Greetings and welcome to iMedia Brands First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I would now turn the conference over to your host, Tim Peterman, CEO. You may begin.

Good morning everyone and thank you for joining. This is Tim Peterman, iMedia Brands, CEO. Before I go into my prepared remarks, I would like to cover a few housekeeping items. We issued our Q1 earnings release earlier this morning. If you do not have a copy these, you may access it through the News section of our IR website at imediabrands.com. This release is an exhibit to Form 8-Ks filed this morning. I would also like to remind everyone that this call will be available for replay through June 10, 2020, starting today at 11:30 A.M. Eastern time. A webcast replay will also be available via the link provided in today’s press release, as well as on the IR section of our website. Some of the statements made 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. For additional information, please refer to the Safe Harbor statement in today’s earnings release and our SEC filings. Finally, we will make references 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. With these housekeeping items complete let’s begin. As with our last call, I would like to begin this morning by acknowledging these uncertain and stressful times for everyone on this call, and to reiterate that iMedia Brands continues to be focused on taking every step it can to keep its employees, vendors, customers, guests, and their families safe. As we turn our attention to the Q1 results, let's start with a 20 million improvement in operating cash flow. In my experience, this kind of dramatic impact observed in one quarter can never really be attributed to just one thing going well and never attributed to the activities that occurred in just the past three months. It is composed of many things and the impact of any story takes time to build. We are a perfect case study and here are four examples of those things. First and foremost, we have completely restaged our viewership opportunity with our customers by introducing and constantly improving our static calendar strategy. In Q1, we successfully launched new static programs like Paula Deen Sweet Home Savannah, Learning to Cook with Shaq as well as Fashion Talk on Mondays and Thursdays, Wake Up in Style on Tuesdays, and Invicta Collectors room on Thursdays. Most of these new static programs are attracting double digit growth in audiences compared to the same calendar time slots last year. As I said before, viewership is not the same as revenue, but viewership is an early indicator for future revenue opportunities because customers in this industry tune in and watch for awhile before they start to buy. Second, we have completely restaged our gross margin model. Our Q1 gross margin rate of 37.1% is the highest Q1 margin since 2014 which was 37.6%. This accomplishment, like I said before, was the result of many things. Better on air execution by our hosts and line producers, better planning discipline around price band assortment and calendar adjacencies, and better viewership trends because of the new static calendar, nothing fancy but not easy either. Third, we have introduced a good, better, best merchandising assortment and pricing strategy in all our categories that appear to be resonating with our customers. For example, in Jewelry, our biggest category is gemstones. We have worked hard over these past six months to position our core three brands differently to our customers. Gem Insiders would be our good. Gem Treasures would be our better and Gems en Vogue would be our best. This provides our customers better choices. Another example is within Fashion. Kate & Mallory would be our good brand from a pricing perspective, One World in Elon would be what we call our better brands, and our recent launches of Designer Brands, DKNY and Karl Lagerfeld would be examples of our best brands. Fourth, we have continued to successfully reduce our distribution costs by collaborating more with our television distribution partners. Our pricing structures today are designed in ways to produce upside for both parties as we grow together. Think about it this way, ShopHQ is celebrating its 30th year anniversary in June of this year. That means we have been great partners to companies like ComCast, DIRECTV, DISH and Charter for a long time, and we expect to continue to do so in the future. We believe in their technologies and their abilities to provide us video distribution opportunities in emerging video platforms as well as the 24/7 linear platforms today. As a reminder, our broader journey here is to become a leading interactive media company, growing a portfolio of niche television networks, niche advertisers and complimentary media services. In Q4, we launched our Bulldog Shopping Network, the first television retailing network focused primarily on celebrating men's products and services. Also in Q4, we completed the acquisition of Float Left Interactive, a leading technology provider delivering over-the-top, OTT, as we call it, content and TV everywhere solutions to media companies and consumer brands. In addition, we completed the acquisition of J.W. Hulme in Q4, an iconic 114-year-old multichannel Americana brand offering artisan crafted handbags and accessories. So, stay tuned for more interactive media successes from us in the near future. As previously reported on our last earnings call, in Q1, we signed definitive agreement for $4 million equity financing transaction led by Eyal Lalo, Invicta CEO and iMedia's Vice Chairman. I cannot say enough about how Eyal Lalo has helped our company from being the driving creative force behind Invicta to helping our merchants find new vendors to spur growth for ShopHQ and Bulldog in different categories, to helping actually finance iMedia's growth. Finally, let's talk about our balance sheet. I think all our stakeholders would agree that in uncertain times like this especially is important to continually improve the balance sheet. iMedia's cash at quarter end was $16 million, a $6 million improvement from year-end. In addition, we reduced our net debt at the end of Q1 by $14 million, moving from $56 million of net debt at year-end to $42 million of net debt at the end of the first quarter. Our credit facility provides up to a $90 million revolving line of credit as supported by our borrowing base, and we also have a term loan which matures in July of 2023. Our inventory balance at the end of the first quarter was $64 million compared to $79 million at the end of the fourth quarter 2019. Regarding capital expenditures during the quarter, we spent approximately 1.2 million on capital projects, primarily reflecting investments and upgrades to our website and infrastructure. From a tax perspective, we have approximately 380 million in federal NOLs that are available to us to offset future taxable income. In terms of our outlook and our more recent financial performance, we expect our May revenues to grow between 6% to 8%, when compared to May revenues last year. This is obviously a very positive revenue performance report, but I also want to temper revenue expectations for the remainder of this quarter and the year. As I mentioned previously, these remain uncertain economic times given the ongoing COVID-19 situation and therefore we will not be providing guidance at this time. However, as evidenced by our May revenue growth, we continue to believe that television retailing will be less impacted than other businesses because we can serve our customers without them ever leaving their homes. In closing, I would like to say that these are important times here at iMedia, as we continue to create measurable growth momentum. Thank you for your time this morning. I will turn the call back over to the operator for Q&A. Operator.

