Greetings, and welcome to the iMedia Brands Second Quarter 2021 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 like to turn the conference over to your host, Mr. Monty Wageman, Chief Financial Officer for iMedia Brands. Please go ahead, sir.

Good morning, everyone, and thank you for joining. This is Monty Wageman, iMedia Brands' Chief Financial Officer. We issued our Q2 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 September 7, 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. We believe the expectations reflected in our forward-looking statements are reasonable, but give no assurance such expectations or any of the 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. Please refer to our earnings release for further information about these measures, including reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to the CEO of iMedia Brands, Tim Peterman. Tim?

Thank you, Monty, and good morning, everyone. Thank you for joining. Q2 was another strong quarter for us. We navigated through a logistics challenge related to COVID-19. We ignited three catalysts to accelerate shareholder growth, one in each of our three business strategies: TV networks, consumer brands and digital services. We grew our customer file again. In fact, July was the 10th month in a row. We improved our gross margin to 42.3%, a 510 basis point improvement over the same prior year period. We significantly strengthened our balance sheet. And despite the logistics bumps and bruises we endured in Q2 that challenged our revenue, we exceeded our profitability expectations that we communicated to investors during our Q1 earnings call. Strategically, our individual successes within our TV networks, consumer brands and digital services, are collectively accelerating our company's time line to becoming the leading single-source partner to consumer brands and advertisers seeking to entertain and transact with customers using interactive video. Now let's walk through these Q2 highlights in a bit more detail. Q2 net sales were $113.4 million, a decrease of 9% compared to the same prior year period and about $5 million lower than we had expected for the quarter. As many retailers are enduring, for the first time, we experienced material shipping delays for several of our most productive products, from our fashion favorites like Kate & Mallory and Indigo Thread; to health favorites like our air purifiers and laser pain massagers; to our seasonal home favorites, like quantum vacuums and Colston air fryers. Inventory receipts were consistently delayed. Fortunately, our entrepreneurial culture pivoted quickly reprogramming our calendar with on-hand inventory that was often higher margin, but lower productivity. Thus, the results you see for the quarter, our gross margin dollar and rate growth despite reduction in net sales. For example, several of our 34 new product launches during the quarter received more airtime than originally estimated, like Dr. Sevinor skin care, which is based on Dr. Sevinor's 40 years of experience performing plastic surgery and is a proprietary collection of quick and easy beauty treatments for women and men to use in the comfort of their own home. Jewels by Jorge Perez, which is a collection that showcases Jorge's artistic talent for creating colorful and unique designs infused with a vibrant Cuban heritage. And last but certainly not least, our very owned Christopher and Banks, which debuted in Q2. These shows focus on putting hair first, providing our customers with style, value and service that help her look fabulous and feel amazing for every day and for life's special moments. The good news is, although we expect continued congestion at the domestic ports on a smaller scale going forward, we have already adjusted our programming calendars accordingly. Also good news, our year-to-date KPIs are strong. Year-to-date net sales were $226.6 million, which was a 3% growth compared to the same prior year period and the strongest year-over-year net sales growth in the Company's first two fiscal quarters in seven years. And year-to-date, adjusted EBITDA was $16.4 million, a $7.3 million increase or 80% improvement over the same prior year period and the highest Q2 year-to-date adjusted EBITDA in the Company's history. Now let's talk about our Q2 strategic catalysts. First, our acquisition of Synacor's portal and advertising business segment, which is the catalyst for our digital services strategy and is truly the foundation of iMedia's overall digital strategy, which is best explained in my mind with a simple formula. Synacor's video advertising platform, plus iMedia's first-party purchasing data from ShopHQ, plus Float Left's best-in-class OTT app, equals a truly differentiated video advertising platform. A good example of a competitor to our strategy would be Walmart's advertising platform. Walmart Connect, that utilizes its first-party purchasing data to help better serve its advertisers seeking to reach better targeted audiences. We have renamed our advertising business, iMedia Digital Services or iMDS. And I'm proud to announce it is already a leading video advertising platform that monetizes over 200 million monthly users for its online publishers by utilizing its proprietary technologies and its interactive video services to drive engagement, traffic and conversion. We expect iMDS will generate