iMedia Brands Inc (IMBI) 2014 Q3 法說會逐字稿

Good morning, and welcome to ValueVision Media' FY14 third quarter conference call. Following today's presentation, there will be a question-and-answer session. Today's call is being recorded for instant replay. I would now like to turn the call over to Teresa Dery, Senior Vice President and General Counsel.

Thank you, operator. I'm joined today by CEO Mark Bozek, CFO Bill McGrath, and President Bob Ayd. Comments on today's conference call 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, or similar expressions. 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 and related cautionary statements is contained in ValueVision's SEC filings.

Comments on today's call may also refer to adjusted EBITDA and adjusted net income or loss, which are both non-GAAP financial measures. For reconciliations of each of these measures to our GAAP results and for a description of why we use them, please refer to today's news release, available on the Investor Relations section of our website. I'd like to remind you that all information in this conference call is as of today, and the company undertakes no obligation to update these statements. I will now turn the call over to Mark.

Thank you very much. Thank you, Teresa. Thank you for joining today's call. We reported solid Q3 results, including a 7% increase in net sales, and a 33% rise in adjusted EBITDA. I'm pleased with our team's execution, and we are all very excited about the holiday season.

To build on this momentum, we strongly believe definitive change and innovation are necessary to take our Company to the next level. What's become clear since I joined the Company in June, is that neither the dedicated team I work with here nor the investment community, including existing and potential investors, are interested in us merely broadening our product mix. Simply broadening our product assortment will not unlock our Company's real value. As I said in August, and I still believe, if we use our size to our advantage, enabling our think nimble and act nimble approach, then we will grow shareholder value.

An important first step in the Company's long-term strategy to become a true and far more competitive digital commerce player, we're excited to unveil our new corporate and consumer brand identity. Effective today, we changed our Company's name from ValueVision Media to EVINE Live. This will be followed by the changing of our NASDAQ trading symbol to EVLV on Thursday, November 20. We will also be presenting at the Goldman Sachs conference in New York on Thursday.

While the change of our corporate name occurs today and the change in the trading symbol occurs this Thursday, our plan is to take the next several months to transition our consumer brand from Shop HQ to EVINE Live. The complete rebranding is planned to take place during the first half of 2015.

Today's announcement begins an entirely new chapter in our Company's history. It is not just changing the cover on the book. Our all things digital commerce platforms and our compelling new relevance and identity should provide a solid foundation upon which to build a diverse portfolio of new, exciting proprietary brands. By combining these proprietary brands with our broad reach across all our digital platforms, including our 87 million television homes, we intend to deliver on our goal of long-term sustained growth.

Most importantly, we have every intention of taking our existing customers, our vendors, and key stakeholders on this fun, new adventure with us. Our message to the vendor community of providing an engaging, exciting launch pad for new proprietary brands has been widely embraced. I can assure you that the quality and quantity of brands and talent, in discussions with us here in Minnesota, as well as in New York, Los Angeles, and elsewhere, are quite impressive. Our merchant and programmers have an energy and enthusiasm like never before.

Bill will provide some further details about the EVINE transaction in a moment, but I'd first like to underscore how excited I am about all of this. There are several hundred of my colleagues here in Minnesota as well as in Bowling Green who are listening, and who will have to help execute this new strategy. But I can assure you they're cheering right now, and ready to deliver.

With this rebranding, we've jump-started all the things we intend to do, as opposed to starting from square one with a much longer ramp-up. Here's what to look for in the short term. In the coming weeks and months, we'll be making a series of announcements to introduce some exciting new brands in the relevant product categories where we're currently playing, and perhaps a few other categories as well. Then there will be more. Even though we're in the early stages of transition, we're committed to doing the work today that we believe will most assuredly move EVINE Live forward in the long term.

Finally, I'd like to acknowledge the hard work and dedication of our team here, who over the past quarter, worked long hours to bring EVINE Live to life in such an expeditious, necessary manner. I'd also like to announce Russell Nuce has joined the Company as our Chief Strategy Officer, reporting to me. Russell has been a long-time colleague of mine whose experience in strategy, licensing, corporate law, and entertainment will help provide the architecture for all that comes next. With that, I will turn it over to Bill for some additional financial details respective on today's announcement, and then we'll take some questions. Bill?

