Hello, and welcome to the iMedia Brands First Quarter 2021 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Monty Wageman, Corporate Controller. Please go ahead, sir.

Good morning, everyone and thank you for joining. This is Monty Wageman, iMedia Brands, Corporate Controller. We issued our Q1 earnings release earlier this morning, if you do not have a copy, you may access it through the News section of our IR website at imediabrands.com. This release is also an exhibit to the Form 8-K filed this morning. I would also like to remind everyone this call will be available for replay through June 8, 2021 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 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 the CEO of iMedia Brands, Tim Peterman. Tim?

Thank you, Monty and good morning, everyone. Q1 was another strong quarter for us. Revenue was $113.2 million, an increase of 18% compared to the same prior year period. This was driven in part by the 34 new brands we launched during the quarter across our television networks. Q1 gross margin was 40.6%, a 350 basis point improvement over the same prior year period. Q1 adjusted EBITDA was $8.1 million, a $9.8 million improvement compared to the same prior year period. And our Q1 total active customer file grew by 14% and that's the company's highest growth rate for this metric in seven years. But before I go deeper into our Q1 financial performance, I want to walk through two recent achievements in our strategic road map to becoming the leading single source provider and partner for advertisers seeking to entertain and transact with customers using interactive video. We at iMedia believe that today the largest scaled marketplace to reach the largest concentration of our core customer demographic using interactive video is linear television, which is the roughly 100 million US homes reached via MVPDs, broadcasters, telcos and satellite providers. As noted by Nielsen's the state of traditional TV five-year Study published in 2017 and updated by Nielsen quarterly thereafter, iMedia's core customer demographic is primarily women who are at least 50 years old, and particularly, women who are at least 65 years old. And in this study it shows how our customer demographic is the only demographic that continues to watch more linear television today than they did five-plus years ago. However, we also believe that within a short two years, the Internet-based video ecosystem Over The Top or OTT or what many are calling today Connected TV or CTV will also be a scaled marketplace to engage large concentrations of our core customer demographic. That is why we acquired Float Left in 2019, a leading OTT SaaS platform. Float Left accelerate iMedia's abilities to launch its own OTT streaming services to engage new customers with its interesting factual content and monetize it efficiently with SVOD, AVOD and/or e-commerce. Float Left also accelerate iMedia's ambitions to one-day offer a single source OTT service to enable advertisers to create, distribute and monetize their own interactive video content. As noted in Nielsen's Q3 2020, the state of traditional TV, viewers who are at least 65 years old watch each day about six hours of linear television compared to only 37 minutes on the Internet Connected TV devices or CTV. Therefore, we are mindful to prioritize our linear television distribution efforts, while aggressively strengthening our streaming and OTT service capabilities for the quickly approaching CTV future. Today, I'm proud to report two recent wins in our linear television arena. First, our new affiliation agreement with RNN, the largest independent broadcast group in the US. As we have previously stated, we want a bigger share of the $10 billion annual revenue marketplace that is TV retailing today, an oligopoly really between QVC HSN and our flagship television network ShopHQ. The additional 20 million high-definition homes we are obtaining in eight of the top 10 US markets, that is New York City, Los Angeles, San Francisco, Philadelphia, Dallas, Washington D.C., Houston and Boston will help us level the playing field against our competition in these markets that matter most. Our affiliation with the RNN HD stations which also have great low channel position next to national broadcast affiliates like ABC, CBS and NBC and which also provides us new carriage in the over-the-air homes in these markets, represent what we believe is a significant catalyst to drive ShopHQ revenue growth beginning in Q3 of this year. Our partnership with Dick French, RNN's founder and media Entrepreneur who built this station group from scratch will be an important collaboration for us, as we navigate future television distribution opportunities. iMedia estimate ShopHQ will experience a revenue lift in these RNN markets that will range from 5% initially to as much as 35% within 18 months based on its previous revenue lift experiences from HD launches in 2016 and 2017. In addition, iMedia believes the consumers' preferences today to watch linear television in the HD channel neighborhood on their cable and satellite systems has only increased since the company's previous HD launches. Our second recent strategic win is Christopher & Banks. Our Hilco partnership to acquire this iconic 50-plus year old brand demonstrates how leading brand managers like Hilco view iMedia as a leading single source partner to help promote and build their consumer brands. Because of this Hilco collaboration and our authentic brand group collaboration with Shaquille O'Neal that we did in 2019, we believe more advertisers and brand managers will realize iMedia is uniquely positioned to leverage its national television promotional power to accelerate a brand's digital and brick-and-mortar retail opportunity, while also providing a compelling customer experience that concludes with iMedia efficiently shipping product directly to the customer from its fulfillment center. In other words, we are becoming a complete single-source partner. And with those two strategic wins now covered, let's delve back into our strong Q1 financial performance. Our operating expenses in Q1 were $48 million, an increase of 17% or $6.9 million, driven primarily by the $5.2 million increase in amortization related to our distribution broadcast rights and channel placement fees, which were not yet successfully negotiated and completed by ShopHQ until Q2 of last year. Regarding our Q1 balance sheet, cash was $14.9 million compared to $16.2 million for the same prior year period. Q1 net debt was $37.8 million, a 10% reduction or improvement when compared to the same prior year period. This net debt reduction is meaningful considering the company also reduced its accounts payable in Q1 by $25 million when compared to the same prior year period. The company also prepared for 2021 revenue growth by increasing its inventory level in Q1 to $75 million, an $11 million increase from the same prior year period. Regarding capital expenditures. During the quarter, we spent approximately $2.1 million on capital projects, primarily reflecting investments and upgrades to our website and infrastructure. Regarding our outlook. For Q2, the company anticipates reporting at least $8 million of adjusted EBITDA and approximately $121 million of revenue, which is roughly a 3% decline in revenue compared to the same prior year period due to the prior year period unusually high revenue performance. For the full year 2021, the company anticipates reporting full year adjusted EBITDA between $35 million and $37 million, which is an approximate $7 million increase from the company's previous guidance. In addition, the company anticipates reporting full year revenue of at least $490 million, which is an 8% full year revenue growth compared to 2020 and is driven primarily by ShopHQ's new 20 million HD homes launching in late June and the growth of Christopher & Banks. As a reminder from a tax perspective, the company has approximately $397 million in federal NOLs that are available to us to offset future taxable income. In closing, I would like to say that these continue to be important times here at iMedia, as we move into our revenue growth stage. Thank you for your time this morning. I will turn the call back over to the operator for Q&A. Operator?

