Felise Glantz Kissell - Senior Vice President of Investor Relations and Strategy Mindy Grossman - Chief Executive Officer Judy Schmeling - Chief Financial Officer and Chief Operating Officer.

Eric Sheridan - UBS Thomas Forte - Brean Capital LLC Neely Tamminga - Piper Jaffray Jason Bazinet - Citigroup Global Markets Alex Fuhrman - Craig-Hallum Capital Group LLC Trisha Dill - Wells Fargo Securities, LLC Barton Crockett - FBR Capital Markets Anthony Lebiedzinski - Sidoti & Company Matthew Harrigan - Wunderlich Securities Inc.

Benjamin Mogil - Stifel, Nicolaus & Company.

Ladies and gentlemen, good morning, and welcome to the HSN Inc. First Quarter 2015 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'd 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. Judy will first review 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.

Also on today's call, there'll be references to certain non-GAAP financial measures. These are described in more detail in 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 non-GAAP financial measures to the most directly comparable GAAP results. I would now turn the call over to Judy Schmeling, HSNi’s COO and CFO.

Judy?.

Thanks, Felise. Good morning and thank you for joining us. As we embarked in 2015, we remain highly committed from differentiating HSNi of the content trends and immersive commerce destination.

The strategic focus combine with our efforts to financial discipline resulted in strong results for the first quarter that include sales growth of 8%, with digital sales up 12%, gross profit dollars higher by 9%, adjusted EBITDA increased 22% and adjusted earnings per share growth of 26%. At HSN, we had excellent performance in the first quarter.

Sales grew 10% to $600 million with digital sales growth of 18% and digital penetration increasing 280 basis points to 41%. All categories aside from jewelry reported growth in the quarter led by apparel and accessories, home and electronics and health.

Our direct-response television marketing campaign featuring Keith Urban also contributed to our sales results. Excluding the Keith Urban direct-response business, sales increased 8%. HSN’s units shipped increased 8% and average price point grew 2%.

Leveraging data analytics and customer insights contributed to customers spending more with us and purchasing additional items. Return rates improved 60 basis points primarily driven by product mix. Gross profit increased 9% to $208 million.

Gross profit margin decreased 40 basis points to 34.6% largely due to an increase in inventory reserves as well as the impact of clearance activity primarily in jewelry. We do expect that jewelry will be pressured in the near term as we continue to take actions to reposition this business.

Our immediate strategies in jewelry include evaluating and refining our product assortment as well as leveraging our new destination programming concepts that Mindy will speak to shortly.

Operating expense leverage, excluding non-cash charges, improved 60 basis points to 23.5% as a result of higher sales leverage over fixed operating expenses and included cost for media spend for our direct-response television marketing efforts.

Driven by the factors that I just reviewed, HSN’s adjusted EBITDA grew 12% to $66 million in the first quarter. Turning to Cornerstone, sales increased 4% to $241 million, with digital penetration increasing 60 basis points to 68%, driven by sales growth in every home brand, particularly at Frontgate.

Sales in our apparel businesses were down for the quarter, although we continue to see sequential improvement in Garnet Hill, despite a strategic reduction in circulation.

Gross profit at Cornerstone increased 9% to $93 million and gross profit margin improved 180 basis points to 38.4% largely due to higher product margins from reduced promotional activity and strategic pricing strategies, particularly at Garnet Hill and Ballard Designs.

Driven primarily by improved catalog productivity, operating expenses as a percent of net sales excluding non-cash charges gained 90 basis points to 35.4%. As a result of Cornerstone’s dramatically improve performance in the first quarter, adjusted EBITDA increased $6.4 million to $7 million, with Garnet Hill the largest contributor to this success.

Ballard Designs and Frontgate also had notable EBITDA growth. We are extremely pleased with the progress made within the Cornerstone portfolio, recognizing that we still have the important summer months ahead of us, particularly related to outdoor part of a home brands.

At HSNi, our first quarter effective tax rate was 37% compared to 40% for the same period last year, primarily due to the non-deductibility of the CPSC settlement in the prior year. Excluding the impact of this item, our effective tax rate would have remained unchanged than the prior year.

As previously announced, we initiated the next phase of our shareholder return plan that included a new 4 million share repurchase program, of which we repurchased 270,000 shares through yesterday’s close.

In summary, we will continue to pursue opportunities to leverage our unique position and commerce that will enable us to drive long-term growth, profitability and shareholder value. I will now turn the call over to Mindy for a strategic review of the business..

Thank you, Judy, and good morning everyone. Our performance in the first quarter reflects the continued execution of our customer strategy and our ability to leverage data analytics to both great personal connection and drive commerce.

It also reinforces the experiential power of our content, our capacity to effectively create engagement across our platforms and the appeal of our unique product assortment. During the first quarter, HSNi had sales growth of 8% and EBITDA growth of 22%.

Once again, accelerated performance in digital was a key factor in our growth momentum, with digital up 12%, representing half of our total business. Mobile grew 31% for the quarter, with penetration at 18% of total sales and 36% digital sales.

