Ladies and gentlemen, good morning, and welcome to the HSN Inc. Fourth Quarter and Full Year 2014 Earnings Conference Call and Webcast. This call is being recorded. Following the conclusion of today's discussion, the HSNi team will be taking your questions. With that, I'd like to turn the call over to Felise Glantz Kissell, Vice President, Investor Relations. Ms. Kissell, please go ahead.

Good morning, and thank you for joining us. On this morning's call, we have Mindy Grossman, Chief Executive Officer of HSNi; and Judy Schmeling, Chief Operating Officer and Chief Financial Officer. Judy will first review our financial performance. Mindy will then strategically discuss the business. As always, some of the statements made on this call may be 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. Also on today's call, there'll 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 are 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. I would now turn the call over to Judy Schmeling, HSNi COO and CFO. Judy?

Thank you, Felise. Good morning, and thank you for joining us. HSNi's strong performance for the fourth quarter was a result of strategic actions that we implemented throughout 2014 to position the company for long-term success. Financial highlights for the fourth quarter included sales growth of 10% with digital sales up 12%, gross profit up 8%, adjusted EBITDA increase of 7% and adjusted EPS growth of 10%. We also maintained our commitment to return capital to shareholders in a balanced and disciplined manner. Just last month, we introduced the next phase of our capital return plan, which included a $10 per share special cash dividend and authorization of a 4 million share repurchase program. These actions were an addition to our existing quarterly dividend of $0.35 per share. At HSN, we had exceptional performance in the fourth quarter. Sales increased 14% to $797 million with digital sales growth of 22% and digital penetration increasing 280 basis points to 42%. This increase represents HSN's highest sales and digital sales growth for any quarter since becoming an independent public company in August, 2008. Most product categories had strong sales growth in the quarter with particular strength in electronics, home, culinary and our ingenious designs by Joy Mangano business. Also contributing to our sales performance was the successful launch of our direct response television programming featuring Keith Urban. Joy is down slightly in the quarter, primarily due to a strategic reduction of air time. HSN's average price point grew 2%, unit shift increased 11% and return rates improved 90 basis points, primarily as a result of our product mix. Lower clearance sales also contributed to the higher average price point. Gross profit increased 14% to $262 million. Gross profit margin decreased 20 basis points to 32.9%, largely due to product mix driven by…

Thank you, Judy, and good morning. HSNi's performance gained momentum throughout 2014 as we executed on our strategic priorities across our business, by strengthening our customer file, optimizing our digital platform and differentiating HSNi and our brands at content-rich, immersive commerce destination. Our consistent focus on deploying these strategies drove our strong results for the quarter in an environment where differentiation is critical for success. For the quarter, HSNi had sales growth of 10%, EBITDA growth of 7% and digital grew 12%, reaching a major milestone of now representing over half of our business. And mobile remains our fastest growing platform with 40% growth in the quarter and mobile penetration reaching 18% of our total business and over 35% of digital sale. These results demonstrate the power of our unique position at the intersection of technology, media and retail, which enables us to leverage content across platforms to drive commerce. It's also a testament to the integrated efforts that we have accomplished as an organization. HSN had an outstanding quarter, with sales growth of 14%, the highest increase we've seen since I joined the company in 2006, and an EBITDA increase of 14%. Digital sales were up 22% with penetration increasing 280 basis points to over 42%. It was the third sequential quarter of double-digit digital sales growth. During the fourth quarter, we continued to leverage the investments we've made in customer analytics that have strengthened our customer segmentation, customization and targeting capabilities. We applied our learnings to scale these efforts significantly. The growth of the customer file has accelerated for the past few years, now reaching over 5.2 million customers, our largest active customer base ever. All buying segments were up considerably during the quarter, including an increase in best customers of 9%. Once again, our customer success was…

[Operator Instructions] Our first question comes from Tom Forte of Brean Capital.