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions]. Our first question today is coming from Tom Forte from D.A. Davidson. Your line is now live.

Great. Congrats on the quarter. So, one question and one follow-up. So you did a great job talking about the comparison of current viewership for your core customer linear TV versus OTT or connected TV. I wanted to know what signs you're seeing of my impression for connected TV is that the conversion rates are lower versus linear television. I wanted to know if that was the case and if you're seeing any signs of improvement in conversion rates for connected TV?

Thanks Tom. So it is interesting. Yes, no, our experience is you're absolutely right. The conversion is lower. And really CTV is dominated by the advertising marketplace e-commerce or that whole arena has yet to really develop in any mature way. As we think about this space, we think about it in three pieces, right? You have the content you have the distribution and then you have the consumer consumption. And the content that we're making today this factual interesting content that we would move into the streaming is something that we do well in categories that we think is very interesting to people whether that's the mining of gold, jewelry, fashion, all these different elements of fact-based interesting content that we can move deeper into as we move into streaming is important, and we call that the content area. Within the distribution, you're right, you've got these devices and then you have these services, services like Xumo, Pluto and trying to find the conversion in these nascent services or in these devices like a Roku that have very fast-growing metrics, but they are not converting as quickly or as certainly as in the numbers that linear TV is. So you're absolutely right that the conversion is lagging. We do think it will catch up, but we don't think it will catch up until the core customer really that we're engaging with 50 and plus begins to adopt it and begins to get comfortable with it in a way that they have and it's taken 30 years to in linear television. And that's where you get to the last part, which is really the consumption. The consumer consumption has to evolve from where it is today in order to drive that conversion rate. And that's where our subsidiary Float Left sits, right? It's in that making those apps in a way that enables the consumer consumption to trust it. To have it personalized. Those are the areas that we think with that experience along with our content and then obviously responding to the format. The format is shorter. The format is different. And those also affect conversion, and those will also have to evolve in order to bring the shorter format up to the conversion rates that the long reformat are currently doing.

