Gaia, Inc. (GAIA) Q2 2012 Earnings Report, Transcript and Summary

Welcome to the Gaiam Incorporated Second Quarter 2012 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Thursday, August 9, 2012. And I would now like to turn the call over to Mr. Norberto Aja with Investor Relations. Please go ahead, Mr. Aja.

Thank you, operator. Good afternoon everyone and thank you for participating in Gaiam’s 2012 second quarter conference call. Joining me on the call today is Gaiam Chairman Jirka Rysavy, Gaiam CEO Lynn Powers and Steve Thomas, Gaiam’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 that involve risk and uncertainties including but not limited to general business conditions, integration of acquisitions, the timely development of new business and the impact of competition and other risk details from time to time and the SEC reports. The company does not undertake any obligation to update forward-looking statements. With this I would now like to turn the call over to Gaiam’s Chairman, Jirka Rysavy.

Thank you, Norberto, and good afternoon everyone. So revenue for the second quarter which ended June 30 increased 48% to $45.4 million from $30.8 million in the same period in last year. Internal revenue growth was 27%, which was meaningfully above our actual expectation and the guidance. In addition, revenue reflect $6.3 million contribution from Vivendi Entertainment acquisition for the quarter. Revenues for the first half of this year rose 36% to $92.8 million, reflecting steady 25%-plus internal growth. Gross profit rose to $28 million from $17.2 million, the gross margin improving 550 basis points to 61.6%. At the same time our expenses as a percentage of revenue decreased 740 basis points, driving $3.3 million improvement in operating income and $4.2 million improvement in EBITDA excluding Real Good Solar. EBITDA rose to positive $0.3 million from a loss of $3.9 million in the Q2 of 2011. These comparisons assume that consolidation of Real Good Solar happened at beginning of 2011 and but it also include all the onetime Vivendi Entertainment acquisition related expenses. We recorded non-cash loss of $0.9 million related to net operating results of Real Good Solar which we did consolidate for accounting purposes at the beginning of 2012. Real Goods, a recently signed new CEO, Kam Mofid, he was previously President of Mainstream Energy, the parent company of REC Solar and AE Solar. Related to acquisition of Vivendi Entertainment, Biotrade Vision we incurred in the second quarter approximately $1 million of expenses is primarily for Vivendi operating and integration cost, they have been eliminated by now. The combination of our media distribution business with Vivendi Entertainment position Gaiam as the largest non-theatrical distributor in United States, and through the first half of this year as a second largest non-theatrical distributor in the U.S. When we acquired the people we were actually third, we are currently second only after Warner. Again distribution network currently consist of approximately 60,000 retail doors, 15,000 stores within a store and 5,600 media category management location plus all our digital distribution platforms. We continue to expect Vivendi Entertainment to contribute even approximately $25 million in revenue and equal amount of gross profit for the first 12 months of our operational to business. Our trade and the RTV subsidiaries recently secure a new 3-year $35 million revolving line of credit from PNC Bank. The new facility will expire in July 2015 and did replace the Gaiam $15 million revolving credit line that was due to expire in this November. In July, we finished the beta stage period for Gaiam TV and now entering the marketing phase. Marketing will be low for few months but increase in November when we expect to have close to 5,000 video for exclusive streaming. Our higher than expected internal revenue growth for the first half of 2012 provides us with added confidence to meet our guidance of meeting internal revenue growth for this year. This would bring Gaiam to revenue of about $200 million that exclude Real Goods for 2012 to which we will add about 9 months of revenues for Vivendi Entertainment. The significant improvement to our bottom line in our secondly weakest quarter, second quarter, together with the new executive management of Real Good Solar are very good sign for us for the second part of the year and with that I will turn call over to Steve, who will review the financials for the quarter.

