Liberty Interactive Corporation (LINTA)

Q1 2012 Earnings Call

May 8, 2012, 11:00 a.m. ET


Courtnee Ulrich – VP, IR

Gregory B. Maffei – President, CEO

Christopher W. Shean – SVP, CFO

Mike George – QVC, President, CEO


David Gober – Morgan Stanley

Barton Crockett – Lazard Capital Markets

Ben Mogil – Stifel Nicolaus

Thomas Forte – Telsey Advisory Group LLC

Matthew Harrigan – Wunderlich Securities

Jason Bazinet – Citi

Jessica Reif Cohen – BofA/Merrill Lynch

Martin Pyykkonen – Janco Partners



Good day everyone, and welcome to the Liberty Interactive Corporation quarterly conference call. At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Courtney Ulrich. Please go ahead.

Courtney Ulrich

Good morning. Before we begin, we’d like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about financial guidance, business strategies, market potential, future financial performance, new service and produce launches 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 and services, competitive issues, regulatory issues and continued access to capital in terms acceptable to Liberty Interactive. These forward-looking statements speak only as of the date of this call, 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. On today’s call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, preliminary notes, and schedules one through three can be found at the end of this presentation. And with that, I’ll turn it over to Greg Maffei, Liberty Interactive’s President and CEO.

Gregory Maffei

Thank you, Courtney, and good morning to all of you. Today, besides myself speaking on the call we will have Liberty’s CFO Chris Shean, QVC’s CEO Mike George and QVC U.S.’s CEO, Claire Watts. So, on to the highlights.

QVC had solid results for the quarter, particularly in the U.S. and Japan. Our e-commerce companies, we were pleased with their performance as their growth continued to outpace comp score estimates for similar companies. Notably, we also completed the initial S-4 filing with the SEC to create our new Liberty Ventures tracking stock. We’re looking to close that in early July. We made significant purchases of our shares, more significant than we’ve done in any recent quarters, $325 million of LINTA stock, and we took advantage of strong results in the rise of stocks of Expedia and TripAdvisor to monetize a portion of our high basis shares. With that, let me turn it over to our CFO, Chris Shean.

Christopher Shean

Thanks, Greg. Liberty Interactive’s revenue increased 7% for the first quarter, while adjusted OIBDA increased 11%. Within that, QVC increased total revenue 5% for the quarter, while its adjusted OIBDA increased 7%. Liberty Interactive’s other e-commerce businesses grew 18%, and their adjusted OIBDA increased 17% in the first quarter. Now let’s take a quick look at LINTA’s liquidity picture.

At the end of the quarter, we had $800 million in cash and 6.5 million principal amount in debt. QVC’s total debt-to-adjusted-OIBDA ratio, as defined in its credit agreement, was approximately 1.4 times, as compared to maximum allowable leverage covenant of 3.5 times. After that, we’ll hand it over to Mike with some additional insights on QVC.

Mike George

Thank you, Chris. We were very pleased with our results in Q1, with most of our markets contributing to our 5% net revenue growth, and adjusted OIBDA was up 7% on the strength of the Japan rebound growth in the U.S. and narrow end losses in Italy.

We’ve sustained our track record of strong e-commerce growth, up 14% in the quarter, to represent 33% of worldwide net revenue, the three-point increase over the prior year. Our mobile business also continues to be a highlight. It represented 6% of total revenue worldwide in Q1, that’s double last year’s mix, and if we look at mobile penetration as a percentage of our e-commerce revenue, that number jumps up to over 18%.

Our sales growth from existing customers was especially strong, up 6% per customer. Our revenue growth from new customers was down 1%; that’s our first decline in new customer growth in a few years. This was largely due to a changing product mix, with higher growth in our fashion businesses and lower growth in consumer electronics globally, and that’s a mix that tends to draw more from existing than new customers. This decline in new customer growth was more than offset by a 7% increase in the sales from inactive customers who begin purchasing again.

The U.S. had a strong quarter, with revenue and adjusted OIBDA both up 4%. We saw especially strong growth in apparel, accessories, cooking and dining and home improvement. We saw a decline in consumer electronics, which had been a strength over the last few years. Our e-commerce revenue grew 13%, with penetration increasing three points to represent 39% of total revenue. We did experience an increase in return rates, up 130 basis points in the quarter to 19.5%, which impacted our top-line growth. This increase was largely driven by the strong mix-shift to apparel and higher price-point jewelry, and to a lesser extent, from select holiday products that we turned at a higher-than-anticipated rate.

Read the rest of this transcript for free on