QVC Group Inc (QVCGA) 2014 Q1 法說會逐字稿

Good day everyone, and welcome to the Liberty Interactive first-quarter earnings call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Courtnee Ulrich, Vice President of Investor Relations. Please go ahead, ma'am.

Good morning.

Before we begin, I 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, the proposed creation of the QVC Group and Liberty Digital Commerce group tracking stock, the proposed spinoff of Liberty TripAdvisor Holdings, market potential, future financial performance, 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, our ability to satisfy the conditions to both the proposed recapitalization and the proposed spinoff, competitive issues, regulatory issues, and continued access to capital and 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. The required definitions and reconciliations, preliminary notes, and schedules 1 through 3 can be found at the end of this presentation.

And now, I'd like to introduce Liberty's President and CEO, Greg Maffei.

Thank you, Courtnee, and good morning to all of you. Today, speaking on the call we will have Liberty's CFO, Chris Shean; and QVC's CEO, Mike George.

On to some of the highlights at Liberty Interactive. QVC experienced solid margin performance in the United States, and the UK results were strong across the board. In the US, QVC.com penetration rose to 45%. That's an increase of 327 basis points over last year, and a very positive trend -- 37% of those orders were mobile.

The Japanese results were negatively impacted by currency movements. We also had a strong issuance of new senior notes, $400 million of 3 1/8% due in 2019, and $600 million of 4.85% notes due in 2024.

It was a rough quarter for our eCommerce Companies, and we were quite disappointed by their performance. Provide Commerce was negatively impacted by the storm around Valentine's Day, particularly for those of you on the East Coast. We saw some reduced demand in Backcountry and at Bodybuilding.com. All of the management teams of those companies are very focused on their operations and executing on their plans for a strong 2014.

We also took actions at several of our other e-Commerce companies. We have a new CEO at BuySeasons, Rick Barton, who was formerly the quite successful CEO of Leisure Arts, another subsidiary of ours. And we are conducting a search for a new CEO at Evite. Notably, CommerceHub again posted outstanding results.

We continue to progress with the creation of the Liberty Digital Commerce Group tracking stock and expect to file the F-4 for that with the SEC shortly. Also notably, we repurchased $224 million of LINTA stock from February 1 through April 30.

Turning now to Liberty Ventures, we reported strong first-quarter results at TripAdvisor. Trips revenue was up 22% year over year to $281 million. Adjusted EBITDA was up 12% as they continue to invest in the Business, and the mobile audience grew to more than 44% of total traffic. Also notably, Trip announced an agreement to acquire La Fourchette, a deal which should allow it to monetize its large restaurant traffic center.

We at Liberty filed an S-1 related to the proposed spinoff of Liberty TripAdvisor holdings with the SEC on May 6; and also at Liberty Ventures, we completed a two-for-one stock split of the Liberty Ventures tracking stock in April.

With that, let me turn it over to Chris Shean to discuss some of the financials.

Liberty Interactive Group 's revenue increased 1% in the first quarter while adjusted OIBDA was down 1%. Liberty Interactive's eCommerce business' revenue was flat for the quarter while adjusted OIBDA decreased 41%.

As Greg mentioned, winter storm Pax, which occurred around Valentine's Day, had a very negative effect on Provide's operations with the Liberty issues and such. We also had Easter fall in Q2 rather than Q1, which causes some comparability issues. As a result of both of these, we had revenue weakness in the quarter for them.

Additionally, Backcountry and Bodybuilding experienced low first-quarter demand. The decrease in adjusted OIBDA was due to increased technology and personnel costs at these subsidiaries to support anticipated growth which did not materialize. Slightly lower product margins during the period, somewhat due to increased packaging costs, and increased marketing spend for the first quarter that did not yield anticipated sales.

