Michael Porter - VP, Finance and IR Robert Rosenblatt - CEO Anne Martin-Vachon - President Diana Purcel - EVP & CFO

Thomas Forte - D.A. Davidson Eric Wold - B. Riley & Company Alex Fuhrman - Craig-Hallum Mark Argento - Lake Street Capital Markets Victor Anthony - Aegis Capital

Greetings, and welcome to EVINE Live Third Quarter 2018 Earnings Conference Call. At this time, all participants will be in a listen-only-mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Michael Porter, Vice President of Finance and Investor Relations. Please go ahead.

Good morning, and thank you for joining us. With me on today's call is our CEO, Bob Rosenblatt; our President, Anne Martin-Vachon; and our CFO, Diana Purcel. We issued our earnings release earlier this morning. If you do not have a copy, you may access it through the News section of our IR website. The earnings release is also an exhibit to a Form 8-K, which is filed this morning and can be accessed through our IR website. Some of the statements that we make during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future operating and financial performance and speak only as of today's date. We undertake no obligation to update or revise these forward-looking statements for any reason. We believe the expectations reflected in our forward-looking statements are reasonable but give no assurance such expectations or any of our forward-looking statements will prove to be correct. Please refer to the safe harbor section in today's earnings release and our SEC filings for additional information. Finally, we will make reference to non-GAAP measures on this call, such as adjusted EBITDA. The information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures, are included within our earnings release. Now I would like to turn the call over to Bob.

