Exhibit 99.1

Image - Image1.jpeg

 

 

 

LIBERTY INTERACTIVE CORPORATION REPORTS

FIRST QUARTER 2016 FINANCIAL RESULTS

 

Englewood, Colorado, May 9, 2016 - Liberty Interactive Corporation ("Liberty Interactive") (Nasdaq: QVCA,  QVCB, LVNTA, LVNTB) today reported first quarter 2016 results.  Highlights include(1):

 

Attributed to QVC Group

·

Grew QVC consolidated revenue by 4% and adjusted OIBDA(2) by 3% for the first quarter, excluding QVC France start-up expenses

·

QVC consolidated operating income increased by 6%

·

Grew QVC US revenue by 5% and adjusted OIBDA(2) by 7%, taking into account new cost allocations associated with ONE Q

·

QVC US operating income increased by 14%

·

QVC consolidated mobile penetration was 57% of QVC.com orders, a 935 basis point increase

·

QVC US mobile penetration was 56% of QVC.com orders, a 1,011 basis point increase

·

zulily revenue grew 16% to $355 million and adjusted OIBDA(2) grew 475% to $23 million

·

zulily operating loss increased to $(43) million, primarily as a result of approximately $56 million of amortization of intangible assets recognized in purchase accounting

·

From February 1, 2016 through April 30, 2016, repurchased 7.7 million QVCA shares at an average price per share of $24.98 and a total cost of $193 million

Attributed to Liberty Ventures Group

·

Filed S-1s related to the separate spin-offs of CommerceHub and Liberty Expedia Holdings

·

Plan to invest $2.4 billion in Liberty Broadband Series C shares (LBRDK) at a price of $56.23 per share upon anticipated completion of the Charter transactions with Time Warner Cable and Bright House

 

“QVC generated another strong quarter of revenue growth, particularly in the US, and posted impressive increases in mobile penetration of orders in the US and on a consolidated basis.  zulily started off strong in 2016 with accelerating

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revenue growth and a six-fold increase in adjusted OIBDA on strong operational execution,” said Greg Maffei, Liberty Interactive President and CEO. 

 

QVC GROUP  For the quarter, QVC Group's revenue increased 22% to  $2.4 billion, adjusted OIBDA increased 8%  to $433 million, operating income decreased 13% to $206 million, adjusted net income(3) decreased 13% to $176 million and net income decreased 40% to $90 millionQVC Group’s reported GAAP results include the zulily acquisition beginning in the fourth quarter of 2015 (see the “zulily” section below for a further discussion of the impact of the acquisition).

 

QVC

“We generated very solid top-line growth, with local currency gains in nearly every market,” said QVC President and CEO Mike George.  “We continued to benefit from our strategies and investments to enhance and extend the reach of our commerce platforms.  We delivered double-digit gains for both consolidated eCommerce revenue and mobile orders. Our top-line performance and the continued expansion of our commerce platforms demonstrate how strongly the QVC brand resonates with consumers.”

 

QVC's ONE Q organizational structure is allowing it to better leverage its global scale and capabilities, to enhance its competitive position and to create operational efficiencies.  Beginning in the first quarter of 2016, QVC began allocating certain corporate costs for management reporting purposes differently. Historically, QVC allocated these costs to the market from which the services were provided. Now, as more of QVC’s costs support initiatives in multiple markets, QVC is allocating costs to the markets that will benefit from the expenditures. These management cost allocations are related to certain functions, such as merchandising, commerce platforms, information technology, human resources, legal, finance, brand and communications, corporate development and administration.  The cost allocations (from QVC US to QVC International) totaled approximately $9 million in the first quarter and are expected to approximate $39 million in 2016.  As a result of the allocations, the US segment’s adjusted OIBDA margin was positively impacted 64 basis points and the international segment’s adjusted OIBDA margin was negatively impacted 148 basis points in the first quarter.  There was no impact to consolidated adjusted OIBDA margin.  With the completion of the ONE Q implementation, QVC’s financial disclosure is consistent with the way it evaluates its business performance and manages its operations. 

 

QVC's consolidated revenue increased 4% in the first quarter to $2.0 billion.  Adjusted OIBDA increased 2% to $415 million and adjusted OIBDA margin declined 39 basis points.  Operating income increased 6% to $261 million. Consolidated eCommerce revenue increased 10% to $895 million and grew to 45% of consolidated revenue in the

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quarter from 42% a year ago.  Mobile orders were 57% of total eCommerce orders in the quarter, compared to 47% a year ago.  Excluding QVC France start-up expenses of $7 million, consolidated adjusted OIBDA increased 3%.

 

QVC’s US revenue increased 5% to $1.4 billion in the first quarter.  Units sold increased 7%, average selling price per unit ("ASP") decreased 3% to $60.03 and returns as a percentage of gross product revenue improved 184 basis points. The US experienced growth in the apparel, accessories and home categories, which was partially offset by declines in jewelry and electronics.  eCommerce revenue increased 10% to $698 million and grew to 50% of total US revenue in the quarter from 47% a year ago.  Adjusted OIBDA increased 7% to $326 million, and adjusted OIBDA margin increased 37 basis points due to the aforementioned cost allocations from ONE Q.   Excluding the cost allocations, adjusted OIBDA increased 4% and adjusted OIBDA margin decreased 27 basis points, primarily due to higher freight and bad debt expenses and lower shipping and handling revenue, which were partially offset by higher initial margins, lower personnel costs for severance and favorable obsolescence expense.