at least $45 million in profitable revenues over these next 12 months. Very soon, our plan is that iMDS will also offer our advertisers tailored first-party customer shopping data from retail, catalog and e-commerce that will enable us to efficiently deliver publishers targeted demographics and conversion at real scale. Today, major advertisers use iMDS' comprehensive suite of video, header bidding display technology and search in mobile and desktop to eliminate cost, maximize yield and create exposure to new demand sources. Our advertising products names are S2S Bidder, Reflex and Search. We also offer our advertisers and publishers an optional best-in-class value-added engagement platform, which is a managed online and OTT digital start page that managed online and OTT digital start page that enables our advertisers and publishers to provide their end users a compelling video-centric website/portal/app, depending on the platform, for original content, news and entertainment, e-mail, identity management, identity protection and TV Everywhere. iMDS creates and host these fully managed interactive video experiences across all technology platforms, specializing in desktop, mobile, OTT and CTV apps. Our next catalyst, Christopher & Banks, or CBK, is the central driver in our consumer brand strategy and is the first real example of how iMedia is being positioned in the marketplace already as being the best single-source partner to drive growth using interactive video. In this case, Hilco is our partner, and I'd like to give more context on this opportunity that Hilco and iMedia are so excited about capturing. CBK was a publicly held specialty retailer, featuring exclusively designed privately branded apparel targeting plus-size women who were 55-plus years old. CBK operated 450 retail stores in 44 states as well as its website. However, CBK filed for Chapter 11 bankruptcy on January 14, 2021, and its primary lender, Hilco, purchased it. To really size the opportunity, let's look at its history. For 2019, CBK posted about $350 million in revenue, of which about $80 million was e-commerce sales. For 2020, CBK posted about $200 million in revenue and about $100 million of that was e-commerce sales. So that was the opportunity that Hilco was thinking about. Hilco carefully evaluated its best path from doing it itself, to partner with other folks and it concluded that iMedia, with its national television promotional platforms, expertise in fashion merchandising, proprietary e-commerce capabilities, including web and mobile customer service, 3PL capabilities and financing products, was the best choice for them for a single-source partner to relaunch its CBK brand. iMedia's growth strategy for CBK centers on its ability to create live CBK-branded television experiences on ShopHQ to engage CBK customers who may miss the live demonstration that they used to enjoy within the bricks-and-mortar experience. Our short-term goal is clear and that is to recapture quickly the $100 million in digital sales from prior year, and I am pleased to report that our progress to date has been meaningful. Our second catalyst, RNN's new 20 million homes that launched on June 28 is a central driver in our TV network strategy. As you may recall, these were 20-plus million high-definition homes across New York City, Los Angeles, San Francisco, Philadelphia, Dallas, Washington, D.C., Houston and Boston, which will help us level the playing field against our competition in these markets that matter most. Today, our revenue lift in these markets is consistent with our already communicated expectations, and we are very pleased. Now back to walking through our Q2 KPIs. Our operating expenses in Q2 were $50 million, an increase of 15% or $6.5 million, driven primarily by new merchandising and marketing-related costs and additional transaction and integration costs for CBK and an increase in amortization related to our broadcast solution rates. Regarding our balance sheet, total unrestricted cash was $20.9 million compared to $15.5 million at prior year year-end. On June 14, we closed on a common stock equity raise, generating proceeds of $40.3 million, net of discounts, commissions and other offering costs. Then on July 30, we closed on an expanded $108.5 million debt refinancing facility to replace our previous facility with P&C. Regarding capital expenditures, during the quarter, we spent approximately $3.1 million on capital projects, primarily reflecting investments and upgrades to our websites, infrastructure and facilities. Regarding our outlook for Q3, we anticipate reporting at least $9 million of adjusted EBITDA and approximately $127 million in net sales, which is roughly a 17% growth in net sales compared to the same prior year period. For the full year 2021, we anticipate reporting full year adjusted EBITDA between $37 million and $40 million, which is an increase from our previous guidance of between $35 million and $37 million. In addition, we anticipate reporting full year net sales of at least $502 million, which is an approximate 11% full year net sales growth compared to 2020. 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 are important times here at iMedia as we accelerate our growth in building shareholder value. Thank you for your time this morning. I will turn the call back over to the operator for Q&A. Operator?

