Ladies and gentlemen, good morning and welcome to the HSN, Inc. Fourth Quarter and Full Year 2016 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 call over to Felise Glantz Kissell, Vice President of Investor Relations. Ms. Kissell, please go ahead

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,…

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…

Also to allow everyone the opportunity to ask questions, we ask that you have one question and one follow-up, if needed. And our first question comes from the line of Eric Sheridan with UBS. Your line is now open.

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.

And our next question comes from the line of Heather Balsky with Bank of America. Your line is now open.

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.

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

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.

And our next question comes from the line of Barton Crockett with FBR Capital. Your line is now open. Zack Silver - FBR Capital Markets & Co.: 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. Zack Silver - FBR Capital Markets & Co.: Okay. Great. Thanks a lot, guys. Very helpful.

And our next question comes from the line of Matthew Harrigan with Wunderlich. Your line is now open.

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…

Thanks, Mindy.

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

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

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.