Liberty Interactive Corporation ("Liberty Interactive") (Nasdaq:
QVCA, QVCB, LVNTA, LVNTB) today reported third quarter 2015
results. Highlights include(1):
Attributed to QVC Group
- Grew QVC US revenue by 4% and adjusted
OIBDA(2) by 1% in the third quarter
- QVC US operating income increased by
5%
- QVC.com revenue as a percent of total
US revenue increased to 48%, a 450 basis point increase
- QVC US mobile penetration was 52% of
QVC.com orders, a 1,100 basis point increase
- QVC consolidated mobile penetration was
53% of QVC.com orders, a 1,000 basis point increase
- QVC generated local currency revenue
growth and adjusted OIBDA improvement in all consolidated markets,
for the second quarter in a row
- Completed acquisition of zulily on
October 1, 2015
Attributed to Liberty Ventures Group
- Interval Leisure Group (Nasdaq: IILG)
entered into definitive agreement to acquire Starwood Hotels and
Resorts’ vacation ownership business in October, and will own 45%
of the combined company; Liberty Interactive pro forma ownership
estimated at 13%
“QVC generated strong results across the board with local
currency growth in all consolidated markets for the second quarter
in a row. The expansion in mobile orders continues at a rapid pace,
comprising 53% of consolidated eCommerce orders. We completed the
acquisition of zulily and have already begun introducing its
customers to QVC,” stated Greg Maffei, Liberty Interactive
President and CEO. “Attributed to Liberty Ventures, Interval
Leisure Group announced an agreement to acquire Starwood Hotels and
Resorts’ vacation ownership business.”
On October 1, 2015, Liberty Interactive completed the previously
announced acquisition of zulily, inc. (“zulily”). Pursuant to the
terms of the acquisition, each share of zulily Class A common stock
and Class B common stock received $9.375 in cash and 0.3098 of a
share of Liberty Interactive’s Series A QVC Group common stock. As
a result of the acquisition, Liberty Interactive drew down an
additional $910 million on the QVC credit facility and issued
approximately 38.5 million shares of its Series A QVC Group common
stock.
Due to the timing of the acquisition, zulily’s results are not
included in Liberty Interactive’s third quarter financial
reporting. However, zulily’s revenue and OIBDA performance for the
third quarter were in the middle and at the high end, respectively,
of guidance provided on zulily’s second quarter earnings call,
which took place on August 5, 2015. We will provide additional
financial disclosure on zulily at Liberty’s Investor Day on
November 12, 2015. Beginning with fourth quarter financial
reporting, zulily will be included as a separate reportable segment
of Liberty Interactive (attributed to QVC Group).
QVC GROUP – Excluding the pre-reattribution impact of the
Digital Commerce companies (see reconciling schedule 1), in the
third quarter, QVC Group's revenue decreased 1% to $2.0 billion,
adjusted OIBDA decreased 3% to $421 million, operating income
increased 1% to $264 million, adjusted net income(3) increased 35%
to $203 million and net income increased 86% to $154 million.
QVC
QVC's consolidated revenue decreased 1% in the third quarter to
$2.0 billion. Adjusted OIBDA decreased 2% to $430 million and
adjusted OIBDA margin decreased 30 basis points. Operating income
increased 1% to $280 million. Consolidated eCommerce revenue
increased 10% to $861 million and grew to 43% from 39% of
consolidated revenue. Mobile orders were 53% of total eCommerce
orders in the quarter, compared to 43% a year ago.
US Dollar denominated results were negatively impacted by
exchange rate fluctuations in the third quarter. The US Dollar
strengthened against the Euro, Japanese Yen and British Pound
Sterling 16%, 15% and 7%, respectively. On a constant currency
basis, consolidated revenue increased 4% and adjusted OIBDA
increased 1% compared to a 1% and 2% decline in US Dollars,
respectively. Excluding the costs related to launch QVC France,
consolidated adjusted OIBDA increased 3% on a constant currency
basis in the quarter.
"We delivered strong constant currency revenue gains across
markets as we continued to execute our strategies to extend our
leading global video and eCommerce position,” said QVC President
and CEO, Mike George. “We expanded our commerce platform reach with
additional TV carriage and increased digital penetration, and
mobile orders now represent over 50% of all eCommerce orders. We
enhanced our merchandise differentiation with key brand launches
and leverage of our global vendor network. Our joint venture in
China generated outstanding results, and on October 1st we
welcomed zulily to the QVC Group, extending our reach to millennial
customers.”
