Jirka Rysavy - Chairman and CEO
Lynn Powers - President
Gaiam Inc., (GAIA) Q1 2010 Earnings Call May 5, 2010 4:30 PM ET
Welcome to the Gaiam first quarter 2010 financial result conference call. All lines have been placed on the listen-only mode until the question and answer session. (Operator Instructions) Today's call is being recorded. If anyone has any objections you may disconnect at this time.
I would now like to turn the call over Miss [Christine Glime] from ICR. Ma'am you may begin.
Thank you, everyone, good afternoon. The following constitutes the Safe Harbor statement of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters discussed in this call are forward-looking statements that 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 risks detailed from time to time in the company's SEC reports. The company does not undertake any obligation to update forward-looking statements.
On the call today representing Gaiam is Mr. Jirka Rysavy, Chairman, Lynn Powers President and CEO, and Carole Buyers Vice President of Corporate Finance and Investor Relations.
Now, I would like to turn the call over to the company's Chairman, Jirka Rysavy. Please go ahead Jirka.
Thank you, Christine. I would like to welcome you on our regular quarterly call and I am pleased to say again that we are happy with our double-digit revenue growth and the significant improvement in our operating performance.
Net revenue for the first quarter increased 11.2% to $62.2 million from $55.9 million in the same quarter last year. This increase was all internal and marks our second consecutive quarter of double-digit internal revenue growth which is back inline with our historical growth rates. It was a strong quarter for our business segment which grew over 20%.
We are especially pleased with our operating expenses declining by $4.4 million from the same quarter a year ago even with 11% revenue growth. As a percentage of revenue, our total operating expenses improved 1380 basis points to 52.7% from 66.5%. The combination of increase of revenue and decrease of expenses you saw for net operating loss to 250,000 or $0.01 cent from $3.1 million or $0.13 in the first Q of last year.
We ended the quarter with $48 million in cash. Even after paying about $2 million for purchase of Discovery Media Catalog Library. We still have no debt. In the quarter, the gross in our media boosted Gaiam to number four U.S. ranking in non-theatrical DVD segment with 10% market share, which is dramatic improvement from number six and 5% market share, which we have in 2009.
During the quarter, we also grew our brand of store-in-store presentation to 12,000 doors from 11,000 doors, which we had at end of the last quarter. In the latter half, we also see the benefits of additional discovery title releases and also, a launch of Reebok fitness accessories in media, which will give us additional 12 feet to our target store presentation.
We are also focusing on digital media market and (inaudible) Gaiam TV as reflect for our digital library during the third quarter. In March, we commence an annual dividend, cash dividend of $0.15 per share. The purpose of dividend is to cover the cost of capital for our shareholders without limiting our growth opportunities. First annual dividend was paid to shareholders in record of April 1.
As we state in our last call, our goals for 2010 are double-digit internal revenue growth, which shall bring our revenue for the year to over $300 million. To continue improvements in our operating result and grow our overall market shares in non-theatrical media. It is also meaningful to point out because our defer tax assets, the next $30 million of our income will be tax free.
Now, I will turn the call to Carole, who will provide more details and the numbers and then to Lynn for operational review. So, Carole.
Thank you, Jirka. For the first quarter of 2010 net revenue was $62.2 million an 11.2% increase from $55.9 million for the first quarter of 2009. Net revenue from our business segment increased 20.7% to $22.6 million for the first quarter of 2010 from $18.7 million for the same quarter last year. The revenue growth in our business segment reflects our success within media category management and increases in Discovery sales coupled with some improvement in the retailer climate.
Net revenue from our solar segment increased to $50 million for the first quarter of 2010 from $9.5 million to the same quarter last year. For more information concerning the results of real good solar a separate earnings call will be held tomorrow May 6, at 8:30 a.m. Pacific Time.
