Presentation to MOI Global: October 2, 2020 NOTE: FOR INFORMATION/EDUCATION ONLY • This presentation is for informational and educational use only. Sullimar Capital Group (“S.C.G.”) is NOT a registered investment advisor. S.C.G. is merely a trade name that one family invests under. This presentation is a not an investment recommendation. Nothing in this presentation is investment advice. Investment decisions should be made only after talking to an investment advisor and determining the investment is suitable for a particular portfolio. An investment in Qurate Retail, Inc. carries a substantial amount of risk. • All information in this presentation is opinion based, biased, and requires verification. The intended audience is a group of investment professionals, specifically members of The Manual of Ideas. The author owns shares of Qurate Retail, Inc. and should be presumed to have motivation to increase the company’s share price. 2 NOTE: NOT ADVICE OR SOLICITATION • S.C.G. makes no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness or reasonableness of the information contained in this presentation. Any assumptions, opinions and estimates expressed in this presentation constitute S.C.G’s judgment as of the date thereof and are subject to change without notice. Any projections contained in the Information are based on a number of assumptions as to market conditions and there can be no guarantee that any projected outcomes will be achieved. S.C.G. does not accept any liability for any direct, consequential or other loss arising from reliance on the contents of this presentation. • S.C.G. is not acting as your financial, legal, accounting, tax or other adviser or in any fiduciary capacity. • THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF QURATE RETAIL, INC. OR ANY OTHER COMPANY. 3 What is Qurate? • Qurate Retail Group is comprised of: • QVC • HSN • zulily • Cornerstone Brands • Ballard Designs • Chasing Fireflies • Frontgate • Garnet Hill • Grandin Road 4 Who Does Qurate Serve? • In 2018 and 2019 55% and 44%, respectively, were women between the ages of 35-64. • If you’d like to be overly punitive, you could assume 40% of the customers are older than 60. • Per Social Security Administration, as 65 year old woman currently has 20.45 years of life left. https://www.ssa.gov/oact/STATS/table4c6.html • A key issue is determining how many of those years are spent consuming. • Almost certainly correlated to stock market and wealth effect. 5 Where do those customers spend • Per the Bureau of Labor Statistics, age cohorts total spend differs in the following ways: https://www.bls.gov/opub/btn/volume-4/pdf/consumer-expenditures-vary-by-age.pdf 6 Where do those customers spend • Per the Bureau of Labor Statistics, age cohorts spend in the following ways: https://www.bls.gov/opub/btn/volume-4/pdf/consumer-expenditures-vary-by-age.pdf 7 Where do those customers spend • Per the Bureau of Labor Statistics, age cohorts spend in the following ways: https://www.bls.gov/opub/btn/volume-4/pdf/consumer-expenditures-vary-by-age.pdf 8 What Does Qurate Say about The Customer? • Mostly women; • Above-average income, above- average household wealth, very engaged in life. • More likely to be involved with community, church, hobbies… • Avid shopper. • She shops everywhere. She's more likely to shop every one of the following destinations than the average shopper. 9 How does Qurate Sell? • Fundamentally, Qurate sells through screens. Note: Easy to see “Phone” and laugh. Many of these calls may be customers clarifying what a product is and then placing an order. Remember, customers can’t touch the products. Also creates a feeling of connection when someone dials into QVC or HSN. 10 Isn’t Qurate Tied to the Bundle? • Overwhelmingly, Qurate is tied to the cable bundle. However, they are trying to pivot. • An important distinction here vs. many other companies tied to the bundle is Qurate only generates revenue when a customer takes an affirmative action. There is no passive revenue generation in this entity. 11 Customer Acquisition: Quantity “So every year we add over 2 million new customers, despite the fears of cord-cutting and all the rest and that line has generally been going up over time. We had a bit of a bubble due to a number of good things that happened in 2014 and 2015, but generally a pretty good line.” Source: 2018 Investor Day 12 Customer Acquisition: How “We must have the right products when the customer is searching for it, we must be in stock at all times, and the Qurate analytics team is helping us identify opportunities to maximize this business. In addition, we leverage the group's new performance marketing function. This is a new capability to the business with a key focus on measurement and return on investment.” 