QVC US revenue increased 4% to $1.4 billion in the third
quarter. Units sold increased 5%, average selling price per unit
increased 1% to $58.70 and returns as a percentage of gross product
revenue increased 21 basis points. QVC US experienced growth in the
apparel, accessories, home and beauty categories, which was
partially offset by a decline primarily in jewelry. eCommerce
revenue increased 15% to $678 million and grew to 48% from 43% of
total QVC US revenue. Adjusted OIBDA increased 1% to $333 million
and adjusted OIBDA margin decreased 55 basis points to 23.5%. These
results were primarily due to higher freight and inventory
obsolescence expense, which were partially offset by higher product
margins and lower bad debt expenses.
QVC's international revenue decreased 10% to $587 million,
adjusted OIBDA decreased 12% to $97 million and adjusted OIBDA
margin declined 35 basis points in the third quarter, reflecting
the aforementioned unfavorable exchange rate fluctuations. On a
constant currency basis, international revenue increased 4% and
adjusted OIBDA was flat. QVC France launched its TV broadcast on
August 1, 2015. The third quarter included $7 million of costs
related to the launch of QVC France. Excluding the costs related to
QVC France, international adjusted OIBDA increased 7% on a constant
currency basis in the quarter.
QVC Germany's revenue in local currency increased 3% in the
third quarter. Sales increased in local currency primarily in
apparel and home, which were partially offset by a decline
primarily in electronics. Adjusted OIBDA in local currency
increased 1%, and adjusted OIBDA margin in local currency declined
28 basis points primarily due to lower product margins and higher
personnel costs, which were partially offset by lower warehouse and
bad debt expense.
QVC Japan's revenue in local currency increased 5% in the third
quarter. QVC Japan experienced sales gains in local currency
primarily in home and beauty, which were partially offset by a
decline primarily in accessories and apparel. Adjusted OIBDA in
local currency increased 3%. Adjusted OIBDA margin in local
currency decreased 32 basis points primarily due to higher
personnel costs and inventory obsolescence expenses, which were
partially offset by favorable commissions resulting from a key
contract renewal, as well as warehouse efficiencies.
QVC UK's revenue increased 5% in local currency in the third
quarter. Sales increased in local currency primarily in apparel and
beauty, which were partially offset by a decline primarily in
electronics. Adjusted OIBDA in local currency increased 16% and
adjusted OIBDA margin in local currency increased 183 basis points
primarily due to higher product margins and sales leverage, which
were partially offset by higher freight costs.
QVC Italy's revenue increased 2% in local currency in the third
quarter. Sales increased in local currency primarily in beauty and
accessories, which were partially offset by a decline primarily in
jewelry and home. Adjusted OIBDA deficit in local currency
decreased 52% and adjusted OIBDA margin in local currency improved
242 basis points primarily due to lower fixed and freight costs,
which were partially offset by lower product margins.
CNR Home Shopping Co., Ltd. ("CNRS"), QVC's joint venture in
China, increased local currency revenue 43% in the third quarter.
CNRS' adjusted OIBDA deficit in local currency decreased 21%,
reflecting the strong revenue growth, which was partially offset by
lower product margins and higher commission, warehouse and freight
expenses as the business continues to grow its presence in this
nascent market. In early July, CNRS added the strategically
important Shanghai market to its TV distribution, bringing its
current reach to approximately 111 million homes. This joint
venture is being accounted for as an equity method investment, and
as a result, QVC reported a $3 million reduction in net income for
the quarter.
QVC's total debt, net of original issue discount, was $4.5
billion at September 30, 2015, down from $4.6 billion at December
31, 2014.
Share Repurchases
Share repurchases over the past quarter were impacted by the
pending acquisition of zulily. Rules governing the exchange offer
for zulily shares prohibited Liberty Interactive from repurchasing
shares from August 4, 2015 through September 30, 2015. As a result,
from August 1, 2015 through October 31, 2015, Liberty Interactive
repurchased approximately 3.5 million Series A QVC Group shares
(Nasdaq: QVCA) at an average cost per share of $27.78 for total
cash consideration of $98 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 $5.9 billion, representing
approximately 39.4% 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 November 1, 2015 for QVC Group stock was approximately $1.1
billion.
As of September 30, 2015, QVC Group consists of Liberty
Interactive’s subsidiary, QVC, Inc., and Liberty Interactive’s
interest in HSN, Inc. zulily is attributable to QVC Group as of
October 1, 2015.
