iMedia Brands, Inc. (NASDAQ: IMBI) today announced results for the
third quarter ended November 2, 2019.
Third Quarter 2019 Summary & Recent
Operational Highlights
- EPS improved 36% to $(0.09)
compared to $(0.14) last year.
- Net loss improved 26% to $6.7
million compared to $9.2 million last year.
- Adjusted EBITDA improved 77% to
$(986) thousand compared to $(4.2) million last year. Previous six
month period Adjusted EBITDA loss of $14 million reduced to $775
thousand for the most recent six month period.
- Net sales of $115 million compares
to $132 million last year, a 12.6% decline. Previous six month
period revenue decline of 17.2% reduced to 12.7% for the most
recent six months.
- Rebranded flagship network to
ShopHQ.
- Secured exclusive relationships
with seven new home and fashion brands: John O’Hurley, Heather
Dubrow, Romero Britto, Danny Seo, Heather Hall, Bear Creek Cattle
Steaks and Leota Fashions.
- Launched innovative new loyalty
program, ShopHQ VIP.
- Entered into exclusive partnership
with Shaquille O’Neal on November 18th.
- Bulldog Shopping Network to launch
on November 22nd.
CEO Commentary
“Before I go into our successes achieved this
past quarter,” said Tim Peterman, CEO of iMedia Brands, “I want to
explain the significance of our Shaquille O’Neal partnership
announced yesterday. Specifically, why we worked so hard to make
this happen and why we believe the size of this opportunity is
significant.
“First and foremost, Shaquille O’Neal is more
than a celebrity to iMedia. We know him. We know his work ethic,
what kind of partner he will be and how good of an entertainer and
entrepreneur he is. That is the ‘why.’ He’s that rare, authentic
personality who has grown beyond his achievements to become a pop
culture icon.
“iMedia estimates the size of the financial
opportunity here to be meaningful. Shaq’s iconic status combined
with iMedia’s television and ecommerce retailing expertise create a
unique opportunity for iMedia to build a profitable, omni-channel
business that iMedia believes could exceed $200 million in annual
revenues.
“Regarding our operating results, prior to my
arrival in May, the revenue decline for the previous six months was
17.2%. During these past six months, we successfully reduced that
decline to 12.7%. We accomplished this by launching multiple
exciting brands, making important staffing changes, simplifying the
promotional framework and introducing an innovative loyalty
program. Although the revenue decline did slow, it did not slow as
fast as we wanted. The reason was the merchandising effort in
the company was more troubled prior to my arrival than previously
expected, particularly in our two long-lead businesses of Home and
Fashion.”
Third Quarter 2019 Results
SUMMARY RESULTS AND KEY OPERATING METRICS |
($ Millions, except average selling price and
EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2019 11/2/2019 |
|
Q3 2018 11/3/2018 |
|
Change |
|
YTD 2019 11/2/2019 |
|
YTD 2018 11/3/2018 |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
$ |
115.2 |
|
|
$ |
131.7 |
|
|
(12.6 |
%) |
|
$ |
378.2 |
|
|
$ |
439.0 |
|
|
(13.9 |
%) |
Gross Margin % |
|
36.1 |
% |
|
|
35.8 |
% |
|
30 bps |
|
|
|
33.5 |
% |
|
|
36.5 |
% |
|
(300 bps |
) |
Adjusted EBITDA |
$ |
(1.0 |
) |
|
$ |
(4.2 |
) |
|
77 |
% |
|
$ |
(9.2 |
) |
|
$ |
3.0 |
|
|
N/A |
|
Net Income (Loss) |
$ |
(6.7 |
) |
|
$ |
(9.2 |
) |
|
26 |
% |
|
$ |
(37.9 |
) |
|
$ |
(12.2 |
) |
|
(211 |
%) |
EPS |
$ |
(0.09 |
) |
|
$ |
(0.14 |
) |
|
36 |
% |
|
$ |
(0.52 |
) |
|
$ |
(0.18 |
) |
|
(189 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Shipped Units (000s) |
|
1,578 |
|
|
|
1,893 |
|
|
(17 |
%) |
|
|
5,227 |
|
|
|
6,827 |
|
|
(23 |
%) |
Average Selling Price
(ASP) |
$ |
66 |
|
|
$ |
63 |
|
|
5 |
% |
|
$ |
65 |
|
|
$ |
58 |
|
|
12 |
% |
Return Rate % |
|
19.0 |
% |
|
|
19.9 |
% |
|
(90 bps |
) |
|
|
19.7 |
% |
|
|
19.1 |
% |
|
60 bps |
|
Digital Net Sales % |