Thanks, Mark. As Mark mentioned, we announced today that the Company acquired certain assets of Dollars Per Minute, including the EVINE brand. As consideration for the asset purchase, we issued unregistered shares our common stock to the holders of convertible notes issued by Dollars Per Minute. These shares represented an aggregate value of $1,044 million, which equates to around 179,000 shares.

As for our Q3 performance, we had very solid results in the quarter. Third-quarter sales of $157 million were up 7% over prior year. Sales growth was driven by strong results in fashion and accessories, as well as the beauty, health, and fitness categories. Net shift units in the quarter increased 28% versus last year, as our average selling price declined to $67 from $80, principally influenced by the strong performance in our fashion and beauty categories. Fashion represented 18% of our merchandise mix, compared to 12% last year. The broadening of product assortment at a lower average selling price continued to foster growth in our customer base. Our rolling 12-month customer count of 1.4 million is up 16% over the comparable prior year.

Gross profit dollars increased 7% to $59 million, and our gross margin percentage of 37.6% is in line with last year. Third-quarter operating expenses totaled $59 million, compared to $56 million last year. Current-quarter operating expenses included $2.4 million in executive transition costs. Excluding this unusual item, operating expenses increased $2 million, or 4% compared to the same quarter last year. Operating expenses were affected by an increase in variable costs of $2 million. Variable costs as a percentage of sales were 8.9%, versus 8.1% last year, reflecting the impact of the 28% increase in net shipped units. We anticipate that Q4 variable expenses as a percentage of sales will be around 9%.

Adjusted EBITDA increased to $4.8 million, versus $3.6 million in Q3 last year, reflecting a 7% increase in gross profit, partially offset by the higher operating expenses I just described. We ended the quarter with cash and restricted cash of $26 million, compared to $23 million at the end of Q2.

During the third quarter we incurred around $4 million in capital expenditures related to the 337,000 square foot expansion of our Bowling Green distribution center. These expenditures were funded by a draw-down from our PNC Credit Facility. We'll have partial use of the expansion for storage during the fourth quarter, and we expect to complete the internal configuration during Q2 2015. Aggregate cost for the expansion will be around $25 million, of which we expect around $18 million will occur in 2014, and the balance in the first half of FY15.

Finally, I'd like to add as CFO for the last four years, I've not seen such strong enthusiasm from both inside the Company, as well as from many of the investors that Mark and I have met over the past few months. With that, operator, let's open the line to questions.

(Operator Instructions)

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

Great, thanks so much for taking my question. This is exciting news about the re-branding, congratulations. My question is here, I'm wondering with your customer file up 16% here in the last 12 months, obviously you've been very successful getting more people into the platform. How do you balance the opportunity to really accelerate that new customer growth now that you're going to be re-branding to a new platform and a new brand against the risk of losing some of your existing customers?

Do you expect there to be a little bit of natural churn there in the customer file over the next year or so? More specifically, as you look at the holiday season, how should we think about the messaging that you're going to put out there over the next six weeks?

Hi, Alex, this is Mark. I think that what makes this exciting in terms of the opportunity of this growth that we've had this year in new customers is we're lucky enough that we have a lot of contact points with our customer via television, via e-mail, via Facebook, via their tablets, and via mobile devices. Our way of communicating with them, I think is one -- is an advantage that most don't have. We're pretty comfortable that these new customers that are coming in, as well as the core customers that have been with us for a while, that they will be really excited about it.

I think in all of these situations as long as you are crisp and clear in terms of how you communicate with them, then it doesn't become a confusing situation. It becomes one where they're excited about it. You do that by showing them the new things that we're going to be doing and these new brands that we're launching that are very much going to be in the sweet spot that appeal to not only our core customer, but to the new customers as well.

