Qurate Retail, Inc.
Q3 2016 Earnings Call Transcript

Published: 8 Nov 2016

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Liberty Interactive Corporation's Third Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Tuesday, November 8, 2016. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead.

[Courtnee Chun Ulrich:]

Thank you. Before we begin, we would 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 business strategies, market potential, stock repurchases, future financial performance, market conditions, future expenses at QVC, sales demand, international regulatory matters, the expected benefits and synergies resulting from the acquisition of zulily, the implementation of new marketing and fulfillment processes at zulily, new service and product 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 or services, market conditions conducive to repurchases, the availability of acquisition opportunities, competitive issues, regulatory issues, and continued access to capital on 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, adjusted net income and constant currency. The required definitions and reconciliations, preliminary note and Schedules 1 through 5 can be found on at the end of the earnings press release issued today, which is available on our website. This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty TripAdvisor. 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. These forward-looking statements speak only as of the date of this call, and Liberty TripAdvisor Holdings 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 TripAdvisor Holdings' expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Now, I'd like to introduce Greg Maffei, Liberty's President and CEO.

[Gregory B. Maffei:]

Thank you, Courtnee, and good morning to all of you listening out there. Today, speaking on the call, we will also have Liberty Interactive's CFO, Mark Carleton; QVC's President and CEO, Mike George; the President and CEO of zulily, Darrell Cavens. Unfortunately since TripAdvisor doesn't report earnings until tomorrow, we will not be answering questions regarding TripAdvisor – Liberty TripAdvisor on this call. On to the highlights. As expected, QVC posted negative results this quarter. Mike will discuss those in more detail in a minute. However, we're seeing some sequential improvement thus far in Q4 and that we did generate local currency sales gains in all consolidated international markets, once again demonstrating the benefits of a diverse portfolio of markets. In Q3, consolidated mobile penetration was 59% of QVC.com orders and U.S. mobile penetration was 58%. zulily posted strong results once again, revenue was up 14%, adjusted OIBDA was up 20%, orders from repeat customers were up to 92%. We also repurchased $188 million of QVCA shares from August 1 to October 31. At Liberty Ventures, we completed the spin-off of Liberty Expedia and received a $300 million distribution of cash, which has been attributed to Liberty Ventures. With that, let me turn it over to Mark Carleton to discuss our financials.

[Mark D. Carleton:]

Thanks, Greg. Let's look a bit at liquidity. At the end of the quarter, the QVC Group had attributed cash and liquid investments of $348 million and around $6.5 billion in principal amount of attributed debt. Note that after the end of the quarter, $345 million in cash was paid to holders of our 1% exchangeable senior debentures. That's substantially all of those. And that payment was funded by drawing on the QVC zulily bank credit facility. Pro forma for this transaction QVC's total debt to adjusted OIBDA, as QVC's credit agreement defines it, was approximately 2.8 times. This ratio now includes also zulily's adjusted OIBDA as part of the refinancing that was announced in June. And now over to Mike for additional comments on QVC.

[Michael A. George:]