|
51.6 |
% |
|
|
51.9 |
% |
|
(30 bps |
) |
|
|
52.5 |
% |
|
|
52.5 |
% |
|
0 bps |
|
Total Customers - 12 Month
Rolling (000s) |
|
1,115 |
|
|
|
1,233 |
|
|
(10 |
%) |
|
|
N/A |
|
|
|
N/A |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Net Merchandise Sales by
Category |
|
|
|
|
|
|
|
|
|
|
|
Jewelry & Watches |
|
45 |
% |
|
|
41 |
% |
|
|
|
|
46 |
% |
|
|
40 |
% |
|
|
Home & Consumer Electronics |
|
23 |
% |
|
|
23 |
% |
|
|
|
|
20 |
% |
|
|
22 |
% |
|
|
Beauty & Wellness |
|
18 |
% |
|
|
18 |
% |
|
|
|
|
19 |
% |
|
|
19 |
% |
|
|
Fashion & Accessories |
|
14 |
% |
|
|
18 |
% |
|
|
|
|
15 |
% |
|
|
19 |
% |
|
|
Total |
|
100 |
% |
|
|
100 |
% |
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net sales decline driven by
assortment pressure in the long lead time businesses of Home and
Fashion & Accessories, which required an over-reliance on the
Jewelry & Watches category.
- Subscription sales increased 10%,
reflecting strong loyalty within the Beauty & Wellness
category.
- Gross margin in the third quarter
increased 30 basis points to 36.1% compared to 35.8% in the
year-ago quarter. The improvement was driven by a strong discipline
to increase rates, which helped to offset slight product mix
pressure.
- The return rate for the quarter was
19.0%, a 90-basis point year-over-year improvement driven by return
rate reductions within the Watches, Fashion & Accessories and
Consumer Electronics categories.
- Average selling price increased 5%
to $66 driven by increases in the Jewelry and Home & Consumer
Electronics categories, combined with a mix shift into Jewelry
& Watches.
- Operating expenses decreased 15%,
or $8.1 million, year-over-year to $47.4 million, reflecting
decreases of $9.0 million in distribution and selling expenses and
$0.8 million in general and administration expenses, partially
offset by a $1.5 million increase related to restructuring
costs.
Liquidity and Capital
Resources
As of November 2, 2019, total unrestricted cash
was $16.6 million compared to $21.6 million at the end of the
second quarter of fiscal 2019. The Company also had an
additional $6.3 million of unused availability on its revolving
credit facility.
Outlook
The company expects a year-over-year revenue
decline in the upcoming fourth quarter, but at a lower rate than
the second and third quarters of 2019. The company also
expects to report positive adjusted EBITDA in the fourth
quarter.(1)
Conference Call
The company will hold a conference call today at
8:30 a.m. Eastern time to discuss its third quarter 2019
results.
Date: Wednesday, November 20, 2019Toll-free
dial-in number: (877) 407-9039International dial-in number: (201)
689-8470Conference ID: 13696572
Please call the conference telephone number 5-10
minutes prior to the start time. An operator will register your
name and organization. If you have any difficulty connecting with
the conference call, please contact Gateway Investor Relations at
(949) 574-3860.
The conference call will be broadcast live and
available for replay here and via the investor relations section of
the iMedia Brands website at www.imediabrands.com.
A replay of the conference call will be
available after 11:30 a.m. Eastern time on the same day through
December 4, 2019.
Toll-free replay number: (844)
512-2921International replay number: (412) 317-6671Replay ID:
13696572.
About iMedia Brands, Inc.
iMedia Brands, Inc. (NASDAQ: IMBI) is a global
interactive media company that manages a growing portfolio of
niche, lifestyle television networks and web service businesses,
primarily in North America, for both English speaking and, soon,
Spanish speaking audiences and customers. Its brand portfolio
spans multiple business models and product categories and includes
ShopHQ, iMedia Web Services and soon-to-be-launched Bulldog
Shopping Network and LaVenta Shopping Network. Please visit
www.imediabrands.com for more investor information.
