{"url_path":"/sec/qvcdq/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1254699/0001254699-26-000011-index.html","accession_number":"0001254699-26-000011","cik":"0001254699","ticker":"QVCDQ","issuer_name":"QVC INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1254699/0001254699-26-000011-index.html","primary_entity_key":"0001254699","primary_entity_name":"QVC INC"},"word_count":7118,"has_tables":true,"body_markdown":"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nOverview\n\nQVC, 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) are a retailer of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised shopping programs, the internet (including social media) 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.\n\nChapter 11 Proceedings\n\nVoluntary Filing under Chapter 11\n\nOn April 16, 2026 (“the Petition Date\"), QVC Group, Inc. (“QVC Group” and together with certain of its affiliates, the “Company Parties”) commenced voluntary cases (the“Chapter 11 Cases”) under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). As of the Petition Date, we are operating our businesses as “debtors-in-possession” (“DIP”) under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. QVC Group and QVC received approval from the Bankruptcy Court for a variety of “first day” motions to continue their ordinary course operations during the Chapter 11 Cases.\n\nCommencing the Chapter 11 Cases constituted an event of default that accelerated the Company Parties’ respective obligations under (i) the 4.750% Senior Secured Notes due 2027, 4.375% Senior Secured Notes due 2028, 6.875% Senior Secured Notes due 2029, 5.450% Senior Secured Notes due 2034, 5.950% Senior Secured Notes due 2043, 6.375% Senior Secured Notes due 2067 (the “2067 Notes”), and 6.250% Senior Secured Notes due 2068 (the “2068 Notes”) (collectively the “QVC Notes”), issued by QVC, (ii) the 3.75% senior unsecured exchangeable debentures due 2030, 4.00% senior unsecured exchangeable debentures due 2029, 8.25% senior unsecured debentures due 2030, and 8.50% senior unsecured debentures due 2029 (collectively, the “LINTA Notes”), issued by Liberty Interactive LLC (“LI LLC”) and (iii) that certain Fifth Amendment and Restatement Agreement dated as of October 27, 2021, by and among QVC and QVC Global Corporate Holdings, LLC, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative and collateral agent (the “Credit Agreement,” and the credit facility thereunder, the “Credit Facility”). The Credit Agreement, together with the QVC Notes and LINTA Notes, are herein referred to as the “Debt Instruments”. The Credit Agreement and the QVC Notes provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. The exchangeable senior debentures provide that the amount accelerated is the greater of (x) the current principal amount of the exchangeable senior debentures or (y) the market value of the reference shares, plus all accrued and unpaid interest and all pass-through distributions due with respect to the reference shares shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments will be automatically stayed as a result of the Chapter 11 Cases, and the stakeholders’ rights of enforcement in respect of the Debt Instruments will be subject to the applicable provisions of the Bankruptcy Code, including the Automatic Stay (defined below).\n\nAs a result of the risks and uncertainties associated with our Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact or timing of events that occur during our Chapter 11 Cases and the impact that those events will have on our business, financial condition and results of operations. Therefore, there remains substantial doubt about the Company’s ability to continue as a going concern.\n\nRestructuring Support Agreement\n\nOn April 16, 2026, prior to the commencement of the voluntary cases, the Company Parties entered into a Restructuring Support Agreement (the “Restructuring Support Agreement” and the holders parties thereto, the “Supporting Stakeholders”), with certain holders of our Debt Instruments. The Restructuring Support Agreement contemplates agreed-upon terms for a comprehensive restructuring with respect to the Company Parties’ capital structure (the “Restructuring”) to be implemented through a proposed prepackaged plan of reorganization (the “Plan”).\n\nThe Restructuring Support Agreement and the Plan attached thereto contemplate the restructuring of the Company Parties’ outstanding funded debt obligations, including approximately $2.2 billion of outstanding QVC Notes, approximately $1.5 billion of outstanding LINTA Notes and approximately $2.9 billion outstanding under the Credit Facility.\n\nI-18\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nThe material terms of the Restructuring Support Agreement and the Plan include, among other things, that:\n\n•QVC or any successor or assign thereto, by merger, consolidation, or otherwise (such entity, “Reorganized QVC”) shall issue approximately $1.3 billion in aggregate original principal amount of takeback debt (the “Takeback Debt”) on the terms and conditions set forth in the Takeback Debt Documents (as defined in the Restructuring Support Agreement);\n\n•on or as soon as reasonably practicable following the effective date of the Plan “Effective Date”), receipt by the holders of claims arising under, in connection with, or on account of the Credit Facility and the QVC Notes of their pro rata share of: (i) QVC Distributable Cash (as defined in the Plan); (ii) the Takeback Debt; and (iii) 