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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Evolv Technologies Holdings Inc | NASDAQ:EVLV | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.20 | 6.37% | 3.34 | 3.30 | 3.34 | 3.31 | 3.10 | 3.16 | 1,466,570 | 23:10:11 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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ValueVision Media, Inc. (ValueVision) is filing with the Securities and Exchange Commission (the SEC) an updated version of its May 28, 2014 investor presentation, pertaining to certain matters to be voted upon at ValueVisions 2014 Annual Meeting of Shareholders scheduled for June 18, 2014, which updates and amends portions of the presentation previously filed with the SEC on May 28, 2014 and May 30, 2014.
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BUILDING AND INSPIRING COMMUNITIES THROUGH SHOPPING
ValueVision Media
(NASDAQ: VVTV)
THE RIGHT LEADERSHIP &
STRATEGY TO CREATE
SHAREHOLDER VALUE
May 28, 2014
Updated June 10, 2014
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DISCLOSURES
SAFE HARBOR
This document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. These statements are based on managements current expectations and accordingly are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein due to various important factors, including (but not limited to): consumer preferences, spending and debt levels; the general economic and credit environment; interest rates; seasonal variations in consumer purchasing activities; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; competitive pressures on sales; pricing and gross sales margins; the level of cable and satellite distribution for our programming and the associated fees; our ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom we have contractual relationships, and to successfully manage key vendor relationships; our ability to manage our operating expenses successfully and our working capital levels; our ability to remain compliant with our long-term credit facility covenants; our ability to successfully transition our brand name; the market demand for television station sales; our management and information systems infrastructure; challenges to our data and information security; changes in governmental or regulatory requirements; litigation or governmental proceedings affecting our operations; significant public events that are difficult to predict, or other significant television-covering events causing an interruption of television coverage or that directly compete with the viewership of our programming; and our ability to obtain and retain key executives and employees. More detailed information about those factors is set forth in the Companys filings with the Securities and Exchange Commission, including the Companys annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this document. The Company is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
The Company includes information on the Future State of the business in certain instances in the following presentation. This information is intended to identify aspirational goals of the Company with respect to certain metrics, and is not tied to a specific date or timeline. These aspirational objectives are forward-looking statements and should be read in conjunction with the companys risk factors identified in our most recent annual report on Form 10-K and periodic reports filed after such 10-K.
Adjusted EBITDA and Adjusted Net Income/(Loss)
EBITDA represents net income (loss) for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The Company defines Adjusted EBITDA as EBITDA excluding debt extinguishment; non-operating gains (losses); non-cash impairment charges and write-downs; activist shareholder response costs; and non-cash share-based compensation expense. The Company defines Adjusted Net Income/(Loss) as net income/(loss) excluding non-cash impairment charges and write-downs; debt extinguishment; and activist shareholder response costs. The Company has included the term Adjusted EBITDA in our EBITDA reconciliation in order to adequately assess the operating performance of our television and Internet businesses and in order to maintain comparability to our analysts coverage and financial guidance, when given. Management believes that the terms Adjusted EBITDA and Adjusted Net Income/(Loss) allow investors to make a more meaningful comparison between our business operating results over different periods of time with those of other similar companies. In addition, management uses Adjusted EBITDA as a metric to evaluate operating performance under the Companys management and executive incentive compensation programs. Adjusted EBITDA and Adjusted Net Income/(Loss) should not be construed as alternatives to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with generally accepted accounting principles and should not be construed as measures of liquidity. Adjusted EBITDA and Adjusted Net Income/(Loss) may not be comparable to similarly entitled measures reported by other companies. The Company has included a reconciliation of each of Adjusted EBITDA and Adjusted Net Income/(Loss) to net income (loss), their most directly comparable GAAP financial measure, in Appendix C of this document.
LTM
LTM refers to the Last Twelve Months of reported company information on or about the date of this presentation. Data in this document may be unaudited.
IMPORTANT INFORMATION
This document may be deemed to be solicitation material in respect of the solicitation of proxies from shareholders in connection with one or more meetings of the Companys shareholders, including the Companys 2014 Annual Meeting of Shareholders. On May 9, 2014, the Company filed with the SEC a proxy statement and a WHITE proxy card in connection with the Companys 2014 Annual Meeting of Shareholders. The Company, its directors and certain of its executive officers and employees may be deemed to be participants in the solicitation of proxies from shareholders in connection with the Companys 2014 Annual Meeting of Shareholders. Information concerning the interests of these directors and executive officers in connection with the matters to be voted on at the Companys 2014 Annual Meeting of Shareholders is included in the proxy statement filed by the Company with the SEC in connection with such meeting. In addition, the Company files annual, quarterly and special reports, proxy and information statements, and other information with the SEC. The proxy statement for the 2014 Annual Meeting of Shareholders is available, and any other relevant documents and any other material filed with the SEC concerning the Company will be, when filed, available, free of charge at the SEC website at http://www.sec.gov. SHAREHOLDERS ARE URGED TO READ CAREFULLY THE PROXY STATEMENT FILED BY THE COMPANY AND ANY OTHER RELEVANT DOCUMENTS FILED WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION WITH RESPECT TO PARTICIPANTS.
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EXECUTIVE SUMMARY
ValueVision A History of Value Creation
A Leading Scalable Multi-Channel Retailer
Rebranded and Transformed as ShopHQ
Accountable and Decisive Management Team Have Developed and Successfully Executed on a Strategic Plan to Restore and Significantly Grow Shareholder Value Over the Long-Term
Experienced Management Team that has Dramatically Turned Around the Companys Fortunes
Strong Share Price Performance and a Well-Articulated Strategy for Sustained, Profitable Growth
Strong Performance Across All Critical Operating Metrics
Significantly Improved Financial Profile
Poised To Grow and Substantially Enhance Shareholder Value
Highly Experienced and Engaged Board
Highly Qualified and Experienced with a Fresh Perspective 5 of the 8 Board Members Have Joined in the Last 3 Years as Part of an Ongoing Review of the Companys Needs
Average Director Tenure of 3.5 Years
Extensive Media, Executive and Public Company Experience
The Clinton Groups Nominees are Seeking Control of the Board with a Slate of Candidates that We Believe are Not as Strong as our Nominees
We Believe that the Clinton Group has Not Articulated a Superior Plan Demonstrating that Control of the Board by Clinton Groups Nominees is Warranted or that its Nominees are Better Qualified than Our Current Directors to Continue the Existing Boards Program to Create Significant Shareholder Value
Dissident Nominees Do Not Have Relevant and Recent Experience or Expertise, in Our View
Proposals Restated Existing and Ongoing Strategy
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WORLD-CLASS LEADERSHIP
Board of Directors
Jill Botway
(Joined in 2013)
Recently appointed President and CRO of Collective Media
Former Global EVP & Director of Sales & Marketing, Interactive Media Holdings
Sean Orr
(Joined in 2011)
CFO and Treasurer of Accretive Health
Former EVP & CFO of IPG
Prior Senior Roles at PepsiCo
Former Partner at KPMG
John Buck
(Joined in 2004)
Chairman, Medica
Former Chairman and Interim CEO of VVTV
Former President and COO of Fingerhut Companies
Lowell Robinson
(Joined in 2014)
Former CFO & COO of MIVA
Former CFO at HotJobs.com
Former CFO & CAO of Advo
Prior Senior Financial Positions at Citigroup and Kraft Foods
William Evans
(Joined in 2011)
Former EVP & CFO, Witness Systems Prosource and Management Sciences America
Former Partner at KPMG
Randy Ronning
(Joined in 2009)
Chairman of the Board
Former EVP and Chief Merchandising Officer, QVC
Prior Executive Roles at J.C. Penney
Landel C. Hobbs
(Joined in 2014)
Former COO and CFO of Time Warner Cable
Former SVP of Turner Broadcasting
Prior Senior Role at KPMG
Keith Stewart
(Joined in 2009)
CEO of VVTV
Former VP of Merchandising, QVC USA
Former General Manager of QVC Germany
Management
Keith Stewart CEO
(Joined in 2009)
Bob Ayd President
(Joined in 2010)
Former EVP and Chief Merchandising Officer at QVC USA
Former SVP at Macys
Bill McGrath EVP & CFO
(Joined in 2010)
Former VP Global Sourcing Operations and Finance at QVC
Former Vice President Corporate Quality Assurance and Quality Control at QVC
Carol Steinberg COO
(Joined in 2009)
Vice President at Davids Bridal
Director of Online Marketing and Business Development at QVC
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IN 2008, VALUEVISION WAS A FAILING BUSINESS
Issues Facing Company in 2008
Narrow Product Mix and Shrinking Customer Base High Return Rates Burdensome Cost of Cable and Satellite Distribution $51 million Operating Loss
GE Preferred Stock Overhang and Liquidity Concerns
Unstable Leadership 4 CEOs in the year and a half prior to Mr. Stewart becoming CEO in January 2009
Results of Managements Strategy Today
80% Active Customer Growth and Broadly Expanded Product Offering
Return Rate Improvement of 28%
38% Improvement in Distribution Costs per Household
$18 million Operating Profit, a $69 million improvement
Simplified Capital Structure
Retired Expensive GE Preferred Instrument
Obtained a $75 million, cost effective PNC credit facility Well Positioned With World Class Management Team Highly Qualified and Experienced Board with Average Tenure of 3.5 Years
The turnaround since The Companys 2008/2009 penny stock status has been completed and ValueVision has already demonstrated that it has entered a new stage to grow and dramatically enhance shareholder value
5
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SHOPHQ TODAY:
A SCALABLE, MULTI-CHANNEL RETAILER
Highly Scalable, Multi-Platform Electronic Retailer (TV / Online / Mobile)
Attractive Operating and Financial Profile
Diverse Product Offerings from In-Demand Brands
Loyal, Attractive Customer Demographic
Strong, Emotional Connection with Large Addressable TV Audience
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PRIMARY DRIVERS OF SHAREHOLDER VALUE
Our base of customers is growing in size and is more engaged
Sustainable topline growth and product cost management drive value creation
The largest costs, distribution and transaction expenses, are predominantly fixed
Average Price Average Purchase
Total Customers Total Revenue Point Frequency
Increasing total customers by:
Lowering average price point to offer a lower entry point for new customers and appeal to impulse buyers
Expanding household distribution and improving awareness with better channel positioning
Adjusting merchandising mix to appeal to a broader customer base
Increasing average purchase frequency by:
Improving selection of repurchase-oriented products (i.e., Fashion and Beauty)
Enhancing customer experience and Brand engagement through Online & Mobile applications
(1) Because ValueVision follows a 4-5-4 retail calendar, every five to six years the Company has an extra week of operations in its reporting cycle, and this occurred in fiscal 2012.