Great. And then for my follow-up question, you've done a lot to materially improve your balance sheet. What opportunities do you see today to make further improvements?

Interesting question. Yes. We feel good about our balance sheet today. And certainly, we think that we have the net debt of call in the high 30s compared to the assets we have is certainly lots of boot collateral in our asset base, but I don't think about anything right now other than opportunistically we want to make sure that we're building the right relationships with our vendors and that we're taking advantage of the distribution opportunities as we see them. So, we feel good about where we are right now.

Great. Thanks for taking my question, Tim.

Thanks, Tom.

Thank you. Our next question today is coming from Mark Argento from Lake Street Capital Markets. Your line is now live.

Hi. Good morning Tim. Congrats on a nice quarter. Just wanted to maybe dig in a little on areas that you see performing well, I know you launched a bunch of brands in the quarter. But can you maybe talk through a little bit on maybe some segments and brands that are performing well for you?

Sure thing. Thanks Mark. Yes. So, we've talked about in several releases, 30-plus brands we've launched in the quarter. And that as a pace is much better than last year. And the ones that are working well for us are really several in every category, and I'll kind of walk through some of those. So, certainly in the beauty area, the launch of Contours Rx was a strong performer for us and continues to be, and we're excited about the opportunities there. Within health, Reduce Fat-Fast has been a very high converting product for us as well as the EWheels, and the whole arena of mobility and massage and health and fitness at home, all of those categories with Medic Therapeutics have done really well. Everything from, a foot massagers to the vibrating platforms that we've introduced continue to become more and more in demand. On the jewelry side, jewelry by Jorge Perez has done really well. Sohna 22 Karat Gold Jewelry has done really well. On fashion side, certainly the Burning Man's footwear even Durango footwear as well as the Boots, have done really well for us. So, Meta Activewear, activewear is our introduction to the activewear lines. We think that's going to do even better in the fall, but that has done well this spring. And certainly, we are happy with Christopher & Banks and that launch was in this past month as well. So, there's lots of different pieces. And as we've talked about, Mark and I talked about it on these calls. It's never just one thing, right? It's a multitude of things working at the same time that create the opportunities that we're seeing today. And the brands that we're launching today will begin to mature and yield a higher conversion in the fall. The brands we launched last fall are the ones that are driving a lot of that demand right now. It's that constant building finding the strongest providers and then sharing them forward, that's how we continue to engage the customer. So, that continues to work well for us as does the Bulldog service, Shop Bulldog and ShopHQ Health. All of those specialties as we move deeper into those verticals are also performing well. So we're encouraged not only by the brand introductions that we put across them, but also on the personalities, if you will, of the networks that we have, the balance of ShopHQ, the focus and fun of Shop Bulldog, and the vertical going deeper into the areas of ShopHQ Health. Does that answer your question?

Yes, absolutely. And then just wanted to drill down on the 14% active customer growth, if you can talk through - are these existing customers that you brought back? Are they new customers? And kind of what do you see resonating? Were you able to go in there with specific marketing campaigns and reactivate some customers? How are you achieving that type of active customer growth?

