Felise Glantz Kissell - Vice President, Investor Relations Mindy Grossman - Chief Executive Officer & Director Judy Schmeling - Chief Operating Officer, Chief Financial Officer & President of Cornerstone Brands.

Tom Forte - Maxim Group LLC Neely J. N. Tamminga - Piper Jaffray & Co. (Broker) Eric J. Sheridan - UBS Securities LLC Anthony C. Lebiedzinski - Sidoti & Co. LLC Chase White - FBR Capital Markets & Co. Alex Joseph Fuhrman - Craig-Hallum Capital Group LLC Victor Anthony - Axiom Capital Management, Inc. Matthew J. Harrigan - Wunderlich Securities, Inc..

Ladies and gentlemen, good morning, and welcome to the HSN, Inc. Second Quarter 2016 Earnings Conference Call and Webcast. This call is being recorded. Following the conclusion of today's discussion, the HSNi team will be taking your questions.

With that, I would now like to turn the call over to Felise Glantz Kissell, Vice President of Investor Relations. Ms. Kissell, please go ahead..

Good morning, everyone. And thank you for joining us. On this morning's call, we have Mindy Grossman, Chief Executive Officer of HSNi, and Judy Schmeling, Chief Operating Officer and Chief Financial Officer and as of today appointed President of Cornerstone. Mindy is going to first say a few words followed by Judy's review of our financial performance.

Mindy will then strategically discuss the business. As always, some of the statements made on this call may be forward-looking and as such are subject to many factors that could cause actual results to differ materially from expectations reflected in the forward-looking statements.

Additional information regarding these factors, as well as various risks and uncertainties, can be found in HSNi's earnings release filed with the U.S. Securities and Exchange Commission and available on the company's website. HSNi does not undertake to publicly update or revise any forward-looking statements.

In addition, on today's call, there will be references to certain non-GAAP financial measures. These are described in more detail on the company's earnings release and SEC filings available on the HSNi website.

You are encouraged to refer to the press release and SEC filings and to review the reconciliation of these GAAP – non-GAAP financial measures to the most directly comparable GAAP results. I would now like to turn the call over to Mindy Grossman, HSNi's CEO.

Mindy?.

Good morning, everyone, and thank you for joining us on today's call. Before Judy reviews our financial performance for the second quarter, I wanted to take a minute to discuss the announcement we made earlier today, regarding Judy's appointment as President of Cornerstone.

Judy has been an integral business partner and friend to me and so many others across the broader management team over the years and I'm thrilled that she'll be taking on the strategically important role, in addition to remaining COO of HSNi.

As you know, Judy is a seasoned executive with extensive financial and operational expertise and over 20 years of experience across all areas of our business.

During her tenure, she has contributed significantly to HSNi's growth and development from the advancement of our innovative and patented technology such as Shop by Remote to the implementation of our operational centers of excellence across the organization, and the expansion of our experiential retail operations and distribution platforms.

As we continue to take steps to optimize the business and drive long-term sustainable growth, I have complete confidence that Judy will continue to play a pivotal role in helping us further advance our business strategy and deliver value for our stakeholders. Judy will remain CFO of HSNi until a successor is appointed.

We expect this to occur over the next several months following a formal external CFO search that we have initiated. Please join me in congratulating Judy. And I'll now turn the call over to her to discuss the quarter in detail..

Thank you so much, Mindy, and to our board of directors for their belief in my ability to lead the Cornerstone Brands business unit. I am absolutely thrilled to be taking on the role of President of Cornerstone Brands in addition to retaining my responsibility as COO of HSNi.

While our current financial results for the Cornerstone business are disappointing, it is my belief that our strong brand identities, superior products, and talented teams, we will overcome these challenges in the future and drive long-term success for our customers, our employees and our shareholders.

I do believe that I am in the unique position of both understanding the business as well as having strong relationships with the brand presidents and senior leaders across the portfolio to immediately hit the ground running. I look forward to reporting back to you on our ongoing process.

Now, putting back my HSNi CFO hat on, let's turn to reviewing our second quarter results. At HSNi, we exerted disciplined operating expense management in light of lower sales demand. HSNi sales decreased 4% in the second quarter with digital sales up 2%.

Gross profit was down 150 basis points with operating expenses excluding non-cash charges, decreasing $17 million or 7%. Adjusted EPS was $0.74 compared to $0.81 a year ago. As part of our strategic review of the Cornerstone portfolio, we entered into a letter of intent to sell our TravelSmith and Chasing Fireflies brands.

