Nov 9, 2013
Executives
Norberto Aja – Investor Relations Jirka Rysavy – Chief Executive Officer Stephen J. Thomas – Chief Financial Officer
Analysts
Mark Argento – Lake Street Capital Markets George Kelly – Craig-Hallum Capital Group LLC
Operator
Ladies and gentlemen thank you for standing by. Welcome to the Gaiam, Inc.
Third Quarter Results Conference Call. During the presentation all participants will be in a listen-only mode.
Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded today Thursday, November 7, 2013.
I would now like to turn the conference over to Norberto Aja. You may begin, sir.
Norberto Aja
Thank you, operator, and good afternoon, everyone. Thank you for participating Gaiam’s 2013 third quarter conference call.
Joining me today on the call are Gaiam’s Chairman, Jirka Rysavy, Gaiam’s CEO, Lynn Powers and Steve Thomas, Gaiam’s CFO. Following some prepared remarks, we’ll open the call for your questions.
But before we get started, I would like to take a minute or two to read the Safe-Harbor language; the following constitutes the Safe Harbor statement of the Private Securities Litigation Reform Act of 1995. Except for historic information contained herein, the matters discussed in this call today are forward-looking statements and involve risks and uncertainties including, but not limited to general business conditions, integration of acquisitions, the timely development of new businesses, the impact of competition and other risk details from time-to-time as described in the SEC reports.
The risks and uncertainties associated with the forward-looking statements are described in today’s news announcement and in the company’s filings with the Securities and Exchange Commission including the company’s reports on Form 10-K and 10-Q. Gaiam assumes no obligation to publicly update or revise any forward-looking statements.
Today’s call includes non-GAAP financial measures within the meaning of the SEC Regulation G, when required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today’s press release as well as on the company’s website. With that, I would now like to turn the call over to Gaiam’s Chairman, Jirka Rysavy.
Please go ahead.
Jirka Rysavy
Thank you, Norberto, and good afternoon, everyone. Revenue for third quarter which ended September 30 increased 22.8% to $52.8 million.
All 22.8% growth was organic; excluding revenue from the subsequently divested non-brand and distribution business GVE, the revenue for quarter would increase 17.7% organically. Business segment revenue grew 32%.and business segment revenue excluding the revenue from GVE rose 27%.
Direct-to-consumer segment revenue increased 7%. During the same quarter we recorded a gain of $2 million on additional sales Real Goods Solar, following our second quarter sale of 6 million shares for gain of $16.4 million.
We founded Real Goods Solar as our solar subsidiary in 1999, called the unit Gaiam Energy Tech until its IPO and we used the portion of NOL to offset all the taxes from the gains. Net income for the quarter was $0.1 million, $0.01 per share compared to a net loss to $11.2 million, or $0.49 per share for third quarter 2012.
Third quarter 2012 included an accounting flows or loss from our equity met that investment in Real Goods Solar of about [$10 million], mostly driven by the good of our impairment charge. Revenue for nine months increased $18.2 million, or 13.4% to $154 million, excluding contribution from GVE the revenue rose organically 12.0%.
Net income for first nine months was $7.7 million, or $0.34 per share, compared to a net loss of $14.4 million, or $0.64 per share for the first nine months of 2012. In September 30, the Gaiam had a total cash of $10.9 million, this $15.4 million drawn company credit line.
After the end of the quarter, Gaiam devastated its non-branded entertainment media distribution business GVE for $51.5 million plus working capital adjustment. Going-forward Gaiam intends to focus on its branded and wellness business in on Gaiam TV, the company’s video streaming subscription business.
Last week we acquired My Yoga Online, to merge it with Gaiam TV. My Yoga is a video streaming subscription business founded in 2004.
Trailing 12 months revenue from My Yoga was approximately $2.6 million. This is subscription price equal to Gaiam TV, My Yoga is actually perfect complement to Gaiam TV offering.
The consideration paid for the business was approximately, same multiple of 2014 EBITDA as we did receive for sale of GVE. Our video subscription business is progressing nicely.
The conversion rate for trial to subscription continues to be above expectation – our expectation and are running over 70%. Revenue for this month is expected to be about $750,000 driven by about 6,000 exclusive video reliable for streaming.
The operating loss for unit for the quarter was about $1.9 million. We do expect positive contribution from the unit after end of second quarter 2014.
