iMedia Brands Inc (IMBI) 2010 Q2 法說會逐字稿

Welcome to the ShopNBC second quarter 2010 teleconference. Following today's presentation, there will be a formal question-and-answer session. At that time instructions will be given. Until that time all lines will remain in a listen-only mode. At the request of ShopNBC, today's call will be recorded for instant replay. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. Nathan Fagre of ShopNBC. You may begin.

Good morning. Today's prepared comments for the conference may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that these forward-looking statements may involve risks and uncertainties that could significantly affect actual results from those expressed in any such statements. More detailed information about these risks and uncertainties is contained in ShopNBC's filings with the Securities and Exchange Commission. On today's conference call from ShopNBC will be Keith Stewart, CEO; Bob Ayd, President; Bill McGrath, Senior Vice President and CFO; and select members of the Company's senior management. I would now like to turn the call over to Mr. Keith Stewart.

Good morning, and thank you, everyone, for joining us. We were pleased with our progress in the second quarter, reflecting another consecutive quarter of improved performance by a talented and committed team. Customer activity trends at our multimedia retailing business remain positive as consumers continue to shop in multiple channels and evolve the retailing experience. We believe we have the right model for next generation retailing, a model that harnesses the power of 24x7 television advertising, the ease and sophistication of the Internet, and the convenience anytime, anywhere mobile access.

Gross margin rates in the quarter were strong across the board, and disciplined execution and merchandising and financial planning remain the focus. However, despite this progress, we recognize that there's still much work to be done. That's why we remain highly focused on prudently managing our working capital while executing our plans and strategies that deliver long-term, sustained growth. For that, I would like to turn the call over to Bill who'll provide a financial and operations overview of the quarter. Bob will follow by providing an overview of our merchandising performance and business segments. We will then hold a question-and-answer session. Bill?

Thank you. Second quarter revenues are $126.2 million, a 5.7% increase compared with revenues of $119.3 million last year. E-commerce sales penetration represented nearly 40% of business in the second quarter up 860 basis points over last year. Net e-commerce sales in the quarter increased 35% to $49.7 million, versus $36.7 million last year. Gross profit dollars increased 13% to $47.2 million, and gross profit margin improved 260 basis points to 37.4%, versus 34.8% last year. This is an improvement of 80 basis points over last quarter and an increase of 500 basis points over Q4 of last year.

Improvements to our merchandise margin were driven by targeted increases in all key product categories. Net average selling price in the second quarter was $97, versus $112 in the year-ago and $108 in the first quarter of this year. Net shipped units increased by 22%, versus last year's quarter, and were up 11% over first quarter of this year. Return rates were down slightly to 20.6% in the quarter, versus 21.8% last year. Transaction costs $2.87 per unit decreased 24%, compared with $3.55 per unit in the year-ago quarter. This was primarily driven by streamlining in order entry, customer service and fulfillment operations, and systems automation. Sequentially, transaction cost per unit in the second quarter improved 19% versus Q1.

Operating expenses for the quarter were $53.4 million, an increase of 2% versus last year driven by increased home counts and the resulting cable and satellite fees as well as variable expenses associated with the higher sales base. This was partially offset by the reduction in transaction costs described earlier. As adjusted EBITDA was a loss of $1.9 million in the second quarter. This compares to an as adjusted EBITDA loss of $5.7 million in the year-ago period. Compared to Q1 of this year, Q2's as adjusted EBITDA loss decreased by $2.3 million. These year-to-date improvements were driven by increased merchandise margin rates and continued reduction in our transaction costs per unit.

I will now provide an update on key balance sheet metrics. The Company ended the second quarter with $22.9 million in cash and cash equivalents, including $5 million of restricted cash. This compares to $25.9 million of cash and cash equivalents in Q1 fiscal '10, of which $5.0 million was restricted cash. The $3 million decrease in our cash balance reflects the EBITDA loss of $1.9 million, the capital expenditures of $2.7 million. This is partially offset by a favorable change in working capital components. On a year-to-date basis, cash and cash equivalents are up by approximately $1 million.

Additionally, the Company has a three year revolving credit facility which it entered into November 2009, to finance working capital investments and to fund other capital growth -- the Company growth initiatives. To date, the Company has not drawn upon the line of credit. The Company has a current availability of $20 million under the facility, of which $12 million of such availability is subject to meeting certain future financial objectives. That concludes my update. Bob?