 

QVC's international revenue increased 2% to $606 million in the first quarter.  The revenue performance included the net impact of slightly unfavorable exchange rate fluctuations.  The US Dollar strengthened against the British Pound Sterling and Euro 6% and 2%, respectively, and weakened against the Japanese Yen 3%.  On a constant currency basis, international revenue increased 3% in the quarter, reflecting solid gains in all markets except Japan.  Units sold increased 3%, ASP in constant currency and returns as a percentage of gross product revenue were flat.  QVC International experienced growth in all categories except jewelry on a constant currency basis.  International eCommerce revenue increased 9% to $197 million and grew to 33% of total international revenue in the quarter from 30% a year ago.  Adjusted OIBDA decreased 12% to $89 million.  On a constant currency basis, adjusted OIBDA decreased 9% and adjusted OIBDA margin decreased 198 basis points, primarily due to the cost allocations from ONE Q and France start-up costs. Excluding the cost allocations and QVC France, international adjusted OIBDA increased 1% and adjusted OIBDA margin decreased 27 basis points, primarily due to lower initial margins, which were partially offset by fixed cost leverage.

 

CNR Home Shopping Co., Ltd. ("CNRS"), QVC's joint venture in China, increased revenue 21% in local currency in the first quarter.  CNRS' adjusted OIBDA deficit in local currency decreased 24%, reflecting the strong sales gain, improved product margins and fixed cost leverage.  This joint venture is being accounted for as an equity method investment, and as a result, QVC reported a $1 million reduction in net income for the quarter.

 

QVC's total debt, net of original issue discount, was $5.5 billion at March 31, 2016, an increase of $0.1 billion from December 31, 2015. 

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zulily

“Our first quarter performance came in strong and I’m pleased with our sales momentum in 2016,” said zulily President and CEO Darrell Cavens.  “Our merchandising and technology teams delivered on a great customer experience by bringing in new and unique products at incredible prices while continuing to innovate on the site experience across platforms.  I remain excited about our continued strong operational execution and improved performance from our shifts in marketing strategy last year.  We continue to discover new ways to leverage the partnership with QVC and believe our continued knowledge sharing will contribute to incremental growth in 2016 and beyond.”

 

Liberty Interactive acquired zulily on October 1, 2015. Prior to the acquisition, zulily utilized a retail calendar, whereby each fiscal year consisted of four 13-week quarters, with one extra week added in the fourth quarter every five to six years. Upon acquisition by Liberty Interactive, zulily changed its fiscal year to a calendar year end on a prospective basis. As a result, the following discussion of zulily’s results for the three months ended March 31, 2016 includes comparisons to zulily’s results for the three months ended March 29, 2015.  In addition, zulily has reclassified certain costs between financial statement line items to conform with Liberty Interactive’s reporting structure for ease of comparability for all reporting periods. zulily's stand-alone operating results for the three months ended March 29, 2015 and March 31, 2016 were as follows:

 

 

 

 

 

 

 

(amounts in millions)

    

    

    

    

    

 

 

Three Months Ended

 

 

 

March 29, 2015

 

March 31, 2016

Net revenue

 

$

307

 

355

Cost of sales

 

 

222

 

254

Gross profit

 

 

85

 

101

Operating expenses

 

 

11

 

11

SG&A expenses (excluding stock-based compensation)

 

 

70

 

67

Adjusted OIBDA

 

 

4

 

23

Stock-based compensation

 

 

4

 

5

Depreciation

 

 

3

 

5

Amortization of intangible assets

 

 

1

 

56

Operating income (loss)

 

$

(4)

 

(43)

 

 

zulily revenue increased 16% in the first quarter driven by strong growth in total orders placed and partly offset by lower average order value.  Mobile orders were 62% of total orders placed in the quarter, compared to 55% in the year prior.

 

Adjusted OIBDA increased 475% in the first quarter to $23 million, up from $4 million a year ago. Adjusted OIBDA margin increased 511 basis points, primarily attributed to improved operational efficiency in transportation and

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fulfillment, leverage across the business as a result of strong top-line growth and higher capitalized costs for software development. Q1 2015 also included $1.2 million in restructuring expenses related to the closure of zulily’s UK office. 

Operating loss increased to $(43) million in the first quarter from $(4) million last year.  zulily’s first quarter operating loss includes $56 million of amortization of intangible assets, primarily recognized in purchase accounting.  

 

Share Repurchases

From February 1, 2016 through April  30, 2016, Liberty Interactive repurchased approximately 7.7 million Series A QVC Group shares (Nasdaq: QVCA) at an average cost per share of $24.98 for total cash consideration of $193 million.  Since the creation of the QVC Group stock (including its predecessor, Liberty Interactive Group) in May 2006, Liberty Interactive has repurchased shares for aggregate cash consideration of $6.4 billion, representing approximately 41.9% of the shares outstanding at the time of the creation of the QVC Group stock.  All repurchases up to August 9, 2012, the date on which the QVC Group stock was recapitalized to create the Liberty Ventures Group stock, were comprised of shares of the combined stocks.  The remaining repurchase authorization as of May 1, 2016 for QVC Group stock was approximately $665 million. 

 

QVC Group consists of Liberty Interactive’s subsidiaries, QVC, Inc. and zulily, llc, and Liberty Interactive’s interest in HSN.