13 Customer Acquisition: Who “Well, the interesting thing is that the average age of new customers coming into the businesses has never been younger and the average demographic of the customer base overall hasn't aged a year. I think it's starting to get slightly younger because the business is able to constantly generate a very, very large number of new customers and then get them to behave from a loyalty perspective and a spending frequency perspective largely as older classes of cohorts of customers have behaved.” Source: Stream by Mosaic Interview of a “Former Executive at QVC” 14 Customer Behavior: Engagement “The goal continues to be make sure you distribute yourself everywhere consumers are consuming video. I think that it becomes harder to catch people's eyes, if you will, because it's not flipping through the channels anymore. Ultimately, the distribution team is extremely experienced and has great relationships across the video distribution environment. I believe they can work to get the businesses placed in the right place. Then the question is how do you drive viewership take up. If it’s a download, download and then viewership and engagement. I think that again, it comes down to can you build compelling, relevant programming that's going to be relevant to those people watching each platform.” Source: Stream by Mosaic Interview of a “Former Executive at QVC” 15 The Key To This Business: Super Users – Whichever slide below is accurate demonstrates the importance of a subset of users. Retention matters a lot to the cohort math, which is why both slides are shown. Sources: 2019 Investor Day and Qurate Retail Business Overview found at https://ir.qurateretail.com/static-files/48e91a49-27a7-4ec6- 91b0-994f9f2a8589 Note: The number recast in these slides is a concern. 16 Super User Habit Formation According to an expert interview, Mike George once said consumers watch QVC for 100 hours before making their first purchase. Quantifying the metrics in the previous slide: • 69 Items/year = 5+ items per month • 35 Web Visits Per Month • 1+ per day • May result in conversion 1 of 7 times • 18 Days Per Month Viewing TV Station • How many other businesses are visited every other day? • Flex and Easy Pay offer 0% interest installment payment plan. Creates steady stream of payments and mind share. • Who else uses this to keep sales flowing? AAPL? 17 Customer Behavior: Stability Source: 2018 Investor Day 18 Customer Behavior: Keep It In the Family “What's absolutely impressive to me, as somebody that's been inside the business, is the parity of the customer metrics across market. The average age demographics swings a little bit from market to market, but it's relatively tight. But as far as the customer loyalty metrics and average number of units purchased, revenue coming from repeat customers year in year out, it's just amazing to see how constant those numbers are across the markets. All of that's been disclosed in various investor meetings across the years. It's just one of those things that the model and how QVC operates to build that customer loyalty and takes a customer-centric and a customer-focused view engenders great loyalty from the customer once they decide that QVC is a place that they enjoy spending time with. A retailer they enjoy spending time with in discovering great products, new products, new inventions, and really spending time with. Interestingly enough, the customer views QVC as part of their family. [inaudible] over the hump of retaining that customer from the first purchase the customer behavior is very, very similar.” Source: Stream by Mosaic Interview of a “Former Executive at QVC” 19 COVID is an Opportunity For Qurate: Qurate’s flexible business model helps all parties (customers and suppliers) in this time of need. 20 TV Adaptability A fellow Qurate Retail Shareholder witnessed Qurate pivot its sales approach in real time. According to him, there is a room that monitors incoming calls and engagement. When the host mentions a word like “beach” and the phones ring the person in the control room communicates with the host to let them know that word created engagement. The host can then tailor the sales pitch in real time. 21 Inventory “So all of these businesses, whether it's the Today's Special Value thru QVC to Today's Special for HSN or the Daily Deal of the Day for Zulily, all these businesses are based around getting unique inventory that you can't often get on Amazon, or Walmart, or all the others and/or inventory that is branded and basically driving customers because of the experiential and discovery driver, which is quite different driver to an Amazon or a typical e-commerce company.