iMedia Brands Reports Third Quarter 2020 Results

Rhea-AI Summary

iMedia Brands reported Q3 2020 results with net sales of $109 million, a 5% decline year-over-year, despite a 4% increase in active customers. Gross margin improved to 37.4%, a 130-basis point increase. The company's net loss was $4.7 million, showing a $2 million improvement compared to the previous year. Adjusted EBITDA stood at $6.4 million, a notable increase from a loss in Q3 2019. Unrestricted cash rose to $19 million, while net debt decreased to $33.6 million. Looking forward, iMedia expects mid-to-high single-digit millions in adjusted EBITDA for Q4.

Positive

• Active customer file grew by 4% year-over-year.
• Gross margin improved to 37.4%, up 130 basis points.
• Net loss narrowed to $4.7 million, a 30% improvement.
• Adjusted EBITDA increased to $6.4 million from a loss last year.
• Unrestricted cash increased by $8.7 million to $19 million.
• Net debt reduced by $25.1 million to $33.6 million.

Negative

• Net sales decreased by 5% compared to the prior year.
• Year-to-date sales down 12.9% to $329.4 million.
• Average Selling Price (ASP) declined by 12% to $58.
• Total customers reduced by 8% year-over-year.

MINNEAPOLIS, Nov. 24, 2020 (GLOBE NEWSWIRE) -- iMedia Brands, Inc. (the “Company”) (NASDAQ: IMBI) today announced results for the third quarter ended October 31, 2020.

Third Quarter 2020 Summary & Recent Highlights

• Active customer file grew by 4% year-over-year, driven by a 31% growth in new customers.
• Q3 net sales were $109.0 million, a decline of 5% compared to same prior-year period, which was the best year-over-year quarterly net sales performance in more than two years. This success was primarily driven by 49 exciting new brands launched so far this year that have generated approximately 21% of our year-to-date net sales, the highest percentage in any nine-month period in the Company’s 30-year history.
• Q3 gross margin was 37.4%, a 130-basis point improvement over the same prior-year period. Year-to-date gross margin was 37.2%, a 370-basis point improvement over the same prior-year period.
• Shaq kitchen products launched in over 2,000 Target and Sam’s Club stores in October 2020.
• Completed an oversubscribed common equity raise in August 2020, increasing institutional ownership and strengthening the balance sheet as the Company positions for growth.
• Q3 net loss was $4.7 million, a $2.0 million improvement over the same prior-year period. Year-to-date net loss was $10.5 million, a $27.4 million improvement over the same prior-year period.
• Q3 adjusted EBITDA was $6.4 million, a $7.4 million improvement over the same prior-year period. Year-to-date adjusted EBITDA was $15.5 million, a $24.7 million improvement over the same prior-year period.
• Float Left’s OTT SaaS proprietary platform, Flicast, generated a 100% year-over-year increase in demand¹ in Q3 as it continues to launch high quality OTT apps for clients on over 12 different internet-based video platforms.
• Company’s newest consumer brand, J.W. Hulme, premiered on both ShopHQ and ShopBulldogTV during Q3 and exceeded internal sales forecasts by offering customers an engaging assortment of men’s and women’s accessories.
  

CEO Commentary

“Q3 was another strong performance from our entrepreneurial-minded employees and vendors,” said Tim Peterman, CEO of iMedia Brands. “We are passionate about capturing our opportunities, and it shows.”

Third Quarter 2020 Results

SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average selling price and EPS)
		Q3 2020 10/31/2020				Q3 2019 11/2/2019				Change			YTD 2020 10/31/2020				YTD 2019 11/2/2019				Change
Net Sales		$	109.0			$	115.2			(5.3	%)		$	329.4			$	378.2			(12.9	%)
Gross Margin %			37.4	%			36.1	%		130 bps				37.2	%			33.5	%		370 bps
Adjusted EBITDA		$	6.4			$	(1.0	)		N/A			$	15.5			$	(9.2	)		N/A
Net loss		$	(4.7	)		$	(6.7	)		30	%		$	(10.5	)		$	(37.9	)		72	%
EPS		$	(0.39	)		$	(0.89	)		56	%		$	(1.05	)		$	(5.20	)		80	%
Net Shipped Units (000s)			1,664				1,578			5	%			4,775				5,227			(9	%)
Average Selling Price (ASP)		$	58			$	66			(12	%)		$	61			$	65			(6	%)
Return Rate %			14.4	%			19.0	%		(460 bps)				14.5	%			19.7	%		(520 bps)
ShopHQ Digital Net Sales %			49.1	%			51.5	%		(240 bps)				50.7	%			52.3	%		(160 bps)
Total Customers - 12 Month Rolling (000s)			1,028				1,115			(8	%)		N/A				N/A				N/A
% of ShopHQ Net Merchandise Sales by Category
Jewelry & Watches			40	%			45	%						40	%			45	%
Home & Consumer Electronics			16	%			23	%						14	%			21	%
Beauty & Health			34	%			18	%						34	%			19	%
Fashion & Accessories			10	%			14	%						12	%			15	%
Total			100	%			100	%						100	%			100	%

