance Sheet The balance sheet shows total assets of $10.77 billion and total liabilities of $10.29 billion, with both figures decreasing compared to year-end 2023 Balance Sheet Highlights (in millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $873 | $1,121 | | Inventory, net | $1,299 | $1,044 | | Total current assets | $3,229 | $3,682 | | Total assets | $10,773 | $11,368 | | Long-term debt | $4,185 | $4,698 | | Total liabilities | $10,294 | $10,879 | | Total equity | $397 | $385 | Condensed Consolidated Statement of Operations The company reported a 5% revenue decline to $2.34 billion and a net loss attributable to shareholders of $23 million for the third quarter Statement of Operations Highlights (Q3, in millions) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total revenue, net | $2,344 | $2,479 | | Cost of goods sold | $1,517 | $1,603 | | Operating income | $152 | $151 | | Interest expense | $(117) | $(119) | | Net earnings (loss) | $(15) | $12 | | Net earnings (loss) attributable to shareholders | $(23) | $1 | Condensed Consolidated Statement of Cash Flows Net cash from operations was $313 million for the first nine months, with financing activities using $412 million, resulting in a net cash decrease of $246 million Cash Flow Highlights (Nine Months Ended Sep 30, in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $313 | $602 | | Net cash provided (used) by investing activities | $(149) | $18 | | Net cash provided (used) by financing activities | $(412) | $(776) | | Net increase (decrease) in cash | $(246) | $(173) | | Cash at end of period | $890 | $1,112 | Non-GAAP Financial Measures and Reconciliations This section defines and reconciles non-GAAP measures like Adjusted OIBDA and constant currency metrics to their comparable GAAP figures - The company defines Adjusted OIBDA as operating income (loss) adjusted for depreciation, amortization, stock-based compensation, and other specific items like restructuring costs[23][24] - Constant currency financial metrics are used to evaluate performance excluding the translational impact of foreign currency fluctuations, particularly for QVC International's operations[25][26] Consolidated Adjusted OIBDA Reconciliation (Q3 2024, in millions) | Line Item | Amount | | :--- | :--- | | Operating Income | $152 | | Depreciation and amortization | $95 | | Stock compensation expense | $3 | | Adjusted OIBDA | $250 |