Our performance was propelled by the result of HSN, which included sales growth of 10% and EBITDA growth of 12%. The Cornerstone portfolio demonstrated tremendous improvement in the quarter.

Sales grew 4% with EBITDA growing exponentially, driven by solid results across the majority of the portfolio, led by strong performance at Garnet Hill, Frontgate and Ballard Designs. At HSN, we had our second consecutive quarter of double-digit sales growth, with strong performance across nearly all categories.

Digital sales continued to be exceptional, growing 18% over the prior year. Our strategic customer initiatives enable us to start the year in a much stronger position than in the same period last year. Our active customer file was up 6% to over 5.3 million, a growth rate we haven’t seen since I joined the company nine years ago.

All customer buying segments demonstrated very strong growth, with the highest increase from new or reactivated customers and best customers. This illustrates how effectively we are bringing more new customers into the HSN experience and moving them along a path of increased loyalty and engagement.

And HSN customers are very pleased with their experiences. Forrester Research just ranked us second only to Amazon in terms of customer satisfaction, with an exceptionally high ratio of positive experiences. We are tracking more customers who are spending more with us and purchasing more items.

Our simulation rate continues to accelerate reflecting our ability to stimulate new customers to repurchase in their first 90 days. Best customers purchasing in the quarter increased 10%, with our HSN credit card program contributing to the success. Sales placed on the HSN credit card increased 22%, with significant growth coming from digital.

Active cardholders were up 15% to 1.2 million. During the quarter, digital sales represented 41% of HSN’s business, up 280 basis points from last year. Our digital commerce efforts continue to focus on four key priorities. First, continuing our digital optimization initiatives which emphasize driving conversion.

This included further rolling out responsive design to more areas of the site, mobile and apps and introducing new navigation and features on both our tablet and phone apps. Second, developing unique enhanced experiences across categories and events.

For example, we successfully launched the wellness microsite, featuring vitamin expert Andrew Lessman that incorporates content and commerce to educate the customer about the healthy lifestyle. The site continues to outperform in terms of engagements, sales and conversion. Third, adding personalization to the customer’s journey and touch points.

In early March, we launched our first customer facing campaign, leveraging our new personalization capabilities. As an example, customers received a target message in their shipping order confirmation email based on their purchase behavior data. We will be extending the placement options to personalize content to appear across our digital channel.

And the fourth priority, of course, is strategic merchandising. We have developed a highly cohesive 360 degree experience that reflects an expanded and curated assortment, improve category representation and compelling story. Mobile continues to accelerate, up 36% over last year, comprising 18% of the total HSN business and 44% of digital.

Customers making a purchase through mobile increased 30% in the quarter and 70% of mobile purchasers were new to HSN. Categories that have particular strength in mobile included beauty, our Joy Mangano business, and the health microsite I just mentioned which features a unique mobile experience.

We are increasingly using social media to drive both engagement and commerce. And because we are a commerce platform that integrates content, we believe we have a unique opportunity to make up a high button, a relative factor in social.

For example, Instagram has always been a great driver for engagement for HSN and now our Instagram feed can be a gallery of products that customers can purchase with just a tap.

We utilize this new capability with beauty brand [indiscernible] and the image generated thousands of sessions, strong sales, higher than average engagement and a spike in Instagram followers.

With the success of two-faced on our platform, we are working to enhance our visual content on Instagram and continuing to explore how we can use social media to drive commerce particularly among users engaging from their mobile devices.

Our partnership with Disney’s latest film Cinderella released in March was an excellent example of how we are continuing to combine entertainment and commerce. The 30 hour event across three days was our most successful entertainment initiative to date and the response from our customers, partners and Disney has been fantastic.

For the first time, we partnered Disney Consumer Products to license our entire collection, which enables us to truly demonstrate how key items were inspired by the film. Brands that have particular success were Vince Camuto, Heidi Daus and Roberto by RFM with numerous sellouts.

In addition, our digital experience was the best we’ve ever created for a movie event with compelling and robust content. We are a strong social media component as well, driving excitement and encouraging engagement with a week of giveaway magic on Facebook.

Fans came back to HSN page each day to discover new products in the collection and to enter-to-win exclusive giveaways.

We use this event across all social channels with an unparalleled behind the scenes work into the partnership to initiatives such as live tweeting from the red carpet event in Hollywood, backstage photos, and exclusive commentary from partners. We are continuing to collaborate with Disney on future films and other opportunities.

Our entertainment integration strategy also contributed to the highly successful launch of the exclusive collection from daytime talk show host and best-selling author, Wendy Williams. Not only do we have many sellouts and strong digital penetration, but it was most integrated launch we’ve done to date.

Wendy cross-promoted her debut on HSN daily during our highly followed Wendy Williams Show, leading our premiere Wendy herself drove a great deal of the conversation and social participation to the show, which also featured a fashion show and promoters of HSN appearance.

The launch also generated significant Twitter, Instagram and Facebook engagement and now has become a continuing series titled Weekends with Wendy. This launch demonstrates the power of our ability to completely connect and integrate a social component cross promotion and a live show itself.