Net revenue generated by our direct to consumer segment for the first quarter of 2010, decreased 11.1% to $24.6 million from $27.7 million for the first quarter of 2009. As we continue to strategically reduce our catalog circulation. In the quarter, we reduced circulation by approximately 21%. Lynn will elaborate further on our business and direct to consumer segments result in just a moment.
Overall, gross profit to the first quarter of 2010 was 51.8% of net revenue compared to 55.4% of net revenue for the same quarter of 2009. Excluding our solar business, gross profit for first quarter of 2010 was 59.7% compared to 61.8% for the same quarter last year. A higher mix of media category managed sales reduce gross profit margins modestly for the quarter.
Our selling and operating expenses for the quarter of 2010 decreased 12.3% to $29.8 million from $33.9 million for the first quarter of 2009 even with 11% growth. Reflecting a current run rate well in excess of the $10 million in annualized cost savings initiated in the first quarter of last year.
Corporate G&A expenses decreased approximately 300,000 to $3 million for the first quarter of 2010 from $3.3 million for the same quarter in the previous year. Total company expenses, as a percentage of sales decreased to 52.7% from the first quarter of 2010 compared to 66.5% in the first quarter of last quarter.
In a seasonally weak quarter for us, our operating loss for the first quarter of 2010 improved to a loss of 563,000 from a loss of $6.2 million during the same quarter last year. We recorded a net loss of 250,000 for the first quarter of 2010 or a penny a share compared to a net loss of $3.1 million or $0.13 per share in the first quarter of 2009.
As of March 31st, 2010 our balance sheet remains healthy. We ended the year with $48.1 million in cash and we continue to carry no debt, while we generated $2.1 million in cash from operations, we invested $2.4 million in the media content. In the quarter, we acquired the licensing rights for the Discovery channels catalog from its previous licensee.
This increases our exclusive licensing rights from new releases to the entire library of Discovery channels programming. Inventory turns for the first quarter of 2010 improved to 4.7 times from 2.7 in last year's first quarter reflecting a broadened strategy to improve inventory management across all divisions.
Our day sales outstanding for the first quarter of 2010 increased to 62 days from 46 days in the first quarter of 2009, reflecting higher receivables from large retailer accounts, which are on longer fee cycles and increase in real good solar receivables, which was driven by a large commercial project.
Approximately 84% of our receivables in the trade division are comprised of our top 10 customers. Overall, we are pleased with the collection efforts and our ability to minimize credit risk. Depreciation amortization and stock compensation expenses totaled $0.4 million for the first quarter of 2010. Capital expenditures were 463,000 and video production costs were 673,000.
We had $23.2 million outstanding common shares as of March 31st, 2010. As I mentioned in our last call, for 2010 we are comfortable with growing our revenues in the double-digit range. We expect the tax rate of approximately 36% and the current seasonality in our business makes our earnings more concentrated in the back half of the year.
In the seasonally weak quarter, we improved our operating performance significantly, with a continued focus on diversifying our consumer offerings and reducing costs, we expect to reduce the seasonality over time. We look forward to the later half of the year with the continued growth of Discovery titles and the expansion of our foot printed target by 12 feet with Reebok.
Now, I will turn the call over to Lynn to provide more detail on our growth initiatives by business segments.
Thanks, Carole. We delivered solid results in the first quarter. Our net revenue increased over 11%. Our business segment revenue increased over 20% and we reported 1380 basis point improvement in expenses. As the U.S. emerges from this economic downturn, we believe, we are well situated to build on our operational strength both internally and externally.
From an internal perspective, what we have dramatically cut costs over the past year, it is important to note that we have also improved the efficiency of our organization. We have consolidated businesses and realigned our assets with the mission of one company, one brand. As a result best practices are being recognized and among and between our business in our direct to consumer segment.
From an external perspective, while the downturn has weakened the competitive landscape and accelerated the progression toward a more efficient digital media model. We are poised to leverage our strong market position to become a premiere non-theatrical content provider in all channels of distribution. Our unique multi-channel business model and sound balance sheet will enable us to adapt and prosper in the changing environment.