As it relates to Q4, our focus on Q4 is really all about Q4, as it is for most retailers these days. There won't be a whole lot between now and the end of the year that's EVINE Live related, as it relates to specific contacts with the customer. There will be a few announcements that we will be making in the coming weeks referring to some specific brands that we will be launching under the EVINE Live presents banner, but for the most part, the evolution of this process will begin after the first of the year.

Great, that's really helpful, Mark. Thanks, and good luck.

Thanks very much.

Your next question comes from the line of Kayla Berg with Piper Jaffray.

Great, good morning. Welcome, Russell. My first question is actually about Russell. I'm wondering if you guys could share any color on what his top priorities and projects will be as he on-boards into the Company? The second question, would love some perspective, maybe from Bill, on how we should think about Q4 in terms of gross margin and ASP, and any thoughts you have there? Thanks.

Yes. Thanks, Kayla. In terms of Russell's role and on-boarding him into the Company, I think that in all of the definition of what we hope to do as it relates to EVINE Live, I think having somebody who's looking at the strategic new initiatives that we're looking to do, rather than necessarily being in the weeds of our Dollars Per Minute world, which as many of you know, we live and breathe by a business model that's all about dollars per minute.

We felt very strongly that having someone who would be part of this process that could look ahead without necessarily having to worry about the day-to-day operations of it. Looking ahead means -- that's why I think it's a big advantage for us if we execute on it -- by having relationships and strategic partnerships, not only with brands and personalities, but other media networks as well. I think his focus is going to be primarily based on that.

Kayla, regarding the outlook for Q4 and for gross margin specifically, you'll recall that in the fourth quarter of last year we had a very, very strong contribution from consumer electronics, and particularly Android tablets within the consumer electronics category. Other things being equal, it's a little bit of a headwind, because consumer electronics we don't anticipate are going to represent as much of our product mix in Q4 of this year as it did a year ago.

While that creates an element of sales that we expect to offset within other categories, gift-oriented categories in the business, I will say that the margin considerations when you look at the strength of consumer electronics last year, it is a category in which we have lower margins. Looking year on year, we would expect our margins to be slightly favorable to our performance a year ago. That really depends on the -- I'll say the level of promotional activity that exists in the retail market, and how we match that.

Great, very helpful, thank you.

Sure.

Your next question comes from the line of Tom Forte with Brean Capital.

Great. Thanks for taking my question, and best of luck with the transition and re-branding. The question I had was on a near-term basis, how should we think about things like average selling price, units shipped, and returns as far as your mix currently? Are we past the point where we should continue to expect year-over-year declines in average selling prices, or are refinements to the mix going to continue to push that down over the near term? Thanks.

Sure. Thanks, Tom. Tom, I'd say that we are past the point -- and maybe this is the transition quarter for us in terms of significant changes in average selling price year on year. As we look at the fourth quarter of last year, I think our average selling price was in the range of about $75, and we'll be at a comparable range as to where we're running now. I'd say somewhere between $65 and $75 is a run rate that we would expect going forward.

The delta that you've seen in the past several quarters between the revenue growth and the shipment growth, which has been substantial -- in the current quarter revenue's up 7%, units shipped up 28%. That begins to level off going forward. Again, that will be a function of there will be some movement within that bandwidth of $65 to $75, really depending on the product mix that's strong for us within the quarter. I do expect again that range to be our run rate in the next several quarters.

Tom, this is Mark. Just to add to that, if I can. I think what's exciting about a lot of these new categories that we're going to be playing in is that not only are they in that sweet spot of the average selling price, but they are also big, high, new-name generating categories that we're going to be playing in. As it relates to the returns, our returns are heavily focused on the core competency products that we sell, particularly in watches and jewelry.

As we expand our base, particularly in the area of home, which is a high, new-name generating category, we see these as real opportunities for us as it relates to our return rate and that average selling price being in the sweet spot right now that we're really comfortable with it. With some of these new launches that we know historically have the new name generating, we feel really confident that that breadth and depth will help this process.

Thank you.

Great. Thanks, Tom.

Your next question comes from the line of Mark Argento with Lake Street Capital.

Mark, could you give us the background on EVINE and the vision that you had when you originally created the brand, and how that might translate over to -- obviously to the ValueVision platform?

