Ladies and gentlemen, thank you for standing by. And welcome to the Gaiam Incorporated Third Quarter 2012 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Monday, November 5, 2012. I would now like to turn the conference over to Mr. Norberto Aja, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon everyone, and thank you for participating in Gaiam’s 2012 Third Quarter Conference Call. Joining me today on the call are Gaiam’s Chairman, Jirka Rysavy; Gaiam’s CEO, Lynn Powers; and Steve Thomas, Gaim’s CFO. Before we get started however, I would like to take a minute to read over 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 in this call are forward-looking statements and involve risks and uncertainties including, but not limited to, general business conditions, integration of acquisitions, the timely development of new business, the impact of competition, and other risks detailed from time-to-time as described in the SEC reports. The Company does not undertake any obligation to update forward-looking statements. 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 the third quarter which ended September 30 increased 3% to $43 million compared to $41.8 million in the same period over the last year. Revenue for business segment increased about $7.5 million or 38% to $27.1 million, and this internal growth rate of 15.2%. Revenue on our direct-to-consumer segment declined 6.3 million primarily due to our pull back in advertisement spending in our direct response television business because of the challenges of securing airtime at reasonable costs due to Olympics and Presidential campaign. EBITDA for the quarter increased $1.7 million. For 9 months, revenue increased 23% to $135.8 million with an internal growth of 13% and the benefit of acquisition of Vivendi Entertainment. Gross profit rose $17 million or 27% and gross margin improved by 180 basis points to 58.3% while operating expenses decreased 290 basis points. This drove a $4.5 million improvement in operating income, $8.7 million improvement in EBITDA and $19.8 million improvement in operating cash flow. $8.7 million improvement in EBITDA exclude $1.7 million acquisition costs from Vivendi. Gaiam has no dollar investment and virtually no tax basis in our holding of about 10 million shares of Real Goods Solar since Real Goods did the IPO in 2008. Because of Real Goods’ non-cash impairment charges of primarily goodwill and deferred taxes in this third quarter, Gaiam recognition of our lost portion of the loss also reduce our GAAP carrying value to 0, and therefore Gaiam will not be required to flow any future losses through its income statement. Excluding this loss from the equity investment, Gaiam reported about $0.01 a share loss in the quarter compared to a loss of $0.04 in the same quarter in last year. Including the loss from the Gaiam investment in Real Goods,…

Thank you, Jirka. I will spend a few minutes reviewing the final results in greater detail and offering some additional perspective on our performance in the quarter beginning with the income statement. As a reminder, all the comparisons discussed are as if Real Goods Solar was de-consolidated from Gaiam as at the beginning of the prior year. Overall 2012 third quarter net revenue was $43 million compared to $41.7 million in the third quarter of 2011, representing a 3% increase. Net revenue from our business segment which is comprised of sales to retailers increased 38.6% to $27.1 million compared to the year ago period as we continue to drive further growth in our aggregator role with some of the largest U.S. based retailers and showcase one of a kind media content and wellness products both from third parties as well as under the Gaiam brand. And of course, Gaiam Vivendi Entertainment is already playing a vital role in the success of this business by providing us with the growing library of desirable content and digital relationships. As for our direct-to-consumer segment, this segment saw revenue decline by 28.4% or $6.3 million as our direct response TV business experienced the $5.4 million or 50% decline in revenue due to our planned holdback of key programming and content in light of significantly higher cost associated with securing television time during the Summer Olympics and more recently with Presidential and local campaigns monopolizing nearly all affordable airtime. We'll begin support this business with the same quality and quantity of content as we have in the past, and fully expected to return to its historical trends. In addition, we expect a growing contribution from our e-commerce sales due to the recent completion of the redesign of our website as well as an expanding Gaiam…

Thanks, Steve. Reaffirming Jirka’s and Steve's comments, I’m also pleased with our third quarter and year-to-date results, and we remain very confident that our performance in the fourth quarter will drive us to achieve our prior goals in regards to revenue and earnings. As we focus on our top 3 priorities, expanding the Gaiam brand, evolving and increasing our distribution and licensing business, and growing our digital subscription services, I remain optimistic and excited for the months ahead. Let me begin by reviewing our business segment. The segment that continues to perform very well for us with internal revenue growth of over 15% compared to the third quarter of 2011. Year-to-date the business segment has internal growth over 30% with growth including acquisition over 50%. I’m particularly pleased with the results of the integration between Gaiam and Vivendi Entertainment and how we are leveraging the additional sales volume of approximately 20 million units or $200 million in gross revenues and expected annualized net revenue and gross margin of approximately $25 million. There are significant economies of scale and operational efficiencies through reduction of third party distribution cost and the elimination of redundant overhead. Just as important as the financial synergies, our larger scale is affording us a greater ability to win important new content distribution deals, becoming the largest independent distributor of non-theatrical content in the U.S. To that end, I can think no better example than the 2 most recent agreements we secured. The first, the Hallmark Channel provides us with the highly visible and unique content library including new first run movies that we're confidently can leverage across multiple partners and via multiple platforms. The Hallmark brand will resonate well with Gaiam’s core values and core customers. The second agreement is with The Jim Henson Company. If there…

[Operator Instructions] Our first question is from the line of George Kelly from Craig-Hallum Capital Group.

Couple of questions for you. First, what are your plans for the solar stock now? Do you have any sort of goals with or how do you think about what to do with that?

As we said, we have no basis -- we never have GAAP basis, but it's really a question of the right opportunity to capitalize the stock now.

