FTD Companies' (FTD) CEO Robert Apatoff on Q2 2016 Results - Earnings Call Transcript

| About: FTD Companies, (FTD)

FTD Companies, Inc. (NASDAQ:FTD)

Q2 2016 Earnings Conference Call

August 04, 2016 05:00 PM ET

Executives

Jandy Tomy – Vice President-Finance

Robert Apatoff – President & Chief Executive Officer

Becky Sheehan – Executive Vice President & Chief Financial Officer

Analysts

Linda Weiser – B. Riley

Jim Chartier – Monness, Crespi, Hardt

Anthony Lebiedzinski – Sidoti & Company

Mark Rosenkranz – Craig-Hallum Capital Group

Operator

Greetings and welcome to the FTD Companies Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Ms. Jandy Tomy. Thank you, you may begin.

Jandy Tomy

Thank you. Good afternoon and welcome to the FTD Companies second quarter 2016 earnings conference call and webcast. With me today on the call are Robert Apatoff, President and Chief Executive Officer, and Becky Sheehan, Executive Vice President and Chief Financial Officer.

Before we begin please remember that during the course of this call management may make forward-looking statements within the meaning of the federal securities laws that address the Company's expected future business, financial performance and financial condition. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different than those expressed in our forward-looking statements. In addition to the Company's reports filed with the Securities and Exchange Commission please refer to the text in the Company's press release issued today for a discussion of the risks and uncertainties associated with such forward-looking statements.

Also please note that on today's call management will refer to certain non-GAAP financial measures including adjusted EBITDA, adjusted net income, free cash flow and constant currency comparisons. The Company believes these non-GAAP financial measures provide useful information for investors. Please refer to today's press release for definitions and calculations of these non-GAAP performance measures as well as reconciliations of the non-GAAP performance measures to the Company's GAAP financial results.

Now I'd like to turn the call over to Robert Apatoff, President and Chief Executive Officer.

Robert Apatoff

Thank you, Jandy. Good afternoon everyone and thank you for joining us today.

I will provide a brief overview of our business performance and initiatives and following my comments our CFO Becky Sheehan will review our financial results and outlook for 2016 in more detail. Finally, I will provide a few closing remarks and then we will open up the call to take your questions.

I want to start by highlighting the three key pillars we've discussed in a previous earnings calls this year as they continue to be the foundation of how we look at the FTD business. First, we remain focused on profitability and cash flow. Although profitability was down in the second quarter, it exceeded our expectations and we grew our consolidated EBITDA margin.

We remain on track in our multiyear integration and synergy realization plan. We have accomplished a great deal in the last year and a half and we will build upon these successes as we continue our integration work. We have several important projects underway, including the consolidation of our multiple technology platforms.

Thirdly, we are remain confident in our ability to deliver future growth and consolidated revenues. We acknowledge that revenue in our U.S. consumer floral businesses have been challenged but we have plans to address this which I will discuss in greater detail in a few minutes.

Now we will spend some time reviewing our business performance for the second quarter. We are pleased with the growth in revenues across our international and florist segments as well as in our gifting brands, particularly in the Easter shift to the first quarter in 2016. However, revenue in our U.S. consumer floral businesses were softer than we expected.

Despite this revenue softness consolidated profitability came in better than our expectations. In addition, I am pleased to report that all of our brands showed growth in average order value in the second quarter compared to the prior year.

In Q2 Mother's Day represents more than half of the quarter's revenue. Our gifting businesses, Shari's Berries and Personal Creations, both grew during the Mother's Day holiday period and for the quarter. However, our U.S. consumer floral brands experienced declines during the holiday period.

In our FTD.com segment the declines were in part due to the softness in our partner programs. The order volume declines in the quarter resulted mostly from reductions from certain corporate partners due to in part, less consumer traffic to those partners and changes by our partners to their marketing tactics. In addition, we shifted some of our group buying order volume from FTD to ProFlowers and Shari's Berries.