We are delivering on our promise of boundary-less retail by creating a content hub that positions us to more fully leverage the assets we’re creating across all platforms.

This is a centralized way of creating content and seamlessly integrating it on our digital platforms and distributing it externally as well through YouTube, AOL, univeseon and other channels. This leads to engagement and ultimately drives commerce. And that’s the key competitive advantage of our 24/7 content machine.

Our destination programming allows us to put a stake in the ground and create a showy tweak that is story driven, with products that are inspiring to our customers and the content doesn’t expire at the end of the show, but continues to live on in various formats on multiple distribution platforms.

We view this uniquely created destination programming as a strategic pillar for our success.

These shows the list with Colleen Lopez, which is our weekly fashion series, the Monday Night Show with Adam Freeman and The Beauty Report with Amy Morrison have all become important ways to unveil product innovation while providing expert insights and entertaining content.

Recognizing its strong following during the quarter, we extended the list to 2 hours and are also deploying the successful strategy to other areas of the business. All the efforts that I just discussed contributed to the results we saw during the quarter, which also included excellent performance in nearly all product categories.

So I will highlight those areas that most notably drove this sales growth. In wellness, we capitalized on the healthy lifestyle mindset of the consumer, with a particular emphasis on health and fitness. As previously mentioned, we had success with our vitamin expert Andrew Lessman.

During the quarter, he had the second most successful month in his 19 years with us. We also benefited from an extra in person appearance, digital health devices also propelled sales and fitness did well with relevant product offerings after a recent period of limited innovation in the marketplace.

In apparel and accessories, with strong growth in the category, the overall marketplace has been somewhat challenged. There was success across most categories of the business from fashion brands such as IMAN and GIULIANA RANCIC to footwear from Steve Madden and Vince Camuto.

The quarter’s performance included our spring fashion series, The Fashion Edit, which features another addition for popular week-long beauty mini-series. As we previously highlighted, we extended fashions weekly destination programming that led to two hours, capitalizing on its popularity.

Our partnership with Disney included a two-hour Cinderella list takeover that features supermodel Coco Rocha’s first ever fashion collection which incorporated behind the scenes footage and interviews to support her HSN debut. In home, our focus on new and innovative products drove our performance, led by travel, textiles and outdoor.

We continue to leverage our partnerships, including AZ-TV and our own improvement and travel brands. Momentum in electronics continued with strong sales growth and productivity gains, despite strategically pulling back airtime.

We remain focused on top tier brand and categories that are relevant to our customer and also took advantage of our unique capability to capitalize on customer curiosity around newer technologies such as smart TVs and [4K]. Our results in culinary reflect the strategic changes we undertook throughout 2014.

Our portfolio of top chefs including Wolfgang Puck, Ming Tsai, Robert Irvine and Curtis Stone contributed to our performance. During the quarter, both Wolfgang and Curtis Stone had some of their most successful visits to date.

In fact, Wolfgang’s rice cooker hit a record in culinary with the most units ever sold and Curtis Stone hit his largest Today’s Special during our HSN spring cook’s event in March, which we titled the World's Largest Cooking Lesson.

As I mentioned in the last call, we posted recipes in advance of the event so customers could prepare their dishes alongside our celebrity chefs. We introduced the delivery of rich content to our unique recipe ensembles that launched with our cook’s event.

Customers are engaging with this content and spending more time browsing these expanded content pages adding value to their overall experience. In beauty, we featured the very successful launch of model actress and entrepreneur Christie Brinkley with her authentic skin care line which sold out quickly due to strong demand.

It included an extremely high [indiscernible] continuity take rate and her appearance created quite a media buzz, with Christie mentioning her partnership with HSN on the [indiscernible] prior to her launch. Performance on beauty was also driven by a launch of Jay Manuel and our 24-hour Beauty Event.

In March, Jay’s launch included our most successful week ever for Beauty Report from a social perspective, leveraging a strong following of the personality on America’s Next Top Model, with impressions on Twitter climbing over 250%.

Our 24-hour Beauty Event featured beauty brand Two Faced referenced earlier, which generated a significant number of new customers and integrating more Hispanic customers by promoting awareness to our partnership with univeseon. We also launched Martino by Martino Cartier, featuring hair care selling products with innovative salon quality hair tools.

Our Joy Mangano business, a key platform for innovation, had an exceptional quarter with significant productivity gains. January represented the largest sales month in Joy’s 15 year history at HSN.

And by the end of the quarter, Joy’s Readers, a very popular product hit a milestone with over 10 million sold, another example of our customers’ affinity for Joy’s products. Our direct-response television marketing partnership with Keith Urban continues to be successful.

Keith play a guitar and lesson collection program and was named on the Long Four Media chart for 23 straight weeks and remains in the top 10. The program continues to drive significant new customers. This was an opportunistic business for us and we will continue to pursue other areas where we can leverage our core competencies.

Turning now to Cornerstone, I cannot commend the team enough for its diligent and improving the performance of the portfolio.

There was improvement in every measure of the overall business, not only with their sales growth improvement, but also substantial growth in gross profit and EBITDA led by Garnet Hill with contributions from Ballard Design and Frontgate.