Contacts:
Investors:Gateway Investor RelationsCody
SlachIMBI@gatewayir.com (949) 574-3860
Media:press@imediabrands.com (800)
938-9707
(1) In accordance with SEC Guidance for
Item 10(e)(1)(i)(A) of Regulation S-K, the Company has not provided
a reconciliation of expected Adjusted EBITDA to expected net income
in this press release due to the uncertainty and inherent
difficulty predicting the occurrence, the financial impact and the
periods in which certain GAAP to non-GAAP adjustments may be
recognized. These adjustments may include the impact of such items
as loss on debt extinguishment; gain on sale of assets; executive
and management transition costs; inventory impairments outside of
normal course business; transaction, settlement and integration
costs, net; restructuring costs; rebranding costs; the effect of
other certain one-time items and the income tax effect of such
items. The Company is unable to quantify these types of
adjustments that would be required to be included in the GAAP
measure without unreasonable efforts. In addition, the Company
believes such a reconciliation would imply a degree of precision on
inherently unpredictable events in its outlook that could be
confusing to investors.
iMEDIA BRANDS, INC. |
AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In thousands except share and per share data) |
|
|
|
|
|
November 2, |
|
February 2, |
|
|
2019 |
|
|
|
2019 |
|
|
(Unaudited) |
|
|
|
|
|
|
ASSETS |
Current
assets: |
|
|
|
Cash |
$ |
16,602 |
|
|
$ |
20,485 |
|
Restricted cash equivalents |
|
- |
|
|
|
450 |
|
Accounts receivable, net |
|
63,729 |
|
|
|
81,763 |
|
Inventories |
|
82,799 |
|
|
|
65,272 |
|
Prepaid expenses and other |
|
7,491 |
|
|
|
9,053 |
|
Total current assets |
|
170,621 |
|
|
|
177,023 |
|
Property and
equipment, net |
|
48,698 |
|
|
|
51,118 |
|
Other
assets |
|
2,397 |
|
|
|
1,846 |
|
Total Assets |
$ |
221,716 |
|
|
$ |
229,987 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
76,950 |
|
|
$ |
56,157 |
|
Accrued liabilities |
|
39,643 |
|
|
|
37,374 |
|
Current portion of long term credit facility |
|
2,488 |
|
|
|
2,488 |
|
Current portion of operating lease liabilities |
|
836 |
|
|
|
- |
|
Deferred revenue |
|
35 |
|
|
|
35 |
|
Total current liabilities |
|
119,952 |
|
|
|
96,054 |
|
|
|
|
|
|
|
|
|
Other long term
liabilities |
|
117 |
|
|
|
50 |
|
Long term credit
facilities |
|
66,924 |
|
|
|
68,932 |
|
Total liabilities |
|
186,993 |
|
|
|
165,036 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
Preferred stock, $.01 par value, 400,000 shares authorized; zero
shares issued and outstanding |
|
- |
|
|
|
- |
|
Common stock, $.01 par value, 99,600,000 shares authorized;
76,770,354 and 67,919,349 shares issued and outstanding |
|
768 |
|
|
|
679 |
|
Additional paid-in capital |
|
449,788 |
|
|
|
442,197 |
|
Accumulated deficit |
|
(415,833 |
) |
|
|
(377,925 |
) |
Total shareholders' equity |
|
34,723 |
|
|
|
64,951 |
|
Total Liabilities and Shareholders' Equity |
$ |
221,716 |
|
|
$ |
229,987 |
|
|
|
|
|
|
|
|
|
iMEDIA BRANDS, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
(In thousands, except share and per share data) |
|
|
|
|
|
|
|
|
|
For the Three-Month Periods Ended |
|
For the Nine-Month Periods Ended |
|
|
|
|
|
|
|
|
|
November 2, |
|
November 3, |
|
November 2, |
|
November 3, |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Net
sales |
$ |
115,159 |
|
|
$ |
131,714 |
|
|
$ |
378,183 |
|
|
$ |
439,018 |
|
Cost of
sales |
|
73,573 |
|
|
|
84,559 |
|
|
|
251,578 |
|
|
|
278,738 |
|
Gross profit |
|
41,586 |
|
|
|
47,155 |
|
|
|
126,605 |
|
|
|
160,280 |
|
Margin % |
|
36.1 |
% |
|
|
35.8 |
% |
|
|
33.5 |
% |
|
|
36.5 |
% |
Operating
expense: |
|
|
|
|
|
|
|
Distribution and selling |
|
38,332 |
|
|
|
47,328 |
|
|
|
128,717 |
|
|
|
144,173 |
|
General and administrative |
|
5,415 |
|
|
|
6,214 |
|
|
|
17,816 |
|
|
|
19,454 |
|
Depreciation and amortization |
|
2,053 |
|
|
|
1,587 |
|
|
|
6,234 |
|
|
|
4,681 |
|
Restructuring costs |
|
1,516 |
|
|
|
- |
|
|
|
6,681 |
|
|
|
- |
|
Executive and management transition costs |
|
87 |
|
|
|
408 |
|
|
|
2,428 |
|
|
|
1,432 |
|
Total operating expense |
|
47,403 |
|
|
|
55,537 |
|
|
|
161,876 |
|
|
|
169,740 |
|
Operating
loss |
|
(5,817 |
) |
|
|
(8,382 |
) |
|
|
(35,271 |
) |
|
|
(9,460 |
) |
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