Thanks, Michael, and good morning, everyone. It's clear that we had a difficult quarter with disappointing results. We missed our plan on many of our key financial metrics, including revenue, adjusted EBITDA and EPS. This was unfortunate and frankly surprising since we delivered several consecutive quarters of strong performances this year, particularly in the first half of fiscal 2018 and the solid trends coming out of the second quarter we expected to continue. We lost momentum and frankly, we are now working to get that back. We are confident that we can and we will. The team is engaged, energized, and the entire organization is refocused towards launching new brands and attracting new customers. As you may recall during the second quarter, we told you that we didn't anticipate a significant impact from losing a brand that we helped build over the past 3 years, Beekman 1802, a brand that chose to leave us in June. The reason that we didn't anticipate the impact was because we had identified a brand that we believe could absorb and frankly, could surpass that performance. Unfortunately, we found out late in the process that this long standing marquee beauty brand that was expected to launch during the third quarter couldn't due to certain legal constraints. While the timing didn't happen as we planned, the good news, as reflected in the recent 8-K filing, is that we expect to have this established and successful brand with significant loyal customer following and a track record of success to launch in January. I can't comment too broadly on this at present. But needless to say, we are very excited for this launch and look forward to sharing more details in the near future. It became clear during the quarter that although we had made significant progress over the last couple of years towards building a more profitable brand portfolio, our bench of unique and exciting brands was not deep enough to absorb the loss of a core brand, and we require a stronger arsenal of emerging brands to adequately defend against unexpected changes. This was a wake-up call and a rallying cry that we swiftly set out to address. We continue to have success discovering and onboarding many promising new and relevant brands. For example, during the third quarter, we premiered over 40 new brands and brand extensions. Most of these were boutique brands that are not only a perfect fit for our brand curator platform, but they will help ensure that we are less reliant on any specific brands in the future. We had a gap in the quarter, however, by not having enough established brands that could bring immediate sales as well as customers. As we move through the fourth quarter, we expect to continue to see pressure on sales as the new brands are nurtured and given the opportunity to grow and until the aforementioned new brand premieres in January. To be clear, we are often in various stages of negotiation with a number of recognizable brands with a large customer base. Some of these negotiations last months, if not years, and contain several variables so the timing is very fluid and challenging to predict with precision. This time, the timing didn't work in our favor. And as a result, both our top line and our bottom line took a significant hit. Our goal and strategy remain the same, to drive sustainable growth through a strong collection of brands. This strategy delivered growth in adjusted EBITDA in 8 of the past 10 quarters, which makes our third quarter overall performance all the more disappointing. That said, there were some bright spots in the quarter. We continue to progress towards our goal of being a leading interactive video and digital commerce company. I'd like to give you an update on our progress as it relates to our operational efforts in retail, entertainment and technology. On the retail side, as mentioned, we introduced over 40 new brands and brand extensions in the quarter. This is an acceleration over the 30 brands we launched in the first half of the year, nearly double the number introduced during the third quarter last year, and a reflection of the efforts that the merchandising team has put forth. At our core, we are brand builders, and this differentiates us from those retailers who are simply selling stuff. Brand building takes patience, and our team works diligently with our brand partners to nurture and thoughtfully build their brands over time. We need to ensure, however, that we have the right mix of new, emerging and core brands. We were left thin in this quarter, which caused us to be more heavily reliant on a smaller number of brands, thus putting pressure on the productivity of our entire portfolio. And while we have identified a solution to this particular instance, we continue to work hard to find other opportunities to augment our current stable of brands. For example, this morning, we announced an exciting partnership with the iconic Jane Fonda, where we will develop an exclusive lifestyle brand centered around Jane's passion for fitness and wellness. The line will include activewear, sophisticated athleisure options, health and nutrition products and fitness equipment. We plan to bring the brand to life by utilizing our newly launched studio and office space in Los Angeles. Starting in fiscal 2019, Jane will make appearances on Evine and will share her wisdom and expertise with our customers. Since we are managing all product development aspects, we will also be partnering with key retailers to offer a bricks-and-mortar version of the brand. It is an exciting new partnership that will allow us to leverage our competencies across many disciplines. This new venture is a bold move towards the future, and I cannot think of a stronger founding partner than Jane Fonda. From an entertainment perspective, we delivered again on our promise to keep our broadcast compelling and unique by bringing our customers to locales that help accentuate the stories behind our brands and products. This quarter, we took our viewers on a virtual shopping experience in Vicenza, Italy, where we premiered Torrini 1369, a nearly 650-year-old brand rooted in creating beautiful 14-karat gold jewelry. During the 4-day event, we also highlighted new items from some of our top Italian jewelry partners, including pieces from Stefano Oro, Viale18K Italian Gold and Toscana Italiana. We remain fully distributed in over 87 million television homes and recently reached an agreement to add 2 million new HD channels for the fourth quarter, bringing our total HD footprint to 38 million homes. Additionally, we have been in discussions on final business terms for carriage with a leading over-the-top live TV streaming provider. Our strategy is to ensure that customers have frictionless access and the ability to transact and to view content across all platforms based on the method they prefer. Last is technology. The highlights in this quarter include our first broadcast from our L.A. studio and the initiation of our direct-to-consumer third-party logistics services division. The L.A. studio launch has been incredibly well received by our vendor partner community. We now have a presence in the neighborhood where many of our partners work and live, thus, unlocking a great opportunity to grow our pipeline of brands. The convenient location decreases the travel time away from our partners' day-to-day businesses as we make it easier for our brands to be part of their own storytelling. The L.A. studio is paramount to us, attracting new brands and working with our existing West Coast-based brands. Equally significant for Evine is the startup of our third-party logistics services division. As you know, we expanded our fulfillment center in Bowling Green, Kentucky to 600,000 square feet and implemented a state-of-the-art warehouse management system that was completed in 2016. Given that warehouse space and skills associated with direct-to-consumer fulfillment is in high demand, we saw a valuable opportunity to leverage our additional capacity, system capability and expertise in distribution through a new 3PL division. During the quarter, we entered into a partnership with AM Retail Group for our distribution center to manage the storage, packaging and shipping functions for their brands, including Karl Lagerfeld Paris, DKNY and G.H. Bass. This initiative will allow us to maximize the value of our fulfillment center assets and will provide a new revenue stream for Evine. Perhaps more importantly, we expected to generate