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Evine Live Inc. Reports Third Quarter 2018 Results

11/28/2018

MINNEAPOLIS, Nov. 28, 2018 (GLOBE NEWSWIRE) -- Evine Live Inc. (“Evine”) (NASDAQ: EVLV) today announced results for the third quarter ended November 3, 2018.

Fiscal Year 2018 Third Quarter Summary

  • Net sales of $131.7 million decreased 12.3% year-over-year.
  • Gross profit margin of 35.8% decreased 230 basis points year-over-year.
  • Net loss of $9.2 million, compared to a net loss of $1.1 million in the prior year.
  • Adjusted EBITDA of ($4.2) million, compared to $3.8 million in the prior year.
  • EPS of ($0.14) compared to ($0.02) in the prior year.
  • Maintained a strong and flexible balance sheet with $44.0 million of total liquidity at quarter end.
  • Introduced 40 new brands and brand extensions during the third quarter, compared to 21 in the prior year.
  • Successfully opened LA office and launched LA studio with the first broadcast on October 18th.
  • Signed first client to new third-party logistics services business.
  • Secured 2 million new HD channels that will launch in the fourth quarter.

Executive Commentary – Bob Rosenblatt, CEO

“We had a very difficult quarter, which was disappointing given that we entered the third quarter with strong trends across multiple business drivers, and after delivering several consecutive quarters of solid performance. Our topline sales were not where they needed to be or where we expected them to be due to the delayed launch of a new proven brand partner. The shift in the timing of the launch put undue pressure on our existing brands and impacted productivity across all of our product categories. The premiere of this well-established brand is now anticipated to occur in January 2019, and we expect that its proven track record of success and its large and loyal customer following, along with other exciting new launches, will put us back on track for sustainable growth.

Our goal and strategy remain the same: to drive sustainable growth through the curation and nurturing of a strong collection of brands. This strategy delivered growth in adjusted EBITDA in 8 of the past 10 quarters. Our expertise is in building great brands and providing a dynamic platform for our core brands. I am encouraged by the quantity and quality of the new brand launches during the quarter and look forward to nurturing and growing these brands over time. Additionally, our new LA studio and office is providing a previously untapped pipeline of brands and new partners that align with our business strategy and model. Our new studio and entrance into direct-to-consumer 3rd party logistics services were wins for us in the third quarter as we continue to move our company forward towards our goal of being a leading interactive video and digital commerce company.”

 
SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average selling price and EPS)
                         
    Q3 2018
11/3/2018
  Q3 2017
10/28/2017
  Change   YTD 2018
11/3/2018
  YTD 2017
10/28/2017
  Change
                         
Net Sales   $ 131.7   $ 150.2   (12.3%)   $ 439.0   $ 455.5   (3.6%)
                         
Gross Margin %     35.8%     38.1%   (230 bps)     36.5%     37.3%   (80 bps)
                         
Adjusted EBITDA   $ (4.2)   $ 3.8   (212%)   $ 3.0   $ 10.3   (71%)
                         
Net Loss   $ (9.2)   $ (1.1)   (730%)   $ (12.2)   $ (6.3)   (94%)
                         
EPS   $ (0.14)   $ (0.02)   (600%)   $ (0.18)   $ (0.10)   (80%)
                         
Net Shipped Units (000s)     1,893     2,342   (19%)     6,827     7,345   (7%)
Average Selling Price (ASP)     $63     $58   9%     $58     $55   5%
Return Rate %     19.9%     19.1%   80 bps     19.1%     19.0%   10 bps
Digital Net Sales %     51.9%     51.5%   40 bps     52.5%     50.8%   170 bps
Total Customers - 12 Month Rolling (000s)     1,233     1,350   (9%)   N/A   N/A   N/A
                         
% of Net Merchandise Sales by Category                        
Jewelry & Watches     41%     39%         40%     40%    
Home & Consumer Electronics     23%     25%         22%     23%    
Beauty & Wellness     18%     16%         19%     16%    
Fashion & Accessories     18%     20%         19%     21%    
Total     100%     100%         100%     100%    
                         