As a result, we recorded a non-cash asset impairment charge of $20 million or $0.24 per share. Diluted EPS was $0.50 versus $0.78 in the prior year. I will discuss TravelSmith and Chasing Fireflies in more detail in a moment. At HSN, sales decreased 3% to $557 million.

Sales grew in electronics and beauty, offset by decreases in other category, most notably, business and infomercial related products. Shipping and handling revenues decrease as we implemented more aggressive and strategic shipping and handling incentives, particularly in apparel and accessories.

Approximately, one-third of the sales decline was related to the discontinuation of our Keith Urban infomercial. Digital sales grew 5% with digital penetration increasing 330 basis points to 44%. HSN's return rate improved 60 basis points with units shipped and average price point down 2%.

Gross profit decreased 6% at HSN to $197 million with gross profit margin down 120 basis points to 35.4%, primarily due to an increase in shipping promotions and higher inventory reserves. Also, in the second quarter last year, as you'll recall, we benefited from favorable settlements of vendor claims.

Adjusted operating expenses decreased 7% to $131 million and improved 120 basis points as a percentage of sales to 23.5% excluding non-cash charges and a $3 million severance related charge in the prior year. This improvement was driven by lower employee related costs, bad debt expense, and media spend.

Including non-cash and severance charges, operating expenses decreased 9% to $142 million. As a result of the factors that I just outlined, adjusted EBITDA decreased 3% in the second quarter to $66 million. Operating income, which includes the $3 million severance related charge in the prior year, increased 3% to $55 million.

At HSN, we remain focused on improving our top-line. In addition to the merchandising strategies that Mindy will be discussing in a moment, we are accelerating our targeted customer acquisition efforts. We expect to continue to experience margin pressure in the near-term as we address excess inventory in certain categories.

Simultaneously, we will be prudently managing operating expenses. Before turning to Cornerstone, I want to provide an update on our latest distribution initiatives at HSN.

We continue to expand our presence in the over-the-top environment, most recently by utilizing our excessive content and patented Shop by Remote technology to create a new channel application that just launched on the Roku platform, HSN Beauty.

This platform combines our entertaining and educational content with the ease of ordering on Shop by Remote to create a frictionless commerce experience. Roku also carries channels for HSN, HSN2, HSN Electronics. While sales from the over-the-top environment are currently limited, we are positioned well for the future in this rapidly emerging space.

As Cornerstone, as I mentioned, we've committed to selling TravelSmith and Chasing Fireflies, two of our apparel brands, allowing us to exclusively focus on improving the performance of our strategic brands. We entered into a non-binding letter of intent and expect this transaction to close in the third quarter.

The assets and liabilities for the two brands were classified as held-for-sale and measured at their fair value less the estimated cost to sell the brands. As a result, we recorded a non-cash asset impairment charge of $20 million.

For a point of reference, the 2015 sales for Chasing Fireflies and TravelSmith combined were $100 million and the pre-tax operating loss for two brands, excluding asset impairment charges and certain fixed costs, which will partially be reabsorbed by Cornerstone following the sale, was approximately $5 million.

In the second quarter, Cornerstone sales were down 5% to $297 million, primarily from lower sales at Frontgate and Ballard Designs related to less demand in the outdoor segment as well as weakness in apparel at TravelSmith. We deliberately reduced catalog circulation by 6%, which also impacted sales.

Digital sales decreased 2% at Cornerstone with penetration increasing 200 basis points to 69%. We're pleased with the performance at Garnet Hill and Grandin Road, which demonstrated solid sales growth in the second quarter. Gross profit at Cornerstone decreased 10% to $115 million.

Gross profit margin decreased 200 basis points to 38.6% largely from lower products and shipping margins driven by higher promotional activity, particularly in the home brands which have been impacted by a highly competitive and promotional marketplace.

In addition, our actions to move certain entities in inventory, including outdoor, contributed to the decline.

Adjusted operating expenses excluding non-cash charges and the asset impairment charge of $20 million decreased 6% to $99 million and improved 40 basis points as a percentage of sales to 33.2%, primarily reflecting lower catalog advertising costs as we tightly managed circulation with sales demand.