mutually beneficial partnerships with some of the leading brands and e-commerce retailers in the world. We also continued our unrelenting focus on improving our seamless shopping experience between TV, mobile and Internet. Our digital sales penetration continues to grow. 51.9% of our net sales in the third quarter were generated from our digital platforms, representing an increase of 40 basis points compared to last year. Additionally, of those digital sales, 55.4% were generated from mobile devices, a 420 basis point increase over last year. Both are great metrics. I will now turn the call over to our President, Anne Martin-Vachon. Since joining in August, Anne has jumped in to both understand and respond to the needs of the business and has quickly made her presence and her expectations known through our organization. Anne? Anne Martin-Vachon: Thank you, Bob, and good morning. I think it's important to start my portion of this call with letting you know that our team is rallying after this last quarter. We are course correcting and pivoting on many fronts and plan to keep adding to the progress of the past three years. My first quarter at Evine was disappointing, for sure, but the reasons as to why I am here, why I believe I can make a difference and why I find Evine so exciting are still firmly intact, and I believe that we will come out of this stronger and better. Last quarter, I introduced our five pillars of focus. I'd like to update you on those since I believe even more today that they are the right focus areas for us as we build a sustainable growth engine. Number one is customers. This is our top priority. We have to do everything we can to build awareness, to increase the number of new customers and to extend the loyalty of the customers we already have. During the third quarter, our customer file declined 10% compared to the third quarter of the last year. And on a rolling 12-month basis, our customer file declined 9% compared to the same period last year. We look at everything with a negative in front of it as unacceptable. I can't promise you when we will turn this around, but I can promise you that we will have the strongest effort our company has ever had on growing our customer base. We are looking at everything we have done, are doing and have plans to do. As Bob mentioned, we are focused on viewership and on increasing our access through incremental channels and through placement on up-and-coming alternative content platforms. We are also working with our content distribution affiliate partners to promote awareness, viewership and ultimately, new customer acquisition through cross-channel promotion efforts as well as tapping into a variety of their customer marketing touch points. During the fourth quarter, we plan to increase our digital marketing effort as compared to last year with specific actions targeted at new customer acquisition. Additionally, we recently converted to a new e-mail service, and we will be leveraging its customer segmentation, retention and reactivation capabilities. This leads me to our second pillar, our curated portfolio of brands and products. If adding customers is our number one priority, adding to our brand and product portfolio is our number one A priority. They go hand-in-hand and are strongly correlated. As we gain more customers, we become more attractive to new brands and create increased loyalty from existing brands, and the converse is true. We have done a good job over the past several years of transforming our brand portfolio to deliver increased profitability. Our goal now is to accelerate the number of brands and the corresponding number of products offered. We made great progress on that front in the third quarter with the launching of 40 new brands. As we proceed through the fourth quarter and as is typical, we will decrease the velocity of new brand launches through the balance of the year as we focus on holiday execution. Because our fashion business has continued to perform below expectations, we purposefully focused our new brand efforts in the third quarter within this category. 21 of the 40 new brands launched in the quarter, or slightly more than half, were within fashion and accessories. Our fashion category has grown substantially over the last few years and with the introduction of some great proprietary brands like Kate & Mallory and Indigo Thread Company. But our customers began telling us that our proprietary brands weren't as fresh and lacked differentiation. We set out to improve that. While we have a variety of good products, we were missing representation from the better and the best category that help to diversify the product mix, attract new customers and increase frequency as well as ASP. The new brand launches in the third quarter support a more balanced, good, better and best assortment strategy and will absolutely diversify the category. Specifically, during the quarter, we had successful launches with brands such as Ron White Shoes and Nygard denim that helped to fill some of the white spaces in this category. Our platform is differentiated through our blended approach of serving three types of brands. The first is our sweet spot, which is to curate and springboard new and undiscovered brands, introducing them to over 1 million customers and 87 million homes. Examples of this would be Pistache [ph] Bath & Body and Brian Bailey fashion, both which launched in the third quarter. The second type is the nurturing and growth of emerging brands. Brands that aren't new per se, but have a following, are gaining momentum and are aspiring to get to the next level. MacKenzie-Childs and Consult Beaute would fall into this category. The third category is what we call our core brands. They are more mature brands, national brands, and our goal is to give them access to our audience and customer base while in a fun, friendly and agile environment. Examples of these are Invicta and Waterford. We have long histories with many of our brands, many of which has strong followings from our customer base. The common bond is that we give each brand and product the time, attention and white space to tell their stories. We do not want commodity products that you can find anywhere and that aren't unique or special. As a boutique video and digital retailer, we want to showcase great brands and products from around the world that have engaging stories which inspire purchasing on any and all aspects of our platforms. Our third pillar is content. We want to be cutting-edge with content and how we tell the stories of our brands. This encompasses our hosts, guests, venues for remote broadcast and use of all of our production studios and sets. We want fun and informative content since people feel better and are more engaged when they are entertained. Lastly, we want to make sure that our customers can access the content in whatever way and on whatever device they choose. Adding more HD channels is another step in the right direction, and I'm encouraged by our dialogue to obtain carriage on alternate content platforms. In addition, I continue to be pleased with our progress in the digital space as this will continue to be an area of increased investment for us. During the quarter, we saw continued growth on our Roku app and on our social platforms. Roku usage and social minutes viewed increased 47% and 44%, respectively, compared to the same period last year. Customer experience is the fourth pillar. We have a strong team of experienced associates who serve our customers day in and day out. The focus here is to increase repeat purchases and improve customer retention by continuing to make our platform more and more seamless and connected. One way we do this is through the use of subscription. It's a very simple way for our customers to get the products they love delivered to them on a regular basis and at a great value. During the quarter, we again increased our subscription sales this time by 13% compared to the third quarter of last year. The fifth and last pillar is our people and culture. This company wants to win and deserves to win, but we clearly have work to do. As I shared last quarter, the team is the heart and soul of the business, our most valuable resource and our most powerful engine for growth and success. What I will share with you is that the team is excited and confident about the future. I will now pass the call over to Diana for additional details on our financial results, capital structure and outlook.