Now, I would like to review the results for our business in direct to consumer segments as well as focus on the opportunities that lie ahead for us in 2010. First, I will provide you with a little more detail on the results for our business segment. In the first quarter, sales for the business segments increased 20.7% versus the first quarter of 2009. We continue to be encouraged by retailers buying patterns as well as retail sell through to the consumer.
Our revenue growth in the quarter was broad based in nature as growth was fairly consistent among our top 25 accounts. And our sell through was consistent with our sell in at retail. During the quarter we continue to ship titles from Discovery franchise licensing deal and we are already seeing the relationship with Discovery help grow our non-theatrical market share and increase our high margin media sales.
Our store-in-store and category management initiatives are key strategies in maintaining our status as the clear leader in fitness media. Our store-within-store initiative continues to enhance the quality of our distribution, which increased over 12,000 doors as of the end of the quarter up from 11,000 at the end of first quarter last year.
In addition, out category management program is in 4500 doors up from 4,000 in the end of the first quarter in '09. Our store-in-store and category management initiatives resulted in driving market shares and fitness media category this quarter to over 41%.
Fitness media also experienced a growth of almost 4% for the quarter, according to Nielsen's video scan against the decline in overall DVD sales. In addition, with our category management strategy our controlled market share improved to 72% in the first quarter of 2010 from 61% at the end of '09.
As Jirka mentioned, our non-theatrical market share improved dramatically 10% in the first quarter of 2010 from 5% in '09. As previewed in our last quarter comment, the shake out in retail store fronts has lowered at total domestic retail distribution to 67,000 doors as it compared to 70,000 doors last quarter.
Most of the decline in doors was attributable to Hollywood video and blockbuster store closing, which are not in our top 25 accounts, as a result, this closures have not have an impact on revenue. With regard to future opportunities in our business segment, we expect double-digit revenue growth in 2010 to come primarily from this segment. We will achieve this through three main initiatives.
First, continue to focus on additional space for store (inaudible) exposures both with current retail partners as well as new store growth. Despite share closures and consolidation among retailers our brand continues to perform well at retail and we expect to be able to expand in new categories and then large our footprint with our current partners.
In addition, we continue to focus on content with our studio complete and the remainder of our currently owned content in the final stage of being digitized we are now focusing on utilizing our studio asset to produce lower cost, low cost content for kids, DVDs, online courses and web downloads.
Second, we expect to expand our revenue and market share in non-theatric with the Discovery Channel brands. We are pleased to announce that during the quarter we acquired the back (inaudible) licensing rights for the Discovery Channel, HG Theater, Investigation Discovery Science channel and Military Channel.
With these investments, we now have access to the entire Discovery library. Previously we would only obtained catalog rights when the old license fees rights expired. With respect to the other Discovery Channel, Animal Planet and TLC, we have had access to new releases since November and the catalog library since January.
This represents a huge win for us and provides a platform for growth in non-theatrical content or continuing the long hand in tradition we have for providing customers with the highest quality authentic content that matters.
In 2010, we intend to launch not only new release titles at Discovery but to work towards creating non-theatrical store-within-store concepts now that we have access to the entire library. As we have shown in fitness media by creating a managed home for a category of media, we can help grow the category even in a down market.
Third, Gaiam will gain revenue and market share by launching Reebok fitness media and accessories in the last half of the year. Overall, we are excited about the new Reebok product line we created with the Reebok team. The result is improved product, packaging and innovation with respect to the breadth and depth of the product offering.
The team's captain to Gaiam's extensive knowledge of the fitness market, each unique merchandising strategy, which incorporates media with fitness accessories and is combined with Reebok's incredible marketing power and new technology.
In June, we will begin to ship the first phase of Reebok distribution to target which includes replenishment of the current product line sold at Target. The second phase of Reebok distribution will begin in August when we ship product to Target and preparation for its annual September reset.
The September reset will be our first opportunity to implement a full scale store-within-store concept of a company by a complete re-branding of Reebok packaging and creating a new and exciting and meaningful destination for the Reebok consumer.