So 14% sales growth at HSN. Wow. You outlined a lot of plans to continue the momentum into 2015. I guess the question is, how sustainable is that?

Well, we've said all along that 2014 was going to be a year of accelerated growth at HSN. Now I'm not saying we're going to have 14% sales growth every quarter, but we do feel confident that everything that I articulated that we had put in place, and a number of the changes that did create some disruption in 2013, were really part of a strategy to unlock the growth potential at HSN. And we feel confident that we will continue to perform.

Great. And then on margin front, you talked about in the fourth quarter there was a slight impact from use of shipping and handling promotions. Can you talk about -- did you do a lot more than you did historically in the fourth quarter? I know sometimes you do it selectively.

Yes. We've continued to say consistently that we're investing in shipping and handling, and that was part of it and some of it was mix. And what was interesting, as I mentioned, we actually pulled back airtime in electronics but had very strong growth, nevertheless. So the growth came from productivity, but that also did have a slight impact on the mix. And we'll continue to have our same strategy in shipping, handling. We are very strategic with the use of that. We do go free shipping, handling on national brands, and of course, electronics. And we look at it strategically in terms of jewelry and beauty where it make sense.

Our next question comes from Neely Tamminga of Piper Jaffray.

A question first for Mindy and then second one for Judy. First for you, Mindy. Could you just remind us then how we should be thinking about the size and scope of the jewelry business? And how your path -- I know this has been strategic, but how we should be thinking about the path of progress in 2015 on jewelry? And then, for you Judy, could you to talk us through how you're discussing with your sourcing partners and would just what's [ph] around the West Coast port, especially as we're thinking about kind of the bigger ticket furniture guys from the Cornerstone side of the business. Any help there would be really helpful.

Yes, as you mentioned -- as I mentioned, we really look strategically at the jewelry portfolio, and we have made changes in the mix of that portfolio and have launched a number of brands and have also focused on our core brands. And that's what we will continue to do. We want to make sure that since it is a higher margin business that, that growth is profitable growth, that we don't overbuy in that business. We worked very hard in 2014 to minimize the clearance in both our fashion and jewelry portfolio, which did contribute to their success. So we will continue to manage that business in the same way, and that's what we see going forward.

Yes, Neely, and regarding your questions on the port issues. On the HSN side, we have been fairly insulated from those issues. We do have a few issues that have cropped up, but by and large, we can substitute products and we don't think we're going to have any significant impact from the West Coast port. However, on the Cornerstone side, you're right in terms of some of our larger businesses like Frontgate and Ballard. We do expect to have some impact in the fourth quarter. We do have some goods held up but we do believe that should just be a timing issue, and hopefully we'll be able to look through that, but we do have some more impact on the Cornerstone side than on the expense side. But we're optimistic it will get cleared through, though.

One next question comes from Alex Fuhrman of Craig-Hallum.

I wanted to ask a little bit the Keith Urban Player Package you've been doing. I'm not surprised to see that was very successful, certainly, compelling programming there. I'd be curious how much of the revenue growth at HSN came from that? And really, what are some other exclusive proprietary brands of yours that would lend themselves to that sort of off-platform, long-form, direct response marketing? It seems like there could certainly be other candidates within HSN's stable of brands for that. And curious if that maybe explains some of the increase in inventory as you plan for distribution and broadcasting beyond the HSN platform?

Sure. The sales of the direct response player with Keith was less than 1%. So it's small relative to the performance of the rest of the business. But again, we do see it being an opportunity, and it is continuing to perform. I would say that we're very, very selective in what we would do in the DR space and that's why we specifically picked Keith. We felt that was an opportunity, an opportunity to get additional new customer acquisitions. And if we were to feel that there was something else that we really felt was compelling from an individual product point of view, we would consider it. But for now, we're very comfortable that this is the right one for us.

And regarding your question on inventory, yes, it does have a longer lead time due to issues with Chinese New Year. We did an incremental inventory so it did help drive the inventory higher at HSN.