Yes. Sure, Mark. I think early on when we started working on EVINE just as EVINE.com, it was the notion that could you create something in an online space? At the time it was online space only that delivered exclusive merchandise that you couldn't find anywhere else -- that it wasn't just based on Calvin Klein at 75%, which I thought there was such a prevalence of one company after another offering flash sales kinds of businesses, but not one that was sticky enough that you could attract customers, new and old customers -- in this case, of course, all new customers -- that would be there and go there way more often than just when they're in the mood to shop.

That was really the premise of what it was at the beginning. Could you create these forms of shopping-centric entertainment that made it sticky and made it a habitual way to go at it. I think that the drawback, as it is for many in the e-commerce space, is that if you only have one single form of distribution and online only, that all the money that you have and all the money that you invest goes into attracting and/or buying those customers. As many in that space know, it's a very, very tough road to haul.

Separate and aside from that, as this opportunity came up in the discussions about ValueVision, it was really only until after I got into the Company where we recognized that in order to accelerate and jump-start the process of what I felt was needed mostly here, was in addition to the need for a proprietary brand, that the EVINE scenario really enabled us to accelerate this process. It's setting a new tone, if you will. I think the setting of a new tone and this new perception, rather than us just trying to be a competitive, distant third-place shopping channel, is really, really important. That's where it started at the beginning. It was really only until I was here when you saw what the issues were, pro and con, by the way -- as many of you know how I came into the Company.

The really good news is that the Company was operationalized, was really on the rails, and it enabled me and Bill to go out into the marketplace and talk about the future and what the future might be, rather than me putting the fire hat on as the new CEO without any due diligence because of the way that I came into it. It enabled this focus, and enabled a real clear understanding early on of what the needs are. Just simply fixing the product mix of a distant third-place shopping channel is really not much of a strategy at all. I think this enables us to accelerate a process that otherwise would have taken us, we feel, much longer.

Got it. And then this transition over, you had mentioned in your prepared remarks that look for some new products, some new brands -- I assume proprietary brands. Can you talk a little bit about the areas that get you most excited in terms of the opportunity for EVINE to build some beachheads, in terms of the products?

Sure, thanks. I think that the categories, particularly in the areas of home -- and home for us is food, cookware, ingestible vitamins, weight loss, home organization -- that's the areas of home. In the areas of fashion, there's some really exciting ones as it relates to fashion that I think that our customers will respond really well to. I think also in the area of beauty that we have a couple not only in beauty but also in skin care. Again, these are -- as you know -- these are high, new-name generating categories, and also with really low return rates, and they become very sticky kinds of customers.

It's really -- again, they're not new categories in the space, but they are, in many cases, new categories for us that I think help our existing brands and our existing vendors, who, as you well know, we have relied on and perhaps relied on far too much over the past couple of years. They will welcome this, and have already reached out and are welcoming this opportunity to be side by side a far broader mix.

Last question for me. In terms of other branded products, [Sternly] branded products, I know obviously the process to go out and work with brand, especially some of the top brands, it takes quite a while. Do you anticipate we'll be able to start seeing some new brands on the platform in the first half of 2015, or is that a second half of 2015? How do you think about bringing new brands on to the platform?

Sure. Well, I really look -- it's some in the first half and some in the second half. The beauty of some of the relationships that we have with EVINE, with people, for example, like Greg Renker, who is one of the great direct-response individuals in the history of direct response. He's now a very happy shareholder, and also a very happy product maker for us. It's those kinds of relationships with people who know how to do this business that we're most excited about and that enables us to again accelerate what would have been a process that had started from scratch.

In terms of known brands, Mark, I think the idea of known brands, at least in our mind, is beginning these kinds of relationships with known brands that could you create this halo effect by this redefining of ourselves as EVINE Live, so that you can attract known brands who are, in fact, creating exclusive merchandise for us, not selling something that they would sell elsewhere; because I don't believe for a second that selling similar merchandise that's available elsewhere that we can or should compete on price. I think that if this perception scenario moves forward, as we most definitely think it will, that it will enable us to enter into these conversations and negotiations, and ultimately relationships with top brands, that might not have happened had this not otherwise happened.