100% of the equity in Reorganized QVC, subject to dilution by the management incentive plan;\n\n•non-funded debt general unsecured claims (including all trade claims and contract and lease claims) will be unimpaired; and\n\n•QVC entered into a $300 million debtor-in-possession letter of credit facility (the “DIP LC Facility”) with JPMorgan Chase Bank, N.A., as agent, to issue new letters of credit and roll existing letters of credit to support operations during the pendency of the Chapter 11 Cases, cash collateralized by $315 million deposited in a cash collateral account; commitments under the DIP LC Facility would expire upon the earliest of (i) six months from the Petition Date, (ii) the Effective Date and (iii) the occurrence of an event of default, all as more fully set forth in such DIP LC Facility Term Sheet attached as Exhibit D to the Restructuring Support Agreement, which is furnished as part of Exhibit 10.1 hereto, and subject to Bankruptcy Court approval pursuant to interim and final DIP orders.\n\nAutomatic Stay and Other Protections\n\nSubject to certain exceptions under the Bankruptcy Code, pursuant to Section 362 of the Bankruptcy Code, the filing of QVC Group’s Chapter 11 Cases automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of QVC Group or our property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of QVC Group’s bankruptcy estate, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim (the “Automatic Stay”). Notwithstanding the general application of the Automatic Stay described above and other protections afforded by the Bankruptcy Code, governmental authorities may determine to continue actions brought under their police and regulatory powers.\n\nNew York Stock Exchanged Delisting\n\nOn April 17, 2026, we received a delisting notice from the New York Stock Exchange (“NYSE”) notifying us, as a result of the Chapter 11 Cases and in accordance with the NYSE Listed Company Manual Section 802.01D, of its determination to delist our 2067 Notes and 2068 Notes from NYSE and suspend trading of our 2067 Notes and 2068 Notes on the NYSE. Following the suspension of trading on NYSE, the 2067 Notes and 2068 Notes were quoted on the Pink Limited Market. The over-the-counter markets are significantly more limited than NYSE. Quotation on the Pink Limited Market could result in a less liquid market for existing and potential holders of our 2067 Notes and 2068 Notes and could further depress the trading price of our 2067 Notes and 2068 Notes. We can provide no assurance as to whether broker-dealers will continue to provide public quotes of our 2067 Notes and 2068 Notes on the over-the-counter markets or whether trading volume will be sufficient to provide for an efficient trading market.\n\nNYSE filed a Form 25 for us on May 4, 2026 in connection with the delisting of our 2067 Notes and 2068 Notes from NYSE and the delisting became effective April 24, 2026. In accordance with Rule 12d2-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the deregistration of our 2067 Notes and 2068 Notes under Section 12(b) of the Exchange Act will become effective 90 days after the date the Form 25-NSE is filed.\n\nI-19\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nStrategies and Challenges\n\nThe goal of QVC is to extend its leadership in video commerce, e-commerce, streaming commerce and social commerce by continuing to create some of the world’s most engaging shopping experiences, combining the best of retail, media, and social, highly differentiated from traditional brick-and-mortar stores or transactional e-commerce. QVC provides customers with curated collections of unique products, made personal and relevant by the power of storytelling. We curate experiences, conversations and communities for millions of highly discerning shoppers, and we also reach large audiences, across our many platforms, for our thousands of brand partners.\n\nAs of March 31, 2026 and December 31, 2025, QVC’s net leverage ratio, as calculated under the Credit Agreement, was greater than 4.5 to 1.0. Under the terms of the Credit Agreement, this constitutes a breach of the financial covenant. Without a waiver under the Credit Agreement, the lenders have the right, but not the obligation, to accelerate the loans and demand repayment from QVC for noncompliance with the net leverage ratio debt covenant; however, such acceleration cannot occur until certain conditions are satisfied, including the expiration of a cure period during which QVC may take remedial action to cure the breach.\n\nUnder the indentures governing the QVC Notes, a default under the Credit Agreement will only constitute an event of default under the indentures, and thus trigger the right, but not the obligation, of the noteholders to accelerate the QVC Notes and demand repayment if (i) the Credit Facility has been accelerated, (ii) there is a payment default under the Credit Agreement or (iii) there is a foreclosure on collateral securing the Credit Facility. Accordingly, acceleration of the QVC Notes is not automatic upon a breach of the Credit Agreement covenant; it is contingent upon the occurrence of one of these specified events under the Credit Agreement.\n\nAs a result of the above-noted net leverage ratio and the maturity date of the Credit Facility, outstanding principal associated with the Credit Facility and QVC Notes has been classified as a current liability in the condensed consolidated balance sheet, as of March 31, 2026 and December 31, 2025.