QRTE.A – Base Case iCDS 137bps, Negative Case iCDS 237bps, 2025 4.450% Bond YTW of 8.391%, iYTW of 6.771%, CCC+ Rating from S&P, XO- (equivalent to BB+) Rating from Valens, Low Refinancing Need

March 22, 2024

  • Credit markets are materially overstating QRTE.A’s credit risk with a YTW of 8.391% relative to an Intrinsic YTW of 6.771% and an Intrinsic CDS of 137bps. Furthermore, S&P is materially overstating QRTE.A’s fundamental credit risk with its CCC+ credit rating six notches below Valens’ XO- (equivalent to BB+) credit rating
  • Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Specifically, QRTE.A’s metrics should generally drive management to focus on all three value drivers: margin expansion, asset efficiency, and top-line growth, which should lead to Uniform ROA improvement and increased cash flows available for servicing debt obligations. Additionally, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
  • Earnings Call Forensics™ of the firm’s Q4 2023 earnings call (02/28/2024) highlights that management is confident they are revitalizing the customer experience and expanding their market presence through the introduction of new, high-quality inventory. They are also confident they are using e-mail channels to encourage further engagement and purchases from new customers, and that they expect to grow in the out years of Project Athens

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