In total, we expect Reebok's store-within-store to begin to materially impact sales in late third quarter of 2010.
Next, I would like to review our address to consumer segment first quarter results. In first quarter of 2010 revenue in our direct to consumer segment declined 11.1%, as compared to the first quarter of last year. On a planned catalog reduction circulation of 21%, much of this revenue decrease was self-initiate, as we once again reduced prospect in an optimized or sales in the web. As we circulate fewer catalogs and become more efficient with web marketing we continue to grow internet revenue.
In this segment, we focused on a number of strategies to help reduce cost and improve profitability. We continue to optimize circulation and prove the efficiency of prospecting on the internet. We also continue to reduce distribution and inventory costs. As result in the quarter, we were able to improve the operating loss in this segment by $1.4 million despite a sales reduction of $3.1 million.
Now, turning our attention to the future opportunities in the direct to consumer segment, while the growth in 2010 will come primarily from our business segment. The growth in 2011 and beyond will also come from our direct to consumer segment. We believe in investing in its future prospects and are committed and on our way to achieving profitability in the segment.
We want to achieve this in the following initiative. Continuing to optimize our catalog business through additional web marketing and further cost reductions. Beginning to utilize our retail packaging to highlight our digital content and market Gaiam brand and story.
Improve this look and feel of the Gaiam website by June 1st. We will achieve this doing corporate in number of initiatives we shared with you over the past two quarters. First, improving the marketing of corporate brand and mission. The website will better represent our vision of one brand, one company.
Over the past year, we have consolidated a number of businesses under the Gaiam brand and are focused on synergies between our direct and business segments.
Second launching our digital platform, we are prepared for the transition from DVDs to digital distribution by continuing to digitize Gaiam, Discovery and other partners content and launching our own platform called Gaiam TV.
And third transitioning our Commerce portal to Gaiam Life a related web portal that utilizes digital content to create relationships, add members and sell medium products, as a result our commerce portal on Gaiam.com will be more solutions oriented versus transaction oriented.
Overall, we continue to focus on cost reductions across our organization. In Q1, 2010 we reported cost saving run rate in excess of our anticipated 10 million on an annualized basis. We continue to seek new efficiencies and cost reductions and expect to realize another 2 million in annualized cost saving benefits in beginning in Q3 with the completion of the warehouse consolidation.
The cost reduction and consolidation will have a one time cost of approximately $0.01 in June. However, this consolidation even without additional revenue growth will make our seasonally weak first and second quarters profitable in 2011.
In conclusion, we remain focused on our business strategies and modestly better retail climate. Our distribution footprint at retailers and our strong balance sheet will afford us the opportunity to grow revenues through our new partnerships and titles.
Our linear cost structure will allow us to leverage our business model as we look ahead to the latter half of this year and continue to focus on profitable growth.
Thank you. And now, I would like to open the call up for questions. Ashley?
Your first question comes from Mark Argento. Your line is open.
Hi, good afternoon. Could you talk a little bit about, now that you have the full Discovery product line which is the catalog and then of course the new releases as well. Some of the things that you are doing innovative things in terms of being able to market that end of the retail channel and maybe demonstrate a couple in your program or some traction that you have had with retailers in terms of the new offering.
Well, a couple of things. First of all, we are in the process of going out and marketing the ability to have a category managed section for Discovery Channel. We are testing this right now in Target. And we have had exposure, supposed to end in April and its now been continue through July. So, that's a good sign. We are also going out to places like museums and pet stores and trying to put together store displays. Like pet-co, it would be for Animal Planet and museums would have all the back catalog of Discovery Channel products and as we have shown with fitness, when we do that we can help grow a whole category. Because consumer finds a home and comes back and buy more product from that home. And this down DVD market, fitness grew up 4% last quarter with there is no other category of DVD that grew.
So, it is a great concept and the retailers are buying into it.