LIBERTY VENTURES GROUP – Revenue for the continuing
consolidated Digital Commerce companies (which consist of
Bodybuilding.com, CommerceHub, Evite and Right Start) increased 4%
to $146 million in the third quarter. The increase in revenue was
primarily due to CommerceHub ($5 million). CommerceHub revenue
growth was primarily attributed to an acquisition during the first
quarter of 2015 and growth in active customers (vendors and
suppliers) which increased the number of aggregate transactions
processed through the CommerceHub platform.
Adjusted OIBDA for the continuing Digital Commerce companies
increased $3 million year-over-year in the third quarter. Adjusted
OIBDA as a percentage of revenue was slightly higher, representing
11.6% of revenue in the third quarter of 2015, as compared to 9.9%
of revenue in the third quarter of 2014.
Operating loss for the continuing Digital Commerce companies was
$7 million in the third quarter as compared to operating income of
$6 million in the same period in 2014. The decrease is primarily
due to increases in stock-based compensation expense.
Share Repurchases
There were no repurchases of Liberty Ventures Group common stock
(Nasdaq: LVNTA) from August 1, 2015 through October 31, 2015. The
total remaining repurchase authorization for Liberty Ventures Group
stock as of November 1, 2015 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, The Right Start and Evite, and
minority interests in Time Warner Inc. and Time Warner Cable.
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 5:15
p.m. (E.S.T.) on November 4, 2015. 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.
QVC GROUP
FINANCIAL METRICS – QUARTER
(amounts in millions) 3Q14 3Q15 % Change
Revenue(1) QVC US $ 1,368 $ 1,420 4 % Germany 229 199
(13 ) % Japan 216 192 (11 ) % UK 173 168 (3 ) % Italy 34
28 (18 ) %
Total QVC Group Revenue
$ 2,020 $ 2,007 (1
) % Adjusted OIBDA(1) QVC US $
329 $ 333 1 % Germany 42 36 (14 ) % Japan 41 35 (15 ) % UK 31 33 6
% Italy (1 ) - 100 % France (3 ) (7 ) NM Total
QVC Adjusted OIBDA
$ 439 $ 430
(2 ) % Corporate and other (6 )
(9 ) (50 ) %
Total QVC Group Adjusted OIBDA $
433 $ 421 (3 )
% Operating Income(1) QVC US $ 203 $
214 5 % Germany 25 22 (12 ) % Japan 33 28 (15 ) % UK 23 27 17 %
Italy (5 ) (3 ) 40 % France (3 ) (8 ) NM Total
QVC Operating Income
$ 276 $ 280
1 % Corporate and other (15 )
(16 ) (7 ) %
Total QVC Group Operating Income
$ 261 $ 264 1
% Adjusted Net Income(1)(2)
Total QVC Group Adjusted Net Income $ 150
$ 203 35 % China
JV(3) Revenue $ 33 $ 45 36 % Adjusted OIBDA $ (3 ) $ (2
) 33 % (amounts in millions)
QVCA Shares
Outstanding 10/31/2014 10/31/2015
Outstanding A and B shares 476 497 (amounts in
millions)
Quarter ended Quarter ended QVCA
and QVCB Basic and Diluted Shares 9/30/2014
9/30/2015 Basic Weighted Average Shares
Outstanding ("WASO") 477 460 Potentially dilutive Shares 10
6
Diluted WASO 487
466
1) Non-GAAP presentation. For GAAP purposes, the Digital
Commerce companies were recorded as part of the QVC Group through
September 30, 2014 (the date of the reattribution). For
presentation purposes in this table, the results of the Digital
Commerce companies have been removed from the QVC Group for all
periods shown (see reconciling schedule 1). 2) GAAP net income was
$83 million and $154 million for the three months ended September
30, 2014 and 2015, respectively (see reconciling schedule 4). 3)
This joint venture is being accounted for as an equity investment.
QVC OPERATING
METRICS – QUARTER
(amounts in millions) 3Q14 3Q15 % Change
QVC -
Consolidated Total eCommerce revenue ($) $ 781 $ 861 10 % Total
eCommerce revenue (%) 38.7 % 42.9 % 424 bps Mobile % of total
eCommerce(1) 43.0 % 53.0 % 993 bps
QVC - US US
eCommerce revenue ($) $ 592 $ 678 15 % US eCommerce revenue (%)
43.3 % 47.7 % 447 bps Mobile % of US eCommerce(1) 41.3 % 52.2 %
1,090 bps Return Rate 19.0 % 19.2 % 20 bps (1) Based
on gross US Dollar orders.
