UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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ValueVision Media, Inc. (“ValueVision”) is filing with the Securities and Exchange Commission a supplemental investor presentation pertaining to certain matters to be voted upon at ValueVision’s 2014 Annual Meeting of Shareholders scheduled for June 18, 2014.
 SUPPLEMENTAL INVESTOR
PRESENTATION
June 10, 2014
ValueVision Media
(NASDAQ: VVTV) |
 DISCLOSURES
2
SAFE HARBOR
This document contains certain “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements
of historical fact may be deemed forward-looking statements. These statements are based on
management's current expectations and accordingly are subject to uncertainty and changes in
circumstances. Actual results may vary materially from the expectations contained herein due to
various important factors, including (but not limited to): consumer preferences, spending and debt
levels; the general economic and credit environment; interest rates; seasonal variations in consumer
purchasing activities; the ability to achieve the most effective product category mixes to
maximize sales and margin objectives; competitive pressures on sales; pricing and gross sales margins;
the level of cable and satellite distribution for our programming and the associated fees; our
ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom we have contractual relationships, and to successfully manage key
vendor relationships; our ability to manage our operating expenses successfully and our working
capital levels; our ability to remain compliant with our long-term credit facility covenants; our
ability to successfully transition our brand name; the market demand for television station sales; our
management and information systems infrastructure; challenges to our data and information
security; changes in governmental or regulatory requirements; litigation or governmental proceedings
affecting our operations; significant public events that are difficult to predict, or other
significant television-covering events causing an interruption of television coverage or that
directly compete with the viewership of our programming; and our ability to obtain and retain key
executives and employees. More detailed information about those factors is set forth in the Company's
filings with the Securities and Exchange Commission, including the Company's annual report on
Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the
date of this document. The Company is under no obligation (and expressly disclaims any such
obligation) to update or alter its forward-looking statements whether as a result of new information,
future events or otherwise.
Adjusted EBITDA and Adjusted Net Income/(Loss) EBITDA represents
net income (loss) for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The Company defines Adjusted
EBITDA as EBITDA excluding debt extinguishment; non-operating gains (losses); non-cash
impairment charges and write-downs; activist shareholder response costs; and non-cash share-based
compensation expense. The Company defines Adjusted Net Income/(Loss) as net income/(loss) excluding
non-cash impairment charges and write-downs; debt extinguishment; and activist
shareholder response costs. The Company has included the term “Adjusted EBITDA” in our
EBITDA reconciliation in order to adequately assess the operating performance of our television and
Internet businesses and in order to maintain comparability to our analyst's coverage and financial
guidance, when given. Management believes that the terms Adjusted EBITDA and Adjusted Net
Income/(Loss) allow investors to make a more meaningful comparison between our business operating
results over different periods of time with those of other similar companies. In addition,
management uses Adjusted EBITDA as a metric to evaluate operating performance under the Company’s
management and executive incentive compensation programs. Adjusted EBITDA and Adjusted Net
Income/(Loss) should not be construed as alternatives to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with
generally accepted accounting principles and should not be construed as measures of liquidity.
Adjusted EBITDA and Adjusted Net Income/(Loss) may not be comparable to similarly entitled
measures reported by other companies. The Company has included a reconciliation of Adjusted
EBITDA to net income (loss) in the Appendix of this document.
IMPORTANT INFORMATION This document may be
deemed to be solicitation material in respect of the solicitation of proxies from shareholders in connection with one or more meetings of the Company's shareholders,
including the Company’s 2014 Annual Meeting of Shareholders. On May 9, 2014, the Company filed
with the SEC a proxy statement and a WHITE proxy card in connection with the Company’s
2014 Annual Meeting of Shareholders. The Company, its directors and certain of its executive officers
and employees may be deemed to be participants in the solicitation of proxies from shareholders
in connection with the Company’s 2014 Annual Meeting of Shareholders. Information concerning the interests of these directors and executive officers in connection with the
matters to be voted on at the Company’s 2014 Annual Meeting of Shareholders is included in the
proxy statement filed by the Company with the SEC in connection with such meeting. In addition,
the Company files annual, quarterly and special reports, proxy and information statements, and other
information with the SEC. The proxy statement for the 2014 Annual Meeting of Shareholders is
available, and any other relevant documents and any other material filed with the SEC concerning the Company will be, when filed, available, free of charge at the SEC website at
http://www.sec.gov. SHAREHOLDERS ARE URGED TO READ CAREFULLY THE PROXY STATEMENT FILED BY THE COMPANY
AND ANY OTHER RELEVANT DOCUMENTS FILED WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION, INCLUDING INFORMATION WITH RESPECT TO PARTICIPANTS.