Sure. In terms of the, sounds like you have go kind of buy or taking it earlier then maybe you originally thought the back catalog as well, was that, how did that transaction come about was it just a situation where the previous owner was ready to part with it or what was the opportunity with that?
We approached the previous owner because we felt we had more opportunity when we have the entire back catalog to create store-within-store so we have approached and were able to work out a deal.
Okay. And then, in terms of Reebok, you talked a little bit in your prepared remarks. Sounds like August for the September reset should be a time where we are going to see a lot more, be able to start to see that product in particular, the refresh product at target. Any opportunity to leverage some the work you put in, new branding in terms of selling that through other mass channels or retailers order sporting goods. What are the opportunities to expand that product line and just to other retailers as well.
We are absolutely working on that right now. And we have taken it out to several sporting goods account definitely believe there is opportunity for that by fourth quarter.
And in terms of I know when you originally had consummated that relationship with Rebook in terms of licensed you know there is the opportunity to do some may be some media with the Reebok brand there any further thoughts to that and would that roll out kind of consummate with the new product set as well?
Yeah we actually shocked some of he Reebok media and in our new studio last week.
Great in terms of the distribution channel there any would there be an opportunity to any direct to consumer with that or would that all be pretty much retail?
It will be both direct to consumer and retail.
You touched on fitness category growing was at 4% in the quarter is that right?
Do you happen to have the dollars versus units, was that dollar growth of 4%
It was the unit growth.
And then now when you think about overall kind or trends at retail that you are seeing that clearly retailers have restocked after kind of burning down their all their inventory. I think I asked this question last quarter but how do you feel about where the retailer’s inventory levels are right now and specially give at least be a little bit better more healthy consumer environment is, guys in out of stock situations or do you think they are at a decent level?
We are actually very pleased to see that our selling and sell through were pretty close this quarter so I think everybody has caught on their inventories and now this is true internal growth.
Jirka I know you have been focused more on the some of the other drug to consumer strategies, the internet, online initiatives, anything to report their in terms of, I know you talked about the GAIM TV but anything else that we could stick our teeth into in terms of opportunities, that have start to see some revenue contribution and maybe later this year or in 2011 from some of those initiatives?
As Lynn kind of mentioned, we kind of start to see again the pushing growth in our direct segment as we kind of try to take the expense out of it and so obviously the digital strategy when we can go consumer direct as our trembling customers and we all are pretty much rights to content to most of our product which is very different and most of our studios so we are really focusing on that and GAIM TV is just kind of the name to kind of cover all the initiative on to that kind of approach so then probably several initiative will come out of that as we try to think more aggressive role and play, consolidate or service house for some bigger retailers because there is lot of parts of technology on this continuity since that’s what’s not available on the market but you have set up so it’s a quite a project but we will see that later in the year when we are actually doing. And I think the presentation is going to be compelling.
And then just lastly in terms of real goods, it looks like they have put their numbers out looked like a pretty solid quarter, even made, I think a little bit of money which is surprising typically Q1, I know it’s a little difficult. From a seasonality prospective so that’s great but any thoughts in terms of the opportunity there strategically what makes sense with that business relative to your pre-sizeable ownership stake?
Its growing, its third quarter, they actually do pretty well and we kind of opened and see our how the markets will happen there is a kind of good initiatives right now where most of it is states or people, even county in California getting money to finance the seller by effectively property tax levy which is definitely changing the game especially in the residential market is very helpful and so is the extension of the credit, its definitely good market right now to sell into also we expect the cost there but finance will keep declining so it’s a good opportunity so we have to kind of see how the market plays itself out and brand what do we do so I will kind of leave that just to watch.
Your next question comes from Jim Duffy.
Thanks Mark covered a number of my questions I will say it is nice to see the early success you have been just established for so and so presence in the outside the fitness category, I wanted to talk a little bit about the catalogue business in the improving economy, while what’s thoughts crossed and is it with regards to perhaps increasing distribution, given that consumer spending is listing up to my decent improved yields on that.