Thanks, Bill. I will now provide an overview of our sales performance in Q2 as well as highlight our strategic priorities going forward. To drive the top line, enhance the margin line, and deliver more predictable performance. These continue to be our three key priorities. Q2 sales increased 5.7%. The Company also continued to achieve year-over-year and sequential quarterly improvements and gross profit dollars and gross profit margins. As Bill stated, gross profit dollars were up 13% versus LY, and gross profit margin rates increased 260 basis points. New and active customer accounts continued to trend positively and were up 39.5% and 26.5% respectively on a rolling 12-month basis.

In addition, the Company continued to expand its product assortment in the quarter, adding over 8,000 new products. Over 75 new vendors and 46 new programming concepts were introduced to the customer, providing excitement, newness, and timeliness. With respect to our goal of delivering more predictable performance, by shifting our mix toward reordered products, revenue in Q2 from reorders was 38% of the total business, versus 19.6% in Q2 last year.

I would now like to provide an update on the core revenue drivers of the business. In the watch category, although top line sales were soft in Q2, down 3.6% versus LY, the watch business continued to be a key revenue driver and has the highest sales and gross margin productivity of all of our major businesses. With several new and exciting events planned in Q3, along with the continuous flow of proven reorders, the watch business is well positioned for growth.

The health and beauty category delivered another strong quarterly performance with sales up 67%. Gross margin dollars also showed significant improvement, up 60% versus last year. Combined with a strong order delivery business and the expansion into new categories, the health and beauty category is expected to be a strong driver of the business.

In the home category, sales were up 30% in the quarter as we introduced a number of new brands including Hoover, Sharper Image, and Hamilton Beach. Going forward, we will continue to add more new national brands.

In consumer electronics, we showed much improvement in Q2 versus the previous quarter, when it was down 45%. While this business segment remained lower this quarter, down 20% in volume versus LY, our gross margin productivity per minute reversed course and increased 50% over last year. New product introductions from LG, Samsung, and Sharp helped improve performance, and we remain confident about the continued progress of the consumer electronics business as a core revenue driver.

In the jewelry category, sales were flat in Q2 versus LY; however, gross margin productivity per minute in the business was 40% higher than Q2 of last year. And gross margins in jewelry were up significantly by approximately 430 basis points. In addition, gross margin dollars increased 8% versus last year. With a number of new events and product launches planned for the back half of the year, we are confident about this category's potential in Q3 and Q4 as it continues to gain traction.

With respect to the Company's Internet performance, as Bill mentioned, e-commerce sales penetration was an industry-leading 40%. Web traffic remains strong on our Internet platform, which is cost effectively driven by leveraging the marketing power o of our 24x7 television shopping channel. Not only did web traffic for our site increase, the online visitors were more productive. Conversion rates for the Internet business increased 310 basis points to 12.1%, versus 9% last year, and the volume of online orders was up 49.6% in the quarter compared to last year. Overall, we are pleased with our multi-media retailing performance and merchandising initiatives in the second quarter. The Company's retail segments across our TV, online, and mobile and social media platforms continue to gain greater acceptance with the multi-channel shopper, affording us more balance with growth and higher gross margins.

We also continue to expand and diversify our multi-channel product offerings and increase per-view order and auto-delivery revenue streams. Inventory levels at the Company continue to be tightly managed due to disciplined planning and financial analysis. In short, what we said would happen happened. There are many positive take aways from the quarter, which provide us with added confidence that we are doing the right things and that our performance will continue to improve.

Entering Q3, our efforts are highly focused on continuing to improve on the progress achieved in the second quarter. As we gear up for the back half of the year and the holiday shopping season, we are confident in our merchandising strategies and execution capabilities to be a preferred multi-channel shopping destination that has broad mass appeal. And through these efforts and continued progress, we will be able to further deliver on the three key priorities of driving the top line, enhancing the margin line, and delivering more predictable performance. With that I will now turn the call over to Keith.

Thanks, Bob, and thanks, Bill. Before concluding today's prepared remarks, please let me reiterate that while we are excited about the continued progress made year-to-date across many areas, we recognize there's still much work to be done and challenges to overcome. We'll move forward with a focus on three strategic priorities.

First, we'll continue our commitment to transform our Company as we grow into a multi-media retailer, including online, mobile, social channels, and prepare for a seemless transition as we look to move from the ShopNBC brand early next year. Our business model is no longer one dimensional, one solely focused on the TV shopping experience. Instead, it's about providing compelling digital content, robust electronic commerce, and creating a transparent, trusting community on any platform the customer desires to engage and shop with us on.

