QVC Group Inc. (QVCGA) Q1 2018 Earnings Report, Transcript and Summary

Please stand by, we're about to begin. Ladies and gentlemen, thank you for standing by. Welcome to the Qurate Retail Incorporated 2018 Q1 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, May 10. I would now like to turn the conference over to Courtnee Chun, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning. This call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, stock repurchases, future financial performance, market conditions, the integration of HSN and expected benefits and synergies, future impacts of accounting changes and the impact of recent tax reforms, expected benefit from the sale of ILG, future expenses at QVC, sales demand, customer growth, new service and product launches and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including without limitation, possible changes in market acceptance of new products or services, market conditions conducive to repurchases, the availability of acquisition opportunities, competitive issues, regulatory issues and continued access to capital on terms acceptable to Qurate Retail. These forward-looking statements speak only as of the date of this call, and Qurate Retail expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Qurate Retail's expectations with regard thereto, or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures including adjusted OIBDA, adjusted net income and constant currency. The required definitions and reconciliations, including Preliminary Note and Schedules 1 through 3, can be found in the earnings press release issued today which is available on our website. Today, speaking on the call, we have Qurate Retail's President and CEO, Mike George; CFO, Mark Carleton; and Executive Chairman, Gregory Maffei. Before we begin, we recognize this is a very complicated quarter for our reports given a few things. It's the first full quarter with HSN results, the reattribution and GCI split up occurred intra-quarter on March 9 and the impact of accounting adjustments. We provide comparable results in the press release and note relevant adjustments throughout. We'll do our best help you work through these adjustments on this call and are happy to follow-up as needed. And with that, I'll hand the call over to Mike George.