Therefore, full year fiscal 2012 has 53 weeks as compared to the same period for other presented years of 52 weeks. The extra week in F12 is not included in these calculations to show the numbers on a comparable basis.
1,022 1,144 1,060 1,132 1,357
Total 754 12.4%
Customers 5-Year
(000s) CAGR
F08 F09 F10 F11 F12 (1) F13
$176 $108 $101 $104 $96 $81(14.3%)
Average
Selling Price 5-Year
F08 F09 F10 F11 F12 (1) F13 CAGR
Average 4.3x 4.8x 4.9x 5.0x 5.3x 5.8x 6.2%
Annual
Purchase 5-Year
Frequency F08 F09 F10 F11 F12 (1) F13 CAGR
Customer growth and increased purchase frequency will accelerate the revenue growth profile as average selling price stabilizes around $80 per item
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FOUR KEY GROWTH STRATEGIES
ValueVisions Scaleable Operating Model
1. Broaden and Diversify Merchandising Mix with Compelling Product
2. Expand and Optimize TV Distribution Platform
3. Be a Watch & Shop Anytime, Anywhere Experience
4. Grow Customer Base, Purchase Frequency and Retention
An engaged customer base creates the foundation for long-term, sustainable growth
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MANAGEMENT HAS EXPANDED MERCHANDISING MIX WITH COMPELLING AND BRAND-ENHANCING PRODUCTS
Jewelry & Watches
Home & Consumer Electronics
Beauty, Health & Fitness
Fashion & Accessories
Management has accelerated its introduction of new and margin enhancing merchandise
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TO DIVERSIFY PRODUCT MIX AND DRIVE
CONSUMER ENGAGEMENT
Managements continuous product mix improvement has driven customer engagement
Airtime and inventory is routinely refocused on products with a proven ability to best communicate our value proposition, convert viewers into customers and drive engagement with existing customers
Jewelry & Watches is targeted to be a smaller fraction of sales; while the products contribute higher than average margins, they also have lower than average purchase frequency and higher return rates Recent merchandising changes have enhanced our brand amongst our viewers and contributed to our margins by reducing transaction costs per item and improving return rates
Increased Product Diversification
100%
7% 11% 14% 80% 5% 13% 16% 32%
60% 33%
40%
40%
56%
20% 43%
30%
0%
F08 F13 Target Future State
Jewelry & Watches Home & Consumer Electronics Beauty, Health, & Fitness Fashion & Accessories
Managements successful diversification of product mix drives increased customer counts and higher purchase frequency
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EXPAND AND OPTIMIZE TV DISTRIBUTION PLATFORM
Increased visibility by improving channel positions that our customers frequent
Company has affiliation agreements with all major cable, satellite and telecom distribution providers Household footprint has increased 20% since 2008 to 87 million homes Improved quality of channel position through lower channel positions and second channel exposure
Annual cost per home declined from $1.74 in 2008 to $1.07 in 2013; results in annual rate savings of $55 million
U.S. Household Penetration
ShopHQ Total US(1)
87 ~115 million million
(1) Source: Nielsen, May 2013.
Increased Second+ Channel Presence
2008 Current
17% 22%
83% 78%
2 Channels + 2 Channels +
1 Channel 1 Channel
Select Cable & Satellite TV Distribution Partners
Managements focus on TV distribution and negotiations has improved ShopHQs exposure and reduced its impact to cost structure to maximize financial scalability
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BE A WATCH & SHOP
ANYTIME, ANYWHERE EXPERIENCE
Internet / mobile sales represent around 46% of total revenue
Mobile growing rapidly and currently represents 25% of internet sales
Customers are able to conveniently watch the broadcast, browse, purchase and share products Experience inspires shopping and is consistent across all channels iPad and Android apps offer content synchronized to the live broadcast Social networking broadens outreach
ShopHQs mobile offerings allow customers to shop and buy anytime, anywhere
Internet & Mobile Revenue
$297 $262 $251 $231
$181 $178
10.4% 5-Year CAGR
F08 F09 F10 F11 F12 (1) F13
(1) Because ValueVision follows a 4-5-4 retail calendar, every five to six years the Company has an extra week of operations in its reporting cycle, and this occurred in fiscal 2012. Therefore, full year fiscal 2012 has 53 weeks as compared to the same period for other presented years of 52 weeks. The extra week in F12 is not included in these calculations to show the numbers on a comparable basis.
Internet and Mobile sales continue to be a significant contributor to revenue and growth
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MANAGEMENTS CUSTOMER-CENTRIC AND OPERATIONAL FOCUS DELIVERED STRONG RESULTS
Management Initiatives
Expand Household Distribution and Broaden Product Offerings to Drive Volume Growth
Overhaul Product Mix to Drastically Reduce ASP and Improve Product and Operating Margin Profile
Negotiate Distribution Terms and Fine-tune Customer Engagement Dynamics to Improve Distribution Efficiency
KPI Improvement
20% Growth
132% growth
54% Reduction
28% Improvement
49% Improvement
38% Improvement
U.S. Households (mm) Net Units Shipped (mm)
80.0 86.6
72.4 7 5 3
F08 F11 F13 F08 F11 F13
Average Selling Price Return Rate
$176 31% $104 23% 22% $81
F08 F11 F13 F08 F11 F13
Transaction Costs / Unit Distribution Cost / Household
$4.82 $1.72 $1.34
$1.07
$2.91 $2.48
F08 F11 F13 F08 F11 F13
Strong KPI performance across critical business fundamentals underscore managements progress to date
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AND PROVEN THE SCALABILITY OF
VALUEVISIONS OPERATING MODEL OVER EACH STAGE OF OUR TURNAROUND
Management stabilized the business, aligned the Companys assets and cost structure, and now achieving growth Results reflect a strategic diversification of product mix and a realignment of the distribution cost structure We have delivered eight consecutive quarters of revenue growth and positive Adjusted EBITDA
Revenue and Gross Margin ($millions)
Priority Timeline: Survival Strategic Alignment Growth
(Jan 09 Jan 11) (Jan. 11Jun. 12) (Since Jun. 12)
$ 700.0 $ 640
$ 600.0 $ 568 $ 562 $ 558 $ 574
(7%) +7% (1%) +3% +12%
$ 528
$ 500.0
$ 400.0
$ 300.0
F08 F09 F10 F11 F12 (1) F13
Gross Margin 32.2% 32.9% 35.5% 36.6% 36.2% 35.9%
5-Year Revenue CAGR
VVTV: 2.4% vs. HSN: 3.4% QVC: 3.5%
Adjusted EBITDA and Adjusted EBITDA Margin ($millions) (2)
Priority Timeline: Survival Strategic Alignment Growth
(Jan 09 Jan 11)(Jan. 11Jun. 12)(Since Jun. 12)
$40.0
$18.0
$20.0 $2.4 $1.0 $4.2
$0.0
($20.0)
($40.0)($19.4)
($60.0)($51.4)(1)
F08 F09 F10 F11 F12 F13
Adj. EBITDA Margin(9.1%)(3.7%) 0.4% 0.2% 0.7% 2.8%
5-Year Adj. EBITDA
Margin Improvement VVTV: 11.9% vs.
