Evine Live Inc. Reports Third Quarter 2016 Results

MINNEAPOLIS, Nov. 22, 2016 (GLOBE NEWSWIRE) -- Evine Live Inc. ("Evine") (NASDAQ:EVLV) today announced results for the third quarter ended October 29, 2016. The company posted quarterly net sales of $152 million, continuing its progress on the strategy of driving toward sustained profitability this fiscal year. Net loss for the quarter was $3.9 million, a 25% improvement year-over-year, with adjusted EBITDA of a positive $2.5 million, a 1,400% improvement year-over-year. Gross profit as a percentage of sales increased 210 basis points to 36.6% compared to 34.5% in the third quarter of last year.

"I'm pleased with our progress as we continue to improve profitability through a disciplined merchandising mix that prioritizes contribution margin," said CEO Bob Rosenblatt.  "For consecutive quarters, we have been expanding our gross margin rate, improving our cash position, lowering our net loss and improving our EPS by refining our mix of compelling merchandise, focusing on our most successful product categories, and engaging our valued customers via a personal shopping experience."

Fiscal Year 2016 Third Quarter Highlights
  • Net sales were $152 million, a 7% decrease year-over-year.
  • Gross profit as a percentage of sales increased 210 basis points to 36.6%.
  • Net loss was $3.9 million, a 25% improvement year-over-year.
  • Adjusted EBITDA was $2.5 million, a 1,400% improvement year-over-year.
  • EPS was ($0.06), a 33% improvement year-over-year.
  • Total Cash, including restricted cash, was $40 million.

Rosenblatt continued, "I am also proud of the progress we made this quarter toward our 2017 revenue growth strategy that centers on gathering a world-class team to help us cultivate our products, attract the right new customers based on their digital lifetime value, and create a culture that can drive sustainable revenue growth.  This progress includes filling out our executive management team with the recent hire of Lori Riley, SVP, Chief Human Resources Officer; launching new high quality beauty brands, like Sirot and CoverFx; launching new fixed programming blocks like Paula Deen on location in Savannah, Georgia, and attracting leading industry advisors to help us bring new brands, products and personalities to our business, as we have done with Tommy Hilfiger and Tommy Mottola."
 
SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average price points and EPS)
                           
      Q3 2016 10/29/2016   Q3 2015 10/31/2015   Change   YTD 2016 10/29/2016   YTD 2015 10/31/2015   Change
                           
Net Sales   $ 151.6     $ 162.3       (7 %)   $ 475.7     $ 481.8       (1 %)
Gross Margin %     36.6 %     34.5 %   210 bps     37.1 %     35.7 %   140 bps
Adjusted EBITDA   $ 2.5     $ 0.2       1,396 %   $ 9.8     $ 4.3       129 %
Net Loss   $ (3.9 )   $ (5.2 )     25 %   $ (10.8 )   $ (13.0 )     17 %
EPS   $ (0.06 )   $ (0.09 )     33 %   $ (0.19 )   $ (0.23 )     17 %
                           
  Net Shipped Units (000s)     2,253       2,282       (1 %)     7,131       6,946       3 %
  Average Selling Price (ASP)   $ 60     $ 65       (8 %)   $ 59     $ 63       (6 %)
  Return Rate %     20.5 %     18.9 %   160 bps     19.8 %     20.2 %   (40 bps)
  Online Net Sales %     49.0 %     46.0 %   300 bps     48.6 %     45.7 %   290 bps
  Total Customers - 12 Month Rolling (000s)   1,429       1,446       (1 %)     N/A       N/A       N/A  
                           
% of Net Sales by Category                        
  Jewelry & Watches     42 %     36 %         42 %     41 %    
  Home & Consumer Electronics     25 %     33 %         23 %     27 %    
  Beauty     14 %     13 %         15 %     14 %    
  Fashion & Accessories     19 %     18 %         20 %     18 %    
  Total     100 %     100 %         100 %     100 %    
                                           

