qvc-20240930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38654

QVC, Inc.

(Exact name of Registrant as specified in its charter)


State of Delaware						23-2414041
(State or other jurisdiction of						(I.R.S. Employer Identification
incorporation or organization)						Number)

1200 Wilson Drive						19380
West Chester, Pennsylvania						(Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (484) 701-1000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
6.375% Senior Secured Notes due 2067	QVCD	New York Stock Exchange
6.250% Senior Secured Notes due 2068	QVCC	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer ☒ Smaller reporting company Emerging growth

☐ company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

None of the voting stock of the registrant is held by a non-affiliate of the registrant. There is no publicly traded market for any class of voting stock of the registrant. There is one holder of record of our equity, Qurate Retail Group, Inc., an indirect wholly-owned subsidiary of Qurate Retail, Inc.

QVC, Inc.

2024 QUARTERLY REPORT ON FORM 10-Q

Table of Contents


	Part I	Page

Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Equity	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	34

	Part II
Item 5.	Other Information	34
Item 6.	Exhibits	34
	Signatures	35

Item 1. Financial Statements

QVC, Inc.

Condensed Consolidated Balance Sheets

(unaudited)


	September 30,		December 31,
(in millions, except share amounts)	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	297	307
Restricted cash	17		15
Accounts receivable, less allowance for credit losses of $80 at September 30, 2024 and $101 at December 31, 2023	872		1,295
Inventories	1,112		860
Prepaid expenses and other current assets	137		162
Total current assets	2,435		2,639
Property and equipment, net of accumulated depreciation of $967 at September 30, 2024 and $908 at December 31, 2023	410		427
Operating lease right-of-use assets (note 5)	497		510
Television distribution rights, net (note 2)	66		83
Goodwill (note 3)	3,162		3,151
Other intangible assets, net (note 3)	3,047		3,111
Note receivable-related party (note 1)	1,740		1,740
Other noncurrent assets	49		54
Assets held for sale noncurrent (note 5)	—		5
Total assets	$	11,406	11,720
Liabilities and equity
Current liabilities:
Current portion of debt and finance lease obligations (note 4)	$	586	424
Accounts payable-trade	783		838
Accrued liabilities	771		938
Other current liabilities	50		51
Total current liabilities	2,190		2,251
Long-term portion of debt and finance lease obligations (note 4)	3,398		3,911
Deferred income taxes (note 6)	532		621
Long-term operating lease liabilities	488		488
Other long-term liabilities	98		112
Total liabilities	6,706		7,383
Commitments and contingencies (note 7)
Equity:
QVC, Inc. stockholder's equity:
Common stock, $0.01 par value, 1 authorized share	—		—
Additional paid-in capital	11,195		10,901
Accumulated deficit	(6,297)		(6,361)
Accumulated other comprehensive loss	(269)		(290)
Total QVC, Inc. stockholder's equity	4,629		4,250
Noncontrolling interest	71		87
Total equity	4,700		4,337
Total liabilities and equity	$	11,406	11,720

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QVC, Inc.

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended September 30,			Nine months ended September 30,
(in millions)	2024		2023	2024	2023
Net revenue	$	2,092	2,194	6,337	6,611
Operating costs and expenses:
Cost of goods sold (exclusive of depreciation and amortization shown separately below)	1,366		1,424	4,113	4,368
Operating	165		175	502	530
Selling, general and administrative, including stock-based compensation	310		324	954	989
Depreciation	19		23	58	68
Amortization	68		75	209	213
Restructuring, penalties and fire related costs, net of (recoveries) (note 10)	—		19	18	(196)
Gains on sales of assets and sale-leaseback transactions	—		—	(1)	(119)
	1,928		2,040	5,853	5,853
Operating income	164		154	484	758
Other (expense) income:
Losses on financial instruments	—		—	—	(1)
Interest expense, net	(62)		(63)	(191)	(167)
Foreign currency (loss) gain	(6)		6	(6)	(3)
Gain on extinguishment of debt	—		—	—	10
Other expense	(7)		—	(7)	—
	(75)		(57)	(204)	(161)
Income before income taxes	89		97	280	597
Income tax expense	(27)		(34)	(90)	(173)
Net income	62		63	190	424
Less net income attributable to the noncontrolling interest	(11)		(12)	(35)	(38)
Net income attributable to QVC, Inc. stockholder	$	51	51	155	386