Thanks, Anne, and good morning, everyone. Thank you for joining us today. I share in Bob and Anne's disappointment regarding our performance this quarter. Our revenue declined 12% year-over-year. And due to the fixed cost nature of our business model, this significantly impacted our adjusted EBITDA and earnings per share. Our revenue pressure was noted across the board in all categories. As Bob mentioned, our bench of brands was not deep enough to absorb the loss of a core brand without a replacement. In hindsight, we underestimated the impact of Beekman leaving, but the impact was exacerbated by the delay in the onboarding of an alternative brand that we expected to launch in the third quarter. This put pressure in our remaining staple of brands and resulted in reduced productivity across all categories. Our return rate was 19.9% in the quarter, which was an 80 basis point increase compared to last year. This increase was caused by a mix shift from Home into Jewelry, which has a higher return rate. The sales mix shift to Jewelry also had an impact on our ASP, which was $63 during the quarter, representing a 9% increase over $58 for the prior year comparable period. Our gross margin percentage was 35.8% in the quarter, which was 230 basis points down from last year. This decline was driven by rate pressure across most merchandise categories as a result of our sales miss and the over-rotation of brands within the quarter and resulting decline in productivity. We had a strong quarter with regard to expense management. In total, operating expenses decreased approximately $2.1 million as compared to last year. Our distribution and selling expenses decreased $1.2 million year-over-year, driven mostly by lower variable expenses as a result of the sales performance and favorable health benefits expenses. General and administrative expenses decreased approximately $600,000 as we continue to more efficiently allocate and leverage our overhead expenses. Variable expense dollars for the quarter declined as we continue to find efficiencies through process and technology. At 10.3% as a percentage of net sales, however, variable expenses were 100 basis points higher than last year, reflecting the deleveraging of our fulfillment, credit and customer solutions expense categories. Interest expense was approximately $767,000 in the third quarter, representing a decrease of approximately $391,000 or 34% from the third quarter last year. This decrease is due to our credit agreement amendment in the second quarter as well as our debt reduction over the past year, particularly the payoff of our high-interest debt. Despite the reduction in expenses, we were unable to make up for the revenue shortfall in the quarter. Accordingly, our profitability suffered as adjusted EBITDA was a negative $4.2 million, and we realized a loss per share of $0.14. Our balance sheet remains solid, and we continue to be proactive on our capital structure. We ended the quarter with cash of approximately $23.5 million, and we had an additional $20.5 million of unused availability on our revolving credit facility. This gave us total liquidity of approximately $44 million. Our inventory balance at the end of the quarter increased to $86 million, a 12% increase as compared to the third quarter of last year. The increase in inventory levels was the result of softer-than-expected sales. We are monitoring our inventory closely as we move through the key holiday season to ensure that we have the right balance of new receipts and appropriate inventory levels to drive our sales and margin expectations. Last quarter, we addressed the tariff topic, and I wanted to provide a quick update. We continue to monitor and evaluate the potential impacts of the China tariffs. As anticipated, we did not experience a material financial impact in the third quarter from the tariffs, and we do not expect a material impact in the fourth quarter. However, if further tariffs are implemented or if the tariff percentage increases on products we purchase, we have options to mitigate our exposure. These include working with our existing suppliers to move production outside of China, looking to other suppliers outside of China for similar products, taking products out of the rotation if they do not meet our internal contribution margin targets or adjusting our pricing. On the debt side, we ended the quarter with $69.1 million of debt outstanding, a 12% decrease from the third quarter of 2017. Our net debt was $45.6 million at the end of the quarter, which was a 17% decline from the same period last year. Regarding cash flow during the quarter. We spent approximately $2.6 million on capital projects, primarily reflecting investments in upgrades to our website, IT infrastructure and customer solutions systems. We expect full year capital expenditures to be toward the high end of the $8 million to $10 million range, of which $6.7 million was incurred during the first 9 months of the year. Lastly, from a tax perspective, we have an excess of $321 million in federal NOLs that are available to us to offset future taxable income. In terms of our outlook for fall fiscal 2018, in light of our third quarter performance, we are reducing our full year outlook. As a reminder, fiscal 2018 will have 52 weeks compared to the 53 weeks in fiscal 2017. For revenue, we now expect to generate $616 million to $626 million, which equates to a decline of 3% to 1% on a normalized 52 week to 52 week basis and a decline of 5% to 3% on a reported basis. We expect adjusted EBITDA to be in the $9 million to $11 million range. This implies a fourth quarter revenue range of $177 million to $187 million. This would result in sales ranging from a decrease of 1% to an increase of 4% compared to last year on a normalized 13 week to 13 week basis, which would equate to decreases of 8% to 3% on a reported basis due to the extra week in fiscal 2017. We expect fourth quarter adjusted EBITDA to be in the $6 million to $8 million range. Again, thank you for joining us today. I would like to turn it back to Bob for some final comments before moving to the Q&A session.

