Ladies and gentlemen, good morning and welcome to the HSN, Inc. Second Quarter 2015 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 now like to turn the conference over to Felise Glantz Kissell, Vice President of 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 statement. Also 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 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 will now turn the call over to Judy Schmeling, HSNi's COO and CFO. Judy? Judy Schmeling - Chief Operating Officer & Chief Financial Officer: Thanks, Felise. Good morning and thank you for joining us. In the second quarter, we continued to leverage our unique attributes as a content-rich, immersive commerce destination. Our performance in the quarter demonstrated our ability to manage all levers of the business to drive strong bottom-line performance. Our second quarter results included sales growth of 4%, with digital sales up 11%, gross profit dollars higher by 7%, and an adjusted EBITDA increase of 10%. At HSN, sales increased 3% to $572 million, with digital sales growth of 11%…

And our first question comes from the line of Eric Sheridan of UBS. Your line is now open.

Thanks for taking the question. Maybe, Mindy, if you have a little bit of color on the direct-response TV marketing campaign, how you saw that operate out in the field, what it meant for sales and what it might mean for doing additional type of marketing campaigns like that going forward to drive the business. Thank you. Mindy Grossman - Chief Executive Officer & Director: Sure. We've been pleased with the Keith Urban direct-response campaign. Knowing that the second and third quarters are smaller, it really ramps up into the fourth quarter of the year. So we're always looking opportunistically for things that we think can drive additional awareness, customer acquisition and certainly revenue. And we will be continuing the Keith Urban business and actually revamping parts of the infomercial to refresh it going into the fourth quarter. As of right now, we don't have any specific plans to expand that to other brands, but we will continue to look for opportunities.

Thank you. And our next question comes from Tom Forte of Brean Capital. Your line is now open.

Great, thanks. So I wanted a little more clarity on what happened in the home category for HSN during the quarter, didn't completely understand the comments there. And then, generally speaking, it sounds like you are advancing your efforts, for lack of a better way of putting it, to have physical stores, so when you look at your brand portfolio, both Cornerstone and perhaps HSN, how do you make the decision on when it's appropriate to have a physical location? Thank you. Mindy Grossman - Chief Executive Officer & Director: Okay, great, both great questions. So we had lower sales in certain home solution and wellness business, as I mentioned. It was primarily due to timing shifts resulting in less airtime for those businesses. So as we stated on the last earnings call, we did benefit from an additional visit in the first quarter from our vitamin expert, Andrew Lessman. But while sales were down in the quarter, these businesses did experience productivity gains, so I just want to be clear on those. So we believe in the growth prospects in these categories, and we're pursuing opportunities, as you heard on the call. We're doing our first digital live Today's Special. We're excited about that. And if successful, we can extend that across other businesses. And then as it relates to physical stores, we have always said our primary goal is to be a direct-to-consumer business. Having said that, we do believe that for our brands, and specifically our home brand, there really is an opportunity, both from a marketing perspective and a customer awareness perspective, to have targeted strategic locations. We have two Ballard Design stores in Florida. They were built quite a while ago. And the result of those stores, even though they're not in our new footprint, which we believe is much more exciting, have been very positive. And we know that there is a lift when we do have a physical store. So we're going to take the learnings from King of Prussia and then we will determine strategically if there are additional opportunities. But to be clear, we are focused on being a direct-to-consumer business and using these as assets for awareness and activation.

Thank you.

Thank you. And our next question comes from Matt Nemer of Wells Fargo Securities. Your line is now open.

Good morning. I just wanted to start with a question on operating expense growth. It was about 7% ex the DC cost in the quarter versus about a 3% to 4% run rate, and I think that was coming from both sides of the house. So just wondering if you could talk to what's driving a little bit above average growth on the expense side. Judy Schmeling - Chief Operating Officer & Chief Financial Officer: Sure, so on the HSN side, part of that expense growth rate, as I mentioned, was related to the Keith Urban infomercial, media costs that we're buying on other networks. So that is a higher expense ratio for that particular business line. That does distort our operating expenses. And I think if you look over the past two quarters as well, you would have seen that same higher growth rate, and that is a big contributor to that. The other part of it, as I had mentioned, was an increase in bad debt expense in the quarter, particularly as it relates to our electronics growth that we've experienced over the past several quarters. Then on the Cornerstone side, it's primarily related to employee-related costs, including incentive compensation because the company's performing better this year versus last year.

