SOURCE: EVINE Live Inc.

EVINE Live Inc.

August 26, 2015 08:00 ET

EVINE Live Reports Second Quarter Results

Second Quarter Sales Increased Three Percent

MINNEAPOLIS, MN--(Marketwired - Aug 26, 2015) - EVINE Live Inc. (NASDAQ: EVLV)

FY 2015 Second Quarter Highlights

  • Net sales were $161.1 million, a 3% increase year-over-year.
  • Beauty was the fastest-growing product category at 23%, while Fashion & Accessories also delivered strong growth of 17%.
  • Online net sales as a percentage of total net sales increased 240 basis points to 46%.
  • Mobile remains the fastest-growing platform with net sales of $31.3 million, a 41% increase year-over-year.
  • Average purchase frequency rose to 4.5 units per customer, a 10% increase.
  • Adjusted EBITDA was $2.5 million.

EVINE Live Inc. (NASDAQ: EVLV), a digital commerce company offering a compelling mix of proprietary and name brands directly to consumers in an engaging and informative shopping experience via television, online and mobile devices, today announced results for the quarter ended August 1, 2015.

"We are pleased with our second quarter financial results during this transition year, which were driven by better-than-expected sales. Over the quarter, we executed a more balanced approach to our airtime mix with continued investment in our new emerging brands, coupled with an ongoing commitment to our established anchor brands. Our top-line growth was driven by strong performance in the categories of Beauty and Fashion & Accessories," said Mark Bozek, Chief Executive Officer. "As we addressed a number of the challenges we faced in the first quarter, we are seeing momentum in our continued efforts to reposition EVINE Live by introducing more merchandising variety with new emerging brands that are generating revenue across our multiple platforms, especially mobile. With key members of our senior leadership team now in place, we are confident that we have the ability to execute our strategic plan and initiatives to create long-term value for our shareholders."

"We are committed to delivering measurable transparency to the market as we execute our plan to drive sustainable shareholder value," added Tim Peterman, Chief Financial Officer. "We are focused on strengthening our balance sheet. We are upgrading our technology and customer care systems at our distribution center in Bowling Green and are currently on track to phase in our new warehouse management system through the first quarter of 2016. Most importantly, we are focused on improving our alignment between merchandising, average selling price, margin and inventory, while carefully evaluating our operating costs."

 
SUMMARY RESULTS AND KEY OPERATING METRICS
($Millions, except average price points and EPS)
                                     
    Q2 2015 08/01/2015     Q2 2014 08/02/2014     Change     YTD 08/01/2015     YTD 08/02/2014     Change  
                                             
Net Sales   $ 161.1     $ 156.6     3 %   $ 319.5     $ 316.3     1 %
Gross Margin %     36.5 %     38.6 %   (210 bps )     36.4 %     38.1 %   (170 bps )
Adjusted EBITDA   $ 2.5     $ 5.5     (54 %)   $ 4.1     $ 11.0     (63 %)
Net Loss   $ (3.0 )   $ (4.3 )   29 %   $ (7.8 )   $ (3.8 )   (103 %)
EPS   $ (0.05 )   $ (0.08 )   38 %   $ (0.14 )   $ (0.08 )   (75 %)
                                             
  Homes (Average 000s)     88,334       87,522     1 %     88,307       87,267     1 %
  Net Shipped Units (000s)     2,434       2,110     15 %     4,664       4,023     16 %
  Average Selling Price (ASP)   $ 60     $ 67     (10 %)   $ 62     $ 71     (13 %)
  Return Rate %     21.4 %     22.9 %   (150 bps )     20.9 %     22.6 %   (170 bps )
  Online Net Sales %     45.9 %     43.5 %   240 bps       45.6 %     44.2 %   140 bps  
  Total Customers - 12 Month Rolling     1,438,654       1,421,235     1 %     N/A       N/A     N/A  
                                               
% of Net Sales by Category                                            
  Jewelry & Watches     42 %     43 %           44 %     45 %      
  Home & Consumer Electronics     22 %     25 %           24 %     26 %      
  Beauty     15 %     13 %           14 %     13 %      
  Fashion & Accessories     21 %     19 %           18 %     16 %      
  Total     100 %     100 %           100 %     100 %      
                                               