Thank you, Jirka. Let me spend a few minutes reviewing the financial results in greater detail and offering some added perspective to our performance in the quarter. Beginning with the income statement, 2012 second quarter net revenue was $45.4 million compared to $30.8 million for the second quarter of 2011. In sequential terms, it's important to remember that we typically experience a drop in sales from the first quarter to the second. Net revenue from our business segment, which is comprised of sales to retailers, increased 96.1% to $28.5 million compared to the year ago period, driven by the Gaiam Vivendi Entertainment business we acquired at the end of March and our continued success in our core health and fitness product business at large retailers including Target and Amazon. Net revenue in our direct to consumer segment which includes contributions from our direct response television business, our e-commerce sales and Gaiam TV digital subscription platform, increased 4.4% to $16.9 million in the second quarter as we experienced ongoing success with the Jillian Michaels program. Gross profit increased to $28.0 million for the second quarter of 2012 versus $17.2 million during the comparable quarter last year. Gross margin increased to 61.6% from 56.1% during the same quarter last year. The improvement in gross margin primarily resulted from the Gaiam Vivendi Entertainment business and increased sales in the higher margin direct response television business. Moving down the income statement, selling and operating expenses increased in the quarter to $26.9 million from $20.4 million in Q2 2011. But as a percentage of revenues, selling and operating expenses were 59.2% of net revenue in the 2012 second quarter versus 66.3% during the same period last year. This 710 basis point improvement was despite the fact that we incurred approximately $0.8 million in non-cash amortization expense in the second quarter of 2012 related to our acquisition of Vivendi Entertainment earlier this year. In addition, during the quarter, we incurred approximately $1 million of non-recurring integration expenses related to the acquisition of Vivendi Entertainment. It's important to note that with consumers been distracted by the Olympic games and political actions, our media spend during the coming quarters will be adjusted to better maximize our media buying strategy with a goal of optimizing the profitability’s rather than driving revenue. As Jirka noted earlier, our investments to further develop Gaiam TV and our digital delivery strategies were higher than they typically have been and for the second quarter such expenses were approximately $1.4 million. Corporate, general and administrative expense increase $0.9 million from the same quarter last year. As a percent of net revenue, corporate, general and administrative expenses decreased to 6.8% from 7.0% in 2011. Inclusive of the $0.8 million in new amortization expense following the Vivendi acquisition, depreciation, amortization and stock compensation expenses totaled $2.3 million for the second quarter of 2012 compared to $1.7 million in the year ago period. Capital expenditures were $0.9 million and media rights costs were $0.8 million. Q2 2011 CapEx was $0.8 million and media rights were $0.5 million. Operating loss for the second quarter of 2012 totaled $2 million compared to $5.3 million during the same quarter of last year. Including an unconsolidated non-cash equity investment loss of $0.9 million, net loss in the quarter was $2.1 million compared to a loss of $3.9 million in Q2 2011. As a quick reminder we converted our Real Good Solar Class B shares to Class A shares on December 31, 2011, reducing our ownership in Real Goods to 38%. For 2012 reporting purposes, Real Good Solar results are deconsolidated and shown as an equity line item in our financials. Our line by line analysis of our financial results are as if Real Good Solar has been deconsolidated as of the beginning of 2011. Moving to the balance sheet, we ended the second quarter with $11.5 million in cash versus $14.5 million on December 31, 2011. This leaves our current ratio at approximately 1.9, a metric that underscores the health of our balance sheet and our continued ability to fund current operations as well as support our investment in value-creating initiatives. Inventory turn for the second quarter of 2012 were 2.3x compared to 2.2 in 2011. As you may remember in order to fund the acquisition of Vivendi Entertainment, we drew $14 million on Gaiam’s credit facility and issued a note for the working capital. I am pleased to report that at the end of June, the working capital note has been fully retired from cash flow in the quarter and certain of Gaiam subsidiaries have replaced a previous $15 million credit facility with a $35 million asset based facility maturing in July of 2015. The new credit facility provides for advances at interest rates of prime plus 75 basis points or LIBOR plus 225 basis points. The new facility with PNC Bank provides the company with the working capital and financial flexibility to continue pursuing our strategies for increasing shareholder value. We drew $14.2 million on the line at closing on August 1st. With regard to Gaiam Vivendi Entertainment, we are in the process of finalizing the working capital and beginning balance sheet amounts and shouldn’t have the last of the financial systems migrated and integrated very soon. Before turning the call over to Lynn I just want to reiterate that our business fundamentals remain strong and we will continue to focus on balancing our long term growth and execution. With that I will now turn the call over to Lynn, who will provide more detail on the overall status of the industry and our growth initiatives. Lynn?