[Operator Instructions] Our first question is from Thomas Forte with D.A. Davidson. Please proceed.

Sure. So two quick questions and I'll get back in the queue. So, the first question is on distribution are you suggesting that you're able to potentially renegotiate terms on a shorter basis than historical? My impression is historical. Your distribution agreements with MSOs are three years in term or something longer term in nature. And then second on your installment payment efforts, to the extent that you're offering consumers the opportunity to purchase products on an installment interest free basis, how should we think about any potential bad debt exposure?

Hey, Tom, thank you for those question. Good morning. Regarding your first question, distribution, no, we haven't changed the methodology or the term of our distribution arrangements. They really range from 2 to 4 years and that's been since the beginning of time. So you're correct on that. What I meant was that when they come up for renewal, we're often talking about new ways to work together. That would be a pricing structure that would escalate as we grew. And I think those are the key changes that we've been able to do as those contracts are completed. So I think that's a very positive thing for us and it will help us in a variety of ways, everything from new neighborhoods, whether that's HD, lower neighborhoods, different ways, additional channels, cross channel promotion. There's a variety of ways that as we partner with our distribution partners like that, that isn't just about rate. And those are the things that I was talking about in my prepared remarks. So in terms of distribution, that's the answer there. In terms of the value base, we still do the same checks and the same balances, as we've always done with value based. So, there is no way that just additional volume would create additional pressure because we're still having the same thresholds for where we do provide credit to customers. So, we feel good about where we are and it hasn't really grown as a percent of sales. It continues to be a distinguishing competitive advantage we believe in the marketplace, providing that opportunity to our customers. But we don't see an increase in credit risk as a result.

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

Yes, Tim. Just wanted to drill down a little bit on the gross margin improvement, pretty impressive in the quarter, is that mostly mix driven or maybe you can give the [indiscernible] on that a little bit for us?

Sure. Yes, I know, it's not really mix driven. What we -- as we talked about restaging the business, one of the critical components was the way we plan our shows and the way we -- and the discipline around what we call offered minutes. So, the idea here of the gross margin being maintained like it is really not maintained, reestablished, is that in each of our categories, in each hour of our shows, we're making sure that we have a price band that begins -- that has balance of high price point, low price point, mid price point in an engaging way that these products make sense to [indiscernible] a show, that allows us to offer an ASP that doesn't require a lot of markdown, it allows the customer to engage better and that conversion of a more balanced ASP allows our planning team to be more disciplined about the pricing model. We have eliminated the notion that the only way to engage the customer is to reduce the price. That is a race to the bottom and not something that we're willing to do anymore. So, that's the first step about maintaining margin is making sure that you have an assortment that is engaging the customer, it’s not just about the discount. The second piece is really the on air execution. The way our line producers engage with our hosts, the way they work on telling their unique selling propositions of the product is another way to engage the customer rather than just discount, and we've really improved that element as well. And then the third element of why the margin has improved is really around how we're buying the inventory. As we talked about earlier, the Company really in the last couple of years, has moved to be buying their entire seasons, cost of goods as new receipts and we just don't believe that's the right way to run the business. So, we're actually using our existing inventory in a better way. And as we improve those first two things I described, means that we can use existing inventory to complement the new inventory. We call it sprinkles, and that results in just a better turn of your inventory and also removes the pressure of having to move through an overload of inventory at a sale or discount just to buy new receipts. So, if you take away the over buying, you improve the on air execution and you offer a price point band balance that those are the three things that allow you to improve your margin and maintain that margin.