Now let's take a quick look at the liquidity picture. At the end of the quarter, the Liberty Interactive Group had attributed cash of $682 million and $5.3 billion in principal amount of debts. QVC's total debt to adjusted OIBDA ratio as is defined in their credit facility was approximately 2.2 times as compared to a maximum allowable leverage of 3.5 times.

And with that, I will hand the call over to Mike George for an in-depth commentary on QVC.

Thank you, Chris.

We had a solid Q1 with strong adjusted OIBDA margin expansion, balanced growth among existing new and reactivated customers, and continued progress on our Digital Commerce and other key initiatives. We were especially pleased with our performance in the US in a difficult environment and saw strong gains in the UK and China, partially offset by continued challenges in Germany. And we were delighted to announce last month our planned entry into the French market.

E-Commerce continues to perform well, up 3 points to represent 39% of global revenue and 45% of US revenue in constant currency. And mobile orders grew nearly 60% and represent 39% of all global eCommerce orders.

Now, looking at the results by market, in the US, revenue growth was 1% with the prolonged winter along with the Easter shift and lost viewership to the Olympics hampering growth. However, OIBDA margins expanded strongly due in part to a mix shift from electronics to higher-margin apparel, home, and beauty products. And despite the softer revenue growth, we were pleased to see strong performance on many dimensions. We achieved our highest first-quarter overall customer count since 2007 and our highest first-quarter new customer count since 2005. And we saw balanced results across most product categories with the exception of consumer electronics, which does remain soft.

Our home division showed good momentum. We saw strength in home environment products like heaters and humidifiers, and several cooking events drew big audiences online and on air, and generated great sales results from brands like Vitamix, KitchenAid, and NuWave. In March we offered a steady stream of innovative new patio and garden products from brands like Roberta's, as well as gardening tips and suggestions on our digital platforms to help customers celebrate the long-awaited change of seasons.

Beauty, apparel, accessories, and jewelry also generated good results. Customers responded well to our spring beauty event, as well as the exclusive launch of bareMinerals' bareSkin foundation.

In fashion, we had success with brands ranging from Joan Rivers to Isaac Mizrahi Live!, LOGO by Lori Goldstein, Clark's, and Vera Bradley. And it was good to see jewelry gaining momentum with several successful events including Gemstone Day and California Gold Rush.

We also continue to see positive results in attracting new customer to QVC using pop culture events and network integration. In January, Project Runway All Stars season three wrapped, with QVC prominently in every episode. This network integration with QVC as the exclusive sponsor of the accessory wall, increased crossover viewership between Lifetime and QVC, increased our brand visibility, and drove sales of future product.

And this season's grand prize winner, Seth Aaron Henderson, unveiled an exclusive new collection during our fifth annual red carpet broadcast from Beverly Hills. This primetime multimedia event, attended by leaders in the fashion, entertainment and media communities during Oscar week, drove strong viewership to QVC and attracted many newcomers to our broadcast and digital platforms.

And this year's red carpet event also marked the kickoff of an innovative viral marketing campaign with Disney in support of their new movie, Muppets Most Wanted. The QVC and Disney teams collaborated to create this five-week-long social media frenzy involving an epic feud between Miss Piggy and Joan Rivers, culminating with the Muppets taking over QVC on Sunday, March 16. All told, the campaign generated hundreds of millions of media impressions worldwide and well over 1 million YouTube views, and helped reinforce QVC's stature as a topical pop-culture brand.

We continue to improve our service experience in the US at every touch point through steady improvements, to speed of delivery and rich content delivered after the purchase to deepen our customers' connection with QVC.

Now, turning to Japan -- as you will recall, we've been impacted by the analog to digital shift over the last few years which eroded our channel position and led to declining new customer count. These headwinds contributed to the modest revenue declines in the back half of last year. And so we were pleased in Q1 to return to positive revenue growth in local currency, and our new customer count grew slightly in the quarter. That's our first positive growth in new customers in nearly two years.