Thanks, Diana. I just wanted to reiterate that while third quarter was a tough quarter no matter how you look at it, we view this as a temporary setback. On behalf of our entire organization, you have our commitment that we are not resting until we get back on track toward the significant progress that we've made over the past several years. And I'm confident that we have the people and the passion to make that happen. With that, we can open the call to questions.

Thank you. [Operator Instructions] Our first question is from Thomas Forte with D.A. Davidson. You may proceed with your question.

Hi, good morning. Thanks for taking my question. So Bob, recognizing that the performance in the quarter is not indicative of recent performance and the overall health of the business, when looking at the share price today and when considering the individual assets you just mentioned, the net operating loss, you look at your coverage, things of that basis, when considering where the shares are trading today, is it time to reconsider the strategy and pursue strategic alternatives, including a sale? I know that the primary strategy has been to get operations right. But when considering where the share is trading, is it time to reconsider that strategy?

Hi, Tom, thanks for your question. It's not as though - I guess, the first thing to say is it's not as though we don't consider all strategic alternatives on any given day. It's part of what we do, obviously, as a public company. So we are always looking at ways of being able to maximize the shareholder value. One of the reasons that we brought Anne aboard to be able to manage the front-of-the-house operation here was to really give me the opportunity to be able to go out and to ensure that we can find out who's out there, what's out there and exactly where we are in the marketplace. I'm confident that in Anne's hands, we'll be able to continue to get back on track on the core business, which is, of course, the most important thing because without the core business, we have nothing. That being said, we have a great chassis in the background that provides a lot of opportunities. So we will continue to go forward and look at all the different ways that we can maximize the shareholder value. Nothing is off the table. It's just kind of part of what we do for a living as being a public company.

Great. Thanks, Bob.

Thanks, Tom.

Our next question is from Eric Wold with B. Riley & Company. Please proceed with your question.

Thank you. Good morning. I guess first question is, Bob, can you confirm that Beekman was entirely within the Beauty & Wellness category in terms of its revenues?

I can - well, I won't confirm it because there's a slight part of it that was in the Home area. And so Beekman was in both - Beekman predominantly was in the Health & Beauty area, but a part of it was also in some of the giftable areas and in some of the home areas.

Okay. So I'm sure to reconcile because, obviously, I noticed in the loss of Beekman and the delay in the launch of the - you hoped to be kind of replacement brand in that category. But Beauty & Wellness was actually the best-performing category of the four in the quarter. And so, I guess, I'm trying to reconcile kind of the venture brands not being deep enough to absorb the loss of Beekman. It seems like kind of everything was weak across the board regardless of losing Beekman. And I'm just trying to get a sense of - if Beekman had still been in there and was still kind of running at its normal run rate that you've seen in the past couple quarters or what you would have expected for Q3, would Q3 revenues have been up with Beekman in there? Or that loss just exacerbated what was weakness across the board?

So that's a really good question, Eric. There are two parts to the answer to that. One is that we didn't anticipate that - the Beekman miss and the fact that we weren't able to get the other brand that we were looking at on board almost lived in two different universes in a way in the sense that we were looking at and working with and trying to get the other organization to come over to us. And we had hoped that we would have Beekman and them. So we have been - we had been working with the other brand to try to bring them over because we felt that they were actually, to a great degree - there are parts that overlap, but actually, they were also complementary to each other and they bring a new customer base to the table. So what I would say is in our Plan A, for lack of better word, we would have had Beekman as well as the new brand on in August, and that would have allowed us to be able to actually drive to be higher. And that's really what our initial plans were when we built the plan, was to have both of them on, which would have actually been able to help satisfy what we wanted to do, which is really to grow the customer base, have more differentiation and be able to succeed in that way. So that was the original intention. The secondary piece to help you reconcile that Beauty was up was when we mentioned over-rotation earlier. And what that meant was with the loss of Beekman and not being able to put the other brand on, we needed to - in order to be able to do the best we can, is put some other brands on - some other health and beauty brands on more times than they would normally be on. And in putting those on, the customer base - and not giving those partners enough time to be able to build new product, that we ended up having those brands on more time than we would usually have them on since we have a very specific set, rest and rotation schedule. And because of that, the customers ended up seeing more - and we spent more airtime in those areas because it's a much more profitable area for us. Unfortunately, when you do put those brands on several times, you do get sort of diminishing returns when it comes to that. And therefore, as Anne - as we mentioned earlier, Anne has done an incredible job bringing these 40 new brands, which I think is a record for one quarter to bring on these quality brands, into the fourth quarter. And it really sets us up nicely for the future. But unfortunately, in this quarter that we just went through, in the third quarter, we had - we ended up being overly dependent on some brands that we knew were going to give us results. But we also - in doing so, we made the mistake of rotating them on too many times, and therefore, there was the tiredness from the customer because they saw these brands more than they should have.