Including non-cash and asset impairment charges, operating expenses increased 12% to $124 million. Cornerstone's adjusted EBITDA was $16 million, a decrease of $6 million from the prior year. Operating loss, which includes the non-cash asset impairment charge of $20 million, was $9 million compared to operating income of $17 million in the prior year.

Although, we expect to continue to see near-term pressure due to the lower demand in the outdoor category, our management team is focused on improving our performance at Cornerstone, which includes accelerating product development efforts as well as infusing newness and offering expanded product assortments.

We are also adjusting our marketing strategies including catalog circulation, digital marketing, as well as our value proposition. At HSNi, our second quarter effective tax rate was 37.4%, virtually unchanged from the prior year. We currently have 2.8 million shares remaining under our existing share repurchase program.

This year, we have purchased 233,000 shares to-date. As we have previously articulated, the principal purpose of the current 4 million share repurchase program is to offset dilution related to our equity compensation programs. We will be opportunistic and take advantage of market conditions as appropriate.

Our board also just approved a quarterly cash dividend of $0.35 per share payable September 22 to shareholders of record as of September 7.

In summary, we're committed to improving our financial performance particularly to drive top-line growth and margin expansion, while simultaneously executing on our strategic initiatives that leverage our unique position in retail commerce.

We're undertaking these strategies while confronting near-term consumer mindshare headwinds that included uncertain political environment, media events such as the Summer Olympics, as well as the competitive retail landscape. We are tightly managing expenses while repositioning the business as we focus on returning HSNi to a growth trajectory.

Mindy will now review our strategies to achieve this goal..

at Frontgate, recognizing the continued softness of the outdoor segment, we are expanding on the success of the interiors business by introducing a collection of interior offerings as part of our grand living lifestyle that combines luxury with innovation, exemplifying designer solutions throughout the home with our greatest expansion coming next month.

At Ballard, our Design Discovery series will be featuring author and editor Eddie Ross. Capitalizing on Ballard's extensive partnerships, the brand is currently showcased in the Traditional Home Hampton Showhouse. Ballard is also expanding its customization services as a core differentiator at retail and online.

As we have articulated, we believe that creating compelling and unique destinations for our brands will allow us to maximize our business across all distribution platforms and be both a significant marketing and sales vehicle. Each brand is unique, as is the specific strategy for expansion.

In addition to the eminent opening of our Tysons Corner Ballard Designs studio and planned expansion throughout 2017, we're finalizing select opportunities to showcase Frontgate as part of our experiential retail strategy. Our prototype, Frontgate Experience, will open in the second quarter of 2017 outside of Dallas.

At Garnet Hill, we have launched the Garnet Hill Mobile Boutique, an engaging brand experience that serves as both a marketing and sales platform. The transportable boutique is open in New Hampshire, which is the home to Garnet Hill, and will be traveling to the South Street Seaport in New York City.

We're also continuing to see success with our seasonal store in Bridgehampton.

And, announce today, in September, Grandin Road will take its first step into experience-driven retailing to an innovative collaboration with Macy's at Herald Square in New York City that will bring an exciting seasonal retail pop-up location to life, Macy's first Halloween concept shop, a definite must see.

This 1,400 square foot Grandin Road Halloween Haven pop-up will immediately greet customers as they enter the store's 7th Avenue entrance.

With two retail windows and four interactive vignettes, this will be a unique and unparalleled experience from September through Halloween and serve as a great marketing vehicle for Grandin Road in what is already a key market.

In summary, we believe that our emphasis on focused execution combines with our strong talent, brands, proprietary products, innovative platform expansion, and extensive content unique to HSNi will position us to take advantage of our growth opportunities.

But once again I'd like to congratulate Judy in her new leadership role at Cornerstone, and I also want to reiterate how thrilled I am that Fiona Dias has just joined our board, given her unique skills and deep digital experience.

With Fiona's addition, women now comprise half of our board and certainly having diverse group of leaders around the table is linked to long-term business success. We look forward to working with Fiona and the board, along with our stakeholders to capitalize on our unique position in retail commerce. Thank you. We will now take your call..

Thank you. Our first question comes from the line of Tom Forte from Maxim Group. Your line is now open..

Great. Thank you. So, first off, congratulations to Judy, I'm very excited..

Thank you..

Second, and maybe it's too early to ask you this question, so now that you've decided to shed Chasing Fireflies and TravelSmith, do you feel like the portfolio is where you wanted or are further adjustments in order? And then it looks like you're accelerating your, call it, physical store effort for your brands.