Thank you, Mark. Our Q3 results in the U.S. were well below our performance standards and consistent with what we had indicated in our prior earnings call, partially offset by a local currency sales gains in every non-U.S. market. We're responding to the immediate challenges in the U.S. through a series of actions, which I'll discuss momentarily. We remain highly confident in the long-term health of our model, and we demonstrated that conviction with last week's launch of Beauty iQ, our multiplatform network for beauty consumers. As we discussed in prior calls and detailed in our press release, at the start of 2016, we began allocating certain fixed costs for management reporting purposes differently between our U.S. and international segments. In this call, I'll describe segment performance excluding the impact of these allocation changes. In the U.S., revenue declined 6% in the quarter, with 7% lower average selling prices and 1% lower volume. We experienced declines in beauty, accessories, jewelry and electronics, which were partially offset by gains in home and apparel. We also benefited from a significant improvement in return rates, especially in accessories, jewelry and apparel and, to a lesser extent, by favorable prior-period returns adjustments. U.S. operating income decreased 22%, while adjusted OIBDA and adjusted OIBDA margin decreased 10% and approximately 100 basis points, respectively. Product margins declined 140 basis points, primarily due to more aggressive clearance activity in jewelry and, to a lesser extent, clearance activity in apparel and accessories. We also have 50 basis point increase in warehouse and freight costs, primarily due to deleverage from the drop in average selling prices and the learning curve impacts from the launch of our Ontario DC. Bad debt expense worsened by just 10 basis points, that's less than the 20 basis point potential impact we had signaled on our last call and the 100 basis point erosion we experienced in Q2. Now, these prices were partially offset by a 70 basis point reduction in our inventory obsolescence expense, as the team did a terrific job managing inventory levels in a tough environment, and a 30 basis point improvement in QCard income, as we successfully increased activation and usage of the card. We reduced fixed and discretionary expenses by 4%. We froze all non-essential hiring and tightly controlled other discretionary expenditures. We also incurred lower incentive compensation and experienced favorable benefits – benefits costs due to unusually low medical claim expenses. We'll likely face offsetting pressures in 2017 in these two areas. That's assuming we earn target levels of incentive comp and that our medical claims would work to historic rates. Partially offsetting these savings were $7 million in severance costs associated with the restructuring actions we announced in early September, which resulted in the elimination of a number of physicians. And consistent with comments on our last call, we have reduced our planned CapEx spending to $185 million to $195 million for the full year. That's down from our original guidance of $210 million to $220 million. In our international segment, on a constant currency basis, revenue increased 2%. We saw local currency gains in all the consolidated markets with particular strength in Italy. Our UK and German businesses generated record third quarter revenue. And Japan produced modest year-over-year growth for the first time since last Q3. Our France business continues to ramp more slowly than anticipated, and we're exploring options to enhance brand awareness and expand our product assortments as we move into 2017. International operating income decreased 5% while adjusted OIBDA declined 5% and adjusted OIBDA margin declined 114 basis points, each on a constant currency basis. These results were impacted by a few one-time challenges. The rapid devaluation of the pound following the Brexit vote contributed about $2 million of margin pressure. In addition, we paid $3 million to terminate a long-term baseball stadium naming rights agreement that we had in Japan. Finally, we incurred an incremental $2 million in severance cost as part of our restructuring program. Excluding these impacts, our OIBDA margin in international was roughly flat with lower product margins, higher inventory obsolescence expense, and additional affiliate TV commissions, offset by reduced customer service costs, strong fixed cost management, and anniversarying our France launch. On a consolidated total customer base – on a consolidated basis, our total customer base grew 1% on a trailing 12-month basis to 12.7 million, with the U.S. customer base essentially flat at 8.1 million. We also saw continued progress on our digital platforms. Of particular note, in the U.S., eCommerce was 51% of revenue, up more than 300 basis points. Mobile continued strong as well, representing 59% of total eCommerce orders, that's a 600 basis point increase. I'm going to focus most of my remaining comments on the drivers of the U.S. slowdown and the actions we're taking to return the business to normal growth rates. Since our last call, there has certainly been a great deal of speculation about whether the sudden decline we experienced in June reflected a structural change on the long-term outlook of our business or more short-term and addressable challenges. We are confident it is the latter and while we're certainly not happy with the speed of the turnaround, we are nonetheless encouraged by some positive trends we're beginning to see. We do believe this slowdown reflects a kind of perfect storm of unrelated challenges across a number of categories, coupled with difficult macro pressures. In particular, five underperforming categories

[Darrell Cavens:]

Thanks, Mike. And thanks, everyone, for joining today's call. Our third quarter results were solid, and I'm pleased with the growth we saw on a more challenging quarter comparable to last year. Third quarter revenue came in at $359 million, up 14% year-over-year on top of 10% year-over-year growth last year. Operating loss was $52 million for the quarter, primarily as a result of approximately $60 million of amortization of intangible assets recognized in purchase accounting. Adjusted OIBDA came in at $18 million, up 20% on top of 150% growth last year. As a reminder, one year ago, our 2015 third quarter revenue accelerated to 10% growth year-over-year, up from 4% in the second quarter. Since the second quarter of last year, we demonstrated a strong double-digit growth, and I am pleased with our team's focus on execution on delivering an amazing customer experience each and every day. As Mike mentioned, we continue to collaborate with QVC and share a tremendous amount of knowledge between our two businesses. I continue to be excited about the partnership opportunities and dozens of programs and tests we've been able to run in just one year since the deal closed. We look forward to sharing more about our progress and key findings from the last year at the Liberty Investor Day later this week. Turning to the core businesses. Today, I'll cover three key areas

[Mark D. Carleton:]

Excellent. Thanks, Darrell. On to the Liberty Ventures liquidity situation, at the end of the quarter, the group had attributed cash and liquid investments of $157 million and a short $2 billion in principal amount of attributed debt. The value of the public equity method securities and the other public holdings attributed to the group was $6.3 billion and $1.7 billion, respectively, at the end of quarter. We did have quite a bit of activity at Liberty Ventures post quarter-end, primarily the Expedia split-off and the related cash distribution. Those are covered in more detail in our press release. Now back to you, Greg.