In the ProFlowers business while the reduction in revenue was partially driven by the Easter shift the performance was negatively impacted by three factors: first, lower traffic than expected throughout the quarter; second, the cumulative impact of the lower brand engagement attributed to reduce marketing spend; and third, Valentine's Day placement over the past two years. That said, we are pleased with the positive impact our limited incremental Mother's Day TV spend had on our new customer acquisition and brand impressions.

Moving on to our floral segment in the second quarter, the floral segment grew both revenue and profitability. We're pleased with the segment margins which expanded to 29% for the second quarter of 2016 compared to 28% last year.

Our international segment, Interflora, continues to perform well despite the economic challenges the UK has been facing. In the second quarter international revenues grew 5% and profit grew nearly $1 million, excluding fluctuations in foreign currency exchange rates. Interflora expanded their profit margin to 13% compared to 11% last year.

Now I'd like to spend some time reviewing some of our key operating initiatives. Our gourmet foods business recently launched its new birthday product line consistent with our strategies to move the brand into everyday occasions. We have additional new product expansion plans furthering our initiative for the Shari's Berries brand to grow beyond the berry and to further expand our consumer reach and appeal.

With our Personal Creations business we remain on a strong growth path. Our plans continue to include development of proprietary product including photo-based gifting and the continued focused expansion of our RedEnvelope product line. We also plan to grow the B2B side of the Personal Creations business in part by expanding sales of our popular personalization products to our wholesale customers.

Moving on to our U.S. consumer floral businesses, we acknowledge the challenge in revenue growth. We have several strategic initiatives in place which combined with the recent leadership changes that I will discuss in a moment puts us in a much better position to execute on our plans and lift our floral revenue trajectory.

One of our first initiatives is the clear differentiation of our floral brands. True to its history, FTD will focus our consumer messaging on our unique ability to provide premium, handcrafted artisan offerings, same day and worldwide. The FTD brand will emphasize our florist heritage and the handcrafted products that make the gifting experience memorable.

In addition, all florist delivered products will carry the FTD brand. Accordingly, we will be branding the florist fulfilled product offerings on the full flower site as FTD to emphasize that these orders will be filled by the trusted FTD florist network.

For ProFlowers we will return to the heritage of how this great brand was born: great value product, fresh from the fields with an emphasis on simplicity and ease of purchase for our customers. We have several initiatives planned for our floral brands designed to return to our brands to their heritage starting in the back half of this year.

Some examples of ProFlowers initiatives include streamlining and simplifying the purchase path, the introduction of new pricing prepositions, simplification of the ProFlowers product offering to a more curated selection. We will continue to build on our successful and innovative product launches such as perk pairs with our proprietary packaging that allows for a wow customer experience when a recipient opens the beautiful box that contains both the dipped berries and the beautiful floral bouquet. We are very pleased with the initial success of perk pairs and the higher ALVs this new product demands.

We are also pleased with the consumer response to our socially responsible products that align with our customers' core values such as our All Across Africa collection which sold very well this past Mother's Day. In addition, we are continuing our initiative to grow everyday order volume. While these efforts traditionally build over time we've continued to launch new collections like the ProFlowers birthday collection to accelerate this growth.

I will give you some examples of FTD initiatives upcoming. We will be redefining how we market our brand and attract and retain customers. These efforts will include enhancing our popular loyalty program FTD Gold, improving our on-site customer purchase path and launching a click-to-chat help feature.

If you remember, I announced on our last call our focus on the faith-based consumer floral and gifting market and our new partnership with DaySpring, the leading Christian card and services company in the U.S. While it's early we are pleased with the initial reaction within the faith-based community and will be expanding our programs to this market.

And finally, we will be expanding our industry-leading luxury program. We are confident in the initiatives underway in our U.S. consumer floral business. And while they may take some time to gain the necessary traction to materially impact results we believe these initiatives represent sustainable changes to the business that will help deliver long-term growth.

