| Information About Qurate Retail's Operating Segments |
(9) Information About Qurate Retail's Operating Segments
Qurate Retail, through its ownership interests in subsidiaries and other companies, is primarily engaged in the video and online commerce industries. Qurate Retail identifies its reportable segments as (A) those operating segments that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA (as defined below) or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of Qurate Retail's annual pre-tax earnings.
Qurate Retail evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, average sales price per unit and revenue or sales per customer equivalent. In addition, Qurate Retail reviews nonfinancial measures such as unique website visitors, number of units shipped, conversion rates and active customers, as appropriate.
For the nine months ended September 30, 2020, Qurate Retail has identified the following operating segments as its reportable segments:
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QxH - QVC U.S. and HSN market and sell a wide variety of consumer products in the United States, primarily by means of their televised shopping programs and via the Internet through their websites and mobile applications. |
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QVC International – QVC International markets and sells a wide variety of consumer products in several foreign countries, primarily by means of its televised shopping programs and via the Internet through its international websites and mobile applications. |
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Zulily – Zulily markets and sells a wide variety of consumer products in the United States and several foreign countries through flash sales events, primarily through its app, mobile and desktop experiences. |
Qurate Retail's operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments are the same as those described in the Company's Summary of Significant Accounting Policies in the 2019 10-K.
Performance Measures
Disaggregated revenue by segment and product category consisted of the following:
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Three months ended |
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September 30, 2020 |
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QxH |
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QVC Int'l |
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Zulily |
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Corp and other |
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Total |
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in millions |
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Home |
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$ |
819 |
|
286 |
|
115 |
|
248 |
|
1,468 |
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Apparel |
|
|
312 |
|
115 |
|
147 |
|
37 |
|
611 |
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Beauty |
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|
297 |
|
168 |
|
17 |
|
— |
|
482 |
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Accessories |
|
|
219 |
|
67 |
|
94 |
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— |
|
380 |
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Electronics |
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|
197 |
|
25 |
|
3 |
|
— |
|
225 |
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Jewelry |
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|
93 |
|
59 |
|
12 |
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— |
|
164 |
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Other revenue |
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|
43 |
|
3 |
|
7 |
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— |
|
53 |
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Total Revenue |
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$ |
1,980 |
|
723 |
|
395 |
|
285 |
|
3,383 |
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Nine months ended |
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September 30, 2020 |
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QxH |
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QVC Int'l |
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Zulily |
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Corp and other |
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Total |
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in millions |
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Home |
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$ |
2,303 |
|
829 |
|
326 |
|
631 |
|
4,089 |
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Apparel |
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|
913 |
|
316 |
|
411 |
|
108 |
|
1,748 |
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Beauty |
|
|
910 |
|
499 |
|
50 |
|
— |
|
1,459 |
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Accessories |
|
|
676 |
|
188 |
|
281 |
|
— |
|
1,145 |
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Electronics |
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|
588 |
|
78 |
|
10 |
|
— |
|
676 |
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Jewelry |
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|
273 |
|
155 |
|
34 |
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— |
|
462 |
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Other revenue |
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|
119 |
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6 |
|
21 |
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|
|
146 |
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Total Revenue |
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$ |
5,782 |
|
2,071 |
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1,133 |
|
739 |
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9,725 |
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Three months ended |
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September 30, 2019 |
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QxH |
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QVC Int'l |
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Zulily |
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Corp and other |
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Total |
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in millions |
Home |
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$ |
670 |
|
236 |
|
95 |
|
187 |
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1,188 |
Apparel |
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|
334 |
|
107 |
|
141 |
|
39 |
|
621 |
Beauty |
|
|
303 |
|
161 |
|
12 |
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— |
|
476 |
Accessories |
|
|
199 |
|
63 |
|
90 |
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— |
|
352 |
Electronics |
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|
209 |
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21 |
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3 |
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— |
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233 |
Jewelry |
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|
98 |
|
59 |
|
12 |
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— |
|
169 |
Other revenue |
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41 |
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3 |
|
6 |
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— |
|
50 |
Total Revenue |
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$ |
1,854 |
|
650 |
|
359 |
|
226 |
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3,089 |
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Nine months ended |
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September 30, 2019 |
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QxH |
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QVC Int'l |
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Zulily |
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Corp and other |
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Total |
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in millions |
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Home |
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$ |
2,009 |
|
714 |
|
298 |
|
530 |
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3,551 |
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Apparel |
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|
1,005 |
|
327 |
|
422 |
|
117 |
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1,871 |
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Beauty |
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|
915 |
|
462 |
|
