Gaiam 2012 Fourth Quarter Revenue Rises 20% to $66.7 Million

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Gaiam 2012 Fourth Quarter Revenue Rises 20% to $66.7 Million

- Fourth Quarter Operating Income Improves to $4.0 Million and Adjusted EBITDA Rises to $7.6 Million -

- Full-Year 2012 Revenue Rises 22% to $202.5 Million Inclusive of 10% Internal Growth; Generates Adjusted EBITDA of $12.8 Million and Cash Flow from Operations Improves to $16.5 Million -


BOULDER, Colo.--(BUSINESS WIRE)-- Gaiam, Inc. (NAS: GAIA) , a lifestyle media company, today reported financial results for the fourth quarter and year ended December 31, 2012.

Conference Call: Gaiam is hosting a conference call today, March 18, 2013, beginning at 2:30 p.m. MT (4:30 p.m. ET). The conference call dial-in numbers are (212) 231-2902 or (415) 226-5355. Questions will be reserved for analysts and investors.

2012 Fourth Quarter Financial Results Highlights (Pro forma as if Real Goods Solar, Inc. deconsolidated from 2011)

  • Net revenue increased $11.1 million, or 19.9%, to $66.7 million.
  • Internal net revenue growth was $16.5 million or 10.0%.
  • Gross profit margin improved 700 basis points to 55.3% of net revenue.
  • Operating income increased $2.7 million to $4.0 million (when excluding a 2011 non-cash goodwill impairment charge of $22.5 million), despite a $2.0 million operating loss from Gaiam's start-up digital subscription businesses, a key part of a long-term digital delivery strategy for the Company.
  • Adjusted EBITDA improved by $4.2 million to $7.6 million.

Lynn Powers, Chief Executive Officer of Gaiam, commented, "Gaiam delivered solid revenue, operating income and Adjusted EBITDA growth in the 2012 fourth quarter and full year periods. The improvement in our operating results reflects double-digit internal revenue growth in our business segment and the benefit from our acquisition of Vivendi Entertainment, which together drove year-over-year revenue increases of approximately 20% and 22% in the fourth quarter and full-year periods, respectively, helping to offset the challenges that impacted our direct to consumer segment. Gaiam's fourth quarter revenue growth combined with prudent fiscal management resulted in an increase in cash flow from operations and a more than 100% rise in Adjusted EBITDA compared to the prior-year.

"In order to optimize our direct to consumer business, we recently appointed accomplished industry veteran, Andrew Davison, as President of Gaiam Brands following his award-winning tenure as Chief Marketing Officer at Crocs, Inc. We look forward to the value of his expertise and the benefit from our recently re-launched e-commerce site to support growth in our catalog and Internet businesses going forward."

2012 Fourth Quarter Financial Review

The table below summarizes the Company's 2012 fourth quarter results, 2011 pro forma fourth quarter results (as if RSOL was deconsolidated) and 2011 fourth quarter historical results:

 

Three Months Ended

December 31,

 

2011

 

2011

2012

(With RSOL

(With RSOL

(in millions except per share data)

Actual

Deconsolidated)

Consolidated)

Net revenues$  66.7$55.6$95.9
Gross profit36.928.836.5
Operating expenses(1)32.925.535.0
Operating income before 2011 non-cash goodwill impairment charge4.01.41.5
2011 non-cash goodwill impairment charge22.522.5
Income (loss) from equity method investment in RSOL(0.8)0.0
Adjusted EBITDA(2)7.63.44.1
Non-GAAP net income attributable to Gaiam(2)2.11.31.4
Net benefit from deconsolidation of RSOL2.6
Net income (loss) attributable to Gaiam1.6(21.1)(18.5)
Net income (loss) per share attributable to Gaiam, Inc. shareholders0.07(0.93)(0.82)

____________________

(1)

     

Total operating expenses excluding a non-cash goodwill impairment charge of $22.5 million for the three months ended December 31, 2011.

(2)

Non-GAAP Financial Measures can be found later in this release.

 

On December 31, 2011, Gaiam converted its RSOL Class B common stock to Class A common stock, which changed the GAAP accounting treatment for its ownership (~38%) in RSOL from a consolidated basis to an equity method ("deconsolidated"). As a result, Gaiam's interest in RSOL's net results are reflected as a single line item in Gaiam's 2012 financial statements, whereas for 2011, RSOL's results of operations were included in each line of Gaiam's consolidated statement of operations. For comparison purposes, the financial results below for both the fourth quarter and the full year periods ended December 31 reflect pro-forma results for 2011 as if RSOL had been deconsolidated as of January 1, 2011.

