By Thomas J. Ryan
Gaia, Inc. (Nasdaq:GAIA), formerly Gaiam, Inc., reported a loss in its first period since selling off its Gaiam fitness products business, but did see healthy subscriber growth for its remaining health and wellness media properties.
In July, Gaia completed the sale of its Gaiam branded consumer products business to Sequential Brands and its operating partner Fit For Life for a gross consideration of $167 million. In May, it also sold its 51 percent interest in Natural Habitat to Lindblad Expeditions for $12.5 million. The company changed its name following the sales.
From the total of about $120 million to $125 million in expected combined gains expected from both transactions, Gaia’s net operating loss carry-forwards will offset about $85 million to $90 million.
The company used the majority of the proceeds from these transactions to conduct a tender offer for its stock, and subsequently acquired 9.64 million shares and also 840,000 vested options at a fixed price of $7.75 per share. The rest of the proceeds focus on its digital business, with an emphasis on “yoga, meditation, and mind-expanding” content. The company charges $7.95 per month under its annual plan.
“Completing these transactions, which actually follows our disposition of solar energy and DVD distribution businesses, were the final steps on our path to focus on subscription video streaming business,” said Jirka Rysavy, Gaia’s chairman and CEO, on a conference call with analysts. “We believe that these transactions actually truly unlocked shareholder value, which was underscored by the price of the tender, which we set at 34 percent premium to our year-to-date trading stock price.”
In the quarter, revenues from streaming increased 40 percent and total revenue increased 28 percent to $4.2 million from $3.3 million in the same quarter a year ago, due to continued subscriber growth. Gaia’s subscriber count grew 45 percent to 170,000 across 120 countries currently, from 117,000 at the end of the second quarter 2015.
Gross margin increased 318 basis points to 82.2 percent, due to the leverage gained on Gaia’s costs of streaming due to higher volumes. The net loss in the second quarter, including one-time costs from both dispositions recorded in the period, was $2.4 million, or 10 cents per share, compared to a loss of $1.1 million, or 5 cents per share, in the year-ago quarter.
On the call, Rysavy said Gaia’s potential is underscored by a report earlier this year from Parks Associates that estimated that size of the global OTT (over the top) market, referring to the delivery of text, image, audio, video and other content over the Internet, at 218 million video subscribers. Also according to a 2015 study completed by Bespoke, 48 percent of the survey respondents prefer streaming, more than double those who prefer cable satellite or DVDs.
Said Rysavy, “We expect the subscriber growth will remain about same during the third quarter, and then increase to 50 percent for full year, and then to accelerate to 80 percent for next two years.”
Lead photo courtesy Gaia
