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Evine Live Inc. Reports Third Quarter 2017 Results

11/21/2017

Revenue and Gross Margin Improvements Help Drive 71% Improvement in Net Income and 67% Improvement in EPS

MINNEAPOLIS, Nov. 21, 2017 (GLOBE NEWSWIRE) -- Evine Live Inc. (“Evine”) (NASDAQ:EVLV) today announced results for the third quarter ended October 28, 2017.  The Company posted quarterly net sales of $150 million, which is less than a 1% decrease year-over-year. Management estimates net sales would have increased 1.0% when excluding the estimated $3 million negative sales impact from Hurricanes Harvey and Irma during the quarter.  The Company posted a net loss of $1.1 million, a 71% improvement year-over-year, EPS of ($0.02), a 67% improvement year-over-year, and an Adjusted EBITDA of $3.8 million, a 49% improvement year-over-year.  

“I am very proud of our Q3 operating results,” said CEO Bob Rosenblatt.  “As our stakeholders know, this is the very beginning of what we call year two, the phase in our strategic plan that is focused on delivering revenue and free cash flow growth. In year one, we fixed our merchandising mix and significantly improved our balance sheet and profitability. This coming year our plan is to begin scaling our enterprise. In addition, boosted by our recent sale of our Boston television station, we are positioned to deliver positive EPS for the fiscal year, which would be the first time we have accomplished this since fiscal 2007.” 

Rosenblatt continued, “We believe our strategy of a thoughtful transition over time into an interactive digital commerce company will drive sustainable revenue growth, EPS growth and multiple expansion growth that will combine to drive significant shareholder value.  Specifically, longer term we seek to build and operate multi-platform digital commerce experiences using proprietary technologies that monetize multiple business models.”

Fiscal Year 2017 Third Quarter Highlights

  • Net sales were $150 million, a 0.9% decrease year-over-year.
  • Gross profit as a percentage of sales increased 150 basis points to 38.1% year-over-year.
  • Net loss was $1.1 million, a 71% improvement year-over-year.
  • Adjusted EBITDA was $3.8 million, a 49% increase year-over-year.
  • EPS was ($0.02), a 67% improvement year-over-year.
  
SUMMARY RESULTS AND KEY OPERATING METRICS 
($ Millions, except average selling price and EPS) 
               
   Q3 2017
10/28/2017
 Q3 2016
10/29/2016
 Change YTD 2017
10/28/2017
 YTD 2016
10/29/2016
 Change 
               
Net Sales $  150.2  $  151.6  (0.9%)  $  455.5  $  475.7  (4.2%)  
Gross Margin %  38.1%   36.6%  150 bps   37.3%   37.1%  20 bps  
Adjusted EBITDA $  3.8  $  2.5  49%  $  10.3  $  9.8  6%  
Net Loss $  (1.1)  $  (3.9)  71%  $  (6.3)  $  (10.8)  42%  
EPS $  (0.02)  $  (0.06)  67%  $  (0.10)  $  (0.19)  47%  
               
Net Shipped Units (000s)  2,342   2,253  4%   7,345   7,131  3%  
Average Selling Price (ASP) $58  $60  (3%)  $55  $59  (7%)  
Return Rate %  19.1%   20.5%  (140 bps)   19.0%   19.8%  (80 bps)  
Digital Net Sales %  51.5%   49.0%  250 bps   50.8%   48.6%  220 bps  
Total Customers - 12 Month Rolling (000s)     1,350     1,429  (6%)   N/A   N/A  N/A  
               
% of Net Merchandise Sales by Category             
Jewelry & Watches  39%   42%     40%   42%    
Home & Consumer Electronics  26%   25%     24%   23%    
Beauty  15%   14%     15%   15%    
Fashion & Accessories  20%   19%     21%   20%    
Total  100%   100%     100%   100%    
               

Third Quarter 2017 Results

  • The top performing category in the quarter was Beauty, which grew 10% year-over-year. Fashion, Home, and Consumer Electronics also increased year-over-year.
  • Return rate for the quarter was 19.1%; an improvement of 140 basis points year-over-year.
  • Gross profit as a percentage of sales increased 150 basis points to 38.1% year-over-year, driven primarily by improved rates.  Gross profit dollars increased 3% to $57.3 million year-over-year.
  • Operating expense remained flat at $58 million year-over-year.
  • Net loss was $1.1 million, a 71% improvement year-over-year, and EPS was ($0.02), a 67% improvement year-over-year.  Adjusted EBITDA increased 49% to $3.8 million. These results were primarily driven by a 3% increase in gross profit dollars. 

