QVC Group Inc.

Good morning everyone, and thank you for joining us. On this morning's call, we have Mindy Grossman, Chief Executive Officer; Rod Little, our new Chief Financial Officer at HSNi; and Judy Schmeling, Chief Operating Officer and President of Cornerstone Brands.

Mindy will first say a few words before Rod reviews our financial performance. Mindy will then strategically discuss the business.

As always, some of the statements made on this call maybe forward-looking, and as such are subject to many factors that could cause actual results to differ materially from expectations reflected in the forward-looking statements. Additional information regarding these factors, as well as various risks and uncertainties can be found in HSNi's earnings release filed with the U.S.

Securities and Exchange Commission and available on the company's website. HSNi does not undertake to publicly update or revise any forward-looking statements.

In addition, on today's call there will be references to certain non-GAAP financial measures. These are described in more detail in the company's earnings release and SEC filings available on the HSNi website.

You're encouraged to refer to the press release and SEC filings and to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results. With that, I would now like to turn the call over to Mindy.

Thanks, Felise. Good morning and thank you for joining us on today's call.

Before Rod reviews our financial performance for the fourth quarter, I wanted to welcome him to our executive team. As you know, Rod joined as CFO of HSNi last month and this is his first earnings call with us.

We look forward to Rod's significant impact on the business. We also have Judy Schmeling with us, who all of you know, as an additional resource to answer your questions.

So I will now turn the call over to Rod to discuss (02:29) in detail.

Thank you, Mindy, and good morning, everyone. I am very pleased to be at HSNi and I'm excited to partner with Mindy and the team to evolve our strategy with a focus on growth, optimal resource allocation, expense management and value creation.

We will focus on a few key measures to judge success as we move forward, notably sales growth, gross margin improvement and operating leverage. I also look forward to getting to know all of you better over the coming months.

Now let's review our fourth quarter results. As someone who has been at consumer-centric companies for over two decades, I can attest that 2016 was a challenging year in retail.

This environment compounded our performance as we made strategic changes in the business to benefit the organization longer term. Our actions included addressing underperforming product categories, standardizing shipping and handling practices at HSN, driving our supply chain optimization initiative, and divesting two businesses, TravelSmith and Chasing Fireflies, which distorted our year ago comparisons.

At HSNi, sales decreased 2% in the fourth quarter with digital up 4%. Excluding the effect of TravelSmith and Chasing Fireflies on our 2015 results, in addition to a 14-week period this year compared to a 13-week period last year, all related to Cornerstone, sales were down 1% at HSNi.

Gross profit decreased 260 basis points with operating expenses down $8 million, or 3%. GAAP and adjusted EPS were $0.82 compared to year ago of $1.12 and $1.15 respectively.

Included in these results, we had a charge of approximately $16 million, or $0.19 per share related to the implementation of our supply chain optimization initiative at the Piney Flats, Tennessee facility. We expect the business will ultimately realize financial and operational benefits from this transformation upon its completion through increased labor efficiencies, greater space utilization, lower transportation costs and faster customer deliveries.

At the HSN segment, sales decreased 1% to $769 million. Excluding the sales in the prior year from the initial rollout of the wholesale expansion of our Ingenious Designs business associated with the Joy Mangano brand and a direct response television marketing campaign, sales increased 1%.

Sales grew in wellness, culinary and electronics offset by lower sales in jewelry and fashion. Wellness was driven by our nutritional supplement business as well as the introduction of innovative health solutions.

Culinary grew largely due to the continued diversification and growth of our chef portfolio. And Smart Home led electronics.

In jewelry, we again pulled back airtime to improve productivity. And finally in fashion we reconfigured an apparel brand, exited an intimate business and moved through seasonal apparel.

We also had lower shipping revenues largely from changes in our standard shipping rates that took effect in August, as we articulated on our last earnings call, and increased promotions. Digital sales grew 9% with digital penetration increasing 440 basis points to 48%.

HSN's return rate improved 110 basis points and units shipped grew by 2%. Average price point decreased 2% primarily from increased promotional activity and product mix.