 

LIBERTY VENTURES GROUP  On November 12, 2015, Liberty Interactive announced that its board of directors had authorized management to pursue a plan to spin-off to holders of its Liberty Ventures common stock shares of newly formed companies to be called CommerceHub, Inc. (“CommerceHub”) and Liberty Expedia Holdings, Inc. (“Liberty Expedia”). CommerceHub would be comprised of Liberty Interactive’s Commerce Technologies, Inc. business.  Liberty Expedia would be comprised of, among other things, Liberty Interactive’s interest in Expedia, Inc. and Liberty Interactive’s subsidiary Bodybuilding.com, LLC and $350 million of debt.

 

In prior periods, Liberty Interactive voluntarily provided financial information for the Digital Commerce businesses on an aggregated basis. Due to the sale of Provide in 2014, Backcountry in 2015 and Liberty Interactive’s announced intention to pursue a plan to spin-off Bodybuilding and CommerceHub, Liberty Interactive no longer provides separate financial information for the Digital Commerce businesses. The Digital Commerce businesses are now included in Corporate and Other.

 

Subsequent to March 31, 2016, the Liberty Ventures Group made cash payments aggregating approximately $500 million to holders of approximately $295 million principal value of Liberty Interactive’s 0.75% Exchangeable Senior Debentures (the “0.75% Notes”) that were exchanged under the terms of the debentures.  In addition, contingent upon the completion of Charter’s acquisition of Time Warner Cable (“TWC”), Liberty Ventures Group expects to make a

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pass-through payment on any outstanding 0.75% Notes.  The terms of Charter’s proposed acquisition of TWC include an option for TWC shareholders to select between $100 and $115 per share as a component of the deal consideration.  The average cash election by TWC shareholders will be used to determine the amount that Liberty Ventures Group passes through to the 0.75% Notes and is therefore currently unknown (estimated range of $325 million to $375 million based on $529 million principal value of notes outstanding).  There will be an offsetting adjustment to the exchange ratio on the 0.75% Notes to account for this pass-through payment.  

 

Share Repurchases 

There were no repurchases of Liberty Ventures Group common stock (Nasdaq: LVNTA) from February 1, 2016 through April  30, 2016The total remaining repurchase authorization for Liberty Ventures Group stock as of May 1, 2016 was $650 million.

 

The businesses and assets attributed to the Liberty Ventures Group are all of Liberty Interactive's businesses and assets other than those attributed to the QVC Group, including its interests in Expedia, Interval Leisure, Lending Tree and FTD, its subsidiaries Bodybuilding.com, CommerceHub, and Evite, and minority interests in Time Warner, Time Warner Cable and Lending Tree.

 

FOOTNOTES

 

1)

Liberty Interactive's President and CEO, Greg Maffei, will discuss these highlights and other matters in Liberty Interactive's earnings conference call which will begin at 12:15 p.m. (E.D.T.) on May 9, 2016.  For information regarding how to access the call, please see “Important Notice” later in this document.

2)

For a definition of adjusted OIBDA and applicable reconciliations and a definition of adjusted OIBDA margin, see the accompanying schedules.

3)

For a definition of adjusted net income and applicable reconciliations, see the accompanying schedules.

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QVC GROUP FINANCIAL METRICS QUARTER 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

1Q15

    

1Q16

    

% Change

 

Revenue

 

 

 

 

 

 

 

 

 

 QVC US

 

$

1,342

 

$

1,407

 

5

%

 QVC International(1)

 

 

596

 

 

606

 

2

%

   Total QVC Revenue

 

 

1,938

 

 

2,013

 

4

%

 zulily(2)

 

 

NA

 

 

355

 

NA

 

 Intergroup eliminations

 

 

NA

 

 

(1)

 

NA

 

Total QVC Group Revenue

 

$

1,938

 

$

2,367

 

22

%

 

 

 

 

 

 

 

 

 

 

Gross Margins

 

 

 

 

 

 

 

 

 

 QVC US

 

 

36.5

%

 

36.0

%

 

 

 QVC International(1)

 

 

38.1

%

 

37.3

%

 

 

 zulily(2)

 

 

NA

%

 

28.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted OIBDA

 

 

 

 

 

 

 

 

 

 QVC US(3)

 

$

306

 

$

326

 

7

%

 QVC International(1)(3)

 

 

101

 

 

89

 

(12)

%

Total QVC Adjusted OIBDA

 

 

407

 

 

415

 

2

%

   zulily(2)

 

 

NA

 

 

23

 

NA

 

   Corporate and Other

 

 

(6)

 

 

(5)

 

(17)

%

Total QVC Group Adjusted OIBDA

 

$

401

 

$

433

 

8

%

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 QVC US(3)

 

$

177

 

$

201

 

14

%

 QVC International(1)(3)

 

 

69

 

 

60

 

(13)

%

Total QVC Operating Income

 

 

246

 

 

261

 

6

%

   zulily

 

 

NA

 

 

(43)

 

NA

 

   Corporate and Other

 

 

(9)

 

 

(12)

 

(33)

%

Total QVC Group Operating Income

 

$

237

 

$

206

 

(13)

%

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income(4)

 

 

 

 

 

 

 

 

 

Total QVC Group Adjusted Net Income

 

$

202

 

$

176

 

(13)

%

 

 

 

 

 

 

 

 

 

 

China JV(5)

 

 

 

 

 

 

 

 

 

 Revenue

 

$

36

 

$

41

 

14

%

 Adjusted OIBDA

 

$

(2)

 

$

(2)

 

 -

%

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

 

 

 

 

 

 

 

 

 

QVCA Shares Outstanding

 

4/30/2015

 

4/30/2016

 

 

 

Outstanding A and B shares

 

 

473

 

 

481

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

 

Quarter ended

 

Quarter ended

 

 

 

QVCA and QVCB Basic and Diluted Shares

 

3/31/2015

 

3/31/2016

 

 

 

Basic Weighted Average Shares Outstanding ("WASO")

 

 

473

 

 

485

 

 

 

Potentially dilutive Shares

 

 

7

 

 

6

 

 

 

Diluted WASO

 

 

480

 

 

491

 

 

 


1)

Includes QVC France, QVC Germany, QVC Italy, QVC Japan and QVC UK. 