And maybe just touch on, the environment obviously shopping at home is really the only one of the only places you can shop up until most recently in a lot of states. So, how sustainable do you think some of this is? And I know you had said, May look strong, double-digit -- or single-digit growth year-over-year, but what's your kind of outlook or thinking in terms of sustainability on some of these trends?

Yes, it's interesting question. I'd like to use the analogy that I think the TV retailing but just the industry in general is kind of Bubba Gump Shrimp boat after the hurricane where we have a certain amount of access to the customer in their home. There's a trust factor because of the engagement with our hosts. We're not ad supported, so we're not affected by the retail. We're really uniquely positioned in terms of what I would call the, the next 6 to 12 months. But I do think the COVID situation that we're in today is actually going to have a permanent effect on the velocity of online migration of shopping. So, when you think about the retail experience and you think about e-commerce, it's still in the teens in terms of e-commerce. And retail I do think, I think it will accelerate, the situation will accelerate that online migration. I think television retailing will also benefit from that acceleration. So, although short term, it will certainly be -- provide a lot of benefit to our industry. I do also believe that long term TV retailing and e-commerce will also benefit as a result of the changing buying habits from the consumer.

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

Thanks very much for taking my question. I wanted to drill down a little bit further, if you could on the strong results in May, obviously, returning to growth there would be a pretty stunning turnaround from what we've seen the last few quarters, including here in Q1. So, we'd love to see if you could provide a little bit more color on really how that that came together in May? Is it mostly your new customers who have been buying -- I am sorry or you existing customers buying more, have you been having, more new customers coming in the month of May? And then to the extent that there have been new customers coming in May, have they been buying things that you would expect to be kind of pandemic related demand like in the kitchen and home categories? Or have they been buying general offerings across the board that you sell?

Thanks for the question that was not even multi-pronged. I think that was 12-pronged, but we're going to go ahead and get that shot. So, in terms of -- we'll start with the May performance. It is a strong performance for sure, as we talked about. And we think, if we're finishing up the month, that 6% to 8% growth to last year is solid. As we talked about, we're not really -- the idea of forecasting a year on that would be opportunity right now, not something we're doing. So, what's the best question really is, as you asked, why is May doing well and it isn't really just related to the hot levels being higher at home. It really is, as I talked about the thesis of my prepared remarks, which is it's a lot of little things that all come together at once. And it really started last fall with when we introduced the static calendar. And bear with me, as we go through the steps. The static calendar allowed customers to establish viewing habits and that each time they establish viewing habits, they come back more and more. And as we talked about viewership isn't revenue, but it begins to lay the groundwork for revenue. So that -- we saw the upside in Q4 on ratings, reversals, viewership increases for certain weeks. March was the first time for the entire month of March in five plus years. Actually, it may be forever because we just started measuring Nielsen back in 2016. But for the full month, our viewership was basically flat to where it was last year. That was stopping a negative trend. That's the benefit of the static calendar. March was viewership and now you have May in revenue. So, it does build in that fashion. So, that's the one, that's called that one stream of things going well. Then you talk about the customer file. We talked about in Q4. We did the hard work of investing in Watches and turning that customer file around. That took some expense to do, but now in Q1, and as we move into Q2 that is also performing well because that had a flat customer file. Health, you've asked about Health. Health is doing well. And, I would say that we were fortunate in that we were already planning a reduced receipts quarter in Q1, as we improve our working capital by $20 million or our operating cash flow by $20 millions. But Health has certainly been -- and I would characterize you even more specifically as Homecare, Beauty and Health has been very vibrant in categories over the last several months and I think will be vibrant for the next year. So that has also driven the results, but our results haven't just been dominated by Health, although Health has been growing. You've got, as we talked about the Watches, you also have our core Home hard brand has been working well. They have -- from everything from Mackenzie to Waterford have all provided record performances in terms of the price band balance that I mentioned earlier to the earlier answer. So, it's really the culmination of you've got a static calendar coming through, it's driving viewership. You have a stronger planning concept that's creating viewership engagement in all categories. You have customer file growth and improvement in Watches and in Health. And then, the businesses that were really focused on restaging still is around fashion and is around Jewelry and we're making progress on those. And we think that in Q2, those will perform even better, but it's all of those combinations that make May such a robust period for us. So when you asked, if that's going to -- if that's a trend that's going to stay, we believe that the culmination of all our efforts over the last six months will continue to drive performance and the idea of COVID and the nature of folks watching more TV right now that the nervousness about the employment, the concern about the retrenchment and advertising, all of those elements will continue to move through the rest of the year. We think we have enough on our plate in terms of our own execution to drive our own results. So, it's not something that we think we're going to be completely captured or beholden to the COVID situation, if that answers your question.