|
 FIVE
YEAR TRACK RECORD OF ACCOMPLISHMENTS
Strategy to drive continued sales growth with lower average selling prices via an
enhanced and diversified product offering continues to leverage fixed
operating expenses and deliver improved earnings and shareholder value
Recapitalized the business
Cleaned up the balance sheet
Raised liquidity
Hired and built an experienced team
Improved the quality and reach of the Company’s TV
distribution footprint while significantly reducing its cost
Improved customer service
Reduced average selling price by nearly 50%, which has
in turn increased customer base by reaching a broader
customer demographic
Grew customer base to 1.4 million from 754,000 in 2008
Improved channel positioning
3
The turnaround of ValueVision since it almost went bankrupt in 2008 has been
developed and implemented by essentially an entirely new Board and Management
team Shifted product mix:
8 consecutive quarters of revenue growth and positive
Adjusted EBITDA
Developed powerful Internet and Mobile access, leading
the industry in sales penetration and growing Internet
and Mobile sales by over 10% annually
Your Management and Board delivered significant
shareholder value with shares up 840%+ since Keith
Stewart was appointed CEO
Shareholder value creation has been superior to
broadcast retail peer group in the past eight quarters with
shares up 165%+ since Q2 2012
Results of Management’s Strategy
Note: Share Performance as of close June 9, 2014.
Jewelry & Watch sales reduced 17%
Beauty, Health & Fitness sales increased over 200%
Fashion & Accessories sales increased over 70% |
 8
QUARTERS OF PERFORMANCE ACCELERATION UNDERSCORES MANAGEMENT’S ABILITY TO
REALIZE VALUEVISION’S FULL POTENTIAL
Strong KPI performance across critical business fundamentals underscores
management’s progress 4
VVTV
169.4%
QVC
65.2%
HSN
36.9%
S&P
Retail Index
43.6%
Russell 2000
46.2%
Note: Share Performance as of close June 9, 2014.
During this period, TTM revenue grew by 17.0% and Adj. EBITDA margin expanded by
3.36% Net Units Shipped (mm)
U.S. Households (mm)
Return Rate
Average Selling Price
Transaction Costs / Unit
Distribution Cost / Household
$99
$78
TTM Q2 2012
TTM Q1 2014
$2.84
$2.50
TTM Q2 2012
TTM Q1 2014
$1.35
$1.09
TTM Q2 2012
TTM Q1 2014
Share Performance
(50%)
–
50%
100%
150%
200%
250%
300%
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
81.4
86.7
TTM Q2 2012
TTM Q1 2014
5
8
22%
22%
TTM Q2 2012
TTM Q1 2014
TTM Q2 2012
TTM Q1 2014
VVTV
HSN
QVC
Russell 2000
S&P Retail Select Industry Index
KPI Improvement From TTM Q2 2012 – TTM Q1 2014
|
 Board
members fully embrace their responsibility to advance shareholder interests and avail their full breadth of experiences and
resources for the benefit of the Company
Lowell W.
Robinson
(2014)
Landel C.
Hobbs
(2014)
Jill R. Botway
(2013)
William F.
Evans
(2011)
Sean F. Orr
(2011)
Keith R.
Stewart
(2009)
Randy S.
Ronning
(2009)
John D. Buck
(2004)
Years of
Media /
Retail /
Technology
Operating
Experience
•
20 years of
media
experience
and 30 years
of finance
expertise
•
25 years in
media and
marketing on
traditional and
digital
platforms
•
20 years in
technology
•
3 years in
media and
retail
•
25 years of
consumer
retail, media,
finance and
operations
experience
•
23 years of
media,
consumer,
retail and
operations
•
37 years of
retail,
consumer,
media and
operational
experience
•
Over 30 years
in consumer
retail
Benefit to
ValueVision
•
Shares his
extensive
public
company
and Internet,
media,
consumer
and retail
industry
experience
•
Offers
extensive
media and
operational
leadership
experience,
distribution
operation
strategy, and
relevant
industry
relationships
•
In addition to
her media
expertise, Ms.