How should we think about the impact on your P&L from that effort? Thanks..

Sure, Tom. Definitely, I would say that I'm very new into the role, but in terms of the brands that we have, we did decide to really focus primarily on the home brands in addition to Garnet Hill, which has done a remarkable turnaround job and has a unique place in the market. So, at this point in time, we don't see any future change.

Of course, once I get in there and really determine, that could always change our approach. But I think our first focus is really trying to return the business back to a growth trajectory and really look at all of those opportunities by continuing to look at our proprietary product development, as I mentioned on the call.

Looking at our retail experiences that you mentioned, we don't have a set number of retail locations that we're looking to expand, but what we have found with a few Ballard stores that we have is it really brings an increased sales to those markets as well as a further brand awareness and so we're trying that also with Garnet Hill, as you know we opened a Bridgehampton store last year in the summer, great brand recognition.

We're very excited about the opportunity with a pop-up shop to be able to again to drive that brand business. And it's not a lot of investment from that perspective. As we rollout more stores, certainly, if we decide to increase that level of store rollout, we will be informing the group in terms of CapEx.

But the incremental P&L is positive, except for opening up startup costs of the first store. So....

Great. Thank you very much..

Thank you. Our next question comes from the line of Neely Tamminga from Piper Jaffray..

Great. Thanks. Hey, Judy, congratulations, completely deserved and I too echo the board and Mindy's accolades here, watching your career over the years. I think you are in a really cool and very unique position, though, given your kind of ability to see cross-functional and then also being kind of a chief capital keeper of the company.

So could you share with us maybe some of your early approach as to how you're going to maybe manage the Cornerstone business differently than it's been managed in the past? Thank you..

Sure. Great question. And you're right. I have seen what has worked and what hasn't worked over the timeframe and I am in a unique position because I know some of the team members here really well and I have looked at it from a CFO vision and a different eye. I would say that my approach first is going to be really work with the team leaders.

I think that they have a lot of thoughts on what their issues and opportunities are.

And one of the things that I think I can do best which is what I've demonstrated here in my current role is really galvanize the team around the core strategies, eliminate roadblocks for them and really focus on the big rocks that are going to have a substantial impact on the business.

And so, I am going to be visiting the brands starting August 15, hitting the ground running on our strategic planning process. But I think that there is a lot of opportunity here. We can continue to really maximize our digital experience from a consumer standpoint. I'm very passionate about that. I think the HSN people will also tell you that as well.

And really question and just determine how we are spending our dollars, whether it's on marketing or capital or whatever it is, I think I bring a different skill set to this team and we'll be very complementary (35:54) with each other..

And I have to say that the response from the organization has been overwhelmingly positive to have Judy as a partner in this role, so we are thrilled..

Thanks for that, Mindy, and congratulations, Judy. We're going to really enjoy watching the next era for Cornerstone. Thank you..

Thank you..

Thank you. Our next question comes from the line of Eric Sheridan from UBS. Your line is now open..

Thanks so much, and congrats also, Judy, look forward to seeing how it progresses going forward with Cornerstone. Maybe one big picture question and just one clarification if I can.

Bigger picture, for Mindy, you cited macro, you cited competition and some of the things you are dealing with in the business as we moved through most of the first half of this year.

I want to understand a little bit better how those pressures might be evolving as you move from Q1 into Q2 and now into Q3, what you're doing just to sort of offset those and how we should be thinking about those impacting the business model as we moved out of the first half and into the second half of the year.

And then maybe a clarification, I think you called out the annualized revenue of the brands that are under the letter of agreement. I wanted to know if you'd also be willing to call out the EBIT or EBITDA impact from those brands. Thanks so much, guys..

Great question. So let me talk about two things. One, what we're seeing in consumer behavior of what we think it is happening externally and then what we're really trying to do within our brands to ensure that if the consumer is going to spend that we will get a piece of that pie.

I would say that what's happening right now in terms of the uncertainty, the distraction, the negativity, that's an anathema to the consumer mindset and for retail in general, especially the want side of retail versus the need. And they will wait for what they want versus need.

So I think across HSNi, we really have to focus on the experience, on the uniqueness and really delivering compelling content wherever the consumers are to drive that commerce.

And those are the strategies we have in place which is I talked about newness and variety in the pipeline, the more content that we are putting on additional platforms, the more opportunities for our brands to be exposed. That has to be our maniacal focus because, over the next few months, I don't see that consumer distraction, as you will, abating.