Thanks, Steve. Echoing Jirka and Steve’s comments, I am pleased by our 2012 second quarter results and I am confident in our performance for the balance of the year as we continue to focus our attention on our top 3 priorities: growing our unique Gaiam brand, evolving and expanding our distribution and licensing business and launching our subscription services. Let me begin by reviewing our business segment, the segment that continues to perform very well for us with the internal revenue growth of 52.8% compared to the second quarter of 2011. I am particularly pleased with the ongoing integration between Gaiam and Vivendi Entertainment to date. With this recent acquisition, we will have an additional sales volume of approximately 20 million units and expected annualized net revenue and gross margin of approximately $25 million while significantly increasing our ability to leverage from economies of scale and other operationally efficiencies through reduction in third party distribution cost, lower post production and digital distribution cost and the elimination of redundant overhead. This is important, this operational efficiencies and digital positioning will help offset any top-line DVD headwind and become a crucial competitive differentiator that will further help position Gaiam Vivendi Entertainment as the largest independent and the second largest overall media distributor in the U.S. for non-theatrical content. There is also some very good industry news this year, according to IHS Screen Digest, after several years of decline total revenue from home entertainment content was projected to rise 3% in 2012 in their May report and has since been revised to 8% in their July report. With the expansion of Blu-ray and digital offsetting DVD decline. Blu-ray sales were up 13% with digital content up 22% for the first half of 2012 based on information supplied by a Digital Entertainment Group. I am also pleased to announce the renewal of our licensing agreement with Discovery, which includes all the Discovery Channel brands including TLC, Discovery and Animal Planet. We have also secured a new agreement to distribute the Olympic Games highlights and collector series which is already receiving pre-orders on Amazon in Blu-ray and DVD and will be available for the first time ever for digital purchase and rental on iTunes, Amazon, Xbox, Sony PlayStation, Vudu and Google Play. Importantly, as we secure new agreements, we are having success with also securing digital distribution, an important driver for our future business. I look forward to announcing additional new partnerships in the coming weeks. We continue to expand our media category management role that we started in 2009. We now have over 5,600 doors in the U.S. under management including being 1 of 2 independent aggregators for media in the Target entertainment department and sole aggregator in Target for fitness media. In terms of market share, according to Nielsen VideoScan for second quarter, Gaiam remains at the top of the charts in fitness with 43% market share, which is up from 33% last year and double our nearest competitors. Additionally, as of the end of the second quarter, the Gaiam Vivendi is the number 2 distributor in non-theatrical, with 15% market share, up from 11% last year, with only Warner Studios ahead of us. In addition as noticed earlier we continue to invest in our digital asset management and deliver platform, having direct agreements with all major digital players and further strengthening our media business to support a robust digital future. We retained a great digital team with our acquisition of Vivendi Entertainment and are leveraging their expertise and digital footprint. With regards to our efforts to continue to grow our business segment, we are seeing strong customer demand across Gaiam brand accessories. Our top 25 retailers are up over 30% in the aggregate for the quarter, with some retailers reaching 50% increases. Sell through also continued to comp well with retailers that report those statistics to us. In regards to our fitness products we continue to see great success from our restore line of at home rehabilitative and restorative accessories along with our Gaiam Sol Premium Yoga Line and our SPRI professional’s line. Our restore products have 2 of the top SKUs in Target and are among the best performing at other Gaiam stores, in store locations and our SPRI brand is expanding to 400 Sears stores this fall. We will continue to grow these lines of products during 2012 both in terms of SKUs as well as retail locations. We also continue to focus much of our efforts in our stores and store concept which is now in place at over 15,000 doors during the quarter. We expect to utilize the strategy at Gaiam restore brand and the SPRI brand as well as for our studio partners. Turning now to the direct to consumer business which had a 3.4% internal growth, we plan to follow-up on the success of the FIRM Express and the early February airing of the Gaiam branded Jillian Michaels product line with new fitness content that will allow for continued growth from this segment as we enter the second half of the year. Of course e-commerce is an integral part of what we do. During the first quarter we repositioned our e-commerce business to shift towards proprietary branded products and apparel and started work on our new Web platform and creative look. Gaiam customers will now have a greater online assortment and an overall more engaging shopping experience. The new website which we expect to launch in the fourth quarter will enable us to be even more connected and accessible to our customers, including through mobile friendly design for the iPhone, iPad and Android devices. These initiatives are now well under way and should be ready to launch in the coming weeks and begin to yield results in the fourth quarter of the year as we enter the holiday shopping season. That’s also been the thinking behind one of our more exciting businesses, Gaiam TV. As Jirka mentioned, we are finished with our beta stage and should be entering the marketing phase in the next couple of months with an increased marketing spend towards the end of the year. The investment in Gaiam TV in Q2 was approximately $1.4 million in negative operating income. We have a one of a kind library of digital titles across fitness, health and wellness and personal development, which together with our in-house capabilities to create compelling content with low incremental cost should make Gaiam TV a very appealing offering to consumers interested in learning more about these areas and bringing the world a fitness, health and wellness and personal development closer to them through their computers, mobile devices, tablets and on their TVs. While this business has had a negative impact on operating income, we believe it's an exciting new initiative that will have great drop through as soon as we hit breakeven on subscribers. In closing, we are focused on the fundamentals of executing our multi-channel business, expanding our product assortment and improving the customer experience. I am both confident and excited at the potential for all 3 of our main businesses, from our ability to develop our Gaiam brand halo across product lines and channels, to been an aggregator that packages and markets content across all distribution channels including digital and non-traditional retail, to Gaiam TV which is quickly becoming a key part of how we build our brand in the digital world. Gaiam is a mainstream brands oriented, licensee and distributor of non-theatrical content, a market leader in the fitness of wellness programming and branded equipment and a pioneer in digital distributor and subscription services. We are taking decisive actions to position and grow the business, strengthen our balance sheet and create shareholder value. Of course, none of this would be possible without everyone at Gaiam coming together to achieve these results and I would like to take this opportunity to thank the entire team at Gaiam for their continued dedication and amazing talent. We look forward to been active in our investor outreach over the coming months and I hope to see many of you in various conferences and investor events throughout the balance of the year, including our upcoming attendance at the Telsey Advisory Group's Third Annual Fall Consumer Conference which will be held October 2nd and 3rd in Las Vegas. Thank you for your continued interest in Gaiam and your participation today. With that I would like to turn the call back to the operator and take this opportunity to answer questions. Chantal?