DIGITAL COMMERCE
FINANCIAL METRICS – QUARTER
(amounts in millions) 3Q14 3Q15 % Change
Revenue(1) Digital Commerce companies - continuing $
141 $ 146 4 % Disposed Businesses(2) 169 -
NM
Digital Commerce Companies Revenue $
310 $ 146 NM
Adjusted OIBDA(1) Digital Commerce companies -
continuing $ 14 $ 17 21 % Disposed Businesses(2) (16 )
- NM
Digital Commerce Companies Adjusted
OIBDA $ (2 ) $ 17
NM Operating Income(1) Digital
Commerce companies - continuing $ 6 $ (7 ) (217 ) % Disposed
Businesses(2) (20 ) - NM
Digital
Commerce Companies Operating Income $ (14
) $ (7 ) NM (1)
Non-GAAP presentation. For GAAP purposes, the Digital
Commerce companies have been recorded as part of Liberty Ventures
Group subsequent to September 30, 2014 (the date of the
reattribution). For presentation purposes in this table, the
results of the Digital Commerce companies are included in Liberty
Ventures Group for all periods shown. In addition, Provide was
included in the Digital Commerce companies prior to the sale of
Provide to FTD Companies, Inc. on December 31, 2014. (2) Includes
financial results of Provide through December 31, 2014 and
Backcountry.com through June 30, 2015.
NOTES
Unless otherwise noted, the foregoing discussion compares
financial information for the three months ended September 30, 2015
to the same period in 2014.
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)
6/30/2015 9/30/2015
HSN(1) $ 1,405 $ 1,146
Total Attributed QVC Group $
1,405 $ 1,146 Expedia(2) $ 2,581 $
2,778 FTD(3) 288 304 Interval Leisure Group and Tree.com(4) 598 564
Other Public Holdings(5) 1,358 1,281
Total
Attributed Liberty Ventures Group $ 4,825
$ 4,927 (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 $151 million and $159
million at June 30, 2015 and September 30, 2015, 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 $587 million and $626
million at June 30, 2015 and September 30, 2015, 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 $358 million and $343 million at
June 30, 2015 and September 30, 2015, 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 $111 million and $115 million at
June 30, 2015 and September 30, 2015, respectively. (5) Represents
Liberty Ventures Group's other public holdings which are accounted
for at fair value. Excludes $2 million and $5 million of long-term
marketable securities as of June 30, 2015 and September 30, 2015,
respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions) 6/30/2015 9/30/2015
Cash and Liquid Investments Attributable to: QVC Group (1) $
505 $ 527 Liberty Ventures Group(2)(3) 2,931 2,932
Total Liberty Consolidated Cash and Liquid Investments
$ 3,436 $ 3,459 Less:
Short-term marketable securities - QVC Group $ 8 $ 15 Short-term
marketable securities - Liberty Ventures Group 837 893 Long-term
marketable securities - Liberty Ventures Group 2 5
Total Liberty Consolidated Cash (GAAP) $ 2,589
$ 2,546 Debt: Senior notes and
debentures(4) $ 792 $ 792 Senior exchangeable debentures(5) 346 346
QVC senior notes(4) 3,550 3,550 QVC bank credit facility 895 920
Other 74 76
Total Attributed QVC Group Debt
$ 5,657 $ 5,684 Unamortized discount
and fair market value adjustment 37 7
Total
Attributed QVC Group Debt (GAAP) $ 5,694 $
5,691 Senior exchangeable debentures(5) $ 2,075 $
2,070 Other 44 43
Total Attributed Liberty
Ventures Group Debt $ 2,119 $ 2,113
Fair market value adjustment 168 51
Total
Attributed Liberty Ventures Group Debt (GAAP) $
2,287 $ 2,164 Total Liberty
Interactive Corporation Debt (GAAP) $ 7,981
$ 7,855 (1) Includes $8 million and $15
million of short-term marketable securities with an original
maturity greater than 90 days as of June 30, 2015 and September 30,
2015, respectively. (2) Includes $837 million and $893 million of
short-term marketable securities with an original maturity greater
than 90 days as of June 30, 2015 and September 30, 2015,
respectively. (3) Includes $2 million and $5 million of marketable
securities with an original maturity greater than one year as of
June 30, 2015 and September 30, 2015, respectively, which is
reflected in investments in available-for-sale securities in
Liberty Ventures Group's condensed attributed balance sheet. (4)
Face amount of Senior Notes and Debentures with no reduction for
the unamortized discount. (5) Face amount of Senior Exchangeable
Debentures with no reduction for the fair market value adjustment.