Subsequent to close of the third quarter, we improved our cash position with a sale of GVE and additional proceeds for Real Goods Solar investment. After fully paying down all outstanding borrowings, investing in working capital for our holiday season then acquired My Yoga, we have over $40 million in cash and no debt.
Our CEO, Lynn Powers has spent over 17 years growing the brand in the company, and we need to focus on successor when she retires. Behind process of identifying potential candidates to leads the Gaiam brands to its next stage.
And overall as I said, we’re unlocking value on our balance sheet, streamlining the company’s structure, and reducing expenses. We’re looking forward to leverage in this financial position to grow the company and increase shareholder value.
Going forward, we will focus on operating margin and cash flow from operation. And now I’d like to turn it over to Steve to give you some color – more color on the financials.
Steve?
Stephen J. Thomas
Thank you, Jirka. I’ll spend a few minutes reviewing the financial results in greater detail and offering additional perspective on the performance for the quarter.
Please note, given the timing around the closing of the sale of GVE, our non-Gaiam branded entertainment media distribution business, the financial results included in our press release earlier today as well as most of the results I will be discussing on today’s call, are inclusive of contributions from GVE. Beginning with the income statement, consolidated third quarter 2013 net revenue increased $9.8 million to $52.8 million representing an organic increase of 22.8%, compared to the prior year period.
The increase in our top line was driven by the strong performance of our business segment, which saw net revenue increase over 32% to $35.8 million. Our direct to consumer segment generated 6.7% revenue improvement to $17 million.
Excluding GVE, net revenue increased 27.3% or $5 million in the third quarter, compared to the prior year period. Moving down the income statement, gross profit for the third quarter was $28.7 million or 54.3% of net revenue, compared to $24.1 million or 56% of net revenue in Q3 of 2012.
The decrease in gross margin primarily reflects a decline in our higher margin direct response television marketing business or DRTV revenue combined with increased sales, some lower margin fitness and wellness accessories. For the third quarter, total operating expenses increased to $30 million from $24.2 million in Q3 of 2012.
However, as a percentage of net revenue, these expenses increased only slightly to 56.8% from 56.4%. This relates to an operating loss for the three months ended September 30, 2013 of $1.3 million, compared to an operating loss of $0.02 million in 2012.
The increased operating loss is primarily attributable to the negative earnings comparisons in our DRTV business, as well as higher year-over-year investments in Gaiam TV. As we reported in our press release, we recorded a gain of approximately $2 million on the sale of 1 million shares of Real Goods Solar common stock with a portion of our net operating loss carry forwards being utilized to offset the resulting taxable gain.
Moving to the bottom line, net income for the 2013 third quarter was $0.1 million or $0.01per diluted share, compared to a net loss of $11.2 million or a loss of $0.49 per share for the third quarter of 2012, which primarily reflected an after-tax loss of equity method investment of RSOL of $10.8 million or a loss of $0.48 per share. Looking at our results on a year-to-date basis, net revenue for the first nine months of 2013 increased $18.2 million or 13.4% to $154 million; net revenue for our business segment increased $21 million or 25.8% to $102.4 million, while our direct to consumer segment net revenue decline $2.8 million or 5.5% to $51.6 million due to a $9.8 million year-over-year decline in our revenue from our DRTV business compared to the first nine months of 2012.
Excluding contributions from GVE, overall revenues were organically 12%, while business segment revenues increased 29.5% or $15.7 million, compared to the prior year period excluding GVE. Year-to-date gross profit margin was 54.9% of net revenue, compared to 58.3% in the year-ago period, primarily due to the approximate 39% year-over-year decline in the higher margin DRTV net revenue.
Operating loss for the first nine months was $5 million, compared to $3.4 million last year. The increase in operating loss is primarily a result of the negative earnings comparisons in our DRTV and Gaiam TV businesses and to a lesser degree, certain discretionary expenses including a brand research and positioning study earlier in the year.
Net income for the first nine months were $7.7 million or $0.34 per diluted share, compared to a net loss of $14.4 million or a loss of $0.64 per share for the year ago period. That loss was primarily the result of an after-tax loss on our equity method investment, accounting of Arthur were $11.9 million.