HSN: 3.1% QVC: 1.3%
(1) Because ValueVision follows a 4-5-4 retail calendar, every five to six years the Company has an extra week of operations in its reporting cycle, and this occurred in fiscal 2012. Therefore, full year fiscal 2012 has 53 weeks as compared to the same period for other presented years of 52 weeks. The extra week in F12 is not included in these calculations to show the numbers on a comparable basis. The Company reported actual results of $587 million and $4.5 million for F12 revenue and F12 Adjusted EBITDA, respectfully.
(2) Adjusted for non-recurring items and stock-based compensation.
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SHOPHQ CONTINUES TO PROVE GROWTH POTENTIAL WHILE SUSTAINING SIZABLE PROFITABILITY GROWTH
Clintons rhetoric ignores ShopHQs superior performance to peers
Performance Since Mr. Stewart became CEO
F2008-F2013
Relative TTM Performance since Q2 2012(1)
Through TTM Q1 F2014
Returns Since 8/15/12
1,199 bps
9.4%
336 bps
2.4%
169.4%
Revenue CAGR Adj. EBITDA Revenue CAGR Adj. EBITDA
Margin Margin
Improvement Improvement
3.4% 311 bps
2.9% 35 bps 36.9%
Revenue CAGR EBITDA Margin Revenue CAGR EBITDA Margin
Improvement Improvement
3.5% 3.5%
135 bps 67 bps 65.2%
Revenue CAGR OIBITDA Margin Revenue CAGR OIBITDA Margin
Improvement Improvement
Broadcast Retail Segment
US Only
Note: Share price returns as of June 9, 2014.
(1) Q2 2012 performance announced August 15, 2012.
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WE ARE HERE TO DELIVER VALUE OVER THE LONG-TERM AND OUR PERFORMANCE PROVES THE BEST IS YET TO COME
Keith Stewart appointed CEO on January 26, 2009
Dividend Adjusted Share Price Performance
Share Price Performance Through 6/9/2014
Since 1/26/2009
VVTV
848.1%
HSN
1,139.9%
Russell 2000
161.3%
S&P Retail
332.2%
Performance vs. HSN
(291.8%)
Performance vs. Russell 2000
+686.8%
Performance vs. S&P Retail
+515.9%
Commentary
Late 2010: Market reacts strongly to potential swing
A to profitability after only 2 years
Fall 2011: Consumer Electronic vendor issues
B demonstrate need to continue product mix refinement Summer 2012: Mr. Stewart announces We returned
C the Company to growth in Q2 as ValueVision is positioned for long-term value creation
Survival Strategic Alignment Growth
(Jan. 2009Jan. 2011)(Jan. 2011Jun. 2012)(Since Jun. 2012)
Share Performance
1,800.0%
1,600.0%
1,400.0% HSN
1,200.0% 1,139.9%
B
1,000.0% VVTV
848.1%
800.0% A
600.0% S&P
C Retail Index
400.0% 332.2%
200.0% Russell 2000
161.3%
0.0%
(200.0%)
Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 Apr-14
VVTV HSN Russell 2000 S&P Retail Select Industry Index
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VALUEVISION RETURN OVER THE LAST EIGHT QUARTERS
Keith Stewart announced We returned the Company to growth in Q2 on August 15, 2012
Dividend Adjusted Share Price Performance
Share Price Performance Through 6/9/2014
Since 8/15/2012
VVTV
169.4%
HSN
36.9%
QVC
65.2%
Russell 2000
46.2%
S&P Retail Select
43.6%
Performance vs. HSN
+132.5%
Performance vs. QVC
+104.2%
Performance vs. Russell 2000
+123.2%
Performance vs. S&P Retail Select
+125.8%
300.0%
250.0%
200.0%
VVTV
150.0% 169.4%
QVC
100.0% 65.2%
Russell 2000
50.0% 46.2%
S&P
Retail Index
43.6%
(50.0%) HSN
Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 36.9%
VVTV HSN QVC Russell 2000 S&P Retail Select Industry Index
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THE NEXT STAGE FOR VALUEVISION IS GROWTH
Survival
(Jan. 2009Jan. 2011)
Redeemed $50 million of GE Series B Preferred (12% PIK Interest) Significantly reduced operating and fulfillment expenses Reduced distribution cost per household by 38% Reduced transaction cost per item by 49%
Turned a $51 million operating loss to an adjusted operating profit in only 2 years
Strategic Alignment
(Jan. 2011Jun. 2012)
Expanded distribution to increase home penetration Improved channel positions Created immersive customer experience with internet and mobile Diversified product mix Adjusted vendor base in Consumer Electronics
Expanded Households by 7.8% Online & Mobile Sales Growth up 7.7% Increase net units shipped by 5.6%
Growth
(Since Jun. 2012)
Adjusted product mix to reduce average selling, better cater to impulse buyers and create a lower entry point Improved merchandise mix that promotes purchase frequency Continued to expand Household penetration and channel positioning
8 consecutive quarters of revenue growth and positive Adjusted EBITDA
Beat Wall Street revenue consensus 11 out of 16 times since Q3 2010 Average Selling Price stabilized at $80 per item
Shareholder Return
(2014 and Beyond)
Customer growth and purchase frequency are top priority:
Product mix improvement
ShopHQ brand awareness
Online & Mobile engagement
VVTV Shareholders have experienced a
840%+ increase in shareholder value under
This Board and This Management Team since Mr. Stewart and Mr. Ronning began a strategic realignment of ValueVision
ValueVision Actions
Results
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EQUITY RESEARCH PRAISES MANAGEMENTS EXECUTION OF THE COMPANYS STRATEGY
All sell-side analysts that cover ValueVision have a BUY rating post Q1 2014 earnings:
Improvements in recent quarters appear to be driven by greater depth of SKUs in each category, thereby reducing concentration risk in product offerings. Broader product assortments are driving customer growth YOY customer growth has trended from 7% in Q1, 22% in Q2, 20% in Q3, and 30% in Q4 to 19% in Q1. A bigger customer base increases the likelihood of sustainable long-term revenue growth, which is the driver of VVTVs decision to lower ASPs by emphasizing products that appeal to a larger audience.
- Dougherty & Company on May 22, 2014
The company will leverage the sales growth more in F2015 and experience very high earnings growth. We think the long-term investment thesis is intact which is that the company can grow revenue by reducing ASP, increasing transactions and the higher revenue will leverage largely fixed operating expenses leading to strong earnings growth. With ample price appreciation potential to our new price target, we are maintaining our BUY rating.
- Feltl and Company on May 22, 2014
VVTV reported solid Q1 results As evidence that the strategy to broaden the merchandise assortment and lower average prices is working, new customer acquisition was up 19% in Q1, paving the way for strong revenue growth in future quarters. ShopHQ has several brands and partnerships slated to launch this year: notably, a partnership featuring Shark Tanks Mark Cuban that is being worked on for the summer.
- Craig-Hallum on May 22, 2014
Mobile continues to grow underscoring this mega trend in consumer behavior. We note that eCommerce sales in total were about 45% of the companys total revenues, of which 32% (or 14% of the companys total revenues) were conducted via a mobile device.
Mobile strategies put into place last year are paying off in driving penetration via mobile. For this year, the company intends to continue these enhancements aimed at driving customer engagement and purchase frequency.