Total cash and liquid investments attributed to the QVC Group
increased by $22 million during the third quarter. Cash flow from
operations and additional borrowings were largely offset by stock
repurchases and capital expenditures. Total debt attributed to the
QVC Group increased by $27 million, primarily due to additional
borrowings on QVC’s credit facility. Subsequent to the end of the
quarter, QVC drew down an additional $910 million on its credit
facility in connection with the acquisition of zulily.
Total cash and liquid investments and debt attributed to the
Liberty Ventures Group were relatively flat during the third
quarter.
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 5:15 p.m. (E.S.T.) on November 4, 2015. 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, new
service and product offerings, Liberty Interactive’s expected
ownership interest in Interval Leisure Group following its
announced transaction with Starwood Hotel and Resorts, 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.
SUPPLEMENTAL INFORMATION
As a supplement to Liberty Interactive's condensed consolidated
statements of operations, which are included in its Form 10-Q,
the following is a presentation of quarterly information and
operating metrics on a stand-alone basis for the largest business
owned by Liberty Interactive (QVC) at September 30, 2015, which
Liberty Interactive has identified as a reportable segment.
Please see below for the definition of adjusted OIBDA and a
discussion of why management believes the presentation of adjusted
OIBDA for QVC provides useful information for investors. See
Schedule 2 to this press release for a reconciliation of QVC’s
adjusted OIBDA to operating income for the same period, as
determined under GAAP.
QUARTERLY
SUMMARY
(amounts in millions) 3Q14 4Q14 1Q15 2Q15 3Q15
QVC
Group QVC Revenue - US $ 1,368 $ 2,030 $ 1,342 $ 1,406 $
1,420 Revenue - International 652 751 596
592 587 Revenue - Total $ 2,020 $ 2,781 $ 1,938 $
1,998 $ 2,007 Adjusted OIBDA - US 329 474 306 349 333 Adjusted
OIBDA - International 110 146 101 100
97 Adjusted OIBDA - Total $ 439 $ 620 $ 407 $ 449 $ 430
Operating income - US 203 349 177 226 214 Operating income -
International 73 110 69 68 66
Operating income - Total $ 276 $ 459 $ 246 $ 294 $ 280 Gross margin
- US 37.2 % 35.6 % 36.5 % 38.0 % 36.4 % Gross margin -
International 37.8 % 37.7 % 38.1 % 38.7 % 38.4 %
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), and the Digital
Commerce companies 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) and net income (loss) generated by the
Digital Commerce companies prior to the reattribution.
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 and the
reattribution of the Digital Commerce companies. 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).
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 September 30, 2014,
December 31, 2014, March 31, 2015, June 30, 2015 and September
30, 2015, respectively.
QUARTERLY
SUMMARY
(amounts in millions) 3Q14 4Q14 1Q15 2Q15 3Q15
QVC
Group QVC Group Adjusted OIBDA (ex. Digital Commerce)(1) $ 433
$ 612 $ 401 $ 445 $ 421 Digital Commerce Adjusted OIBDA(1)
(2 ) NA NA NA NA
Adjusted OIBDA 431 612 401 445 421 Depreciation and
amortization (166 ) (150 ) (152 ) (149 ) (141 ) Stock compensation
expense (18 ) (17 ) (12 ) (12 )
(16 )
Operating Income $ 247 $
445 $ 237 $ 284
$ 264 (1) QVC Group
adjusted OIBDA presented exclusive of the impact of the Digital
Commerce companies and reconciled to both QVC Group adjusted OIBDA
and GAAP operating income. Under GAAP, the Digital Commerce
companies were only included as part of the QVC Group through
September 30, 2014.
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries) and the Digital Commerce
businesses to that entity or such businesses' operating income
(loss) calculated in accordance with GAAP for the three months
ended September 30, 2014, December 31, 2014, March 31, 2015,
June 30, 2015 and September 30, 2015, 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) 3Q14 4Q14 1Q15 2Q15 3Q15
QVC
Group QVC Adjusted OIBDA QVC US $ 329 $ 474 $ 306
$ 349 $ 333 QVC Germany 42 53 39 35 36 QVC Japan 41 45 39 37
35 QVC UK 31 50 28 35 33 QVC Italy (1 ) 1 (2 ) (1 ) — QVC France
(3 ) (3 ) (3 ) (6 ) (7 ) QVC
International adjusted OIBDA $ 110 $ 146 $ 101
$ 100 $ 97 Consolidated QVC adjusted OIBDA 439
620 407 449 430 Depreciation and amortization (147 ) (151 ) (153 )
(148 ) (141 ) Stock compensation (16 ) (10 )
(8 ) (7 ) (9 )
Operating Income $
276 $ 459 $ 246
$ 294 $ 280
Liberty Ventures Group Digital Commerce
Companies(1) Adjusted OIBDA $ (2 ) $ 44 $ 22 $ 19 $ 17
Depreciation and amortization (19 ) (20 ) (15 ) (13 ) (9 ) Stock
compensation 7 (16 ) (2 ) (15 )
(15 )
Operating Income (Loss) $ (14
) $ 8 $ 5 $
(9 ) $ (7 ) (1)
For GAAP purposes, the Digital Commerce companies have been
recorded as part of Liberty Ventures Group beginning with the
fourth quarter of 2014 (due to the reattribution). For presentation
purposes in this table, the results of the Digital Commerce
companies are included in Liberty Ventures Group for all periods
shown.