2)

Includes zulily as of the beginning of the fourth quarter 2015. 

3)

Includes the reallocation of $9 million in corporate costs from QVC US to QVC International for the first quarter 2016.

4)

GAAP net income was $151 million and $90 million for the three months ended March 31, 2015 and 2016, respectively (see reconciling schedule 4).

5)

This joint venture is being accounted for as an equity investment.

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QVC OPERATING METRICS QUARTER 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

1Q15

    

1Q16

    

% Change

 

QVC - Consolidated

 

 

 

 

 

 

 

 

 

 Total eCommerce revenue ($)

 

$

813

 

$

895

 

10

 %

 Total eCommerce revenue (%)

 

 

42.0

%  

 

44.5

%  

251

bps

 Mobile % of total eCommerce(1)

 

 

47.2

%  

 

56.6

%  

935

bps

 LTM Total Customers(2)

 

 

12.4

 

 

12.7

 

2

 %

 

 

 

 

 

 

 

 

 

 

QVC - US

 

 

 

 

 

 

 

 

 

 US eCommerce revenue ($)

 

$

632

 

$

698

 

10

 %

 US eCommerce revenue (%)

 

 

47.1

%  

 

49.6

%  

252

bps

 Mobile % of US eCommerce(1)

 

 

45.8

%  

 

55.9

%  

1,011

bps

 LTM Total Customers(2)

 

 

8.0

 

 

8.2

 

2

%

 Return Rate

 

 

20.3

%  

 

18.5

%  

(184)

bps

 

 

 

 

 

 

 

 

 

 

zulily

 

 

 

 

 

 

 

 

 

 Mobile % of total orders

 

 

55.0

%

 

62.4

%

740

bps

 LTM Total Customers(2)

 

 

5.0

 

 

5.0

 

 —

%

 


(1)

Based on gross US Dollar orders.

(2)

LTM:  Last twelve months. 

 

 

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NOTES 

Unless otherwise noted, the foregoing discussion compares financial information for the three months ended March  31, 2016 to the same period in 2015.

 

The following financial information with respect to Liberty Interactive's equity affiliates and available for sale securities is intended to supplement Liberty Interactive's condensed consolidated statements of operations which are included in its Form 10-Q.

 

Fair Value of Public Holdings 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

12/31/2015

    

3/31/2016

 

HSN(1)

 

$

1,014

 

$

1,047

 

Total Attributed QVC Group

 

$

1,014

 

$

1,047

 

 

 

 

 

 

 

 

 

Expedia(2)

 

$

2,934

 

$

2,545

 

FTD(3)

 

 

267

 

 

268

 

Interval Leisure Group and Tree.com(4)

 

 

507

 

 

512

 

Other Public Holdings(5)

 

 

1,294

 

 

1,421

 

Total Attributed Liberty Ventures Group

 

$

5,002

 

$

4,746

 

 

 


(1)

Represents fair value of QVC Group's investment in HSN.  In accordance with GAAP, QVC Group accounts for this investment using the equity method of accounting and includes this investment in its attributed balance sheet at its historical carrying value which aggregated $165 million and $180 million at December  31, 2015 and March  31, 2016, respectively.

(2)

Represents fair value of Liberty Ventures Group's investment in Expedia.  In accordance with GAAP, Liberty Ventures Group accounts for this investment using the equity method of accounting and includes this investment in its attributed balance sheet at its historical carrying value which aggregated $927 million and $894 million at December 31, 2015 and March 31, 2016, respectively.

(3)

Represents fair value of Liberty Ventures Group's investment in FTD.  In accordance with GAAP, Liberty Ventures Group accounts for this investment using the equity method of accounting and includes this investment in its attributed balance sheet at its historical carrying value which aggregated $267 million and $261 million at December 31, 2015 and March 31, 2016, respectively.

(4)

Represents fair value of Liberty Ventures Group's investments.  In accordance with GAAP, Liberty Ventures Group accounts for these investments using the equity method of accounting and includes these investments in its attributed balance sheet at their historical carrying values which aggregated $118 million and $146 million at December 31, 2015 and March 31, 2016, respectively.

(5)

Represents Liberty Ventures Group's other public holdings which are accounted for at fair value.  

 

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Cash and Debt 

 

The following presentation is provided to separately identify cash and liquid investments and debt information.