- Piper Jaffray on May 21, 2014
All emphasis added. Permission to quote or use the statements herein has not been sought or obtained from any party. This page presents only brief excerpts from selected analyst reports and does not purport to be comprehensive or to summarize the entire content of the reports. Other analyst reports may express alternative views. ValueVision is not responsible for the accuracy, completeness or currentness of the reports, and the presentation of these excerpts should not be read to imply adoption or endorsement by ValueVision of the reports or any views expressed therein.
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VALUEVISIONS NOMINEES ARE HIGHLY
QUALIFIED & CRITICAL TO CONTINUED SUCCESS
All board members are encouraged to take an objective and hard look at ValueVisions strategy and employ their breadth of experience to serve best interests of all stockholders
Lowell W. Robinson (2014)
Years of Media / Retail / Technology Operating Experience
Benefit to ValueVision
Relevant Experience
35 years of retail, consumer, media, finance and operations experience
Shares his extensive public company and Internet, media, consumer and retail industry experience
Former CFO & COO of MIVA Former CFO and CAO of HotJobs.com and Advo / Valassis Prior senior roles at Citigroup and Kraft Former Director at The Jones Group, Local.com, International Wire Group, EdisonLearning, Inc. and Independent Wireless One
Landel C. Hobbs (2014)
20 years of media experience and 30 years of finance expertise
Offers extensive media and operational leadership experience as well as important viewpoints on strategy
CEO of LCH Enterprises LLC
Former COO & CFO of Time Warner Cable
Previously held various roles at AOL Time Warner and Turner Broadcasting System, Inc.
Jill R. Botway (2013)
25 years in media and marketing on traditional and digital platforms
In addition to her media expertise, Ms. Botway adds value as an attorney with an understanding of legal issues that we may face
President and CRO of Collective Media
Former Global EVP & Director of Sales and Marketing for Interactive Media Holdings
Former CEO of WMI
Former President of Omnicoms U.S. Strategic Business Units
William F. Evans (2011)
3 years in media and retail 20 years in technology
Offers senior financial management and accounting expertise gained with respect to financial reporting
Former EVP & CFO of Witness Systems Former Partner at KPMG Prior senior executive roles at ProSource, H&R Block and Management Science America Director, SAIA Former Director of SFN Group, Wolverine Tube, Electromagnetic Sciences and LXE
Sean F. Orr (2011)
25 years of consumer retail, media, finance and operations experience
Mr. Orr is a CPA and offers senior financial and accounting expertise gained through his distinguished career
CFO and Treasurer of Accretive Health Former EVP & CFO of IPG Former Director, IPG
Former partner at KPMG
Previously held various roles at Pepsico and Readers Digest
Keith R. Stewart (2009)
23 years of media, consumer, retail and operations
Brings extensive executive retail, operations, product sourcing and e-commerce experience
CEO of ValueVision Various roles at QVC, including General Manager of German business unit
Randy S. Ronning (2009)
37 years of retail, consumer, media and operational experience
Provides extensive senior executive level experience at two major retailing companies
Former EVP & Chief Merchandising Officer of QVC Previously held various executive positions at J.C. Penney, including President of their catalog and internet divisions Former Chairman, Commerce Hub
John D. Buck (2004)
Over 30 years in consumer retail
In addition to his extensive board and VVTV experience, Mr. Buck shares his experience at Fingerhut Companies
Former Chairman and Interim CEO of VVTV
Previously served various roles, including President & COO, at Fingerhut Companies Chairman, Medica Lead Director at Patterson Former Director at ATS Medical
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VALUEVISIONS DIRECTORS PROVIDE ACCOUNTABILITY
ValueVision Directors are Committed to Shareholder Value Creation Through Accountability
Deep Board Engagement Across Functional Areas
Annual Budget The Board reviews and approves sales, operating expenses and capital expenditure targets in Process accordance with our budget and 5-year plan
The Board sets and approves annual management goals in accordance with the budgeting
Set / Update process Management Goals
No bonuses awarded in fiscal year 2008, 2011 or 2012
The Board participates in weekly, monthly and quarterly business updates regarding operating Governance and financial metrics that are key to budget expectations
The Board works each year with management to set and implement a 5 year plan
Develop 5-Year
Strategic Plan Engaged and structured process for annual review of succession planning for CEO and management
The Board undergoes an annual assessment process to explore efficacy, talent, diversity of each committee and the Board as a whole Self Assessment This self assessment leads us to seek for new candidates to enhance the Boards quality, diversity and ability to deliver shareholder value
Annual Meetings
Review Board composition and Management performance
Ensure Management is on track with 5-year plan objectives
Quarterly Meetings
Ensure Management is on track with annual objectives Determine if intermediate-term adjustments need to be made
Monthly Updates
Review operating and merchandising mix performance Reflect on event-driven changes to our business
Weekly Updates
Regular KPI performance update
Discuss recent vendor or distribution agreement wins
The Board has developed a culture of strong corporate governance
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VALUEVISIONS NOMINEES ARE BETTER QUALIFIED, IN OUR VIEW
Jill R. Botway
John D. Buck
William F. Evans
Landel C. Hobbs
Sean F. Orr
Lowell W. Robinson
Randy S. Ronning
Keith R. Stewart
Ronald L. Frasch
Thomas Beers
Thomas Mottola
Fred Siegel
Mark Bozek
Robert Rosenblatt
Multi-Channel Retail Experience Within the Last Decade (1)
Media Related Public Board Experience (1)
Public Company C-Level Professional Experience
Your Boards Nominees
Clintons Nominees
(1) Includes, but not limited to experience at ValueVision Media. John Buck, Lowell Robinson, Randy Ronning and Keith Stewart also each have multi-channel retail experience at other companies, and Sean Orr and Randy Ronning each have media public board experience at other companies.
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BOARD AND MANAGEMENT INTERESTS ARE ALIGNED WITH LONG TERM SUCCESS
ValueVisions CEO and Board of Directors each own more shares than the Clinton Group
Notes: Ownership % sourced from each companys most recently filed proxy.
(1) Per Clinton Groups Definitive Proxy Statement dated May 12, 2014.
(2) Liberty Interactive Corp. ownership based on LINTA shares.
(3) Peer group includes 1-800-FLOWERS.COM, Inc.; Big 5 Sporting Goods Corporation; Blue Nile, Inc.; Cato Corporation; Coldwater Creek Inc.; dELiA*s, Inc.; Liquidity Services, Inc.; New York
& Company Inc.; Nutrisystem, Inc.; Overstock.com Inc.; Pacific Sunwear of California Inc.; priceline.com Incorporated; Select Comfort Corporation; and Tuesday Morning Corporation.
Summary
Managements and directors incentives are closely aligned with stockholders
Overall beneficial ownership of our CEO as well as other executive officers and directors is above the median of our proxy peer group
ValueVision:
CEO Beneficial Ownership: 5.3%
Beneficial Ownership of all Directors and Officers: 12.6%
Proxy Peers Median:
CEO Beneficial Ownership: 1.4%
Beneficial Ownership of all Directors and Officers: 7.8%
Clinton Group Ownership: 4.0%
Reduced beneficial ownership from 6.5% during campaign(1)
Beneficial Ownership as a %
of Total Shares Outstanding
ValueVision Media
5.3% 7.3%
Leadership
Clinton Group 4.0% (1)
Selected Competitors:
HSN, Inc.