Our next question comes from Timothy Chiodo, UBS.

Yes, Tim in for Eric here. In the past you guys have talked about some of the M&A candidates or kind of the company you might you look at would be something that's profitable or kind of approaching profitability. And once you layered it onto your platform, you might be able to get it there more quickly. Sometimes, investors have been asking sort of about, what are some of the investments you've made in the past years that'll help make that more possible, centers of excellence and the like. And if you could just help us with maybe a little bit more color there.

Sure. We've done many different things on the HSN front. We invested in our information repository campaign management, which gives us more detailed analytical tools to really help drive analysis on the customer behavior on the front end. But then also on the back end, we have our investing and warehouse automation, and that should be able to enable us to have additional throughput. And then, just in terms of our scale and leverage, which we've always had, but really from a leverage over our contracts at UPS and our total [ph] operator, things like that. We can definitely have incremental value added to the portfolio. Yes, in terms of the total customer base, we have 59 million names. We can bring that to bare on the front end of the business, again with our investments that we made on the information repository side. And then, we've done a lot of smaller things but that they're important to businesses that don't have the scale and size that we do at HSN, things like import compliance, fraud control, all of those smaller areas which we bring a lot of expertise to.

Our next question comes from Trisha Dill of Wells Fargo Securities.

Just have couple here. I know you're not providing guidance on sales and EBITDA, but maybe you can just help us frame out how you're thinking about the balance between growth and profitability this year, particularly given your incredibly strong sales results this quarter but lack of leverage on the EBITDA line?

Sure. If you look at that, for the fourth quarter on HSN, we did have a 14% sales growth and a 14% EBITDA increase. So the primary reason for that not having more leverage on EBITDA was the fact that it was partly mix related. If you look at our gross profit, it was down about 60 basis points when you take out that $5 million credit. So that impact did impact our leverage. And then we also had some increase in catch up and expenses, like health care and things like that, that impacted fourth quarter. But I think if you look overall for the year, HSN had a 7% sales increase with an 11% EBITDA, and that's the kind of relationship that I think that it makes more sense for us on a long-term basis. Likewise, I would say on the Cornerstone side, we certainly don't. And the reason why I caution people who look at any one quarter versus looking over a period of time, where we're going to take it, I don't think that we're looking for a flat sales increase and a negative EBITDA increase going forward for Cornerstone either. So I think on balance, we should continue to look at HSN and over a period of time for the year, like our performance in 2014 at the home and then improvement on the Cornerstone side.

Okay that's very helpful. And then just on the Frontgate, still hoping you get a little more clarity on how much of the decline was due to seasonal versus core furniture and then how you're feeling about the brand so far in Q1?

I feel good about the Frontgate brand. I mean, it's certainly powerful. It's got a great connection, and a big part of that was the seasonal piece of the business, including they had a lack of a very key tree that had driven a lot of the business that we were not able to have this year. So their strengths going into -- their biggest quarter is obviously Q2. But we felt great about the collections they have. PortaForma [ph], which is launching, which is the new modern book as a separate brand. I think when we looked at the market, we really saw an opportunity that wasn't even addressed that we will. And certainly, we're evaluating what percentage of the business in the fourth quarter we're going to allocate to seasonal next year. And we're really much more focused on the indoor segment to expand their ownership of the house, as you will, in addition to outdoor.

Our next question comes from Ben Mogil of Stifel. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: On just sort of the more consumer environment, can you sort of talk maybe regionally. Are you seeing any parts of the country being stronger than others? Kind of curious around areas that have a lot of energy production, employment, if you're seeing any kind of sort of material slowdown there? And it's sort of almost 2/3 through the quarter. Maybe you can talk about how the current quarter, just broadly speaking, is sort of shaping up from a trend perspective?