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first comes from the line of Tom Forte with D.A. Davidson. Please proceed with your question.

Great. Tim and Monty, I have one short-term question and one long-term question. I'll start with the short-term one. Tim, you and I have been following the industry for a long time, how can we put in historical context, the supply chain challenges? Is it the toughest to spend in the last 24 months ever, how do you think about it? And what gives you confidence you can navigate the challenges over the next 12 months? And then after that, I have a longer-term question.

Thanks Tom. It's great question, right? If I had a crystal ball, I could say that for sure, the -- it's probably the most challenging I've seen in ever, right? Because it is just the way that's just cresting now, right? So it's been building -- people talked about the logistics challenges. And so did we last year, as the pandemic slowed virtually all areas, but that was just a little ripple as the way it was headed to shore, and it was really focused or contained within the consumer electronics and some of the more ordinary products that you would think would be affected by these types of logistics issues. However, now the -- as we move into Q1 and Q2, it's a combination of container shortages for these direct imports as well as big backups at the port to the local ports, whether that's East or West Coast. Now the container shortages have lightened up a bit, and the ports are getting a little bit better on the congestion, but it's still there. Now so I would say that if you ask my view today, and then I'll give you that view every quarter, I would say that I think Q2 was depressed and then we're going to start to see this dissipate in Q3 and Q4. And so there will be some challenges, but it won't be as acute -- at least as broadly speaking in from a product category, we looked at -- it was in fashion, it was in beauty, it was virtually in every category. So that's what I think will dissipate and move behind us. But it's here for at least a year, in my view. It will take -- it took a year to build. It will take a year to get back to normal. And so, from an organizational perspective, from a programming perspective, we've implemented several different countermeasures from making sure that the product was in-house, at least three weeks in-dock before. And even getting to port, which used to be a point of reference for products being available to calendar, is no longer reliable because of the congestion. So just different programming policies that we put in place, has helped alleviate the short-term pressure, and that's how we're planning Q3 and Q4.

Right. So then the longer-term question and I'll get back in the queue for maybe a couple more follow-ups. Is that you did a wonderful job explaining your advertising efforts? How should we think about how that could potentially positively impact your long-term gross margin and then therefore, your long-term EBITDA margin?

Great question again. I think there's two catch to our gross margin. As you know, we worked hard throughout 2020 to improve our gross margins by 500 basis points. And as I talked about getting to the 37%, 38% was where we could scale revenue. And that's for TV retailing, and that has -- we've demonstrated that. But as you point out, certainly in the consumer brands with CBK and certainly with our new advertising video advertising platform, our acquisition of Synacor's portal and advertising business those margins are higher. So as those businesses scale, you will see our gross margin move. And you've seen some evidence of it in Q1 and Q2, but I think it's going to move into more of the -- from a modeling perspective, if you want to think about our enterprise margin, it would be in the 39% to 40% by next year is our view.

Our next question comes from the line of Eric Wold with B. Riley Securities. Please proceed with your question.

A couple of questions. I guess, one, first off, kind of following on the last question is around the port issues. It sounds like, obviously, you're making some programming changes, making sure the inventory is in hand, et cetera. But with gross margins in the ShopHQ segment well above target levels for now the second consecutive quarter, does it make sense at all to try to expedite airfreight do some things around that to get the desired products in hand to drive further customer growth? Or is that just not an option at this point?