Liquidity and Capital Resources

As of October 31, 2020, total unrestricted cash was $19.0 million, an increase of $8.7 million from prior-year end. Net debt at the end of Q3 was $33.6 million, a $25.1 million reduction from prior-year end. The Company also had an additional $11.3 million of unused availability on its revolving credit facility.

Outlook

In Q4, iMedia Brands anticipates posting adjusted EBITDA in the mid-to-high single-digit millions. The Company also continues to believe that the pandemic’s effect will be reduced because it has a direct-to-consumer revenue model that serves customers who seek to buy goods from the comfort of their own homes, and it is not dependent on the traditional advertising dollars from national advertisers who are impacted by the continued disruption of the brick and mortar shopping experience.

_{_____________________________}

^{¹ Demand defined as total value of new contracts during the period.}

Conference Call

The Company will hold a conference call today at 8:30 a.m. Eastern time to discuss its third quarter 2020 results.

Date: Tuesday, November 24, 2020
Toll-free dial-in number: (877) 407-9039
International dial-in number: (201) 689-8470
Conference ID: 13712618

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here and via the Investors section of the iMedia Brands website at www.imediabrands.com.

A replay of the conference call will be available after 11:30 a.m. Eastern time on the same day through December 8, 2020.

Toll-free replay number: (844) 512-2921
International replay number: (412) 317-6671
Replay ID: 13712618

About iMedia Brands, Inc.

iMedia Brands, Inc. (Nasdaq: IMBI) is a leading interactive media company that owns a growing portfolio of lifestyle television networks, consumer brands and media commerce services. Its brand portfolio spans multiple business models and product categories. Its television brands are ShopHQ, ShopBulldogTV, ShopHQHealth and LaVenta. Its media commerce services brands are Float Left Interactive and i3PL. Its consumer brands include J.W. Hulme, Live Fit and Indigo Thread. Please visit www.imediabrands.com for more investor information.

Contacts:

Investors:
Gateway Investor Relations
Cody Slach
IMBI@gatewayir.com
(949) 574-3860

Media:
press@imediabrands.com
(800) 938-9707

iMEDIA BRANDS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
						October 31,				February 1,
							2020				2020
						(Unaudited)
ASSETS
Current assets:
	Cash					$	18,962			$	10,287
	Accounts receivable, net						53,539				63,594
	Inventories						71,666				78,863
	Current portion of television distribution rights, net						15,420				-
	Prepaid expenses and other						7,364				8,196
		Total current assets					166,951				160,940
Property and equipment, net							43,560				47,616
Television distribution rights, net							3,875				-
Other assets							4,413				4,187
			Total Assets			$	218,799			$	212,743
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable					$	81,168			$	83,659
	Accrued liabilities						28,102				40,250
	Current portion of television distribution rights obligation						21,478				-
	Current portion of long term credit facility						2,714				2,714
	Current portion of operating lease liabilities						643				704
	Deferred revenue						205				141
		Total current liabilities					134,310				127,468
Other long term liabilities							5,619				335
Long term credit facilities							49,836				66,246
		Total liabilities					189,765				194,049
Commitments and contingencies
Shareholders' equity:
	Preferred stock, $.01 par value, 400,000 shares authorized;
		zero shares issued and outstanding					-				-
	Common stock, $.01 par value, 29,600,000 and 14,600,000 shares authorized;
		as of October 31, 2020 and February 1, 2020; 13,016,660 and 8,208,227
		shares issued and outstanding as of October 31, 2020 and February 1, 2020					130				82
	Additional paid-in capital						473,647				452,833
	Accumulated deficit						(444,743	)			(434,221	)
		Total shareholders' equity					29,034				18,694
			Total Liabilities and Shareholders' Equity			$	218,799			$	212,743