That does. Thanks, Tim. That's really helpful. And, yes, if I could just follow up the viewership turnaround here with the downward trend in viewership finally reversing, that seems like quite an accomplishment here. Are those programs that are really been capturing the viewership? Are those specifically the programs that have been driving the revenue as we get into April and May? Or is it been more of a halo effect of bringing in customers and then they shop across your site?

Great question, Alex. It really is -- it's a combination, right. So think about the categories, we have introduced static programs in Q1, in virtually every category. And the ones that we introduced in Q4 are beginning to move from that viewership range to our -- what I would call converged or revenue range. So think about, we've done fashion, we've launched several different fashion shows because we know in the morning, our customers are more engaged and more interested in the same host around the same format in the same category because that's their viewing habits. We've introduced Paula Deen to a Sunday night program with your shop from her home in Savannah. Obviously, we've done Shaquille with Learning to Cook with Shaq, and that has gone well, and we've actually introduced Learning to Eat with Shaq, it's called Shaq Shop, but there's all these different elements of why people engage with the television on a week-over-week basis. So, it's not just one category, not one host or one guest. Dr. Terry Dubrow has done great things with Consult. So much so that now folks are engaging Dr. Terry appointments, where it's a weekly show where they're asking about health questions and we have all these different elements. ISOMERS another great beauty brand of ours where we've introduced a weekly status shows, Jennifer Stallone with Serious Skincare. I can think of every single category having the benefiting from engaging with the customer on a regular basis. So, I don't see it as one or the other, I see it really just as a new fundamental of at least our business. And it certainly this is nothing new. You know, if you think about the entertainment world. That is how you build network ratings. And cable world, same thing, you start with a show, you build a day. And that's really the fundamentals that we're introducing to this network in the fall of last year and to the spring now.

We have a follow-up question from Tom Forte with D.A. Davidson. Please proceed.

Great. So, I think I had three. So, we'll go one at a time. So, the first one is, Tim, can you tell us today what is the significance for you for OTT distribution such as Roku?

We could do this one at a time because I've got a pen, I'll start with that one though. Alright, so we think of the OTT marketplace as important for sure. Obviously, we acquired Float Left Interactive in Q4 because we believe that ecosystem where you create a walled garden in an environment where you have new customers dominating that ecosystem. So, we think it's important for the future of our network. We think that learning about the OTT system in a way that -- like Float Left provide services to entertainment networks and to consumer brands. We're learning just by participating in that, what does engage the customer? How do you from a Roku to a Smart TV to be skinny bundles, there's a lot of definitions of OTT, but we believe that it's important. We believe that if we have the kind of personalities that engage those customers in a different type of sale. We don't think that long form content that we're doing today at 24/7 television is the right mechanism for what going to create conversion in the OTT marketplace. We think someone like Shaq would be a way that we would be relevant in -- more relevant and more discoverable in the OTT world, but we would have to make and we are making programs that are much shorter and engage those customers differently. So, it's not -- I wouldn't say it's economically critical in the next year that we learn and engage the OTT customer in a way that would create dramatic effect on our financial results for our viewership. But it is critically important as we talked about, what are we trying to do here as an enterprise, we're an interactive media company, OTT very important five years from now. And like I said at the beginning, it's a variety of things that get you to the finish line. And just because it's not creating economic impact today doesn't mean that it's not very important to our agenda.

Okay, and then as a follow-up to that one. Can you remind us where Bulldog is on distribution? And are you distributing in OTT?