Thank you, Courtnee. We were pleased to complete our first quarter as Qurate Retail. We've continued to work on the integration of HSN. I also state more broadly about how we operate as a global organization, offering engaging shopping experiences across our brand and geographies. We'll share more at our Investor Day. And rest assured, we remain focused on broadly long-term shareholder value, by first focusing on the fundamentals of instilling strong operating practices and principles across the companies in capturing the targeted cost synergies. Second, making sure we deliver every day on our brand promises, bringing joy to our customers, through compelling and differentiated products and inspiring shopping experiences; and then, finally, accelerating growth by expanding our relevance and our reach to new customers and new platforms. We were pleased to deliver another quarter of positive customer growth and positive sales by QVC along with outstanding top and bottom line performance at zulily. While the HSN and Cornerstone results remain challenged, we are confident in our ability to affect a turn-around at both. Similar to our comments about QVC US when we experienced the disruption in 2016, we expect this turnaround process will be a matter of quarters, not months, and not years. As discussed on the yearend call, the adjusted revenue recognition in accordance with new accounting standards related to recognizing revenue at the time of shipment, rather than delivery, and second, recognizing branded credit card income as revenue rather than as an offset to SG&A expense. We've also excluded transaction costs related to HSNi from our adjusted OIBDA as presented in our earnings release and discussed on this call. Throughout my comments, unless noted, I'll discuss Q1 results for QVC US, HSN and zulily, as if the credit card income remained and offset SG&A expenses as it was in 2017. We believe this provided the most comparable view of our year-over-year performance. We did not adjust our results for the change to recognize revenue at the time of shipment, because this impact is expected to balance out over the course of the year. Our reported reports in the impact of the revenue recognition changes are included in our earnings release issued this morning or in SEC filings. Now, let's look at each segment starting with QVC US. Net revenue increased 2% on strong 8% volume growth and 4% lower ASP, our third consecutive quarter of solid sales growth. Net revenue was also impacted by a net $19 million unfavorable returns adjustment which negatively impacted revenue growth by about 150 basis points. This adjustment primarily reflects comping and reserves released in Q1 of 2017, as our 2016 returns actualized at a lower than expected rate. Operating income increased 26%, primarily reflecting lower purchase accounting amortization. Adjusted OIBDA declined 3%, primarily driven by three factors. First is the returns adjustment, which reduced adjusted OIBDA by $10 million. Second, the change in bonus accrual methodology as discussed in our Q4 earnings call, which was $5 million unfavorable. And third, is the impact of ASP deleverage, which I'll discuss momentarily. I'd also note that these options of new accounting standard around recognition of QCard revenue, impacted reported margins by approximately 40 basis points. But we continue to increase our marketing spend in the quarter, given favorable performance, but these investments were more than offset by favorable bad debt expenses. The U.S. team stayed focused on executing the key strategies pervious discussed to sustain growth, including driving balanced sales growth across categories, increasing product freshness, increasing customer engagement across platforms and attracting new customers. We delivered sales gains of all categories accept jewelry and electronics and we introduced 125 new brands, a 7% year-over-year increase. We saw particular strength in accessories led by footwear brands Alegria, Vionic, Earth Brands and Skechers and newer brands Fly and Taryn Rose. Handbag returned to strong growth, driven by Kipling, Radley London and Dooney & Bourke. And we saw continued strong growth from Cuddl Duds and proprietary brand AnyBody in loungewear. In apparel, we saw strength from newer brands NYDJ, Laurie Felt, Belle by Kim Gravel, Peace Love World and Du Jour. We're also delighted with the launch of the Vince Camuto lifestyle brand with strong results across footwear, handbags and apparel and the premiere of Brooke Shields' new fashion line. In Beauty, we continue to diversify and broaden our assortments, while also focusing on our core volume-driving brands, made good results from longstanding brands like Peter Thomas Roth in cosmetics and Supersmile, as well as success with newer offerings such as Crepe Erase, Toni Brattin, Westmore Beauty and Sara Happ. We're seeing a nice uptick in beauty devices as well with Clarisonic, Calista, MicrodermMD and Dyson. While our jewelry business continues to decline on reduced airtime, we were encouraged by strong gains in productivity and some new pockets of growth in areas like Imperial and Italian gold, Italian silver and Jade by John Hardy, along with the lines of Stephen Dweck and the Grace Kelly Collection. In home, we saw strength in floor-care with key items from Shark, iRobot and Dyson; in cookware, with proprietary brand, Cooks Essentials, along with Le Creuset, Vitamix and Oster; and in gourmet food which continues to grow rapidly. Home décor expanded with the success of newer brands like HomeWorx By Harry Slatkin, Catherine Zeta-Jones and Scott Brothers, along with outstanding results from our proprietary Valerie Parr Hill brand. In electronics, we continue to see strong gains from Apple and from a number of smart home offerings including Ring, Blink and Nest. However, these gains were offset by softness in computers and tablets. And finally, our Martha Stewart business continues to grow and expand across apparel, beauty, cooking, food and gardening among other categories. Now, earlier I mentioned the ASP pressure we've been experiencing. These declines are driven by lower mix of electronics and jewelry, our higher ASP categories, but also by specific product trends within categories. This is the shift from computers to smart home in the growth of loungewear and fashion which carries lower price points. While we don't typically manage the ASP, we have put heightened focus on finding ways to moderate these declines, whilst still ensuring that we're offering the customer what she wants to buy, looking carefully at both our mix of items offered and the frequency of offers at various price tiers. We're also looking selectively at where we have opportunities to move prices, while still offering a compelling value. With these actions, we do anticipate moderating pressure on ASP in the back-half of the year. We continue to be encouraged by the strong customer engagement across our platforms. On broadcast tv, total viewing minutes increased 6% on QVC and QVC 2 at the fourth consecutive quarter of broadcast viewership gains. In addition, viewership on digital and interactive platforms grew strongly. Digital session grows 11% and the number of unique visitors grew 8%, resulting in total e-commerce penetration raising 240 basis points, the 56% of revenue and mobile orders growing 380 basis points, at 65% of e-commerce orders. We continue to expand our reach on emerging platforms as well. We had 1.2 million net downloads of our Roku app at quarter end. It's a 100% year-over-year increase. On Facebook Live, we simulcast approximately 800 hours per month in Q1 with video views more than doubling and minutes view increasing 240% from the prior year. This strong customer engagement is a testament to our ability to adapt to changing consumer behavior. Combined with increased marketing spend, we were able to deliver another strong quarter of new customer acquisition, attracting nearly 440,000 new customers, a 2% year-over-year increase. And 81% of these new customers made their first purchase on digital platforms. Looking ahead to Q2, we do anticipate continued pressure on adjusted OIBDA margins in the US, driven by the ASP declines as well as comping some additional returns reserve release from the prior year and the change in the bonus accrual methodology. That said, we remain confident in our ability to maintain relatively stable to improving OIBDA margins over time. And expect favorable ways to prior year in the back-half, which includes the benefit of the bonus methodology change. Looking now QVC International, we posted our 15th consecutive quarter of positive constant currency revenue gain. Revenue increased 2% in constant currency, and 2% volume growth and 1% higher ASP. We also increased a number of new customers 3% in the quarter. Our UK business generated solid sales gains in Q1, continuing to rebound to started in the second half of 2017. In Japan, while sales growth rate slowed from previous quarters, which we believe was largely due to the impact of Olympic