Gross profit decreased 9% to $230 million with gross profit margin down 250 basis points to 29.9%, primarily driven by the supply chain optimization implementation, which included increased freight, packaging, and labor costs, changes in product mix and higher shipping cost rates. Excluding the impact of the supply chain optimization implementation, gross profit decreased 4% and gross profit margin was down 90 basis points.

Adjusted operating expenses increased 2% to $154 million, excluding non-GAAP adjustments and increased 1% with these adjustments. We incurred approximately $3 million related to the supply chain optimization effort largely associated with additional consulting fees.

Aside from these costs, operating expenses remained unchanged. Adjusted EBITDA decreased 25% in the fourth quarter to $76 million and down 9% excluding the impact of the supply chain optimization implementation.

Operating income decreased 27% to $65 million. Turning now to Cornerstone, sales were down 5% to $304 million.

Excluding the impact of the divestitures and the benefit of the additional week, sales decreased 1% due to certain home brands. Importantly, both Garnet Hill and Improvements had sales growth in the fourth quarter.

Digital sales penetration at Cornerstone increased 130 basis points to 73%. Gross profit decreased 12% to $106 million and gross profit margin decreased 270 basis points to 34.7%.

Excluding the divestitures, gross profit decreased 2%. The home brands in particular experienced lower shipping margins driven by higher promotional activity.

Adjusted operating expenses excluding non-GAAP adjustments decreased 11% to $93 million with a similar decrease including these adjustments. Excluding the divestitures, operating expenses increased 4% primarily due to an increase in digital marketing efforts partially offset by lower catalog costs as the portfolio intensifies its digital strategies.

Cornerstone's adjusted EBITDA was $12 million, a decrease of $2 million from the prior year. Excluding the divestitures, adjusted EBITDA declined $6 million.

Fixed cost of approximately $7 million annually will be absorbed by the remaining Cornerstone brands. These costs are largely associated with fixed expenses related to our distribution centers and will be reduced over time.

As part of my responsibilities, I will be evaluating our capital allocation opportunities, taking into account our focus to drive the value for our shareholders. We have 2.7 million shares remaining under our existing share repurchase program and our Board just approved quarterly cash dividend of $0.35 per share payable on March 22 to shareholders of record as of March 8.

Looking forward, I am confident that we are taking the appropriate actions to improve our performance and we expect to see sequential improvement as the year progresses. Mindy will be reviewing our growth strategies next.

We expect to incur incremental costs in the range of $8 million to $10 million primarily in the first half of the year related to our supply chain optimization initiative, largely from increased labor and consulting fees. Beginning in the second half, we will be lapping our TravelSmith and Chasing Fireflies divestitures and the impact from our new shipping and handling standards at HSN, allowing for cleaner comparisons.

As I mentioned in the beginning of my remarks, my primary focus is to optimize our portfolio for growth that will include efficient and effective resource allocation and a rigorous expense management discipline to drive shareholder value. I will be providing ongoing updates on our progress.

Now, I will turn the call back over to Mindy.

Thanks, Rod. As I reflect on 2016, it was clearly a year of disruption in retail.

Consumers were distracted and remained cautious, putting pressure on spending that fueled a heightened promotional environment. While not immune to these factors, we remain committed to our strategies and took actions that we believe will strengthen our brand, from building our assortments to elevating our content and data capabilities, and to investing for a competitive advantage.

These efforts also included continuing our strong emphasis in digital, which now represents 55% of our business, with mobile at 45% of digital sales. We expect our hard work and learnings from 2016 to position 2017 as a Year of Growth Regeneration, building strength in the business as the year progresses.

At HSNi, we're committed to restoring top line performance by emphasizing five immediate priorities. One, driving customer acquisition, retention and spend.

Second, optimizing digital platforms particularly mobile, which we consider our flagship. Third, advancing our distributed commerce capabilities.

Fourth, attracting and developing talent across the organization. Five, and most importantly, the foundation of our business, building upon a proprietary product pipeline and investing in key consumer growth categories and experiences.