Yes, we are. Certainly, ShopHQ is on OTT everything from Roku, to the Smart TV from Samsung and several other environments. And Bulldogs is not yet on OTT, and it is still relatively small in terms of distributions. We talked about in the last release, we think because of the COVID situation, a wiser hedge prevail and we're going to increase -- we were planning to increase the distribution on Bulldog in a significant way in Q1, we're now pushed that back to Q3 to Q4 to make sure that we have the opportunity with that niche business to engage them. If you think about how we're engaging the customer today, they really are focused as I talked about, the at home beauty and health being the primary category, along with fashion and other things. But the male and in the category that we are with Bulldog, it's much better to launch that in an environment that isn't like today and more like it's going to be, we believe in Q3 and Q4. So it's stay the course. Bulldogs are still producing its online content, still building its social campaigns and still looking for the right distribution model. As we talked about from the very beginning, the combination of, of 24/7 linear distribution, the combination of partial blocks on call it regional sports networks where it's not 24/7 as well as social is going to be how we reach our male customers with Bulldog. And it's each single network that we launched will have a distinct programming and a distinct distribution strategy with a ShopIQ, which is our broadest base network is still not trying to be all things to everybody, right. We're not in the Home soft category as a business today. Bulldog is -- the state is after certain categories celebrating male products and male services. The distribution again will be different. So although we're in -- call it under finally homes today, 24/7. We think we're in a good position from a programming, from a product assortment perspective and a guest perspective to hit the ground running when the opportunity presents itself again in Q3.

Great. So last two, still one at a time. Okay, can you explain how you're managing your fulfillment center efforts in Bowling Green, Amazon's talking about -- for Amazon, an incremental $4 billion spend in the June quarter. And a lot of that is managing COVID-19 at the logistics level.

So I think the inference of your question is. Are we seeing a spike in costs related to the situation at the fulfillment center? And our answer is no, we are not. Although, we are certainly being very thoughtful and proactive on all the protective measures for all our employees and we certainly limited outside personnel from coming in. You know, we're a -- our facility in Bowling Green is not only shipping out our goods for ShopHQ and Bulldog, we also operate a 3PL services there, as you know, and we're providing those services to ABG, which is G3 direct-to-consumer group, and we continue to provide those services without interruption. And as we've talked about, we have not had as a company any cases of COVID, and we think the major that we've put in place have been implemented well by our teams and thoughtful in their design. So, we continue to obviously watch the situation every day, but we have not incurred any kind of dramatic cost increases as a result and we believe we've done a great job in protecting our crew.

And so last question. So this is sort to summarize. So while it's too early to suggest that the sales trends in May are sustainable. There's reason to believe that improvement on the sales trends for the quarter you just reported are sustainable. And while it's unclear the future of your improved profitability and cash flow, it's also easy to suggest that the trends are improving. So in both cases, while it's difficult to provide guidance because of COVID-19, you're confident saying that the improving trends both top and bottom line, you're able to at least say that.

Yes, I would say even -- I would say, if you take the, what control, right. We control the improvements, the static calendar improvements in viewership. We control how we've improved the operating cash flow by 20 million and continue to do that. We control the discipline in fundamentals around how we plan and how we operate as a team. And I think all of those will continue to drive the benefits not only on the bottom line. Now, we're actually seeing benefits, as probably some investors would say, finally, on the top line, which is very important to us. But again, it's not the whole ballgame for us. We don't subscribe to -- we just need a bigger wheel barrel before we make money, right. We believe at this size and this scale, we need to be making money right now. And that's why we're doing the fundamentals of improving the operating cash flow, improving the viewership, restaging the gross margin completely. All of those elements are important. And then if you do those well when you start to make more revenue, that all drops to the bottom line. So, we think all of the trends that we control are driving the opportunity on the revenue side. And we do believe that is something that is sustainable because we've worked for the last year to make those things happen. They just don't happen overnight. And so, they just don't also go away overnight. So, we feel good about being able to push through in 2020 with these improved trends.

Okay. So if I could tack on one quick then, so just to be clear. What you are saying is the improvement in top and bottom line while you're getting some short-term benefit from COVID-19 from the fact that physical stores are closed is more a reflection of the efforts you've been putting in place basically since you took over to improve the business and set it on the ground footing for at some point long-term top-line and bottom line growth?

Yes, better said. And shorter, I appreciate that. Yes, that is what I'm trying to communicate.

This concludes our question-and-answer session. I would like to turn the call back over to Mr. Peterman for closing remarks.

Thank you, Sherry. Listen, we appreciate everybody's time this morning, and we will talk to everybody soon. Thank you.

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