Gaia Inc (GAIA) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Gaiam, Inc. third-quarter results conference call. (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.

Thank you, Operator, and good afternoon, everyone. Thank you for participating in 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 will 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 on this call today are forward-looking statements and involve risks and uncertainties, including, but not limited to, general business conditions, integration of acquisitions, timely development of new business, 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 the Company's website.

With that, I would now like to turn the call over to Gaiam's Chairman, Jirka Rysavy. Please go ahead.

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 nonbranded distribution business, which we call 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 third quarter we recorded a gain of $2 million on additional sales of Real Goods Solar stock following our second-quarter sale of 6 million shares for a gain of $16.4 million. We founded Real Goods Solar as our sole subsidiary in 1999, calling the unit Gaiam Energy Tech until its IPO. And we used a portion of our NOLs to offset all the taxes from the gains.

Net income for the quarter was $0.1 million, or $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 flow-through loss from our equity-method investment in Real Goods Solar of about $10.8 million, mostly driven by the goodwill impairment charge.

Revenue for nine months increased $18.2 million, or 13.4%, to $154 million. Excluding contribution from GVE, 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.

On September 30, Gaiam had total cash of $10.9 million, with $15.4 million drawn on Company credit line.

After the end of the quarter Gaiam divested its unbranded 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 and on GaiamTV, the Company's video streaming subscription business.

Last week we acquired My Yoga Online to merge it with GaiamTV. My Yoga is a video streaming subscription business founded in 2004. Trailing 12-months revenue from My Yoga was approximately $2.6 million. With its subscription price equal to GaiamTV, My Yoga is actually perfect complement to GaiamTV offering. The consideration paid for the business was approximately same multiple of the 2014 EBITDA as we did receive for sale of GVE.

Our video subscription business keeps progressing nicely. The conversion rate for the trial to subscription continues to be above our expectation and running over 70%. Revenue for this month is expected to be about $750,000, driven by about 6,000 exclusive video available for streaming. The operating loss for the 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 the 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, and acquiring My Yoga, we have over $40 million in cash and no debt.

Our CEO Lynn Powers has spent over 17 years growing the brand and the Company and we need to focus for successor when she retires. We are in the process of identifying potential candidates to lead the Gaiam brand to its next stage.

And overall, as I said, we are unlocking value on our balance sheet, streamlining the Company's structure, and reducing expenses. We are looking forward to leveraging 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 more colors on the financials. Steve?

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 that, given the timing around 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 a 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 of 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 led to an operating loss for the three months ended September 30, 2013 of $1.3 million compared to an operating loss of $0.2 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 GaiamTV.

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 carryforwards 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 $0.01 per 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 on 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 declined $2.8 million, or 5.2%, 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 rose 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 the result of the negative earnings comparisons in our DRTV and GaiamTV 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 was $7.7 million, or $0.34 per diluted share, compared to a net loss of $14.4 million, or a loss of $0.64, for the year-ago period. That loss was primarily the result of an after-tax loss on our equity-method investment accounting of RSOL of $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 facility decreased from $16.2 million at December 31, 2012 to $15.4 million at the end of the quarter. In conjunction with the sale 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 end of the quarter, we sold GVE for $51.5 million plus the customary final true-up of 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.

Inventory turns 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 reported $13.2 million use of cash [in] operations for the nine months of 2013. Recall at the end of Q1 in the prior year we had just acquired the Vivendi Entertainment operations and were 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 for 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 assets. Depreciation and amortization was approximately $2.2 million for the quarter.

Looking ahead, the historical contributions of GVE will be reported as 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, as well as our growth initiatives. We've already identified substantial cost savings and operational 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 in which 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 are 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 payoff of our debt, we now have a much stronger balance sheet and 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'll provide some additional detail on the status of the industry and our business. Lynn?

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 1,000 video titles and an active online community, including a large international membership.

This was a very attractive acquisition for us on multiple fronts, as 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 a 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 would be more helpful if we focused the majority of our discussion on Gaiam's future without entertainment.