Moving to the balance sheet, we ended the third quarter with $10.9 million in cash and our borrowings under our credit facilities decreased by $16.2 million at December 31, 2012 to $15.4 million at the end of the quarter. In conjunction with the sales of GVE, we fully paid off the borrowings and terminated our credit facility.
Our current ratio at September 30 was 2.0 a metric that continues to reflect the health of our balance sheet and our ability to fund our growth. Subsequent to the year, at end of the quarter we sold GVE for $51.5 million plus customary final true up to working capital, the GVE business represented approximately $50 million of revenue and $12 million of EBITDA to Gaiam over the past 12 months.
After the GVE sale, we expect our current ratio to improve to historical levels that were around $4.5 million. Inventory turn for the third quarter of 2013 were 2.9 times as we get ready for resets with our major customers in Q4.
Taking a brief look at our cash flow statement, we report $13.2 million use of cash in operations for the nine months of 2013. Recall that at the end of Q1 in the prior year, we had just acquired to the Vivendi Entertainment operations and we’re able to utilize the acquired working capital to reduce the acquisition related note in Q2 by $18.7 million, without the cash flow from the acquired working capital, our net cash flow from operations would have been only $0.7 million for the nine months of 2012.
Capital expenditures for the third quarter were $0.9 million comprised of $0.5 million of property additions and $0.4 million of media asssets. Depreciation and amortization was approximately $2.2 million for the quarter.
Looking ahead the historical contributions of GVE will be reported to this discontinued operation allowing us to better align our new business model with our financial reporting. In the meantime, we’re focused on identifying opportunities to realign our resources across the Company to better and more efficiently support the current business and as well as our growth initiatives.
We’ve already identified substantial costs savings and operations efficiencies, which we will look to execute on over the coming months. In addition, we continue to look to monetize some other assets on our balance sheet in order to further improve our financial position and focus on our core growth strategies.
As an example, we’re exploring different ways and we could more efficiently utilize our headquarters, which encompasses approximately 13 acres and 150,000 square feet of office space and/or monetize the value we have in this asset. In summary, we’re pleased with our results for the quarter, as well as for the year-to-date across both of our reporting segments.
We’re also very pleased with the return on investment we generated for shareholders through the sale of GVE, as well as with our continued monetization of our investment in Real Goods Solar, with the proceeds from both the sale of GVE and Real Goods Solar stock and the full pay off of our debt we now have a much stronger balance sheet in the added financial flexibility to invest in and support our core yoga, health, wellness and fitness businesses. With that, I’d now like to turn the call over to Lynn, who will provide some additional detail on the status of the industry and our business.
Lynn?
Lynn Powers
Thanks Steve. Let me begin by announcing some exciting news.
Earlier this week, we acquired My Yoga Online which is the largest online yoga video streaming subscription business in the world with an expansive content library including around a 1000 video titles and an active online community including the large international membership. This was a very attractive acquisition for us on multiple fronts is My Yoga Online reflects our strategy to grow Gaiam by leveraging the tremendous value of our brand in all distribution channels.
The unique resources, we have around Yoga Health and Wellness and our strategic initiatives to grow the business as the unified global brand as well as our state-of-the-art video subscription platform. I’ll now offer some color around the recent results and our plans for the businesses.
Given the recent sale of GVE, our non Gaiam branded entertainment media distribution business, I believe it will be more helpful as we focus the majority of our discussion on Gaiam’s future without entertainment. But first let me begin with the quick review of our recent sale of GVE to Cinedigm for $51.5 million.
Monetizing the value of our entertainment media distribution business has been a key focus for us and we felt this is an approximately time to do so given both the return on investment we achieved and our desire to pursue growth in our core yoga health and wellness as well as our Gaiam TV businesses. Since combining our entertainment media business with Vivendi back in early 2012, we’ve achieved our goal of growing GVE to become the leading independent and second largest overall distributor of non-theatrical content in the U.S.
making GVE a unique valuable and attractive asset that could command a premium valuation in the marketplace. I believe the combined teams at GVE and Cinedigm led by [indiscernible] are well positioned to take that company to the next level.
Going forward, we are focused on growing our two core businesses. Our branded, yoga health and wellness business and Gaiam TV.
Our Gaiam media content products have a presence in over 38,000 retail doors and are also marketed through our branded e-commerce and catalogue platforms. Gaiam TV is our recently launched streaming video subscription business.