[Gregory B. Maffei:]

Thank you to Mike, Darrell and Mark. To the listening audience, we appreciate your continued interest in Liberty Interactive. We hope to see many of you on Thursday in New York at our Investor Meeting. If you haven't registered yet, please do so using the link on our homepage. With that, operator, let me open up to questions. Thank you.

[Operator:]

Your first question comes from the line of Heather Balsky with Bank of America.

[Heather N. Balsky:]

Hi. Good morning. Thank you for taking my question. I guess, if you could go back to talking about Easy Pay and the impact from Amazon? I know there's been a lot of investor worries about those and maybe you can elaborate on why you don't think those have been what's driving the slowdown recently. And then, also Darrel, you mentioned that it was a challenging quarter as well. I'm curious when you look across the business holistically, what you saw at zulily that could give insight into what happened maybe this quarter at QVC?

[Michael A. George:]

Great. So I'll take the QVC question first and then turn it to Darrell. On Easy Pay usage, again our pull back was relatively modest. We kept the penetration of Easy Pay about the same and at a slight reduction in kind of average number of payments that we offered our customers. And as I mentioned, in some places, we're a little more conservative, like consumer electronics, and there's no question that some of the decline in consumer electronics, by no means all of it, was driven by that more conservative usage. But there has been some analysis that there this tight correlation between Easy Pay and our sales. That correlation is simply not that strong. We use it strategically, we've pulled it back slightly. The areas where we had pressure weren't highly correlated necessarily with the pullback in Easy Pay. So I truly think it was a factor in our Q3 performance. I think if we were really aggressively increasing Easy Pay usage, I'm sure we would have grown faster than we did. But – and I don't think by moderating the usage, it had a huge – was a huge driver of the decline. That's really not what our analysis tells us. Since we have seen the write-off rates moderate, since the bad debt impact is pretty limited, as I mentioned, we are being a little more liberal in the use in Q4 not dramatically so, but loosening up a little bit as we monitor these trends. So I think it's a factor on the margin, just not something I would view as a primary driver. On Amazon, we just kind of can't find any evidence that there were some particular Amazon effect that all of a sudden hit us in June. They're powerful competitor. Our shoppers cross-shop at Amazon all the time. Our own data in terms of their propensity to shop at Amazon, in terms of what categories they shop at Amazon for, in terms of what they tell us kind of qualitatively in focus groups, kind of none of that points to any change in trend. So, we have great respect for Amazon, they are a real competitor for sure, but there just doesn't feel like there was any sort of change in trend that would speak to the kind of results we saw in the June and onwards time period. And whereas we can look at these kind of specific pressure points in various categories, some of the macro pressures, those we can correlate tightly to our performance, but we can't find any sort of Amazon effect that would suggest there is something unusual going on there. Darrell, I'll let you answer the other.

[Darrell Cavens:]

Sure. Yeah. I mean, I think if I look at the quarter, I wouldn't say it was a challenging quarter. I think what – I feel good about the execution in the quarter and the growth. I think we had a challenging comp to deal with there. But I think, overall, we're continuing to do a lot of experimentation, a lot of work with the QVC team, kind of learning from their lessons over the last 30 years there that I think can help us – continue to help us over time. And then just a huge focus on marketing. I mean, we continue to stay very, very focused on marketing and driving kind of new customer growth and our focus there. So, I wouldn't say challenging, but that's core kind of where our focus is.

[Heather N. Balsky:]

Great. Thank you very much.

[Operator:]

Your next question comes from the line of Eric Sheridan with UBS.