Cornerstone's 4% sales growth was driven by the home brands, most notably Frontgate, where our efforts to build broader home categories delivered an exceptionally strong quarter, particularly with the interior furnishing segment including the master suite collection. Outdoor enhancements also contributed to this performance.

As you recall, Frontgate had a challenging first quarter last year, particularly in outdoor and we are pleased to see this business demonstrate this time the improvements. Ballard Design’s performance was driven by a strong indoor focus with particular success in bed, bath and lighting as well as improved digital penetration.

Grandin Road also had success with a similar strategy that focused on indoor home. During the quarter, digital grew 5%, with penetration at 68%, up 60 basis points from last year. Mobile increased 20%, representing 17% of total Cornerstone business and 25% of digital.

Average order value increased across all digital platforms, desktop, tablet and smartphone, with smartphone and tablet penetration and traffic particularly strong. We made numerous enhancements to our sites during the quarter to optimize experience and remove barriers to purchase.

For example, PayPal went live on both desktop and smartphones across the majority of our brands. In addition, both Ballard Design and Grandin Road’s smartphone homepages were enhanced to be more dynamic and engaging.

And in keeping with our overall digital strategy, expanding personalization and elevating the 1 to 1 customer experience remains an important focus across the portfolio. In social, Ballard Designs incorporated Instagram on their homepage to share the Instagram campaign leading to increased engagement.

Frontgate received hundreds of submissions for its America’s Finest Homes user generated content experience which gives the winner the opportunity to showcase their home on Frontgate’s platforms.

And Garnet Hill launched a social media campaign that included the participation of numerous bloggers with a significant following who cover apparel, home and kids. The campaign encouraged fans to share their significant style on Instagram and Twitter.

As we look forward, while retail remains competitive, we continue our focus of capitalizing on our unique attributes as a content rich immersive commerce destination. This includes the power of the collective HSNi in pursuing growth opportunities that can be scaled across our portfolio.

For example, we just announced this morning and exciting new partnership with Margaritaville Brand Holding that will bring Margaritaville inspired products in culinary, home, electronics, beauty and apparel to HSNi. It’s estimated that approximately 75% of US consumers recognize the Margaritaville name. The brand is truly a lifestyle.

Close your eyes and you’ll escape to paradise. This partnership which spans three HSNi brands is our most envisaged brand launch in recent memory. We have developed exclusive home and apparel products that will resonate with our current customers and we expect it will attract new ones.

Millions of people are passionate advocates of the Margaritaville brand and they are in our highly covenant demographic, 35 plus years of age with high disposable income. We are working with the Margaritaville organization to activate these loyalists and engage them with our exclusive collection at Frontgate, TravelSmith and HSN.

The partnership just kicked off at Frontgate with over hundred products to the home. In mid-May, the rollout will continue with TravelSmith, offering a curated mix of apparel, swimwear and accessories coinciding with summer travel.

Then, in July, HSN will launch an exclusive collection of Margaritaville branded merchandise created by us along with Margaritaville’s own bestselling products. The launch will be part of our special birthday month which will feature a 5 O'clock Somewhere series showcasing each Friday across our platforms.

Marketing tactics we extend the HSN brand include using radio on Margaritaville on Sirius and their digital site, including Margaritaville TV.

As part of the partnership, we are working on sweepstakes for our customers to give them a chance to Margaritaville theme product and experiences, including a weekly cruise giveaway in partnership with Norwegian Cruise Lines. We are also excited by the number of other initiatives.

In apparel and accessories, we just premiered our Tastemaker series on HSN featuring fashion icon Iris Apfel. This series which includes must-have items and tips leverages Iris’ reputation in the fashion industry and the recently released Albert Maysles’ documentary about her.

HSN sponsored the New York state view of the documentary just two weeks ago. Also in apparel, last month, HSN exclusively welcomed the return of renowned American designer Sigrid Olsen to the fashion world with the premier of her exclusive SIGRID OLSEN Studio collection.

Sigrid’s latest fashion reflects her multifaceted talents with over 30 years as a successful designer and artist. And building on our success, in electronics, last month we introduced our first month-long series of innovation. We continue to be strategic with our airtime and product assortment in this category.

Keith Urban returns to HSN later this month, following its highly successful previous visit, featuring his guitar collection. We remain focused on repositioning our jewelry business with a goal of successfully transforming the business similar to what we have accomplished in culinary and electronics.

As part of this strategy, we’re leveraging our original content and destination programming initiatives with the debut of our new [indiscernible] share their latest jewelry discoveries and exclusive collections.

Before turning to Cornerstone, I would like to welcome industry veteran John Aylward who joined the company as Chief Marketing Officer for HSN. John has held senior leadership positions across fashion, apparel, food and consumer electronics brands including DSW, Starbucks, The Gap, and Sony Corporation.

John’s responsibilities include the continued development of the HSN brand and oversight for integrated marketing, cross-platform marketing and creative. John reports directly to Bill Brand, President of HSN.