Thanks for the question, Eric. And yes, that's the age question, right? If I had to -- if I could look back 2020, I'd say that I could have taken less margin and perfectly brought those in. It's a constant question we wrestle with, particularly for jewelry, we can do that and we do do that. For some of the bigger items like fashion, they were stuck in containers, and they were stuck in a route where we didn't really have that option. So where we where it wasn't caught up in route we took advantage of it. And then the other side of that is that when, we put the existing fronts we have on hand, as we talked about, rather talk about in my prepared remarks, some of it was already higher margin and we knew would be less productive. And so, that balance is something that we're used to doing as we did all last year. So when we looked at the overall impact we want -- it was a balance of what do we know we have in-house, what do we know that will resonate with the customers, have a strong margin? What can we air in and from a category perspective in the quarter? And then again, what do we have to brace for impact on in terms of what we won't get in fashion? And what we won't get in home? What we won't get in, even in some cases, watches? So it was a blended rate that, at the end of the day, allowed us to make sure, from an EPS and net income and margin perspective, we delivered on what we promised. And we feel good about it. I mean we feel -- it wasn't like it happened all at once, it was like one of those things that kept really. This happened again really on that? And so, as we move through it, we reacted pretty quickly.

Got it. And then second question, you mentioned obviously quite banks going along well. Maybe give us some kind of details around kind of what you've done so far? How have you exploited or targeted their customer list, they came along with kind of what's next on the calendar? And what would you be disappointed at if that didn't generate X amount of revenue this year? And how much could that go next year?

Great question, Eric. The -- so when we think about CBK, the first and foremost is the customers call it, over 1.5 million 12-month customers when we began the journey and what we've been doing to reengage those customers. And it's a multipronged effort. First and foremost, we're reaching out from an e-mail perspective and reengaging them to bring them back with new products, discounts because as you might recall, in the last six months of last year, they weren't really introducing new products. So making sure that we have the new products to engage them when they come is first and foremost. And first step in the spring was making sure we kept all the vendors that some of them were in the bankruptcy and engaged with them, and they've together with our team created an amazing fall season and brought in some goods for the spring to help us with this reengagement process we're talking about. So first and foremost, it was on e-mail. We've also, as you think about a retailer, have many of our customers that don't have e-mail addresses. And so we old-fashioned, reengaged them with post cards, and that has been tremendously successful. So we bring them -- we mail them a postcard. We say that we missed them and we do it by strata within the customer file, and we do it monthly, and those have been very productive. And then on the television side, so you think about e-mail, you think about the post cards and then you think about our television, our television began -- the monthly rotation is what we're doing for this brand. So in fashion, you can have static programming that happens every week. But then when you have a distinct brand, like One World, for example, Christopher & Banks, we rotate them in monthly. And when a brand starts it starts to, call it, three to four hours. And the first rotation for CBK was in April, and it was good. There were some learnings. We were -- sizing was different. There were all these different things that we wanted to try to make sure we were doing right by the customer, and we -- and some of the art of TV retail and we didn't pay enough attention to. So in May and June, the on-air presentation was much improved. The new products that we bought were much improved. It's really taken off on the television side and something that we're very excited about in the fall to rebuild that customer file. So you have those three pieces. And then we have stood up the two of the bigger, more productive retail stores because we do believe in omni-channel. It's just we don't believe in retail -- brick-and-mortar retail driving the bus. We believe television and digital drives the bus, but it's a complement on the physical retail side. And Philip Branson, Missouri and here in Minnesota, both of those stores were up and engaged. And the customers are on the social platform are very happy to have that store back. And so that's really the fourth side. And then as we think about engaging customers in digital, we've talked about Salesforce.com, which is a way for us to virtually style out different customers as they as they think about what they want to buy from us, and that's something that is planned for fall. So it's a multipronged approach to get back to 1.5 million into the 12-month file. And I would be disappointed if we didn't reach that 100 million next year. And I would be disappointed in digital sales. I would be disappointed if you think about it, we should have, in the first full year, reached half of that. So we started in March, so you can do the math. It is a meaningful growth catalyst for us and something that we're already seeing great success with.

Our next question comes from the line of Mark Argento with Lake Street Capital Markets. Please proceed with your question.