Unfortunately, we weren't able to translate the revenue improvement into OIBDA growth. Adjusted OIBDA margins declined due to softness in product margins, driven by both product mix shifts and added promotional activity, along with the step up in programming distribution cost that we discussed on past calls, much of which we have now anniversaried.

And while we saw these modestly improved fundamentals in Q1, at the start of Q2 we are dealing with a significant short-term challenge stemming from the VAT increase in Japan from 5% to 8%, as it went into effect April 1. This increase pulled forward consumer spending into March, but that primarily benefited sales of autos, appliances, and other consumer durables. And this was followed by a significant spending pullback in April.

Our revenues declined in April, in line with the declines reported by Japan's leading department store retailers. We think the worst of this is probably behind us, but even if it is, the April decline will likely have a material impact on Japan's Q2 results.

Looking at Germany -- Germany, as you know, is also being hurt by the conversion from analog to digital, which has resulted in a significant increase in the number of channels, creating more competition for viewers' time and attention. This is not unlike the transition we experienced in the US and the UK and worked through several years ago.

In addition, as I've shared on past calls, we've struggled with executional issues in key categories that have taken longer to address than we expected. Under the interim leadership of European CEO Steve Hofmann, we're executing a comprehensive plan to systemically address the underperformance in Germany, focused on enhancing our brand portfolio and increasing programming variety, continuing to expand our Digital Commerce capabilities, improving the rigor and consistency of daily execution, and driving a structural reduction in our fixed cost base.

Now, in Q1 we were also impacted by the deployment of our new European systems platform in Germany. This was a significant milestone for us. We are delighted to have it behind us, but it did cause some short-term sales disruption. We think that without the systems impact, revenue growth would have been roughly flat or maybe slightly down, and so a modest improvement over the recent trend. And we're now fully past these issues and do not expect any material impact on Germany's Q2 results.

Now the decline in OIBDA margins was largely driven by weaker product margins as we shifted the Business away from fashion and jewelry, although this had a corresponding benefit to return rates. We also had a number of one-time expenses in the quarter, mainly related to the systems deployment, but these were offset from the benefit of anniversarying a personnel tax accrual that we took last Q1.

The UK was our standout business in Q1 with a whopping 10% revenue growth and 32% adjusted OIBDA growth in local currency. And we're clearly benefiting from an upturn in the economy, but we're also getting good traction on a number of strategic initiatives.

We launched two additional niche channels in mid-2013, and along with the beauty channel that we previously launched, these channels are driving incremental growth. ECommerce also performed strongly, up 22% in local currency, fueled by an 81% growth in mobile orders, which represented 55% of all eCommerce orders. Finally, we continue to see strong gains in product margins due in large part to pricing moves that we will anniversary in May and numerous expense efficiencies, most notably in our warehouse operations.

In Italy, while we continue to be very confident in the long-term potential of this business, given the high levels of customer retention, customer spend, and purchase frequency that we enjoy, we were disappointed with the low single-digit revenue growth. It was driven largely by a reduction in sales of some of our largest home brands. That's to us a clear indication that we over-relied on these major brands and need to expand our mix of home categories, brands, and key items to keep our customers engaged.

This is often a challenge in young markets as we deal with a less mature vendor base and limited merchandising resources, so we're taking a number of steps to clean up inventory in these larger brands, add staff to our home division and expand the product base. We've also seen some softness in new customer acquisition as we pull back from our heavy marketing spend, but we will continue to monitor brand awareness and modestly ramp up our marketing spend in future quarters.

As you know we've been just slightly below OIBDA breakeven for a couple of quarters now. This is an important, symbolic milestone for us. We would love to get past it, but of course we don't want to rob the Business of needed resources just to hit the breakeven goal. Our product margins are strong, the cost structure is well-managed and the delay in hitting breakeven simply reflects the slower revenue ramp than initially anticipated. But, we clearly are on a path to breakeven.