Secondly, if we are positioned for the -- well positioned for the mass consumer appeal, we are confident our unique product offerings will help us achieve continued customer growth. Every decision we make starts with the customer. We are committed to surprising and delighting them at every customer point along their shopping experience and serving their needs as best we can.

Lastly, continuing to reduce our operating expenses is the third strategic priority. As Bill mentioned, transaction costs of the Company in Q2 were a record-low $2.87 per unit, opposed to $3.55 per unit last year. This improvement speaks volumes to the continued operational efficiencies and cost savings we are making in the business.

With that, let me conclude by saying that we remain highly focused on the business and are committed to delivering long term sustained growth. With the right infrastructure in place, we are confident about our future plans that deliver on the expectations of our shareholders. We certainly appreciate your time this morning and look forward to speaking with you on our continued progress during our next call. We will now open the call to questions.

Thank you. (Operator Instructions). One moment, please, for the first question. Our first question comes from Greg McKinley, and please state your company name.

Dougherty & Company. Could you guys talk a little bit on an update on your rebranding efforts, how we're going to see that rolled out and staged as we head into next year? What are some of the key things we should be looking for as you move -- introduce that new brand? And what are some of the risks along that process?

Greg, Keith. Thanks very much for the question. We've been working on the rebranding process for months, and we are now to a very short list of brands. And as we decide on the final brand in the next weeks to come, we will bring that out on the social sites and pair that again the ShopNBC brand. We'll get feedback from the social sites, and then, it will be in the end of the third quarter, into Q4. And Q1, we will bring it online. The new brand will be small. The ShopNBC brand will be next to it and larger. And the ShopNBC brand will get smaller as the new one gets larger. We will get the feedback from online, and I (inaudible) actually bring it back on to the television. We will provide a very, very similar type of approach, and we will conclude the rebranding in Q1 of next year, well before the conclusion of the licensing agreement made in 2011. That's most like the process.

As far as the risk, we think there's very little risk to that. And we've learned over the years, don't take hard turns with the customer. We have been very methodical. We've gotten customer feedback about the brands and logos thus far. We've gotten employee feedback. And we'll continue to get feedback, and we will do it very, very, very gradually. Thanks for your question, Greg.

Yes. So, we are going to see it begin to shop with your social media marketing in the third quarter? When will it begin to hit your .com business?

It will coincide with the ShopNBC brand at the end of the third quarter and into the fourth quarter.

Okay. And then it'll -- it'll begin showing up on the TV channel, really Q4, Q1?

That's exactly right, Greg.

Okay. So, you guys have made a lot of progress on margins -- gross margins, and in think certainly part of that is probably aided -- by your operating margin -- be aided by your transactional cost. When you look back at what you accomplished in Q2 on the gross margin side, how much of that would you say is just mix driven versus better execution? And are we beginning to see a new run rate of margins in the business? Would -- is this type of 37% level sustainable? And then secondly, $2.87 in transactional costs. Big improvement year-over-year and sequentially. What, if any, additional room do you have on that side of the equation, and what should we be looking at going forward?

Thanks, Greg. That's a full question. Starting with the margins, it is primarily margin adjustments within categories. Somewhat of a mixed influence in terms of improved health and beauty composition, but it's primarily market adjustments within categories. It also reflects some operational considerations. We are able to drive the top line with less of a reliance on free shipping within the quarter, which is beneficial to us, both from a margin standpoint and on an ongoing basis, to improve the special nature of that as an offering going forward. In terms of the transaction costs, again, we are also pleased with that improvement, the continued momentum in that direction, and we feel confident that that momentum will continue. It reflects streamlining from a systems standpoint in terms of order entry, scripting, and other elements of management. It reflects improvement in the functionality of our voice response unit we call the IBR in terms of the front-end capability and the facility that the customer has, where placing an order without having to talk to an operator. That functionality has improved substantially. Finally, it reflects the continued comfort and migrations of our customers, in terms of order entry with our Internet website as well as the Internet customer is much more self sufficient in terms of handling customer inquiries and other elements without having to talk to an operator. So, those structural improvements, we feel confident, are going to continue to carry forward and be reflected on long transaction costs.

There are many things, core metrics, that we could speak to that I am very pleased with. But really, the gross profit improvement, the true real gross profit improvement that Bill had mentioned, along with the reduced transaction costs, considering the increased unit, is a true efficiency improvement. But it really -- I am most pleased that we were able to deliver EBITDA positive in the month of June and July, and I think that's the first consecutive months since 2007. So, it's very good progress. A lot of work to do yet, but good progress.