Botway adds
value with her
ecommerce
background
as well as her
experience as
an attorney
•
Chairs the
audit
committee
•
Offers insight
on a broad
range of
matters,
financial
management,
accounting
and otherwise
•
Chairs the
finance
committee
and is critical
to matters on
capital
structure and
financing
•
Mr. Orr is a
CPA with a
distinguished
career
•
Brings
extensive
executive
retail,
operations,
product
sourcing and
e-commerce
experience
•
Chairs the
compensation
committee
•
Provides
extensive
senior
executive
level
experience at
two major
retailing
companies
•
Chairs the
governance
committee
•
Provides his
extensive
board and
VVTV
experience, as
well as retail
and
operational
experience
BOARD REGULARLY REFRESHED WITH
RELEVANT AND EXPERIENCED ADDITIONS TO
DRIVE VALUE FOR SHAREHOLDERS
5
With
decades
of
retailing,
media
and
operational
experience,
the
Board
is
well
suited
to
shape
and
assess
ValueVision's
competitive strategy and position the Company for continued success
•
35 years of
retail,
consumer,
media,
finance and
operations
experience
•
Independent Chairman provides greater oversight of CEO and management
•
The Board has an average tenure of 3.5 years, which is actively managed relative to
the needs of the Company and enables management to effectively adapt to the
evolving competitive landscape |
 VALUEVISION’S DIRECTORS BRING STRONG
OVERSIGHT AND ACCOUNTABILITY
6
•
The Board reviews and approves sales, operating expenses, and capital expenditure
targets in accordance with our budget and 5-year plan
•
Engaged
and
structured
process
for
annual
review
of
compensation
for
CEO
and
management
Annual Budget
Process
ValueVision Directors are Committed to Shareholder Value Creation Through
Accountability Governance
•
The Board participates in weekly, monthly, and quarterly business updates
regarding operating and financial metrics that are key to budget
expectations Self Assessment
•
The Board undergoes an annual assessment process to explore efficacy, talent,
diversity of each committee, and the Board as a whole
•
This self assessment leads us to seek new candidates to enhance the Board’s
quality, diversity, and ability to deliver shareholder value
Develop 5-Year
Strategic Plan
•
The
Board
works
each
year
with
management
to
set
and
implement
a
5-year
plan
No bonuses awarded for
fiscal year 2011 or 2012
Share Performance
Note: Share Performance as of close June 9, 2014.
(200%)
–
200%
400%
600%
800%
1,000%
1,200%
1,400%
1,600%
1,800%
09
Sep-
-10
Jan-
Sep-
May-
Jan-
Sep-
Apr-
Jan-
09
May
11
11
12
13
13
14
VVTV
HSN
Russell 2000
S&P Retail Select Industry Index |
 VALUEVISION IS OPEN TO EXPANDING OUR
BOARD BUT STRONGLY DISAGREES WITH ISS’
ASSESSMENT OF CLINTON GROUP’S STRATEGY
Clinton has provided minimal detail on value-add strategy and would commit
ValueVision to a first 90 days that we believe could do lasting damage to
your investment 7
Concerns Regarding
Clinton Group’s
90-Day “Plan”
•
We
believe
Clinton
Group’s
poorly
conceived
ninety-day
“plan”
lacks
substance,
demonstrates
little
strategic
insight
and
no
internal assessment of the Company and fails to account for the costs and risks of
their proposed changes, and, in fact, could derail the Company’s
ongoing momentum •
In our view, many of Clinton Group’s proposed changes, such as a
merchandising location in NYC, 24/7 live programming, celebrity-driven
sales, etc., with no consideration to costs associated with these initiatives, present a highly unrealistic view
on how to enhance value for shareholders
•
Management has been, and remains, open to ideas from all of our shareholders,
though believes material investments in these
strategies
at
this
time
would
not
be
a
prudent
use
of
our
shareholders’
capital
Concerns Regarding
Clinton Group’s
Marketing “Strategy”
•
We believe the marketing tactics proposed by the Clinton Group are not a
comprehensive business strategy •
Management maintains a forward perspective to continue our recent acceleration and