We will be executing against these priorities while investing in operational execution for future efficiency and leverage as Rod mentioned. At HSN, we have withstood tremendous market challenges over the past year with our most loyal customer intact and up slightly in the quarter.

Our core business had sales growth and we did see sequential improvement in our overall customer file, although the 12-month file was down 3% with infomercials and fitness the primary factors. We have initiatives underway that I will discuss in a moment that are demonstrating results.

In fact, the infomercial category had sales growth in the fourth quarter after six consecutive quarters of sales declines, which is encouraging as we believe this represents a resurgence of opportunity for us. We remain focused on restoring growth to our overall customer file.

We intensified our brand awareness efforts to further engage with current customers and attract new customers to the HSN experience. Our efforts in the fourth quarter included: doubling our targeted marketing reach; extending our frictionless commerce experience, that included a successful Visa Checkout holiday campaign, which added thousands of new customers; launching innovative personalization enhancement that employs analytical machine-driven decision-making; evaluating new artificial intellivision (15:23) experiences via voice-controlled interfaces including Amazon Echo, Google Home and Chatbox; delivering a contextual commerce experience and community inspired content; and finally, implementing an advanced internal search engine across the HSN digital properties that will also power product recommendations.

We are leveraging digital for accelerated growth through targeted spends, data analytics, customization and personalization, as well as content distribution. This approach, as Rod mentioned, resulted in 9% digital sales growth now reaching 48% of the total HSN business, which is a new milestone.

Conversion was strong through our optimization efforts with traffic virtually unchanged. Mobile sales grew 19%, now reflecting 26% of our total business and 54% of our digital sales.

We believe that a mobile device is no longer just a point of sale or a means of checkout. It's increasingly our first point of contact and maybe the only form of engagement we have with certain consumers.

During 2017, we will deploy resources to support our digital and mobile opportunities through targeted experiences based on segmentation to ensure that right content and products are aligned to the customer. A customized app that is personalized to drive discovery, engagement, and ease of purchasing, social conversations throughout our digital platforms highlighting community interaction.

Unique digital events to support distinct offers, drive urgency and deliver new discoveries. Video content strategically infused within experiences and the launch of a full video library.

And expanded distribution through HSN partners entertainment opportunities, innovators and influencers, marketplaces, social commerce and OTT platforms. Recognizing that there are shifts in live television consumption pattern, we're accelerating our content development and distribution across alternative platforms to complement our own on-air brand experience.

Nonetheless, we do benefit from broadcasting into over 90 million homes, the valuables differentiated marketing vehicle. In the fourth quarter, we worked extensively with our key partners such as Facebook.

We created various tests of quick, unique product offering that we will scale in 2017. And to date, we have premiered over 70 Facebook Live events.

In addition, we continue to collaborate with key personalities to amplify our brands to their extensive followings. As an example, in the fourth quarter we intensified our partnership with Wendy Williams by integrating HSN product into her highly followed show.

And just last month, as part of our launch strategy with NASCAR's Danica Patrick, we distributed original video content to ESPN digital platforms to raise awareness. We're also creating new destination programming in wellness, beauty, and fashion to elevate and contextualize the depth of our customer experience by using storytelling and content.

This quarter alone, our remote event will include: Andrew Lessman with a live broadcast from his ProCaps Laboratory in Las Vegas; Benefit Cosmetics, a behind the scenes look at the Benefit's pink palace offices in San Francisco; and Tony Robbins, a visit to Tony's home for a series of multichannel experiences. As part of our entertainment integration strategy, next month we will once again partner with Disney, this time on the highly anticipated Beauty and the Beast to offer captivating commerce experience inspired by the movie.

Disney is putting an amplified marketing effort behind this film, which has already received more views of its official trailer than any other film in history; 128 million views just in its first 24 hours. HSN will be prominently showcased on Disney's extensive platform.

This will feature social media influencers not only with an appearance on HSN, but also on Disney's Facebook pages, as well as Disney creating a Snapchat story highlighting the collection. Disney's popular fashion-inspired blog, Disney Style, will also generate content dedicated to the HSN collection and event.