We were very encouraged by the continued strong performance of our newest market, China, with revenue up 27% to CNY212 million and a modest OIBDA loss of CNY9 million. We saw strong growth in every product category, added over 10 million net new homes in the quarter, bringing our total home count to over 80 million; and introduced over 200,000 new customers. We also achieved strong gains in product margins, up 360 basis points, but these gains were roughly offset by higher programming distribution costs associated with this added carriage.

The China team is really focused on executing all of the QVC fundamentals. We're increasing the rate of new product introductions, leveraging our global vendor base, and executing more engaging programming. As a result of these efforts, we're now seeing modest but sustained increases in repeat purchase rates and we continue to believe that this business has extraordinary growth potential.

And finally, we were delighted in April to announce our planned entry into France with an anticipated on-air date of Q2 2015. We have long aspired to be in France, the second largest market in Europe by GDP. One of the barriers to entering France in the past has been the limited channel availability and regulatory requirements mandating a majority local partner to broadcast on the free-to-air platform. To control the Business ourselves and to be able to capture 100% of the economics, we decided instead to operate channels that broadcast over the pay-TV networks, which do not carry the same foreign ownership restrictions.

Fueled by the rapid growth of IPTV, these pay-TV services, which also include cable and satellite, will reach nearly 20 million homes in France and in French-speaking Belgium by 2016. That's up from just 12 million homes five years ago. We anticipate that we will secure access to the majority of these homes by launch.

We've appointed Steve Bridgeman as our France CEO effective immediately. Steve brings 15 years of QVC experience, including stints as the Chief Operating Officer, and most recently, the Chief Merchandising Officer for our UK business. We estimate our initial capital investment to be just north of $20 million with roughly $15 million through the balance of 2014 and about $5 million in 2015. The $15 million CapEx estimate for 2014 is incremental to previous CapEx guidance for the year.

We've kept the upfront capital investment much lower than Italy, and by leveraging our new regional and global systems platforms, leasing the headquarters building, and outsourcing logistics and customer service operations to top-tier third-party providers.

Finally, we look forward to hosting you next week at our QVC investor meeting on May 15 here at Studio Park. And with that, I will turn it back to Chris.

Thanks, Mike.

Now, let's take a quick look at the liquidity picture of the Liberty Ventures Group. At the end of the quarter, the group had attributed cash and liquid investments of $1.9 billion and $2.4 billion in principal amount of attributed debt, which includes $745 million of TripAdvisor cash and liquid investments and $361 million of their debt facilities. The value of the public equity method securities and other public holdings attributed to the group was $2.2 billion and $1.1 billion respectively at the end of the quarter.

Now, I will hand the call back to Greg.

Thank you, Chris, and thank you, Mike.

Audience, we appreciate your continued interest in Liberty Interactive, and to the operator, I think we're now ready for some questions.

(Operator Instructions)

Matt Nemer.

Thanks for taking my question. So first I wanted to ask about the eCommerce businesses. Can you give us any color on what the revenue growth would've looked like ex Provide and I'm thinking maybe Celebrate may have also been a drag. I'm trying to get a sense of the core LDC growth.

The winter storm Pax was the primary obstacle that Provide had, and that was about $13 million of revenue. And most of that flowed down the contribution margin from our early calculations.

In addition, how far behind were we at Celebrate year over year?

Celebrate was down versus the prior year $3 million or $4 million.

Okay, great, that's helpful.

The biggest impact was definitely the storm that hit over Valentine's Day.

Okay, great. And then as a follow-up to that, but I think this also applies to QVC, given the weather and the Q1 experience across retail this year and your inventory seems like it was up quite a bit at the end of the quarter, do you think there's some inventory hangover that impacts margins in the end and the second and the third quarter, or are you able to clear that pretty quickly?

Are you asking e-Commerce or QVC?