\n\nAdditionally, as noted above in Part I, Item 2 under “Overview”, on the Petition Date, commencing the Chapter 11 Cases constituted an event of default that accelerates the Company Parties’ respective obligations under the Debt Instruments. The Credit Agreement and the QVC Notes provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. The exchangeable senior debentures provide that the amount accelerated is the greater of (x) the current principal amount of the exchangeable senior debentures or (y) the market value of the reference shares, plus all accrued and unpaid interest and all pass-through distributions due with respect to the reference shares shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases, and the stakeholders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code, including the Automatic Stay.\n\nAs a result of the risks and uncertainties associated with our Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact or timing of events that occur during our Chapter 11 Cases and the impact that those events will have on our business, financial condition and results of operations. Therefore, there remains substantial doubt about the Company’s ability to continue as a going concern.\n\nOn November 14, 2024 QVC announced the WIN strategy, targeting top-line growth through three central priorities: (i) ‘Wherever She Shops’ - aims to enhance customer interactions across diverse platforms; (ii) ‘Inspiring People & Products’ - fosters rich, engaging content experiences; and (iii) ‘New Ways of Working’ - emphasizes leveraging technology and process enhancements to streamline operations and fuel innovation. With the WIN strategy, QVC plans to broaden content outreach by creating dynamic, purpose-built experiences that resonate across social media and digital streaming channels. By optimizing our production studios and fostering continuous improvement, we envisage content creation as an integrated, efficient process that adapts to various platforms without losing the essence of our brand. We aim to grow audiences and redefine shopping experiences, ensuring that we meet our customers wherever they are while building on our heritage for sustained success.\n\nOn January 29, 2025, the Company announced the consolidation of its QVC and HSN operations at the Company’s Studio Park location in West Chester, PA, and the closing of the St. Petersburg, FL campus. The consolidation is part of QVC’s organizational and strategic changes intended to support the Company’s WIN strategy. As a result, the Company accelerated depreciation related to the closure of the St. Petersburg, FL campus, which was completed as of September 30, 2025. The Company recorded $14 million of incremental depreciation for the three months ended March 31, 2025 related to the St. Petersburg closure. On March 27, 2025 the Company announced a plan to reorganize teams across the Company as part of the WIN strategy, which is intended to increase revenue through growth initiatives while maintaining Adjusted OIBDA\n\nI-20\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nmargin. As a result of the reorganization, QVC recorded $36 million and $21 million of restructuring costs at QxH and QVC International, respectively, during the three months ended March 31, 2025.\n\nIn September 2025, QVC entered into agreements to sell the St. Petersburg properties to independent third parties, and two of these property sales closed in December 2025. As of March 31, 2026, the remaining long-lived assets of $17 million, all within QxH, were included in assets held for sale noncurrent in the condensed consolidated balance sheet. The sale of the remaining property is expected to be completed within by the end of 2026.\n\nTrends\n\nQVC’s future net revenue will depend on its ability to grow through Digital Platforms, retain and grow revenue from existing customers, and attract new customers. QVC's future net revenue may also be affected by (i) the willingness of cable television and direct-to-home satellite system operators to continue carrying QVC's programming service; (ii) QVC's ability to maintain favorable channel positioning, which may become more difficult due to governmental action or from distributors converting analog customers to digital; (iii) changes in television viewing habits because of video-on-demand technologies and internet video services; (iv) QVC's ability to source new and compelling products; and (v) general economic conditions.\n\nThe current economic uncertainty in various regions of the world in which our subsidiaries and affiliates operate has impacted and could continue to adversely affect demand for our products and services since a substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls, to varying degrees, during times of economic instability and inflationary pressures. Economic tensions and changes and uncertainty relating to international trade policies, including, for example, the recent widespread tariffs announced by the U.S. on its major trading partners, higher tariffs on imported goods and materials, actions taken in response (such as retaliatory tariffs or other trade protectionist measures or the renegotiation of free trade agreements), have increased inflationary cost pressures and recessionary fears. In February 2026, the U.S. Supreme Court struck down the sweeping tariffs that the U.S. government had imposed through the executive orders issued pursuant to the International Emergency Economic Powers Act. Shortly thereafter, the U.S. government issued a series of