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

12/31/2015

    

3/31/2016

 

Cash and Liquid Investments Attributable to:

 

 

 

 

 

 

 

QVC Group (1)

 

$

438

 

$

440

 

Liberty Ventures Group(2)

 

 

2,921

 

 

2,904

 

Total Liberty Consolidated Cash and Liquid Investments

 

$

3,359

 

$

3,344

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

Short-term marketable securities - QVC Group

 

$

12

 

$

 —

 

Short-term marketable securities - Liberty Ventures Group

 

 

898

 

 

601

 

Total Liberty Consolidated Cash (GAAP)

 

$

2,449

 

$

2,743

 

 

 

 

 

 

 

 

 

Debt:

 

 

 

 

 

 

 

Senior notes and debentures(3)

 

$

791

 

$

791

 

Senior exchangeable debentures(4)

 

 

346

 

 

346

 

QVC senior notes(3)

 

 

3,550

 

 

3,550

 

QVC bank credit facility

 

 

1,815

 

 

1,894

 

Other

 

 

72

 

 

72

 

Total Attributed QVC Group Debt

 

$

6,574

 

$

6,653

 

Unamortized discount, fair market value adjustment and deferred loan costs

 

 

(39)

 

 

(38)

 

Total Attributed QVC Group Debt (GAAP)

 

$

6,535

 

$

6,615

 

 

 

 

 

 

 

 

 

Senior exchangeable debentures(4)

 

$

2,070

 

$

2,040

 

Other

 

 

41

 

 

33

 

Total Attributed Liberty Ventures Group Debt

 

$

2,111

 

$

2,073

 

Fair market value adjustment

 

 

61

 

 

188

 

Total Attributed Liberty Ventures Group Debt (GAAP)

 

$

2,172

 

$

2,261

 

 

 

 

 

 

 

 

 

Total Liberty Interactive Corporation Debt (GAAP)

 

$

8,707

 

$

8,876

 

 


(1)

Includes $12 million of short-term marketable securities with an original maturity greater than 90 days as of December 31, 2015.  

(2)

Includes $898 million and $601 million of short-term marketable securities with an original maturity greater than 90 days as of December 31, 2015 and March 31, 2016, respectively.  

(3)

Face amount of Senior Notes and Debentures with no reduction for the unamortized discount.

(4)

Face amount of Senior Exchangeable Debentures with no reduction for the fair market value adjustment.

 

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Total cash and liquid investments attributed to the QVC Group were flat during the first quarter.  Share repurchases and capital expenditures were offset by operating cash flow and additional borrowings.  Total debt attributed to the QVC Group increased by $79 million, primarily due to additional borrowings on QVC’s credit facility

 

Total cash and liquid investments attributed to the Liberty Ventures Group declined $17 million, primarily due to net repayment of $52 million of attributed debt. 

 

Important Notice: Liberty Interactive (Nasdaq: QVCA,  QVCB, LVNTA, LVNTB) President and CEO, Greg Maffei, will discuss Liberty Interactive's earnings release in a conference call which will begin at 12:15 p.m. (E.D.T.) on May 9, 2016.  The call can be accessed by dialing (844)  307-2219 or (678)  509-7635 at least 10 minutes prior to the start time.   The call will also be broadcast live across the Internet and archived on our website.  To access the webcast go to http://www.libertyinteractive.com/events.  Links to this press release and replays of the call will also be available on Liberty Interactive's website.

 

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, future financial prospects, international expansion, the expected benefits and synergies from the acquisition of zulily, the implementation of new marketing and fulfillment processes at zulily, new service and product offerings, the monetization of our non-core assets, the continuation of our stock repurchase program, the estimated liabilities under exchangeable debentures and other matters that are not historical facts.  These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, competitive issues, regulatory matters affecting our businesses, continued access to capital on terms acceptable to Liberty Interactive, changes in law and government regulations that may impact the derivative instruments that hedge certain of our financial risks, the availability of investment opportunities, and market conditions conducive to stock repurchases.  These forward-looking statements speak only as of the date of this presentation, and Liberty Interactive expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Interactive's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Liberty Interactive, including the most recent Forms 10-K and 10-Q, for additional information about Liberty Interactive and about the risks and uncertainties related to Liberty Interactive's business which may affect the statements made in this presentation.

 

 

Contact: Courtnee Chun (720) 875-5420

11

 


 

 

NON-GAAP FINANCIAL MEASURES

 

This press release includes a presentation of adjusted OIBDA, which is a non-GAAP financial measure, for Liberty Interactive, the QVC Group, QVC (and certain of its subsidiaries), zulily and the Liberty Ventures Group together with a reconciliation to that entity or such businesses’ operating income, as determined under GAAP.  Liberty Interactive defines adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses, excluding all stock based compensation, and excludes from that definition depreciation and amortization and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP.  Further, this press release includes adjusted OIBDA margin which is also a non-GAAP financial measure.  Liberty Interactive defines adjusted OIBDA margin as adjusted OIBDA divided by revenue.

 

Liberty Interactive believes adjusted OIBDA is an important indicator of the operational strength and performance of its businesses, including each business' ability to service debt and fund capital expenditures.  In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance.  Because adjusted OIBDA is used as a measure of operating performance, Liberty Interactive views operating income as the most directly comparable GAAP measure.  Adjusted OIBDA is not meant to replace or supersede operating income or any other GAAP measure, but rather to supplement such GAAP measures in order to present investors with the same information that Liberty Interactive's management considers in assessing the results of operations and performance of its assets.  Please see the attached schedules for applicable reconciliations.

 

In addition, this presentation includes references to adjusted net income, which is a non-GAAP financial measure, for QVC Group. Liberty Interactive defines adjusted net income as net income, excluding the impact of purchase accounting amortization (net of deferred tax benefit).

 

Liberty Interactive believes adjusted net income is an important indicator of financial performance, in particular for QVC Group, due to the impact of purchase accounting amortization.  Because adjusted net income is used as a measure of overall financial performance, Liberty Interactive views net income as the most directly comparable GAAP measure.  Adjusted net income is not meant to replace or supersede net income or any other GAAP measure, but rather to supplement such GAAP measures in order to present investors with a valuable supplemental metric of financial performance.  Please see the attached schedules for a reconciliation of adjusted net income to net income (loss) calculated in accordance with GAAP for QVC Group (Schedule 4).