iMEDIA BRANDS, 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 31,				November 2,				October 31,				November 2,
					2020				2019				2020				2019
Net sales				$	109,025			$	115,159			$	329,374			$	378,183
Cost of sales					68,211				73,573				206,711				251,578
			Gross profit		40,814				41,586				122,663				126,605
			Margin %		37.4	%			36.1	%			37.2	%			33.5	%
Operating expense:
	Distribution and selling				31,490				38,332				97,100				128,717
	General and administrative				4,687				5,415				15,158				17,816
	Depreciation and amortization				7,977				2,053				16,700				6,234
	Restructuring costs				55				1,516				264				6,681
	Executive and management transition costs				-				87				-				2,428
		Total operating expense			44,209				47,403				129,222				161,876
Operating loss					(3,395	)			(5,817	)			(6,559	)			(35,271	)
Other income (expense):
	Interest income				1				4				2				15
	Interest expense				(1,339	)			(914	)			(3,920	)			(2,608	)
		Total other expense			(1,338	)			(910	)			(3,918	)			(2,593	)
Loss before income taxes					(4,733	)			(6,727	)			(10,477	)			(37,864	)
Income tax provision					(15	)			(14	)			(45	)			(44	)
Net loss				$	(4,748	)		$	(6,741	)		$	(10,522	)		$	(37,908	)
Net loss per common share				$	(0.39	)		$	(0.89	)		$	(1.05	)		$	(5.20	)
Net loss per common share
		---assuming dilution		$	(0.39	)		$	(0.89	)		$	(1.05	)		$	(5.20	)
Weighted average number of
common shares outstanding:
			Basic		12,177,990				7,577,028				10,000,383				7,286,380
			Diluted		12,177,990				7,577,028				10,000,383				7,286,380

iMEDIA BRANDS, INC.
AND SUBSIDIARIES
PERFORMANCE MEASURES BY SEGMENT
($ in Millions)
		For the Three-Month Period Ended												For the Three-Month Period Ended
		October 31, 2020												November 2, 2019
		ShopHQ				Emerging				Consolidated				ShopHQ				Emerging				Consolidated
Net Sales		$	104.3			$	4.7			$	109.0			$	114.0			$	1.1			$	115.2
Gross Profit			38.8			$	2.0				40.8				41.5			$	0.1				41.6
Operating Loss			(2.4	)		$	(1.0	)			(3.4	)			(5.3	)		$	(0.5	)			(5.8	)
Adjusted EBITDA			7.2			$	(0.8	)			6.4				(0.9	)		$	(0.1	)			(1.0	)
		For the Nine-Month Period Ended												For the Nine-Month Period Ended
		October 31, 2020												November 2, 2019
		ShopHQ				Emerging				Consolidated				ShopHQ				Emerging				Consolidated
Net Sales		$	318.8			$	10.6			$	329.4			$	375.6			$	2.6			$	378.2
Gross Profit			118.5			$	4.2				122.7				126.3			$	0.3				126.6
Operating Loss			(2.5	)		$	(4.1	)			(6.6	)			(32.3	)		$	(2.9	)			(35.3	)
Adjusted EBITDA			19.1			$	(3.5	)			15.5				(7.9	)		$	(1.3	)			(9.2	)

iMEDIA BRANDS, INC.
AND SUBSIDIARIES
Reconciliation of Net Loss to Adjusted EBITDA:
(Unaudited)
(in thousands)
		For the Three-Month Period Ended												For the Three-Month Period Ended
		October 31, 2020												November 2, 2019
		ShopHQ				Emerging				Consolidated				ShopHQ				Emerging				Consolidated
Net loss										$	(4,748	)										$	(6,741	)
Adjustments:
Depreciation and amortization											8,952												3,052
Interest income											(1	)											(4	)
Interest expense											1,339												914
Income taxes											15												14
EBITDA (as defined)		$	6,315			$	(758	)		$	5,557			$	(2,419	)		$	(346	)		$	(2,765	)
A reconciliation of EBITDA to Adjusted EBITDA is as follows:
EBITDA (as defined)		$	6,315			$	(758	)		$	5,557			$	(2,419	)		$	(346	)		$	(2,765	)
Adjustments:
Transaction, settlement and integration costs, net (a)			312				-				312				(1,016	)			212				(804	)
Restructuring costs			55				-				55				1,502				14				1,516
Executive and management transition costs			-				-				-				87				-				87
Rebranding costs			-				-				-				554				-				554
Non-cash share-based compensation expense			504				-				504				426				-				426
Adjusted EBITDA		$	7,186			$	(758	)		$	6,428			$	(866	)		$	(120	)		$	(986	)
		For the Nine-Month Period Ended												For the Nine-Month Period Ended
		October 31, 2020												November 2, 2019
		ShopHQ				Emerging				Consolidated				ShopHQ				Emerging				Consolidated
Net loss										$	(10,522	)										$	(37,908	)
Adjustments:
Depreciation and amortization											19,697												9,192
Interest income											(2	)											(15	)
Interest expense											3,920												2,608
Income taxes											45												44
EBITDA (as defined)		$	16,679			$	(3,541	)		$	13,138			$	(23,629	)		$	(2,450	)		$	(26,079	)
A reconciliation of EBITDA to Adjusted EBITDA is as follows:
EBITDA (as defined)		$	16,679			$	(3,541	)		$	13,138			$	(23,629	)		$	(2,450	)		$	(26,079	)
Adjustments:
Transaction, settlement and integration costs, net (a)			886				-				886				(1,016	)			212				(804	)
Restructuring costs			264				-				264				5,839				842				6,681
Executive and management transition costs			-				-				-				2,428				-				2,428
Rebranding costs			-				-				-				792				-				792
Inventory Impairment write-down			-				-				-				6,050				-				6,050
Non-cash share-based compensation expense			1,227				-				1,227				1,631				52				1,683
Adjusted EBITDA		$	19,056			$	(3,541	)		$	15,515			$	(7,905	)		$	(1,344	)		$	(9,249	)