routinely evaluates a broad range of tactics to engage customers and drive
sales, including those identified by Clinton Group In our view, shareholders
should have serious concerns about Clinton Group’s nominees and strategy for the Company
–
Proposed “changes”
such as the use of live programming are already a part of the Company’s
business execution when the potential benefits of such remote broadcast are
a logical investment relative to the cost of such investments. Similarly, the
Company has already considered establishing a permanent merchandising presence in
NYC. Finally, we evaluate celebrity relationships
in
terms
of
premium
cost
to
be
paid
to
a
celebrity
relative
to
the
potential
sales
to
be
generated
from
such a
relationship
–
We believe they reflect an idealistic portrayal of sales generation without
consideration for the significant costs of implementation and the risk of
negatively impacting the Company’s current trajectory –
Live events and celebrity-driven events are among a suite of marketing
alternatives that Management routinely evaluates on a net economic impact
basis –
ValueVision already has a large and growing portfolio of more than a dozen
proprietary brands, which have been representing an increasing percentage
of the Company’s sales –
As ValueVision continues to grow in scale, profitability and resources, the
Company will continue to evaluate a broad suite of marketing tactics,
customer engagement technologies, fulfilment capabilities and other initiatives |
 Focused
on delivering long-term
sustainable growth
•
Broader product offering, lower average price point and
improved channel positioning attracts new customers
•
Increasing purchase frequency drives higher count of
retained customers
–
Mobile, iPad / Tablet
Apps
–
Social Media
–
Interactive Webcasts
–
Contests & Promotions
Grow Customer
Base, Purchase
Frequency and
Retention
Be A Watch &
Shop Anytime,
Anywhere
Experience
VALUEVISION HAS A CLEARLY ARTICULATED
MULTI-POINT STRATEGY…
Prudent and thoughtful implementation of this strategy has positioned ValueVision
for future growth 8
Significant Progress
Achieved?
Four Key Growth Strategies
•
Improved channel positioning and adjacencies in
strategic markets through the addition of second
channels and lower channel positions
•
Drive profitability with growing sales to leverage our
fixed cost base
Expand and
Optimize TV
Distribution
Platform
•
Increased investment in emerging product categories
and proprietary brands complemented by a broad
array of national and luxury brands
Broaden &
Diversify
Product Offering
•
Multichannel Engagement
–
Internet
TV Promotions
–
Brand Power
–
Live Streaming on Internet
& Mobile Platforms |
 …AND RECENT MOMENTUM
HAS AFFORDED VALUEVISION
THE OPPORTUNITY TO GO ON THE OFFENSIVE
These
accomplishments
lay
the
groundwork
for
your
Management
and
Board
to
pursue
new
strategies
previously
out
of
reach
for
the
Company
9
•
Diversification into emerging categories of Fashion, Beauty and Home has reduced
Jewelry and Watches sales mix from 56% of total sales in 2008 to 43% of
total sales in 2013 •
Revenue
from
proprietary
brands
have
increased
65%
over
the
past
two
years.
Proprietary
brands
now represent 25% of total merchandise sales
•
Introduced
99
new
concepts
launched
and
over
25,000
new
items
and
established
relationships
with
over 250 new suppliers over the past 12 months
•
Presented
13
remote
broadcasts
over
the
past
12
months
including
remotes
from
Tucson
Gem
Show, Las Vegas, Cabo San Lucas and Florida
•
Second channel presence in over 78% of total distribution footprint compared to
only 17% in 2008 •
Broadcasting in the HD space in over 7 million homes
•
Since the beginning of 2013 the Company has moved approximately 10 million homes
from a primary channel position above channel 50 to a primary channel
position below channel 50 •
Key
industry
benchmark
of
Net
Promoter
Score
(NPS)
has
increased
from
36%
NPS
in
2011
to
54%
NPS in 2013.