Second Quarter 2015 Results

  • Beauty was the fastest-growing product category at 23%, Fashion & Accessories delivered strong growth of 17% and Jewelry & Watches grew by 1%; gains were partially offset by declines of 12% in Home & Consumer Electronics.
  • Return rate for the quarter was 21.4%, down 150 basis points year-over-year.
  • Gross profit decreased 2.6% to $58.9 million. Gross profit as a percentage of sales decreased 210 basis points to 36.5%, primarily related to the following decreases:
    • 190 basis points of gross margin percentage decrease was attributable to reduced margins in Jewelry & Watches and Home (excluding textiles) due to merchandising mix changes and a lower than optimal average selling price (ASP).
    • 30 basis points of gross margin percentage decrease was attributable to continued discounting of excess textile inventory.
    • 25 basis points of gross margin percentage decrease was attributable to reduced shipping and handling margin.
  • Adjusted EBITDA decreased 54% to $2.5 million primarily due to continued gross margin pressure from merchandising mix changes and increased variable costs from lower than optimal blended ASP in Jewelry & Watches, Home, and the continued discounting in textiles. Operating loss was ($2.2 million) vs. ($3.7 million) in the second quarter of last year.
  • Second quarter incremental expense of $972,000 resulted from our distribution facility consolidation and technology upgrade initiative.
  • EPS for the fiscal 2015 second quarter, which includes distribution center consolidation and technology upgrade costs, executive and management transition costs, and costs associated with the implementation of the Shareholder Rights Plan, improved $0.03 to ($0.05). EPS for the fiscal 2014 second quarter was ($0.08), which included executive and management transition costs and activist shareholder response costs.

Liquidity and Capital Resources

As of August 1, 2015, total cash was $16.2 million, including restricted cash, compared to $18.2 million at the end of the first quarter of fiscal 2015. The Company also had approximately $28 million of availability on its revolving credit facility with PNC Bank at the end of the second quarter.

2015 Outlook

The Company expects third quarter revenue to be relatively flat with prior year results, followed by fourth quarter sales growth and net income profitability.

Conference Call

A conference call to discuss the Company's second quarter earnings will be held at 8:30 a.m. Eastern Time on Wednesday, August 26, 2015.

Conference Call/Webcast Today, Wednesday, August 26, 2015 at 8:30 a.m. EDT:

WEBCAST LINK: http://edge.media-server.com/m/p/qrfuutuw

TELEPHONE: (866) 515-2912

PASSCODE: 69028282

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) is a digital commerce company offering a compelling mix of proprietary and name brands directly to consumers in an engaging and informative shopping experience via television, online and mobile devices. EVINE Live reaches approximately 88 million cable and satellite television homes 24 hours a day; engaging its community of customers in a digital shopping experience that includes live streaming and social platforms.

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

   
EVINE Live Inc.  
AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(In thousands except share and per share data)  
             
    August 1,     January 31,  
    2015     2015  
    (Unaudited)        
                 
ASSETS  
Current assets:                
  Cash   $ 14,073     $ 19,828  
  Restricted cash and investments     2,100       2,100  
  Accounts receivable, net     91,954       112,275  
  Inventories     59,311       61,456  
  Prepaid expenses and other     6,449       5,284  
    Total current assets     173,887       200,943  
Property and equipment, net     50,790       42,759  
FCC broadcasting license     12,000       12,000  
Other assets     1,975       1,989  
    $ 238,652     $ 257,691  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY  
                 
Current liabilities:                
  Accounts payable   $ 62,221     $ 81,457  
  Accrued liabilities     34,307       36,683  
  Current portion of long term credit facility     2,143       1,736  
  Deferred revenue     85       85  
    Total current liabilities     98,756       119,961  
                 
Capital lease liability     9       36  
Deferred revenue     207       249  
Deferred tax liability     2,340       1,946  
Long term credit facility     56,709       50,971  
    Total liabilities     158,021       173,163  
                 
Commitments and contingencies                
                 
Shareholders' equity:                
  Preferred stock, $.01 par value, 400,000 shares authorized; zero shares issued and outstanding     -       -  
  Common stock, $.01 par value, 100,000,000 shares authorized; 57,125,435 and 56,448,663 shares issued and outstanding     571       564  
  Additional paid-in capital     422,718       418,846  
  Accumulated deficit     (342,658 )     (334,882 )
    Total shareholders' equity     80,631       84,528  
    $ 238,652     $ 257,691  
                 