Really both. It's hard -- we don't see where the inventory is, I'd be curious --

-- QVC. I was going to say it's as much of a factor at the e-Commerce companies. Thinking about the inventory there that was most negatively impacted with seasonal and short-lived. It's not something that got flushed and taken out, it's not going to be stuff that's overhanging.

Mike, do you want to comment about QVC?

Overall, we're very comfortable with our inventory position. We had a bit of a buildup in Germany, ironically for the opposite reason, an extremely hot winter. But overall we have a little bit to work through in Germany, but overall we think our inventories are pretty solid and don't see them having a material impact in the Company other than some modest impact in Germany as we clear through some apparel and home textile inventory.

Lastly, Mike, if you look at the growth in Italy, how does that compare to other market launches? It would seem like for a market that is relatively immature that you should be growing mid-singles, high singles, maybe doubles for many years. Have you seen this before as you entered new markets?

I guess a couple of things. So first of all, we definitely don't think we should be in the low to mid single digits, to your point. We should certainly still be in double digits at this point in our evolution.

So, this was a bump for us. We don't think it is going to be meaningful for the long run. I do think we're just a little overconfident in some of the more successful brands and probably lean on them a little too heavily.

If you look back at every one of our launches, maybe with the exception of Japan, they were not linear. They had ups and downs, took a number of years to reach breakeven, I think five years in the UK, seven years in Germany.

So these things aren't as linear as you would like them to be. It's still a slugfest retail business, but they all emerge as healthy, long-term value drivers. And we're very confident in that in Italy, but definitely disappointed.

We would have wanted to be a double-digit revenue growth in the quarter, and so we've got a little bit of work to do to get back on that track. But we think we can get that done.

Great, very helpful. Thanks so much.

Eric Sheridan.

Thanks for taking my question. So just one on the customer growth, Mike, that you called out, maybe some of the drivers of why the customer growth was so strong and whether it was in certain geographies or something you guys did to stimulate demand? Thanks so much.

I would say we had really healthy customer growth in the US. If I had to point to a couple of drivers, I would point to the launch of Q Plus, our second channel last fall, as well as our expansion of carriage over the air carriage in the US.

So I think that added TV reach is helping us, supported by continued growth in our digital platforms and OLM in particular to support digital platforms, as well as some of the show directly. I think some of these network integrations like the Project Runway is clearly elevating our viewership. I think all those things are working for us in a big established market to be able to get record levels of new customers.

And the rest of the world is a little bit of a mix story. Japan went from a big negative to be flat as we start, and I think that's a little bit of anniversarying these big declines we have had and hopefully getting to the point of more stability. UK, also I think helped by their niche channels, saw good growth and a little more mixed in Germany and Italy.

Alex Fuhrman.

Great, thanks for taking the question. Interesting about the customer acquisition, it sounds like a lot of the new customer acquisition is coming from increased carriage on the television, and we're also seeing the mobile commerce numbers at least in terms of the transaction rising sharply.

I was wondering if you could talk a little bit about from your perspective the viewership of your content whether that's on television or on mobile or tablet devices or just on QVC.com? To what extent is that viewership migrating more towards web-based distribution?

And I'm curious what you're seeing with your newest cohort of customers that's really been driving your customer file to record highs there? Is that new cohort of customers more likely to be purchasing items that were aired on TV in the last 24 hours, or is that group more inclined to the off-line side of the Business?

So the couple -- great question, and it certainly is evolving at a high pace. I would say true meaningful levels of viewing of the live TV experience I would say it's still predominately over the TV platform. So we've got a great live streaming experience on the tablet, mobile, and you are seeing people engage on those platforms and view content, sometimes live content and sometimes paid content, and we continue to experiment with that because that a harder get. It's more of a lean-in experience, so you have to really engage beyond just the traditional wide contact.