So we really have to focus on where we can be differentiated..

And for your follow-up question, the EBIT, the pre-tax loss was $5 million..

Thanks so much for the color..

Thank you. Our next question comes from the line of Anthony Lebiedzinski from Sidoti & Co. Your line is now open..

Yes, good morning. And let me add my congratulations as well to Judy.

So, a couple questions, you did mention – I think actually it was Mindy, that mentioned near-term margin pressures and, just to clarify, is that at both at HSN and Cornerstone, and also what you're seeing from just an overall demand perspective? And my follow up question as far as the divested brands, can you give us a run rate for the first half of this year in terms of sales and EBIT? Thank you..

So, I would say where we will see pressure, as I mentioned before, is in that outdoor segment as we get through just the balance of the season and inventory until all our interior drops occurred. And then in select categories at HSN where we're still cleaning up on terms of the inventory.

Where we're seeing strength is in beauty, electronics, this is specifically HSN, culinary and certain design and improvements with health and wellness. Where we are still challenged is really more on the equipment side of fitness and the infomercial category.

We're seeing it this time of year, less launch, less media spend because of the high cost of dollars spend. And less innovation, obviously, occurs during election year. But it's been somewhat more pronounced. So we're obviously focusing on the categories that are performing. And then the business such as Garnet Hill, which has been pretty consistent..

Got it. Thank you..

And regarding your question on the first half sales for those two brands, it was approximately $30 million..

Okay.

And what was the EBIT drag from that?.

I don't think that we release that yet, so let me find out. And I will let you know..

Thank you..

Thank you. Our next question comes from the line of Barton Crockett from FBR Capital Markets. Your line is now open..

Hey, guys. Chase White stepping in for Barton Crockett today. Thanks for taking the call. First question is do you guys have any thoughts on how the Olympics might impact your 3Q 2016 TV shopping segment, especially given that it is in the same time zone this year? And then I have a follow-up..

Yeah. We always take that into consideration certainly and any time there is a shift in kind of media viewing, we know that it can have specific programming disruptions, particularly certain very high profile elements.

I think the combination of that and as we're seeing a lot of increases in the whole new genre with the election, we know it is going to have some impact to key programming, but we try and program against that and anticipate. And we launch more digital campaigns..

Got you. That's helpful. And then second one, I had an unfortunate question that I hate to have to ask but investors have been concerned about it.

So, has the string of recent horrific tragedies across the world, which has obviously driven increases in news viewership, have you guys seen any impact from that at all and do you think that would continue if so?.

You know, sadly when in the immediacy of something or an event like that happening, yes, of course we see it, because that's when the customer migrates to the news channels. I would say at a very high level, it goes back to my earlier comment that any time there's uncertainty and distraction and negativity and I would hate to use the word fear.

And I'm not just talking for our business, I'm just talking in general obviously, that's not a good thing. You know, what we try and do is give our consumers meaning, we have a philosophy, there's never any bad news on HSN. And what we try and do is really just focus on our customer and try and be a respite for her and give her a great experience..

Gotcha. Thanks guys..

Thank you. Our next question comes from the line of Alex Fuhrman from Craig-Hallum Capital. Your line is now open..

Great, thank you for taking my questions. And I will certainly add my congratulations for Judy.

Would love to ask about the big July birthday month, are there any big learnings, both in terms of just how business trended all in general for such a big, important month for HSN? And then as you kind of think about the holiday season coming up, are there any particular items or categories or brands that get you excited that were launched during the birthday period that could be key as you think about the holiday season this year?.

Yeah, well we weren't down. So as I mentioned before, we definitely had strength in certain categories but pressures in others. I continue to be pleased with the beauty business. It's obviously a key business for us. We are having very good success, actually we have a program on Beauty Report tonight all around the doctors and innovation and brands.

I'm also – we're also focused in the health and wellness category, digital health particularly with Fitbit, preventative, digital spa, I think those you're really going to see emerging. And then the areas of connected home, as well, for going into the fourth quarter and some of the electronic categories.

And then expansion of our, let's call it, organization automotive and home solutions, et cetera and then our vitamin business. Again, but it's got to be balanced with some of the areas. I mentioned before, we've seen improvement in jewelry and productivity and profitability, but knowing that is not a real strong category externally.