Great question, Mark, and I can tell you slowly, is the only way to go on this. So if you look back at our pattern, from -- starting in May of 2019, and you watch how we've moved every single quarter. As we talked about in 2020, the first thing we had to do among other things was around the merchandising and new brand. But equally important we had to move our merch margin, our gross profit margin up 500 points every single quarter. So, we've got to a place from a business model perspective, we could begin to grow revenue profitably. But as you look back at those trends, each quarter you'll see that the customer file the proxy for health, the 12-month customer file, was in the high-double-digits decline back in early 2019. And as you -- as it started to go down to 15%, and then down to 13%, and then down to 8%. And if you look through 2020, and you watch each and every quarter you're moving, less and less negative. And as I talked about all last year, it's arresting the decline and that arrest really happened in Q4, but it only happened because of all the 1.5 years before that. And now when you see this growth in Q1, again, it's -- it didn't happen suddenly. It was an overnight success. It took 24 months that now you're starting to see that consistent performance driving consistent customer file growth. And when you think about, where that growth came from, certainly, it came from new customers. Certainly, it came from less churn. And certainly, it came from reactivation. We have a history of strong performance in the Beauty, Fashion, Jewelry, the wearables category. And that's where primarily, those reengagements occurred. And when you think about -- so let me stop there. And see if that answers your question Mark.

It's a little of everything a little pot for you there. So yeah, I know that answers it, and then, just one quick follow-up on the carriage deal. The deal you struck with R&N, is that any materially different just structurally than some of the legacy deals that you've done maybe, you can tell us how you're thinking about carriage and kind of the new world order? That's it for me. Thanks.

Yeah. Mark, that's a great question. R&N and I, was hoping I'd get a chance to talk about this. The -- it's a very big deal for us. The HD homes, in these major markets which, we weren't in HD in these markets and some of them just weren't available wasn't that -- even if we could have afforded to pay the cable entrance into it, the bandwidth just wasn't there. So, very important opportunity for us and one that, we've been working on for quite sometime. And happy to, get it across the finish line. And happy to, partner with Dick and Christian on this, effort as we move forward. In terms of the structure of it absolutely similar to what we've been doing, where we have an affiliate fee, service portion and a channel placement portion. From an accounting perspective, we expect the channel placement a portion to relate to about $7 million to $8 million in additional annual amortization of that channel placement fee, which, as you know, the channel placement fee for us is making sure that it remains in the same channel all the time, during the term of the agreement, which is critical, because, as you move channels around the disruption is immense the drop in viewership. And then, you have to rebuild the viewership, before you can rebuild the buying. So, this is a very similar structure of, what we've done in the past. Except the distribution, the HD distribution, the low-channel position, is unique. And at this scale, I just can't emphasize enough, the positive impact, that we feel this is going to create for us, not only in the back half of this year, because these services they mature, right? They start with creating a lift. And that was what I was talking about, with the viewership. So the HD neighborhoods where people more-and-more are just remaining to watch TV, they view it. And they begin to watch it more. And then they engage. And then, they're actively listening and then they're buying. And that maturation process, takes anywhere from 30 days to 18 months. And so, we expect good bids from this.

Thank you.

Thanks Mark.

Thank you. Our next question today is coming from Alex Fuhrman from Craig-Hallum Capital Group. Your line is now live.

Great. Thanks very much for taking my question. And congratulations on a really strong start to the year. Wanted to get a sense of how you feel about the CBK partnership with Christopher & Banks? That was a strong brand doing $100 million e-commerce business fairly recently. Do you think now that, you've had a chance to get more of a look under the hood? Do you feel like the brand is, still resonate? Do you think, the bankruptcy did any damage to the brand? Just curious, as you think about your guidance for the back half of this year, and then, looking two, three years out. How big of a business can Christopher & Banks ultimately be for you?