Following our Disney event, we will celebrate Music City in Nashville, exposing customers to performers who have developed exclusive collection for HSN. The new brand launches will include Sheryl Crow's first fashion collection, LaBellum by Hillary Scott of Lady Antebellum, Patricia Nash Handbags and Kimberly Schlapman of Little Big Town with Kitchen.

As Rod reviewed, we had success in categories such as wellness, culinary and electronics which delivered growth in the fourth quarter and will be distorted going forward while we take the appropriate action to improve underperforming categories, such as jewelry that include infusing newness, (21:45) brands, and maximizing profitability. Carmen Bauza, our new Chief Merchant at HSN has hit the ground running, focused on optimizing our cross category product portfolio and expanding our proprietary offering.

Under Carmen's leadership, the following will be areas of emphasis throughout the year. We will leverage our ability to create a holistic multi-category commerce experience focused on consumers living their best life, which we refer to as connected life, a hot topic at CES last month.

Technology and innovation have evolved to the point where we can integrate products to enable and enhance life for our customers and we plan to offer a broad assortment of products from health and wellness, to connected home, to culinary, to beauty, just to name a few. We are executing this dynamic content in commerce experience through dedicated programming, digital content, community interaction, expert support and education, and innovative products.

As part of this initiative, we will be launching a new weekly destination program series titled, Life Well Lived. We're also excited about the successful launch of a Golden Door Spa, a curation of unique health, beauty and culinary solutions for our customers from the world renowned retreat that is coveted by celebrity enthusiasts.

We are also intensifying our American Dreams initiative, leveraging HSN's robust history of cultivating entrepreneurs with innovative products. We have built a number of key partnerships including Good Housekeeping, the Hispanic Chamber of Commerce, the TV show Hatched, and most recently CES to help us extend the message and the power of the HSN's inspiring American Dreams program.

At CES, we targeted tech entrepreneurs in collaboration with leading wearables manufacturer, Flex, by hosting an extensive product search. Our American Dreams strategy has resulted in nearly 5,000 product submissions and over 120 products already successfully launched on HSN.

We're currently premiering at least two new inventions and/or inventors each week. This initiative celebrates our heritage, while positioning us for the future with a strong pipeline of new products and brands.

This year, we're also leveraging our 40th birthday with a campaign celebrating 40 years of firsts and 40 years of innovation. This milestone provides an opportunity to engage our existing customers and amplify our message to a new audience.

Throughout the year, we will take customers through the past, present, and future of HSN, highlighting the innovations we have developed and the relationships that we have built over the past four decades. Turning now to the Cornerstone portfolio, we continue to navigate through a highly competitive and promotional retail environment particularly in homes.

I believe that's an opportunity to leverage the portfolio to create value through key strategies focused on intensifying our digital presence to drive commerce, creating 360-degree experiential destination to increase market penetration through direct and physical sales and accelerate proprietary product development with faster seat to market and heightened customization and personalization capabilities. We have begun realigning the organization to capitalize on our high digital presence, now representing over 73% of the portfolio, an increase of 130 basis points in the quarter.

Mobile sales grew 11%, now reflecting 22% of our total business and 30% of our digital sales. Similar to HSN, Cornerstone will be reallocating resources to intensify our digital and mobile efforts, which includes the recent addition of seasoned talent.

We've also introduced another innovative digital concept, our How to Decorate podcasts. This ongoing series launched by Ballard Designs allows customers to engage directly with guest designers and Ballard specialists.

The technology is featured in the iTunes new and notable section, with over 20,000 downloads to date. Going forward, within digital, we are focused on three key strategic pillars.

One, agility and scalability. Two, customer journey marketing.

And third, authority and differentiation. At Cornerstone, a strategic area of growth is building upon our experiential retail environment that represents 360-degree commerce destination with strategic physical experiences.

As you know, our first two experiential retail concepts opened last year with Ballard Designs Studios in King of Prussia and Tysons Corner Mall. They provide a proof statement that these destinations not only drive their own traffic, but also lift the direct business in their respective markets.

We are unveiling four experiential destinations this year and remain purposeful about their location and the interconnectivity with our overall direct business. Our Ballard Designs Studio in Natick near Boston opened today for media with the official opening next week, that includes the social media campaign with bloggers and a VIP event with our best customers.