viewership on February sales. The team continued its streak of year-over-year sales gains. And Germany also delivered solid sales growth. International operating income margins expanded 160 basis points, largely due to reduced purchase accounting amortization and adjusted OIBDA margins declined 70 basis points driven by a combination of lower product margins, due primarily to a mix shift in electronics, higher freight expenses in the UK and Japan due to rate increases and higher fixed costs. These are partially offset by a reduction in marketing expenses. Our joint venture in China produced another strong quarter. At local currency revenue increased 11% and we were profitable for the third consecutive quarter. At HSN, revenue declined 10% in Q1, on 6% lower unit volume and 5% lower ASP. We experienced declines in all categories except beauty. ASP declines were primarily driven by a product mix shift away from electronics, which typically carry higher price points. Operating income decreased primarily reflecting purchase accounting amortization associated with the acquisition. Adjusted OIBDA decreased 10% primarily reflecting higher inbound and outbound shipping costs and deleverage of fixed costs due to lower sales. Despite these challenged results, however, we achieved higher product margins, lower personnel expenses driven by integrated related synergies and lower bad debt expenses. In addition, S&H revenue declined partially in line with sales. That's a significant improvement from the downtrend over the last few years. The overall sales declined at HSN reflects both the underlying challenges with the businesses faced over the last couple of years compounded by distraction from the transaction and the leadership transition following acquisition. Among other challenges there were simply insufficient purchase orders executed in the back half of 2017 to effectively support sales in the first half of 2018. We anticipate that it will take until the third quarter to achieve meaningful changes in sellable inventory levels. Despite the disappointing top line results, we were encouraged by a number of bright spots. We're seeing momentum in the beauty space along with improving gross profit margin. This is an area of focus, building off key learnings from QVC's experience. The team has focused on bringing better balance to the beauty portfolio and maximizing productivity, including increasing enrollments in the auto-ship program, and focusing on the most productivity brands as well as new skincare and beauty device launches. The best in beauty seven day digital event was a success. And in April, HSN exclusively launched Lancome's Renergie Multi-Glow with Isabella Rossellini. Additionally, with an eye on growing the food business, and continuing to provide a platform to introduce amazing chefs to broader audience. The team successfully launched Symon Home by Chef Michael Symon. We've also selectively taken some of the strongest national kitchen and cook brands from the QVC line up, and introducing them to HSN. We began with KitchenAid online in Q1 and on air in May. We'll also be launching Keurig and Vitamix in the coming months. While we're committed to maintaining healthy brand differentiation between QVC and HSN, we do believe we can maximize the performance of top tier national brand by carrying them on both networks and optimizing the programming time to provide the customer with more choice. As we work to turn the HSN business around, we're focused on strengthening key operating fundamentals, including building more balance across categories and product assortments, introducing new brands and items, airing more items and more brands per hour and day, moderating promotional intensity, improving on-air presentation, advancing our online assortment and managing costs. While, there is considerable work to be done, we are confident in our plans to address the underlying issues and return to healthy business growth. And we look forward to sharing more with you at our Investor Day later this month. The zulily team built on the momentum that began in the second half of 2017, and delivered an outstanding first quarter. Revenue increase 17% on 12% quarter growth driven by continued strong gains in the customer base. We ended the quarter with 6.1 million active customers, that's a 24% year-over-year increase. The strong customer growth reflects continued progress refining marketing strategies and tools along with a strong focus on creating compelling events every day and enhancing the customer experience. Operating loss improved 26%, and adjusted OIBDA grew 80%. Adjusted OIBDA margin expanded from 4.2% to 6.4% due to fixed cost leverage from high top line growth and more productive marketing spend. Based on the current encouraging results, we believe there's an opportunity to test higher levels of marketing spend in order to fuel even additional growth, while still, of course, monitoring carefully the quality of incoming customers. The accounting change relating to recognition of zulily branded credit card income did not materially impact the quarter results, but I would note that the change in accounting standards to recognize revenue at the time of shipment rather than delivery, did have a more significant impact on zulily than our other businesses. Under the prior accounting methodology, revenue would have increased 14%, operation loss would have decreased 15%, and adjusted OIBDA would have increased 47%. zulily's cost of sales as a percent of revenue was 73.37% that netted up compared to prior year by 40 basis points. The increase was largely driven by increases in fulfillment and transportation cost due to expansion of China direct shipping, a higher dropship mix and international growth. The supply chain team remains focused on optimizing the fulfillment network and improving productivity and while we anticipate continued pressure in Q2, we remain confident that we'll see improving cost in the back half of 2018 compared to the prior year. In addition, the work of the merchant team to curate the product she wants at an appealing pricing point is evident by both the double-digit revenue growth, and approximately flat ASP. That's a significant improvement from the trend of declining ASPs, we saw last year, and that relieved some of the margin pressure. zulily added roughly 50,000 new branded credit card accounts in the quarter, bringing total accounts to about 150,000 since the September launch. We're encouraged to see that the new branded card customers are seeing value in the program with more frequent purchases and larger order sizes compared to non-zulily card customers. We're excited by the strong revenue in customer growth that the zulily team has generated and look forward to building on that momentum for the remainder of 2018 and beyond. At Cornerstone brands' sales declined 8%, operating loss increased and adjusted OIBDA fell by $3 million. Sales were negatively impacted by weakness in the home segment. Frontgate and Grandin Road's outdoor businesses were specially challenged and we believe in part due to unusually cold weather in March, along with efforts to reduce promotional intensity and increased regular price sales. Catalog circulation decreased 6% consistent with ongoing efforts to shift marketing investments to the digital and retail platforms. The increase in operating loss was primarily driven by purchase accounting amortization and the adjusted OIBDA decline was driven by lower sales partially offset by lower operating expenses. On a positive note, Garnet Hill achieved a record Q1 financial performance capitalizing on the brand strong momentum over the last several quarters. Looking forward, we remain confident in the potential of the Cornerstone home brand. The team is focused on establishing a clear and elevated position for each brand, developing innovating and differentiated product that can't be found elsewhere and increasing customer satisfaction and retention. We're also focused on driving sustainable increases in OIBDA margins by optimizing marketing spend across channels and improving gross profit management. And finally, we continue to make good progress on our HSNi integration and cost synergy initiatives. By the end of April, we had largely completed the organizational integration. In Q1, we had approximately $8 million of transaction related expense. That's spread evenly across QVC US and HSN. At the parent level, Qurate Retail, Inc., there was an additional $4 million of transaction related expenses associated with the split-off of non-Qurate Retail assets. These costs are excluded from reported adjusted OIBDA. We've already began to realize immediate synergy benefits. We expect to achieve $35 million to $40 million of expense savings in 2018, which we believe approximately 80% will impact adjusted OIBDA with the reminder - with remainder impacting equity compensation expenses. Going forward, we'll be looking at synergy realization on a consolidated basis across the businesses. And with that, I will turn it over to Mark.