[Eric J. Sheridan:]

Thanks for taking the question, and thanks for all the detail in the prepared remarks. I think those are pretty helpful to folks. Mike, maybe we could turn to customer growth. How are you thinking about customer growth in the U.S. business? Where it is trajected as we move through this year and sort of what the sort of incentives or initiatives you need to put in place, as we turn the page on 2016 and go to 2017, when you think about customer growth, primarily in the U.S. business? Thanks so much for the detail.

[Michael A. George:]

Yeah. Thanks, Eric. So, I would say customer growth was roughly flat in Q3. So we've, quite frankly, felt good about the fact that in a tough quarter, we were able to keep customer file stable. And if you look at our need-that (35

[Operator:]

Your next question comes from the line of Ed Yruma with Pacific Crest Securities.

[Edward J. Yruma:]

Hey, guys. Thanks very much for taking my questions. I guess, first, not to draw too fine of a point behind it, but the kind of increase sequentially in Easy Pay, is it fair to assume that you're going to use Easy Pay equally this fourth quarter as you did last year? Second is another follow-up, given your experience of the WEN – I know you've also done a great job incubating new beauty brands, are you taking any different procedure or process around understanding safety and efficacy? And how you're going to help some of these emerging brands deal with some issues that they may face? Thanks.

[Michael A. George:]

Yeah. So, on Easy Pay usage, I think it's probably a fair assumption that Easy Pay usage are probably broadly stable Q4 this year to Q4 of last year. I am so proud on the second question and every vendor tells us it sets us apart from every other retailer they work with and that's the rigor of our quality control process, the rigor of validating in claims that are made, our legal review process. And for obvious reasons, I don't want to get too deep into the WEN issue other than to say that the products that were the original source of complaint are not products we sold. We're not seeing any material set of customer issues with these products. I'll let WEN sort of challenge whether or not that complaints have any merit, but again, they weren't even on our products. So that's a tough situation. It's been tough for WEN that – but we feel really good and proud about the rigor we put into our claims process. Quite frankly, I think it hurts us from time to time, as our advisor remind us because we're so conservative about what will stay on air and what products are allowed to get through our filters. I think that's one thing that works really strongly for us.

[Edward J. Yruma:]

Great. Thanks so much.

[Operator:]

Your next question comes from the line of James Ratcliffe with Evercore ISI.

[James Ratcliffe:]

Morning. Thanks for taking the question. Two, if I could, on Ventures. First of all, can you give us an update on where the green energy investments stand and your thoughts on if there are potential additional opportunities there and how things have been going thus far? And second, given the IRS has had some discussions, I guess, on notice of proposed rulemaking about limiting Section 355 spins. If those rules go into effect, how does that change the landscape for structural changes going forward? And does the potential of those change your thoughts on timing? Thanks.

[Gregory B. Maffei:]

So I'm going ask Albert to comment on both.

[Albert E. Rosenthaler:]

In connection – and I'll go in reverse order. In connection with the spin-offs, there's a notice of proposed rulemaking that's outstanding. We think, by and large, it imposes additional criteria. We appreciate the fact that it puts clarity around what the requirements are around doing the spins. And I think it's a situation that if there's other things that we need to do, we'll make sure that we're in compliance with the existing rules. By knowing what those rules are is better than not knowing what they are. And I think that they've actually gone back in some regards in terms of some of the rigor around the size of the ATV and other things from the notice to the proposed regulations that are outstanding. So, we've been able to kind of do these things for a long period of time. We expect to be able to do these things going forward to the extent they make sense. The green energy investments, they all are moving along. We have a little bit of an increase with respect to our clean coal this year, production is up, we bought an incremental interest there, and so that one is doing well. The Abengoa situation, which relates to our Solana parabolic solar field, it looks like Abengoa will be able to not file a bankruptcy. There are certain claims from the project against Abengoa that would be of benefit to us. Essentially, to the extent, any of those make wells and get fulfilled, that effectively creates additional equity for Liberty.

[James Ratcliffe:]

Great. Thank you.

[Operator:]

Your next question comes from the line of Tom Forte with Maxim Group.

[Tom Forte:]

Great. Thanks for taking my question. So, Mike George, just wanted to know what your current thoughts were on shipping and handling, and plans to potentially ramp it up or ramp it down for fourth quarter holiday? Thank you.