orders to comply with the ruling, while also announcing new temporary tariffs for a 150 day period beginning February 24, 2026. Tariffs and international trade arrangements may continue to change, potentially without warning and to an extent or duration that is difficult to predict. The ultimate availability, timing, and amount of any potential refunds remain uncertain and are subject to further legal and regulatory developments. Global financial markets have experienced and may continue to experience disruptions, including increased volatility and diminished liquidity and credit availability. If economic and financial market conditions in the U.S. or other key markets, including Europe and Japan, continue to be uncertain or deteriorate, QVC’s customers may respond by further suspending, delaying or reducing their discretionary spending. Any further suspension, delay or reduction in discretionary spending could adversely affect revenue. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments decline. Such weak economic conditions may also inhibit QVC’s expansion into new European and other markets. We currently are unable to predict the extent of any of these potential adverse effects.\n\nThe Company has continued to see inflationary pressures during the period including higher wages and merchandise costs consistent with inflation experienced by the global economy. The full impact of recent governmental actions on macroeconomic conditions and on QVC’s business is uncertain, difficult to predict and depends on a number of factors, including the possible eligibility for refunds of previously paid tariffs, extent and duration of tariffs, changes in the amount and scope of tariffs, the imposition of new tariffs and other measures that target countries may take in response to U.S. trade policies, and possible resulting general inflationary pressures in the global economy, as well as the availability and cost of alternative sources of supply for merchandise. If these pressures persist, inflated costs may result in certain increased costs outpacing our pricing power in the near term.\n\nI-21\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nResults of Operations\n\nQVC's operating results were as follows:\n\nThree months ended March 31,\n\n(in millions)20262025\n\nTotal revenue, net$1,769 1,905 \n\nOperating costs and expenses:\n\nCost of goods sold (excluding depreciation and amortization shown separately below)1,180 1,271 \n\nOperating expense137 154 \n\nAdvertising78 63 \n\nSelling, general and administrative (excluding stock-based compensation, advertising, and pre-petition charges)233 232 \n\nAdjusted OIBDA (defined below)141 185 \n\nDepreciation and amortization74 95 \n\n(Gain) loss on sale of assets(10)— \n\nPre-petition charges21 — \n\nStock-based compensation— 4 \n\nRestructuring benefits (costs)\n— 57 \n\nOperating income (loss)56 29 \n\nOther (expense) income:\n\nInterest expense(76)(64)\n\nInterest income11 4 \n\nOther income (expense)1 (4)\n\n(64)(64)\n\nEarnings (loss) before income taxes(8)(35)\n\nIncome tax (expense) benefit(8)2 \n\nNet earnings (loss)(16)(33)\n\nLess net earnings (loss) attributable to the noncontrolling interest9 9 \n\nNet earnings (loss) attributable to QVC, Inc. shareholder$(25)(42)\n\nTotal revenue, net\n\nTotal revenue, net by segment was as follows:\n\nThree months ended March 31,\n\n(in millions)20262025\n\nQxH$1,231 1,368 \n\nQVC International538 537 \n\n   Consolidated QVC$1,769 1,905 \n\nQVC's consolidated total revenue, net decreased $136 million or 7.1% for the three months ended March 31, 2026, as compared to the corresponding periods in the prior year. The three month decrease in total revenue, net is primarily due to an 8.7% decrease in units shipped attributable to QxH and to a lesser extent QVC International. The decrease to total revenue, net was partially offset by a $46 million decrease in estimated product returns primarily at QxH and to a lesser extent QVC International.\n\nI-22\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nDuring the three months ended March 31, 2026, the changes in revenue and expenses were affected by changes in the exchange rates for the Euro, the U.K. Pound Sterling, and the Japanese Yen. In the event the U.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected.\n\nIn discussing our operating results, the term “currency exchange rates” refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. Dollar. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the prior period's currency exchange rates. We refer to the results of this calculation as the impact of currency exchange rate fluctuations. Constant currency operating results refer to operating results without the impact of the currency exchange rate fluctuations. The disclosure of constant currency amounts or results permits investors to better understand QVC’s underlying performance without the effects of currency exchange rate fluctuations.\n\nThe percentage change in net revenue for each of QVC's segments in U.S. Dollars and in constant currency was as follows:\n\nThree months ended March 31, 2026\n\nU.S. DollarsForeign Currency Exchange ImpactConstant Currency\n\nQxH(10.0)%— %(10.0)%\n\nQVC International0.2 %4.8 %(4.6)%\n\nFor the three months ended March 31, 2026, QxH's total revenue, net decline of $137 million or 10.0% was attributable to a 12.4% decrease in units shipped. This decline was partially offset by a $41 million decrease in estimated product returns and a 1.6% increase in average sales price (“ASP”).