Third Quarter 2018 Results

  • The top performing category in the quarter was Beauty & Wellness, which declined 4% year-over-year. Subscription sales increased 13% and continue to help this category be one of the top performers.
  • Digital net sales as a percentage of total net sales increased 40 basis points to 51.9%, reflecting our continued focus on making the customer experience seamless across all platforms.
  • The return rate for the quarter was 19.9%; an increase of 80 basis points year-over-year driven by increased ASP and increased mix into our Jewelry & Watches Category.
  • Gross profit dollars decreased to $47.2 million and gross profit margin was 35.8%.
  • Operating expenses decreased 3.7% or approximately $2.1 million year-over-year to $55.5 million, reflecting reductions in both general and administrative expenses and distribution and selling expenses as we continue to find efficiencies through process and technology to manage overhead.

Liquidity and Capital Resources

As of November 3, 2018, total unrestricted cash was $23.5 million, compared to $23.3 million at the end of the third quarter of fiscal 2017. The Company also had an additional $20.5 million of unused availability on its revolving credit facility, which gives the Company total liquidity of $44.0 million as of the end of the third quarter.

Fiscal Year 2018 Outlook

Note: Fiscal 2018 has 52 weeks compared to 53 weeks in Fiscal 2017.

For Fiscal 2018 – We expect sales for the year of $616 million to $626 million. This would result in a sales decline of (3%) to (1%) compared to last year on a normalized 52-week to 52-week basis, which would equate to (5%) to (3%) on a reported basis due to the extra week in fiscal 2017. We expect Adjusted EBITDA to be in the $9 to $11 million range.(1)

For Fourth Quarter 2018 – The annual guidance above implies our 4th quarter sales to be $177 million to $187 million. This would result in sales ranging from a decrease of (1%) to an increase of 4% compared to last year on a normalized 13-week to 13-week basis, which would equate to decreases of (8%) to (3%) on a reported basis due to the extra week in fiscal 2017. We expect Adjusted EBITDA to be in the $6 to $8 million range.(1)

Conference Call

As previously announced on November 7, 2018, a conference call and webcast to discuss the Company's third quarter earnings will be held later this morning at 8:30 a.m. Eastern Time on Wednesday, November 28, 2018. Hosting the call will be Bob Rosenblatt, CEO, Anne Martin-Vachon, President, Diana Purcel, CFO and Michael Porter, VP of Finance and Investor Relations:

WEBCAST LINK:    https://event.on24.com/wcc/r/1824050/F5231464052A1FF8BBB9E0E2A1248D25
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 television homes with entertaining content in a comprehensive digital shopping experience offered 24 hours a day.

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

Contacts

Media:
Liz Joseph
press@evine.com
(952) 943-6192

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

(1) In accordance with SEC Guidance for Item 10(e)(1)(i)(A) of Regulation S-K, we have not provided a reconciliation of our expected Adjusted EBITDA range to expected net income range 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, business development and expansion costs, restructuring charges, the effect of other certain one-time items, and the income tax effect of such items. We are unable to quantify these types of adjustments that would be required to be included in the GAAP measure without unreasonable efforts. In addition, we believe such a reconciliation would imply a degree of precision on inherently unpredictable events in our outlook that could be confusing to investors.

 
EVINE Live Inc.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
         
    November 3,   February 3,
    2018   2018
    (Unaudited)    
         
ASSETS
Current assets:        
Cash   $ 23,528     $ 23,940  
Restricted cash equivalents     450       450  
Accounts receivable, net     74,142       96,559  
Inventories     86,034       68,811  
Prepaid expenses and other     8,185       5,344  
Total current assets     192,339       195,104  
Property and equipment, net     52,029       52,048  
Other assets     1,935       2,106  
Total Assets   $ 246,303     $ 249,258  
         
LIABILITIES AND SHAREHOLDERS' EQUITY
         
Current liabilities:        
Accounts payable   $ 57,604     $ 55,614  
Accrued liabilities     45,445       35,646  
Current portion of long term credit facilities     2,714       2,326  
Deferred revenue     35       35  
Total current liabilities     105,798       93,621  
         
         
Other long term liabilities     60       68  
Long term credit facilities     66,375       71,573  
Total liabilities     172,233       165,262  
         