This year, we will roll out additional Ballard Studio locations in Roosevelt Field, New York, and Charlotte, North Carolina. We will also be launching our first Frontgate destination in Plano, Texas, in Legacy II (28:25) outside of Dallas this summer.

This grand living experience will feature both indoor and outdoor interiors and exteriors, as well as a wine bar, café, and concierge service. We will also host a robust calendar of events focused on entertaining and seasonal decorating as well as designer-led (28:56).

We've intensified our focus on proprietary product development with faster speed to market to capitalize on a first mover advantage and to further differentiate and elevate our unique brand positioning within the marketplace. As an example, at Frontgate and Ballard, we're building our extensive customization capabilities, which will be prominently featured from a digital platforms all the way through to our experiential retail destination.

We'll also be collaborating with key authorities including same designer and artist, Judy Ross, with the textile collection at Garnet Hill. And Judy's clients include the Ritz-Carlton, Four Seasons hotels, et cetera.

And at Grandin Road, I look forward to the contributions from our new president, Jason Jones. Jason has had extensive leadership roles including at Crate & Barrel, Pottery Barn and Ralph Lauren Home.

In closing, while this past year was challenging not only for us, but for broader retail, I am optimistic regarding our growth prospects. The foundation we are building provides us with ample opportunity to drive sales growth, optimize for investments in areas such as digital and realize operational benefits to deliver leverage and scale in the business.

We will apply our hard work and learnings from 2016 along with our extensive history of success to propel improved performance. We remain laser focused on the actions that I've outlined which we believe, will result in the year of growth regeneration.

I look forward to updating you on our progress. And now, we'll open the call to your questions.

Thank you.

Thanks for taking the questions. Maybe just two quick ones.

One, Mindy, you talked about the competitive environment and the consumer behavior in Q4. Wanted to know (31:20) an update as we move into 2017 of what you're seeing on either the consumer behavior front or the competitive front?

And appreciate all the detail on the digital initiatives. There was a lot in there.

Wanted to know if we could tease out what you're seeing either from a spend per customer standpoint or a retention standpoint as people engage with more digital platforms as time goes on? Thanks.

Sure. Certainly, we look forward to entering a new year in 2017 given everything in 2016.

And I would say as much as we're optimistic as to where the year is going to go. Sequentially, there's still some volatility in the environment, but I think we had taken appropriate actions to manage, did a lot around our customer focus and engagement.

You mentioned digital, which we did as well, and certainly bringing in new talent in the merchandising area was very important. But we really don't see some future state where the environment is all of a sudden going to lose its promotional nature or the competitive environment is going to remain intent.

So we just have to use all the assets we have to maximize our performance. On the digital side, what we are seeing, and I think I talked a lot to this.

It's not just investment in digital which we're looking to reallocate resources to be able to increase those investments on the marketing side, but a lot of the efforts and I mentioned Facebook, so things like mini (33:00) digital VR videos. We tested a tremendous amount in 2016.

You're going to see a lot of that in 2017. Our focus on custom audiences, which allows us to take our marketing spend and really apply it against new customer acquisition, which as I said, is very much our focus.

We've seen consistent performance at our existing customer and the retention and engagement. And not just for HSN, but for Cornerstone as well.

Most of the efforts or incremental efforts that you're going to see throughout the year are really again effective customer acquisition.

Hi. Good morning.

Thank you for taking my question. First as a follow-up, in terms of the promotional environment and how the consumer is responding?

How do you think about the pace of your sales turnaround given those headwinds? And then in terms of SG&A, it sounds like you're investing a lot in your business, but you also saw some opportunities to find savings.

I'm just curious, how we should think about SG&A going forward?

Okay. I'll take the first part and I'll let Rod talk.

As Rod said in his recap, we definitely have opportunities as the year progresses, because we're lapping certain things in terms of comp. So we do feel that you all will see that progress throughout the year.