Third Quarter 2016 Results
  • Wearable categories, which include Jewelry & Watches, Fashion & Accessories, and Beauty, posted strong revenue performance, and together grew by 3%.  The growth in wearables was offset by a 66% decline in the Consumer Electronics category.
  • Return rate for the quarter was 20.5%; an increase of 160 basis points year-over-year, driven by product mix shifts.
  • Gross profit as a percentage of sales increased 210 basis points to 36.6%, also driven by product mix shifts.  Gross profit dollars decreased 0.9% to $55.4 million.
  • Net loss was $3.9 million, a 25% improvement year-over-year and Adjusted EBITDA increased 1,400% to a positive $2.5 million. These results were primarily attributable to a 4% operating expense reduction of $2.7 million year-over-year, driven primarily by lower content distribution costs and decreased accrued incentive compensation, which were partially offset by higher expenses in marketing, and higher variable expenses resulting from increased credit costs and increased labor costs in customer solutions and fulfillment center.
  • EPS for the fiscal 2016 third quarter improved to ($0.06), which includes $0.6 million in executive and management transition costs and $0.2 million in distribution facility consolidation and technology upgrade costs. EPS for the fiscal 2015 third quarter was ($0.09), which included $0.8 million in executive and management transition costs, $0.1 million in costs associated with the implementation of the Shareholder Rights Plan, and $0.3 million in distribution facility consolidation and technology upgrade costs.

Liquidity and Capital Resources

As of October 29, 2016, total cash, including restricted cash, was $40.1 million, compared to $40.1 million at the end of the second quarter of fiscal 2016. The Company also had an additional $16.2 million of unused availability on its revolving credit facility with PNC Bank at the end of the third quarter 2016.

Strategic Investment in Evine

As announced on September 14, 2016, the Company executed a definitive agreement to sell $10 million of common stock at $1.68 per share to investors ("Investors") that included, among others, Mr. Tommy Hilfiger, Mr. Morris Goldfarb and Mr. Tommy Mottola. This initial investment closed on September 19, 2016 and resulted in 5,952,381 shares sold to the Investors.  Other details were provided in Form 8-K filings with the SEC on September 15, 2016 and November 4, 2016.

2016 Outlook

The Company expects revenue in the fourth quarter to be negative low to mid-single digits on a year-over-year basis. We expect Adjusted EBITDA to increase in the fourth quarter on both a sequential and year-over-year basis.

Conference Call

A conference call and webcast to discuss the Company's third quarter earnings will be held at 8:30 a.m. Eastern Time on Tuesday, November 22, 2016:

AUDIO WEBCAST LINK:   http://event.on24.com/wcc/r/1212123/4462CF2FF40534845EAD22D0F0F3B135

TELEPHONE:  1-877-407-9039 (domestic) or 201-689-8470 (international)

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) operates Evine, a digital commerce company that offers a compelling mix of proprietary and name brands directly to consumers in an engaging and informative shopping experience via television, online and on mobile. Evine reaches approximately 87 million cable and satellite television homes 24 hours a day with entertaining content in a comprehensive digital shopping experience.

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)
                 
            October 29,   January 30,
              2016       2016  
             (Unaudited)    
                 
ASSETS
Current assets:          
  Cash     $ 39,680     $ 11,897  
  Restricted cash and investments       450       450  
  Accounts receivable, net       89,588       114,949  
  Inventories       81,187       65,840  
  Prepaid expenses and other       5,257       5,913  
    Total current assets       216,162       199,049  
Property and equipment, net       51,464       52,629  
FCC broadcasting license       12,000       12,000  
Other assets       1,609       1,819  
            $ 281,235     $ 265,497  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                 
Current liabilities:          
  Accounts payable     $ 78,504     $ 77,779  
  Accrued liabilities       36,367       35,342  
  Current portion of long term credit facilities     2,993       2,143  
  Deferred revenue       85       85  
    Total current liabilities       117,949       115,349  
                 
                 
Deferred revenue       100       164  
Deferred tax liability       3,326       2,734  
Long term credit facilities       83,122       70,271  
    Total liabilities       204,497       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   635       571  
  Additional paid-in capital       434,061       423,574  
  Accumulated deficit         (357,958 )       (347,166 )
    Total shareholders' equity         76,738         76,979  
            $   281,235     $   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 Nine-Month Periods Ended
                     