Thank you, Mike. We've discussed on the last call, and as Mike mentioned a bit today, there were quite a few accounting updates impacting 2018. And I think, we had to go over those to make sure everyone are clear. They are: first, recognition of branded credit card income for QVC, HSN and zu as revenue rather than an offset to SG&A. We've highlighted these amounts in the press release. And during 2018, we'll discuss quarterly comparisons as if the income were still an offset to SG&A. Second, we've also began recognition QVC and zulily revenue at the time of shipment rather than delivery. This had a modest positive impact of QVC, with bigger impact to zulily in Q1, which we expect will be neutral on an annual basis. We've not adjusted number for this change. Lastly, we've changed our methodology for incentive compensation accruals at QVC in 2018. We'll now accrue incentive compensation more equally throughout the year, which will result in a headwind to margins in the first half of 2018. Four other items, I'd like to point out. First, we've included pro forma results in the press release to reflect HSN and Cornerstone's historical results for the prior period to help with comparability. We've also reflected the impact of the reattribution 1/1/2018 in certain tables for comparability purposes. Two, we expect our effective tax for 2018 to be in the range of 20% to 23%, excluding the impact of one-time items. Three, we've included revised adjusted EPS in our earnings press release excluding the impact of purchase accounting amortization, net of deferred tax benefit, mark-to-market adjustments on certain public debt and equity securities and other one-time adjustments. Please look at Schedule 3 for more details. And fourth, unallocated corporate costs were modestly elevated in quarter one due to legal costs as we completed the split-off. Now let's take a look at the liquidity picture. At the end of the quarter, Qurate Retail had attributed cash and liquid investments of $1.1 billion and $8.4 billion in principal amount of debt. QVC's total debt to adjusted OIBDA ratio as defined in QVC's credit agreement was approximately 2.5 times, which includes zulily's adjusted OIBDA to a maximum allowable leverage ratio of 3.5 times. Total leverage for the Qurate Retail Group, which includes QVC, zulily, HSN and Cornerstone was also 2.5 times. Now I'll hand it over to Greg for some final comments.

