Qurate Retail(QRTEA) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results Overview CEO Commentary CEO David Rawlinson highlighted a challenging operating environment marked by linear television decline, volatile consumer confidence, and international trade uncertainty, yet the company achieved a double-digit Adjusted OIBDA margin and made significant progress with its WIN strategy - Operating in a challenging environment with continued decline of linear television, volatile consumer confidence, and uncertainty in international trade[2] - Delivered double-digit Adjusted OIBDA margin despite a declining top line[2] - Made significant progress with the WIN strategy, growing social and streaming business revenue to nearly double-digits as a percentage of total QxH revenue, diversified sourcing, and completed HSN's transition to Studio Park campus[2] Key Financial Headlines QVC Group reported a 7% decrease in revenue (9% in constant currency) and generated an operating loss of $2.3 billion for the second quarter of 2025, with Adjusted OIBDA decreasing 18% (19% in constant currency) and varied performance across segments Key Financial Headlines Summary | Metric | Change (US Dollars) | Change (Constant Currency) | | :------------------------- | :------------------ | :------------------------- | | QVC Group Revenue | -7% | -9% | | Operating Loss | -$2.3 billion | | | Adjusted OIBDA | -18% | -19% | | QxH Revenue | -11% | | | QVC International Revenue | +3% | -3% | | Cornerstone Revenue | -8% | | Discussion of Results Consolidated Financial Performance QVC Group's total revenue decreased 7% to $2,236 million in Q2 2025, leading to a significant operating loss of $2,272 million, primarily due to a $2.4 billion non-cash impairment charge, while Adjusted OIBDA also declined 18% to $232 million Consolidated Financial Performance (amounts in millions) | Metric (amounts in millions) | 2Q24 | 2Q25 | % Change | % Change Constant Currency | | :--------------------------- | :--- | :--- | :------- | :------------------------- | | Total QVC Group Revenue | $2,407 | $2,236 | (7)% | (9)% | | Total QVC Group Operating Income (Loss) | $165 | $(2,272) | (1,477)% | (1,479)% | | Total QVC Group Adjusted OIBDA | $282 | $232 | (18)% | (19)% | - QxH incurred a $2.4 billion non-cash impairment charge related to goodwill and tradenames in the second quarter of 2025, which is included in operating income and excluded from Adjusted OIBDA[6] QxH Segment Performance QxH revenue declined 11% to $1,391 million, primarily due to a 13% decrease in units shipped and lower shipping and handling revenue, despite a 1% increase in average selling price, resulting in a substantial operating loss of $2,334 million mainly driven by a $2.4 billion non-cash impairment charge, and Adjusted OIBDA decreased 23% to $150 million, impacted by higher fulfillment costs and sales deleverage QxH Segment Performance (amounts in millions) | Metric (amounts in millions) | 2Q24 | 2Q25 | % Change | | :--------------------------- | :--- | :--- | :------- | | QxH Revenue | $1,558 | $1,391 | (11)% | | QxH Operating Income (Loss) | $106 | $(2,334) | NM | | QxH Adjusted OIBDA | $194 | $150 | (23)% | - Revenue declined primarily due to a 13% decrease in units shipped and lower shipping and handling revenue, partially offset by favorable returns and a 1% increase in average selling price[9] - Operating loss was primarily driven by a $2.4 billion non-cash impairment charge related to goodwill and tradenames[9] - Adjusted OIBDA margin decreased mainly due to higher fulfillment costs (driven by higher freight rates and labor costs) and sales deleverage, partially offset by higher product margins and favorable commission rates[10] QVC International Segment Performance QVC International's revenue increased 3% in US Dollars to $593 million but decreased 3% in constant currency, with US Dollar results favorably impacted by exchange rate fluctuations, while operating income increased 9% to $62 million, partly due to lower restructuring