Liquidity and Capital Resources

As of October 28, 2017, total cash was $23 million, compared to $22 million at the end of the second quarter. The Company also had an additional $13 million of unused availability on its revolving credit facility with PNC Bank, which gives the Company total liquidity of approximately $36 million as of the end of the third quarter.

Sale of Boston Station

As previously announced on August 28, 2017, the Company agreed to sell its television station, WWDP, serving the Boston market, for an aggregate of $13.5 million.  The transaction includes two agreements with unrelated parties.  The first agreement closed in the third quarter and resulted in the initial receipt of a $2.5 million cash payment.  The cash received was used to pay down an equal amount of our loan with GACP.  The transaction resulted in an $833 thousand net tax benefit related to the reversal of a deferred tax liability that was partially offset by a $221 thousand loss related to the early debt extinguishment. The second agreement is expected to close in the fourth quarter of fiscal 2017 following satisfaction of customary closing conditions, including FCC approval. The financial impact of this transaction, including the complete paydown of the remaining $3.6 million loan with GACP, is expected to include a $3.0 million positive impact to net income in the fourth quarter.

Fourth Quarter and Full Year 2017 Outlook

The following details relate to our expected performance for the fourth quarter and full-year of fiscal 2017, which include a 53rd week in fiscal 2017:

We continue to expect fourth quarter revenue growth in the mid to high single digits.

We continue to expect full year adjusted EBITDA to be $18 to $22 million, which would be growth of 11% to 36% year over year, and we now expect full year EPS to be $0.00 to $0.04. These results include the impact of the expected close of our Boston Television Station sale in the fourth quarter.

Conference Call
A conference call and webcast to discuss the Company's third quarter earnings will be held at 8:30 a.m. Eastern Time on Tuesday, November 21, 2017:

WEBCAST LINK: https://event.on24.com/wcc/r/1472316/2D4FA277E38225472215B7CA47A90492

TELEPHONE: 1-877-407-9039 (domestic) or 1-201-689-8470 (international)

Please visit www.evine.com/ir for more investor information and to review an updated investor deck.

About Evine Live Inc.

Evine Live Inc. (NASDAQ:EVLV) operates Evine, a multiplatform interactive digital commerce company that offers a mix of proprietary, exclusive and name brands directly to consumers in an engaging and informative shopping experience via television, online and mobile. Evine reaches more than 87 million cable and satellite television homes with entertaining content in a comprehensive digital shopping experience 24 hours a day.

Please visit www.evine.com/ir for more investor information.

Contacts

Media:
Dawn Zaremba  
press@evine.com
(952) 943-6043

Investors:
Michael Porter
mporter@evine.com
(952) 943-6517

EVINE Live Inc.  
AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
(In thousands except share and per share data) 
          
      October 28, January 28, 
       2017   2017  
       (Unaudited)    
          
ASSETS 
Current assets:      
 Cash   $  23,334  $  32,647  
 Restricted cash and investments     450     450  
 Accounts receivable, net     84,245     99,062  
 Inventories     77,068     70,192  
 Prepaid expenses and other     5,253     5,510  
  Total current assets     190,350     207,861  
Property and equipment, net     53,135     52,715  
FCC broadcasting license     9,500     12,000  
Other assets     2,188     2,204  
Total Assets  $  255,173  $  274,780  
          
LIABILITIES AND SHAREHOLDERS' EQUITY 
          
Current liabilities:      
 Accounts payable  $  63,527  $  65,796  
 Accrued liabilities     33,249     37,858  
 Current portion of long term credit facilities    3,440     3,242  
 Deferred revenue     35     85  
  Total current liabilities     100,251     106,981  
          
          
Other long term liabilities     327     428  
Deferred tax liability     3,256     3,522  
Long term credit facilities     74,630     82,146  
  Total liabilities     178,464     193,077  
          
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;     
  65,261,231 and 65,192,314 shares issued and outstanding   653     652  
          
 Additional paid-in capital     438,257     436,962  
          
 Accumulated deficit     (362,201)    (355,911) 
  Total shareholders' equity     76,709     81,703  
Total Liabilities and Shareholders' Equity $  255,173  $  274,780  

 

 