Thanks, Mark. We're pleased to complete the GCI Liberty split-off create an asset-backed stock, which as you know, we've now renamed Qurate Retail. From the period of February 1 through April 30, we repurchased $231 million of that Qurate Retail stock. And I'd like to note that, post-quarter, Marriott Vacations Worldwide announced the acquisition of ILG. And from that, we expect after tax cash proceeds of approximately $200 million and approximately $325 million of Marriott Vacations equity. When it's done, we expect to have a stake in Marriott Vacations of just under 6% on a pro forma basis. We are hosting investors at QVC's headquarters next week May 22, a week and a - I guess, little more than a week, Tuesday May 22. If you'd like to join us in person, please reach out to IR, and as always, we appreciate your continued, if new interest, by name in Qurate Retail. And with that, operator, we'd like to open up for questions.

Thank you. [Operator Instructions] And we'll take our first question from Ed Yruma with KeyBanc Capital Markets.

Hi, good morning and thanks for taking my questions. I guess, first on the H side, I know you categorize return there as quarters, not months, not years. I know you also indicated that there were some low orders done or low inventory levels. I guess, will results deteriorate in your opinion from here before they get better or is this indicative of kind of a bottoming of the business. And then as a follow-up, you've had a couple of key management departures at the Q level. I guess, kind of any progress on how we should think about replacements and were there any benefits from any incentive comp accrual reversals? Thanks a lot.

Hey, Ed, on the HSN performance, I don't want to necessarily put specific numbers against it. But we would hope that we're certainly close to a bottom. It will take a little while to get certainly deposited growth. But our goal is try to make every quarter better than the prior quarter. I think we'll start to have a sort of a better feel on the impact of our action by Q3. But don't see the situation materially worsening before it gets better. On leadership replacements, kind of no news announced today, but we continue to make good progress on a couple of the key openings and we'd expect to have news sometime over the next several weeks. And did you have a third question, Ed?

I think it was on incentive comp, Mike. And I think there was not any kind of material impact of any reversals in incentive comp from the headcount changes.