SCHEDULE 3
The following table provides a reconciliation of adjusted OIBDA
for QVC Group and the Digital Commerce companies to the Liberty
Interactive Corporation operating income (loss) calculated in
accordance with GAAP for the three months ended September 30, 2014,
December 31, 2014, March 31, 2015, June 30, 2015 and September 30,
2015, respectively.
QUARTERLY
SUMMARY
(amounts in millions) 3Q14 4Q14 1Q15 2Q15 3Q15 QVC Group
Adjusted OIBDA Consolidated QVC $ 439 $ 620 $ 407 $ 449 $ 430
Corporate and other (6 ) (8 ) (6 ) (4 )
(9 ) QVC Group Adjusted OIBDA(1) $ 433 $ 612 $
401 $ 445 $ 421 Liberty Ventures Group
Adjusted OIBDA Digital Commerce(1) $ (2 ) $ 44 $ 22 $ 19 $ 17
Corporate and other (6 ) (6 ) (4 ) (5 )
(4 ) Liberty Ventures Group Adjusted OIBDA $ (8 ) $ 38
$ 18 $ 14 $ 13
Consolidated Liberty
Interactive Corp. Adjusted OIBDA $ 425
$ 650 $ 419 $
459 $ 434 Depreciation and
amortization (166 ) (169 ) (168 ) (161 ) (150 ) Stock compensation
(20 ) (37 ) (15 ) (29 ) (37 )
Consolidated Liberty Interactive Corp. Operating Income
$ 239 $ 444 $
236 $ 269 $ 247
1) For GAAP purposes, the Digital Commerce
companies have been recorded as part of Liberty Ventures Group
beginning with the fourth quarter of 2014 (due to the
reattribution). For presentation purposes in this table, the
results of the Digital Commerce companies are included in Liberty
Ventures Group for all periods shown.
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 September 31, 2014, December 31,
2014, March 31, 2015, June 30, 2015 and September 30, 2015,
respectively. Adjusted net income excludes the impact of the
Digital Commerce companies due to their reattribution to Liberty
Ventures Group in the fourth quarter of 2014.
QUARTERLY
SUMMARY
(amounts in millions) 3Q14 4Q14 1Q15
2Q15 3Q15 LTM
QVC Group Net income $ 83
$ 222 $ 151 $ 112 $ 154 $ 639 Purchase accounting amort., net of
deferred tax benefit (1) 51 51 51 49 49 200 Digital Commerce net
income (loss) (16 ) — — — —
— QVC Group Adjusted net income $ 150 $ 273 $ 202 $
161 $ 203 $ 839 QVCA/B shares outstanding as of September
30, 2015 460 Adjusted LTM earnings per share $ 1.82 1)
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.