 

12

 


 

 

SCHEDULE 1

 

The following table provides a reconciliation of QVC Group's adjusted OIBDA to its operating income calculated in accordance with GAAP for the three months ended March  31, 2015,  June 30, 2015, September  30, 2015,  December 31, 2015 and March  31, 2016, respectively.

 

QUARTERLY SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

1Q15

 

2Q15

    

3Q15

    

4Q15

    

1Q16

 

QVC Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted OIBDA(1)(2)

 

 

401

 

 

445

 

 

421

 

 

620

 

 

433

 

Depreciation and amortization

 

 

(152)

 

 

(149)

 

 

(141)

 

 

(215)

 

 

(209)

 

Stock compensation expense

 

 

(12)

 

 

(12)

 

 

(16)

 

 

(20)

 

 

(18)

 

Operating Income

 

$

237

 

$

284

 

$

264

 

$

385

 

$

206

 

 


(1)

Includes zulily beginning with the fourth quarter of 2015.

(2)

zulily’s results for the fourth quarter 2015 include the impact of a $17 million non-cash, one-time reduction in deferred revenue.

13

 


 

 

SCHEDULE 2

 

The following table provides a reconciliation of adjusted OIBDA for QVC (and certain of its subsidiaries) and zulily (beginning with the fourth quarter of 2015) to that entity or such businesses' operating income (loss) calculated in accordance with GAAP for the three months ended March  31, 2015,  June 30, 2015, September 30, 2015, December  31, 2015 and March 31, 2016, respectively.  As there are no material reconciling items between adjusted OIBDA and operating income for the QVC China joint venture for the referenced periods, no reconciliation has been provided. 

 

QUARTERLY SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

1Q15

    

2Q15

    

3Q15

    

4Q15

    

1Q16

QVC Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVC Adjusted OIBDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVC US

 

$

306

 

$

349

 

$

333

 

$

479

 

$

326

QVC International

 

 

101

 

 

100

 

 

97

 

 

129

 

 

89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated QVC adjusted OIBDA

 

 

407

 

 

449

 

 

430

 

 

608

 

 

415

Depreciation and amortization

 

 

(153)

 

 

(148)

 

 

(141)

 

 

(146)

 

 

(148)

Stock compensation

 

 

(8)

 

 

(7)

 

 

(9)

 

 

(7)

 

 

(6)

Operating Income

 

$

246

 

$

294

 

$

280

 

$

455

 

$

261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

zulily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted OIBDA(1)

 

$

NA

 

$

NA

 

$

NA

 

$

21

 

$

23

Depreciation and amortization

 

 

NA

 

 

NA

 

 

NA

 

 

(69)

 

 

(61)

Stock compensation

 

 

NA

 

 

NA

 

 

NA

 

 

(5)

 

 

(5)

 Operating Income

 

$

NA

 

$

NA

 

$

NA

 

$

(53)

 

$

(43)

 

 

 


(1)

Includes zulily as of the beginning of the fourth quarter 2015.  Fourth quarter 2015 adjusted OIBDA includes the impact of a $17 million one-time, non-cash purchase accounting reduction in deferred revenue.

 

14

 


 

 

SCHEDULE 3

 

The following table provides a reconciliation of adjusted OIBDA for QVC Group and the Liberty Ventures Group to the Liberty Interactive Corporation operating income (loss) calculated in accordance with GAAP for the three months ended March 31, 2015, June 30, 2015, September 30, 2015, December 31, 2015 and March 31, 2016,  respectively.

 

QUARTERLY SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

1Q15

    

2Q15

    

3Q15

    

4Q15

    

1Q16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVC Group Adjusted OIBDA

 

$

401

 

$

445

 

$

421

 

$

620

 

$

433

 

Liberty Ventures Group Adjusted OIBDA

 

 

18

 

 

14

 

 

13

 

 

14

 

 

4

 

Consolidated Liberty Interactive Corp. Adjusted OIBDA

 

$

419

 

$

459

 

$

434

 

$

634

 

$

437

 

 Depreciation and amortization

 

 

(168)

 

 

(161)

 

 

(150)

 

 

(224)

 

 

(217)

 

 Stock compensation

 

 

(15)

 

 

(29)

 

 

(37)

 

 

(46)

 

 

(31)

 

   Consolidated Liberty Interactive Corp. Operating Income

 

$

236

 

$

269

 

$

247

 

$

364

 

$

189

 

 

 

 

SCHEDULE 4

 

The following table provides a reconciliation of QVC Group's adjusted net income to its net income calculated in accordance with GAAP for the three months ended March 31, 2015, June 30, 2015, September 30, 2015, December 31, 2015 and March 31, 2016, respectively.     

 

QUARTERLY SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(amounts in millions)

    

 

1Q15

    

 

2Q15

    

 

3Q15

    

 

4Q15

    

 

1Q16

    

 

LTM

 

QVC Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income(1)

 

$

151

 

$

112

 

$

154

 

$

223

 

$

90

 

$

579

 

QVC purchase accounting amort., net deferred tax benefit (2)

 

 

51

 

 

49

 

 

49

 

 

50

 

 

50

 

 

198

 

zulily purchase accounting amort., net deferred tax benefit (3)

 

 

 —

 

 

 —

 

 

 —

 

 

39

 

 

36

 

 

75

 

 QVC Group Adjusted net income

 

$

202

 

$

161

 

$

203

 

$

312

 

$

176

 

$

852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA/B shares outstanding as of April 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

481

 

Adjusted LTM earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.77

 

 


1)

Includes the results of zulily beginning in the fourth quarter of 2015.  zulily’s results for the fourth quarter 2015 include the impact of a $17 million non-cash, one-time reduction in deferred revenue, net of book deferred tax benefit.

