HSN, Inc. (NASDAQ:HSNI) Q4 2014 Earnings Conference Call - Final Transcript

Feb 26, 2015 • 09:00 am ET

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HSN, Inc. (NASDAQ:HSNI) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, good morning, and welcome to the HSN Inc. Fourth Quarter and Full Year 2014 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, Investor Relations. Ms. Kissell, please go ahead.

Executive
Felise Glantz Kissell

Good morning, 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 US 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?

Executive
Judy A. Schmeling

Thank you, Felise. Good morning, and thank you for joining us. HSNi's strong performance for the fourth quarter was a result of strategic actions that we implemented throughout 2014 to position the Company for long-term success.

Financial highlights for the fourth quarter included sales growth of 10%, with digital sales up 12%, gross profit up 8%, adjusted EBITDA increase of 7% and adjusted EPS growth of 10%. We also maintained our commitment to return capital to shareholders in a balanced and disciplined manner. Just last month, we introduced the next phase of our capital return plan, which included a $10 per share special cash dividend and authorization of a 4 million share repurchase program. These actions were in addition to our existing quarterly dividend of $0.35 per share.

At HSN, we had exceptional performance in the fourth quarter. Sales increased 14% to $797 million, with digital sales growth of 22% and digital penetration increasing 280 basis points to 42%. This increase represents HSN's highest sales and digital sales growth for any quarter since becoming an independent public Company in August, 2008.

Most product categories had strong sales growth in the quarter with particular strength in electronics, home, culinary and our Ingenious Designs by Joy Mangano business. Also contributing to our sales performance was the successful launch of our direct response television programming featuring Keith Urban.

Joy was down slightly in the quarter, primarily due to a