Jim we are actually looking at that for holiday right now. We had planned to continue to decrease but we are seeing some pockets of consumer spending so we are analyzing right now what our speculation will be for holiday.
And then Lynn you mentioned something that probably was interesting seeing like a downturn you feel accelerated the progression to digital delivery, beyond just where you are seeing with the closures of sort of as a Hollywood video. What is the evidence that you feel that in your business or specific to the fitness category?
In the fitness category its actually opened up an opportunity for us because what happened is as they were contacting DVD space in the entertainment section, it opened up the opportunity for us to create a stores in store where the consumer is actually shopping for fitness media within either escorting its department or fitness department and based on that we are actually seeing growth in the category so I think there is whole new business model here of creating store within store where the consumer is looking for it.
And also you kind of said that we grew $1000 for our store in store which is pretty big for us and this kind of tougher economy kind of weak in light of our competitors. So our control shares kind of grow nicely so that we have more to say what’s going there and charge for controlling this space.
So kind of and its because category is still growing, it’s kind of created some opportunity for us when we really want to use that strength and really forge ourselves into the digital front.
Is there any evidence other than may be anecdotal that consumers are spending less on health club and more on fitness at home?
I don’t have any stats, just anecdotal information.
Okay. Well nice to see the fitness category up as well. Thanks for taking my question.
Your next question comes from Andrew Burns. Your line is open
My questions have been answered. Thank you.
Your next question comes through [Robert Routh]. Your line is open.
Yeah. Few quick questions. We’ll start strategically and move with the landscape and we see what’s going on with libraries and evaluations and you guys have done a great job and you kind of different model everybody else. And during kind of content, non controversial it could go worse especially now. What you see out there as far opportunities to grow? Maybe Miramax for sale and I know bidder do like price MGM, everybody time owners said that input in the update so that price everybody knows it is you know LionsGate what’s been happening here with Icon if he gets it, I was wondering you guys have any discussions with them about possibly acquiring a fitness library because I don’t think I would want it and I don’t think strategic to LionsGate Stars Media heard that there are no bids out there but there are certain things for sale there I am just curious it seems with your cash balance and your expertise, its kind of a in your favor to buy the market and you kind of go in cherry pick some, I was wondering if you could give us any sense as to if you have done anything along those lines and or then on in your term?
Yeah. Absolutely right. There’s definitely the opportunity on buy side. So that should be very interesting because little of the players are strapped with the debt and the cash flows are while we have a good cash, good cash flow and definitely right now, capability, we kind of took a little breather from acquisition, we consolidated our expenses which I'm glad we did because its like much easier to operate with so much lease expenses and hopefully we brought the company to point that as Lynn mentioned right now, with traditional savings, we kind of run all the course profitably. And so, we're definitely looking at some of these opportunities as you mentioned. The question, what do we take, do we take pieces like what we just took from discovery which goes kind of no brainers and that’s kind of good and safe for us to do it or do we take a bigger play and I think over the next six months, it would be very interesting. There is also what we really watch who owns which digital rights because that’s kind of as you know, kind of really questions because like all the people who've ended time dated contracts that didn’t exist. So it’s kind of questionable who wants what.
And so, these are good positioning and the kind of spending out control space like the current stores. We can play increasing role in kind of all the segments but how this all shape up with different players like you know, Lions Gate and Miramax that hasn’t been seen and we kind of we're talking to a couple of players right now and we’ll see where it goes because definitely getting more and more interesting as money is kind of harder to come by and we're probably the only company with a good balance sheet.
Would you consider under the right structure for example, you're taking a look at Lions Gate with icon knowing what they’re going through, they're clearly cleaning the house and trying to get these done. What would Liberty media given their desire to avoid taxes at all cost, would you consider exchanging volume equity for titles or for subsidiaries say with limited and align yourself with company that way as a way to both get titles increase, the shares outstanding and the kind of leverage your expertise with inner confidence or is that something you wouldn’t consider?