2.8% 0.9%
Leadership 7.8%Median of
Proxy Peer Group
Board and CEO
Liberty Interactive Corp. ownership(3)
1.2% 1.5%
Leadership (2)
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
CEO Other Directors and Officers
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VALUEVISION HAS BEEN OPEN TO A CONSTRUCTIVE DIALOG WITH CLINTON
ValueVision has shown a repeated willingness to have an open dialog with Clinton Group
On September 19, 2013, representatives of Clinton Group had a conference call with CEO Keith Stewart and CFO William McGrath; Clinton Group expressed their conclusion that Keith Stewart should be replaced as CEO but did not offer any concrete strategic recommendations
On October 21, 2013, representatives of Clinton Group met with CEO Keith Stewart and directors Sean Orr and Randy Ronning in Minneapolis; Clinton Group made a presentation to the Companys representatives and again did not provide any recommendations, but merely repeated its previous desire to replace Keith Stewart
On October 28, 2013, representatives of Clinton Group and director Sean Orr had a conference call to discuss the Boards response to Clintons presentation; Sean Orr indicated that the Board supported the CEO and management team but was willing to listen to any concrete recommendations if Clinton provided any
On April 14, 2014, Sean Orr and counsel for the Company spoke with Clinton to discuss possible approaches to reaching a settlement
On April 21, 2014, Sean Orr again spoke with Clinton regarding a possible settlement of the proxy contest; no agreement was reached
Clinton Group (1) has rejected several settlement offers, (2) abandoned its special meeting proposals, but only after the Company filed preliminary proxy materials with the SEC and incurred significant expense associated with the special meeting, and (3) is seeking to have its nominees control the Board with a slate of candidates that we believe are not as strong as our nominees
In response to Clintons desire for a Special Meeting, on November 15, 2013, the Company issued a press release announcing it had scheduled a Special Meeting for March 14, 2014 to give shareholders an opportunity to vote on Clintons proposals
On February 3, 2014, 10 days after ValueVision had already filed a preliminary proxy statement with the SEC, Clinton sent a letter to the Company abandoning its Special Meeting proposals and indicating that it would instead pursue a proxy fight at the Annual Meeting
We believe the Clinton Group has been unwilling to engage in constructive dialogue with our Board and Management based on (among other things) the Clinton Groups failure to present, or engage in any meaningful discussion of, any concrete alternative strategic recommendations before submitting its special meeting demands and initiating a proxy contest
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STOCKHOLDERS SHOULD HAVE SERIOUS CONCERNS ABOUT CLINTONS NOMINEES
Clinton Group has been inconsistent and flip-flopped on the nominees it is advocating to be placed on the ValueVision board
As recently as four months ago, Clinton proposed Dorrit M. Bern and Melissa B. Fisher as nominees critical to the future success of ValueVision, yet weeks later, these nominees were suddenly swapped out for others
Mr. Bozek has not been with any other major television shopping network since his departure from HSN more than 10 years ago
According to Clinton Groups nomination letter, nominees Mark Bozek and Thomas D. Beers are limited partners of and have substantial capital interests in Channel Commerce Partners, L.P. which is associated with Clinton Group and a participant in its solicitation
Nominee Thomas D. Beers eers is a trustee of the Beers Family Trust, which hich directly owns 39.96% of
Channel Commerce Partners
Mark Bozek has a 3% ownership in Channel Commerce Partners
Each of Mark Bozeks and the Beers Family Trusts contributions are made through a feeder fund associated with the Clinton Group into Channel Commerce Partners; as such, each of Mr. Bozek and the Beers Family Trust is also a limited partner of this Clinton Group associate feeder fund
Despite these facts and our ongoing communications with Clinton Group, Clinton only recently retraced and corrected their proxy to include this material relationship on May 23rd, 2014
In our view the Clinton Groups agenda, including its 90 day plan, was formulated without undertaking any inside evaluation of the Company or without any analysis of the costs or benefits to the Company, demonstrates little strategic insight and does not adequately account for the risk and damage that could derail the Companys ongoing momentum
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TWO OF THE CLINTON GROUPS NOMINEES HAVE SERVED ON THE BOARDS OF PUBLIC COMPANIES THAT HAVE LOST SHAREHOLDER VALUE DURING THE PERIODS THE
NOMINEES SERVED ON THESE BOARDS
Total Return Total Return
Tenure End Relative to Relative to
Company Board Member Tenure Start Date Date(1) Total Return(2) Market Index(2)(3) Sector Index(2) (4)
Pep Boys Mr. Rosenblatt 3/13/2013 Present(12.5%)(31.8%)(31.3%)
THWAPR Inc. Mr. Rosenblatt 6/7/2010 2/27/2012(99.0%)(132.7%)(155.5%)
Crocs, Inc. Mr. Frasch 11/2/2006 Present(20.4%)(70.5%)(134.1%)
Average Underperformance:(78.3%)(107.0%)
We believe that two of Clinton Groups nominees have demonstrated a poor track record of stewardship
Although Mr. Rosenblatt is Clinton Groups only nominee with Media related public company board experience, ValueVision questions Clinton Groups judgment in selecting Mr. Rosenblatt as a nominee:
During his appointment to the Board at THWAPR, the company has declined nearly 100% in value
More recently, The Pep Boys: Manny, Moe & Jack has also drastically underperformed the market by any measure since he joined their Board
Additionally, two of Clinton Groups nominees lack any public company board experience (Mr. Beers and Mr. Siegel)
Given the track record of Clintons nominees, how can fellow shareholders be convinced that Clintons slate is the right direction for the Company?
Source: SEC filings and Bloomberg. (1) As of May 23rd, 2014.
(2) Reflects the dividend adjusted share price appreciation during the tenure of the nominees. (3) Russell 2000.
(4) S&P Select Retail Index.
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CLINTON GROUPS RETAIL INVESTMENTS HAVE DECLINED IN VALUE
Do not give Clinton Group the chance to disrupt your investment in ValueVision: The majority of their campaigns targets have underperformed Russell 2000 over the short and long-term(1)
In campaigns where Clinton attempted to obtain or obtained a board seat, the targets median total shareholder return underperformed the Russell 2000 by 6.8% after 500 or fewer trading days post activist campaign announcement
In campaigns where Clinton was successful in gaining a board seat, the targets median total shareholder return was even worse by underperforming the Russell 2000 by 13.2% after 500 or fewer trading days post activist campaign announcement
We believe Clinton Groups materially dismal performances at other retailers such as Wet Seal, JAKKS and Dillards demonstrate a severe lack of understanding around the basics of retail strategy.
A Costly Distraction to Wet Seal Shareholders
Noted activist investor, Clinton Group, accumulated a 7% position in WTSL and began agitating for change in spring 2012 We believe the proxy battle distracted management from running the business resulting in comps accelerating to the downside.
Jeremy Hamblin & Peter Mahon Dougherty & Company August 12, 2013
Steward of Value Destruction at JAKKS Pacific
Our current estimates assume financial improvement over the next two years, coming off an earnings loss in 2012. However, we do not have a high degree of confidence in our estimates given recent poor product performance, loss of business to competitors, an inability to create protectable brands, and the departure of key talent.
Gerrick Johnson BMO Capital Markets March 5, 2013
(13 Months after Clinton Group Joined the Board)
Unable to Materialize Any Strategy for Growth at Dillards
Dillards greatest challenge for over a decade has been sales growth. We do not believe that the company has yet to come up with strategies to deal with this. In fact this may be becoming an even larger challenge as low levels of capital spending mean the store level experience will likely deteriorate further versus competitors that are spending closer to depreciation.
Michael Exstein & Christopher Su Credit Suisse August 2010
(2 Years after Clinton & Barrington board members were elected)
(1) Defined as dividend adjusted returns between 250 and 500 trading days (long-term) or 250 or fewer trading days (short-term) post announcement of an activist campaign.
All emphasis added. Permission to quote or use the statements herein has not been sought or obtained from any party. This page presents only brief excerpts from selected analyst reports and does not purport to be comprehensive or to summarize the entire content of the reports. Other analyst reports may express alternative views. ValueVision is not responsible for the accuracy, completeness or currentness of the reports, and the presentation of these excerpts should not be read to imply adoption or endorsement by ValueVision of the reports or any views expressed therein.
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CASE STUDY: THE WET SEAL, INC.
Share Price Performance
July 30, 2012:
Clinton sends letter to board threatening to announce a written consent solicitation to replace the Board
Price: $2.72
September 17, 2012:
Company offered to settle the proxy fight by expanding the Board to nine directors and adding two Clinton nominees and two directors selected by the current board; Clinton rejected offer
Price: $3.13
February 3, 2014:
Clinton Nominee Mindy Meads resigns from the Board
Price: $2.26
April 7, 2014:
Clinton Nominee Doritt Bern resigns from the Board
Price: $1.19
August 10, 2012: Company hired Guggenheim and Peter J. Solomon to review strategic options
Price: $3.04
August 22, 2012:
Clinton announced intent to solicit written consent to remove four members of the Board and elect five new directors
Price: $2.79
October 5, 2012:
Wet Seal reached settlement with Clinton and accepted resignations from 4 of its current board members and appointed 4 of Clintons nominees to fill the vacancies
Price: $3.14
March 10, 2014:
Company announces Clintons letter agreement to vote for the Companys nominees to the Board at the upcoming annual meeting
Price: $1.91
May 23, 2014:
Companys current share price is $0.95
$6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00
Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Stock price decreased 65% from Clintons settlement on October 5, 2012 to May 12, 2014
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CASE STUDY: JAKKS PACIFIC, INC.