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QVC, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)


	Three months ended September 30,			Nine months ended September 30,
(in millions)	2024		2023	2024	2023
Net income	$	62	63	190	424
Foreign currency translation adjustments, net of tax	94		(47)	21	(51)
Total comprehensive income	156		16	211	373
Comprehensive income attributable to noncontrolling interest	(21)		(8)	(35)	(26)
Comprehensive income attributable to QVC, Inc. stockholder	$	135	8	176	347

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QVC, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Nine months ended September 30,
(in millions)	2024		2023
Operating activities:
Net income	$	190	424
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	(89)		66
Foreign currency loss	6		3
Depreciation	58		68
Amortization	209		213
Change in fair value of financial instruments and noncash interest	(2)		1
Other charges, net	70		16
Gain on extinguishment of debt	—		(10)
Stock-based compensation	15		27
Gains on sales of assets and sale-leaseback transactions	(1)		(119)
Gain on insurance proceeds, net of fire related costs	—		(225)
Insurance proceeds received for operating expenses and business interruption losses	—		226
Change in operating assets and liabilities
Decrease in accounts receivable	410		378
(Increase) decrease in inventories	(246)		12
Decrease in prepaid expenses and other current assets	31		19
Decrease in accounts payable-trade	(59)		(62)
Decrease in accrued liabilities and other	(246)		(273)
Net cash provided by operating activities	346		764
Investing activities:
Capital expenditures	(118)		(116)
Expenditures for television distribution rights	(23)		(111)
Insurance proceeds received for fixed asset loss	—		54
Proceeds from derivative instruments	—		167
Payments for derivative instruments	—		(179)
Changes in other noncurrent assets	(4)		(2)
Proceeds from sale of fixed assets	6		202
Other investing activities	2		2
Net cash (used in) provided by investing activities	(137)		17
Financing activities:
Principal payments of debt and finance lease obligations	(1,473)		(1,086)
Principal borrowings of debt from senior secured credit facility	1,895		1,022
Principal repayment of senior secured notes	(775)		(396)
Capital contributions received from Qurate Retail, Inc.	277		—
Dividends paid to Qurate Retail, Inc.	(91)		(344)
Dividends paid to noncontrolling interest	(51)		(35)
Other financing activities	(1)		—
Net cash used in financing activities	(219)		(839)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	2		(17)
Net decrease in cash, cash equivalents and restricted cash	(8)		(75)
Cash, cash equivalents and restricted cash, beginning of period	322		367
Cash, cash equivalents and restricted cash, end of period	$	314	292

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QVC, Inc.

Condensed Consolidated Statements of Equity

(unaudited)


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, December 31, 2022	1	$	—	10,869	(6,080)	(312)	95	4,572
Net income	—	—		—	386	—	38	424
Foreign currency translation adjustments, net of tax	—	—		—	—	(39)	(12)	(51)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(344)	—	(35)	(379)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.	—	—		—	(2)	—	—	(2)
Stock-based compensation	—	—		25	—	—	—	25
Balance, September 30, 2023	1	$	—	10,894	(6,040)	(351)	86	4,589


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, June 30, 2023	1	$	—	10,886	(6,050)	(308)	89	4,617
Net income	—	—		—	51	—	12	63
Foreign currency translation adjustments, net of tax	—	—		—	—	(43)	(4)	(47)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(44)	—	(11)	(55)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.	—	—		—	3	—	—	3
Stock-based compensation	—	—		8	—	—	—	8
Balance, September 30, 2023	1	$	—	10,894	(6,040)	(351)	86	4,589

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QVC, Inc.

