OREANDA-NEWS.  Evine Live Inc. (NASDAQ:EVLV) today announced results for the second quarter ended July 30, 2016. The company posted quarterly net sales of $157 million.  The company also posted a net loss of $2 million, a 35% improvement year-over-year, and an Adjusted EBITDA of $3.8 million, a 52% improvement year-over-year. Gross profit as a percentage of sales increased 160 basis points to 38.1% compared to 36.5% in the second quarter of last year.

“I’m pleased with our team’s delivery of improved profitability this quarter as we executed on our strategy announced in February.  By improving the merchandising balance, accelerating the development of engaging brands our customers love and prioritizing contribution margin discipline, we were able to expand our gross margin by 160 basis points, improve our cash position by 148% and lower our net loss to $2.0 million — which is a 35% improvement compared to the second quarter last year,” said newly appointed CEO Bob Rosenblatt.

Fiscal Year 2016 Second Quarter Highlights

  • Net sales were $157 million, a 2% decrease year-over-year.
  • Gross profit as a percentage of sales increased 160 basis points to 38.1%.
  • Net loss was $2.0 million, a 35% improvement year-over-year.
  • Adjusted EBITDA was $3.8 million, a 52% increase year-over-year.
  • EPS was ($0.03), an improvement of $0.02 year-over-year.
  • Total Cash, including restricted cash, increased by 148% year-over-year to $40.1 million.

Rosenblatt continued, “We continued to drive significant growth in our merchandising partnerships by adding new brands and expanding existing ones. From our newer brands like Vanessa Williams, Paula Deen, Todd English and Beekman 1802, to our more tenured brands like Invicta, One World and Gems En Vogue, we’re excited about engaging our customers wherever they are -- on social, mobile, television and now 'over the top' platforms like Apple TV, Amazon Fire Stick, Roku and Samsung smart TVs. Additionally, as Evine’s new CEO, it’s great to be a permanent part of our newly energized management team and to build something more special for our customers — both existing and new — our employees, and our shareholders.  We are building a culture based on trust, mutual support, accountability and a clear definition of success.”

 
SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average price points and EPS)
                           
      Q2 2016
07/30/2016		   Q2 2015
08/01/2015		   Change   YTD 2016
07/30/2016		   YTD 2015
08/01/2015		   Change
                           
Net Sales   $ 157.1     $ 161.1       (2 %)   $ 324.1     $ 319.5       1 %
                           
Gross Margin %     38.1 %     36.5 %   160 bps     37.4 %     36.4 %   100 bps
                           
Adjusted EBITDA   $ 3.8     $ 2.5       52 %   $ 7.3     $ 4.1       77 %
                           
Net Loss   $ (2.0 )   $ (3.0 )     35 %   $ (6.9 )   $ (7.8 )     11 %
                           
EPS   $ (0.03 )   $ (0.05 )     40 %   $ (0.12 )   $ (0.14 )     14 %
                           
  Homes (Average 000s)     87,417       88,334       (1 %)     87,589       88,307       (1 %)
  Net Shipped Units (000s)     2,461       2,434       1 %     4,878       4,664       5 %
  Average Selling Price (ASP)   $ 57     $ 60       (5 %)   $ 59     $ 62       (5 %)
  Return Rate %     19.8 %     21.4 %   (160 bps)     19.4 %     20.9 %   (150 bps)
  Online Net Sales %     47.9 %     45.9 %   200 bps     48.4 %     45.6 %   280 bps
  Total Customers - 12 Month Rolling (000s)   1,447       1,439       1 %   N/A     N/A     N/A  
                           
% of Net Sales by Category                        
  Jewelry & Watches     41 %     42 %         42 %     44 %    
  Home & Consumer Electronics     21 %     22 %         22 %     24 %    
  Beauty     16 %     15 %         16 %     14 %    
  Fashion & Accessories     22 %     21 %         20 %     18 %    
  Total     100 %     100 %         100 %     100 %    
                           

Second Quarter 2016 Results

  • Beauty grew 2% vs. the prior year, followed closely by Fashion at 1%. Jewelry & Watches declined by 7% and Home & Consumer Electronics declined by 9%, both on less airtime.
  • Return rate for the quarter was 19.8%; an improvement of 160 basis points year-over-year.
  • Gross profit dollars increased 1.7% to $59.8 million. Gross profit as a percentage of sales increased 160 basis points to 38.1%.
  • Net loss was $2.0 million, a 35% improvement year-over-year.
  • Adjusted EBITDA increased to $3.8 million primarily due to improved merchandising margins and increased discipline in operating expenses and shipping & handling margin.
  • Operating expense decreased $1.0 million year-over-year to $60.0 million, a 2% decrease, driven primarily by stronger discipline with corporate expenses and a reduction in distribution facility consolidation and technology upgrade costs. 
  • EPS for the fiscal 2016 second quarter improved to ($0.03), which includes $0.2 million in executive and management transition costs and $0.3 million in distribution facility consolidation and technology upgrade costs. EPS for the fiscal 2015 second quarter was ($0.05), which included $0.2 million in executive and management transition costs, $0.4 million in costs associated with the implementation of the Shareholder Rights Plan, and $1.0 million in distribution facility consolidation and technology upgrade costs.

Liquidity and Capital Resources

As of July 30, 2016, total cash, including restricted cash, was $40.1 million, compared to $33.2 million at the end of the first quarter of fiscal 2016. The Company also had an additional $11.1 million of unused availability on its revolving credit facility with PNC Bank at the end of the second quarter 2016.