We are also focused on making sure that not only are we looking for sales growth, but we're looking at doing it through productivity, profitably, making the right investments. He also mentioned, we'll also be lapping our change in our S&H tables because we need that fine balance of being competitive, but really focusing on having the most compelling products and assortments to drive top line.

So we don't have to achieve it through just promotional activity. So I think that's what you're going to see as the year progresses.

We tend to be optimistic, but conservative. We're not insinuating that all of a sudden there's going to be the ceiling lifting up on spends.

If that happens, we will be thrilled and we will be able to take advantage of that, but we are being very strategic about how we're investing, the pace at which we're investing, and what we are investing against.

Yeah. And Heather, this is Rod.

I would just add to that, from a philosophical point of view on the SG&A line, we want to have more investment going against things that drive new consumers to find us and ultimately take them through the funnel and convert that to purchase. So anything digital, it's going to reach our target.

We're going to spend money against things like Shop by Remote, over-the-top platforms, are things where we're going to invest and we'll look very closely and have a lot of discipline on the SG&A line and things that don't do that.

Okay. Thank you so much.

Great. Thank you for taking my question.

First of all, I was wondering if you could help us to think about the impact of losing the leap year from last year. If I recall correctly, I think last year we gained a weekday in the calendar.

Now, we're going to be losing a weekend. So just wondering if you could size up how much revenue you expect to lose from the loss of leap year, relative to what you gained last year.

And then secondly, it was interesting that you commented on the infomercial category growing in Q4 for the first time in a while. Are there any particular products coming out of the infomercial pipeline that you're partnered with for 2017 that you're excited about?

And when does that typically – something that was a big infomercial for Q4? At what point in the year in 2017, would a product like that really start to be on your platform?

Yeah. I'll take the second question.

I'll let Rod take the first question. We use the word, I would say, infomercial very broadly.

It's not just about, wait there's more. Right?

It's about, are there businesses that can be maximized that also have direct response exposure. And as I mentioned, one of the challenges last year especially in an election year, there wasn't a lot of media spend, so a lot of innovation didn't roll out.

One that we launched in the fourth quarter that was very successful which is an ongoing business and is part of our holistic health and wellness strategy was Copper Fit. And we will see that certainly as a viable active life business going forward.

So, in that category, we're really focused on things that are going to really enhance our customer, not just for short-term maximization. So those are the kind of things we're looking at.

It also speaks to fitness. We've seen some better performance in that category as well.

Wearables continue to perform. So one of the things that Carmen is actually very focused on is, how do we look at our product categories, not just vertically, but horizontally?

And how are we creating programming that brings things together? So again, it's not just infomercial programming, it's health and wellness program that incorporates product across all our categories.

And that's one of the areas that we're very focused on. Travel is another good example of that.

So you will see more holistic programming that integrates a lot of these new products.

And Alex, good morning. This is Rod following up on the question on leap year impact.

It's a good observation. It goes from 91 days to 90 day.

We expect it will be approximately a $5 million impact, mostly impacting the HSN segment.

Great. That's helpful.

Thank you both very much.

Hey, guys. This is Zack Silver on the line for Barton.

I just had two questions. The first one is the pressures that you guys – I guess you guys changed your shipping and handling tables in August of 2016.

Do you think going forward just given how aggressive people like Amazon are in terms of shipping and handling that you'll have to reduce those rates, change those rates going forward? And then the second question is on Piney Flats.

You guys took a $13 million hit to gross profit on this during the quarter. Can you just give us a sense of where you are in kind of fixing that and when we can start seeing margin improvements from that initiative?

Thank you very much.

Sure. I'll just take the first, and hand it over to Rod.

On shipping and handling, if you think of the different ways to maximize and be competitive, and we've been very clear that this is something we will continue to invest in. We feel the new tables, as I mentioned, we lapped that in August, are where we need to be.

But in addition to that, we're also very strategic about selective promotion, where we put free shipping and handling on an item basis, whether it's TES or whether it's a category, and we look to be competitive and balance all of that. But for us, it's a combination of things.