In the quarter ended December 31, 2012, net revenue rose 19.9% to $66.7 million, compared to net revenue of $55.6 million in the prior-year period. Net revenue for the Company's business segment increased $14.1 million, or 40.7%, to $48.8 million for the fourth quarter of 2012, inclusive of internal revenue growth of 14.1% (which excludes revenue related to the acquisition of Vivendi Entertainment at the end of the 2012 first quarter). Revenue for the direct to consumer segment was $17.9 million in the 2012 fourth quarter, compared to $20.9 million for the prior year quarter. The decrease in direct to consumer sales primarily reflects the Company's previously disclosed strategy of optimizing media spend in its DRTV business during the Fall political campaign period when advertising rates were significantly higher than normal.

Gross profit for the 2012 fourth quarter increased $10.1 million to $36.9 million, or 55.3% of net revenue, compared to gross profit of $26.9 million, or 48.3% of net revenue, in the fourth quarter of 2011. The increase in gross margin primarily reflects the 100% margin (net fee revenue) of the Gaiam Vivendi Entertainment business, partially offset by lower net revenues in the higher margin direct response television marketing business.

Operating expenses were $32.9 million, or 49.3% of net revenue, in the 2012 fourth quarter period, compared to $25.5 million, or 45.8% of net revenue, in the prior-year period, when excluding a $22.5 million non-cash goodwill impairment charge incurred in the 2011 fourth quarter. Included in operating expenses for the 2012 fourth quarter is $3.2 million, or 4.8% of net revenue, of non-cash amortization expense related to the Gaiam Vivendi Entertainment acquisition with no such similar expense in the prior-year period.

Operating income for the three months ended December 31, 2012 improved to $4.0 million, from $1.4 million in the fourth quarter of 2011, when excluding the 2011 non-cash goodwill impairment charge. Adjusted EBITDA increased to $7.6 million in the fourth quarter of 2012 from $3.4 million in the prior-year period.

Because of RSOL's fourth quarter loss, including its additional non-cash valuation allowance for deferred tax assets, Gaiam's recognition of its portion, $1.0 million, of RSOL's loss, partially offset by the collection of $0.2 million of interest on Gaiam's loan to RSOL, again reduced the GAAP carrying values of Gaiam's investments in RSOL to zero. Gaiam does not anticipate recognizing any future losses from RSOL.

Excluding the non-cash equity method investment gains or losses from RSOL, net of any related tax benefit, Gaiam reported net income for the 2012 fourth quarter of $2.1 million, or $0.09 per share, compared to $1.3 million, or $0.06 per share, in the prior-year period, when also excluding the 2011 non-cash goodwill impairment charge. Including the aforementioned items, Gaiam reported net income of $1.6 million, or $0.07 per share, for the fourth quarter of 2012. (See Non-GAAP Financial Measurements.)

2012 Full Year Financial Results Highlights

  • Revenue for the twelve month period ended December 31, 2012 increased $37.0 million, or 22.3%, to $202.5 million. Internal net revenue growth was $16.5 million or 10.0%.
  • Gross profit margin for 2012 improved to 57.3% of net revenue, compared to 53.8% in 2011.
  • Operating income rose $7.2 million to $0.6 million for 2012, compared to an operating loss of $6.6 million in 2011, when excluding a non-cash goodwill impairment charge of $22.5 million.
  • Adjusted EBITDA was $12.8 million for 2012, compared to break-even Adjusted EBITDA for 2011.
  • Cash flow from operations for 2012 improved by $14.9 million to $16.5 million from $1.6 million in 2011.

The table below summarizes the Company's 2012 year-end results, 2011 pro forma year-end results (as if RSOL was deconsolidated) and 2011 year-end historical results:

 

Year Ended

December 31,

 

2011

 

2011

2012

(With RSOL

(With RSOL

(in millions except per share data)

Actual

Deconsolidated)

Consolidated)

Net revenues$  202.5$165.5$274.8
Gross profit116.189.0116.9
Operating expenses(1)115.595.6125.7
Operating income (loss) before 2011 non-cash goodwill impairment charge0.6(6.6)(8.8)
2011 non-cash goodwill impairment charge22.522.5
Loss from equity method investment in RSOL18.40.7
Adjusted EBITDA(2)12.80.01.7
Non-GAAP net income (loss) attributable to Gaiam(2)0.6(3.9)(3.2)
Net benefit from deconsolidation of RSOL2.6
Net loss attributable to Gaiam(12.9)(27.1)(24.9)
Net loss per share attributable to Gaiam, Inc. shareholders(0.57)(1.17)(1.08)

____________________

(1)

     

Total operating expenses excluding a non-cash goodwill impairment charge of $22.5 million for the year ended December 31, 2011.