Okay. Secondly, on organic growth for the fourth quarter, is it fair -- the direct to consumer business clearly, there will be an impact in the first month of the quarter, how should we think about organic growth for the fourth quarter in total within that segment?

On the direct to consumer side, we will see high media cost through fourth quarter. We'll move from the political campaigns into heavy holiday advertising which does not work that well for DRTV. So you'll see a continued slowdown in that particular category during the fourth quarter. However, we plan to come back very strong and really look forward to launching the recut Jillian Michaels for New Year, New You starting in January, she goes back on The Biggest Loser. But we do expect to continue to see strong comps on the business segment side.

Okay, great. And then the TV segment, can you break out any other numbers that you have before? I think you may have given conversion was 70%, but what is the number of subs?

Yes, okay. So the conversion is actually, it's still running, kind of expected 30 was running at 70, it's still running 70 actually increased somewhat. So that's actually surprising and very promising. The number of subs we probably -- as we said last time we will start to run advertising kind of slow and soon we'll hit this benchmark when we mentioned last on 5,000 exclusive titles for streaming which we just hit that we'll start to market by Thanksgiving like kind of the regular campaign, be kind of looking for different way to launch it. It will happen between over next 30 days to 45 days and the -- I expect that right now before we start a campaign, we'll be about right now 20,000 subscribers and the biggest impact right now is our gross profit on the sub right now because most of this sub is fixed until you are high in numbers. It’s running maybe 65% by end of the next year when we expect to hit breakeven of run above 90%. So that's kind of the bottom line as far as the impact. So speaking it about contribution Lynn and Steve said, it cost us right now around $1.3 million a quarter, and we expect about equal number on the fourth and first because as we increasing revenue, increasing advertising spend. So we’re probably same kind of negative contribution for the fourth and first and then it will start to improve about $400,000, $500,000 a quarter to reach slight contribution by end of the year. On monthly basis.

[Operator Instructions] Our next question is from the line of Mark Argento [ph] with Lake Street Partners [ph].

Talking a little bit more about the Gaiam TV launch, can you talk a little bit about your launch strategy, is it going to be mostly all online marketing, do you have any partners that you are going to roll this out, with any thoughts around how you really start to build that sub base?

It's pretty much, mostly online, the biggest contributors right now is the search engine, both free and paid. And we very successfully launched second generation of Raku [ph] and so we doing a launch with Raku [ph] which proportionately actually let us people watching it on that. And our third part we just signed as a new host guy named George Noory, he is host in coast to coast which is second highest radio station. I mean he can be listen -- he get daily show for 4 hours with about 3 million listeners. And so he would do actually TV show on our thing will start in December. His promotion on his radio station and we have a couple of others like that that's coming online. So that's pretty much kind of on the first between now and Christmas and then we see the different responses to really tweak it. But it's hard with really helping that our retention almost doubled since beginning of the year, retention of the customers. So that’s obviously very good trend which kind of help us to breakeven.

Remember a number of years ago, you guys bought a company called I think it was The Spiritual Cinema Circle, is that still up and running and are you kind of doing any tie-in between the 2 entities?

Yes, we pretty much all the subscription it’s merged into a unit or will be by next few months as we totally incorporated. And we pretty much going to have one different offering -- I mean you can buy all of them together, you can do it separately but it's all subscription units. So it's like kind of look at it as you call the trade divisions of -- subscription unit which is incorporated all those parts?

It’s helpful and then shifting gears over to the retail side of the business side. Lynn it sounds like pretty good traction. Are you -- sell through at the rates that you are seeing growth at or you are replenishing lower inventories. What do you kind of seeing that the point of sale right now in terms of volume?

Well, certainly Mark in the first couple of quarters of the year, we did see a little bit of replenishing out of stocks which I think you were very familiar with seeing at retail. But right now we are seeing really strong sell through in the accounts where we get sell through, so it's keeping pace with our sell-in.

Okay. And when can you guys think about the DirecTV business, I know it’s a tough one because it's fairly lumpy depending upon when you have new products rolling out, you guys look at that business as a natural extension from distribution perspective to your general product set or what it make sense over time to maybe migrate more of that online and do less on the TV -- take some of the volatility out of the numbers, I guess the question is, are you getting the right return given the amount of volatility that you see in that business?

Couple of things, Mark. As you know, we used that channel really as our marketing channel. It creates a demand for a product or a category of merchandise, and we just have to always be cautious on the media spend side. It isn't so much that it is lumpy based on our offerings, but it does can be lumpy based on cost of media stand. And we were very cautious this quarter as a media spend went up to pullback. And yes it may be lumpy from a revenue standpoint, but we’re protecting the overall bottom line by pulling back, because we do use it to launch like I said, brands or categories like we’ve used with the firm, which we launched via DRTV, then we take it out to retail, and we also then have online communities and online sales. So I think that we’re going to continue to use it in that manner, since we can maintain the profitability. You may just see some contractions in revenue, when the cost of media goes up. And it certainly does at election times and the holiday times, so you’ll see that usually is our lowest time of the year for revenue for that division, but it didn’t hurt our profitability.

And just shifting back, I think you’d mentioned Lynn in regards to the Gaiam TV, offering that you expect to get that breakeven by the end of fiscal ’13. Do you guys have a total sub number that you’re targeting to get there, or it’s, how do you guys kind of model that out?

Yes, it’s exactly, it’s about, based on as we see today, and it really depends retention and some factors, but right now we kind of see is about 19,000 subs.

And there are no further questions at his time.

So we like to thank everybody for being with us and hopefully we see you in next quarter which should be in March probably, early March. Thank you very much.

Okay. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation. And I say please disconnect your line. Have a great day, everyone.