In addition, as we address the customer experience we will leverage the success we have had with our Interflora business in the UK. We have been implementing customer-focused strategies in the UK market over the past several years which resulted in enhanced customer satisfaction scores, lower refund rates and higher customer repeat purchase. We are confident that we can transfer these learnings and actions to our U.S. businesses.

So accordingly, I have made several important organizational changes to bring the experience needed in to ensure that we can quickly move forward to execute these new initiatives. First, I have promoted Rhys Hughes who has served as President of our Interflora business for the past eight years to also be President of Global Consumer Floral. Rhys will now oversee the Interflora, ProFlowers and FTD.com businesses as well as manage the operations and customer service functions. We also promoted Helen Quinn who had been General Manager of the Interflora Consumer business to Executive Vice President of our U.S. Consumer Floral businesses reporting in to Rhys.

In addition, as a part of the organizational changes to ensure proper focus is given to our growing gifting businesses we have promoted Eric Vratimos who has been running our Personal Creations business to the position of Executive Vice President of Gifting where he will lead the gourmet foods, Personal Creations and Sincerely brands. I have confidence in these initiatives underway led by our new leadership team to execute and drive solid financial performance and help increase shareholder value over the long term.

And with that overview I'd like to turn the call over to our CFO Becky Sheehan.

Becky Sheehan

Thanks, Rob, and thank you everyone for joining us on the call today. As Rob mentioned I will provide further detail on our second quarterfinancial results and review our full-year outlook.

Consolidated revenues for the second quarter were $338.6 million versus $365.8 million last year. As previously discussed our revenues were negatively impacted by the shift in Easter to the first quarter in 2016 from the second quarter in 2015.

Our Provide Commerce and Consumer segments reported year-over-year revenue declines in the second quarter. These declines were partially offset by increases in revenues for both the florist and international segments excluding foreign currency fluctuations. Changes in foreign currency exchange rates negatively impacted the 2016 second quarterrevenue by $2.3 million.

Net income was $12.1 million for the second quarter of 2016 compared to net income of $17.8 million for the second quarter of 2015. Adjusted net income for the second quarter of 2016 decreased $1.7 million to $23.8 million compared to $25.5 million in 2015. Adjusted EBITDA for the second quarter was $45.4 million, or 13.4% of consolidated revenues as compared to $47.5 million, or 13% in the prior-year period.

I will now review our second quarter segment performance. Consumer segment revenues for the second quarter of 2016 decreased 6.9% to $90.9 million compared to $97.7 million last year. This decline was driven by an 8.9% decline in consumer orders partially offset by a 2.1% increase in average order value to $70.18.

Consumer segment operating income was consistent with the prior-year quarter at $10.9 million. We saw margin expansion to 12% for the second quarter of 2016 compared to an 11.1% margin in 2015. These results demonstrate our ongoing attention to cost management during the quarter.

Provide Commerce segment revenues were $176.5 million, 10.2% lower than revenues in the second quarter of 2015 of $196.5 million. This decrease was due to a 12.6% decline in consumer orders, partially offset by a 1.9% increase in average order value to $49.78. The decline in revenue is related to a $22 million or 17% decline in ProFlowers business.

On a positive note, the gourmet foods business grew $0.8 million or 2% and our Personal Creations business grew $1.3 million or 7%. Also our Sincerely business, which is focused on engagement of consumers through development of mobile applications, grew $0.3 million or 54%. We achieved this growth in each of our gifting businesses despite the Easter shift.

Provide Commerce segment operating income was $22.2 million representing 12.6% margins compared to $26.1 million or 13.3% margin in the prior-year quarter. Florist segment revenues for the second quarter of 2016 increase slightly to $43.4 million as compared to $43.2 million in the prior year. Services revenues increased $0.8 million, offset by a $0.6 million decrease in product revenue.