2)

Add-back relates to non-cash, non-tax deductible purchase accounting amortization from Liberty Interactive’s acquisition of QVC, net of book deferred tax benefit (gross non-cash, non-tax deductible purchase accounting amortization was $316 million for the twelve months ended December 31, 2015, and is applied ratably across the four quarters in each year).

3)

Add-back relates to non-cash, non-tax deductible purchase accounting amortization from Liberty Interactive’s acquisition of zulily, net of book deferred tax benefit.

 

 

 

 

15

 


 

 

LIBERTY INTERACTIVE CORPORATION

BALANCE SHEET INFORMATION

March 31, 2016 - (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributed

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

440

 

2,303

 

2,743

 

Trade and other receivables, net

 

 

1,040

 

54

 

1,094

 

Inventory, net

 

 

1,032

 

52

 

1,084

 

Short-term marketable securities

 

 

 —

 

601

 

601

 

Other current assets

 

 

79

 

8

 

87

 

Total current assets

 

 

2,591

 

3,018

 

5,609

 

Investments in available-for-sale securities and other cost investments

 

 

4

 

1,478

 

1,482

 

Investments in affiliates, accounted for using the equity method

 

 

223

 

1,428

 

1,651

 

Property and equipment, net

 

 

1,164

 

37

 

1,201

 

Intangible assets not subject to amortization

 

 

9,391

 

129

 

9,520

 

Intangible assets subject to amortization, net

 

 

1,419

 

38

 

1,457

 

Other assets, at cost, net of accumulated amortization

 

 

33

 

5

 

38

 

Total assets

 

$

14,825

 

6,133

 

20,958

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Intergroup payable (receivable)

 

$

45

 

(45)

 

 —

 

Accounts payable

 

 

642

 

25

 

667

 

Accrued liabilities

 

 

576

 

47

 

623

 

Current portion of debt

 

 

358

 

2,247

 

2,605

 

Other current liabilities

 

 

184

 

111

 

295

 

Total current liabilities

 

 

1,805

 

2,385

 

4,190

 

Long-term debt

 

 

6,257

 

14

 

6,271

 

Deferred income tax liabilities

 

 

1,290

 

2,164

 

3,454

 

Other liabilities

 

 

283

 

12

 

295

 

Total liabilities

 

 

9,635

 

4,575

 

14,210

 

Equity/Attributed net assets (liabilities)

 

 

5,098

 

1,568

 

6,666

 

Noncontrolling interests in equity of subsidiaries

 

 

92

 

(10)

 

82

 

Total liabilities and equity

 

$

14,825

 

6,133

 

20,958

 

 

16

 


 

 

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF OPERATIONS INFORMATION

Three months ended March 31, 2016 - (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributed

 

 

 

 

 

QVC

 

Ventures

 

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Revenue:

 

 

 

 

 

 

 

 

Net retail sales

 

$

2,367

 

143

 

2,510

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

1,535

 

91

 

1,626

 

Operating, including stock-based compensation

 

 

153

 

17

 

170

 

Selling, general and administrative, including stock-based compensation

 

 

264

 

44

 

308

 

Depreciation and amortization

 

 

209

 

8

 

217

 

 

 

 

2,161

 

160

 

2,321

 

Operating income (loss)

 

 

206

 

(17)

 

189

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(76)

 

(17)

 

(93)

 

Share of earnings (losses) of affiliates, net

 

 

21

 

(42)

 

(21)

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

(1)

 

(6)

 

(7)

 

Other, net

 

 

5

 

29

 

34

 

 

 

 

(51)

 

(36)

 

(87)

 

Earnings (loss) before income taxes

 

 

155

 

(53)

 

102

 

Income tax benefit (expense)

 

 

(57)

 

26

 

(31)

 

Net earnings (loss)

 

 

98

 

(27)

 

71

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

8

 

 —

 

8

 

Net earnings (loss) attributable to Liberty stockholders

 

$

90

 

(27)

 

63

 

 

17

 


 

 

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF OPERATIONS INFORMATION

Three months ended March 31, 2015 - (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributed

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Revenue:

 

 

 

 

 

 

 

 

Net retail sales

 

$

1,938

 

276

 

2,214

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

1,221

 

194

 

1,415

 

Operating, including stock-based compensation

 

 

138

 

22

 

160

 

Selling, general and administrative, including stock-based compensation

 

 

190

 

45

 

235

 

Depreciation and amortization

 

 

152

 

16

 

168

 

 

 

 

1,701

 

277

 

1,978

 

Operating income (loss)

 

 

237

 

(1)

 

236

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(75)

 

(20)

 

(95)

 

Share of earnings (losses) of affiliates, net

 

 

24

 

(21)

 

3

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

(10)

 

6

 

(4)

 

Other, net

 

 

8

 

7

 

15

 

 

 

 

(53)

 

(28)

 

(81)

 

Earnings (loss) from continuing operations before income taxes

 

 

184

 

(29)

 

155

 

Income tax benefit (expense)

 

 

(24)

 

21

 

(3)

 

Net earnings (loss)

 

 

160

 

(8)

 

152

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

9

 

 —

 

9

 

Net earnings (loss) attributable to Liberty stockholders

 

$

151

 