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;      
66,363,845 and 65,290,458 shares issued and outstanding   664       653  
Additional paid-in capital     441,357       439,111  
Accumulated deficit     (367,951 )     (355,768 )
Total shareholders' equity     74,070       83,996  
Total Liabilities and Shareholders' Equity   $ 246,303     $ 249,258  


 
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
                 
    November 3,   October 28,   November 3,   October 28,
    2018   2017   2018   2017
Net sales   $ 131,714     $ 150,212     $ 439,018     $ 455,504  
Cost of sales     84,559       92,918       278,738       285,444  
Gross profit     47,155       57,294       160,280       170,060  
Margin %     35.8 %     38.1 %     36.5 %     37.3 %
Operating expense:                
Distribution and selling     47,328       48,501       144,173       145,918  
General and administrative     6,214       6,779       19,454       18,786  
Depreciation and amortization     1,587       1,475       4,681       4,791  
Executive and management transition costs     408       893       1,432       1,971  
Total operating expense     55,537       57,648       169,740       171,466  
Operating loss     (8,382 )     (354 )     (9,460 )     (1,406 )
                 
Other income (expense):                
Interest income     12       6       28       10  
Interest expense     (767 )     (1,158 )     (2,691 )     (3,966 )
Loss on debt extinguishment     -       (221 )     -       (1,134 )
Total other expense     (755 )     (1,373 )     (2,663 )     (5,090 )
                 
Loss before income taxes     (9,137 )     (1,727 )     (12,123 )     (6,496 )
                 
Income tax benefit (provision)     (20 )     624       (60 )     206  
                 
Net loss   $ (9,157 )   $ (1,103 )   $ (12,183 )   $ (6,290 )
                 
Net loss per common share   $ (0.14 )   $ (0.02 )   $ (0.18 )   $ (0.10 )
                 
Net loss per common share                
---assuming dilution   $ (0.14 )   $ (0.02 )   $ (0.18 )   $ (0.10 )
                 
Weighted average number of                
common shares outstanding:                
Basic     66,351,835       65,191,367       65,907,301       63,400,368  
Diluted     66,351,835       65,191,367       65,907,301       63,400,368  


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  
                 
  November 3,   October 28,   November 3,   October 28,
  2018   2017   2018   2017
               
     
Net loss   $ (9,157 )   $ (1,103 )   $ (12,183 )   $ (6,290 )
Adjustments:                
Depreciation and amortization     2,532       2,451       7,667       7,710  
Interest income     (12 )     (6 )     (28 )     (10 )
Interest expense     767       1,158       2,691       3,966  
Income taxes     20       (624 )     60       (206 )
EBITDA (as defined)   $ (5,850 )   $ 1,876     $ (1,793 )   $ 5,170  
                 
                 
A reconciliation of EBITDA to Adjusted EBIDTA is as follows:              
EBITDA (as defined)   $ (5,850 )   $ 1,876     $ (1,793 )   $ 5,170  
Adjustments:                
Executive and management transition costs     408       893       1,432       1,971  
Contract termination costs     -       -       753       -  
Loss on debt extinguishment     -       221       -       1,134  
Business development and expansion costs     395       -       395       -  
Non-cash share-based compensation expense     822       790       2,180       2,057  
Adjusted EBITDA   $ (4,225 )   $ 3,780     $ 2,967     $ 10,332  
                 

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; business development and expansion costs; contract termination costs; gain on sale of television station and non-cash share-based compensation expense. The Company has included the “Adjusted EBITDA” measure 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 Adjusted EBITDA measure 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. Any statements contained herein that are not statements of historical fact, including statements regarding guidance, industry prospects, or future results of operations or financial position are forward-looking. We often use words such as anticipates, believes, estimates, expects, intends, 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 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 and shipping 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; our ability to respond to changes in consumer shopping patterns and preferences, and changes in technology and consumer viewing patterns; 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 events (including disasters, weather events or events attracting significant television coverage) that either cause an interruption of television coverage or that divert viewership from our programming; disruptions in our distribution of our network broadcast to our customers; our ability to protect our intellectual property rights; our ability to obtain and retain key executives and employees; our ability to attract new customers and retain existing customers; changes in shipping costs; expenses related to the actions of activist or hostile shareholders; our 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 our most 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.

Evine-logo-outline-stripes (002).jpg

Source: EVINE Live Inc.