Florist segment operating income was $12.6 million compared to $12.1 million for the second quarter of 2015. Segment margins expanded to 28.9% for the second quarter of 2016 compared to 28.1% last year. Average revenue per member increased 8.3% to $3,742 compared to $3,456 in the second quarter of 2015.

International segment revenues for the second quarter of 2016 increased 5.2% on a constant currency basis to $33.4 million. International segment average order value was $50.41, representing an increase of 4.4% in constant currency. Consumer orders increased slightly in the period.

International segment operating income was $4.3 million, representing an increase of $0.7 million on a constant currency basis. Operating income margin expanded to 12.8% in the current period compared to 11.3% in the prior-year period.

Now focusing on our balance sheet and cash flow. Cash flow from operating activities for the six-month period ending June 30, 2016 decreased $3.3 million to $24.1 million.

Our free cash flow for the six-month period ended June 30, 2016 was $18.4 million compared to $30.6 million in the prior year. Free cash flow declined primarily due to a reduction in EBITDA, timing of settlements of stock repurchases, certain working capital adjustments settled through purchase accounting last year and other changes in payments to vendors and employees.

Cash and cash equivalents were $56.1 million compared to $57.9 million as of December 31, 2015. Debt outstanding at June 30, 2016 was $290 million compared to $300 million at the end of 2015 excluding debt issuance cost. The reduction in debt represents the mandatory $5 million quarterly amortization of our term loan.

As a reminder, in March the Board approved a new share repurchase program authorizing the Company to repurchase up to $60 million of stock of the next two years. The Company repurchased 300,000 shares as of June 30, 2016 at an aggregate cost of $8.2 million. In addition, the Company continued buying in the third quarter and has now repurchased 450,000 shares year-to-date under this program for a total cost of $12 million.

And now turning to our annual outlook, we are updating our 2016 guidance which is as follows. We expect consolidated revenues in 2016 to be down 5% to 7% compared to our revenues for 2015 of $1.22 billion. Based on the assumption that the British pound to U.S. dollar exchange rate will be $1.26 in the remainder of 2016 compared with $1.53 in 2015, consolidated revenues for the full-year 2016 will be negatively impacted by approximately $20 million, or 2%, and consolidated adjusted EBITDA for 2016 will be negatively impacted by approximately $2.5 million.

Keep in mind that what we originally assumed was a $1.43 exchange rate in our initial 2016 outlook. This change in exchange rate assumptions lowered our 2016 consolidated revenue guidance by an incremental $9 million or 2% on our second-half revenue and our consolidated adjusted EBITDA guidance by $1 million.

In addition, our relationship with one of our sympathy partners ended in July. We take great pride in the program we built with them but we are focused on profitable partner relationships. This will have a negative impact of approximately 1% on our second-half revenue.

We expect consolidated adjusted EBITDA of approximately $121 million to $126 million, representing margin expansion to 11% compared to 2015 margin of 10%. We expect net income of approximately $4 million to $8 million and we expect cash taxes to be approximately $20 million. We continue to be on track to achieve $25 million in cost synergies by the end of 2017.

Our guidance includes realization of $12 million in incremental cost synergies in 2016. In addition, it's important to note that our cash flows are also seasonal. While we may not generate positive cash flows in every quarter, we expect to generate significant free cash flow on an annual basis.

That concludes our financial overview. I will now turn the call back to Rob for a few closing remarks.

Robert Apatoff

Thanks, Becky. We are excited about the additions we have made to our leadership team and we are confident in our ability to tackle the challenges facing our U.S. consumer floral businesses and continue the momentum with our international florist and gifting businesses. We believe we are well-positioned for future growth and enhancement of shareholder value.

That concludes our prepared remarks. We are now available for your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Linda Weiser of B. Riley.

Linda Weiser

Hi, so in terms of the sales decline in the quarter, it seems that there was some execution issues in the first quarter with Valentine's Day and that you said you had learnings from those issues that occur. So I'm just trying to get at is this a continuation of some of the execution issues that occurred in the first quarter or are these different issues? And if you had to hone in on just really one thing that was so much below what you would have expected, is it the partnership traffic so the partnership shortfall, is it that, or is it something else that you would have to point to as really the primary cause for the sales shortfall?