Thanks, guys.

And we'll take our next question from David Gober with P. Schoenfeld Asset Management.

Hi, it's Richard Bilotti and David. And I guess, two questions inter-related. First, when we look at HSN, how different will the product mix be when the integration of HSN and the revitalization of the business? How different will be from what it was historically and how should we benchmark that progress going forward in order to be able to calibrate for ourselves how you're doing in terms of hitting your integration target? And second, given the tremendous amount of free cash flow the company produces, I mean, we calculate that it's more than 12% yield on the stock. If the integration is progressing according to plan at what point would you consider potentially changing your debt to EBITDA ratio targets with the idea of either making accretive acquisitions to fill in on the business or more importantly to accelerate stock repurchases, because it look pretty damn attractive to buy back stock at this price level. So two integrated questions and by the way, thanks very much for letting us ask it.

Thanks. I'll take the product mix question. I'll let Greg or Mark replying on the other. On product mix, it will certainly evolve and it will evolve in a few ways. We're looking to a better, trying to find a better balance across categories. So as an example, the HSN business has a relatively small fashion mix, a relatively large electronics mix. We'd like to see a better balance. We'd like to see a bigger beauty business as well. And so there is some kind of rebalancing across the portfolio, so that we're both attracting new customers and getting higher levels of engagement from existing customers. You will also see us pushing on out of the QVC playbook, just kind of more items in a day, more new items in a day, more brands in a day. But also, maybe more methodically building reorder businesses where you really can do very well. And I think in all of those areas, there will be some evolution of the assortment structure. That we'll see over time. And then I think you'll see some sharing of brands between the two networks. Again, we want to keep them fairly distinct, but I mentioned some examples where it's a broadly distributed national brand where we think we can get more total sales by putting the brand on both networks. You'll also see us introducing more QVC suppliers, but those suppliers would be bringing different kinds of brands to HSN. But we think - I shared an example on the last earnings call of a very big food business we built at QVC. HSN doesn't have as established food business. There is a lot of supply chain complexity to managing food. So we're working with our partners to develop unique brands and offers for HSN customer. So expect evolution in the mix of categories, expect more balance over the course of the day. And some leverage across QVC kind of vendors and partners, as well just introducing other new brands to the company. And, Mark…

Thank you, Mike, and - yeah, Mike, I will chime in on this one. Thanks, Rich. So I think you are right. You noted couple of things. One, this is obviously a very high free cash flow generating business particularly for a retailer. We are in the midst as Mike has noted, a transition of H, some of the things we're doing and we do expect that there is going to be some quarters of pain ahead while we do that. We are also somewhat constrained or aware of what the rating agencies' expectations are, where our leverage level. That having been said, I think our philosophy has been pretty clear. We've been a big returner of capital historically to the stock market and to our investors, primarily via buyback. We have looked for creative acquisitions and probably put that near the top of the list. We'd like to think H and zulily qualify and are consistent with our view of experiential shopping, discovery-based shopping that is differentiated, and if we see other acquisitions in that space that are consistent with our thinking, we'll be there. There is a goal to retire some of our debt of different flavors, because of the nature of the deductibility that it has and our lack of deductibility out of the new tax law. So we weigh some of that as well. But I think you're right to point out, our biggest use of free cash flow over the last 12 years, since this becoming a separate company has far and away been retirement of equity. And I expect that's going to continue to be the largest source of - or use, rather for our cash given - if we can find other acquisitions we do it, but unlikely to find ones that we think fit as well in the portfolio. So we like to be large retires of equity.

Thank you.

And we'll take our next question from Alex Fuhrman with Craig-Hallum Capital Group.

Great. Thank you for taking my question. I wanted to ask a little bit more about the jewelry category, it's sound like you've been having some success there, just like pulling back on airtime getting more productivity. With Qurate side, it - what extent you think the increase in productivity has been driven the reduction on airtime is there some amount of just stable demand in jewelry or is it just better selections of brands and curating of the assortment? And what are your plan, I guess, going forward in terms of airtime for different categories? Or are there any category that you think could be showing enough good signs that you're ready to put more airtime behind them?