charges in the prior year, and Adjusted OIBDA decreased 3% (8% in constant currency) to $75 million, affected by sales deleverage and fulfillment pressure QVC International Segment Performance (amounts in millions) | Metric (amounts in millions) | 2Q24 | 2Q25 | % Change (USD) | % Change (Constant Currency) | | :--------------------------- | :--- | :--- | :------------- | :--------------------------- | | QVC International Revenue | $576 | $593 | 3% | (3)% | | QVC International Operating Income | $57 | $62 | 9% | 2% | | QVC International Adjusted OIBDA | $77 | $75 | (3)% | (8)% | - US Dollar denominated results were favorably impacted by exchange rate fluctuations due to the US Dollar weakening 6% against the British pound, 5% against the Euro, and 8% against the Japanese Yen[11] - Constant currency revenue declined due to a 3% decrease in units shipped and a 2% decrease in average selling price, partially offset by a favorable returns rate[12] - Operating income increased mainly due to $8 million of restructuring charges in the second quarter of 2024 related to a plan to shift QVC International's information technology operating model[13] Cornerstone Segment Performance Cornerstone revenue decreased 8% to $252 million, primarily due to continued softness in interior furniture, outdoor furniture, and decor within the home sector, with operating income margin remaining flat while Adjusted OIBDA margin decreased due to sales deleverage and higher administrative costs related to a transformation plan Cornerstone Segment Performance (amounts in millions) | Metric (amounts in millions) | 2Q24 | 2Q25 | % Change | | :--------------------------- | :--- | :--- | :------- | | Cornerstone Revenue | $273 | $252 | (8)% | | Cornerstone Operating Income (Loss) | $11 | $10 | (9)% | | Cornerstone Adjusted OIBDA | $19 | $17 | (11)% | - Revenue decreased 8% due to continued softness in interior furniture, outdoor furniture, and decor in the home sector[15] - Adjusted OIBDA margin decreased primarily due to sales deleverage and higher administrative costs related to the previously announced transformation plan, partially offset by higher product margins and lower fulfillment and supply chain costs[16] SECOND QUARTER 2025 SUPPLEMENTAL METRICS QxH Supplemental Metrics QxH's Adjusted OIBDA Margin decreased by 170 bps to 10.8%, while its Operating Income Margin significantly dropped to (167.8)% due to the impairment charge, with Units Sold decreasing by 13% but Average Selling Price increasing by 1%, and eCommerce revenue declining 8% though its percentage of total revenue increased to 64.5% QxH Supplemental Metrics | Metric | 2Q24 | 2Q25 | Change | | :-------------------------- | :----- | :----- | :------- | | Cost of Goods Sold % of Revenue | 64.6 % | 64.7 % | 10 bps | | Operating Income Margin (%) | 6.8 % | (167.8)% | (17,460)bps | | Adjusted OIBDA Margin (%) | 12.5 % | 10.8 % | (170)bps | | Average Selling Price | $52.51 | $52.83 | 1 % | | Units Sold | | | (13)% | | Return Rate | 15.9 % | 14.4 % | (150)bps | | eCommerce Revenue (millions) | $980 | $897 | (8) % | | eCommerce % of Total Revenue | 62.9 % | 64.5 % | 160 bps | | Mobile % of eCommerce Revenue | 70.6 % | 71.6 % | 100 bps | | LTM Total Customers (millions) | 7.9 | 7.2 | (9)% | QVC International Supplemental Metrics QVC International's Adjusted OIBDA Margin decreased by 80 bps to 12.6%, while its Operating Income Margin improved by 60 bps to 10.5%, with Units Sold decreasing by 3% and Average Selling Price decreasing by 2% in constant currency, and eCommerce revenue increasing 5% (USD) but decreasing 1% (constant currency), representing 53.3% of total revenue QVC International Supplemental Metrics | Metric | 2Q24 | 2Q25 | Change (USD) | Change (Constant Currency) | | :-------------------------- | :----- | :----- | :----------- | :------------------------- | | Cost of Goods Sold % of Revenue | 63.7 % | 64.2 % | 50 bps | | | Operating Income Margin (%) | 9.9 % | 10.5 % | 60 bps | | | Adjusted OIBDA Margin (%) | 13.4 % | 12.6 % | (80)bps | | | Average Selling Price | | | 4 % | (2)% | | Units Sold | | | (3)% | | | Return Rate | 20.4 % | 18.6 % | (180)bps | | | eCommerce Revenue (millions) | $300 | $316 | 5 % | (1)% | | eCommerce % of Total Revenue | 52.1 % | 53.3 % | 120 bps | | | Mobile % of eCommerce Revenue | 76.1 % | 77.4 % | 130 bps | | | LTM Total Customers (millions) | 4.1 | 3.9 | (5)% | | Cornerstone Supplemental Metrics Cornerstone's Adjusted OIBDA Margin decreased by 30 bps to 6.7%, while its Operating Income Margin remained flat at 4.0%, with Cost of Goods Sold as a percentage of revenue improving by 190 bps to 56.0%, and eCommerce revenue decreasing 7% but its share of total revenue increasing to 76.6% Cornerstone Supplemental Metrics | Metric | 2Q24 | 2Q25 | Change | | :-------------------------- | :----- | :----- | :------- | | Cost of Goods Sold % of Revenue | 57.9 % | 56.0 % | (190)bps | | Operating Income Margin (%) | 4.0 % | 4.0 % | 0 bps | | Adjusted OIBDA Margin (%) | 7.0 % | 6.7 % | (30)bps | | eCommerce Revenue (millions) | $207 | $193 | (7)% | | eCommerce % of Total Revenue | 75.8 % | 76.6 % | 80 bps | Cash and Debt Cash and Debt Overview QVC Group's cash and cash equivalents increased by $64 million to $897 million as of June 30, 2025, driven by cash provided by operations and net borrowings, while total debt increased by $74 million to $5,640 million, primarily due to additional borrowing under QVC's bank credit facility Cash and Debt Overview (amounts in millions) | Metric (amounts in millions) | 3/31/2025 | 6/30/2025 | | :--------------------------- | :-------- | :-------- | | Cash and cash equivalents | $833 | $897 | | Total QVC Group Debt | $5,566 | $5,640 | | Total QVC Group Debt (GAAP) | $5,000 | $4,920 | - Cash at QVC Group increased $64 million in the second quarter due to cash provided by operations and net borrowings, partially offset by expenditures for television distribution rights and capital expenditures[22] - Total debt at QVC Group increased $74 million in the second quarter primarily due to additional borrowing under QVC's bank credit facility[22] Debt Covenants and Leverage As of June 30, 2025, QVC's bank credit facility had $1.93 billion drawn with $1.2 billion incremental availability, with an additional $975 million borrowed in July 2025, reducing availability to approximately $200 million, and Cornerstone was removed as a borrower on April 1, 2025, while QVC, Inc.'s leverage ratio was 3.9x, and the consolidated leverage ratio exceeding 3.5x restricts unlimited dividends, though QVC Group remains in compliance with all debt covenants - QVC's bank credit facility had $1.93 billion drawn as of June 30, 2025, with incremental availability of $1.2 billion, net of letters of credit[23] - In July 2025, QVC borrowed $975 million under its bank credit facility, reducing availability to approximately $200 million as of August 1, 2025[23] - On April 1, 2025, Cornerstone was removed as a borrower under QVC's credit agreement and is no longer included in calculations of QVC, Inc.'s leverage[23] - QVC, Inc.'s leverage ratio was 3.9x at quarter-end. As of June 30, 2025, QVC's consolidated leverage ratio was greater than 3.5x, restricting its ability to make unlimited dividends or other restricted payments[23][24] - QVC Group is in compliance with all debt covenants as of June 30, 2025, and following the borrowing in July 2025[27] NON-GAAP FINANCIAL MEASURES Adjusted OIBDA Definition and Rationale Adjusted OIBDA is a non-GAAP financial measure defined as operating income (loss) plus depreciation and amortization, stock-based compensation, and other specific non-recurring items, serving as an important indicator of operational strength and performance by excluding items not directly reflective of ongoing business trends, facilitating analytical comparisons and benchmarking - Adjusted OIBDA is defined as operating income (loss) plus depreciation and amortization, stock-based compensation, and, where applicable, separately identified impairments, litigation