We are pursuing multiple opportunities for organic and acquisition related growth in both of these areas. With regards to the business segment, we are pleased to see an $8.8 million net revenue increase this quarter and excluding GVE this segment’s revenue achieved organic growth of 27.3% from last year.
Reflecting the ongoing success of our fitness products and demonstrating our focus on adding categories and expanding our storage and store opportunities so that we can further solidify our leading 39% market share position in the fitness media market. Our category expansion includes wellness products under the Gaiam restore line high end yoga products under the Gaiam sole brand and fitness products under the scribe brand.
Our Gaiam store line is among the top performers that target where we launched a cohesive group of accessories last year. We’ve continued rolling out the restore line through additional retailers this year based on the success we had with restore, we also launched a similar line of products under the SPRI active recovery brand this quarter.
We now have a fourth target that combines our Gaiam restore and SPRI active therapy. By offering array of products we can grow our business through existing retail relationships and offer our retail partners the opportunity to reduce their vendor relationship and benefit from cohesive branding and product displayed.
We currently have about 16,000 stores and store replacements in the U.S. Regarding Gaiam Sole, this brand continues to offer a very compelling higher price alternative to our traditional Gaiam branded product, which are typically priced at mainstream price points.
We’re expanding this line with mats at Dick's Sporting Goods and REI in fourth quarter this year. Given the success of Restore and Gaiam Sole, we will continue to expand and refresh these product lines and look for ways to expand their distribution footprint and visibility with consumers.
Both lines hold a lot of growth potential in terms of SKUs, as well as placement across fitness clubs, sporting goods, grocery and drug stores and e-tailers. In terms of distribution reach, we’re launching product tests with Walgreens in their Zen prototype stores and Meyer.
We're also testing a new category, captain status for yoga at Academy Sports. We continue to enjoy great success with our SPRI Professionals line of workout accessories.
Historically, SPRI has been offered only in the professional gym market. Following a repackaging and repositioning of the brand, we strategically launch the brand into the fitness retail market including placement in Sears and Sports Authority, and recently gained further real estate at Sports Authority as the supplier for cross-training product under the SPRI cross-training brand.
With this growing success including new products such as the recently added SPRI Active Therapy line, which I already mentioned, we believe SPRI has the opportunity to be a leading authority in the consumer, as well as the professional equipment marketplace. We will also continue to solidify this position with new products and equipment design for the cross fit and active recovery market.
In summary, the growth of our fitness business has demonstrated the power of our brands and our broad capabilities as a partner with our retail customers. The high level of acceptance among consumers reflects the added value we offer as a partner to some of the largest retailers in the country.
In fact, revenue from our top 25 accounts in fitness, media and equipment grew by over 55% in the 2013 quarter compared with the third quarter of 2012, and is up over 45% year-to-date. Regarding our direct-to-consumer segment, which includes contributions from our direct response television business, our e-commerce sales, Eco-Travel, and our Gaiam TV digital subscription platform, net revenue increased 7% to $17 million in the third quarter.
As Steve mentioned, some of this growth was tempered by a tough comp versus Q3 of 2012 for DRTV. Without DRTV the direct-to-consumer segment revenues were up 23%.
Our banded catalog and e-commerce initiatives are integral parts of the Gaiam yoga, health and wellness business. As I mentioned in our previous calls, we engaged IDEO, a highly regarded brand positioning company to help us position the Gaiam brand for long-term sustainable growth.
And on the back of this review, we were able to reposition e-commerce business towards proprietary branded, products and apparel. We also completed work on a new web platform, where we’re continuing to update our creative look.
With this platform, we are able to make smaller changes fast and therefore provide Gaiam customers with a more engaging simplified shopping experience. We continue to grow our online assortment offering the unique online only products that complement our core Gaiam product line.
The new website has already enabled us to be even more connected and accessible to our customers including through our mobile friendly design for Apple and Android. We expect to continue to expanding our offering around video, interactivity and mobile devices as these initiatives are a great way to leverage our catalog and e-commerce assets.
Regarding Gaiam TV, we have made significant progress over the past 12 to 18 months in that business, which currently provides over 5,000 exclusive video titles for digital streaming including, sounds, documentaries and original programming dedicated to conscious media, personal growth and spirituality along with the world’s largest online library of Yoga fitness and wellness videos. We continue to do our original programming at the rate of 6 to 10 programs a week, which are subscriber’s favorites.