Rosenblatt Named Permanent CEO

Bob Rosenblatt was named CEO of Evine Live Inc. effective August 18, 2016.  Mr. Rosenblatt has more than 25 years of leadership experience at a number of leading retail organizations, including Group President and Chief Operating Officer of Tommy Hilfiger, Chief Operating Officer and President of HSN (formerly the Home Shopping Network) and Chief Financial Officer at Bloomingdale’s.

2016 Outlook

Executing on our 2016 priority of improving profitability, the Company expects revenue growth in the back half of the year to be similar to the low single digit revenue growth achieved in the first half of the year. We expect third quarter Adjusted EBITDA to be similar to the first and second quarter 2016 Adjusted EBITDA results, driven primarily by improved margins and a more balanced merchandising mix.  In addition, the Company expects increased Adjusted EBITDA in the fourth quarter on both a year over year and previous quarter basis.

 

 
 
Evine Live Inc.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
                 
            July 30,   January 30,
              2016       2016  
            (Unaudited)    
                 
ASSETS
Current assets:          
  Cash     $ 39,644     $ 11,897  
  Restricted cash and investments       450       450  
  Accounts receivable, net       93,246       114,949  
  Inventories       58,789       65,840  
  Prepaid expenses and other       6,047       5,913  
    Total current assets       198,176       199,049  
Property and equipment, net       50,506       52,629  
FCC broadcasting license       12,000       12,000  
Other assets       1,661       1,819  
            $ 262,343     $ 265,497  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                 
Current liabilities:          
  Accounts payable     $ 64,423     $ 77,779  
  Accrued liabilities       37,142       35,342  
  Current portion of long term credit facilities     2,993       2,143  
  Deferred revenue       85       85  
    Total current liabilities       104,643       115,349  
                 
                 
Deferred revenue       121       164  
Deferred tax liability       3,129       2,734  
Long term credit facilities       83,766       70,271  
    Total liabilities       191,659       188,518  
                 
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;      
    57,335,381 and 57,170,245 shares issued and outstanding   573       571  
                 
  Additional paid-in capital       424,202       423,574  
                 
  Accumulated deficit       (354,091 )     (347,166 )
    Total shareholders' equity       70,684       76,979  
            $ 262,343     $ 265,497  
                 
 
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
                     
        July 30,   August 1,   July 30,   August 1,
          2016       2015       2016       2015  
 Net sales $ 157,139     $ 161,061     $ 324,059     $ 319,512  
 Cost of sales    97,311       102,205       202,783       203,351  
      Gross profit   59,828       58,856       121,276       116,161  
      Margin %   38.1 %     36.5 %     37.4 %     36.4 %
 Operating expense:              
  Distribution and selling   51,605       51,357       105,030       102,156  
  General and administrative   5,878       6,391       11,647       12,103  
  Depreciation and amortization   1,977       2,107       4,084       4,238  
  Executive and management transition costs   242       205       3,843       2,795  
  Distribution facility consolidation and technology upgrade costs   300       972       380       972  
    Total operating expense   60,002       61,032       124,984       122,264  
 Operating loss   (174 )     (2,176 )     (3,708 )     (6,103 )
                     
 Other expense:              
  Interest income   2       2       4       4  
  Interest expense   (1,606 )     (669 )     (2,811 )     (1,267 )
    Total other expense   (1,604 )     (667 )     (2,807 )     (1,263 )
                     
 Loss before income taxes   (1,778 )     (2,843 )     (6,515 )     (7,366 )
                     
Income tax provision   (205 )     (205 )     (410 )     (410 )
                     
 Net loss $ (1,983 )   $ (3,048 )   $ (6,925 )   $ (7,776 )
                     
 Net loss per common share $ (0.03 )   $ (0.05 )   $ (0.12 )   $ (0.14 )
                     
 Net loss per common share              
     ---assuming dilution $ (0.03 )   $ (0.05 )   $ (0.12 )   $ (0.14 )
                     
Weighted average number of              
common shares outstanding:              
      Basic   57,258,672       57,092,654       57,219,914       56,866,711  
      Diluted   57,258,672       57,092,654       57,219,914       56,866,711  
                     

 

 
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
             
    July 30, August 1,   July 30, August 1,
      2016     2015       2016     2015  
             
             
Adjusted EBITDA (000's)   $ 3,836   $ 2,532     $ 7,261   $ 4,111  
Less:            
Executive and management transition costs     (242 )   (205 )     (3,843 )   (2,795 )
Distribution facility consolidation and technology upgrade costs   (300 )   (972 )     (380 )   (972 )
Shareholder Rights Plan costs     -     (364 )     -     (364 )
Non-cash share-based compensation     (398 )   (768 )     (635 )   (1,376 )
EBITDA (as defined)     2,896     223       2,403     (1,396 )
             
             
A reconciliation of EBITDA to net loss is as follows:            
             
EBITDA (as defined)     2,896     223       2,403     (1,396 )
Adjustments:            
Depreciation and amortization     (3,070 )   (2,399 )     (6,111 )   (4,707 )
Interest income     2     2       4     4  
Interest expense     (1,606 )   (669 )     (2,811 )   (1,267 )
Income taxes     (205 )   (205 )     (410 )   (410 )
Net loss   $ (1,983 ) $ (3,048 )   $ (6,925 ) $ (7,776 )
             

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 facility 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.