Alex, I would say on jewelry, it's a little bit of all, what you just described. I think, we know that our core customer loves our jewelry offering. It just isn't as important overall in her lifestyle as it used to be. And so we have - they're trying over the last few years to find that level having been a very probably over penetrated business historically at QVC. And so I think the team has done a really nice job trying to understand what the customer would respond to. There's a fair amount of newness in the assortments. The team has done a nice job kind of programming the jewelry events. Because one of the challenges is when airtime falls too much, the customer doesn't quite know when to tune in to find jewelry. Some of her old favorite programs have gone away over the years. And so, the team really focused in Q1 on trying to kind of concentrate some of the airtime and events that would be destination events for that jewelry customer. So I think all of that is working to help stabilize and grow the business at tleaste from a productivity standpoint. In terms of going forward airtime mixes, we're always trying to stay probably flexible with airtime. So I wouldn't say necessarily a specific direction where we want to take airtime, we revisit it online going basis, kind of leaning to what's working, but also trying to maintain healthy balance across the category. We are pleased that most of the categories are working right now. And so, I think, the call for us is more to maintain that balance. But over lean into any one category.

Great. That's helpful, Mike. Thank you very much.

And we'll take our next question from Barton Crockett with B. Riley FBR.

Okay, great. Thanks for taking the question. I guess, a couple of things I was very interested in. One, I think, last quarter, you guys gave some very interesting color on time viewing new customers, which were kind of a positive metric. We're not hearing that this quarter. I was wondering if you could elaborate if there's any meaningful change from what we were seeing last quarter on those counts.

I'm sorry. I missed that. What - say again what you're referring to?

So you were talking about time people spent viewing, which I think was a constructive metric from the fourth quarter, as well as the number of new customer additions, which were near historic highs. And I was wondering if you could update us on what you're seeing now. Is that - has those positive trends changed this quarter versus last quarter?

No. Those have continued positive, I did mentioned we're seeing viewing minutes of - total time spent viewing QVC is up 6%. So it's actually one of the steeper growth we've seen. So we feel very good about time viewing QVC and that 6% is just on our two main platforms of QVC and QVC2. If you added in Beauty iQ, which we don't currently have data on, and if you added in OTT, you - that 6% would be a bigger growth rate, so very good about viewership engagement. And then on new customers, up about 2% in the quarter, and so continues to see nice new customer momentum that we now have for about a year.

Okay. That's helpful. And then a question about the margins. You quantified some of the margin impacts, but the delever, how much of an impact on the ASP declines, how much of an impact on margin OIBDA was that in the quarter? And additionally, you talked about the expectation for the synergies. How much of that did you have this quarter? And how much is still to come?

So on the margin impact from ASP deleverage if you see - the principal impacts are, as you would expect on a distribution costs or freight costs - or warehouse costs or freight costs than a little bit just on the credit card line is your paying transaction fees on the cards were more units. It's hard to give a really precise major of all those impacts, but a little bit on how you look at it. But I think it's safe to say in the range of around 40 basis points, the impact across those line items.

And in terms of the synergies, how much have you realized in this quarter versus what's to come?

We're looking at $35 million to $40 million for the full year, and I believe in this quarter was $4 million.

Okay. So a lot yet to come. Yeah, I think that's good for now. Thank you very much.

All right. Thanks, Barton.

We will take our next question from Tom Forte with D.A. Davidson.

Great. Thanks for taking my question. So Mike, I wanted to ask you the question that I get asked most by investors. There were some speculation in the quarter that Amazon might be considering looking at Amazon Live. Would love your thoughts on that? Thanks.