Thank you. Our next question comes from Arnold Brief. And please state your company name.

Goldsmith & Harris. Just two questions. One, you indicated that the average unit's selling price is $97 versus $112. If I remember, after the first quarter you said your goal was to get that down to $80. Could you give us some idea of -- is that still your goal, the time frame to reach it? It seems to me that the real growth in revenues is dependent on that bottoming out. I'm trying to look for when that will bottom out. The second question, is the Internet and TV customer -- the customer profile the same? Is there any difference? Is it the same customer?

Thank you very much for your question. As far as the average selling, we've been embarking on a campaign for quite some time to broaden our merchandise mix, and as a result, reduce the average selling price. And that certainly has leveled off over the last couple of quarters. We do intend to finish the year somewhere around $80 in the average selling price. It's -- and I see end-of-the-year because it's more Christmas gift merchandise, the gifting merchandise that will (inaudible) lower ASP. But anything beyond that $80 range, we really don't have plans to go any lower than that. So, as far as the Internet customer, the -- as I mentioned we're evolving into a true multi-channel retailer. We provide service to the customer in any portal he or she wants to be serviced. So, to the extent it is television, social, mobile online applications or .TV applications and certainly .com, that customer profile remains largely the same. It must be noted that the largest percentage of our business that go to the website and other portals are driven by the power of the television advertising. So, it is all about multi-channel retailing and increasing the overall value of each customer, whereby they'll purchase on more than one portal at any given time.

(Operator Instructions). One moment, please, for the next question. Okay, our next question comes from Matthew Harrigan, and please state your company name.

Wunderlich Securities. Q's put a lot of effort into reworking their global Internet sites, and HSN, I think, similarly, has done a pretty good job with the look and feel. Can you talk about what your plans are there? I mean, obviously, you've got a lot of balls up in the air. But if you look at everyone, there's a pretty surprising migration of ordering to the Internet, and in some instances it appears that a lot of the activity, at Q is at least, is relatively divorced from the immediate on-air content being shown. I'm curious as to how you see that trajectory developing for your business?

Thank you very much for the question. We continue to see growth, obviously, in our online business, and our M-dot applications. We very much believe in the one Company, one look, one brand in all the portals in which we offer. The statistics that we see is that traffic is driven by the television advertising. But to the extent online can become incremental revenues through a variety of strategies is one of the secret sauces, if you will. So, for example, our I-Net team has been working very hard to run extended assortments, meaning merchandise that is not sold on our television program but only offered online. And, I think Bob had mentioned that we added 8,000 new items in quarter, which is tremendous progress. To the extent that we can not only drive the customers online opposed to television, one, we have an advantage of extended assortment; two, they tend to buy more than one item per order when they buy on our .com business. For example, our items per order are at around 1.5, which is extremely, extremely productive. So, not only that, there's significant cost savings. We'd save about $1 per transaction, and Greg had mentioned transaction costs earlier in the call, for every order that's taken online. So, there's cost savings, you make the customer more productive, and there's incremental revenues. I think because of what Carol and the (inaudible) team have done with our .com, they can be credited for (inaudible) of 40%.

Our next question comes from Wilson Jaeggli, and please state your company name.

Southwell Partners. Good morning. Keith, did I understand you correctly to say that EBITDA cost is in the month of June and July?

That's correct.

Help us -- that's really a good metric, as we all know here. And how -- how did that occur? [ LAUGHTER ] I mean as compared to maybe the month of May. Did you get a pick up in revs in those two months? Was it an improvement in the problems you'd had with electronics? Did you get reduction in expenses? This is a great water fall event. So, help us here a little bit.

Thank you, Wilson. Thanks very much. May was more like the first quarter. I think that's how we would characterize it. And June and July, we really reflect at a lot of the efforts that Bob and his team, Carol and her team put together to continue to drive top line and continue the quarter-on-quarter trend of improved margins. As you can see, the operating expenses held tight. So, when you were able to improve your transactional costs while improving your gross profit line, it was just a very pleasing, pleasing metric. So we are very -- we are very confident in the, certainly, the long term of the business, and thank you for the congratulations.

Well, good. If we stay within the frame work where we've done for these two months here, can we look forward, then, to profitable months going toward here as far as EBITDA?