Interest income |
|
4 |
|
|
|
12 |
|
|
|
15 |
|
|
|
28 |
|
Interest expense |
|
(914 |
) |
|
|
(767 |
) |
|
|
(2,608 |
) |
|
|
(2,691 |
) |
Total other expense |
|
(910 |
) |
|
|
(755 |
) |
|
|
(2,593 |
) |
|
|
(2,663 |
) |
|
|
|
|
|
|
|
|
Loss before income
taxes |
|
(6,727 |
) |
|
|
(9,137 |
) |
|
|
(37,864 |
) |
|
|
(12,123 |
) |
|
|
|
|
|
|
|
|
Income tax provision |
|
(14 |
) |
|
|
(20 |
) |
|
|
(44 |
) |
|
|
(60 |
) |
|
|
|
|
|
|
|
|
Net loss |
$ |
(6,741 |
) |
|
$ |
(9,157 |
) |
|
$ |
(37,908 |
) |
|
$ |
(12,183 |
) |
|
|
|
|
|
|
|
|
Net loss per common
share |
$ |
(0.09 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
Net loss per common
share---assuming dilution |
$ |
(0.09 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
75,770,277 |
|
|
|
66,351,835 |
|
|
|
72,863,795 |
|
|
|
65,907,301 |
|
Diluted |
|
75,770,277 |
|
|
|
66,351,835 |
|
|
|
72,863,795 |
|
|
|
65,907,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iMEDIA BRANDS, INC. |
AND SUBSIDIARIES |
Reconciliation of Net Loss to Adjusted
EBITDA: |
(Unaudited) |
(in thousands) |
|
|
|
|
|
|
|
|
|
For the Three-Month Periods Ended |
|
For the Nine-Month Periods Ended |
|
|
|
|
|
|
|
|
|
November 2, |
|
November 3, |
|
November 2, |
|
November 3, |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(6,741 |
) |
|
$ |
(9,157 |
) |
|
$ |
(37,908 |
) |
|
$ |
(12,183 |
) |
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
3,052 |
|
|
|
2,532 |
|
|
|
9,192 |
|
|
|
7,667 |
|
Interest income |
|
(4 |
) |
|
|
(12 |
) |
|
|
(15 |
) |
|
|
(28 |
) |
Interest expense |
|
914 |
|
|
|
767 |
|
|
|
2,608 |
|
|
|
2,691 |
|
Income taxes |
|
14 |
|
|
|
20 |
|
|
|
44 |
|
|
|
60 |
|
EBITDA (as defined) |
$ |
(2,765 |
) |
|
$ |
(5,850 |
) |
|
$ |
(26,079 |
) |
|
$ |
(1,793 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of EBITDA to Adjusted EBITDA is as
follows: |
|
|
|
|
|
|
|
EBITDA (as defined) |
$ |
(2,765 |
) |
|
$ |
(5,850 |
) |
|
$ |
(26,079 |
) |
|
$ |
(1,793 |
) |
Adjustments: |
|
|
|
|
|
|
|
Restructuring costs |
|
1,516 |
|
|
|
- |
|
|
|
6,681 |
|
|
|
- |
|
Executive and management transition costs |
|
87 |
|
|
|
408 |
|
|
|
2,428 |
|
|
|
1,432 |
|
Rebranding costs |
|
554 |
|
|
|
- |
|
|
|
792 |
|
|
|
- |
|
Inventory Impairment write-down |
|
- |
|
|
|
- |
|
|
|
6,050 |
|
|
|
- |
|
Transaction, settlement and integration costs, net |
|
(804 |
) |
|
|
395 |
|
|
|
(804 |
) |
|
|
1,148 |
|
Non-cash share-based compensation expense |
|
426 |
|
|
|
822 |
|
|
|
1,683 |
|
|
|
2,180 |
|
Adjusted
EBITDA |
$ |
(986 |
) |
|
$ |
(4,225 |
) |
|
$ |
(9,249 |
) |
|
$ |
2,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
EBITDA represents net income (loss) for the
respective periods excluding depreciation and amortization expense,
interest income (expense) and income taxes. The Company defines
Adjusted EBITDA as EBITDA excluding non-operating gains (losses);
executive and management transition costs; restructuring costs;
rebranding costs; non-cash impairment charges and write downs;
transaction, settlement, and integration costs, net; loss on debt
extinguishment; gain on sale of television station and non-cash
share-based compensation expense. The Company has included the
“Adjusted EBITDA” measure in its EBITDA reconciliation in order to
adequately assess the operating performance of its television and
online businesses and in order to maintain comparability to its
analyst's coverage and financial guidance, when given. Management
believes that the Adjusted EBITDA measure allows investors to make
a meaningful comparison between its business operating results over
different periods of time with those of other similar companies. In
addition, management uses Adjusted EBITDA as a metric to evaluate
operating performance under the Company’s management and executive
incentive compensation programs. Adjusted EBITDA should not be
construed as an alternative to operating income (loss), net income
(loss) or to cash flows from operating activities as determined in
accordance with generally accepted accounting principles (“GAAP”)
and should not be construed as a measure of liquidity. Adjusted
EBITDA may not be comparable to similarly entitled measures
reported by other companies. The Company has included a
reconciliation of the comparable GAAP measure, net income (loss) to