Great. Well, congratulations. Look forward to the branding effort, thanks.

Great. Thank you very much.

Your next question comes from the line of Greg McKinley with Dougherty.

Yes, thank you. I wonder if we could talk a little bit more about EVINE, and maybe from two different perspectives. Number one, what is it about the brand name perhaps, that as you were considering the name change, what attributes of that name did you think were particularly compelling or would be value-added longer term? Why did that make the right strategic fit for the Company? Relating to the assets acquired from it, what are your biggest opportunities or risks with those?

Thanks, Greg. In terms of the name itself, EVINE, I think we were extremely mindful, as was the Board extremely mindful, of being sure that we vetted the name both EVINE and the name EVINE. We did over the past couple of months focus groups both in New York and here in Minneapolis. The response to the brand concept and the branding system that we tested was extremely well received.

Some of the comments, and I went to most of them and listened to the others, was that it was the notion of taking home shopping and moving it up a notch, finally, and having that sort of alive-ness. I was very specific, and I believe this, that the notion of putting the word live in our name is not just about live television, but it's live mobily, live on the tablets, live on Facebook, live on all the social ways that we connect. I think our industry has become very un-alive. I think the notion of injecting life and live back into the way we communicate and the way we connect with our customers, not just necessarily through TV but through all of the other platforms, is a real opportunity.

As far as the Es in EVINE, we see them as bookending all things that relate to e-commerce, all things that relate to the entertaining aspect of e-commerce, and all things that sort of come in between that. I think the definition of more of that you'll see as we go. You watch us on television, and you watch our direct competitors on television, and we all pretty much look the same. Yes, I sure would love to be broadcasting in HD right now and soon we're going to do that. But I think that there's more to just making nice better sets and doing things that are perhaps clearer than have been done in the past. I think this is a much bigger play than that, and you're going to see that both on television and in our other platforms, where it shows there is a real definite difference.

We feel again, just coming up with a name and just because it was there, it was not something that we just slam-dunked and rubber-stamped into the process. Secondarily, I think that mindful that we just changed the name as what was internally referred to as the dress rehearsal a year and a half ago, that we found through these focus groups there was actually zero to no brand equity in the name Shop HQ and/or ShopNBC. It's with that in mind that we had the confidence that we were on to something really good. Of course you have to execute on it, but we think it sets a real fun, colorful, live, alive kind of tone to it, and one that I think our customers, current and future, will respond really well to.

Greg, relative to the asset acquisition, the primary asset that was acquired was the trademark and the brand name. However, additionally within the transaction, the consideration that was provided to the prior investors in EVINE, the $1,044 million worth of shares, the 179,000 shares that were issued, also enabled us to take advantage of the relationships that Mark had described -- the groundwork of discussions with suppliers, with personalities, other sources of product and creative elements that we think are key to this transition of the business.

The acquisition of the assets of EVINE enable us to pursue those in a positive manner. Again, our perspective on that is these are elements that will help us accelerate the development of proprietary brands for our business in a greater manner than we would have been able to do absent this acquisition.

I would add, Bill -- excuse me for interrupting you -- but I would add that the risks to doing nothing were far greater than the risks than what we've done in this deal. I think that just again saying we're going to come out and change the mix of products -- as I said earlier, it's really not a strategy. I think the acceleration of that and having those kinds of relationships, and as you will soon hear and see, they are really good ones, and ones that we're really excited about, and we think ones our customers and new customers will respond well to.

Greg, the means of monitoring and managing that risk, it is -- we are giving ourselves several months of transition through this process. As Mark had described, we'll be phasing in brands and elements of the EVINE presentation. In each of those, there's an evaluation of the success factors and of the challenges that may have manifest. This will be an iterative process. We'll learn from each launch. We'll iterate that, we'll move forward consistently; but we'll bundle that in such a way as to mitigate, we think, the risks that may be there with the brand change.