Okay, that's fair. And then, I guess, last question. Obviously, with the weaker-than-expected sales, inventory popped up more than would normally be kind of sequentially in the quarter by 20 million plus, any characterization of that inventory? If some of them - something you showed repeatedly was kind of getting tiring with consumers, is there any risk with that inventory level? Or do you feel the mix of inventory and the inventory level itself is okay to be worked down?

Yes. This company has survived a lot worse than this particular inventory bite that we have. The good news is almost all of the inventory is current inventory. And they - we are very adept and skilled at being able to figure out ways to be able to minimize our inventory risk. A lot of this was in the current apparel season - current - it was apparel in this past season that we were in, as we had mentioned earlier, from the softness that we didn't expect. And because apparel is a long lead time business, when we see the softness in that, it's a little bit more challenging. The good news is it's current. Its currency is in merchandise and Anne and team have already jumped on the opportunity and we've seen some positive results on being able to have a strategy in place to be able to deal with the inventory piece of it. So I'm not as concerned with that. And many of the other brands are - many of the other brands we have relationships with that are - the merchandise could be returned to the vendor, many of the merchandise we have certain concessions with them that they could take the merchandise back or that we can get markdown allowances. So I'm actually not really as concerned about that. I mean, it's not the ideal situation to be in because we clearly will not be able to maximize that. But in terms of being able to monetize it, I'm not really concerned with that.

Got it. Thanks, Bob.

You’re welcome.

Our next question is from Alex Fuhrman with Craig-Hallum. Please proceed with your question.

Great. Thank you for taking my question. You know, curious, the guidance for Q4 looks comparatively better than the Q3 results were. Curious if that's maybe starting to see some of the impact of the new brands that you launched in the third quarter or perhaps there's a better trend here in November?

Hi, Alex, so yes. I think it's easy enough to be able to back into - based on our guidance, easy enough to back into what our fourth quarter numbers are. And they reflect essentially yesterday's forecast of where we believe we will end the year. We feel very good about where we're going. It would - clearly, it would've been better had we been able to get the brand that we talked about, the health and beauty brand, on sooner. But unfortunately, based on some contractual issues, we won't be able to get them on until January. But we feel very comfortable with the numbers that we have in there for fourth quarter and be able to hit those numbers.

Great. That's helpful. And then just thinking about the delay of this brand launch and the hole that was created by Beekman 1802 leaving, just curious if you can give us a little bit more of a sense of why this hole took down so many other categories. Was it airtime that you had previously pinned in for this new brand? I don't know if that was maybe something that you had a number of time blocks in mind for. And then also, just thinking about the fact that Beekman ultimately surfaced at HSN, do you think maybe that, that hurt you as well? That maybe some of the Beekman core customers ended up sort of migrating over to HSN?