\n\nFor the three months ended March 31, 2026, QVC International's total revenue declined $25 million, or 4.6% in constant currency primarily due to a 2.8% decrease in ASP attributable to all markets with the exception of Italy and a 1.8% decrease in units shipped across all markets. This decline was partially offset by a $5 million decrease in estimated product returns attributable to Germany and Japan.\n\nCost of goods sold (excluding depreciation and amortization)\n\nQVC's cost of goods sold (excluding depreciation and amortization) as a percentage of total revenue, net was 66.7% for each of the three months ended March 31, 2026 and 2025.\n\nOperating expenses\n\nQVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees and TV distribution expenses. Operating expenses were 7.7% and 8.1% of net revenue for the three months ended March 31, 2026 and 2025, respectively. The decrease was driven by lower commissions and lower personnel costs.\n\nAdvertising\n\nQVC recorded $78 million and $63 million of advertising expenses for the three months ended March 31, 2026 and 2025, respectively. QVC’s advertising expenses increased $15 million or 23.8% for the three months ended March 31, 2026, as compared to the corresponding period in the prior year. The increase was primarily driven by marketing investments on social and streaming platforms at QxH.\n\nSelling, general and administrative expenses (excluding stock-based compensation, advertising, and pre-petition charges)\n\nQVC's selling, general, and administrative expenses (excluding stock-based compensation, advertising, and pre-petition charges) include personnel, information technology, production costs and the provision for doubtful accounts. QVC's selling, general, and administrative expenses (excluding stock-based compensation, advertising, and pre-petition charges) was 13.2% of total revenue, net for the three months ended March 31, 2026, as compared to 12.2% of total revenue, net for the three months ended March 31, 2025.\n\nI-23\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nThe increase in expense for the three months ended March 31, 2026 was driven by increases in consulting costs of $5 million and an increase in bonus expense of $10 million related to changes in the incentive strategy plan previously announced and disclosed in the Company's 2025 Form 10-K. The increase in expense was partially offset by a reduction in personnel costs driven by the reorganization of teams across the Company as part of the WIN strategy announced at the end of the first quarter of 2025.\n\nDepreciation and amortization\n\nDepreciation and amortization consisted of the following:\n\nThree months ended March 31,\n\n(in millions)20262025\n\nProperty and equipment depreciation$15 34 \n\nTotal depreciation15 34 \n\nCustomer relationships amortization12 12 \n\nTelevision distribution right amortization17 17 \n\nSoftware amortization30 32 \n\nTotal amortization59 61 \n\nTotal depreciation and amortization$74 95 \n\nThe decrease in depreciation for the three months ended March 31, 2026, was primarily due to the St. Petersburg, FL campus and associated assets that are held for sale including $14 million of accelerated depreciation recorded during the three months ended March 31, 2025.\n\n(Gain) loss on sale of assets\n\nQVC recorded a $10 million gain on sale of assets for the three months ended March 31, 2026, primarily related to the sale of a property in Germany.\n\nPre-petition charges\n\nPre-petition charges consist primarily of professional fees related to, and incurred prior to, the filing of Chapter 11 Cases. QVC recorded $21 million of pre-petition charges for the three months ended March 31, 2026. These charges relate to legal, financial advisors, and other professional fees incurred in connection with the Chapter 11 Cases.\n\nStock-based compensation\n\nStock-based compensation includes compensation related to options and restricted stock granted to certain employees, directors and officers. QVC recorded $4 million of stock-based compensation expense for the three months ended March 31, 2025. As previously disclosed in the 2025 10-K, during the prior year the company canceled primarily all of the stock-settled and cash-settled RSU awards granted during 2025, resulting in no stock based compensation expense in 2026.\n\nRestructuring (benefits) costs\n\nFor the three months ended March 31, 2025, QVC recorded $36 million and $21 million of restructuring costs at QxH and QVC International, respectively, resulting from the announced plan to reorganize its teams across the Company as part of the WIN strategy.\n\nInterest expense\n\nFor the three months ended March 31, 2026, interest expense increased $12 million, as compared to the corresponding period in the prior year. The increase in interest expense is primarily due to higher outstanding debt during 2026.\n\nInterest income\n\nFor the three months ended March 31, 2026, interest income increased $7 million, as compared to the corresponding period in the prior year. The increase in interest income is primarily due to increases in invested cash balances during the year, although at lower interest rates on invested cash balances compared to the prior year.