[Michael A. George:]

Thanks, Tom. So, no plans really to do anything differently with shipping and handling. As we shared when we put in place our kind of reduced rates a year-and-a-half ago, we felt that put us in a solid position that we could stick with. So, I would tell you it's really something we watch all the time, listen to customers, monitor their behavior, and so it's one you could never say you're finished with. Right now, the plan is clearly to largely kind of hold path where we are with shipping and handling rates and sort of, generally speaking, the kind of frequency of shipping and handling promotions. We certainly don't see that going up over time – shipping and handling going up over time to the extent that we need to further lower it over time, we'll try to do that in a way that we can offset it with other cost savings. So, we are very focused as well on a number of initiatives to lower our cost of fulfillment so that if – to the extent that we do need to be a little more aggressive on shipping and handling, we'll have ways to try to cover that in the P&L. So, that's our current plan, something we monitor carefully, but in the short term, largely stable.

[Tom Forte:]

Great. Thank you.

[Operator:]

Your next question comes from the line of Alex Fuhrman with Craig-Hallum Capital.

[Alex Joseph Fuhrman:]

Great. Thanks for taking my question. Just as a follow-up, I guess, to Tom's question there, I'd be curious, given that you typically don't offer a lot of free shipping, but you were doing during the month of August free shipping on your TSVs. I'd be curious to what – what kind of a response you got from your customers there during the month and how that informs your thinking? And then, just a quick question on your customer file. Obviously, the growth you talked about there had been sort of slowing throughout the year. Is that being driven more by more attrition within the file or just fewer new customers? And I'd be curious if – are there any particular categories that maybe had been pulling more of their weight in terms of bringing new customers in or haven't (44

[Michael A. George:]

Yeah. Thanks, Alex. So, on the first one on kind of August S&H promotions on TSVs, we do periodically spend in on the item and promote free shipping and handling on TSVs. We probably did a little more of that in Q3, but I wouldn't say dramatically more. Customer absolutely responds, so there is no question that shipping and handling promotions are a powerful lever. You generally don't usually increase your revenue, but you don't get even on OIBDA. But when we think it makes sense, we'll do it. We tend to try to build it into the upfront plan, so rather than just layer it on at the end, it's something we work collaboratively with the vendor on. We often get the vendor to fund that shipping and handling promotion. And I think at last count maybe about a quarter of our total sales go out the door with no shipping and handling charge. So we do think – one, that's because it's included in the purchase price all the time or because of something like a TSV offer. So it's a powerful lever. We just want to use it carefully and also make sure we don't create any remorse because we offer a sale one day, and the customer doesn't get it the prior day. On the customer file, what we've seen in the customer file broadly over the last 12 months, and I'm speaking specifically to the U.S., has been just as outstanding growth in the existing customer base. That outstanding growth moderated to kind of flat in Q3 from very strong. And that's really a tale of the apparel business growth moderated, existing customer that's what she keeps coming back for every day. So, in a sense, that mirror that kind of slowing of apparel. With new customers, we still bring in a lot of new customers. But we did see, as I mentioned earlier, a modest decline in new customer growth over the last 12 months, largely because of the decline in categories like electronics, kitchen cook and hair care. Those were all very highly penetrated with new customers, as well as anniversarying some expanded distribution. So, I think through all of that, we basically were kind of flat in Q3, a little bit down with new, slightly up with existing, just not up as much as before, no change in retention rate so no attrition issues at all. And I think as we start to get to more balanced growth across categories, we will see – we think we can drive balanced growth across both existing and new customer segments. Add to that the fuel of Beauty iQ as we really ramp up that opportunity, and we would anticipate seeing the customer file return to solid growth.

[Alex Joseph Fuhrman:]

Great. That's helpful. Thank you very much.

[Michael A. George:]

Thanks.

[Operator:]

Your next question comes from the line of Barton Crockett with FBR Capital Markets.

[Barton Crockett:]

Okay. Thank you for taking the question. I wanted to focus a little bit more on the change in the trends. You guys on the second quarter were talking about the high single-digit declines in the U.S. in July and start of August. Now you are saying so far in Q4 that you are down low to mid single-digits in the U.S. What drove the deceleration in the downward trajectory there?

[Michael A. George:]

You're asking what drove the kind of relative improvement we're seeing in Q4, was that the question?

[Barton Crockett:]

Yeah. Yeah, exactly. What got better or got less bad?