So it's more the first one than the second one. It's clearly we had a schedule that reflected us having Beekman, as well as this new brand. And we do our schedules very far in advance for many of the brands and work hard to be able to have that schedule set in place. So for the most part, because we were surprised about the fact that we couldn't move on the second brand quicker, that really did cause the issue in terms of that. And then, by having to fill in, if you will, as I explained earlier with the over-rotation piece of it, by having to be more dependent on brands that we had on before, that ended us - ended up putting us in a position where we didn't have enough other brands to be able to bring in, that were mature enough and had enough new product development because, obviously, the product development cycle for these kind of brands are pretty big to be able to do as we were doing. The second piece of it, there's no question there's some of that in terms of having some of the customers that move on to what - that, I would call, Beekman fence that moved on to watch on HSN. But it was not the significant part of it. Most of the Beekman - most of the people that bought from Beekman, frankly, were Evine fans. They were part of the Evine core base first. And as you know, we helped develop the Beekman brand with them over the first three years. And so we clearly, in that particular case, were in a situation where Beekman was able to, due to a pretty significant marketing program that they had, be able to draw attention to the fact that even though we built the brand together, by moving over to HSN, they were able to - and also give them more hours than would normally be given for a launch definitely had more customers going over to HSN. That being said, we haven't seen as much degradation as you'd think or as we thought, I guess, in terms of that. And we are aggressively working and will work even harder when we get the new brand - the other brand on to make sure that we reach out to those customers to try to enhance them to come back. And I think with the launch of Jane Fonda and since - as Anne had said earlier, our job is to be able to get more eyeballs and more lifetime value to the customer and get people to know that we exist in that realm. We believe between those two brands and our L.A. studio and the pipeline that we have based on now having - being where a lot of the talent is, both on the partner side of manufacturing, as well as the entertainment side, we think we have the opportunity to actually be able to exploit that in a much bigger way than, frankly, that we had even anticipated.

Great. Thanks, Bob.

Thanks, Alex.

Our next question is from Mark Argento with Lake Street Capital Markets. Please proceed with your question.

Good morning. Just a couple of quick questions. One, maybe you could walk us through the logistics opportunity a little bit better, what the economics or the arrangements you're having with some of the other brands there. And then kind of stepping back a little bit and looking more at the big picture. The whole phenomena in terms of cord cutting and viewership, do you think part of the issue you're having here is that this a shrinking - the pie is shrinking, so to speak? And if you believe in that, what are you guys doing to aggressively go after some of the OTT or other digital video opportunities? I know you said in the quarter that Roku viewership was up, but it should be up a lot more than 50%. What are you guys doing? Or how do you guys think about kind of the macro picture here as well? Thanks.

Sure. Thanks, Mark. Okay, let's start with the third-party fulfillment piece of it. Before we even talk about that, I do want to say that we are - the third-party fulfillment piece of it is absolutely an opportunity. We have a guy that's running it that has been with us for a long time and goes back to the days when - I think this is probably one of those trivia facts that people don't know. But that in the past, when I guess we were at - called ShopNBC, we actually ran polo.com's third-party fulfillment center, as well as a lot of other - nhl.com and another bunch of big brands. So we're actually steeped historically on doing third-party fulfillment. So I just want to say that the third-party fulfillment is something that we knew that we were good, that it was kind of a natural thing for us that - and so that so far has been really good. And the fact that we have essentially completed our expansion of the distribution center, essentially doubling the size and putting in a warehouse management system that this past September was when we finally were able to, I'm going to say, get us to be in a position where we can do a lot more of the things we wanted to do using the Manhattan system in the third-party system. So we are probably in about - at probably somewhere around 60% capacity because of the expansion and because of the fact that we completed the technology that allows us to take advantage of that only in September. This past September really gave us the opportunity to be able to go across merchandise. So we believe there's a big need for that, a big desire for that, and we think it's a - and we know it's a competency of ours. So the third party is very exciting to us, but I would just want to assure everybody else that it is not something that's going to take our ball off of the court that we're looking at, which is really to be able to drive the business - the front-of-the-house Evine business where it needs to be. But we are excited about the third-party piece of it, the fact that we're getting 8 brands to be working with us to do this. And the fact that there is a need by so many of these direct-to-consumer companies that don't have the competencies. They may have a great front-of-the-house competency in terms of being able to have a great product, but the reason that so many of these digital native companies are struggling, as well as a lot of the bricks-and-mortar companies that are struggling and the manufacturers that are struggling is because they don't have the competencies that we have in the back of the house. Our chassis, our ability to be able to tend mass merchandise direct-to-consumer is something that takes years and years to be able to do. And one of the things that I think that these digital native companies, as well as some of these manufacturers and direct-to-consumer people are trying to figure out how to break the clutter out is how to be profitable. At the same time, they have to go out and they have to get third-party business. They have to go to third parties to be able to do these fulfillment and other kind of issue. And that, unfortunately, is a very expensive proposition. The fact that we own it, we've been doing it, we have room to expand is a great added value for us. The same thing goes for being able to do the calls and do customer fulfillment based on that. So that's a big thing. Your second question on cord cutting and viewership and big picture. I read a report this past weekend. There is no question that there is cord cutting going on. There was no question that we need to address it. Roku is just one of the ways. We're looking at over-the-top to be able to do that. The good news I think on that part is, because we're looking at an older demographic, is that according to this survey, and I'll get it back to you on exactly who put the survey out, but that the baby boomers and - are watching 5 hours more television than they used to be. And so it is something that is not going away in that arena, in that demographic as quickly. And the fact that we have that ability to be able to be fully distributed out there, we think, is a big plus. That being said, there is no question that, as you can see, our mobile usage continues to go up. We continue to invest into mobile and digital, which is going to be a major part of our future. And you'll be hearing more about us in the digital arena and how we plan on being able to manage through that. But we are blessed because our audience has more disposable income than the other groups. And since 10,000 people turn 65 every day and since these people are living longer, we believe the opportunity to be able to go and try to amaze and satisfy these viewers that are 45 and above is a huge opportunity for us and one that we plan on optimizing. I don't know, Anne, do you want to say anything about that group in general? Anne Martin-Vachon: No. I think we're really understanding her on all levels. She's a mother, she's a grandmother, she is somebody caring for her elderly parents. So we're thinking of her holistically and really investigating all the products and services that she needs. So a huge opportunity.

