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Strategies & Market Trends : Value Investing

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From: Sean Collett	11/9/2023 12:31:32 PM
	1 Recommendation Recommended By sixty2nds Read Replies (3) of 78673

As promised, Qurate investor day recap and the notes I took. Went pretty fast so tried my best to document everything I could. What they have done so far with Project Athens: Executed cost reductions and margin actions throughout 2023 and will reach run-rate in 2024 Renegotiated favorable freight, shipping, and vendor rates Sold Zulily Improved OIBDA in Q3 Reduced inventory balance and re-infused fresh merchandise and enhanced programming Returned order-to-delivery times to pre-Rocky Mountain fire and overall improved fulfillment efficiency Expanded video commerce gross margins through pricing and better merch mix Launched QVC/HSN on Vizio Smart TV and Amazon Freevee Launched beta of Sune which is a next generation live streaming shopping platform Improved labor productivity by 21% in units per hours vs. 2022 Reduced headcount ~17% which has improved their operating costs Balance sheet updates: Completed sale/leaseback for UK/Germany Monetized non-core assets Sold Zulily Finalized insurance recovery from Rocky Mountain $741M total principal debt reduced YTD Repurchased $177M 2024 QVC notes and $15M 2025 QVC notes at discount Retired/exchange the remaining 1.75% debentures Reduced aggregate interest expense vs. prior year Reduced leverage ratio to 2.6x as of 9/30 which brings them closer to their target of 2.5x Expect FCF to be applied to debt payment for foreseeable future Well capitalized to handle near term maturities with $1.1B cash and $2.1B in undrawn revolver capacity Expect 2024/2025 maturities to be dealt with using cash and/or revolver Technology changes/concerns: While cord cutting is a concern to the market, Qurate does not see this as too major a concern due to their ability to pivot to streaming platforms. They are working to move customers to these newer platforms too. 58% of QVC revenue came from eCommerce in Q3 and 69% of QVC revenue came from mobile in Q3. Project Athens was designed to stabilize the company and focus on FCF generation, not so much growing the customer base. As they move into year 3 of Project Athens, customer growth will be a big focus for them and they feel confident they can reach customers via new platforms and grow. Streaming is growing 9% YoY and they currently reach 100M 40M reach via free OTT streaming which is up 25% YoY vMVPD reaches 17M and that is also up 21% YoY Overall say a 23% increase in viewing minutes per household in Q3 Sune is their home grown app targeted at products for millennials and Gen Z audience Other notes: Estimate they lost 1M customers due to the Rocky Mountain fire and they are now seeing stabilization of customer declines. Many of their products are exclusive which means they can only be bought via QVC While housing products are slowing, Cornerstone was able to turn its first positive OIBDA Gave a taste of a post Project Athens world focused on growing customers outside of the current aging base. While cable has been their star, they are able to move away from it and believe they can continue to grow in the new world and much of their revenue is already coming from digital spaces. -Sean

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