•
Company is investing in leading edge Order Capture software solutions (Genesys
Echopass) and CRM technology (Salesforce) to improve transaction processing
efficiency and enhance the customer experience. Implementation will
occur in early 2015. •
Broken ground on expansion of Bowling Green Kentucky Distribution Center more than
doubling footprint from 267,000 to over 600,000 square feet
•
Implementing leading edge Warehouse Management System software from Manhattan
Associates along with material handling systems
•
When fully operational in 2015, these developments will enhance customer
experience and will significant improve transaction costs and shipping
expense Management’s Key
Growth Strategy
Continues to Deliver
Exceptional
Shareholder
Returns
Programming
Content
Improved Quality
of TV Distribution
Platform
Warehouse
Distribution
Center Expansion
Improved
Customer
Experience |
 Total
Customers Average Price
Point
Average Purchase
Frequency
Total Revenue
VALUEVISION’S DIRECTORS ARE COMMITTED TO
DRIVING SHAREHOLDER VALUE
10
Five key infrastructure investments are intended to provide scale, drive sales and
enhance profitability over the next 18 months:
1.
Bowling Green Expansion
2.
Warehouse Management System by Manhattan Associates
3.
Update Contact Center Technology with a Cloud-Based Interactive Voice Response
System 4.
Client Relationship Management System by Salesforce
5.
Web Site Upgrade |
 APPENDIX
11 |
 SUMMARY ADJUSTED EBITDA
RECONCILIATION
a) EBITDA as defined for this statistical presentation represents net
income (loss) from continuing operations for the respective periods excluding depreciation and amortization expense,
interest income (expense) and income taxes. The Company defines Adjusted EBITDA as
EBITDA excluding debt extinguishment; non-operating gains (losses); non-cash impairment charges
and write-downs; activist shareholder response costs; and non-cash
share-based compensation expense. Management has included the term
EBITDA, as adjusted, in its EBITDA reconciliation in order to adequately assess the operating performance of the Company's television and Internet
businesses and in order to maintain comparability to its analyst's coverage and
financial guidance. Management believes that EBITDA, as adjusted, allows investors to make a more
meaningful comparison between our business operating results over different periods
of time with those of other similar small cap, higher growth companies. In addition, management uses
EBITDA, as adjusted, as a metric measure to evaluate operating performance under
its management and executive incentive compensation programs. EBITDA, as adjusted, should not be
construed as an alternative to operating income (loss) or to cash flows from
operating activities as determined in accordance with GAAP and should not be construed as a measure of liquidity.
EBITDA,
as
adjusted,
may
not
be
comparable
to
similarly
entitled
measures
reported
by
other
companies.
($ 000s)
F08
F09
F10
F11
F12
F13
F14
FY
FY
FY
FY
FY*
FY
Q1
EBITDA, as adjusted
(51,421)
$
(19,411)
$
2,351
$
996
$
b
4,494
$
18,012
$
5,513
$
Less:
FCC license impairment
(8,832)
(11,111)
Writedown of Auction Rate Securities
(11,072)
Gain (loss) on sale of investments or asset
(969)
3,628
100
CEO Transition Cost
(2,681)
(1,932)
-
Debt Extinguishment
-
-
(1,235)
(25,679)
(500)
Activist Shareholder Response Costs
-
-
-
-
(2,133)
(1,045)
Restructuring costs and other non-recurring items
(4,299)
(2,303)
(1,130)
-
-
-
Non-cash share-based compensation
(3,928)
(3,205)
(3,350)
(5,007)
(3,257)
(3,218)
(1,044)
EBITDA (as defined) (a)
(83,202)
(23,223)
(3,364)
(29,690)
(10,274)
12,662
3,424
A reconciliation of EBITDA to net income (loss) is as follows:
EBITDA, as defined
(83,202)
(23,223)
(3,364)
(29,690)
(10,274)
12,662
3,424
Adjustments:
Depreciation and amortization
(17,297)
(14,320)
(13,337)
(12,827)
(13,423)
(12,585)
(2,372)
Interest income
2,739
382
51
64
11
18
-
Interest expense
-
(4,928)
(9,795)
(5,527)
(3,970)
(1,437)
(391)
Income taxes
(33)
91
577
(84)
(21)
(1,173)
(201)
Net income (loss)
(97,793)
$
(41,998)
$
(25,868)
$
(48,064)
$
(27,676)
$
(2,515)
$
460
$
*Includes 14th week/53rd week
12 |