I think we're really going to focus on the fine jewelry business and manage it really well. And then we're enthused with apparel and accessories. But our big really fall emphasis and where that business becomes stronger, it doesn't really launch until a little later in this month. So that's basically what we've been seeing..

That's really helpful. Thank you very much..

Thank you. Our next question comes from the line of Victor Anthony from Axiom Capital. Your line is now open..

Thank you, thank you. And Judy, I will tell you congratulations as well. So a quick question at Cornerstone, it's a $1 billion revenue business; thin margins, but most retail businesses are. So maybe I'll ask the question this way.

Is you assuming the role a precursor to some sort of value enhancing transaction in the feature?.

Well, I'm taking this role to really create value for all of our shareholders. So you know my goal is to really turn the business back to a growth trajectory. And with all the different things that I outlined earlier, obviously I am still a CFO and I think in certain ways, but I think that I'm also front facing as well.

And so, again we will do and grow the business and maximize value for shareholders, absolutely..

Okay. Okay. Second, how has your customer base evolved over the past probably two years, given – has it skewed younger, given mobile has become a bigger part of the mix? This is on HSN. And given that you've leveraged social media, you called out Facebook Live, I'm not sure if you're doing anything on Periscope, maybe Messenger.

I'm just curious if your customer base has skewed younger, or as well, maybe if there's any sort of shift away from more of the affluent regions like Long Island to more lower – less-affluent regions in the country?.

Okay. We have not seen any shift in the region. I mean we still have very strong market, which reflects both income and population. It's interesting at HSN, you understand it's a 40-year-old brand and as we said, we have an incredible commitment from our loyal customers.

But to your point, our mobile customers are most affluent, are youngest and most diverse.

So the key for us is to keep driving customer acquisition through digital and mobile in these younger segments, or even segments with the psychographics that look like our existing customers with a younger demographic, while we keep our existing customer base, which is also very important.

But hence that's why all our acquisition strategies are around mobile and digital. And to your point, we are leveraging a tremendous amount of live streaming. So for example, in September, we are live again from New York with Serena Williams, but we are taking the streaming event one step further.

It's September 18, so it's streaming across all our digital mobile platform, as well as other digital media outlets. And then we're also going to stream that feed on the TV screens, but what I'm excited about is there's the shoppable video experience for online viewers for the first time, which will be a virtual reality experience.

And you'll be able to feel like you're there with or without a headset. And as I mentioned before, the Facebook Live, just the ones we've done have been successful. So you'll see us escalating our efforts there..

Fair enough. Just one last question on the sources of the gross margin pressure. I know you called out shipping, the product mix, high inventory reserves.

Maybe you could just unpacked that for me in terms of which one had the greatest impact and which one will going forward?.

Sure. I would say on the HSN side, shipping, handling had the highest impact. We specifically did that in certain areas of our business to A; be more competitive, but to also ensure that we were limiting any additional inventory overhang going forward.

We do have already, as I mentioned, some excess inventory that continues to be moved, so our goal there is to continue to try and limit that on a go forward basis, any additional buildup, if you will.

On the Cornerstone side, I'd say it was both a mixture of promotional price and shipping, really because the teams were actively managing down the inventory-related to the four outdoor seasons..

Okay. Thank you very much..

Thank you. Our next question comes from the line of Matthew Harrigan from Wunderlich Securities. Your line is now open..

Thank you. There's been a lot of emphasis at NAB and some other conferences on adapting programming for short form into mobile devices, really on the part of original content and on the part of advertising as well. I mean, that's a real established wheelhouse for you.

Do you see yourselves going even more in that direction? I mean that's a behavioral change, particularly for younger people but of course that gradually seemingly disseminates to the upper age ranges as well over time..

Yes, Matthew, as a matter of fact, we have released quite a number of those short form, almost DR (51:43) minimercials that are demonstrable. We've done it with the great pineapple cutter.

We've done it with cookware, with Wolfgang Puck, and actually we are reallocating resources in content to be able to do more of those coming up through digital feeds. And we do think that is part of our distributed commerce strategy that you will see more of..

Got it. Thanks, Mindy. Congratulations, Judy..

Thank you..

Thank you. There appears to be no further questions. I will now turn the call back over to Ms. Grossman..

Okay. Thank you, everyone. Congrats once again to Judy, and we look forward to keeping you up on our progress. Thank you..

Ladies and gentlemen, thank you for participating in today's conference call. This does conclude the program, and you may all disconnect. Everyone, have a great day..