[Michael A. George:]

So, I would say the fashion business has got moderately better, accessories in particular. I would say beauty got moderately better, electronics got better, and we had some very successful TSVs on products like Amazon Fire and (49

[Barton Crockett:]

Okay. That's helpful. And then another thing I was curious about the television environment, clearly the election's been a big focus in October until today. That's going to change tomorrow going forward hopefully. Can you quantify or give us some gut feeling of how big of a impact headwind that has been so far in Q4?

[Michael A. George:]

I really can't. It's just hard for us to tell. Our gut has been that there is this sort of – when it comes to an entertainment-oriented shopping channel, highly discretionary purchases that it just feels to us, as we look at the performance of like items year-over-year that there's this sort of general malaise that's affecting everything in addition to the specific issues I called out. How much of that is specific to the elections and how much will that go to that base as soon as the elections are over, I honestly just don't know. As we've shared in the past, we've been actually encouraged that our viewership has stayed solid. So she's still taking the time to watch, just a little less motivated to buy. I'd love to think that that gets better quickly, but I'm certainly not ready to bet on that and I think we just have to sort of take that day by day. I don't honestly think that there's going to be sort of a miraculous change in consumer psyche sort of a day after, but yeah, it's guesswork.

[Barton Crockett:]

Okay. I'll leave it there. Thanks a lot.

[Michael A. George:]

Thank you.

[Operator:]

Your next question comes from the line of Jason Bazinet with Citi.

[Jason Boisvert Bazinet:]

Can I just ask a question on Liberty Ventures and Liberty Expedia? I guess, one thing that I didn't realize till after the fact. Since you have a voting control inside Liberty Expedia, was it necessary to put an active trade or business like bodybuilding in that spin or split-off or was that a choice?

[Gregory B. Maffei:]

Jason, that really goes to the question of whether it was a good asset, but they're still – and not as bundled security, which is sort of the problems like Yahoo! had, but it still does not obviate the need for an ATV.

[Jason Boisvert Bazinet:]

It does not. Okay. Thank you.

[Operator:]

Your final question comes from the line of Matthew Harrigan with Wunderlich Securities.

[Matthew J. Harrigan:]

Thank you. I actually had two. One, there's been some remarkably public pushback from some of the European couture houses and getting approached by Amazon as fashion business. I mean, you've always been perceived as a very good partner, but now you're really in, I guess, up to your neck on Beauty iQ with some of your partners there. I mean, how do they feel about the effects on the rest of their sales? I mean, that's a pretty vibrant category in retailing. And then the second question is, it's still early, but a lot of excitement about 4.5G on the way to 5G and all the possibilities for retailing there and clearly you're sitting on a huge bank of video retailing content. Thank you.

[Michael A. George:]

Thanks, Matthew. Yeah. So, on Beauty iQ, we just have been sort of overwhelmed by the response of both existing vendors and potential new vendors to this opportunity. I mean, there really is no – forget in the shopping space, just in general, there is no other beauty network. And I encourage everyone to watch it when we're – especially when we're live, which is Wednesday through Sunday evenings. It feels very different from QVC, it feels it has as much more contemporary vibe, a little bit more like kind of beauty bloggers on YouTube. It's a way to really kind of imagine QVC for another generation and to take this very dynamic growing area of beauty and present it in a different way. So, the vendors are thrilled about it, they're thrilled about having this different environment to complement the QVC main environment, and we think we can grow beauty across both platforms. So just a huge opportunity that we're excited to build on in the coming years. On 5G, it is early to know exactly what it's going to mean for us. I would just sort of maybe broaden the question and say, when you think about all the changes in the digital media, communications landscape from 5G to the real expansion of true interactivity on a set-top box, there's just so many more way – to Facebook Live, there's just so many more ways for us to engage with the customer to present something to her that's compelling kind of where ever she is, to enable her to interact with it. The test we have with – we're going to get amazing data from Roku about how people interact with on-demand content from QVC in addition to live content. So you just go through that list of more and different ways to get high quality video out there streamed across different kinds of devices with high levels of interactivity, and I think we're just kind of in early innings of imagining what all of that could be.

[Matthew J. Harrigan:]

Thanks, Mike.

[Gregory B. Maffei:]

Great. And thank you to all of our listening audience. As we said, we appreciate your interest in Liberty. We look forward to seeing you soon perhaps in New York or if not next quarter on this call. Thank you.

[Operator:]

Thank you. This does conclude today's conference call. You may now disconnect.