But first let me begin with a 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 that this was an appropriate 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 GaiamTV 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 nontheatrical content in the US, making GVE a unique, valuable and attractive asset that could command a premium valuation in the marketplace. I believe the combined teams of GVE and Cinedigm, led by Bill Sondheim, 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 GaiamTV. Our Gaiam media content and products have a presence in over 38,000 retail doors and are also marketed through our branded e-commerce and catalog platforms.

GaiamTV 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 regard to the business segment, we're 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 stores 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 Soul brand and fitness products under the SPRI brand. Our Gaiam Restore line is among the top performers at 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 Therapy brand this quarter. We now have a 4-foot section at Target that combines our Gaiam Restore and SPRI Active Therapy.

By offering this array of products, we can grow our business through existing retail relationships and offer our retail partners the opportunity to reduce their vendor relationships and benefit from cohesive branding and product displays. We currently have about 15,000 stores and store placements in the US.

Regarding Gaiam Soul, this brand continues to offer a very compelling higher priced alternative to our traditional Gaiam branded products, 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 Soul, 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 launched 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 products under the SPRI cross training brand.

With its 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 designed for the cross fit and active recovery markets.

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.

A 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 third 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 GaiamTV 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 branded 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 the e-commerce business towards proprietary branded products and apparel.

We also completed work on a new web platform where we are 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 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 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 GaiamTV, 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 films, 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 original programming at the rate of 6 to 10 programs a week, which are our subscribers' favorites. This is very important, as incremental content will be a key catalyst for GaiamTV to retain subscribers.

We continue to focus our efforts on supporting the growth of GaiamTV, 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 and completed the development of apps for Sony PlayStation, as well as smart TVs from LG, Panasonic and Samsung.

Going forward, as online innovations and technology expand consumers' options for how, when, and where they may enjoy content, we see GaiamTV benefiting from these trends and growing its subscriber base.

Turning now to our DRTV business, last year we saw a 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 the 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 from monetizing more of our RSOL investment, and the divesture of GVE, we now have both 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, and armed with brand positioning and brand research, we see some very compelling growth and 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.

While keeping 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, Pilates, and other nonimpact activities. Given our brand awareness among consumers, our longstanding relationship with the fitness studios and our retail partners, we feel confident we can leverage this opportunity to create a mid-price 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, a 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, make important investments in our business to improve the quality of services we provide, and pursue select acquisitions to advance our product roadmap and expand our market depth. 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 wanted 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 join 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 on board over the next 6 to 12 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. While my retirement is not imminent, 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 our strategic initiatives for growth will surely be of great 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'd like to turn the call back to the Operator.

Thank you. (Operator Instructions) 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? 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.

Well, clearly the divesture just happened. So there is definitely still some costs, right, because when we sold the unit Cinedigm obviously picked the parts that they want and paid for that. And so we have to deal with the costs, what kind of stayed. So we will do that over the next two months. And so, as we kind of said before, we definitely need to take some kind of restructuring charge for that. We don't know yet the scope. But generally, like, if you're going to -- we don't want really want to go to guidance, but you just kind of deduct [what kind of people have,] what Steve mentioned. So that's how it's going to do.

But also you have a positive things that on EBITDA basis GaiamTV 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 (inaudible.) Lynn, do you want to say something?

No. We're certainly focused right now, Mark, on a leaner, more efficient structure, which we will announce when we go through our fourth-quarter and full-year earnings. And, as you can see by the healthy growth that we're having, both now in our direct-to-consumer segment and certainly the pretty dramatic comps in our business segment, we also see some nice revenue growth.

And the business you sold -- so you still are retaining all your fitness video business and all that? That did not go with --

Yes.

-- the GVE acquisition?

Absolutely, Mark. We did not sell any of our fitness/wellness business nor anything that's Gaiam branded.

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?