Got it. Okay, that's very helpful. And then looking forward, you talked about the increased footprint for HSN2 during the quarter. Do you have any sense for how that could lay out over the next several quarters? Are you in discussions to roll that out with additional distribution partners? Mindy Grossman - Chief Executive Officer & Director: Yes. We are very pleased with the performance of launch on Comcast last year, continue to see additional opportunity, so we launched with Cablevision and Verizon FiOS this quarter and are continuing to be in talks with other providers as well. We do see that as a great platform, not only to continue to have sales growth related to that, but also that reactivation of customers and deepening that engagement with our existing customers.

And then just lastly, is the bad debt expense purely a function of the mix shift into CE? So for example, does the percentage of charge-offs correlate directly with that or is there something that drove that higher in terms of the types of customers that are taking advantage of it? Mindy Grossman - Chief Executive Officer & Director: Sure. Great question, so it is primarily related to that increase in electronics that we've had growth in over the past several quarters, but there is also a mix shift. As we go more and more online, we do experience higher bad debt write-offs via online versus the phone. Because the phone is our existing core customer, so as we're attracting more new customers, there is a higher bad debt write-off associated with some of those new customers. So that is an area that we continue to tweak and really look at our screening processes and things that we can do to continue to eliminate those ones that have the higher propensity to do that. But, like I had mentioned, overall, our FlexPay program is a very effective one for us and our expense is nominal on it, approximately at 1% of sales.

Great, very helpful. Thanks so much.

Thank you. And our next question comes from Anthony Lebiedzinski of Sidoti & Company. Your line is now opening. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Yes. Good morning. Thank you for taking the questions. So first, as far as the HSN gross margin, you called out in the press release favorable vendor settlements. So just wanted to know the significance of that, and was that just a one quarter issue? And while we're also on the HSN subject, as far as the supply chain optimization initiative, I know you gave some details about that, just wondering as to what your expected cost savings are from that for 2016, once you complete that process fully. Judy Schmeling - Chief Operating Officer & Chief Financial Officer: Sure, Anthony. In terms of the favorable vendor settlements, it was not a huge part of our gross profit margin improvement, but probably a third, I'd estimate. But again, I wouldn't take that in isolation, because to have a favorable settlement, you took a charge in a prior period. So I would look at our gross margin over several quarters together in terms of evaluating that. So, in other words, yes, there was a slight tick-up this quarter. There would have been a down tick in a previous quarter, so just average them out. And our goal continues to remain to really keep our gross margin constant year-over-year, but it will fluctuate quarter-by-quarter depending upon product mix and other anomalies like this. As it relates to the supply chain optimization, we haven't articulated exactly what our savings are going to be on that, but it is a favorable IRR on the project. And again, as we've articulated, we're going to be strategic with how we use those savings to really drive continued sales demand…

Thank you. And our next question comes from Barton Crockett of FBR Capital Markets. Your line is now open.

Hey, guys. This is Zack Silver on behalf of Barton Crockett, and thanks for taking my question. We were interested in hearing how you're feeling about the fourth quarter. I know you guys touched on it a little bit earlier, looks like you're facing some tougher comps. I know you don't give specific guidance, but maybe if you could just give us a sense of how you're viewing this in a little bit more detail. Judy Schmeling - Chief Operating Officer & Chief Financial Officer: Sure. So the fourth quarter last year, if you'll recall, we did have a fantastic quarter, with our sales up 14%. So we're, I would say, feeling optimistic about the fourth quarter, but recognizing that is a really, really tough comp for us. So all hands are on deck. I think that given the competitive nature of the environment and what is happening out there, it's hard to say today in August exactly what's going to happen in the fourth quarter, but we have a tremendous line-up of brands on HSN. We feel much better about Frontgate, Ballard Designs and Garnet Hill going into the fourth quarter at this point in time. So we are doing everything that we can, but recognizing it's a very tough comp and a very competitive environment.