Robert Apatoff

Hi, Linda. It really depends on the business. On FTD it was primarily some of the changes in partnership programs where partners, as you can imagine, there are e-commerce businesses that evolve their tactics and strategies and some putting what they call contact strategies where they restrict flow from all their partnerships to their customers. So that clearly had an impact on the FTD business.

Regarding the ProFlowers business, I guess I would say as you know in 2015 we were really focused on improving profitability in the Provide business and we spent differently and we are intent on looking at first-quarter profitable orders. In 2016 as we look forward we are looking forward to spending differently and potentially adjusting that spend, but clearly as we looked at this and we looked at the impact of several different items as I talked about as far as being out in the marketplace and brand traffic, those are things we will look at picking up in the future, obviously with an eye on profitability but obviously a little bit differently than we are currently doing.

Linda Weiser

So in terms of the partnership revenue, what percentage of that is that for your core FTD consumer segment of your floral revenue? What percent is partnership?

Becky Sheehan

Linda, partners to us today it's an important part of our revenues. It's not most of it but it certainly is a significant portion of our consumer revenues, FTD.com revenues.

Those are programs that we've built up over time that include a very significant number of corporate partners, airline programs, hotels, travel and a variety of others. So it's a fairly important part of our business but it's certainly less than half of it.

Linda Weiser

And in terms of the SCI partnership, one of the things that I guess was highlighted was that they were seeking somebody who had a broad portfolio including many food gifting items because that's the fastest growing part of sympathy is food gifting. So I'm just thinking partnership is important for you and you've lost one important partnership.

Can you think of other ones that might be at risk because of this sort of lack of broadness in your portfolio that you're big in floral but not so much in other areas? Is there any other partnerships that you feel could be at risk?

Robert Apatoff

No, Linda. I think this is an isolated incident. We take great pride in the relationship we've built with that sympathy partner.

We had a great relationship. When the partnership ended we were at all-time highs in growth and conversion and profitability. But ultimately these relationships have to be mutually rewarding and profitable, and we weren't willing to do certain things but we enjoyed an excellent relationship with them and we built a great program.

We do have, if you look at that business floral is the vast, vast, vast majority of the sympathy orders that we take in. And we had, as you know, between Shari's Berries and Personal Creations we have a wide variety of gifting options that they can use. I won't get into all the details of it but no, we have very healthy partner relationships, long-term, this past one was six years, we haven't lost a sympathy partner in our partnership group for about eight years since I've been here.

Linda Weiser

And I would think that the negotiations of the talks with SCI could have begun as early as early in the calendar year. Were you are aware that there was a possibility you could lose that partnership when you gave guidance for 2016?

Robert Apatoff

We've had that relationship, Linda, for six years. It's come and go. The majority of our relationships are long-term relationships that are very healthy and continually renew and we renew them. So it's nothing out of the ordinary from what we usually see.

Linda Weiser

Okay, so just to put things to a cadence as the year progresses, I haven't worked out the math but what does that imply then for sales growth in the third and fourth quarter? Does it imply it has to be up in terms of the sales and do you think third quarter will be a little less bad and then fourth quarter again less bad or how does the cadence go do you think?

Becky Sheehan

So what the guidance implies is that we do have improvement in trendlines with the businesses our floral brands. Again, if you remember the comments from our results, Linda, we do have businesses that are growing. And our gifting businesses, in particular, we do expect them to continue to grow in the back Of the year as they have in the first part of the year.

Our floral brands we are anticipating that as we move forward with the initiatives that Rob described we will get better traction on those as we get to the latter part of the year. Now as we look at what's left in terms of the back half, the fourth quarter is really the most significant part of the back half of the year. Of course, it's very Christmas-oriented across the brands.