We actually looked at that for the special reasons, we kind of act like guests so we prefer to pay cash but also so we have issues (inaudible). So that will open the question about who it is and how it plays but it’s definitely opportunity. We get approached by a few players too who try to put some more money in our company for start but this well depends on some kind of a larger deal. But I think their liquidity is something what we have in mind and right so overall its going to be a question of the right price and the right opportunity.
Okay. Sounds like it’s the right opportunity did present itself with the right price in your cargo or you wouldn’t mind to contact Liberty or Lions Gate or whoever owing a percentage of your company in exchange for titles and an extended relationship, you wouldn’t entertain that.
Yeah. We would have entertained them for sure.
Okay, great. And one another follow up question, you're kind of on a different topic but similar. Obviously, you’ve done a lot of celebrities to come and endorse the Gaiam brand. This is kind of a two part question. The first is, we saw the bundling in the videos and the products like (inaudible) and the hula hoops and things like that. I wonder if you could talk about what the opportunities are given what you’re doing going forward for more freestylers and (inaudible) to kind of endorse the brand and align it with the products and also along those lines, what you found doing? I know you have the one brand to kind of motto other than re-boxing with the Gaiam brand, what is the management’s plans to increase awareness about the brand over the next twelve months and get to realize the value of the equity just inherent in that.
Well, first of all as you know, up until this past year, we kind of avoided any kind of bringing in personalities with the Gaiam brand but particularly in someone like a truly styler, we felt she certainly had the authenticity to combine her with the Gaiam brand and we found that its worked really, really well. There’s couple of other things like that that we’re working on. Its great exposure for us and truly has been terrific while hitting the PR trail and really in the working the daily talk shows and all and promoting the Gaiam brand, so it’s worked. And I see other opportunities to do that, we also think we have tremendous opportunity just to start utilizing a little bit more on our retail packaging and branding on our DVD’s to promote the Gaiam brand and who we are as a lifestyle company. And I don’t think we’ve done enough of that. And also to promote you know the opportunities in digital. It can be DVD with free digital copy and start really letting people know who we are. But we have plans with it, some of them I can’t talk about right now, but it was test this past year and its working.
Great and just one question and you probably haven’t answered this but, I focused on the brand because you guys kind of like the Nike School for Footwear in terms of what you do. Nobody else has a brand or an identity like you do in public awareness of it isn’t what it should be. Have you ever done an internal evaluation, or have you become anything?
What do you think it would cost to build a brand like Gaiam from scratch? What is that were what you built? The infrastructure, the brand the relationships, in line tender to this analysis just a while ago and they told conductors "hi cost of recordable million dollars just to go in distribution infrastructure that you know credit in the stock crises. I am sure it's just data senses to what you think you got invested in Gaiam brand and building this company since inception to just give sense of what may or may not be reflected in equity value?
You know, we do won't give you number if what it were cost, because we never kind of look at to our low cost to duplicate. But we actually did over last Board meetings to really kind of hubs, in side it's kind of add a little more time and a more money in branding, so for this year budget we have some branding initiatives kind of behind to what, what we are doing this year more than we ever did on, increasing the visibility of the brand because I think we kind of have a brand but we never really spend time to marketing the brand per say, we kind of build it. But, so we kind of try to round it up. So, it's more visible and more clear. So, it's a big initiative for this year to kind of make an estimate [what will call us], we can take a shot on it. But we never did that.
And I think the other thing is at what price authenticity because its one things that we have brought to back brand up with the authenticity. In many cases, we have in the past for non-revenue in order to maintain the authenticity. So, the brand has tremendous brand integrity. So, we want to make sure that yes we really want to grow and really want make people aware that but not at the cost of integrity we built over the last 15 years.
That now concludes the Q&A portion. I would now like to turn the call back over to Mr. Rysavy.
Now, I would like to thank everybody for being with us and hopefully you with us for next quarter. Thank you very much.
Thank you everyone for participating in today's conference call. You may disconnect at this time.