\n\nI-24\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nOther income (expense)\n\nOther income (expense) is primarily related to foreign exchange gains and losses. Certain loans between QVC and its subsidiaries are deemed to be short-term in nature, and accordingly, the translation of these loans is recorded in the condensed consolidated statements of operations. The change in foreign currency gain (loss) was due to variances in short-term loans, interest and operating payables balances between QVC and its international subsidiaries denominated in the currency of the subsidiary and the effects of currency exchange rate changes on those balances.\n\nIncome taxes\n\nThree months ended March 31,\n\n20262025\n\nEarnings (loss) before income taxes$(8)(35)\n\nIncome tax (expense) benefit$(8)2\n\nEffective income tax rate(100.0)%5.7 %\n\nOur effective tax rates were (100.0)% and 5.7% the three months ended March 31, 2026 and 2025, respectively. The 2026 rate differs from the U.S. federal income tax rate of 21% primarily due to permanent items and foreign taxes for the three-month period. The 2025 rate differs from the U.S. federal income tax rate of 21% primarily due to state and foreign tax expense and permanent items.\n\nFor the three months ended March 31, 2026, the Company utilized the discrete effective tax rate method, treating the year-to-date period as if it was the annual period to calculate its interim income tax provision, as allowed by Financial Accounting Standards Board Accounting Standards Codification 740-270-30-18, Income Taxes - Interim Reporting which management determined to be more appropriate than the annual effective rate method.\n\nAdjusted Operating Income before Depreciation and Amortization (Adjusted OIBDA)\n\nTo provide investors with additional information regarding our financial statements, we disclose Adjusted OIBDA (defined below), which is a not a U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) measure. QVC defines Adjusted OIBDA as operating income plus depreciation and amortization, stock-based compensation, and where applicable, separately identified impairments, litigation settlements, restructuring (benefits) costs, pre-petition charges (primarily professional fees directly related to, and incurred prior to, the filing of the Chapter 11 Cases), and (gain) loss on sale of assets. QVC's chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate the businesses and make decisions about allocating resources among the businesses. QVC believes that this is an important indicator of the operational strength and performance of the segments by identifying those items that are not directly a reflection of each segment's performance or indicative of ongoing business trends. In addition, this measure allows QVC to view operating results, perform analytical comparisons and perform benchmarking among its businesses and identify strategies to improve performance. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.\n\nI-25\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nThe primary material limitations associated with the use of Adjusted OIBDA as compared to U.S. GAAP results are (i) it may not be comparable to similarly titled measures used by other companies in the industry, and (ii) it excludes financial information that some may consider important in evaluating QVC's performance. QVC compensates for these limitations by providing disclosure of the difference between Adjusted OIBDA and U.S. GAAP results, including providing a reconciliation of Adjusted OIBDA to U.S. GAAP results, to enable investors to perform their own analysis of QVC's operating results. The following table provides a reconciliation of operating income to Adjusted OIBDA.\n\nThree months ended March 31,\n\n(in millions)20262025\n\nOperating income - U.S. GAAP$56 29 \n\nDepreciation and amortization74 95 \n\n(Gain) loss on sale of assets(10)— \n\nPre-petition charges21 — \n\nStock-based compensation— 4 \n\nRestructuring (benefits) costs (note 5)\n— 57 \n\nAdjusted OIBDA - Non-U.S. GAAP$141 185 \n\nQVC Adjusted OIBDA decreased by $44 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease is due to a $30 million decrease at QxH and a $14 million decrease at QVC International.\n\nSeasonality\n\nQVC's business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, QVC has earned, on average, between 23% and 24% of its revenue in each of the first three quarters of the year and between 29% and 30% of its revenue in the fourth quarter of the year.\n\nFinancial Position, Liquidity and Capital Resources\n\nGeneral\n\nThe following are potential sources of liquidity: available cash balances, equity issuances, dividend and interest receipts, proceeds from asset sales, and cash generated by the operating activities of our wholly-owned subsidiaries. Cash generated by the operating activities of our subsidiaries is only a source of liquidity to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted. In general, QVC uses this cash to fund its operations, make capital purchases, expenditures for affiliation agreements with television providers, make dividend payments to QVC Group, make interest payments and minimize the outstanding balance of the Credit Facility. The Company expects that cash on hand and cash provided by operating activities in future periods will be sufficient to fund projected uses of cash, except for any principal amounts of the Debt Instruments, that become accelerated as a result of the Chapter 11 cases, as described above. Additionally, as a result, there remains substantial doubt about the Company's ability to continue as a going concern.\n\nAs of March 31, 2026, substantially all of QVC's cash and cash equivalents were invested in AAA rated money market funds and time deposits with banks rated equal to or above A.