Gaiam, Inc. reported net revenue rose 19.9 percent to $66.7 million in the fourth quarter ended Dec. 31, 2012 , compared to net revenue of $55.6 million in the prior-year period.
Gaiam delivered solid revenue, operating income and Adjusted EBITDA growth in the 2012 fourth quarter and full year periods, said CEO Lynn Powers. 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 percent and 22 percent in the fourth quarter and full-year periods, respectively, helping to offset the challenges that impacted our direct to consumer segment.”
Gaiams fourth quarter revenue growth combined with prudent fiscal management resulted in an increase in cash flow from operations and a more than 100 percent rise in Adjusted EBITDA compared to the prior-year, Powers continued.
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 companys 2012 fourth quarter results, 2011 pro forma fourth quarter results (as if RSOL was deconsolidated) and 2011 fourth quarter historical results:
The table below summarizes the companys 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 profit | 36.9 | 28.8 | 36.5 | |||||||||||
| Operating expenses (1) | 32.9 | 25.5 | 35.0 | |||||||||||
| Operating income before 2011 non-cash goodwill impairment charge | 4.0 | 1.4 | 1.5 | |||||||||||
| 2011 non-cash goodwill impairment charge | – | 22.5 | 22.5 | |||||||||||
| Income (loss) from equity method investment in RSOL | (0.8 | ) | 0.0 | – | ||||||||||
| Adjusted EBITDA (2) | 7.6 | 3.4 | 4.1 | |||||||||||
| Non-GAAP net income attributable to Gaiam (2) | 2.1 | 1.3 | 1.4 | |||||||||||
| Net benefit from deconsolidation of RSOL | – | – | 2.6 | |||||||||||
| Net income (loss) attributable to Gaiam | 1.6 | (21.1 | ) | (18.5 | ) | |||||||||
| Net income (loss) per share attributable to Gaiam, Inc. shareholders | 0.07 | (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. | |||||
Net revenue for the companys business segment increased $14.1 million, or 40.7 percent, to $48.8 million for the fourth quarter of 2012, inclusive of internal revenue growth of 14.1 percent (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 companys 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 percent of net revenue, compared to gross profit of $26.9 million, or 48.3 percent of net revenue, in the fourth quarter of 2011. The increase in gross margin primarily reflects the 100 percent 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 percent of net revenue, in the 2012 fourth quarter period, compared to $25.5 million, or 45.8 percent 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 percent 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 RSOLs fourth quarter loss, including its additional non-cash valuation allowance for deferred tax assets, Gaiams recognition of its portion, $1.0 million, of RSOLs loss, partially offset by the collection of $0.2 million of interest on Gaiams loan to RSOL, again reduced the GAAP carrying values of Gaiams 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 percent, to $202.5 million. Internal net revenue growth was $16.5 million or 10.0 percent.
- Gross profit margin for 2012 improved to 57.3 percent of net revenue, compared to 53.8 percent 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 companys 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 profit | 116.1 | 89.0 | 116.9 | |||||||||||
| Operating expenses (1) | 115.5 | 95.6 | 125.7 | |||||||||||
| Operating income (loss) before 2011 non-cash goodwill impairment charge | 0.6 | (6.6 | ) | (8.8 | ) | |||||||||
| 2011 non-cash goodwill impairment charge | – | 22.5 | 22.5 | |||||||||||
| Loss from equity method investment in RSOL | 18.4 | 0.7 | – | |||||||||||
| Adjusted EBITDA (2) | 12.8 | 0.0 | 1.7 | |||||||||||
| Non-GAAP net income (loss) attributable to Gaiam (2) | 0.6 | (3.9 | ) | (3.2 | ) | |||||||||
| Net benefit from deconsolidation of RSOL | – | – | 2.6 | |||||||||||
| 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. | |||||
Gaiam, Inc. (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