^{(a) Transaction, settlement and integration costs for the three and nine-month period ended October 31, 2020 includes consulting fees incurred to explore additional loan financings, settlement costs, and incremental COVID-19 related legal costs. Transaction, settlement and integration costs, net, for the three and nine-month period ended November 2, 2019 includes a $1.5 million gain for the sale of our claim related to the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation class action lawsuit, partially offset by costs incurred related to the implementation of our ShopHQ VIP customer program and our third-party logistics service offerings of $721,000.}

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; restructuring costs; non-cash impairment charges and write downs; transaction, settlement, and integration costs, net; rebranding costs; and non-cash share-based compensation expense. The Company has included the “Adjusted EBITDA” measure in its EBITDA reconciliation in order to adequately assess the operating performance of its television and online businesses and in order to maintain comparability to its analyst's coverage and financial guidance, when given. Management believes that the Adjusted EBITDA measure allows investors to make a meaningful comparison between its 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. EBITDA and Adjusted EBITDA are both non-GAAP measures and 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 (“GAAP”) and should not be construed as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of the comparable GAAP measure, net income (loss) to Adjusted EBITDA 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. Any statements contained herein that are not statements of historical fact, including statements regarding the expected impact of COVID-19 on television retailing are forward-looking. The Company often use words such as anticipates, believes, estimates, expects, intends, seeks, predicts, hopes, should, plans, will and similar expressions to identify 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): variability in consumer preferences, shopping behaviors, spending and debt levels; the general economic and credit environment, including COVID-19; 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 and sales promotions; pricing and gross sales margins; the level of cable and satellite distribution for the Company’s programming and the associated fees or estimated cost savings from contract renegotiations; the Company’s ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom the Company has contractual relationships, and to successfully manage key vendor and shipping relationships and develop key partnerships and proprietary and exclusive brands; the ability to manage operating expenses successfully and the Company’s working capital levels; the ability to remain compliant with the Company’s credit facilities covenants; customer acceptance of the Company’s branding strategy and its repositioning as a video commerce Company; the ability to respond to changes in consumer shopping patterns and preferences, and changes in technology and consumer viewing patterns; changes to the Company’s management and information systems infrastructure; challenges to the Company’s data and information security; changes in governmental or regulatory requirements; including without limitation, regulations of the Federal Communications Commission and Federal Trade Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting the Company’s operations; significant events (including disasters, weather events or events attracting significant television coverage) that either cause an interruption of television coverage or that divert viewership from its programming; disruptions in the Company’s distribution of its network broadcast to customers; the Company’s ability to protect its intellectual property rights; our ability to obtain and retain key executives and employees; the Company’s ability to attract new customers and retain existing customers; changes in shipping costs; expenses related to the actions of activist or hostile shareholders; the Company’s ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits of television programming; and the risks identified under Item 1A(Risk Factors) in the Company’s most recently filed Form 10-K and any additional risk factors identified in its periodic reports since the date of such Form 10-K. More detailed information about those factors is set forth in the Company’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. the Company’s is under no obligation (and expressly disclaim any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

FAQ

What were iMedia Brands' Q3 2020 net sales figures?

iMedia Brands reported net sales of $109 million for Q3 2020, a 5% decline year-over-year.

How much did iMedia Brands lose in Q3 2020?

iMedia Brands reported a net loss of $4.7 million in Q3 2020, an improvement of $2 million from the prior year.

What is the adjusted EBITDA for iMedia Brands in Q3 2020?

The adjusted EBITDA for Q3 2020 was $6.4 million, a significant improvement from a loss during the same period last year.

What changes occurred in iMedia Brands' gross margin in Q3 2020?

iMedia Brands' gross margin improved to 37.4% in Q3 2020, marking a 130-basis point increase compared to the prior year.

What is iMedia Brands' outlook for Q4 2020?

iMedia Brands anticipates posting adjusted EBITDA in the mid-to-high single-digit millions for Q4 2020.