(2)

Non-GAAP Financial Measures can be found later in this release.

 

During 2012, Gaiam secured a new three year, $35 million asset-based credit facility from PNC Bank, N.A., which expires in July 2015. The credit facility currently carries an average annual interest rate of 3.53%. At December 31, 2012, the Company had outstanding borrowings against the credit facility of $16.2 million and cash of $9.9 million on its balance sheet.

Jirka Rysavy, Chairman of Gaiam, commented, "We are pleased with our fourth quarter results as well as the improvement in our operating cash flow and our 10% internal revenue growth for the year. The recent launch of GAIAM TV is progressing nicely and we expect it to contribute to operating margin next year."

Following the completion of today's conference call, a replay will be available until March 25, 2013 by dialing (800) 633-8284 or (402) 977-9140, passcode: 21649339.

About GAIAM

Gaiam, Inc. (NAS: GAIA) is a leading producer and marketer of lifestyle media and fitness accessories. With a wide distribution network that consists of over 60,000 retail doors, 15,000 store within stores, and 6,000 media category management locations, and a digital distribution platform, Gaiam is dedicated to providing solutions for healthy and eco-conscious living. The Company dominates the health and wellness category and releases non-theatrical programming focused on family entertainment and conscious media.In addition, Gaiam has exclusive licensing agreements with Discovery Communications and other licensing partners.For more information about Gaiam, please visitwww.gaiam.comor call 1.800.869.3603.

This press release includes forward-looking statements relating to matters that are not historical facts. Forward-looking statements may be identified by the use of words such as "expect," "intend," "believe," "will," "should" or comparable terminology or by discussions of strategy. While Gaiam believes its assumptions and expectations underlying forward-looking statements are reasonable, there can be no assurance that actual results will not be materially different. Risks and uncertainties that could cause materially different results include, among others, introduction of new products and services, completion and integration of acquisitions, the possibility of negative economic conditions, and other risks and uncertainties included in Gaiam's filings with the Securities and Exchange Commission. Gaiam assumes no duty to update any forward-looking statements.

GAIAM, INC.

2012 RESULTS WITH REAL GOODS SOLAR DECONSOLIDATED

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 
 Three Months Ended Three Months Ended
December 31, 2012December 31, 2011
Net revenue$66,713 100.0%$55,627 100.0%
Cost of goods sold 29,797 44.7% 28,760 51.7%
 
Gross profit36,91655.3%26,86748.3%
Selling and operating30,03945.0%22,93741.2%
Corporate, general and administration2,8554.3%2,5594.6%
Other general expense  % 22,456 40.4%
 
Income (loss) from operations4,0226.0%(21,085)-37.9%
Interest and other expense(173)-0.3%(109)-0.2%
Income (loss) from equity method investment (830)-1.2% 43 0.1%
 
Income (loss) before income taxes3,0194.5%(21,151)-38.0%
Income tax expense (benefit) 1,263 1.9% (317)-0.5%
 
Net income (loss)1,7562.6%(20,834)-37.5%
Net income attributable to the noncontrolling interest (209)-0.3% (286)-0.5%
 
Net income (loss) attributable to Gaiam, Inc. (a)$1,547 2.3%$(21,120)-38.0%
 
Weighted-average shares outstanding:
Basic22,70622,691
Diluted22,70622,691
Net income (loss) per share attributable to Gaiam, Inc. common shareholders (a):
Basic$0.07$(0.93)
Diluted$0.07$(0.93)

____________________

(a)

     

Excluding the earnings and losses from our equity method investment in RSOL, net of a related tax benefit, net income attributable to Gaiam, Inc. was $2.1 million, or $0.09 per share, during the fourth quarter of 2012 and $1.3 million, or $0.06 per share, during the fourth quarter of 2011, when also excluding the 2011 non-cash goodwill impairment charge.

 

GAIAM, INC.

2012 RESULTS WITH REAL GOODS SOLAR DECONSOLIDATED

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 
 Year Ended Year Ended
December 31, 2012December 31, 2011
Net revenue$202,475 100.0%$165,516 100.0%
Cost of goods sold 86,371 42.7% 76,515 46.2%
 
Gross profit116,10457.3%89,00153.8%
Selling and operating102,86750.8%86,37452.2%
Corporate, general and administration10,9805.4%9,1825.5%
Acquisition-related costs1,6670.8%%
Other general expense  % 22,456 13.6%
 
Income (loss) from operations5900.3%(29,011)-17.5%
Interest and other income (expense) Read Full Story

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