Adjusted EBITDA in this release.
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995
This document may contain certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statements contained
herein that are not statements of historical fact, including
statements regarding rebranding, savings from cost reductions,
expected changes in the merchandise mix and its impact,
expectations arising from our partnership with Shaquille O’Neal,
plans for Shop Bulldog and LaVenta, expected advantages to pursue
restructuring and operational changes, guidance, industry
prospects, or future results of operations or financial position
are forward-looking. The Company often use words such as
anticipates, believes, estimates, expects, intends, seeks,
predicts, hopes, should, plans, will and similar expressions to
identify forward-looking statements. These statements are based on
management's current expectations and accordingly are subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained herein due to various
important factors, including (but not limited to): variability in
consumer preferences, shopping behaviors, spending and debt levels;
the general economic and credit environment; interest rates;
seasonal variations in consumer purchasing activities; the ability
to achieve the most effective product category mixes to maximize
sales and margin objectives; competitive pressures on sales and
sales promotions; pricing and gross sales margins; the level of
cable and satellite distribution for the Company’s programming and
the associated fees or estimated cost savings from contract
renegotiations; the Company’s ability to establish and maintain
acceptable commercial terms with third-party vendors and other
third parties with whom the Company has contractual relationships,
and to successfully manage key vendor and shipping relationships
and develop key partnerships and proprietary and exclusive brands;
the ability to manage operating expenses successfully and the
Company’s working capital levels; the ability to remain compliant
with the Company’s credit facilities covenants; customer acceptance
of the Company’s branding strategy and its repositioning as a video
commerce company; the ability to respond to changes in consumer
shopping patterns and preferences, and changes in technology and
consumer viewing patterns; changes to the Company’s management and
information systems infrastructure; challenges to the Company’s
data and information security; changes in governmental or
regulatory requirements; including without limitation, regulations
of the Federal Communications Commission and Federal Trade
Commission, and adverse outcomes from regulatory proceedings;
litigation or governmental proceedings affecting the Company’s
operations; significant events (including disasters, weather events
or events attracting significant television coverage) that either
cause an interruption of television coverage or that divert
viewership from its programming; disruptions in the Company’s
distribution of its network broadcast to customers; the Company’s
ability to protect its intellectual property rights; our ability to
obtain and retain key executives and employees; the Company’s
ability to attract new customers and retain existing customers;
changes in shipping costs; expenses related to the actions of
activist or hostile shareholders; the Company’s ability to offer
new or innovative products and customer acceptance of the same;
changes in customer viewing habits of television programming; and
the risks identified under Item 1A(Risk Factors) in the Company’s
most recently filed Form 10-K and any additional risk factors
identified in its periodic reports since the date of such Form
10-K. More detailed information about those factors is set forth in
the Company’s filings with the Securities and Exchange Commission,
including its annual report on Form 10-K, quarterly reports on Form
10-Q, and current reports on Form 8-K. Investors are cautioned not
to place undue reliance on forward-looking statements, which speak
only as of the date of this announcement. the Company’s is under no
obligation (and expressly disclaim any such obligation) to update
or alter its forward-looking statements whether as a result of new
information, future events or otherwise.
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