Just a couple of quick ones. Just wanted to look at Synacor a little bit and better understand the integration process. And you walked through the whole iMedia Digital Services, but maybe just talk about how close you're going to stitch the Synacor assets together with some of the other digital assets that you currently have and kind of your level thinking there?

Thanks Mark. Great question. Yes, it is -- when you think about the team and the culture that we acquired with this business, which I know well, since call it 5, 6, more like 8, 9, 10 years ago. But let me first just by saying the team that is our new business called iMedia Digital Services that is the construct of Synacor's portal and advertising business is very strong. So you have -- I'll mention them by name, Ron, Matt, Bill and Gabor is the leadership team there, and they've been there for quite some time. And so when you think about what they've done so far and what the ambition is, there's not really a stitching together of this iMedia Digital Services with our other digital. I would say that this video asset platform that we have today is the foundation of our iMedia digital strategy. So they are driving forward with a platform that will utilize our -- really our -- what we call our first-party customer data. As you think about the ecosystem of digital advertising and the third-party cookies going away and the tracking going away, the idea of this video asset platform, having real first-party data for them is a distinguished -- differentiation for them in the marketplace. And so we're going to take their skills and their culture of gritty entrepreneurial development, and we're going to provide them with a couple of our assets and those assets being Float Left, which is our OTT app business that we bought back in 2019. If you think about some value-added services that iMDS provides today, they're an advertising platform, primarily an interactive video. But they provide their clients, particularly the MVPDs and the ISPs, what we call video engagement portals or website in the online world. And that's really what Float Left does on the OTT side. Left does on the OTT side. So complementing the video asset platform today with our first-party customer data and the Float Left OTT app is the Float Left OTT app is a faster in this marketplace. And so, integration isn't really the right way to think about it. We're enabling them with a few key pieces of technology and data to make them grow faster as a standalone. So it's an exciting time. I think that we're just getting started here, and you'll hear more about our efforts each and every quarter. It's foundational for us.

Great. And then just in terms of the guidance, the old guide, $490 million on the top line going to $502 million. So -- and I think you said $45 million in revenues kind of next 12 months, and so you could just straight line it and you take 40% of that this year, maybe 45%, whatever the math works out to be. Just -- it's probably another $16 million, $17 million in contribution this year, I'm guessing. And the delta being the overall iMedia business, you expect to be down a little bit, just given the logistics relative to kind of where it was before. Is that kind of the put and take there? Or just fill me a little bit on the guide?

Yes, absolutely, Mark. Great question. And it's like the duck on the pond as well as swimming under there. So, think about it this way. We guided to a full year $490 million at the end of Q1. And then now we're guiding to a full year of $502 million . And as we talked about, the guide we were short on the revenue side of guidance, call it, $4 million. And so, if you think about our increase of $12 million in the back half of the year, Q3 and Q4, primarily driven by iMDS, you can think about that as $16 million being added because we're making up the gap in the logistics. We're starting to get all that product in now in Q3. So we do think that productivity from the receipts that were coming in from -- that didn't come in Q2 coming in, in Q3 will drive obviously productivity and then the acquisition of the portal and that team will drive revenue as well. So that combined $16 million is how you should think about what we're adding to the forecast for Q3 and Q4.

Our next question comes from the line of Alex Furman with Craig Hallum Capital Group. Please proceed with your question.

Tim, do you mind just building on what you were just talking about your outlook for the third and the fourth quarter. Can you give us a sense of what's kind of baked into the forecast in terms of availability of inventory as you get closer to the holiday season? I mean it sounds like from what you were just describing, you're not anticipating any sort of pickups or anything in the third or the fourth quarter. Can you just give us a sense of how much visibility you have at this point into your ability to be well-stocked for the holiday?