But for example we did a customized video piece with Mally, who's one of our top beauty vendors, a wonderful tutorial piece that we only aired on our Internet platforms. And I forget the number of average minutes that video was viewed, but people were engaged for 15, 20, 25 minutes which on the Internet is a big number. So, most of the viewership is clearly still live feed over TV platforms, but I think as we do more and more to tailor content to some of these platforms, we're seeing that viewership pick up.

In terms of the new customers, we do know that they're more likely than the existing customer to buy an off air product. So sales of off-air products are a bigger part of the mix for the new customer, and they're much more likely to use our digital platform. So, the existing customers, as you heard earlier, we have about 41% of our sales mix, 41%, 42% -- speaking to last year's numbers now -- in digital.

For the new customer, if you look over last year, it was about 68% of the sales were on the digital platform, so substantially higher than existing. And along with that comes a higher mix of off air items. So we do think these platforms are really extending the experience and making us more relevant to a new generation of customers.

Great, that's really helpful, thank you.

Barton Crockett.

Okay great, thank you. I wanted to ask a question about the TripAdvisor spend. Now you put in the filing there verbiage that suggested this could make it easier for a combination over time of TripAdvisor and Liberty TripAdvisor.

I was wondering if you could give us your thoughts about how you think about control premium in that context? What do you think there's a reasonable argument for TripAdvisor shares within Liberty TripAdvisor getting a premium for the voting control they have.

And also there's a dual sure class structure of Liberty TripAdvisor, A B shares, the B shares I assume mainly owned by John Malone. Do you think in some type of accommodation there should be an additional premium paid for the B shares over the A shares?

Well, it's often the case that high-vote shares particularly when they have with them a majority of the vote or a substantial portion of the vote get a premium. We have no plans obviously to merge Liberty TripAdvisor with TripAdvisor, but as a backdrop, it is not unusual that those shares get a premium.

Correspondingly I'm not negotiating with John Malone over his shares, and we're not talking about in any way shape or form collapsing his shares. But it is not unusual that somebody who has a significant portion of votes would get a premium for their shares as well. So as I think your point about B shares, high vote shares, if you have enough of them is a meaningful comment, but if you -- if there's no plans on any of those fronts.

Okay, great. And just one other quick question on the eCommerce side. Bodybuilding has been such a great performer, but you called it out here as having a weaker quarter. What happened? What caused things to slip a little bit?

I think you're right. Bodybuilding has had straight-line growth basically for its entire life, and this is the first quarter where it really has not had that cycle. Most of the challenges were around International.

I would say Management including Liberty Management digging in deeper into why some of that occurred. We're probably not ready to make a statement yet, but they have an action plan on growth, and you're right, it's been a very consistent strong grower for the entire tenure.

Okay great, I will leave it there. Thank you.

Matthew Harrigan.

Thank you. Some of the European retail markets, apart from the conditions on carriage and all that that Mike explicated are very different in their dynamism. I think Italy is pretty sporadic, Spain I think has some really good retailers, everyone knows about the unemployment rate. France, the luxury houses are globally renowned.

But can you talk a little bit about the structure of the French retailing business, who you're competing with? And I know you're your own animal, but how easy is it to make inroads in France compared to Germany or Italy or a market like that?

And then secondly, I know it's early, but what are you seeing in looking at [ex-one] and Horizon over in Europe in terms of how that affects the QVC business model in terms of opportunities in terms of usage? I mean maybe even using a little bit more of a push strategy or social media strategy?

So, on the retail markets, it is a little too early to say in France exactly who will take share from. There are sale competitors directly in the TV shopping space. We think we've got a better formula than those competitors, but there are competitors out there doing some business in TV shopping.

Beyond that, I would say the market in some ways it feels a little bit like Italy. There's a little bit more to markets that love shopping, there's a little bit more of a boutique feel to the market although not completely. There are some bigger and very successful national brick-and-mortar players in France, as you know.

So and a little more healthy I would say e-Commerce and distance selling market than Italy was. So on balance it feels like you've got a market that is engaged in e-Commerce although that's a component of our business. There's a little bit of TV shopping that we think we could show a much better version of, and then a range of national players and boutiques, so I think share comes from all of those.