(8)

 

143

 

 

18

 


 

 

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF CASH FLOWS INFORMATION

Three months ended March 31, 2016- (unaudited)

 

 

 

 

 

 

 

 

 

 

 

Attributed

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

98

 

(27)

 

71

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

209

 

8

 

217

 

Stock-based compensation

 

 

18

 

13

 

31

 

Cash payments for stock based compensation

 

 

 —

 

(10)

 

(10)

 

Excess tax benefit from stock based compensation

 

 

(5)

 

 —

 

(5)

 

Share of (earnings) losses of affiliates, net

 

 

(21)

 

42

 

21

 

Cash receipts from return on equity investments

 

 

6

 

9

 

15

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

1

 

6

 

7

 

Deferred income tax (benefit) expense

 

 

(30)

 

24

 

(6)

 

Other, net

 

 

(2)

 

(25)

 

(27)

 

Intergroup tax allocation

 

 

49

 

(49)

 

 —

 

Intergroup tax payments

 

 

(54)

 

54

 

 —

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Current and other assets

 

 

268

 

13

 

281

 

Payables and other current liabilities

 

 

(297)

 

(3)

 

(300)

 

Net cash provided (used) by operating activities

 

 

240

 

55

 

295

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash proceeds from dispositions

 

 

 —

 

9

 

9

 

Investments in and loans to cost and equity investees

 

 

 —

 

(22)

 

(22)

 

Capital expended for property and equipment

 

 

(43)

 

(8)

 

(51)

 

Purchases of short term and other marketable securities

 

 

 —

 

(116)

 

(116)

 

Sales of short term and other marketable securities

 

 

12

 

413

 

425

 

Other investing activities, net

 

 

(13)

 

1

 

(12)

 

Net cash provided (used) by investing activities

 

 

(44)

 

277

 

233

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings of debt

 

 

515

 

108

 

623

 

Repayments of debt

 

 

(438)

 

(160)

 

(598)

 

Repurchases of Liberty common stock

 

 

(238)

 

 —

 

(238)

 

Min. withholding taxes on net settlements of stock-based comp

 

 

(7)

 

(1)

 

(8)

 

Excess tax benefit from stock-based compensation

 

 

5

 

 —

 

5

 

Other financing activities, net

 

 

(6)

 

1

 

(5)

 

Net cash provided (used) by financing activities

 

 

(169)

 

(52)

 

(221)

 

Effect of foreign currency rates on cash

 

 

(13)

 

 —

 

(13)

 

Net increase (decrease) in cash and cash equivalents

 

 

14

 

280

 

294

 

Cash and cash equivalents at beginning of period

 

 

426

 

2,023

 

2,449

 

Cash and cash equivalents at end period

 

$

440

 

2,303

 

2,743

 

 

 

 

 

19

 


 

 

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF CASH FLOWS INFORMATION

Three months ended March  31, 2015 - (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Attributed

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

160

 

(8)

 

152

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

152

 

16

 

168

 

Stock-based compensation

 

 

12

 

3

 

15

 

Cash payments for stock based compensation

 

 

 —

 

(2)

 

(2)

 

Excess tax benefit from stock-based compensation

 

 

(13)

 

 —

 

(13)

 

Share of losses (earnings) of affiliates, net

 

 

(24)

 

21

 

(3)

 

Cash receipts from return on equity investments

 

 

7

 

6

 

13

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

10

 

(6)

 

4

 

Deferred income tax (benefit) expense

 

 

(79)

 

25

 

(54)

 

Other, net

 

 

(9)

 

1

 

(8)

 

Intergroup tax allocation

 

 

47

 

(47)

 

 —

 

Intergroup tax payments

 

 

(6)

 

6

 

 —

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Current and other assets

 

 

238

 

20

 

258

 

Payables and other current liabilities

 

 

(268)

 

(42)

 

(310)

 

Net cash provided (used) by operating activities

 

 

227

 

(7)

 

220

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash proceeds from dispositions

 

 

 —

 

(20)

 

(20)

 

Investments in and loans to cost and equity investees

 

 

(1)

 

(44)

 

(45)

 

Cash receipts from return of equity investments

 

 

200

 

 —

 

200

 

Capital expended for property and equipment

 

 

(31)

 

(13)

 

(44)

 

Purchases of short term and other marketable securities

 

 

(54)

 

(233)

 

(287)

 

Sales of short term and other marketable securities

 

 

66

 

247

 

313

 

Other investing activities, net

 

 

(44)

 

 —

 

(44)

 

Net cash provided (used) by investing activities

 

 

136

 

(63)

 

73

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings of debt

 

 

351

 

180

 

531

 

Repayments of debt

 

 

(466)

 

(176)

 

(642)

 

Repurchases of QVC Group common stock

 

 

(123)

 

 —

 

(123)

 

Min. withholding taxes on net settlements of stock-based comp

 

 

(12)

 

1

 

(11)

 

Excess tax benefit from stock-based compensation

 

 

13

 

 —

 

13

 

Other financing activities, net

 

 

(8)

 

1

 

(7)

 

Net cash provided (used) by financing activities

 

 

(245)

 

6

 

(239)

 

Effect of foreign currency rates on cash

 

 

(10)

 

 —

 

(10)

 

Net increase (decrease) in cash and cash equivalents

 

 

108

 

(64)

 

44

 

Cash and cash equivalents at beginning of period

 

 

422

 

1,884

 

2,306

 

Cash and cash equivalents at end period

 

$

530

 

1,820

 

2,350

 

 

20