                 
                 
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 Six-Month Periods Ended  
                         
    August 1,     August 2,     August 1,     August 2,  
    2015     2014     2015     2014  
Net sales   $ 161,061     $ 156,587     $ 319,512     $ 316,288  
Cost of sales     102,205       96,152       203,351       195,847  
      Gross profit     58,856       60,435       116,161       120,441  
      Margin %     36.5 %     38.6 %     36.4 %     38.1 %
Operating expense:                                
  Distribution and selling     51,357       50,110       102,156       99,839  
  General and administrative     6,391       6,776       12,103       12,688  
  Depreciation and amortization     2,107       2,163       4,238       4,431  
  Executive and management transition costs     205       2,620       2,795       2,620  
  Distribution facility consolidation and technology upgrade costs     972       -       972       -  
  Activist shareholder response costs     -       2,473       -       3,518  
    Total operating expense     61,032       64,142       122,264       123,096  
Operating loss     (2,176 )     (3,707 )     (6,103 )     (2,655 )
Other expense:                                
  Interest income     2       6       4       6  
  Interest expense     (669 )     (387 )     (1,267 )     (778 )
    Total other expense     (667 )     (381 )     (1,263 )     (772 )
Loss before income taxes     (2,843 )     (4,088 )     (7,366 )     (3,427 )
Income tax provision     (205 )     (201 )     (410 )     (402 )
Net loss   $ (3,048 )   $ (4,289 )   $ (7,776 )   $ (3,829 )
Net loss per common share   $ (0.05 )   $ (0.08 )   $ (0.14 )   $ (0.08 )
Net loss per common share                                
    ---assuming dilution   $ (0.05 )   $ (0.08 )   $ (0.14 )   $ (0.08 )
Weighted average number of common shares outstanding:                                
    Basic     57,092,654       52,199,792       56,866,711       51,022,023  
    Diluted     57,092,654       52,199,792       56,866,711       51,022,023  
                                     
                                     
                                     
EVINE Live Inc.  
AND SUBSIDIARIES  
Reconciliation of Adjusted EBITDA to Net Loss:  
(Unaudited)  
                         
    For the Three-Month Periods Ended     For the Six-Month Periods Ended  
                         
    August 1,     August 2,     August 1,     August 2,  
    2015     2014     2015     2014  
                                 
                                 
Adjusted EBITDA (000's)   $ 2,532     $ 5,528     $ 4,111     $ 11,042  
Less:                                
  Activist shareholder response costs     -       (2,473 )     -       (3,518 )
  Executive and management transition costs     (205 )     (2,620 )     (2,795 )     (2,620 )
  Distribution facility consolidation and technology upgrade costs     (972 )     -       (972 )     -  
  Shareholder Rights Plan costs     (364 )     -       (364 )     -  
  Non-cash share-based compensation     (768 )     (1,874 )     (1,376 )     (2,918 )
EBITDA (as defined)     223       (1,439 )     (1,396 )     1,986  
                                 
                                 
A reconciliation of EBITDA to net loss is as follows:                                
                                 
EBITDA (as defined)     223       (1,439 )     (1,396 )     1,986  
Adjustments:                                
  Depreciation and amortization     (2,399 )     (2,268 )     (4,707 )     (4,641 )
  Interest income     2       6       4       6  
  Interest expense     (669 )     (387 )     (1,267 )     (778 )
  Income taxes     (205 )     (201 )     (410 )     (402 )
Net loss   $ (3,048 )   $ (4,289 )   $ (7,776 )   $ (3,829 )
                                 

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); activist shareholder response costs; executive and management transition costs; distribution center consolidation and technology upgrade costs; Shareholder Rights Plan 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 more 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 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 Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, in this release.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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; 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 brands; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our long-term credit facility covenants; our ability to successfully transition our brand name and corporate name; customer acceptance of our new branding strategy and our repositioning as a digital 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; 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; our ability to obtain and retain key executives and employees; 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 the Company's forward-looking statements whether as a result of new information, future events or otherwise.

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