        October 29,   October 31,   October 29,   October 31,
          2016       2015       2016       2015  
Net sales $ 151,636     $ 162,258     $ 475,695     $ 481,770  
Cost of sales    96,205       106,348       298,988       309,699  
      Gross profit   55,431       55,910       176,707       172,071  
       Margin %   36.6 %     34.5 %     37.1 %     35.7 %
Operating expense:              
  Distribution and selling   49,161       51,038       154,191       153,194  
  General and administrative   5,690       5,975       17,337       18,078  
  Depreciation and amortization   1,941       2,131       6,025       6,369  
  Executive and management transition costs   568       754       4,411       3,549  
  Distribution facility consolidation and technology upgrade costs   150       294       530       1,266  
    Total operating expense   57,510       60,192       182,494       182,456  
Operating loss   (2,079 )     (4,282 )     (5,787 )     (10,385 )
                     
Other expense:              
  Interest income   3       2       7       6  
  Interest expense   (1,586 )     (690 )     (4,397 )     (1,957 )
    Total other expense   (1,583 )     (688 )     (4,390 )     (1,951 )
                     
Loss before income taxes   (3,662 )     (4,970 )     (10,177 )     (12,336 )
                     
Income tax provision   (205 )     (205 )     (615 )     (615 )
                     
Net loss $ (3,867 )   $ (5,175 )   $ (10,792 )   $ (12,951 )
                     
Net loss per common share $ (0.06 )   $ (0.09 )   $ (0.19 )   $ (0.23 )
                     
Net loss per common share              
    ---assuming dilution $ (0.06 )   $ (0.09 )   $ (0.19 )   $ (0.23 )
                     
Weighted average number of              
common shares outstanding:              
      Basic   60,513,215       57,125,435       58,317,681       56,952,952  
      Diluted   60,513,215       57,125,435       58,317,681       56,952,952  

EVINE Live Inc.
AND SUBSIDIARIES
Reconciliation of Adjusted EBITDA to Net Loss:
(Unaudited)
             
     For the Three-Month Periods Ended    For the Nine-Month Periods Ended
             
    October 29, October 31,   October 29, October 31,
      2016     2015       2016     2015  
             
             
Adjusted EBITDA (000's)   $   2,529   $   169     $   9,790   $   4,279  
Less:            
Executive and management transition costs       (568 )     (754 )       (4,411 )     (3,549 )
Distribution facility consolidation and technology upgrade costs     (150 )     (294 )       (530 )     (1,266 )
Shareholder Rights Plan costs       -       (82 )       -       (446 )
Non-cash share-based compensation       (797 )     (762 )       (1,432 )     (2,138 )
EBITDA (as defined)       1,014       (1,723 )       3,417       (3,120 )
             
             
A reconciliation of EBITDA to net loss is as follows:            
             
EBITDA (as defined)       1,014       (1,723 )       3,417       (3,120 )
Adjustments:            
Depreciation and amortization       (3,093 )     (2,559 )       (9,204 )     (7,265 )
Interest income       3       2         7       6  
Interest expense       (1,586 )     (690 )       (4,397 )     (1,957 )
Income taxes       (205 )     (205 )       (615 )     (615 )
Net loss   $   (3,867 ) $   (5,175 )   $   (10,792 ) $   (12,951 )
                             

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); 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. 

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

This document 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 or estimated cost savings from contract renegotiations; 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 and exclusive brands; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our credit facilities covenants; customer acceptance of our 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; including without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings; 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; our ability to attract new customers and retain existing customers; changes in shipping costs; our ability to offer new or innovative products and customer acceptance of the same; changes in customers viewing habits of television programming; 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 our forward-looking statements whether as a result of new information, future events or otherwise.
ContactsMedia: Dawn Zaremba Evine Live Inc.press@evine.com(952) 943-6043Investors: Michael PorterEvine Live Inc.mporter@evine.com(952) 943-6517

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