At Cornerstone, we remain focused on sustaining the improved performance in the portfolio, particularly for Cornerstone’s very important second quarter.

Initiatives in the quarter from a few of our brands include, leveraging Frontgate’s ability to incubate brands [indiscernible] Grandin Road, which ultimately became a highly successful standalone business. Frontgate just launched its new luxury cotemporary brand Porta Forma.

This new content includes exclusive collection that are for furnishing, decor and products for entertaining, all with international contemporary elegance. We’re supporting this launch to outreach campaigns with prominent bloggers and influencers along with strategic placement on [indiscernible].

As I mentioned previously, we will focus for both Frontgate and TravelSmith in the second quarter will be at a prominent launch of Margaritaville inspired products. Ballard Designs entailed its outdoor collection and is sponsoring the Southern Living Idea House featuring our partner designer Wendy Williams.

Ballard will also have a strong presence as a sponsor at the Atlanta Food & Wine Festival. And at Garnet Hill, we’ve taken the appropriate actions to right size the business while strengthening brand awareness and profitable growth. The team will continue their focus on growing the home side of the business, the original foundation of Garnet Hill.

The brand will also be introducing its dorm initiative within kids home and showcasing its home offerings at a pop-up location in Bridgehampton, New York later this month. Finally, at HSNi, we’re in the unique position of being a presenter of the new retail commerce universe, where customers are beginning to expect the buy button to be everywhere.

We already meet this expectation by delivering distributed commerce in content, community, curation, convenience and customization. I’m confident that we will continue to develop innovative ways to optimize our point of differentiation and be a disruptive force in the expanding world of retail. Thank you. And now, I’d like to take your questions..

[Operator Instructions] Our first question comes from Eric Sheridan with UBS..

A question about customer growth, you’ve now seen an increase in customer growth over the last two quarters, highest level you’ve seen, Mindy, in a long time, wondering what you’re seeing from those new customers as they come on to the platform? And then you talked a little bit about social media.

How much is social media and even the potential for paid search that are available for you to drive maybe new member growth from a non-TV landscape into the platform as well going forward?.

Obviously, overall customer growth simulation, retention and migration for greater spend has all been in unison to the collective impact. A substantial portion of that new customer growth is through our digital platforms, increasingly mobile. And that mobile customer is our youngest most affluent and most diverse.

So very valuable as we bring the customer in. However, what has really impacted the momentum has been the assimilation of those new customers which has really been a result of our capability in terms of our system transformation around analytics and customer relationship with management and the tools and talent that we’ve really brought in.

Social, definitely is a significant part of that strategy across every one of our social platforms, but we don’t peanut butter it, we have very specific strategies with Pinterest, Twitter, I talked a lot about Instagram and we do feel that platforms with strong visual content have the future opportunity we believe to drive the greatest potential that convert to commerce.

So again, they all play strategically together..

Our next question comes from Tom Forte with Brean Capital..

Mindy, I really wanted to take this opportunity to ask you about something I’m getting a lot of questions from investors, it’s the [indiscernible] from cord cutting, so there is a lot of concern that as more consumers cut their cable cords and elect for over-the-top options, it’s going to have a material negative impact on your business..

Actually I think both Judy and I can certainly talk to that, one on the distribution side and then I’ll talk to my perspective on what it all means..

And I think to tie it together, we don’t view it as just people cutting the cord, it really is about the content itself. And HSN does not charge license fee and we actually own all of our content, the inclusion of HSN on almost all the over-the-top platform is very straight forward unlike some other content providers.

And we strive to have HSN carried on in a multiple platform, but primarily those ones that do have a good viewer customer experience and as you know we already carried on several connected TV platforms like Samsung, Sharp and Panasonic, so on standalone devices like [TEGO and ROCU].

And so we’re continuing to look at options for us to be able to have that great content that we create day in and day out and attract new and different customers.

The over-the-top platforms are continuing to evolve and we believe that we’re positioned well for this change and the landscape and also are looking for opportunities to be able to use our patented shop by remote technology to make that experience much different and unique to HSN.

So we think that there actually is some additional opportunities for us in this area. And I do think that’s why there is also a lot of chatter about over-the-top platforms.

I think that continuing to soften the cable providers, actually the bundle package is actually a very good option and I think I wouldn’t underestimate the competitive nature of that business from what they do as well..

And do Judy’s point, our belief is it's not a [indiscernible] content, right. And I think that we continue to look at not just how do we get the customers to come to HSN, but how do we get HSN out in the landscape of distributed commerce. And the amount of original content net of the live show that we are creating has increased dramatically.

And the more platforms we can get that content on is more opportunities for the customers to interface with HSN, so whether that's univeseon, AOL, YouTube and Judy also mentioned shop by remote. So our new version which was developed for the HTML-type platform, it really is kind of the best of TV, timely video, and broad product on demand.

And I think as we continue to leverage the unique capabilities that we have, and again as Judy mentioned, I think we are positioned differently than maybe some other players that you would think of..

Our next question comes from Q - Neely Tamminga with Piper Jaffray..