This is very important this incremental content will be a key catalyst for Gaiam TV to retain subscribers. We continue to focus our efforts on supporting the growth of Gaiam TV as it is our goal to build our brand in the digital world.
For example, we recently launched the Sony Smart TV app including support for 2013 Sony Blu-Ray players. We completed the development of apps for Sony PlayStation as well as Smart TVs from LG, Panasonic and Samsung.
Going forward is online innovations and technology expand that consumers options for how, when and where they may enjoy content, we see Gaiam TV benefiting from these trends in growing its subscriber base. Turning now to our DRTV business.
Last year, we saw very strong performance in the DRTV business on the back of the launch of the Jillian Michaels Body Revolution. So far this year, we have experienced a much lower level of sales that resulted in the $1.3 million net revenue decline in Q3 versus a year ago period for DRTV.
We tested our new Firm branded infomercial last month, and look forward to its launch during the fitness season in 2014. Regarding growth opportunities, we believe the Gaiam brand has many options including more solution based wellness products, online community, apparel and physical locations.
With the strengthening of our balance sheet for monetizing more of our RSOL investment, and the divesture GVE, we now have booked the focus as well as the financial capabilities to grow our core business of Yoga health and wellness in a way we did not have before. As the leader in the expanding Yoga health and wellness markets in armed with brand positioning and brand research, we see some very compelling growth in investment opportunities ahead for us.
As we’ve mentioned before branded fashion has always been an attractive growth avenue for us and we are now confident we’ll have the ability to act on that opportunity. Well keep in mind that this is still very early in the process, our focus will be around launching a mid price point women’s fitness fashion line, focused around Yoga, polities another non-impact activities.
Given our brand awareness among consumers, our longstanding relationship with the fitness studios and our retail partners, we’re still confident we can leverage this opportunity to create a mid priced fashion line that would resonate with consumers and bring to the market a unique and compelling offering. In summary, we’re pleased with what we’ve accomplished so far this year.
We now have a more focused business, stronger balance sheet, double-digit comp growth and an improved operating structure to execute on our growth initiatives and gain market share. With the leadership position in the fast growing Yoga fitness and wellness media and products market, our operating model permits us to further invest in new product development, making important investments in our business to improve the quality of services we provide and persists select acquisitions to advance our product roadmap and expand our market debt.
All this affords us great confidence in our ability to grow our revenue, strengthen our bottom line and generate more value for our shareholders. And before I hand the call over to the operator, I want to briefly make a few comments regarding the future direction of the company, while we will miss the contributions of Bill Sondheim and others who joined Cinedigm as part of the GVE transaction, we have initiated a recruiting process to identify new senior executive personnel who can lead Gaiam into the future and we will update you as these new leaders come onboard over the over the next six to twelve months.
Having been with Gaiam for over 17 years I feel it is also an appropriate time for the company to begin the process of searching for a new CEO, who will lead the company forward when I retire. Well my retirement is not eminent Gaiam is better positioned from a financial brand awareness and strategic focus perspective than ever before to leverage our various brands and expertise in the yoga health and wellness market bringing someone on board who believes in our vision and has the enthusiasm, vision and skill set, to execute on a strategic initiatives for growth will surely be a greater benefit to Gaiam, I could not be more pleased with the foundation we’ve established from which to grow the business and look forward to the rest of my time here.
This concludes our prepared remarks, so I would like to turn the call back to the operator.
Operator
Thank you (Operator Instructions) And our first question is from the line of Mark Argento from Lake Street Capital Markets, you may begin sir.
Mark Argento – Lake Street Capital Markets
Hi good afternoon everybody.
Unidentified Company Representative
Hi Mark.
Mark Argento – Lake Street Capital Markets
I think you mentioned in your prepared remarks that kind of the contributions from GVE is roughly $12 million in EBITDA on a trailing-12-month basis. Could you talk a little bit about how you see – I know you don't provide hard guidance, but how do you see the business now without GVE kind of any type of profit or cash flow goals?
Just trying to get a better feel of how you see the business playing out without GVE on the financial side.