Okay, great. And just a quick follow-up, looks like you guys again generated some good leverage with EBITDA significantly above revenue growth. And I was wondering if you could give a sense on whether you see that trend continuing throughout the back half. Judy Schmeling - Chief Operating Officer & Chief Financial Officer: Sure. So again, we don't give any guidance, but we continue to try and manage the business based upon the levers that we have on hand, so sales, gross margin driver levers, operating expenses. So that has been our goal is to continue to have higher EBITDA leverage on that sales growth and so that continues to be our goal over the long-term.

Okay, great. Thank you very much.

Thank you. And our next question comes from Matthew Harrigan of Wunderlich Securities. Your line is now open.

Thank you. You know, I've noticed that you're advertising more on CNN and I think maybe even some other cable networks. I know you've had some nice improvement in your assimilation rate and that really changes the economics of your business and probably affects the efficacy of the marketing. And I suspect also the assimilation rate probably equates to better viewing retention when people start watching HSN. I mean, do you feel that that's something that really needs to be tweaked now that the core business is as robust as it is? And then secondly, this is kind of a mildly flaky question, I guess, but with technology changing and getting better, even things like 3D getting better, I think you made an effort with visualization early in the last decade before you were even on board at HSN and that seems like it might be kind of a fun concept as well as things improve. Is that something that you think could be nice for your business? Mindy Grossman - Chief Executive Officer & Director: Great question. So on the first one we do run cross channel spots across a number of different networks, from lifestyle network to news. And those are great to extend our content. But the real focus and where we're seeing the greatest impact of that assimilation is through our personalization efforts based on the new talent and technology capabilities that we have, as well our ability to leverage all this new content that we're creating off the HSN platform. And you've heard from me before, but we're very focused on the universe of distributed commerce. And we believe that audience and extending our reach is a very important part of our strategy, hence our partnerships with Univision and AOL and other social and over-the-top networks. So that's really going to be where our focus is going to be concentrated. And it's really about getting our content in as many places as possible. As it relates to technology, you're right. We're technology obsessed, and we're always involved in what's new. And yes, we have a team that is looking at what the future of 3D could be along with other technologies, including shoppable video and things like that. And who knows? I mean, 3D technology, you'd be able to design what your home is going to look like with all our furniture could be something in the future. So I think you've got to know what's out there. You've got to be engaging with people. And we've always had a team that is in the advance innovation space. And we will continue to do that.

And what about, I guess, the effort like 15 years ago was like in virtual modeling for clothes, where people put a conception of themselves, I guess just probably just like height and weight back then. Obviously, it could be much more now. Is that something that you tried once, and even though the technology has improved somewhat, it probably doesn't make sense? Because you would think that that sort of faux try everything on... Mindy Grossman - Chief Executive Officer & Director: Yeah. No, I think that one's a little different. I mean, I think that you're seeing people have had mixed success with things like fit predictors and mirrors that will show you what everything looks like on. We're constantly looking at things. I feel a little bit more robust about the opportunities in things like the home and designing area. But again, there's new technology coming out every day. And it behooves our teams to be looking at it first and then determining what's going to be the most effective for our business.

Have fun at the U.S. Open. Mindy Grossman - Chief Executive Officer & Director: Yeah. It will be fun.

Thank you. And our next question comes from Alex Fuhrman of Craig-Hallum. Your line is now open.

Great. Thanks for taking my question, wanted to ask a little bit about the supply chain optimization initiative that you have rolling out over the next year or so. It seems just a little counterintuitive that you're going to be consolidating into fewer distribution centers while actually shortening delivery times. Can you talk a little bit about how that's going to work, and where packages will be shipped through and from, and how specifically much shorter delivery times could become? Mindy Grossman - Chief Executive Officer & Director: Sure. So the reason why the delivery time will be shorter is because we'll be able to get the packages out much faster because the facilities will be highly automated. So and we'll also have the ability to do same-day drops and things like that. So we'll be able to ship out the packages much faster versus what the current time is today. And our existing Roanoke facility is more antiquated. So by us being able to consolidate that, we'll be able to do it on a much quicker methodology. And this is really more of those apparel, jewelry items, we'll be able to quickly get them out.

That's terrific, very helpful. Thank you very much.

Thank you. And I'm showing no further questions at this time. I'd like to turn the conference back over to Ms. Grossman for closing remarks. Mindy Grossman - Chief Executive Officer & Director: Thank you, everyone. Look forward to speaking with you again soon.