Question for you, Mindy, on products, on outdoor specifically, could you help us rewind to last year's outdoor situation and how we are approaching that more specifically this year and what that can be for Q2 for you guys, I think that's a pretty decent sized opportunity for Q2? And then Judy, as it relates to the West Coast port situation, are we totally done with the bottleneck that's occurred from debentures point of your business, if you could give us an update there would be great..

So, if you recall last year, we had a slow start to the outdoor segment and had a tough time really catching up throughout the balance of the season. So clearly, we are encouraged by what we are seeing this year.

But another thing to take into consideration, particularly with Frontgate and as I highlighted for Ballard, Grandin, we stepped up our product offering and our assortment in indoor home. So, we are not as dependent.

We are still dependent, I mean, it's a big part of our business, but we are continually working to be more diversified and that definitely was a factor in Frontgate's performance in the first quarter versus last year..

Mindy, can I ask a quick follow-up to that, is that just under the banner of – you guys are better positioned for just overall entertaining too, I mean, this year versus last year as people gather, is that another way to kind of think about how you're approaching outdoor?.

Yes, I think we have more options to your point, so if you look at, it's everything from furniture, to accessories, to day core, to dining and if you look at the new flash catalog which is more of the fun outdoor, pool et cetera and it features the entire Margaritaville assortment.

It's just really create this whole level of fun and entertaining and I think it really inspired the team, not just in the Margaritaville product, but in general to say we want to own fun for the entire summer..

In terms of the West Coast port situation, we did have impact on that. I think we have mentioned it on the other call and it continued into the second quarter.

We are not completely off away through it, we are still having some backup issues on the Cornerstone side, but hopefully over the next couple of weeks we will be done and be able to ship all of our products finally.

We did actually have some impact on the HSN side of the business with some of our partners not being able to get their product, but we were able to move different shows and have different items in that timeframe. So a little bit different than the Cornerstone side of the business.

But the one thing that I think is unknown is how, how is that impacting other businesses and is there going to be any more competitive issue, not that I can imagine, there would be in apparel side of the business, it's so competitive already, but would there be any more competitive issues with that? But overall, we should be done with having any backup at the port..

Our next question comes from Jason Bazinet with Citi..

I just have two quick questions. I think all of us have been trying to figure out whether lower gas prices were going to show up or not show up, do you think anything in the solid results that you reported is a function of lower gas prices or would you describe it more to just execution? That's my first question.

And then secondly, on the Cornerstone part of the business, if I go back to the prerecession era, you were running gross profit per catalog at a little over $1 and it went up after the recession and is slowly being coming back down.

Do you ultimately see that getting back to that $1-ish level as opposed to the $1.50-ish level where it peaked? Or is that the wrong way to think about it?.

Let me answer the first question. Our perspective is absolutely anything that more disposable income into the consumers' hand and into the economy is going to have a positive impact on the business. And any kind of betterment to how the consumer is feeling about what their comfortable spending is going to have a positive impact on the business.

So yes from that perspective. But clearly, as we walk through the results for the quarter, we also believe it is the combined execution of the strategies that we employed..

Jason, sorry, we weren't quite following your $1 and $1.50 question.

Can you repeat that?.

Sure, yes. I mean, just one of the simple calculations we do is just your gross profit on the Cornerstone side of the business per catalog that's in circulation and when we went into the recession, I think you dialed back the magnitude of circulation of Cornerstone and so your gross profit per catalog was rising.

Since we came out of the recession, it seems like it's falling, but it still has a long way to go before we get back to the 2007, 2008 levels?.

First of all, you're looking at an aggregate portfolio, so that is very different business today than it was prerecession. Prerecession, our apparel businesses had a much higher percentage of the portfolio than they do now. So our gross profit dollar rate on the home side of the business is lower than on the apparel side of the business.

And then I think that the market dynamics have changed a lot and we are a lot more competitive on pricing as well as shipping and handling costs which affect that gross profit dollars.

So we are doing everything we can to continue to improve our gross profit dollars and gross profit margin rate, I think, as you can see in this quarter, we made a dramatic improvement. But I don't believe that that metric is one that is going to be easily obtained in the short or near-term..

Our next question comes from Alex Fuhrman with Craig-Hallum Capital Group..

I wanted to talk a little bit about channel placement, I'm wondering it looks like there's been a lot of markets where you are in a greater number of channels than you were six or 12 months ago, I'm wondering if maybe that's because of maybe some of the ease of getting into some of those base packages that you alluded to earlier in the Q&A.

And if that's contributing to the lift in customers, I was surprised to hear, it sounds like reactivated customers are actually contributing as much as the new customers are to the revenue growth.

And I'm wondering if that is perhaps due to increased channel placement or new products or really what's driving the increase in the reactivated customers..

Sure. So I will take that channel placement. Our average channel placement hasn't changed dramatically over the past year. We do have some more HD channels which has continued to increase in penetration.

Some markets might have dual channel, an analog and an HD, other ones were actually combining those and then we also have our HSN2 which rolled out on Comcast, that definitely has contributed somewhat to our performance, although it's not huge.