 EVINE Live 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    
             
    October 28, October 29, October 28, October 29,  
     2017   2016   2017   2016   
 Net sales $  150,212  $  151,636  $  455,504  $  475,695   
 Cost of sales    92,918     96,205     285,444     298,988   
   Gross profit   57,294     55,431     170,060     176,707   
    Margin %  38.1%  36.6%  37.3%  37.1%  
 Operating expense:          
  Distribution and selling    48,501     49,161     145,918     154,191   
  General and administrative    6,779     5,690     18,786     17,337   
  Depreciation and amortization    1,475     1,941     4,791     6,025   
  Executive and management transition costs    893     568     1,971     4,411   
  Distribution facility consolidation and technology upgrade costs    -     150     -     530   
   Total operating expense    57,648     57,510     171,466     182,494   
 Operating loss    (354)    (2,079)    (1,406)    (5,787)  
            .  
 Other income (expense):          
  Interest income    6     3     10     7   
  Interest expense    (1,158)    (1,586)    (3,966)    (4,397)  
  Loss on debt extinguishment    (221)    -     (1,134)    -   
   Total other expense    (1,373)    (1,583)    (5,090)    (4,390)  
             
 Loss before income taxes    (1,727)    (3,662)    (6,496)    (10,177)  
             
 Income tax provision    624     (205)    206     (615)  
             
 Net loss $  (1,103) $  (3,867) $  (6,290) $  (10,792)  
             
 Net loss per common share $  (0.02) $  (0.06) $  (0.10) $  (0.19)  
             
 Net loss per common share          
   ---assuming dilution $  (0.02) $  (0.06) $  (0.10) $  (0.19)  
             
 Weighted average number of          
 common shares outstanding:          
    Basic    65,191,367     60,513,215     63,400,368     58,317,681   
    Diluted    65,191,367     60,513,215     63,400,368     58,317,681   
             

 

 

EVINE Live 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  
          
  October 28, October 29, October 28, October 29, 
   2017   2016   2017   2016  
          
          
Net loss $  (1,103) $  (3,867) $  (6,290) $  (10,792) 
Adjustments:         
  Depreciation and amortization    2,451     3,093     7,710     9,204  
  Interest income    (6)    (3)    (10)    (7) 
  Interest expense    1,158     1,586     3,966     4,397  
  Income taxes    (624)    205     (206)    615  
EBITDA (as defined)  $  1,876  $  1,014  $  5,170  $  3,417  
          
          
A reconciliation of EBITDA to Adjusted EBITDA is as follows:        
EBITDA (as defined)  $  1,876  $  1,014  $  5,170  $  3,417  
Adjustments:         
  Executive and management transition costs     893     568     1,971     4,411  
  Loss on debt extinguishment     221     -     1,134     -  
  Distribution facility consolidation and technology upgrade costs   -     150     -     530  
  Non-cash share-based compensation expense    790     797     2,057     1,432  
Adjusted EBITDA $  3,780  $  2,529  $  10,332  $  9,790  
          

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; loss on debt extinguishment; distribution facility consolidation and technology upgrade costs and non-cash share-based compensation expense. The Company has included the term “Adjusted EBITDA” in our EBITDA reconciliation in order to adequately assess the operating performance of our television and online businesses and in order to maintain comparability to our analyst's coverage and financial guidance, when given. Management believes that the term Adjusted EBITDA allows investors to make a meaningful comparison between our 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, including guidance regarding anticipated future operating results, the Company’s focus for the remainder of the fiscal year and the Company’s beliefs regarding the future of retailing. Such statements may be identified by words such as anticipate, believe, estimate, expect, intend, predict, hope, should, plan, will or similar expressions. Any statements contained herein that are not statements of historical fact may be deemed 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): consumer preferences, 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; pricing and gross sales margins; the level of cable and satellite distribution for our programming and the associated fees or estimated cost savings from contract renegotiations; our ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom we have contractual relationships, and to successfully manage key vendor relationships and develop key partnerships and proprietary and exclusive brands; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our credit facilities covenants; customer acceptance of our branding strategy and our repositioning as a video commerce company; the market demand for television station sales; changes to our management and information systems infrastructure; challenges to our 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 our operations; significant public events that are difficult to predict, or other significant television-covering events causing an interruption of television coverage or that directly compete with the viewership of our programming; disruptions in our distribution of our network broadcast to our customers; our ability to obtain and retain key executives and employees; our ability to attract new customers and retain existing customers; changes in shipping costs; our ability to offer new or innovative products and customer acceptance of the same; changes in customers viewing habits of television programming; and the risks identified under “Risk Factors” in our recently filed Form 10-K and any additional risk factors identified in our periodic reports since the date of such Form 10-K. More detailed information about those factors is set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements whether as a result of new information, future events or otherwise.

 

Source: EVINE Live Inc.