settlements, restructuring, acquisition-related costs, and (gains) losses on sale leaseback transactions[30] - It is considered an important indicator of operational strength and performance by identifying items not directly a reflection of each business's performance or indicative of ongoing business trends[31][32] - This measure allows management to view operating results, perform analytical comparisons and benchmarking between businesses, and identify strategies to improve performance[32] Constant Currency Definition and Rationale Constant currency financial metrics are non-GAAP measures calculated by translating current and prior-year reported amounts using a single foreign exchange rate for each currency, providing a framework to assess business performance by excluding the effects of foreign currency exchange fluctuations, which is particularly relevant for QVC due to its international subsidiaries - Constant currency financial metrics are calculated by translating the current-year and prior-year reported amounts into comparable amounts using a single foreign exchange rate for each currency[33] - This measure is an important indicator of financial performance, especially for QVC, due to the translational impact of foreign currency fluctuations relating to its subsidiaries in the UK, Germany, Italy, and Japan[34] - It provides a framework to assess how businesses performed excluding the effects of foreign currency exchange fluctuations[34] Financial Reconciliations Consolidated Operating Income and Adjusted OIBDA Reconciliation This section provides a reconciliation of QVC Group's GAAP operating income (loss) to its Adjusted OIBDA for the past five quarters, detailing adjustments for depreciation and amortization, stock compensation expense, impairment of intangible assets, and restructuring costs Consolidated Operating Income and Adjusted OIBDA Reconciliation (amounts in millions) | (amounts in millions) | 2Q24 | 3Q24 | 4Q24 | 1Q25 | 2Q25 | | :-------------------- | :--- | :--- | :--- | :--- | :--- | | QVC Group Operating Income (Loss) | $165 | $152 | $(1,271) | $14 | $(2,272) | | Depreciation and amortization | 96 | 95 | 93 | 102 | 105 | | Stock compensation expense | 3 | 3 | 10 | 4 | 4 | | Impairment of intangible assets | — | — | 1,480 | — | 2,395 | | Restructuring costs | 18 | — | — | 57 | — | | QVC Group Adjusted OIBDA | $282 | $250 | $312 | $177 | $232 | - The reconciliation highlights significant non-cash impairment charges related to goodwill and tradenames recognized at QxH: $1.5 billion in 4Q24 and $2.4 billion in 2Q25[37] Subsidiary Adjusted OIBDA Reconciliation This table reconciles operating income (loss) to Adjusted OIBDA for QVC and Cornerstone, and also presents Adjusted OIBDA for QxH and QVC International, across the past five quarters, providing a detailed view of segment-level performance adjustments Subsidiary Adjusted OIBDA Reconciliation (amounts in millions) | (amounts in millions) | 2Q24 | 3Q24 | 4Q24 | 1Q25 | 2Q25 | | :-------------------- | :--- | :--- | :--- | :--- | :--- | | QVC | | | | | | | Operating income (loss) | $163 | $164 | $(1,254) | $29 | $(2,272) | | Depreciation and amortization | 88 | 87 | 84 | 95 | 98 | | Stock compensation | 2 | 1 | 5 | 4 | 4 | | Impairment of intangible assets | — | — | 1,480 | — | 2,395 | | Restructuring costs | 18 | — | — | 57 | — | | Adjusted OIBDA | $271 | $252 | $315 | $185 | $225 | | QxH Adjusted OIBDA | $194 | $182 | $204 | $122 | $150 | | QVC International Adjusted OIBDA | $77 | $70 | $111 | $63 | $75 | | Cornerstone | | | | | | | Operating income (loss) | $11 | $(2) | $(4) | $(11) | $10 | | Depreciation and amortization | 8 | 8 | 9 | 7 | 7 | | Stock compensation | — | — | — | — | — | | Adjusted OIBDA | $19 | $6 | $5 | $(4) | $17 | Condensed Consolidated Financial Statements Balance Sheet Information As of June 30, 2025, QVC Group reported total assets of $6,699 million, a decrease from $9,243 million at December 31, 2024, primarily due to a significant reduction in intangible assets not subject