We are not providing guidance at this time, Wilson. Thank you. But we continue to see quarter-on-quarter improvement in all the core metrics. There's a strong gross profit line. It wasn't an aberration as evidenced from the last quarter and all of the metrics. As we have talked before, the secret sauce is continuing to add the -- to add the customers to the top and to bring back the existing customers to purchase more. So, combining all those strategies together, we'll continue to perpetuate good opportunities moving forward.

Okay. And a few other questions here. That's -- inventories were up a pop here or so versus revenues in the last quarter. Basically, a slight improvement sequentially in revenues, and yet inventories are up, what, $4 million, $5 million? Are you happy with the level of inventories? What -- why was that growth needed in inventory level?

Wilson, we felt that at the end of first quarter that we needed to add a little more to the balance sheet, certainly, to sustain -- to create the growth in the key categories of business. So, it was -- it was a mindful investment in the overall stock balances. We continue to be very, very comfortable with the quality of our inventory. Our turns continue to be high, and the aging of our inventories is young. So, we are comfortable with that, both the level and the terms. We are being -- we are managing and focusing very, very carefully on the categories within which we are investing in inventory, and we think it's the right mix for us as we sustain growth going forward.

Okay. Did you give -- I may have missed it. Did you give your transaction fee per unit for the first quarter? I know it was, what, $2.87 for this quarter? What was it for the prior quarter?

For the prior quarter, it was $3.55.

$3.55. Then a year ago what was it?

Actually, no, it was in the same range, actually. Second quarter of last year, also, around $3.54, $3,55, so we were in that same range.

All right. So, that's a substantial reduction in that transaction fee. You have mentioned some metrics that affected it. What was your most important thing that drove that cost down?

Yes. I'll combine two elements of it, Wilson. We had implemented in the early part of the second quarter improvements to what we call our IBR system, our automated capability for the customer who's calling in to place an order, to, in a very timely and user-friendly manner, get the order transactions placed and processed. So, we had a material rise in the mix of orders that were received that were not taken by an order entry operator. And, as we also mentioned, the continued focus on the facility of the Internet and driving customers to the Internet to consider their transaction and to make the purchases there also helped us. It helped us from an order entry standpoint, that initial order. As more and customers become comfortable with the overall use of the Internet as an order entry vehicle, it extends to their follow-up questions that they would have on the status of their order, another element. So, that's reducing our back-end number of calls that operators have to handle. The combination of influences. One is systemic improvements that we've made to the front-end IBR component, certainly, as well, to the scripted order entry calls that are received. But also, the continued encouragement and the migration of customers toward the Internet.

Okay. Since all of this good improvement, I know, is strictly due to Bob Ayd's hard work here, I need to ask him a couple of questions. Bob, are the numbers you gave in improvements, like health and beauty sales were up, I believe 67%, I assume that was versus a year ago, and you are talking about revenues, right? Not units?

Yes, sir. Revenues, and that was versus Q2 last year.

Okay. And what was the delta there in sales and watches versus last year?

Watches was down about -- a little over 3%. I think it was 3.6%. I am not concerned about it. I think, quite candidly, we could have done a better job with some of our selections, and we also took watches to all day parts and air time. So, we are testing watches, less reliant on prime time and putting watches in day parts. And so, the productivity suffered a drop, and the sales came down a drop. But we are correcting it for Q3 and Q4, and I feel really confident.

Okay. Talk a little more about electronics. You mentioned a nice improvement here over the first quarter, which was, obviously, really poor, unfortunately. And you have new personnel involved. Have the new personnel had a chance to affect your offering there in different products?

Yes. We did. We had Stephanie Juaire join us, and she's a seasoned veteran. In fact, just before this meeting, I met with her in planning out Q3. But, if we look at it, in Q1, as you know, we dropped about 45%. It was a terrible quarter. We brought in Stephanie. We have brought in great products from some existing vendors and some new vendors, so our product selection is enhanced. I went back, and we started to trickle back great product into CE, consumer electronics, for Q2. So, the sales dropped 20%, which is fine, because the number, as you know, that I look at is, how did we do gross margin dollars per minute. How much more profitable was our air time? And what we found in Q2 in consumer electronics, for every minute of air time, our gross margin dollars generated 50% more than the previous year. So, now we have the confidence. We know we have the right product. We know we have the customer. Now we put the accelerator down.

Well, good. Listen, hardy congratulations to all of you there. Turning EBITDA positive here for the past two months is, obviously, a huge milestone. Keep up the good work.

Thank you very much.

Thank you. Our next question comes from Greg McKinley. Please state your company name.