One last comment about that. I think as it relates to retailers in general, but for any retailer that had been living under a rock had not learned from the past couple of years of certain retailers who tried to do things overnight and quickly in very rather noisy, loud, and dramatic ways, and we all know how those turned out. We're mindful of the evolutionary process; but evolution does mean move. It does mean go ahead. It does not mean do it tomorrow, but over the right period of time.

Again, we have a huge advantage to bring our customer along because we can communicate with her 24 hours a day, and him, seven days a week, in ways that nobody else can. That's why we feel as confident as we do, and also as confident in the timing of which we've done this, which is merely four months into our being here.

Great. Thank you for that color. Another area I wanted to better understand, if we just dive into some of your -- one of your operational metrics more deeply here, and that is purchase frequency. Customer purchase frequency has been growing at a quite healthy clip. I think it was up roughly 16% year over year here in the third quarter, and so was the number of active customers. I think that was up 11% or so. Is there anything you can tell us about frequency trends in your established base of customers versus the newer customers coming into the system? Maybe give us a sense for how much legs the frequency growth has in front of it. Are those newer customers tending to be higher purchase frequency, or how should we expect that to play out?

Greg, this is Bill. The purchase frequency that you'll see in any given period is influenced by product mix. What we've -- with the strong performance in the fashion category and in the beauty categories year to date, we are garnering growth, really from the categories which have a natural replenishment or repurchase activity. That's very, very positive to us, because to the extent that our customers are able to develop an affinity with the brands that we're offering in both fashion and in the beauty category, that bodes well for ongoing replenishment.

I'll contrast that to periods where in the tail end of last year where we had a high volume of first-time customers coming in on the consumer electronics category. That tends to be much more of a one and done, or perhaps a two and done customer relationship -- partially due to the fact that you're appealing to more of a male audience; and then also partially due to the fact that our existing product mix, other than moving into the watch category, really didn't offer as much diversity.

In terms of the going forward expectation for purchase frequency, obviously our desire is to have that continue to improve, because it is a reflection of customer affinity in terms of the overall experience. I think as we move into classifications such as food, such as ingestibles, vitamins, as broadening the fashion mix and adding additional beauty and skin care, all of those lend themselves to high purchase frequency.

Mark had also mentioned our desire to, our expectations as well, to get into the cookware business in a much more robust way than we have been in the past. There, too, I know from my experience in this space, those are categories that tend to create affinity with the brand (technical difficulty) execute them well. Continuing to improve purchase frequency really is the foundational element of our growth going forward.

I also think -- this is Mark. I also think, Bill, that the notion of second purchases and third and 20 purchases a year -- a lot of that has to do with this depth and breadth. We talked about the Mark Cuban show when he came here in August. Turned out it was the most-watched show in the history of this Company. That's without doing any -- very little promotion at all, as it was early on when we arrived here. It just shows you that these kinds of brands, and we refer to them here as these brands with fans that come with a pretty baked- in fan base, that if you do it right it enables you to light up the lines in a way that helps you grow your business -- not just necessarily introducing a brand but enable to promote it in other ways that are not necessarily just on your channel.

We don't generally look at viewership, because we don't make any money from viewership. But we look at them as leading indicators, that if, in fact, those kinds of shows -- and that was a really great show, and there's going to be a lot more like that -- that those shows of what makes this second and third purchase thing work, because you're coming back and you're seeing a lot more variety than you are currently seeing right now. I think if you deliver on that -- like the AMC Channel, right? They just had a bunch of black-and- white movies, then Mad Men. Then they had Breaking Bad, and then they had Walking Dead. They started to create a robust reason to go back to that channel every day, because it's very much of a parallel in what we're doing here, as well.

Okay, thank you on that. Last thing, your balance sheet. Inventories surprised me a little bit in terms of they were higher than I was expecting. I don't know, is the Company positioning itself a little more aggressively with some buys heading into the holiday season there, or anything of note that you'd comment on?

Sure, Greg. Yes, Q3 ending inventory is typically -- obviously it's a build period as we get into the busy selling season in advance of the holidays. You have a cyclical component in terms of inventory up-ticking as a result of that. Another influence in current inventory positions is the fact that fashion having been such a strong component of our mix is a category that turns more slowly than our other classifications of goods. That's an effect, as well. I'd say the last element, I had mentioned that in the prior year consumer electronics were a very, very strong category of our overall business. We're expecting less of that in Q4 of this year. Much of our consumer electronics business last year was drop shipped, so it was an inventory remodel. We've got that influence that's built into the current balance sheet growth, as well.