to amortization, while total liabilities also decreased to $9,587 million from $10,128 million, and equity remained negative Balance Sheet Information (amounts in millions) | (amounts in millions) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $897 | $905 | | Total current assets | $3,101 | $3,299 | | Intangible assets not subject to amortization | $2,020 | $4,337 | | Total assets | $6,699 | $9,243 | | Total current liabilities | $1,638 | $2,724 | | Long-term debt | $4,834 | $4,101 | | Total liabilities | $9,587 | $10,128 | | Equity | $(2,980) | $(971) | Statement of Operations Information For the three months ended June 30, 2025, QVC Group's total revenue was $2,236 million, down from $2,407 million in the prior year, and the company incurred a net loss of $2,209 million, a significant decline from net earnings of $32 million in 2Q24, primarily due to a $2,395 million impairment of goodwill and intangible assets Statement of Operations Information (amounts in millions) | (amounts in millions) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Total revenue, net | $2,236 | $2,407 | | Cost of goods sold | $1,422 | $1,532 | | Operating expense | $164 | $178 | | Selling, general and administrative | $422 | $418 | | Depreciation and amortization | $105 | $96 | | Impairment of goodwill and intangible assets | $2,395 | — | | Operating income (loss) | $(2,272) | $165 | | Net earnings (loss) | $(2,209) | $32 | | Net earnings (loss) attributable to QVC Group, Inc. shareholders | $(2,222) | $20 | Statement of Cash Flows Information For the six months ended June 30, 2025, net cash provided by operating activities was $26 million, a decrease from $293 million in the prior year, while net cash used by investing activities increased to $167 million, and net cash provided by financing activities was $118 million, a reversal from $85 million used in the prior year Statement of Cash Flows Information (amounts in millions) | (amounts in millions) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net earnings (loss) | $(2,300) | $40 | | Net cash provided (used) by operating activities | $26 | $293 | | Net cash provided (used) by investing activities | $(167) | $(98) | | Net cash provided (used) by financing activities | $118 | $(85) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $4 | $89 | | Cash, cash equivalents and restricted cash at end period | $927 | $1,225 | Important Notice and Disclosures Earnings Conference Call QVC Group announced details for its earnings conference call scheduled for 8:30 a.m. (E.T.) on August 7, 2025, providing dial-in information and webcast access for interested parties - QVC Group's earnings conference call was scheduled for 8:30 a.m. (E.T.) on August 7, 2025[28] - The call can be accessed by dialing (877) 704-4234 or (215) 268-9904, passcode 13748878, or via webcast at https://investors.qvcgrp.com/investors/news-events/ir-calendar[28](index=28&type=chunk) Forward-Looking Statements Disclaimer The press release includes forward-looking statements regarding business strategies, market potential, and future financial performance, which involve numerous risks and uncertainties that could cause actual results to differ materially, and QVC Group disclaims any obligation to update these statements and advises readers to refer to publicly filed documents for additional risk information - The press release includes forward-looking statements about business strategies, market potential, future financial performance, and other non-historical facts[29] - These statements involve many risks and uncertainties, including changes in market acceptance, competitive issues, regulatory matters, access to capital, general market conditions, impairment losses, and issues impacting the global supply chain and labor market[29] - QVC Group expressly disclaims any obligation to disseminate any updates or revisions to any forward-looking statement and refers readers to its most recent Forms 10-K and 10-Q for additional information about risks and uncertainties[29]