Yes. Still Dougherty & Company. In terms of the customer counts, could you talk a little bit about where you see that heading directionally now on a trailing 12-month basis? It looked like active customers were up, maybe, 40,000 sequentially from April to July. What is required to achieve your revenue goals going forward to get us to consistently break even EBITDA? Obviously, we need more productivity per customer. But where do you -- directionally, where do you see your customer base maturing as you introduce new merchandising initiatives?

Well, the maturation point is way, way, way down in the distant future. You can take a look at some -- some competitive sets in the market where they have active customer bases of 7 million opposed to the nearing 1.1 we disclosed earlier. So, there's lots of core business that will continue to grow and become more productive. So, I am very pleased with the rate of customers, nearly 40% new customers and then 27% active customers. And I am also pleased that those customers are purchasing more frequently from us. And the secret sauce, again, is continue to add the customers to the top and get the existing customer to buy more frequently.

Would you expect we'll continue add new and active customers at the rate we have been in recent quarters? Or are the big changes you're making on the merchandising side giving you cause for thinking that those additions -- the rate of additions should change?

I have no pause with that at all. We'll continue with a consistent rate of an active customer growth (inaudible).

Anything unusual in accounts receivable at the end of the quarter? Or was that just -- anything big in there? Anything -- I think you said you did actually maybe last from a value pay perspective. But are there any -- any amounts in there which give you some concern in terms of collectibility or anything along those lines?

No, Greg. From the standpoint of the quality of our accounts receivable, we remain very, very confident in the overall quality. We had used a little bit less value pay than we've had to use in prior quarters, and we've moderated the duration of those value pay, the number of installments that we've had. It's a product-by-product decision in the scripting -- item-by-item decision at the time of scripting,but we've been more mindful of that. But in terms of the overall quality of the accounts receivable, they remain very, very strong from a collections standpoint.

Thank you.

We have time for two more questions.

The next question comes from [George Thomasy], and please state your company name.

Yes. I am a private investor. Could you shed a little of light or more color on your $75 million shelf registration? And related to that, whether or not you might liquify the TV station?

Thank you for your question, George. As many of us know, in the month of June, NBC had notified us they plan to register, filing an S-3, for their 6.5 million common shares and intended to sale those shares in the open market. End of June, July, we also had notified, at the same time, coincident with the NBC filing of the S-3, that ValueVision Media would file an S-3 registration as advised by its bankers. We went through the process. NBC notified us that they didn't believe that they could get -- were going to be able to get the value per share they thought it was worth, so they pulled their intent to sell their common stock. That S-3 still exists. Again, ours was coincident. It was a process component. It was advised by our bankers. And if -- in the event that there's a SEC review, it's better to do it coincident with NBC's filing. So, that was the reason why we timed everything together. We have no -- no formal plans on drawing down on the shelf, and we haven't had any discussions at the board level.

As it relates to, separately, our Boston television station, our Boston television station is one of our core assets. It's not a strategic asset. Television stations own a lot of commercial real estate, as you may know. It's not the best time to move the real estate, and we don't need to sell it at this moment. At some point in time we will sell the Boston TV station when we know we can maximize shareholder value.

Thank you.

You're welcome.

Thank you, and our last question comes from Jeffrey Raff. Please state your company name.

It's [Gilford] Securities, and my question did relate to shelf offering, and Keith did addressed that. But I guess my follow on is, I don't understand how there's no plan if NBC has a filing and you have a shelf. And as a shareholder -- and I compliment the management team on all of the fundamental progress they have made in the business. But as a shareholder, how do we look at the stock going forward knowing that all of this stock and potential securities are out there for sale and management has no plan to deal with it?

Well, we are --

I don't understand that.

Well, thank you for your question. Then we'll conclude by breaking them into sections. First NBC, I explained their intents. NBC had announced at the time of their filing that transactional shopping is not part of their core business. They certainly, like any shareholder, want to maximize their return. And at the time they wanted to sell the shares, they didn't believe the value would provide a good enough return. NBC's decision; it's their stock.

As it pertains to the filing by ValueVision, again, I provided the reason why we did that. It's out there. It's got a three year shelf on it. It's prudent. A lot of good companies have a shelf out standing, and we followed the advice of the bank. So again, at the board level, at the management level, we are not having any conversations about acting on that shelf, and we're very comfortable with our cash position to see us through the turn.

Okay. That's the end of our Q&A session. I want to thank you very much for joining us today. And with that we'll conclude the call.

Thank you. That concludes today's conference. You may disconnect at this time.