Okay, thank you.

Thank you, Greg.

Your next question comes from the line of Mark Smith with Feltl.

Hi, guys. First off, do you have the sales by category numbers handy?

Sure, Mark. This is Bill. We've got -- looking at the total revenues of $157 million in the quarter, jewelry and watches were about $57 million; home and consumer electronics, combined, about $40 million; beauty, health, and fitness, $21 million; fashion, $25 million; and then all other, which is primarily shipping and handling revenue, about $14 million.

Excellent. Then the mobile mix in online, can you talk about where that was?

Yes, the online percentage was basically in line with last year's, at about 43.5%. Mobile as a percentage of our internet sales, however, continues to rise. We're about 34% of mobile penetration within the internet mix, versus about 26% a year ago.

Okay. We didn't see any growth in homes this quarter. It had been ticking up quarter to quarter here for the last couple years. This 87 million to 88 million, is this where we're tapped out for now, or will we see any change in total homes?

No, I think the growth rate in the household footprint, Mark, is probably going to remain in that range of 1% to 2% over the next several quarters. The thing that might change that and create a little bit of a spike in that within a period may be if we've elected over a broader footprint to pursue a change in channel position, such that that puts us on a different band of service within a particular system. We're at 87 million homes, compares to a total universe, if I use QVC as a surrogate for that, of around 98 million homes. We'll make some gradual in-roads into this, but I think it will be, in fact, gradual in that range of 1% to 2% on an annualized run rate.

Lastly, can you talk about the price per home that you paid during the quarter, and do you still expect that to creep up to like $1.15 or so?

Yes, within the current quarter, Mark, our average cost per home was about $1.13 for distribution. That's up over last year's where we were running at about $1.07. In the fourth quarter of last year, we had -- and the early part of this year -- made some improvements to our channel positions and other qualitative effects that accounted for that delta from last year's run rate of $1.06 to $1.13 this year. In the fourth quarter, we've made a few changes. We could end the quarter at around $1.15 per home on an annualized rate.

Okay, excellent. Thank you.

Thank you, Mark.

Your next question comes from the line of Justin Ruiss with Sidoti & Company.

Good morning. I just had a question when it came to now with the new branding of EVINE, when it came to the product category mix, should we see a significant change in broadcasting patterns when it comes to time allocated per product vertical?

This is Mark. Justin, I think, yes, you absolutely will. I think the product verticals in terms of how we allocate them air time on our networks, as well as on our mobile platform and other digital platforms, I think will certainly evolve. Again, it's really all about variety, right? In those categories, particularly in the areas of home and beauty, you're going to see a lot more variety.

If you watch us, you know we sell a lot of Waterford and we sell a lot of linens and we sell a lot of watches. And you know what? We love our linens and our watches and our Waterford. But having them -- having a much broader assortment before and after them is really what you're going to be seeing more of as we head into 2015. I think that variety, in and of itself, is what's desperately needed to create a stickiness that doesn't -- that perhaps doesn't, or perhaps allows us to keep customers longer who are otherwise not inclined to watch us because we're selling a lot of the same stuff all the time.

All right. Perfect, thank you.

Thanks, Justin.

There are no further questions in queue. I'll now turn the call over to Mr. Mark Bozek for closing remarks.

Okay. Well, I'd just like to thank everybody for being on this call. I am four months into this process, incredibly excited by these moves that we've taken today. I'm very grateful for our Board. They have been incredibly diligent and responsible through this entire process. I applaud all those efforts, as well as the support that they've given me with all that's happened today, and they are opening doors for us on many different levels.

When you do these kinds of changes, you don't do them in a vacuum. You do them with a lot of thought and a lot of help from some really smart people and, boy, are there some really smart people that work in this Company. I and we are very excited about all that comes next, and we look forward to communicating that to you over the coming months. Thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.