[Operator Instructions] And we have our first question from the line of George Kelly with Craig-Hallum.

Couple of questions for you. First, wondering if you could sort of help with the seasonality with the Vivendi acquisition and specifically how do you kind of expect revenues to trend here in the third and fourth quarters?

Well the Vivendi will have similar seasonality to the Gaiam business. It will be heavily fourth quarter weighted, which is similar to what we have right now. As far as our outlook for third and fourth quarter, we're certainly continued to be pleased with our progress, not only with the Vivendi integration but also the acceptance of some of our new product lines and we expect to see continue to see comp growth.

And then maybe I have missed it in your prepared remarks but did you give an update at all about your retail store? Is there any news there?

No, right now we've been a little bit busy with the integration and so we still just have one retail store open. It's doing fine. We'll look at additional opportunities when we get later on in the year and we get through this integration.

And then lastly, wondering if you could give out any details about the Gaiam TV, whether number of paying subs or conversion, any of that stuff that you can give out?

We can give you some kind of peek. It's still kind of early on it. As I said, we just took beta off a couple weeks ago. We're starting to market like next week. So far right now, it was mostly internal. We have about 10,000 paying subs and we accept it start to change as we start to market. The conversion rates are well above what we expected from the free trial. We kind of hoped to 30% conversion and it's running about 70%. Retention more than double over the last 4 months and its increasing pretty much every week as we track it. Obviously we adding a lot of content. We started when we just listed internally with couple of thousand titles where we have, we added like 100 a week right now. We expected about 5,000 titles for exclusive streaming, that means you cannot find in services like Netflix at all and it's also a very different model, because our content, the way how we do the deal, it's 10 years, some of them are longer and it's all upfront and there is a participation which creates a lot of very different economic model than Netflix. So our cost of goods is pretty steady. So we pretty much pretty eager to see how their paying sub start to grow and we expect to this be a net contributor to the company over the next year and have a very significant drops after that.

And just to make sure I heard you right, you said advertising is pretty pressured right now, so you're not going to heavily advertise until November, is that correct?

More was a comments about DRTV but it's more that we want to test what's actually when we start to do it, right now we'll be more skewed towards search engine and optimization of that kind of line but we also want to see from different lines see what's actually paying because the beauty of being digital, you can track everything. So you try to wait for campaign and you see that and so it's kind of the campaign is to become a trick doors end of the year when we get all the content what we own currently which is about 5,000 titles, they all will be in live and which should have also a good response from the campaign and we kind of also have enough subscribers right now to see what they are actually watching. So it's more that than the competing for a space and media. It's more an outdoor response television.

[Operator Instructions] Our next question is from the line of Mark Argento [ph] with MA Research [ph].

First question on the in-stock rates. I know they have returned to normal after a couple down quarters. How do you feel, how are in-stock rates, replenishment rates some of your TV retailers?