Thank you.

Our next question is from Victor Anthony, Aegis Capital. Please proceed with your question.

Hey, guys. Thanks for putting me on. Maybe just a follow-up to the last question. There was – two of your major competitors did merge last year. And they have detailed this last quarter and at the Analyst Day that it's seeing greater synergies on the cost side. And it seems to be that they have a greater handle on driving one of the existing brands back to growth. I guess the question is, are you seeing any sort of negative repercussions on your business because of that merger and whether the - your ability to attract more brands or just from consumers coming on? Thanks.

Yes. No, thank you, Victor, for the question. We actually see it as - and I was the President of HSN for a while, and I know enough to be dangerous here in this particular category. Our business, because our revenue is so much smaller, but we're still - we're in all of the other houses, the same number of houses from a distribution standpoint that they are in, cost synergies are great. I also - so I see the opportunity for them to try to be able to get some cost synergies. But because of the scale of how big they are compared to us, and because their business plan and business model is one that is more of selling stuff than being an editing function, I think there's enough room in the world for them and us. And I see the opportunity - I think the opportunity from a revenue and growth standpoint for us, being curators and being able to be brand builders and working with the brands, is a huge opportunity for us. And I think that is different than the direction that the other companies are going, especially with the merger. So we've actually seen - and also, I think that with the report - and I read the investor report as well. It looks to me as though there's - that one of the things that they are looking to do is be able to challenge some of the bigger companies because they're bigger, I get it. I think they're looking to be able to be playing in the same league as Amazon and Walmart.com and Best Buy. And we made a very specific decision from a profitability standpoint to be able to move out of those areas that have commodity goods that are out there because we think that the curation component of it and being able to let people tell their stories and be bigger fishes in smaller bowls, which we are, is a bigger opportunity. And they have a great business model. It's worked really well in the past, and I salute them. I also think that putting together - that a merger, under any circumstances, is challenging. And I think when you look through the deck, and I cannot look through the deck, and when you take a look at how that merger seems to be rolling out, I think there are challenges in terms of being able to put those two cultures together. And I think that that's going to keep - that's going - that's some work that they need to do. Certainly, from the HSN numbers, it looks like there was work that needs to be done. And although I'm a big believer since I'm a finance guy in terms of expense efficiencies, I also have a deep respect for brands and for customer loyalty. And I think they have the work cut out for them based on that. But that being said, I think they run a great organization as, again, I was part of the HSN organization. And I think they're moving in a direction mostly, because of the scale of the business, that is actually a different direction that we're going into. And so I think there's enough room out there. I think they have somewhere around 6 million or 7 million customers that buy from them at least once a year. We have about 1 million and change customers that shop with us - probably 1 million, 2 million, 3 million customers that shop with us once a year. We're both in 90 million households and 330 million people in the United States of America. I think there's enough room for all of us to be able to figure out a way to be able to monetize this. And the best news for us is that we are now at the point where are going to be at scale. So to the degree that we'll bring on great brands that have great stories, and we have a great merchandising department that are not editors, but they're actually people that go out there and partner with the merchandising community to find great people to tell stories and to be able to entertain and to go on location and do so. And I think both companies have a really good opportunity to be able to succeed, and I don't think it's one or the other.

Okay. Thank you.

You’re welcome.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Thank you so much. Thanks, ladies and gentlemen, for participating in our business update this morning. As I hope you can tell, we are very optimistic about our long-term prospects. I want to take the opportunity to thank all of our employees, customers, brand and vendor partners and shareholders for your continued support and confidence. We look forward to our next quarterly report and having Evine serve you during the holiday season. Happy holidays. Thanks so much.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.