Thanks Alex. Great question, and we are more excited about Christopher & Banks then we began with. And first, I'll call out that, we have a great partnership with Hilco, great group of folks that understand how to brand build. And yes, Hilco tipped over in January. It was a $300 million business. The brand had been around 50-plus years. And its reason for being was strong, which was it had these unique designs. They made -- and still today we make our own patterns, is their proprietary patterns to fit everything about the brand has a unique reason for being and that's why it resonates so well still now, after closing its 250-plus retail stores. So let's start with where it was, was call it $200 million to $300 million retail enterprise with $100 million digital platform. And we're moving forward with the digital platform that we would be surprised if we can build bigger than that next year. It won't -- that won't happen this year, as we talked about it takes the right amount of time to make sure that we do this the right way. So you've got a digital platform, with a great group of loyal customers that we're building on. We've also reopened already two of their strongest performing stores here in Minnesota, as well as Branson Missouri where there's an outlet. And here in Minnesota and Coon Rapids is where the full price store is. And that opened just this past weekend. So, if you think about the customer and the vendors that we've engaged with that we continue to work with [indiscernible] which is with G3 has done a great job as well as several other key vendors. Those are all moving forward with the employees that we have hired, that have been with the brand for also 15 to 20 years are great from the product development and the merchandising to the marketing and the digital marketing, which is critical to us. So, we are bullish on Christopher & Banks as we talked about earlier in my remarks, we did launch Christopher & Bank on TV and that was a great experience. We have lots of notes on different ways of engaging our customer and their customer. We think -- and when you think about our strategy for growth, we are not going to replicate the large retail footprint. We do believe in the omnichannel experience. But in the brick-and-mortar is a small component. We think that with the television being in 100 million homes with ShopHQ that we'll be able to engage the customers with some of the interactive video as a replacement of the retail, rather than relying on retail to be driving the bus. Clearly, our strategy is digital is driving the bus on the development of this brand and the complement is the brick-and-mortar retail.

Great. That's really helpful, Tim. And then, if I could ask one about, float left. I would imagine that's still a very small business for you, relative to the retail side of your business, but there's been some really impressive national and global brands that float left has been partnering with to design some of their applications. At what point, does that really start to inflect higher and become a really meaningful growth engine that starts to drive the overall results?

Great question, Alex. So, you're correct on everything you said, which is flow left is a small component within our media commerce services inside our emerging business segment. Great management team there and a very strong technology platform, a stack that has a highly customizable approach to working with major entertainment companies, as they produce apps to engage their customers in this space, this connected TV space, OTT space. And so, as we talked about, we're taking our factual content and we are using their expertise to help us build streaming services app in this arena. And their platform isn't as robust as we want it to be yet. And as they would say, they would agree, we want to make sure that we have a robust ad ops component, advertising ops component. Something that -- a technology that can service their clients to make sure, they are also a one stop service partners. So they can deal with the supply side providers, the demand side suppliers and move in a way that they can grow their client which was the -- one of them would be us, their clients business, because it is a new marketplace and it takes an important one stop service in our view to help us navigate more quickly. And so, when you ask about how quickly would that become a material part of our business? I can tell you that, there's two pieces of that. Certainly, the streaming service is going to be -- if you -- there's a business that just recently talked about moving into the streaming services in our programming strategy, which is this factual content. So, there's a company called CuriosityStream started by John Hendricks that started discovery, which again based on factual content. We also believe the factual content that we produce today will be important in streaming services, particularly for those niche services. So we think the float less fat platform as it develops and creates more capabilities like ad operations, as well as the development and distribution of our own streaming services, just is going to together combined create a faster materiality to our financial statements in this connected TV space than just the Float Left services business or just our streaming services. If that helps to answer your question.

That does. Thanks very much, Tim.

Thanks, Alex.

Thanks. Next question is a follow-up from Tom Forte from D.A. Davidson. Your line is now live.

Great. Thanks. One follow-up for me, Tim. Can you talk about the drivers of gross margin in the quarter? And to what extent the improvement is sustainable?

Tom, great question. Yes, I can. So first, the broader question, the answer to the broader question which is ideally we see the gross margin of our business in the 37% range. We don't -- there are occasions based on mix, certainly fashion is a higher gross margin and jewelries of gross -- higher gross margin. And so in Q1, we did have a higher concentration of jewelry within the jewelry and watches. And certainly, fashion is finding its footing again for us. And those created unusually high call it 40% gross margin rate in the quarter. So I would say from a modeling perspective, we think about it back in the 37 range so we can properly scale revenue growth. So this would be an unusually high margin, not one that we are seeking from a business model perspective to replicate every quarter.

Great. Thanks for taking my follow-up question.

Thanks, Tom.

Thank you. We've reached end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you. And we appreciate everybody's time as we always do and we appreciate the questions and we look forward to our next quarter and talking to you again then. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.