The third quarter, as you know, is a non-holiday period. And while the everyday business is important, this is a period of time where we're really planning for the fourth quarter and then looking forward into 2017.

Linda Weiser

And I remember the original plan was that ProFlowers could have some sales growth in the second half. I would assume is that kind off the table now and that's pushed out into 2017 when we think ProFlowers could grow?

Becky Sheehan

Yes, that's right. So the initiatives that we have in place for Pro we think are going to take a bit longer to get some traction. And we're looking for growth to come beyond 2016.

Linda Weiser

And then finally, just in terms of your cash flow outlook, is that a commensurate reduction in line with the EBITDA reduction or are you still looking for roughly $80 million or free cash flow for the year?

Becky Sheehan

We're expecting that cash flow, Linda will be reduced by the reduction in the adjusted EBITDA. And the other thing that I would point to his remember in our current year guidance we're also expecting a bit higher CapEx this year than we had actually incurred last year. But, yes, I do think cash flow will come down as EBITDA comes down.

Linda Weiser

Okay, thanks very much.

Robert Apatoff

Thanks, Linda.

Operator

Our next question comes from Jim Chartier with Monness, Crespi and Hardt.

Jim Chartier

Thanks for taking my questions. First, I was just curious are the partnership programs, how does the profitability of those programs compare to the rest of your business?

Becky Sheehan

Jim, it depends on the program across all of our portfolio of marketing channels, quite frankly, so partners in the mix just like the other channels as well. So by that I mean when we purchase a paid on known brand search those orders are not as profitable as an order that we get through our retention channel or through one of our brand impressions, if you will, customers that come to us more directly that way. Our partner programs, there's a variety of different programs and I would say it depends on the program in terms of their profitability as well.

Jim Chartier

Okay. I hear you've done a good job managing profitability despite lower than expected sales. Can you call out anything specific you've done on the expense side to mitigate the sales impact on EBITDA?

Becky Sheehan

I would say it's across the board, Jim, in terms of our approach to cost management. So it's everything from re-looking throughout the year at our vendor relationships and trying to determine ways to be more efficient with our spend. It's consolidating vendors.

It's things like in our marketing programs where between our two floral brands in the U.S. we are doing much more collaboration to get some efficiencies and so we're not competing against each other. We do see that continuing to help us be good from a cost management perspective.

We have done some things around our distribution centers that we've talked about on other calls. We continue to look at things around being very efficient and making sure our structure is rightsized for the business today but also as we look forward. So I would say it's really across the board in terms of how we approach it.

Jim Chartier

Okay. Then you talked about bringing some of the best practices from the UK over to the U.S.. When will most of that be felt by the business? Is that mostly a 2017 impact or is it gradual over the back half?

Robert Apatoff

Hi Jim. The management team is in place over here and so we do think that, obviously, we're moving quickly to institute some of our technology that will take longer as we look at streamlining things in the purchase path and other things.

But as we look at the way we have focused that business on the customer and the UK market and we see the response that we've received, including and probably as importantly as anything, the repeat purchase rate we are excited about what that holds in store. I think we're going to look at starting to feather some of these in the back half, but the majority I think will come in early 2017 and beyond.

Jim Chartier

Thanks and best of luck.

Robert Apatoff

Thank you.

Operator

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

Anthony Lebiedzinski

Yes, good afternoon and thank you for taking the questions. So, first, just wanted to see, just check in, so since your first-quarter call what have been the incremental partner programs if any that you have added? Obviously we read you guys discussed the SCI deal, but just wondering if there had been any incremental partnership additions since your Q1 call in May?

Becky Sheehan

So we are working on new proposals around partnership arrangements I would say on a regular basis. That happened since our last call. That happened throughout the year and, quite frankly, it's happened on a regular routine basis.

We are fortunate we have a dedicated team whose really role is not just managing existing relationships but also looking for those next new opportunities. So we have been successful with securing a few other corporate partners that we are very excited about. And I don't think typically we've named all those but there have certainly been some, Anthony, that we're pretty excited about having in the portfolio as we look forward.