Share Price Performance
April 23, 2012:
JAKKS announces $80 million self-tender at $20.00 per share and appoints an independent director with nomination of additional director subject to Clinton Group approval
Price: $17.96
July 17, 2012:
JAKKS announces 2nd Quarter Earnings, net loss of $46.9 million
Price: $15.91
September 30, 2013:
Clintons last reported ownership stake of 0.2% of JAKK stock
Price: $4.50
March 14, 2012:
Clinton Group sends letter to the Board requesting the company start a sale process and openly consider the indication of interest from Oaktree Capital Management, L.P
Price: $16.55
March 31, 2012:
Clinton reports ownership stake of 0.2% of JAKK stock Price $17.45
$20.00 $19.00 $18.00 $17.00 $16.00 $15.00 $14.00 $13.00 $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00
Mar-12 May-12 Aug-12 Oct-12 Dec-12 Feb-13 May-13 Jul-13 Sep-13
JAKKS share price declined 75% since its settlement with Clinton on April 23, 2012 and on September 30, 2013, Clintons last reported position
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CASE STUDY: DILLARDS
June 28, 2007: Barington Capital Group, a 3.2% stakeholder, requests meeting with Chairman and CEO
Price: $36.69
August 30, 2007:
Barington Capital Group sends additional letter
Price: $23.03
April 1, 2008: Settlement to avoid proxy fight reached. Two board seats were nominated by the dissident group
Price: $18.41
May 17, 2008:
Barington and Clinton approved board members are elected
Price: $18.92
September 25, 2008:
Barington and Clinton file 13D calling on the Board of Directors to repurchase all Class B shares with its own class of directors on the Board
Price: $12.54
November 19, 2007: Company announces share repurchase program
Price: $16.53
January 29, 2008:
Barington, the Clinton Group and RJG Capital Management jointly filed a 13D to report a combined 5.32% stake and a letter to the Board
Price: $19.78
October 27, 2008:
Additional letter sent reiterating demands
Price: $4.52
December 8, 2008: Group lowers stake to below 5.0% stake
Price: $4.47
$40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00
Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08
Stock price decreased 76% from when Clintons nominee was appointed to their December 13DA filing
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SHAREHOLDERS HAVE A CLEAR CHOICE
ShopHQ
Continued execution of a clearly articulated strategy that has produced eight consecutive quarters of positive adjusted EBITDA and has positioned the Company to grow and substantially enhance shareholder value:
Expand and Optimize TV Distribution Platform
Broaden and Diversify Merchandising Mix with Compelling Product
Grow Customer Base, Purchase Frequency and Retention
Be a Watch & Shop Anytime, Anywhere Experience
Proven track record as demonstrated by their ability to streamline operations, improve the quality and cost effectiveness of the Companys TV distribution footprint and significantly enhance the stability and flexibility of the Companys balance sheet all designed to produce significant shareholder value
Nominated following a thorough review of their qualifications
Aligned with stockholders via material equity ownership
Accountable to stockholders with annual elections
Clinton Group
In our view, the Clinton Groups pre-determined agenda, including its 90-day plan, was formulated without undertaking any inside evaluation of the Company or any analysis of the costs or benefits to the Company, demonstrates little strategic insight and does not adequately account for the risk and damage that could derail the Companys ongoing momentum
Clinton Groups retail theater solution is marketing, not a business model, in our view
Poor track record as stewards of value or no public board experience at all
Minimal multi-channel retail experience in the last decade
Pre-determined and incomplete 90-day plan
Minimal public media Board experience
Clinton Group and its nominees are seeking Board representation greatly disproportionate to their shareholdings
Significant recent reductions in ownership
Short-term focus to detriment of long-term value
Clinton not aligned with interests of all stockholders
Strategy for ValueVision
Director Nominees
Alignment and Accountability
Track Record of Performance and Long-Term Value Creation
Clintons Nominees Are Not as Well Qualified to Deliver Shareholder Value, in Our View
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APPENDIX A SUPPLEMENTARY CLINTON GROUP MATERIALS
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DISMAL PERFORMANCE OF CLINTON GROUPS CAMPAIGNS WITH OBTAINED BOARD SEATS
Clinton Target Shareholder Returns Relative to the Russell 2000
700% 600% 500% 400% 300% 200% 100% 0% -100%
Performance Relative to the Russell 2000
Summary 250 Days or Fewer
Return Vs. Russell 2000 Over 0% 5 Return Vs. Russell 2000 Under 0% 10 Median Relative Return (16.4%)
Summary 500 Days or Fewer
Return Vs. Russell 2000 Over 0% 5 Return Vs. Russell 2000 Under 0% 10 Median Relative Return (13.3%)
Source: SEC Filings, Press Releases, Shark Repellent and Company Websites.
Note: Initiating Event defined as the date of the first publicly available document citing Clinton Group announcing the pursuit of or intent to pursue a variety of tactics at a publicly traded companies or the announcement of settlement agreement between Clinton Group and a publicly traded company. Note: Includes 15 contested situations with Clinton obtaining a Board seat within 500 days of the initiating event: Nutrisystem in 2012, Quality Systems, Inteliquent (f.k.a. Natural Tandem) in 2011, Inteliquent in 2013, Stillwater Mining, Digital Generation, The Wet Seal, Rumson-Fair Haven Bank, Red Robin Gourmet Burgers in 2010, JAKKs, Lenox Group, China Security
& Surveillance Technology, Giffon Corp, Abraxis Petroleum and BJs Restaurants.
Note: When a second campaign is launched at the same target or the Company is delisted, performance is no longer tracked for the first campaign.
0 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500
Days Since Activist Campaign Became Public (Until Company Delisting or 500 Days)
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DISMAL PERFORMANCE OF CLINTON GROUPS CAMPAIGNS WITH INTENT TO OBTAIN / OR OBTAINED BOARD SEATS
Clinton Target Shareholder Returns Relative to the Russell 2000
Performance Relative to the Russell 2000
-
100% 0% 100% 200% 300% 400% 500% 600% 700%
0 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500
Days Since Activist Campaign Became Public (Until Company Delisting or 500 Days)
Summary 250 Days or Fewer
Return Vs. Russell 2000 Over 0% 7
Return Vs. Russell 2000 Under 0% 14
Median Relative Return (16.4%)
Summary 500 Days or Fewer
Return Vs. Russell 2000 Over 0% 8
Return Vs. Russell 2000 Under 0% 13
Median Relative Return (6.8%)
Source: SEC Filings, Press Releases, Shark Repellent and Company Websites.
Note: Initiating Event defined as the date of the first publicly available document citing Clinton Group announcing the pursuit of or intent to pursue a variety of tactics at a publicly traded companies or the announcement of settlement agreement between Clinton Group and a publicly traded company. Note: Includes 21 contested situations with Clinton publicly announcing the intent to obtain or obtaining a Board seat within 500 days of the initiating event: XenoPort, Nutrisystem in 2012, Quality Systems, Inteliquent (f.k.a. Natural Tandem) in 2011, Inteliquent in 2013, Gleacher & Company, ModusLink, Stillwater Mining, Digital Generation, The Wet Seal, Rumson-Fair Haven Bank, JAKKs, Porter Bancorp, Select Comfort Corporation, Red Robin Gourmet Burger in 2010, Dillards, Lenox Group, China Security & Surveillance Technology, Giffon Corp, World Air Holdings, Abraxis Petroleum, BJs Restaurants and ValueVision Media.
Note: When a second campaign is launched at the same target or the Company is delisted, performance is no longer tracked for the first campaign.
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APPENDIX B DIRECTOR AND MANAGEMENT BIOGRAPHIES
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DIRECTOR BIOGRAPHIES
Jill Botway
President and CRO of Collective Media
Ms. Jill R. Botway serves as the President and CRO of Collective Media. She recently served as Executive Vice President and Director of Sales and Marketing for Interactive Media Holdings, a multi-platform, digital media company in New York since 2012. In addition, from 2009 to 2010, Ms. Botway was Chief Executive Officer of WMI, Inc., a multi-platform media services company, and since 2010, she has been a Managing Member at private equity firm Cavu Holdings LLC. From 2005-2009, Ms. Botway was President of Omnicom Media Groups U.S. Strategic Business Units. Before joining Omnicom, Ms. Botway held various executive positions with media companies and as an attorney has prior law firm experience.
Ms. Botway brings broad expertise in media and consumer marketing, as well as brand development, which gives the Board insight into customer focusing initiatives, marketing methods and brand positioning. As an attorney, Ms. Botway also brings a sound understanding of legal issues and concerns that may face the Company.