37 |
|
— |
|
1,414 |
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Accessories |
|
|
667 |
|
190 |
|
295 |
|
— |
|
1,152 |
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Electronics |
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|
564 |
|
68 |
|
10 |
|
— |
|
642 |
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Jewelry |
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|
303 |
|
161 |
|
37 |
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— |
|
501 |
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Other revenue |
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|
122 |
|
12 |
|
20 |
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— |
|
154 |
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Total Revenue |
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$ |
5,585 |
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1,934 |
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1,119 |
|
647 |
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9,285 |
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For segment reporting purposes, Qurate Retail defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses excluding all stock-based compensation and transaction related costs. Qurate Retail believes this measure is an important indicator of the operational strength and performance of its businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, certain acquisition accounting adjustments, separately reported litigation settlements, transaction related costs (including restructuring, integration, and advisory fees), and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flows provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Qurate Retail generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.
Adjusted OIBDA is summarized as follows:
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Three months ended September 30, |
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Nine months ended September 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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amounts in millions |
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QxH |
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$ |
380 |
|
346 |
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1,061 |
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1,093 |
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QVC International |
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|
132 |
|
106 |
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|
348 |
|
313 |
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Zulily |
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|
27 |
|
8 |
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|
74 |
|
32 |
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Corporate and other |
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|
27 |
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(4) |
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|
32 |
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(9) |
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Consolidated Qurate Retail |
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$ |
566 |
|
456 |
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1,515 |
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1,429 |
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Other Information
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September 30, 2020 |
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Total assets |
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Investments in affiliates |
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Capital expenditures |
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amounts in millions |
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QxH |
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$ |
11,928 |
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38 |
|
121 |
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QVC International |
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2,294 |
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— |
|
19 |
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Zulily |
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|
1,085 |
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— |
|
17 |
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Corporate and other |
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|
1,485 |
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14 |
|
8 |
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Consolidated Qurate Retail |
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$ |
16,792 |
|
52 |
|
165 |
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The following table provides a reconciliation of Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
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2020 |
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2019 |
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2020 |
|
2019 |
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amounts in millions |
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Adjusted OIBDA |
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$ |
566 |
|
456 |
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1,515 |
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1,429 |
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Stock-based compensation |
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(19) |
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(17) |
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(46) |
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(54) |
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Depreciation and amortization |
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(141) |
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(146) |
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(427) |
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(457) |
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Impairment of intangible assets |
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— |
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(1,020) |
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— |
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(1,020) |
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Transaction related costs |
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|
— |
|
— |
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— |
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(1) |
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Operating income (loss) |
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$ |
406 |
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(727) |
|
1,042 |
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(103) |
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Interest expense |
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(98) |
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(93) |
|
(290) |
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(282) |
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Share of earnings (loss) of affiliates, net |
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(32) |
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(36) |
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(96) |
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(104) |
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Realized and unrealized gains (losses) on financial instruments, net |
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(12) |
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(45) |
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(127) |
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(239) |
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Gains (losses) on transactions, net |
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|
223 |
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— |
|
224 |
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(1) |
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Other, net |
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|
(65) |
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(4) |
|
(65) |
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(18) |
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Earnings (loss) before income taxes |
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$ |
422 |
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(905) |
|
688 |
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(747) |
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