\n\nSenior Secured Notes\n\nOn February 18, 2025, QVC repaid the remaining 4.45% Senior Secured Notes due 2025, at maturity, using availability under the Credit Facility and cash on hand.\n\nI-26\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nThe QVC Notes contain certain covenants, including certain restrictions on QVC and its restricted subsidiaries (subject to certain exceptions), with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; and restricting subsidiary distributions.\n\nUnder both the Credit Agreement and the indentures governing the QVC Notes, QVC is permitted to make unlimited dividends to service the debt of its parent entities so long as it is not in default under those agreements and to make certain restricted payments to QVC Group under an intercompany tax sharing agreement (the “Tax Agreement”) in respect of certain tax obligations of QVC and its subsidiaries. As a result of the breach of financial covenant under the Credit Agreement, QVC is no longer permitted to make unlimited dividends to service the debt of its parent entities to QVC Group. QVC can continue to make certain restricted payments to QVC Group under the Tax Agreement in respect of certain tax obligations of QVC and its subsidiaries.\n\nFollowing the commencement of the Chapter 11 Cases, rating agencies have downgraded QVC's credit ratings. These downgrades have adversely affected, and are expected to continue to adversely affect the market prices of its debt securities, its access to capital, or trigger additional collateral or funding requirements or the imposition of financial or other burdensome covenants.\n\nSenior Secured Credit Facility\n\nOn October 27, 2021, QVC entered into the Credit Agreement with CBI and QVC Global Corporate Holdings, LLC (“QVC Global”), each a direct or indirect wholly owned subsidiary of QVC Group, as borrowers (collectively, the “Borrowers”), and the other parties thereto. The Credit Facility is a multi-currency facility providing for a $3.25 billion revolving credit facility, with a $450 million sub-limit for letters of credit and an alternative currency revolving sub-limit equal to 50% of the revolving commitments thereunder. The Credit Facility may be borrowed by any Borrower, with each Borrower jointly and severally liable for the outstanding borrowings. Borrowings bear interest at either the alternate base rate (“ABR Rate”) or a London Inter-bank Offered Rate (“LIBOR”)-based rate (or the applicable non-U.S. Dollar equivalent rate) (“Term Benchmark/RFR Rate”) at the applicable Borrower’s election in each case plus a margin. Borrowings that are ABR Rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% and 0.625% depending on the Borrowers’ combined ratio of consolidated total debt (less cash and cash equivalents) to consolidated EBITDA (the “consolidated net leverage ratio”). Borrowings that are Term Benchmark/RFR Rate loans will bear interest at a per annum rate equal to the applicable rate plus a margin that varies between 1.25% and 1.625% depending on the Borrowers’ consolidated net leverage ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed availability; provided that, if QVC Global or any other borrower (other than QVC) is removed, at the election of QVC, as a borrower thereunder, all of its loans must be repaid and its letters of credit are terminated or cash collateralized. Any amounts prepaid may be reborrowed.\n\nOn June 20, 2023, QVC and QVC Global, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto entered into an agreement whereby, in accordance with the Credit Agreement, LIBOR-based rate loans denominated in U.S. dollars made on or after June 30, 2023 would be replaced with Secured Overnight Financing Rate (“SOFR”)-based rate loans. Borrowings that are SOFR-based loans will bear interest at a per annum rate equal to the applicable SOFR rate, plus a credit spread adjustment, plus a margin that varies between 1.25% and 1.625% depending on the Borrowers’ consolidated net leverage ratio.\n\nOn April 1, 2025, CBI was removed as a borrower under the Credit Agreement. CBI had no outstanding borrowings under the Credit Facility at the time of its removal from the Credit Agreement.\n\nSee Part I, Item 2 under “Strategies and Challenges” for additional discussion regarding the Company's Chapter 11 Cases, noncompliance with the net leverage ratio, as of March 31, 2026 and December 31, 2025 and a discussion regarding the Company’s substantial doubt about its ability to continue as a going concern.\n\nAs a result of noncompliance with the net leverage ratio, no additional borrowings are available under the Credit Facility. The interest rate on the Credit Facility was 5.4% and 6.0% at March 31, 2026 and 2025, respectively.\n\nThe payment and performance of the Borrowers’ obligations under the Credit Agreement are guaranteed by each of QVC’s and QVC Global’s Material Domestic Subsidiaries (as defined in the Credit Agreement), if any, and certain other subsidiaries of any Borrower that such Borrower has chosen to provide guarantees. Further, the borrowings under the Credit Facility are secured, pari passu with QVC’s existing notes, by a pledge of all of QVC’s equity interests.\n\nI-27\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nThe Credit Agreement contains certain affirmative and negative covenants, including certain restrictions on the Borrowers and each of their respective restricted subsidiaries (subject to certain exceptions) with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting the Borrowers’ consolidated net leverage ratio.