So I think it probably depends on what you're looking at in your market, but overall, we haven't dramatically improve or added additional channels, other than on HSN2 on Comcast..

And actually what's interesting is where we are seeing improvement, you've seen certainly the digital accelerated growth, a lot of that growth is coming from engagement and sales of products that have nothing to do with the live television broadcast.

So it really has come from our digital marketing, our digital content effort and our customer out link effort that contributed to both the new customer acquisition and the reactivation and we can track that. And so that's what we're seeing..

And then thinking ahead to the Margaritaville partnership that you have staggered across a number of your different brands, I'm not sure if you mentioned it during the call, but is it fair to assume that Mr.

Butler will be joining us for a live concert on HSN?.

Not at launch, but let's never say never. But we are excited about that partnership on a number of levels, we do think it really aligns really well from both a brand and a consumer perspective.

They are great partners to work with, have incredible reach as I mentioned, will be integrating with – they are the number two radio station on Sirius, it's Margaritaville TV.

And this is not just a one-time event launch, this is going to be a sustainable business, ongoing, and will be continuing to develop products and coming up with events and concepts throughout the year that we're pretty excited about..

Our next question comes from Trisha Dill with Wells Fargo Securities..

My first question is on the leverage your generated in Q1 with EBITDA growth well above revenue, obviously the comparisons get a bit more challenging in the back half of the year, but maybe you can talk to how you are thinking about full year EBITDA growth relative to revenue and whether or not there are any additional investments that might be planned for the back half that could impact this leverage?.

So, yes, it was terrific leverage in the first quarter. I think if you break that down by business units, part of that is because of dramatic improvement at the Cornerstone brands. And so obviously it's our lowest quarter performance and we didn't have that same degradation in the back half, so our comps are higher.

So I would say you're not going to continue to see 800%, it is the best increase at Cornerstone side of the business. So we try not to look at it by quarter though, we look at how we perform over a year because in any certain quarter you are going to have ebbs and flows.

For instance, in the second quarter at HSN, that is actually our lowest sales quarter, so we don't have the same leverage over our fixed operating expenses whereas on Cornerstone it's a much more – the largest quarter that they had. So it will balance itself out over the course of the year.

And again, I think we are constantly looking at how do we perform over the year and I think if you look at last year, the year performance on the HSN side, that's really indicative of how we are thinking and looking at 2015. And then of course continued improvement on the Cornerstone side, albeit not as dramatic as the Q1 performance..

And then just a quick question on the personalization efforts that you spoke to on the call, maybe you can give us a little more detail on what you're doing there and how that will evolve throughout the year with may be any color on how much higher conversion is when the customer receives a personalized email or any other metrics that you share on the effectiveness of this strategy?.

There's a number of strategies inherent throughout that digital journey. So how do we continue our digital optimizing efforts to drive conversion, right? And then on the personalization side within the customer journey, how do we use our new capabilities to continue to drive that.

And we are constantly testing and iterating, so I mentioned in our customer confirmation emails, we are now able to personalize part of that content, some will be extending that out.

So it really is from end to end, continuing to test both in our customer outreach strategies as well as through the online journey itself, how can we be more personalized and customized. And we do believe that this is something that is going to be a continued the area of focus for us.

We are obviously seeing the results and how much further can we take that..

Our next question comes from Barton Crockett with FBR Capital Markets..

A little bit more about the item, the number you called out in the release about two percentage point contribution to sales from the direct-response television marketing campaign that started during the fourth quarter and continued into the first quarter.

I was curious how you did the math there, is that the revenues generated from this event like an assumption of what you would have been selling had you just been doing your normal operations in those timeslots?.

Let me explain that, Barton. It's actually it's not on HSN, so these are separate media buyers that we are buying and are shown on other channels. So when you see any type of direct response [indiscernible] on other channels, if you see Keith Urban say on DirecTV, on whatever, that would be our response.

So it's all the sales that we recorded directly through that program..

Okay.

So on a completely different channel?.

Yes, it's very simple, because it's a completely different channel, not Keith Urban's HSN business. It is pre-recorded programming that is generating those sales.

And the reason for that, Barton, is obviously given Keith's schedule, we're able to have Keith's live performance three times a year, very focused, but we realized that this was a business that we thought we had the opportunity to maximize much more broadly than that and this was a way for us to do it as long as we continue to see that profitable balance of investment versus return, we will continue.

And I should say with the media spend that we are planning in Q4 and Q1 is higher than what is planned in Q2, because that's generally a softer period for that type of programming. So I do want to call that out, it would be that same 2% more than likely in Q2 and we will determine for Q3 and Q4 as we go forward..

So is this something that’s just very particular to Keith Urban or is it something you would like to do more of in other products, other personalities?.

I would not call this a strategy for the broad business.

Certainly if we see another opportunistic product scenario that we really think can lend itself, we now have the findings and the knowledge, but then again we are being very purposeful and this is something we thought made a lot of sense because as I mentioned, the structure of when we can have Keith within the live show, the product itself, its ability to be very demonstrable and scenario.