It's looking at where we have to be competitive in shipping and handling by category, by item at times, where we have to be competitive because the product is new and exclusive and compelling, and where we have to be competitive with FlexPay or other areas of our business that we can use as levers. But again, we're going to look to be as competitive as we can, as well as maximizing as many efficiencies as we have to be able to invest in that.

And Zack, good morning, on Piney Flats, it's a top priority for the organization to deliver ultimately what was anticipated with that initiative. We need the savings and we need to be faster and that's exactly what the initiative sets out to do.

So what's behind us, I think we've laid out clearly in this call. What's ahead of us, is an incremental $8 million to $10 million, which will be a blend of gross profit and operating expense, largely in the first half of the year.

And that's predicated on an assumption that the new sorter at the Piney Flats facility comes up in the summer, and that we get to going rates in the back half of the year. So any improvement financially from that will largely start to come in 2018.

Okay. Great.

Thanks a lot, guys. Very helpful.

Thank you. Two questions.

One, given everything going on with retail, with mobility and social media and all that, I'd be curious what your big takeaways from CES are even (43:15) starts to mount? And then secondly, I know partitioning digital on a regular business, it's a little arbitrary and some of it is just fulfillment.

Is there any benefit at all as the digital component gets really, really large – higher growth rate there will naturally propel the business forward as you get a smaller contribution from the existing business, I think maybe it's actually even older customers who are getting less active on purchasing activity on that side (43:48) customer acquisition obviously on the digital front. And that may be a little bit of a naïve supposition, but that's (43:55).

Okay. Let me talk to two things.

So after a decade of attending the CES show, I was actually more excited coming out of this show than in the past 10 years. And there's been a massive shift in what truly consumer electronics are.

Right? We went from televisions and laptops to fast forward to today and I would say that entire show was around, I'm calling it connected life.

The idea of mobility being the core of everything. The ability – for the first time you had massive areas of that show, not just dedicated to traditional consumer electronics, but to health and wellness, to sleep, to mom and baby, the broader assortment.

And what excited us is that we are unique, and that we have the capability to showcase these as an ecosystem and really how technology and meaning, can we bring things to the customer. And to your point, that also includes new, more sophisticated technology in everything from wearable devices, to televisions, to everything in between.

So, as I mentioned before, we have new programming concepts coming out. We will be testing a lot of new and innovative products, and I think we really felt that people were looking to us as a very significant partner to be able to showcase this connectivity.

As far as the digital piece, to your point, yes, we report kind of digital penetration, but it's really evolved. It's less a checkout mechanism choice, which in some cases it certainly is, but people are becoming more and more comfortable with these devices as both a way for them to really look at content, to communicate, whether it's with us or anyone else, and how we're able to approach people when they pick up that phone and how we're kind of the first person they come to, that's got a lot to do with the content and experiences that we're developing.

So you saw that in June we will have a really enhanced app experience on the HSN side. You will see a lot of development in areas such as customization on the CBI side.

I think the amount of customizable products at both Frontgate and Ballard, have accelerated dramatically. I mean, we have one chair at Ballard, I think there's about a 1,000 different ways to customize it.

So we're trying to create a lot of experiences that are going to create engagement versus just I looked at something and now it's a checkout device. Now to your last point on who the customer is, as I mentioned we're going to celebrate our 40th anniversary and we're going to celebrate the customers, I don't know, some of whom maybe have been there the whole time.

Existing customers and kind of new customers everything in between. Certainly, our big focus for growth is expanding that funnel for new customer acquisition.

And yes, that is going to be a somewhat younger demographic than our median. But we really do have a pretty broad diversity.

What's interesting to us is that our psychographic is as important as our demographic because even our customers who may skew a little older – and I guess, I have to put myself in that bucket today, we're pretty technology savvy because she really loves to shop and she wants to engage and she wants to share in community. And if you think about it, the reason why Facebook has been such an important partner, 70% of our customers are on Facebook and they're checking it three to four times a day.

And she's very comfortable shopping digitally. So we have to make sure that everything we do certainly is going to keep our existing customer engaged, but it really is a focus on customer acquisition.

Thanks, Mindy.

Well, thank you, everyone. And I look forward to updating you on our progress as the year progresses.

Thank you.