\n\nParent Issuer and Subsidiary Guarantor Summarized Financial Information\n\nThe following information contains the summarized financial information for the combined parent (QVC, Inc.) and subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC Global Corporate Holdings, LLC; QVC GCH Company, LLC; QVC Rocky Mount, Inc.; QVC San Antonio, LLC; QVC Global Holdings I, Inc.; HSN, Inc; HSNi, LLC; HSN Holding LLC; Home Shopping Network En Espanol, L.P.; Home Shopping Network En Espanol, L.L.C; Ingenious Designs LLC; NLG Merger Corp.; Ventana Television, Inc.; and Ventana Television Holdings, Inc.) pursuant to Rules 3-10, 13-01 and 13-02 of Regulation S-X.\n\nThis consolidated summarized financial information has been prepared from the Company's financial information on the same basis of accounting as the Company's consolidated financial statements. Transactions between the parent and subsidiary guarantors presented on a combined basis have been eliminated. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, such as management fees, royalty revenue and expense, interest income and expense and gains on intercompany asset transfers. Goodwill and other intangible assets have been allocated to the subsidiaries based on management’s estimates. Certain costs have been partially allocated to all of the subsidiaries of the Company.\n\nThe subsidiary guarantors are 100% owned by the Company. All guarantees are full and unconditional and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its U.S. subsidiaries, including the guarantors, by dividend or loan.\n\nSummarized financial information for the year-to-date interim period and the most recent annual period was as follows:\n\nCombined Parent-QVC, Inc. and Subsidiary Guarantors\n\nMarch 31, 2026December 31, 2025\n\nCurrent assets$2,317 2,693 \n\nIntercompany payable to non-guarantor subsidiaries(2,222)(2,274)\n\nNote receivable - related party1,740 1,740 \n\nNoncurrent assets1,744 1,784 \n\nCurrent liabilities5,588 5,906 \n\nNoncurrent liabilities383 405 \n\nCombined Parent-QVC, Inc. and Subsidiary Guarantors\n\nThree months ended March 31, 2026Year ended\nDecember 31, 2025\n\nNet revenue$1,341 6,481 \n\nNet revenue less cost of goods sold554 2,684 \n\nIncome before taxes(33)(2,389)\n\nNet loss(16)(2,127)\n\nNet loss attributable to QVC, Inc. Stockholder(25)(2,168)\n\nI-28\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)\n\nAdditional Cash Flow Information\n\nDuring the three months ended March 31, 2026, QVC's primary uses of cash were $98 million for operating activities, $38 million of capital and television distribution rights expenditures, and $8 million in dividend payments from the Company’s Japanese operations (“QVC-Japan”) to Mitsui & Co. LTD (“Mitsui”). These uses of cash were funded primarily with cash on hand as of December 31, 2025. As of March 31, 2026, QVC's cash, cash equivalents and restricted cash balance was $1,417 million.\n\nThe change in cash provided by operating activities for the three months ended March 31, 2026 compared to the previous year was primarily due to changes in working capital and lower net income. Working capital at any specific point in time is subject to many variables, including seasonality, inventory management, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.\n\nAs of March 31, 2026, $343 million of the $1,417 million in cash, cash equivalents and restricted cash was held by foreign subsidiaries. Cash in foreign subsidiaries is available for domestic purposes with no significant tax consequences upon repatriation to the U.S. QVC accrues taxes on the unremitted earnings of its international subsidiaries. Approximately 30% of this foreign cash balance was that of QVC-Japan. QVC owns 60% of QVC-Japan and shares all profits and losses with the 40% minority interest holder, Mitsui. We believe that we currently have appropriate legal structures in place to repatriate foreign cash as tax efficiently as possible and meet the business needs of QVC.\n\nOther\n\nSubject to Bankruptcy Court approval and the terms of the Restructuring Support Agreement and the Plan, the Company may from time to time repurchase any level of its outstanding debt through open market purchases, privately negotiated transactions, redemptions, tender offers or otherwise. Repurchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.\n\nQVC has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible QVC may incur losses upon the conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that the amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.\n\nCritical Accounting Estimates\n\nThe preparation of consolidated financial statements in conformity with U.S. GAAP requires QVC 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates under different assumptions or conditions. Estimates include, but are not limited to, retail-related adjustments and allowances, depreciable lives of fixed assets and internally developed software, and valuation of acquired intangible assets and goodwill. QVC bases its estimates on historical experience and on various other assumptions that QVC believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions. In addition, as circumstances change, QVC may revise the basis of its estimates accordingly.\n\nThere have been no significant changes to our critical accounting policies and estimates disclosed in our 2025 10-K.\n\nI-29\n\n[Table of Contents](#id5ae62bfbf7a4dcb9af63275483b44a5_7)"}