John Buck Chairman, Medica
Mr. John D. Buck currently serves as non-executive chairman of the Board of Medica (Minnesotas second largest health insurer) and previously served as chief executive officer of Medica from July 2001 until his retirement in January 2003. From October 2007 to March 2008, and again from August 2008 through January 2009, Mr. Buck served as our interim Chief Executive Officer. Previously, Mr. Buck worked for Fingerhut Companies where he held several senior executive positions, including president and chief operating officer. He left Fingerhut in October 2000. Mr. Buck also previously held executive positions at Graco Inc., Honeywell Inc., and Alliant Techsystems Inc. Mr. Buck currently serves on the Board of Directors of Patterson Companies, Inc.
Mr. Buck provides the Board with his experience in the consumer retail industry, including his past service as an interim Chief Executive Officer of our Company and his senior leadership positions at Fingerhut Companies. He additionally brings to us the knowledge and judgment he gains from serving on other public and private company boards, which allows us to benefit from his insight into board governance matters and appropriate board processes.
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DIRECTOR BIOGRAPHIES
William Evans
Former VP & CFO, Witness Systems
Mr. William F. Evans most recently served as the executive vice president and chief financial officer of Witness Systems, Inc., a public, global provider of workforce optimization software and services based in Roswell, Georgia from May 2002 until he retired when the company was sold in June 2007. Previously, Mr. Evans had served in a number of operational and financial management roles for a variety of companies, including Superior Essex, ProSource, Inc., H&R Block, Inc., Management Sciences of America and Electromagnetic Sciences, Inc. He began his professional career at Peat Marwick, Mitchell, and Co. (now KPMG), where he was elected a partner in 1980 and was named partner-in-charge of the Atlanta audit practice in 1985. Mr. Evans has served on the Board of Directors of several other private and public companies, including SFN Group, Inc. and Wolverine Tube, Inc. Mr. Evans also currently serves on the Board of directors of SAIA, Inc., where he serves on the audit committee.
Mr. Evans offers senior financial management and accounting expertise gained through his long career both in public accounting as well as in senior management and board positions with corporate governance duties at a number of companies. We believe his broad experience and service in senior management and boards of directors provides our Board with valuable expertise, particularly with respect to financial reporting.
Landel C. Hobbs CEO, LCH Enterprises LLC
Mr. Landel C. Hobbs has been Chief Executive Officer of LCH Enterprises LLC, a consulting firm that operates in the broader telecommunications and media space, since 2010. Mr. Hobbs previously served as Chief Operating Officer of Time Warner Cable (TWC) from 2005 until the end of 2010 and was Chief Financial Officer of TWC from 2001 until 2005. He served as Vice President of Financial Analysis and Operations Support for all divisions of AOL Time Warner from September 2000 until October 2001. Mr. Hobbs also served in various positions, including Senior Vice President, Controller and Chief Accounting Officer, of Turner Broadcasting System, Inc. from 1993 until 2000. Before joining Turner in 1993, he served as Senior Vice President and Audit Director of Banc One Illinois Corporation and Senior Manager with KPMG Peat Marwick. He is Lead Director of Allconnect and a current Trustee of the National 4H Council and The Dyslexia Resource Trust. He was previously Chair and a Director of CSPAN and a Trustee of Women in Cable Television (WICT) and is a Broadcasting and Cable Hall of Fame Member.
We believe Mr. Hobbs experience in the media and telecommunications sectors, including financial, strategic and operational leadership roles, provide the Board with important experience and viewpoints in the strategically important areas of media, telecommunications and finance.
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DIRECTOR BIOGRAPHIES
Sean Orr
CFO and Treasurer of Accretive Health, Inc.
Mr. Sean F. Orr is currently the CFO and Treasurer of Accretive Health, Inc., a position he has served in since August 2013. Before that, Mr. Orr served as SVP and CFO for Maxum Petroleum, Inc. from July 2012 until December 2012, following the companys sale to a third party. From March 2009 through June 2012, Mr. Orr provided consulting services to a range of clients in his own consulting business as well as serving active roles on two not-for-profit boards. Prior to that he served as president and CFO of Dale and Thomas Popcorn, LLC, a snack food business, from February 2007 until March 2009. Prior to that, he was a partner in Tatum Partners, LLC, an executive services firm, in 2006, and the EVP and CFO of The Interpublic Group of Companies, a parent of global advertising and public relations firms, from 1999 to 2003. He also worked at Pepsico Inc. from 1994 to 1999 in the roles of SVP and Controller at Pepsico Corporate Headquarters and EVP and CFO of its Frito-Lay division; Readers Digest as VP and Controller from 1990 to 1994; and Peat Marwick, Mitchell, and Co. (now KPMG), from 1976 to 1990 (serving as a partner from 1986 to 1990). Mr. Orr also was a member of the Board of Directors and Chairman of the Boards Finance Committee for The Interpublic Group of Companies from 1999-2003.
Mr. Orr is a certified public accountant and offers senior financial management and accounting expertise gained through his long career both in public accounting and in private industry. We believe his broad experience and service in senior management provides our Board with valuable expertise, particularly with respect to financial reporting and capital markets.
Lowell W. Robinson Former CFO and COO of MIVA, Inc.
Mr. Lowell W. Robinson served as the CFO and COO of MIVA, Inc., an online advertising network, from 2007 through 2009. He joined MIVA in 2006 as CFO and Chief Administrative Officer. He had previously served as the President of LWR Advisors from 2002 to 2006 and as the CFO and Chief Administrative Officer at HotJobs.com from 2000 to 2002. He previously held senior financial positions at Advo, Inc., Citigroup Inc. and Kraft Foods, Inc. Mr. Robinson also served on the Board of Directors of The Jones Group from 2005 to 2014, the Board of Directors of Local.com Corporation from 2011 to 2012, the Board of Advisors for the University of Wisconsin School of Business from 2006 to 2010, the Board of Directors of International Wire Group, Inc. from 2003 to 2009, and the Board of Directors of Independent Wireless One, Diversified Investment Advisors and Edison Schools Inc. He is a member of the Smithsonian Libraries Advisory Board and the Board of the Metropolitan Opera Guild. Since 2009, Mr. Robinsons principal occupation and employment has consisted of his service on the Board of Directors of the Jones Group, the Board of Directors of Local.com Corporation and the Board of Advisors for the University of Wisconsin School of Business.
We believe that Mr. Robinsons extensive public company experience and deep understanding of the Internet, media, consumer and retail industries provide our Board with critical experience and perspectives on issues of importance to public companies operating in the e-commerce area.
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DIRECTOR BIOGRAPHIES
Keith Stewart CEO
Mr. Keith Stewart joined ShopHQ in 2008 after having served the majority of his retail career at QVC, where he most recently was general manager of QVCs large and profitable German business unit, vice president merchandising home of QVC (USA), and vice president international sourcing of QVC (USA). During his tenure at QVC, he developed expertise in all areas of TV shopping, including merchandising, programming, cable distribution, strategic planning, organizational development, and international sourcing. Mr. Stewart is also experienced in leading a large employee base and vendor community with a focus to drive sales, profits, and new customers.
Mr. Stewart brings to our Board and our Company extensive executive retail, operations, product sourcing and e-commerce experience both domestically and internationally with more than 23 years of leadership experience in the electronic retailing industry. His strong understanding of multichannel retailing strategy and operations and his track record of delivering growth and profitability in our industry gives the Board essential perspectives and insights in their oversight of Company strategy and development.
Randy Ronning Chairman of the Board
Mr. Randy S. Ronning currently serves as Chairman of our Board. Mr. Ronning served as EVP and chief merchandising officer of QVC, a major electronic retailer, where he oversaw all merchandising, brand management, and merchandise analysis efforts of QVC and QVC.com, from June 2005 until his retirement in January 2007. He also was responsible for QVC.com operations during this period. Previously, Mr. Ronning was EVP with responsibility over affiliate sales and marketing, information services, marketing, research and sales analysis, direct marketing, corporate marketing, public relations, and charitable giving at QVC, from 2001 to May 2005. Prior to joining QVC, Mr. Ronning spent 30 years with J.C. Penney Co., where he held executive positions including president of its catalog and internet divisions. Mr. Ronning has also served on the Boards of several nonprofit and organizations, including the Electronic Retailing Association, the Dallas Symphony Association, the University of Dallas, the Fashion Institute of Technology, the Mail Order Association, Chairman of the Board, Forrester Research, Knot, Philadelphia Orchestra, The Franklin Institute, and another private company, Commerce Hub, where he was Chairman of the Board.