We're not seeing any anomalies on a regional or location basis. So there's no big sound bites on that. As it relates to the consumer, I think what you seen is somewhat more money in their pocket based on gas and based on employment, and some other things. The question is, where is that money going? And is going to technology, is it going to autos? Is it going to other things? And if I look at the overall environment and I look at retail results, what I'm really seeing are the people who have been innovating and have been investing in the right ways to reach the customer relative to their digital assets, their mobile assets, and they're really focused on differentiating their brands, their products and experiences are the ones that are performing. And so, we continue to look at a broad swath of retail and have a real focus on gaining share through customer acquisition and as well as the overall file and spend.

Our next question comes from of Barton Crockett of FBR Capital Markets. Howard Ma - FBR Capital Markets & Co., Research Division: Hi, this is Howard Ma in for Barton. Given the tremendous growth of digital sales for both HSN and TV shopping in general, could you talk about how aggressively HSN has to invest going forward to drive this level of digital growth? I guess, versus taking a more passive stance, or I guess asked another way, given HSN's great improvements already in the online platform, have you tried to parse out how much of future digital growth will happen on its own as a function of the continued change in online adoption and just consumer behavior shift? And then, just given the HSN segment digital sales approach or exceeds 50%, do you see any structural changes in the inner carriage agreements as you -- are you believe have more leverage versus distributors? And are having any increasing cost for versus primary method of engagement might not be through TV set?

Okay. On additional conversations, I don't think there's anyone that should put the word passive next to their strategies around digital and mobile. I mean that is the most personal way to reach the consumer. And the expectation of the consumer is that, that experience is going to be seamless, it's going to be consistent across screens, and they're going to want to engage anywhere, how, and have that experience, and we're going to continue to invest. Now surely there's just adoption that's going to happen naturally, but we really feel the big opportunity is personalizing and customizing our ability to reach the customer through these platforms. And that's where a lot of our investments have been. And if you remember, we really started testing against those capabilities at the end of last year, and we've been ramping up throughout this year, and we are certainly seeing the benefits of that. So we're going to continue those investments.

And in terms of our agreements with our cable operators, certainly, things have changed tremendously over the past 10 years and they'll continue to change going forward. I said that we do view being on television as key differentiator for us. We love to be able to demonstrate our products into 95 million homes. So that's part of our overall strategy. I'm hesitant to say leverage of any kind because that's a rather strong word, but we do continue to work on our agreements and try and get the best possible arrangement for HSN and try and to make those shorter terms so we can be more flexible with what's happening currently as those deals come up for renewal.

Our next question comes from Anthony Lebiedzinski of Sidoti & Company. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: Just had a couple of questions. So looking at your comments already about your liquidity in your press release, FlexPay was certainly a demand level that you used. Can you just talk about you view that going forward? Do you plan to use that more aggressively?

Sure. So FlexPay is definitely a key differentiator for us from -- in retail in general, and it's definitely a lever that all electronic retailers have. And in particular in certain product categories like electronics that is definitely a key differentiator for us. So we'll continue to use it, but again, it's much more strategic. I'd say that we do use it more historically in the fourth quarter than in any other quarter, just like we used it a lot more during our July birthday month. So it'll continue to ebb and flow, and we manage that and have a very good process in our credit department, working closely with the planning team to evaluate which items should go on FlexPay and at what price point, et cetera. So there's always a little bit of push-pull there, but I'd say it'll come down a little bit or go up a little bit, nothing substantial. You can look at our past history to judge from that. Anthony C. Lebiedzinski - Sidoti & Company, Inc.: Got it. And then just also touching on the Cornerstone. As far as the catalog circulation that you did pull that back in the fourth quarter, is that something that we should expect to continue in 2015?

Well, we pulled back primarily in Garnet Hill in the fourth quarter, to really revamp and get the company back to more of a positive growth story, bottom line versus top line. As we see that business start to continue to respond, we will invest more back in circulation. But I'd say that the first half, you're going to see probably somewhat similar to what we have in the fourth quarter and then continue to evaluate. We do have some brands that we're investing more in circulation like Grandin Road. So it's hard to say, specifically as a total, because each company we have different strategy for. But we're very pleased with what we did in the fourth quarter to manage it.