Condensed Consolidated Statements of Equity

(unaudited)


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, December 31, 2023	1	$	—	10,901	(6,361)	(290)	87	4,337
Net income	—	—		—	155	—	35	190
Foreign currency translation adjustments, net of tax	—	—		—	—	21	—	21
Capital contribution received from Qurate Retail, Inc.	—	—		277	—	—	—	277
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(91)	—	(51)	(142)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.	—	—		1	—	—	—	1
Withholding taxes on net share settlements of stock-based compensation	—	—		(1)	—	—	—	(1)
Stock-based compensation	—	—		17	—	—	—	17
Balance, September 30, 2024	1	$	—	11,195	(6,297)	(269)	71	4,700


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, June 30, 2024	1	$	—	10,913	(6,307)	(353)	79	4,332
Net income	—	—		—	51	—	11	62
Foreign currency translation adjustments, net of tax	—	—		—	—	84	10	94
Capital contribution received from Qurate Retail, Inc.	—	—		277	—	—	—	277
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(41)	—	(29)	(70)
Stock-based compensation	—	—		5	—	—	—	5
Balance, September 30, 2024	1	$	—	11,195	(6,297)	(269)	71	4,700

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

QVC, Inc. and its consolidated subsidiaries (unless otherwise indicated or required by the context, the terms "we," "our," "us," the "Company" and "QVC" refer to QVC, Inc. and its consolidated subsidiaries) is a retailer of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised shopping programs, the Internet and mobile applications. QVC is comprised of the reportable segments of QxH, which includes QVC-U.S. and HSN, Inc. ("HSN"), and QVC-International. These segments reflect the way the Company evaluates its business performance and manages its operations.

In the United States ("U.S."), QVC's televised shopping programs, including live and recorded content, are distributed across multiple channels nationally on a full-time basis, including QVC, QVC2, QVC3, HSN and HSN2. The Company's U.S. programming is also available on QVC.com and HSN.com, which we refer to as our "U.S. websites"; virtual multichannel video programming distributors (including Hulu + Live TV, DirecTV Stream, and YouTube TV); applications via streaming video; Facebook Live, Roku, Apple TV, Amazon Fire, Xfinity Flex and Samsung TV Plus; mobile applications; social media pages and over-the-air broadcasters.

QVC's digital platforms enable consumers to purchase goods offered on our televised programming, along with a wide assortment of products that are available only on our U.S. websites and our other digital platforms (including our mobile applications, social media pages and others) are natural extensions of our business model, allowing customers to engage in our shopping experience wherever they are, with live or on-demand content customized to the device they are using. In addition to offering video content, our U.S. websites allow shoppers to browse, research, compare and perform targeted searches for products, read customer reviews, control the order-entry process and conveniently access their account.

Internationally, QVC's televised shopping programs, including live and recorded content, are distributed to households outside of the U.S., primarily in Germany, Austria, Japan, the United Kingdom ("U.K."), the Republic of Ireland and Italy. In some of the countries where QVC operates, QVC's televised shopping programs are distributed across multiple QVC channels: QVC Style and QVC2 in Germany and QVC Beauty, QVC Extra and QVC Style in the U.K. Similar to the U.S., our international businesses also engage customers via websites, mobile applications, and social media pages. QVC's international business employs product sourcing teams who select products tailored to the interests of each local market.

The Company's Japanese operations ("QVC-Japan") are conducted through a joint venture with Mitsui & Co., LTD ("Mitsui"). QVC-Japan is owned 60% by the Company and 40% by Mitsui. The Company and Mitsui share in all profits and losses based on their respective ownership interests. QVC-Japan paid dividends to Mitsui of $51 million and $35 million during the nine months ended September 30, 2024 and 2023, respectively.

The Company is an indirect wholly-owned subsidiary of Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB and QRTEP), which owns Cornerstone Brands, Inc. ("CBI"), as well as other minority investments. QVC is part of the Qurate Retail Group, a portfolio of brands including QVC and CBI. Zulily, LLC (“Zulily”) was a wholly owned subsidiary of Qurate Retail until its divestiture on May 24, 2023.

During the nine months ended September 30, 2023, QVC and Zulily engaged in multiple transactions relating to sales, sourcing of merchandise, marketing initiatives and business advisory services. Prior to Qurate Retail's divestiture of Zulily, QVC allocated expenses of $3 million to Zulily and Zulily allocated expenses of $2 million to QVC for the nine months ended September 30, 2023.

During each of the nine months ended September 30, 2024 and 2023, QVC and CBI engaged in multiple transactions relating to personnel and business advisory services. QVC allocated expenses of $21 million and $19 million to CBI for the nine months ended September 30, 2024 and 2023, respectively. CBI allocated expenses of $1 million to QVC for each of the nine months ended September 30, 2024 and 2023.