Eric, great question. Again, I'll have to pick up my mic. I'm sorry, Alex. I had to take out my crystal ball here. So what do we know and what do we think, right? We know what we can control and what do we think about the logistics situation. I'd call that the unknown or the headwind is really this logistics. And so we know we've taken care of it from a programming perspective and an inventory on hand perspective. We think that from that perspective, it's baked in as a -- not a material distraction from the revenue performance that you see in the guidance. So there is some hesitancy that we baked into the guidance because of the congestion, but it's not meaningful. So we are with the view that the Q2 logistics was depressed and it would be moving down along with our remediations that we've done internally. We're not going to face the kind of tumult on the revenue side that we did in Q2. So that's the first issue. Then when you think about the tailwinds as you move into Q3 and Q4, there's several. There's really three that are new that really weren't there last year. So the first, obviously, is the RNN HD carriage that we have in Q3 and Q4 that we recently launched. As that matures, that growth -- that incremental growth will get higher. And so as we move into Q3 and Q4, that's a tailwind. And we baked some of that in, obviously, very conservatively in our revenue numbers. The second catalyst is Christopher & Banks. Obviously, not your last fall. And even in the spring from a performance perspective, we didn't have new inventory. We didn't really have inventory per se. So we developed a great fall season. We've also introduced accessories for the balance of the product, which will be, we think even more engaging for the customers. So that's a tailwind moving into Q3 and Q4. And our new acquisition, which is the iMedia digital services there, that is a tailwind for sure. Obviously, not here last fall. So when you think about on balance our guidance for the back half, we have baked in some optimism from the tailwinds I just described and some concern considering the logistics issue. So it's a balance. We feel good about it. It's -- as we've always talked about, my goal with all IR communication is to beat expectations. So, we think about that too when we provide guidance.

[Operator Instructions] Our next question is a follow-up from Tom Forte with D.A. Davidson. Please proceed with your question.

So let's go short term, long term again. So on a short-term basis, Tim, historically, the Olympics are often challenging for TV retail. How, if any, do you think it impacted you this year?

Great question, Tom. I don't know that really is going to be impactful to us. It certainly is a distraction. I think world events and things like that are bigger distraction. So I think the NFL football could kick off is a bigger distraction where we have to deploy a counter programming. But our strategy is the same and probably the same in most cases, is how good can you counter program against those? So for example, on the NFL Sunday kickoff, we have great Invicta NFL watch is a big deal for us, right? And you would think naturally, wait let's put that on a Sunday NFL, right? And we put it on Monday because it's going to -- everybody -- all our fans are going to be watching the football. So it's -- and then on that Sunday, we would have great beauty brands like Isomers or Consult. We have jewelry. Any of the really female-dominated categories is where we would go. So with the Olympics, it isn't that cut and dry, right, because it's very mixed in terms of demographics as who watches it. But that's our strategy. That's how we would approach it. But looking at historically, it hasn't -- unless there's some acute events on the Olympics, it hasn't been as painful as some of the examples I just said.

Excellent. All right. So then last one, long term. So with the adjustments you've made to your asset portfolio, do you think you have everything in place to execute your full vision? Or are there more potentially complementary or other assets you'd like to add?

Great question. Again, Tom, as always. The -- I'd like to think about it this way. We have three primary strategies. We have television networks or TV networks. We have consumer brands, and we have digital services. That has been our offensive plan since I came back in the middle of '19. And that will -- and that is all we need to execute our strategy to become the leading single-source partner to advertisers and consumer brands who are seeking to use interactive video to drive growth. And that's really what I want to make sure I'm clear, on the river that runs through it is the interactive video. So, if you think about examples of single source providers out there today similar to what we're moving, you can think of a Shopify, you can think of a Squarespace. And there an e-com based self-serve single source provider to consumers. We are still B2B in providing advertisers and consumer brands. And again, the differentiated quality here with us is that interactive video is something that we really think we do well and that as the central driver supported by a thriving TV networks, a thriving consumer brand, and a thriving digital services just accelerates our path, but you won't see anything outside of those three strategies from us going forward. We have our offense on the field and that's what we're executing against.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Peterman for any final comments.

Thank you. And just, again, thank everybody for their time and their trust. We appreciate it. And as I like to end it is, these are exciting time at iMedia, and we look forward to talking again soon.

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