Thanks, Tom. We did see that speculations. It's - I don't really want to speculate on what Amazon is or isn't going to do. As I said many times, in response to all questions Amazon-related, we feel good about our strategy, good about our unique positioning. We play in a different space with a different kind of strategy than Amazon. I don't really see Amazon - it's hard for me to believe that Amazon would want to acquire a small competitor to compete directly with what we do. But again, I hate to speculate on what others are thinking. I suspect they would have other uses for broadcast capacity, if they ever did choose to go that direction. I would note - and we're subject to these various Amazon rumors and pronouncements, few years we saw big one day wall-up in the stock price when there was an article published about Amazon launching Style Code Live, which was sort of a video, internet, shopping experience had fairly short life at Amazon. So these sorts of speculations come with the territory. We're kind of unwavering in our confidence at our business and the direction we're going and don't see those kind of issues as being material to us.

Great. Thanks, Mike.

Thanks, Tom.

We'll take our next question from Victor Anthony with Aegis Capital.

Thanks, guys. So, Mike, you successfully right-size or turned around the QVC US business, surprising most of the skeptics, including myself as well. So I'm wondering if you are seeing the same level of challenges at HSN that you saw at QVC. Whether or not this - the turnaround will be more difficult than you anticipated versus what you saw at QVC US? That's it for me. Thanks.

Thanks for question. I'm glad we're able to disprove you on the QVC US. I guess, I would describe it - the HSN situation as probably some - maybe bigger challenges than we fully anticipated, but equally offset by bigger opportunities than we expected. So while we're encouraged by it, you just - there are number of kind of indicators of kind of assortment, business health, brand health that we look at carefully at QVC. You see big gaps at HSN that we can go tackle. So the bad news is that there are those gaps, but the good news is there are those gaps. And we are confident that as we go after them in a methodical way you will see similar results to what we have seen when we had bump in QVC US, when we had a bump in Japan few years back. A few year before that when we had a bump in Germany. So I think we know how to go at these things. The difference is obviously that hasn't operated under traditional model and there are traditional model in the past. We don't want to by any means totally convert HSN to a QVC model. There are many good things that the team does. But I've been encouraged by the responsiveness that kind of level of energy we're seeing with that team to really learn from each other, great collaboration across QVC US and HSN teams to figure it out and to go for it. And so, it's early enough that I'm hesitant to put a very tight timeline on that turn, but I would say our confidence in the turn as we see these sort of gaps or differences that we can go fill is quite high.

Thank you very much.

And we'll take our final question today from Matthew Harrigan with Buckingham Research.

Thanks for taking my question. Yeah, I was curious. Your Chinese JV is basically around the area, even though you had a pretty healthy revenue quarter. But just being present in that market, you just kind of - Mike George, word the learnings you can extract when you look at that market in AI, devices for retailing and voice interaction and all that. Is there something to set for just being there to monitor how that retailing market is developing? And is that some sort of precursor for some of the changes in some of the other markets including the U.S. and Japan and Europe. And when you look at aspects of retailing like that, do you see any real major differences or distinctions across the major markets that you operate in indirectly? Thank you.

I just I'd be like - I definitely see it that way. It is a very low cost option to be in an important and to learn. It's a business where to your point it's not meaningful in our total P&L. But we put in a fairly modest investment when we went into the JV several years ago and never added another cent to that investment. And now we actually are a few quarters of breakeven or better. So it's a kind of no cost way to be in that market, to learn. Is there a potential down the road to see a really big up-shift in the growth of that business and have it be more meaningful? It's possible. That's a very - that remains a very immature and fragmented market with many, many competitors. And so as we just sort of stick with it, I suspect you'll see some of that lessen over time. But equally importantly, it is a way to be in the market to see what other innovative retailers are doing to see what's happening on social platforms. Long before we got engaged in Facebook Messenger we had a very innovative WeChat application in China. And so - and to see some of these different kinds of models like WeChat. It's something you try to learn from and hopefully we can take forward to - take all of the learnings forward to our other businesses.

Thanks, Mike, Congratulations for the quarter.

Thank you.

Thank you, operator, and thank you to all the questioners. And thank you for your continued interest in Qurate Retail. As we noted, in a little under two weeks we're going to have an Investor Day in Westchester. If you are so inclined, please reach out to the IR department. If you are otherwise, we hope to speak with you next quarter, if not sooner. Thank you very much.

Thank you. And that conclude today's conference. Thank you for your participation. You may now disconnect.