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

On December 30, 2020, the Company and Liberty Interactive LLC ("LIC") completed an internal realignment of the Company's global finance structure that resulted in a common control transaction with Qurate Retail. As part of the common control transaction, LIC issued a promissory note (“LIC Note”) to a subsidiary of the Company with an initial face amount of $1.8 billion, a stated interest rate of 0.48% and a maturity of December 29, 2029. Interest on the LIC Note is paid annually. QVC recorded $6 million of related party interest income for each of the nine months ended September 30, 2024 and 2023, included in interest expense, net in the condensed consolidated statement of operations.

The condensed consolidated financial statements include the accounts of QVC, Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions were eliminated in consolidation.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in QVC's Annual Report on Form 10-K for the year ended December 31, 2023.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates include, but are not limited to, sales returns, uncollectible receivables, inventory obsolescence, depreciable lives of fixed assets and internally developed software, valuation of acquired intangible assets and goodwill and income taxes.

(2) Television Distribution Rights, Net

Television distribution rights consisted of the following:


(in millions)	September 30, 2024		December 31, 2023
Television distribution rights	$	561	592
Less accumulated amortization	(495)		(509)
Television distribution rights, net	$	66	83

The Company recorded amortization expense of $22 million and $24 million for the three months ended September 30, 2024 and 2023, respectively, related to television distribution rights. For the nine months ended September 30, 2024 and 2023, amortization expense for television distribution rights was $63 million and $74 million, respectively.

As of September 30, 2024, related amortization expense for each of the next five years ended December 31 was as follows (in millions):


Remainder of 2024	$	21
2025	34
2026	11
2027	—
2028	—

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(3) Goodwill and Other Intangible Assets, Net

The changes in the carrying amount of goodwill by operating segment for the nine months ended September 30, 2024 were as follows:


(in millions)	QxH		QVC-International	Total
Balance as of December 31, 2023	$	2,366	785	3,151
Exchange rate fluctuations	—		11	11
Balance as of September 30, 2024	$	2,366	796	3,162

Other intangible assets consisted of the following:


	September 30, 2024				December 31, 2023
(in millions)	Gross cost		Accumulated amortization	Other intangible assets, net	Gross cost	Accumulated amortization	Other intangible assets, net
Purchased and internally developed software	$	1,118	(877)	241	1,052	(784)	268
Affiliate and customer relationships	2,828		(2,723)	105	2,825	(2,684)	141
Debt origination fees	9		(6)	3	9	(5)	4
Trademarks (indefinite life)	2,698		—	2,698	2,698	—	2,698
	$	6,653	(3,606)	3,047	6,584	(3,473)	3,111

The Company recorded amortization expense of $46 million and $51 million for the three months ended September 30, 2024 and 2023, respectively, related to other intangible assets. For the nine months ended September 30, 2024 and 2023, amortization expense for other intangible assets was $146 million and $139 million, respectively.

As of September 30, 2024, the related amortization and interest expense for each of the next five years ended December 31 was as follows (in millions):


Remainder of 2024	$	50
2025	163
2026	114
2027	22
2028	—

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(4) Long-Term Debt and Finance Lease Obligations

Long-term debt and finance lease obligations consisted of the following:


(in millions)	September 30, 2024		December 31, 2023
4.85% Senior Secured Notes due 2024, net of original issue discount	—		423
4.45% Senior Secured Notes due 2025, net of original issue discount	585		585
4.75% Senior Secured Notes due 2027	44		575
4.375% Senior Secured Notes due 2028	72		500
6.875% Senior Secured Notes due 2029	605		—
5.45% Senior Secured Notes due 2034, net of original issue discount	400		399
5.95% Senior Secured Notes due 2043, net of original issue discount	300		300
6.375% Senior Secured Notes due 2067	225		225
6.25% Senior Secured Notes due 2068	500		500
Senior secured credit facility	1,280		857
Finance lease obligations	1		2
Less debt issuance costs, net	(28)		(31)
Total debt and finance lease obligations	3,984		4,335
Less current portion	(586)		(424)
Long-term portion of debt and finance lease obligations	$	3,398

SEC Form 10-Q filed by QVC, Inc.