So again, it was very purposeful. We're not saying we wouldn't do it again if we find the same combination of assets, but it's not like we are proactively looking to do more..

Our next question comes from Anthony Lebiedzinski with Sidoti & Company..

I have a couple of questions.

So first as a follow up on the gasoline prices, so gas prices are actually up around 10% versus a month ago, but still substantially down from a year ago, so just wanted to get a better sense as to what part of your customer base would be the most sensitive to gas prices? The second question is also the outlook for jewelry, just wondering how you are thinking about the holiday quarter for that segment.

And lastly is more or less a housekeeping question about the tax rate assumption, how should we think about that for the year?.

In terms of the gas prices and all that, one of the things if you look across our portfolio, our customers' average income ranges from about $70,000 on the HSN side, in excess of $100,000 across most of the portfolio brands, and in excess of $300,000 at Frontgate. So we don't play in the really heavy pressured value segment, okay.

So it's not the penny. But again, it's a combination of gas prices and consumer sentiment. But again, we are not in that are really pressured traditional low end bank. So I just want to clarify from that point of view. As far as jewelry is concerned, we are being very strategic around the repositioning.

And as you can imagine, just like what we did in culinary, some of that is getting out of businesses, adding businesses, growing businesses. And to your point, we're really trying to do that work. So we can maximize the fourth quarter which we know is a great quarter for that business..

And in terms of your question on the effective tax rate, we think it will be between 37% and 38% for the year..

Our next question comes from Matthew Harrigan with Wunderlich Securities..

[indiscernible] for your concert as you keep putting up your sales numbers, how does the cable show, there is a lot of interest in 4K, I think really at an inflection point and that was evidence to you guys as well, most of the delivery be on the streaming basis rather than a linear channel basis.

I mean, you talked about the richness visual content, certainly your entertainment programming certainly, what you do is marketing, making the products look as good as possible.

And I know everyone is very sensitive as to production cost on 4K right now, I think probably the assumption a while ago would have been that wasn't particularly applicable to you, but do you think that that could [indiscernible] because I mean, a lot of advertisers I wouldn't think will even be able to offer 4K programming in a lot of linear channels.

And then I actually had a number of questions, but I will hold with that one.

And then the second question would be some talk about Martha Stewart, that still seems kind of extensive for you, it'd be a pretty big commitment, I don't know, I guess you probably ordinarily don't comment on quick side of the speculation, but in an event that you were inclined to do so, I'd love to that. And then I had a couple of follow-ups..

Sure, I will take the Martha Stewart question. Yes, we don’t comment on – in terms of 4K, yes, we are looking at that and seeing what makes sense for us and we do have great entertainment and programming, we’re all about – but we don’t do this for entertainment, taken as combining that with the shopping experience.

So we're constantly looking at ways to maximize our performance..

And just looking at kind of random, but when you look at your entertainment profile now and the electronics growing as fast as it is and social media, are you getting more of a male component leaching into your new customer numbers from what you had to look for?.

No, it's still very much a female driven business. It's not that we don't have male customers particularly in electronics and our cooking businesses. But still, the vast majority of the decisions and purchases are being influenced by the women..

And it's kind of less the demographics for us and it's more the psychographics of why she likes shopping in this environment. And it's part that she just like shopping, but she is very social, so she really likes this idea of getting the idea, the information it is very empowering to her. And finally we've had a lot of success as well with our K.

So there's a reason for her to come to our platform for everything she likes to do..

And then finally on social media, some consultancies have concluded that you just kind of hear that the face change in terms of all retailers recognizing the obsolete pivotal to their business right now.

When you look at Cornerstone and clearly Margaritaville rounds across Cornerstone as well as HSN, how would you characterize the social media intensity for that business? Obviously there are some metrics you can measure in terms of the activity, I guess the demographics probably benefited, but it feels like it's less of a kind of cohesive community type ambience to the business than you have with HSN..

I'm going to step back and talk about it specifically about social and more about the broad-based community. We absolutely are going to be looking to partner with Margaritaville to tap into their very engaged audience. That really has an affinity of that brand.

So some of that certainly is going to be social channels, some of it is going to be their media channel, their digital channel and our outreach. And we're going to use that all in tandem. And certainly we want to engage as much of that audience as possible. So it's a big part of that strategy..

Our next question comes from Ben Mogil with Stifel..

In terms of the M&A environment, it's been a while since you have done any deals on the Cornerstone side.

Are you seeing the digital valuation just be hard for you to rationalize and build versus buy makes more sense for you in contrast with what you're seeing on the M&A environment in general?.

I think that we are always in the marketplace to evaluate and look at businesses that fit our criteria. To your point, there has been definite issues with valuations in many cases.

But the other part of it is we believe that there are still a lot of opportunity to invest in our own businesses and create new platforms such as Porta Forma which is just launching and other areas that we think are the best investments for us within our own categories.

So we will continue to look at what can be added and really have an impact materially on our business, but we are also going to continue to invest..

And there are no other questions at this time. I'd like to turn the call back over to Ms. Grossman for closing remarks..

Thank you everyone. We look forward to following up and speaking with you soon..

Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day..