Unidentified Company Representative
Clearly, the divestiture just happen and so there is definitely still some cost right because when we sold the unit Cinedigm obviously pick the parts where they want and paid for that and so we have to deal cost but still, what kind of stayed so we will do it over two months. And so it’s kind of we kind of said before we definitely need to make some kind of restructuring charge for that obviously we don’t disclose, but generally like if you kind of we developed on a go to guidance but you just kind of deduct for kind of people have what Steve mentioned, so that’s how it is going to do, but also you have a positive thing that on EBITDA basis, Gaiam TV probably lost about $8 million, last year or $7 million to $8 million and that will turn to some positive number next year, so that will also offset that deal.
But I think it was – Lynn, do you want to say something?
Lynn Powers
Mark Argento – Lake Street Capital Markets
And the business you sold – so you still are retaining all your fitness video business and all that? That did not go with the acquisition?
Lynn Powers
Absolutely Mark we didn’t sell any of our fitness wellness business nor anything that’s Gaiam branded?
Mark Argento – Lake Street Capital Markets
Got you. Okay.
And then, in terms of the cash, I know you talked a little bit about trying to figure out different ways to deploy it. Do you see more kind of the acquisition along the lines of the one you just did on the online yoga video company, more little tuck-in acquisitions?
Or would you like to do something a little bit more sizeable if you see the opportunity?
Lynn Powers
Well I think we’ve done the branding study and I believe that study pretty, gave us pretty clear direction we want to own the yoga/fitness/wellness business across all platforms and in all categories. So I think it will depend on what acquisitions we see available but certainly something in the apparel space could be a possibility as well as certainly anything in the digital space.
Mark Argento – Lake Street Capital Markets
Sure. And last question for me.
I know you had mentioned kind of a mid-price-point yoga apparel line. Is that a 2014 event?
How far down the road are you in terms of the design work and potentially have a product out to market?
Lynn Powers
We’ve hired the design team and we hired a couple of internal people to work with the design team and we hope to launch for fall or holiday 2014.
Mark Argento – Lake Street Capital Markets
Fantastic. I appreciate it.
Thank you..
Lynn Powers
Thanks Mark.
Operator
(Operator Instructions). And our next question is from the line Mr.
George Kelly from Craig-Hallum Capital Group. You may begin sir.
George Kelly – Craig-Hallum Capital Group LLC
Hi guys, just to follow up on Mark's question, so with the women's apparel line, and owning the sort of category, how important is it to have stores? And will this concept – is it a standalone store or is it kind of within the store-within-a-store concept that you already have developed?
Lynn Powers
I think initially we will go to the retail partners and a store-within-a-store concept. Certainly we believe that physical locations should be part of a long-term strategy for Gaiam but we haven’t identified anything at this time.
George Kelly – Craig-Hallum Capital Group LLC
Okay. And the fall and holiday 2014 launch, that's not dependent on any kind of acquisition?
That's just internal product development you're working on right now?
Lynn Powers
That’s correct.
George Kelly – Craig-Hallum Capital Group LLC
Okay. And then, on the business segment, really strong quarter.
I think you mentioned 55% growth in the top 25 retailers there. So wondering if you could highlight if there's a couple brands within that that have been doing really well, or what's driving that.
Lynn Powers
Yes, absolutely the Gaiam restore brand is doing really well everywhere it’s placed now. We started that a year ago target and now we have expanded it to having products that could consume four-seat, so that’s one of the big drivers in the second is SPRI taking that out into the consumer market from the professionals market started at the end of last year and we are getting great traction with it including a full cross train set at the sports authority.
So those are the two brands and lines that are driving that growth.
George Kelly – Craig-Hallum Capital Group LLC
That's great. That's great.
How early on do you think we are? I know SPRI was – just really last year that you sort of shifted the position of the brand.
But do you think that we can see – I mean, will 2015 or 2014 be similar? Could we see 20% plus growth in 2014, do you think?
Lynn Powers
Uncertain of our lines absolutely we’re right now the SPRI brand is really only in the Sports Authority and Sears. So you can see there is a lot of doors, we can expand that too as well as the Gaiam Restore, we have the opportunity on Restore because there are more wellness product offer the also to go out into the drug and grocery market and we have not penetrated that at all yet.
George Kelly – Craig-Hallum Capital Group LLC
That's great. And then, couple of questions on GaiamTV.