LIBERTY INTERACTIVE
CORPORATIONBALANCE SHEET INFORMATIONSeptember 30,
2015 - (unaudited)
Attributed QVC Ventures
Inter-group Consolidated Group
Group Eliminations Liberty
amounts in millions
Assets Current assets: Cash and cash
equivalents $ 512 2,034 — 2,546 Trade and other receivables, net
876 57 — 933 Inventory, net 1,166 66 — 1,232 Short-term marketable
securities 15 893 — 908 Other current assets 271 8
(206 ) 73 Total current assets
2,840 3,058
(206 ) 5,692 Investments in
available-for-sale securities and other cost investments 4 1,335 —
1,339 Investments in affiliates, accounted for using the equity
method 204 1,302 — 1,506 Property and equipment, net 997 37 — 1,034
Intangible assets not subject to amortization 7,594 126 — 7,720
Intangible assets subject to amortization, net 892 39 — 931 Other
assets, at cost, net of accumulated amortization 57 6
— 63 Total assets
$ 12,588 5,903
(206 ) 18,285 Liabilities and Equity
Current liabilities: Intergroup payable (receivable) $ 48 (48 ) — —
Accounts payable 722 30 — 752 Accrued liabilities 564 37 — 601
Current portion of debt 9 885 — 894 Current deferred tax
liabilities — 1,274 (206 ) 1,068 Other current liabilities
171 90 — 261 Total current liabilities
1,514 2,268 (206 ) 3,576
Long-term debt 5,682 1,279 — 6,961 Deferred income tax liabilities
926 802 — 1,728 Other liabilities 205 13 — 218
Total liabilities
8,327 4,362
(206 ) 12,483 Equity/Attributed net assets
(liabilities) 4,155 1,549 — 5,704 Noncontrolling interests in
equity of subsidiaries 106 (8 ) — 98 Total
liabilities and equity
$ 12,588 5,903
(206 ) 18,285
LIBERTY INTERACTIVE
CORPORATIONSTATEMENT OF OPERATIONS INFORMATIONThree
months ended September 30, 2015 - (unaudited)
Attributed QVC Ventures
Consolidated Group Group
Liberty amounts in millions Revenue: Net retail sales $
2,007 146 2,153 Operating costs and expenses: Cost of sales
1,266 92 1,358 Operating, including stock-based compensation 174 16
190 Selling, general and administrative, including stock-based
compensation 162 46 208 Depreciation and amortization 141
9 150 1,743 163 1,906
Operating income (loss) 264 (17 ) 247 Other income
(expense): Interest expense (70 ) (18 ) (88 ) Share of earnings
(losses) of affiliates, net 13 18 31 Realized and unrealized gains
(losses) on financial instruments, net 30 40 70 Gains (losses) on
dispositions, net (note 1) — (1 ) (1 ) Other, net 14
11 25 (13 ) 50 37 Earnings
(loss) before income taxes 251 33 284 Income tax benefit (expense)
(89 ) 3 (86 ) Net earnings (loss) 162 36 198 Less net
earnings (loss) attributable to noncontrolling interests 8
— 8 Net earnings (loss) attributable to
Liberty stockholders $ 154 36 190
LIBERTY INTERACTIVE
CORPORATIONSTATEMENT OF OPERATIONS INFORMATIONThree
months ended September 30, 2014 - (unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions Revenue: Net retail sales $ 2,330 — 2,330
Operating costs and expenses: Cost of sales 1,488 — 1,488
Operating, including stock-based compensation 203 — 203 Selling,
general and administrative, including stock-based compensation 226
8 234 Depreciation and amortization 166 — 166
2,083 8 2,091 Operating income
(loss) 247 (8 ) 239 Other income (expense): Interest expense
(80 ) (19 ) (99 ) Share of earnings (losses) of affiliates, net 13
23 36 Realized and unrealized gains (losses) on financial
instruments, net 2 16 18 Other, net (46 ) 8 (38 )
(111 ) 28 (83 ) Earnings (loss) from continuing
operations before income taxes 136 20 156 Income tax benefit
(expense) (41 ) 14 (27 ) Net earnings (loss) from
continuing operations 95 34 129 Net earnings (loss) from
discontinued operations, net of tax (4 ) 14 10
Net earnings (loss) 91 48 139 Less net earnings (loss) attributable
to noncontrolling interests 8 11 19 Net
earnings (loss) attributable to Liberty stockholders $ 83 37
120
LIBERTY INTERACTIVE
CORPORATIONSTATEMENT OF CASH FLOWS INFORMATIONNine
months ended September 30, 2015- (unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions CASH FLOWS FROM OPERATING ACTIVITIES: Net
earnings (loss) $ 442 166 608 Adjustments to reconcile net earnings
to net cash provided by operating activities: Depreciation and
amortization 442 37 479 Stock-based compensation 40 41 81 Cash
payments for stock based compensation — (11 ) (11 ) Excess tax
benefit from stock based compensation (17 ) (5 ) (22 ) Share of
(earnings) losses of affiliates, net (46 ) (75 ) (121 ) Cash
receipts from return on equity investments 21 21 42 Realized and
unrealized gains (losses) on financial instruments, net (28 ) (70 )