Our next question comes from Matthew Harrigan of Wunderlich Securities.

Mindy, you talk a lot about customization and certainly, one of the themes in retailing is fracturing, I mean marketing to everyone from first wave boomers, Gen Y down to millennials. But you're still -- one of your big levers is the TV channel, which is almost in a certain sense, an old-fashioned broadcaster in trying to reach everybody who wants to shop with you. Particularly, as your business model it just really seems to breakout, is there any better way to address the fracturing? And I know on digital devices you've got a lot of adaptability. But could there possibly be more emphasis on doing flanker channels, either by lifestyle or by product genre? And then, secondly, on the set-top box data, I mean, Cablevision, Rentrak, all wax eloquent about how valuable that is. That some of the information has a lot of value to the people who are marketing their products through you almost as an advertising form as opposed to just buying the products through you. Can you talk about the value of the set-top box data to HSN and even getting better analytics on the mobile side as Nielsen and other people try to work with that?

Okay. I think when I think about -- let's take the word television out of the equation and let's use the word live streaming content. Because that's really what we have to think about in terms of engagement. Because we have the capabilities and we do stream our content live across every platform. So that's number one. However, recognizing that we have significant engagements through those digital platforms that may not be specific to a time of the day or other, we have created -- we had 180% increase in the amount of original content that we've been creating. And we also have created additional studios to be able to do a lot of that content. So for example, in our beauty business, the beauty bar is all segments of original content that the customer can engage with every day on demand, on their own terms. And we're also doing that in fashion, in electronics, with our "out of the box" series, and we believe those are both going to continue to be important. As much as we could call it old fashioned, there's still a lot of people watching the live broadcast in 96 million homes. We do get some of the information, and we know that we don't have a viewership issue, as you will. But I do believe, to your point, that where and how people are viewing has definitely evolved. And we will continue to evolve with it and test new things. We have our second channel, HSN 2. We're pleased with the performance. We continue to roll out and look for additional distribution. And we will be testing some new formats on HSN 2 this year, to your point, that may be specific to a category or a lifestyle. And based on those performances, we'll see where we want to go from there.

Yes, and of course we use that same content across all of our platforms as well. So it does have multiple uses to reach multiple customers and demographics. In terms of viewership data, we do have some viewership data that we use that's geared towards a specific cable distributor that we extrapolate those to the rest of our results. We continue to look at the data coming from Rentrak and Nielsen, et cetera. But so far, I'd say that for the cost involved, we're a little hesitant to say if it's really going to be beneficially to us because they do sampling prices and we don't have people that are sitting down watching an hour show like you're watching a drama, which, from then you have a bigger base to evaluate that. So we continue to look at that and see if it makes sense for us. But for now, we feel like we have enough data to be able to understand our viewership and our conversion.

But I would think that you must be getting the sense from some of your partners that you're just getting more and more important as a lever in their marketing strategy as opposed to just the product that's actually moved off your air. Is that fair? That there's sort of a breakout sense right now?

I would say that one of the reasons that we've been able to attract the brands, the partners and the personalities we have is because, absolutely, they recognize that we're not just a commerce partner, but we're a marketing partner for the brand. And over the course of these last years, we've basically said that our point of differentiation and the reason why a brand would choose to come to HSN is because of our capabilities to bring the DNA other brands to light in a very unique way to allow brands to be able to tell their story. Hence, our partnerships with Disney or our partnerships with any of the other entertainment world, they certainly are looking at that.

There appears to be no further questions. I'll now turn the call back over to Ms. Grossman.

Thank you, everyone. I look forward to following up and speaking soon, and thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You now disconnect. Everyone, have a great day.