Well, I think we've done the branding study and I believe that study gave us a pretty clear direction. We want to own the yoga/fitness/wellness business across all platforms and on 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.

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?

We've hired the design team and we've hired a couple of internal people to work with the design team. And we hope to launch for fall or holiday 2014.

Fantastic. I appreciate it. Thank you.

(Operator Instructions) George Kelly; Craig Hallum Capital Group.

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?

I think initially we will go to the retail partners and put it into 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.

Okay. And the fall and holiday 2014 launch, that's not dependent on any kind acquisition? That's just internal product development you're working on right now?

That's correct.

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.

Yes. Absolutely. The Gaiam Restore brand is doing really well everywhere it's placed now. You know we started that a year ago at Target and now we've expanded it to having products that could consume 4 feet. So that's one of the big drivers.

And the second is SPRI. Taking that out into the consumer market from the professionals market started at the end of last year. And we're 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.

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 2014 be similar? Could we see 20%-plus growth in 2014, do you think?

On certain of our lines, absolutely. Right now the SPRI brand is really only in the Sports Authority and Sears. So you can see there's a lot of doors we can expand that to, as well as the Gaiam Restore. We have that opportunity on Restore, because they're more wellness products, also to go out into the drug and grocery market. And we have not penetrated that at all yet.

That's great. And then, couple 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 ba- -- if the next couple quarters we could expect to see a higher investment in TV with that acquisition.

So number of subscribers -- you know, it's $750,000 a month already mentioned revenue. It's probably, it's about 70,000 subscribers.

And for business acquisition I think it should -- it's definitely a positive to everything. Obviously there is a little integration cost. And also we have to, for accounting purposes, to -- there's this new GAAP guidance how you account for acquisitions. So we have to establish per the customers and amortize them. So amortization will take about nine months. So that's basically what's kind of skewing it from being profitable early. But we'll get profitable when they get -- it's a big chunk when you've got to amortize for first nine months. And so we'll get to profitability about midyear 2014.

Okay. And of those 70,000 subscribers, how many came from the My Yoga acquisition?

We don't -- we agree with the sellers we're not going to disclose any numbers.

Okay. Okay, fair enough.

It's not material transaction for Gaiam.

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?

First, they're kind of the largest yoga online streaming business. They started 10 years ago. And obviously getting a content, what they built, so there is this -- we mentioned about 1,000 titles.

And the relationship with the yoga community, the founders -- I think I'm personally most excited to bring the team in. The founders -- you know, being an [entrepreneur] all my life, I can really appreciate for somebody building something, because there's a lot of people who try to do it and 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 beta out just like [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 company's a perfect match. You just bring them together. They're very -- you know, we built much more robust technology. They have really the penetration on that, what do you call, channel. And so you might kind of see more of this kind of -- going to be focused a different channel of the GaiamTV. Because [the depth,] what [he] built within 10 years in yoga community is very hard to replace by just starting from scratch. Even we, well known in yoga, we have a lot of content. It's still, you know, if you have the two strongest companies in the market combining in that segment, it will definitely established the ultimate player.

And will they continue to be independently -- the experience -- they'll be independent brands online?

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.

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 --

Just for (inaudible.) Just until it's integrated.

Okay. Okay. Got you. And then, on the Real Goods Solar stock, I wasn't sure -- you commented on it in the press release -- do you guys still own 3 million shares? Or did you sell more?

End of the third quarter we owned roughly about 3 million shares, yes.

And did you sell more subsequent to the end of the quarter?

We did little bit, yes. But we still have some.

You still have 3 million shares?

No, we don't have quite 3 million. Last on -- actually, when we have -- because there was a voting [snap] for a proxy, we own about 1.8 million at that time.

So you -- okay, 1.8 million. All right. Thank you very much.

Speakers, we have no further questions at this time. I'll be turning the call back to you for your closing remarks.

We'd like to thank everybody for being with us and hopefully same in the next quarter. Thank you very much.

Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation. Have a great evening.