What was the number of subscribers? And then wondering if the breakeven has changed at all now with the My Yoga acquisition, and what that looks like, what that adds on a cost base if the next couple quarters we could expect to see a higher investment in TV with that acquisition.
Unidentified Company Representative
So number of subscribers, it’s 750,000 a months or it mentioned revenue that's probably, it’s probably 70,000 subscribers and for this acquisition I think the it should, it’s definitely a positive to everything obviously there is a little integration cost and also we have to for accounting purposes there is this new GAAP guidance how you confer for acquisitions so we have to establish for the customers and amortize them, so it will take amortization, it will take about nine months. So that basically would kind of skewing it from being profitable a little early but we’ll get profitable when they get – it’s a big chunk when you get amortized for first nine months.
And so we’ll get to profitability about mid-year 2014.
George Kelly – Craig-Hallum Capital Group LLC
Okay. And of those 70,000 subscribers, how many came from the My Yoga acquisition?
Unidentified Company Representative
We don’t we agree with the sellers we are not going to disclose any numbers.
George Kelly – Craig-Hallum Capital Group LLC
Okay. Okay, fair enough.
Unidentified Company Representative
It’s not material transaction for Gaiam.
George Kelly – Craig-Hallum Capital Group LLC
Okay. And then, when you were thinking of looking at My Yoga, what do they offer that's different?
What kind of capabilities do they bring that you didn't have before? And I guess why are you excited to bring them in?
Unidentified Company Representative
First, they kind of the largest Yoga Online training business. They started 10 years ago and obviously getting a content what they build so there is limits about 1000 titles and the relationship is Yoga community, the founders.
I think I’m personally most excited to bring the team in. The founders being an entrepreneur all my life I can’t really appreciate for somebody building something, because there is a lot of people who tried to do it, they never succeed.
And so I think it’s probably from the most, just addition to that scale, because for us, it’s GaiamTV is still a relative startup, we took data out just like 13 to 14 months ago. And not even, and so that would be kind of my personal take, but otherwise it’s just same subscription.
So the companies are perfect match. You just bring them together, they vary.
We build much more robust technology. They have really the penetration on that what we call channel.
And so you might kind of see more of this, kind of whenever you focus a different channel of the Gaiam TV, because that what you built within 10 years and you got communities it’s very hard to replace by just starting from scratch even. We – well known in yoga, we have a lot of content, it’s still, if you have the two strongest company in the market combining in that segment, it will definitely establish the ultimate player.
George Kelly – Craig-Hallum Capital Group LLC
And will they continue to be independently kind of, do you experience there will be independent brands online?
Unidentified Company Representative
No, the founders will within the year kind of, they'll come here and operate from – with our team here, so it will be one unit.
George Kelly – Craig-Hallum Capital Group LLC
But I just mean as far as what I see on the Internet. I'll still be a My Yoga subscriber or a GaiamTV, maybe they'll be some – but they'll be independent sort of…
Unidentified Company Representative
Just for until it show. Just until it’s integrated.
George Kelly – Craig-Hallum Capital Group LLC
Okay, okay, gotcha. And then, on the Real Goods Solar stock, I wasn't sure, you’ve commented on it in the press release, do you guys still own 3 million shares, or did you sell more?
Unidentified Company Representative
End of the quarter – end of the third quarter, we owned roughly about 3 million shares, yes.
George Kelly – Craig-Hallum Capital Group LLC
And did you sell more subsequent to the end of the quarter?
Unidentified Company Representative
When we did a little bit, yes. But we still have some.
George Kelly – Craig-Hallum Capital Group LLC
We still have 3 million shares.
Unidentified Company Representative
No, we don’t have quite 3 million, last time, actually when we have – because there was eroding pick, the snap for our proxy, we own about 1.8 million in that.
Unidentified Company Representative
So, you’re okay, 1.8 million.
George Kelly – Craig-Hallum Capital Group LLC
All right. Thank you very much.
Lynn Powers
Thanks.
Unidentified Company Representative
Thanks, George.
Unidentified Company Representative
Thank you.
Operator
Speakers, we have no further questions at this time. I’ll be turning the call back to you for your closing remarks.
Unidentified Company Representative
We’d like to thank everybody for being with us and hopefully same in the next quarter. Thank you very much.
Operator
Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation.
Have a great evening.