(98 ) (Gains) losses on dispositions — (110 ) (110 ) Loss on
extinguishment 21 — 21 Deferred income tax (benefit) expense (103 )
105 2 Other, net (5 ) (1 ) (6 ) Intergroup tax allocation 90 (90 )
— Intergroup tax payments (51 ) 51 — Changes in operating assets
and liabilities Current and other assets (39 ) 4 (35 ) Payables and
other current liabilities (30 ) (51 ) (81 ) Net cash
provided (used) by operating activities 737 12
749 CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid
for acquisitions — (20 ) (20 ) Cash proceeds from dispositions —
271 271 Investments in and loans to cost and equity investees (4 )
(122 ) (126 ) Cash receipts from returns of equity investments 200
50 250 Capital expended for property and equipment (132 ) (32 )
(164 ) Purchases of short term and other marketable securities (154
) (1,040 ) (1,194 ) Sales of short term and other marketable
securities 160 1,020 1,180 Other investing activities, net
(48 ) — (48 ) Net cash provided (used) by investing
activities 22 127 149 CASH FLOWS
FROM FINANCING ACTIVITIES: Borrowings of debt 1,470 486 1,956
Repayments of debt (1,638 ) (462 ) (2,100 ) Repurchases of Liberty
common stock (531 ) — (531 ) Min. withholding taxes on net
settlements of stock-based comp (17 ) — (17 ) Excess tax benefit
from stock-based compensation 17 5 22 Other financing activities,
net 2 (18 ) (16 ) Net cash provided (used) by
financing activities (697 ) 11 (686 ) Effect of
foreign currency rates on cash 28 — 28
Net increase (decrease) in cash and cash equivalents 90 150 240
Cash and cash equivalents at beginning of period 422
1,884 2,306 Cash and cash equivalents at end period
$ 512 2,034 2,546
LIBERTY INTERACTIVE
CORPORATIONSTATEMENT OF CASH FLOWS INFORMATIONNine
months ended September 30, 2014 - (unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions CASH FLOWS FROM OPERATING ACTIVITIES: Net
earnings (loss) $ 325 30 355 Adjustments to reconcile net earnings
to net cash provided by operating activities: (Earnings) loss from
discontinued operations 15 (63 ) (48 ) Depreciation and
amortization 493 — 493 Stock-based compensation 66 5 71 Cash
payments for stock based compensation (13 ) (2 ) (15 ) Excess tax
benefit from stock-based compensation (10 ) (1 ) (11 ) Share of
losses (earnings) of affiliates, net (41 ) 3 (38 ) Cash receipts
from return on equity investments 13 18 31 Realized and unrealized
gains (losses) on financial instruments, net (9 ) 57 48 Impairment
of intangible assets 7 — 7 Loss on extinguishment of debt 48 — 48
Deferred income tax (benefit) expense (146 ) 79 (67 ) Other, net 2
1 3 Intergroup tax allocation 158 (158 ) — Intergroup tax payments
(330 ) 330 — Changes in operating assets and liabilities Current
and other assets 166 (1 ) 165 Payables and other current
liabilities 71 (5 ) 66 Net cash provided
(used) by operating activities 815 293 1,108
CASH FLOWS FROM INVESTING ACTIVITIES: Cash proceeds
from dispositions — 40 40 Investments in and loans to cost and
equity investees (3 ) (48 ) (51 ) Capital expended for property and
equipment (142 ) — (142 ) Purchases of short term and other
marketable securities (59 ) (364 ) (423 ) Sales of short term and
other marketable securities 43 315 358 Other investing activities,
net (28 ) 16 (12 ) Net cash provided (used) by
investing activities (189 ) (41 ) (230 ) CASH FLOWS
FROM FINANCING ACTIVITIES: Borrowings of debt 3,233 — 3,233
Repayments of debt (2,910 ) (10 ) (2,920 ) Repurchases of Liberty
common stock (736 ) — (736 ) Min. withholding taxes on net
settlements of stock-based comp (16 ) — (16 ) Excess tax benefit
from stock-based compensation 10 1 11 Reattribution of subsidiary
25 (25 ) — Other financing activities, net (49 ) —
(49 ) Net cash provided (used) by financing activities (443
) (34 ) (477 ) Net cash provided (used) by discontinued operations:
Operating (20 ) 293 273 Investing — (194 ) (194 ) Financing 3 368
371 Change in available cash held by discontinued operations
3 (119 ) (116 ) Net cash provided (used) by discontinued
operations (14 ) 348 334 Effect of foreign currency rates on cash
(31 ) — (31 ) Net increase (decrease) in cash and
cash equivalents 138 566 704 Cash and cash equivalents at beginning
of period 595 307 902 Cash and cash
equivalents at end period $ 733 873 1,606
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Liberty Interactive CorporationCourtnee Ulrich,
720-875-5420
Liberty Interactive Corp. - Series A Liberty Ventures (delisted) (NASDAQ:LVNTA)
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