Robert Apatoff

And I will add, Anthony, that as we look – we have I would say the widest selection of partnerships out there. We have either exclusive or preferred relationships with all the big airlines, with USAA, with other people as well, that is the cream of the crop of partnerships.

We also added in UPS, as well. So we are really pleased with our partnerships.

Anthony Lebiedzinski

Okay, that's good to hear and thanks for that clarification. As far as ProFlowers, Rob, you talked about some new pricing propositions if I heard correctly and simplifying of the assortment. So what's the expected timing of that? If you could just give us some more details about that that would be great.

Robert Apatoff

Well, as I said before the team, the new leadership team is in place on the floral business. We are looking at this stuff in the third and the fourth quarter. I assume we will see some of this by Christmas and we will and obviously into 2017.

Anthony Lebiedzinski

Got you. Okay, and then just wondering how has the international segment done in the UK since Brexit? If you could obviously we know about the FX headwinds, but as far as the performance of that segment in local currency, if you could just give us an update that would be great.

Becky Sheehan

Anthony, the business is still doing well. Certainly the Brexit announcement has caused this cloud of uncertainty that exists not just in that UK economy but I would say more broadly as you know than that.

So for now knock wood, if you will, that business is still holding strong and Interflora is a really strong brand in that marketplace. We continue to be very optimistic about what we will do over there.

Anthony Lebiedzinski

Got it. And then lastly, just a quick housekeeping question as I look at the reconciliation of your net income and adjusted net income the litigation charges and transaction-related costs, are those embedded in your G&A expenses?

Becky Sheehan

Yes, those are in our G&A expenses and the transaction-related cost, just for clarity, is more around integration. It's integration expenses at this point, but that's how we've defined the term transaction. So, yes, they are embedded in G&A.

Anthony Lebiedzinski

Okay, thanks so much.

Becky Sheehan

Thank you.

Operator

Our next question comes from Mark Rosenkranz of Craig-Hallum Capital Group.

Mark Rosenkranz

Hi, good afternoon everyone. Thanks for taking my questions.

Robert Apatoff

Hi, Mark.

Mark Rosenkranz

So most of my questions have been covered so thank you for the detail you've provided today. Just wondering if you could talk a little bit on the B2B relationships. In terms of the guidance, how much of that are you incorporating in terms of any future arrangement as well as some recently signed deals you've had? And just kind of the competitive environment around some of these B2B opportunities.

Robert Apatoff

Well, I can't quantify but I can tell you that we have, especially in our Personal Creations business and our Shari's business, we have real opportunity I believe. Personal Creations have a multiyear relationship we're expanding that we want to expand. We are one of the biggest wholesalers in the country and we hope to expand that into other wholesale.

As far as B2B we think we have already seen some success with Shari's Berries looking at the B2B market. And we do believe there's a real opportunity for gourmet food and Shari's Berries to drive that.

I guess as I look at this, and I appreciate the questions by the whole group, we really are excited about our future. We continue to be strong operators and focus on profitability. Our financial position is strong.

We have a great Company with fantastic brands and a very talented employee base and our adjusted EBITDA and cash flow give us the flexibility to really allow us to do what we need to do to expand our business whether organically or through acquisitions. So we're very confident about that we have the right strategic initiatives in place and coupled with the changes that I made in the leadership team I really believe we are very well-positioned to drive solid financial performance and increase shareholder value. So your questions are right in line and I hope that we're answering what you need.

Mark Rosenkranz

Absolutely. Great, thank you very much. I appreciate you taking my questions.

Robert Apatoff

Thanks, Mark. Appreciate it.

Operator

We have reached the end of our question-and-answer session. I would now like to turn the call back over to Robert Apatoff for closing remarks.

Robert Apatoff

Thanks, operator, and thank you all for joining us this afternoon. We truly appreciate your interest in FTD. Have a good afternoon.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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