Mr. Ronnings extensive senior executive level experience at two major retailing companies provides the Board and the Company with invaluable expertise and industry knowledge as we continue to execute our strategy for growth and profitability. In particular, Mr. Ronnings record of success in leading the development and success of the e-commerce operations at his prior companies is of substantial importance to the Board and the Company in addressing similar growth opportunities in our Companys business. Mr. Ronnings depth of experience in managing, leading and motivating employees provides the Board with great insights in his role as chairman of the human resources and compensation committee.
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MANAGEMENT BIOGRAPHIES
Keith R. Stewart CEO
Mr. Keith Stewart joined ShopHQ in 2008 after having served the majority of his retail career at QVC, where he most recently was general manager of QVCs large and profitable German business unit, vice president merchandising home of QVC (USA), and vice president international sourcing of QVC (USA). During his tenure at QVC, he developed expertise in all areas of TV shopping, including merchandising, programming, cable distribution, strategic planning, organizational development, and international sourcing. Mr. Stewart is also experienced in leading a large employee base and vendor community with a focus to drive sales, profits, and new customers.
Mr. Stewart brings to our Board and our Company extensive executive retail, operations, product sourcing and e-commerce experience both domestically and internationally with more than 23 years of leadership experience in the electronic retailing industry. His strong understanding of multichannel retailing strategy and operations and his track record of delivering growth and profitability in our industry gives the Board essential perspectives and insights in their oversight of Company strategy and development.
William J. McGrath EVP & CFO
Mr. William McGrath is the Executive Vice President and Chief Financial Offer for ShopHQ. Mr. McGrath was appointed EVP & CFO in June 2011. He joined the company in January 2010 as Vice President of Quality Assurance and was appointed Senior Vice President & Chief Financial Officer in August 2010. Most recently, Mr. McGrath served as Vice President Global Sourcing Operations and Finance at QVC in 2008. During his tenure at QVC, he also served as Vice President Corporate Quality Assurance and Quality Control from 1999 2008; Vice President Merchandise Operations and Inventory Control from 1995-1999; Vice President Market Research and Sales Analysis from 1992 1995; and Director Financial Planning and Analysis from 1990-1992. Prior to QVC, Mr. McGrath held a variety of leadership positions at Subaru of America from 1983-1990 and Arthur Andersen from 1979-1983. He holds an MBA in finance from Drexel University and a BS in Accounting from Saint Josephs University.
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MANAGEMENT BIOGRAPHIES
G. Robert Ayd President
Mr. Bob Ayd joined ShopHQ in February 2010 as President, overseeing Merchandising, Planning, Programming, Broadcast Operations, and On-Air Talent. Mr. Ayd brings an extensive background and proven track record of success to ShopHQ, including executive leadership roles at QVC and Macys. Most recently, he served as Executive Vice President and Chief Merchandising Officer at QVC (U.S.) from 2006 to 2008. During his tenure at QVC, Mr. Ayd also served as Senior Vice President, Design Development & Global Sourcing and Brand Development from 2005 to 2006, and Senior Vice President of Jewelry and Fashion from 2000 to 2004. Prior to joining QVC in 1995 as Vice President of Fashion, Mr. Ayd held numerous executive leadership positions for Macys, culminating with Senior Vice President in Womens Sportswear from 1991 to 1995. Mr. Ayd began his career at Macys in 1975 as buyer of handbags, bodywear and footwear.
Carol Steinberg COO
Ms. Carol Steinberg is the Chief Operating Officer for
ShopHQ. Ms. Steinberg was appointed the COO in October of 2012. She joined the company in June 2009 as Senior Vice President of E-Commerce, Marketing and Business Development and was appointed EVP of Internet, Marketing and Human Resources in June 2011. Ms. Steinberg has over 25 years of experience in marketing, customer relationships, management, strategic planning and business development across a broad portfolio of businesses in the TV shopping, retail, cable, pharmaceutical and financial industries.
Previously she was Vice President at Davids Bridal, where she expanded its Internet presence by designing and implementing marketing and merchandising strategies that drove traffic in store and online. Prior to this position, Ms. Steinberg spent 12 years at QVC, most recently having served as the Director of Online Marketing and Business Development.
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APPENDIX C RECONCILIATION TO ADJUSTED EBITDA AND ADJUSTED NET INCOME / (LOSS)
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SUMMARY ADJUSTED EBITDA RECONCILIATION
($ 000s)
F08 F09 F10 F11 F12 F13 F14
FY FY FY FY FY* FY Q1
EBITDA, as adjusted $(51,421) $(19,411) $ 2,351 $ 996 b $ 4,494 $ 18,012 $ 5,513
Less:
FCC license impairment (8,832)(11,111)
Writedown of Auction Rate Securities(11,072)
Gain (loss) on sale of investments or asset (969) 3,628 100
CEO Transition Cost(2,681)(1,932) -
Debt Extinguishment (1,235)(25,679)(500)
Activist Shareholder Response Costs (2,133)(1,045)
Restructuring costs and other non-recurring items(4,299)(2,303)(1,130) --
Non-cash share-based compensation(3,928)(3,205)(3,350)(5,007)(3,257)(3,218)(1,044)
EBITDA (as defined) (a)(83,202)(23,223)(3,364)(29,690)(10,274) 12,662 3,424
A reconciliation of EBITDA to net income (loss) is as follows:
EBITDA, as defined(83,202)(23,223)(3,364)(29,690)(10,274) 12,662 3,424
Adjustments:
Depreciation and amortization(17,297)(14,320)(13,337)(12,827)(13,423)(12,585)(2,372)
Interest income 2,739 382 51 64 11 18 -
Interest expense -(4,928)(9,795)(5,527)(3,970)(1,437)(391)
Income taxes(33) 91 577(84)(21)(1,173)(201)
Net income (loss) $ (97,793) $ (41,998) $ (25,868) $ (48,064) $ (27,676) $ (2,515) $ 460
*Includes 14th week/53rd week a) EBITDA as defined for this statistical presentation represents net income (loss) from continuing operations for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The Company defines Adjusted EBITDA as EBITDA excluding debt extinguishment; non-operating gains (losses); non-cash impairment charges and write-downs; activist shareholder response costs; and non-cash share-based compensation expense.
Management has included the term EBITDA, as adjusted, in its EBITDA reconciliation in order to adequately assess the operating performance of the Companys television and Internet businesses and in order to maintain comparability to its analysts coverage and financial guidance. Management believes that EBITDA, as adjusted, allows investors to make a more meaningful comparison between our business operating results over different periods of time with those of other similar small cap, higher growth companies. In addition, management uses EBITDA, as adjusted, as a metric measure to evaluate operating performance under its management and executive incentive compensation programs. EBITDA, as adjusted, should not be construed as an alternative to operating income (loss) or to cash flows from operating activities as determined in accordance with GAAP and should not be construed as a measure of liquidity. EBITDA, as adjusted, may not be comparable to similarly entitled measures reported by other companies.
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SUMMARY ADJUSTED NET INCOME RECONCILIATION
($ Millions)
F08 FY F09 FY F10 FY F11 FY F12 FY* F13 FY F14 Q1
1/31/2009 1/30/2010 1/29/2011 1/28/2012 2/2/2013 2/1/2014 5/3/2014
Net Sales $ 567.5 $ 527.9 $ 562.3 $ 558.4 $ 586.8 $ 640.5 $ 159.7
Gross Profit $ 182.8 $ 173.8 $ 199.5 $ 204.1 $ 212.4 $ 230.0 $ 60.0
Gross Profit % 32.2% 32.9% 35.5% 36.6% 36.2% 35.9% 37.6%
Adjusted EBITDA $(51.4) $(19.4) $ 2.4 $ 1.0 $ 4.5 $ 18.0 $ 5.5
Adjusted Net Income/(Loss) $(89.3) $(14.7) $ (24.6) $(22.4) $ (16.1) $(0.4) $ 1.5
FCC License Impairment $(8.8) $$$$ (11.1) $$ -
Debt Extinguishment $$$(1.2) $(25.7) $(0.5) $$ -
Activist Shareholder Costs $$$$$$(2.1) $(1.0)
Net Income/(Loss) $(98.1) $(14.7) $ (25.9) $(48.1) $ (27.7) $(2.5) $ 0.5
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