And of course, as a comparison to Italy, clearly the per capita income and GDP is higher in France, probably 20% or so higher in France than Italy, so you're dealing with some of the wealthier household base as a starting point. So we think it's a healthy shopping market and good income levels from the household and think it should be a good opportunity for us. And I forgot your second question, Matthew?

I know it's really early, but with the whole TV experience changing and TV still being a big engine for you, what do you see out of ex-one and Horizon over in Europe? Is it still too early, or are you pretty excited about how the EUIs are evolving and the implications for QVC?

I don't -- I'm not sure I'm familiar enough with that, Matthew. I think in general the TV viewership remains high. We are seeing -- UK's been a bit of an experimental lab for us with interactivity and various kinds of over-the-top applications, although we've tried to be an early leader in that area.

But it's -- if you're still seeing very limited customer adoption of those platforms. The other markets have remained pretty traditional carriage markets. I'm not sure if I fully answered it, but that's how we see the landscape.

Look forward to next week. Thanks, Mike.

Same here, thanks.

Thomas Forte.

Great, thanks. Question is for Mike, and I'm also looking forward to QVC next week. Congratulations on the entry into France. I apologize if I am premature, but is it too early to look ahead to other International opportunities you discussed in the past, either Brazil or Spain or Mexico or Turkey?

And then what's your take on the consumer electronics environment right now for QVC? Should we expect continued softness relative to other categories on a go forward basis, or is there something to get excited about there? Thanks.

Thanks so we are excited about France, and it is a little too early to talk about the next one. I would characterize it as we're deeply exploring a handful of opportunities. I don't know that I see anything as imminent; sometimes these things surprise you and they accelerate faster than you'd expect.

But my guess is it will be a while before we have another market to talk about. We want to make sure we got enough resources obviously on the France deployment, and then we're continuing to be in an earlier phase of work across a number of markets to see which one emerges. So we want to keep on the pace, but don't anticipate anything imminent in terms of next market after France.

In terms of the consumer electronics business, it's hard to read it. I think it's going to continue to be challenging. I don't know the it will be a big drag, but I don't see it as something to be excited about.

You've got a couple of real anchors, but I don't know if they're going to turn in any near-term, which is the TV market, there's really not much new in TV. And so at some point that next level of HD will take off, but that feels like it's a little bit out there yet.

And the bread-and-butter digital camera business has gone the way of the iPhone. So we're seeing an okay business in higher end digital cameras, but those are couple of bigger businesses to anniversary.

And the other challenge is we still do a very good computer business, but of course a lot of the computer business we traded for tablets. And that's maybe a trade up in units but a trade down in revenue when we go from a computer to a tablet.

That said, we occasionally have a lot of success on great computer offer. So tablets will be good, computers will be mixed, but probably the balance of the two isn't a big growth. A little bit of weakness in TVs and cameras.

Some success in cell phones. We've never had a big market for cell phones, but we're starting to build that business. So I think it will bounce along, not a huge grower but also not -- also don't see it as being the big pressure point either.

Thank you.

Ben Mogil.

Great, thanks for taking my question. On your new customer number, which I gather you said was the highest in the first quarter since 2005, what do you think attributed to that?

I think some of the carriage expansion I was mentioning earlier, I think the biggest drivers were the launch of Q Plus, our second channel in the US, and expansion into over the air carriage. So I described that as probably the biggest driver, and then after that would be investments in online marketing, investments in some of the network integration efforts that are extending the brand visibility to more customers.

That's great, Mike, thanks a lot.

Thank you.

Great, thank you, operator. Thank you all for your continued interest in Liberty Interactive. We look forward to speaking with you again next quarter if not sooner. Thanks.

This does conclude your conference call for today. Thank you for your participation. Please feel free to disconnect at any time.