Yes, we've seen them bounce back up. Right now they are a little bit low in a couple of places where they are preparing for the big September reset where we launch a lot of new products, but overall we're pretty pleased with them. I think that because not only you're seeing really nice comps on sell in but we've seeing nice comps on sell through. So the improved stock levels have certainly helped that as well.

Great. And in terms of getting back to Gaiam TV, you talked a little bit about your go to market strategic on the marketing side and who is really the target customer. Is it a Gaiam customer, predominately female, 35 and up? Maybe you could give me a little bit of idea of your go to market and more particular who you think your target customer are.

So, so far the marketing was really internal so the answer would yes, that's pretty much today, probably half of that current paying subscribers are from our existing base. We also just let a search engine where people kind of find us so far kind of on their own and from the statistics you see you have female about 45 but you have lot of males in late 20s or mid to late 20s. Those are 2 predominant groups right now who are the subscribers more than say who we will target. Though I can tell you more after the first few months of the company to see what's actually working because as I said, there's beauty over that to know exactly. But from our current viewers that's kind of what it is and it is without trying, it's about 15% international viewed in about 70 countries.

And when that business starts to scale, is that an 80%, 70% gross margin business? I know you mentioned something about content costs. What should content costs be as a percent of sales in that business over time?

Well the content cost right now is because we still dominated mostly by our internal titles, it's more like probably average around 5% to 7% but as we sign maximum participation is 20% so let`s say the participation between 9% and 20%. So we'll probably come closer to 10% as an average. But the cost of the goods sold, which is mostly digital delivery, it's right now because there is lot of fixed costs, maybe we can look at this month maybe like 22%, next year, probably by end of the year should be more like 11% to 12% and next year should be probably 7%. So you're going to have the margin let`s say the gross profit if you put the participation cost in it, it will be below 20%. But also because you have credit cards, you have about 2.5% credit card fees. Even they don't really go to cost to solve this as reporting I consider them pretty much to kind of cost because it's lower revenue. Even they reporting operating expenses. So you can say it's about 20% between all of that and then you have roughly 30% what we thinking to start overall digital marketing right now for our online business about 25% and then you look for maybe when this stabilized like 10% operating. So our stabilized business should have about 40% pre-tax of revenue.

Steve, a quick one for you. In terms of the new credit facility, what are the basic terms on that facility?

It's basically a revolver. Three year term, asset based on receivables and inventories and then it's got layers of interest rates. It's based on 1, 2- or 3-month LIBOR plus 2.25% or prime plus 0.75.

Can you tap that for acquisitions as well or do you have to do something separate?

It's tied to the trade business assets and so it's really devoted to those businesses. Yes, it's available for whatever working capital needs we have.

But also, Mark, because it's done in a subsidiary level, also the previous line which was $15 million was done at parent level, tied to all company assets. This is basically the subsidiary level that is tied to receivable inventory. So all assets like inventory and direct business and building land that we own and those investments those are free to have separate line if you want.

NOLs, where do you guys stand right now in terms of tax loss, carry forwards or NOLs?

Yes, I think we still are in a position where we've got NOLs to cover us for the foreseeable future. Yes, I think last time it was about 45 million.

Apparel, I know it's something that you guys did then looking at more and more, any thoughts around apparel either you're doing it yourself or partnering with somebody in regards to apparel line or…?

We're testing a lot of different concepts right now, Mark, on our direct business when we get ready to go forward and take it out to the trade business or any more retail we'll look at all options, whether it’s a partnership we're trying to do it ourselves. We're still looking at both of those. Again, when we free up time after we get this integration complete, we'll turn our attention back towards retail and apparel.

Our next question is from the line of Robert Routh with Phoenix Partners Group.

Three quick questions, first, obviously given what you do with Gaiam TV, a niche based nature of the customer base and obviously it's global, and people who are very loyal, that like to watch that content and it is evergreen. But at the same time, would it make sense given the recent announcements like Liberty just made to split Starz into a separate asset backed securities to work with someone like that, that also has consumer type product where you can piggyback on their content, they can piggyback on yours and basically you almost have strategic investment by another entity and one plus one is greater than 2 because of the breadth of content. Would that make more sense than kind of going it alone with the Gaiam TV product long term?

It definitely makes sense to think about that. It's still early product so it's good to show right now what we have since we spent all the money to build it, minimum for evaluation purposes. But definitely we can talk about this various way to look at it but I would definitely would want to go through this next phase to put more revenue on the table and see what's actually happening. So each thousand customers have a big impact on our bottom line.

Right, but would you consider or take seriously a strategic investment by another partner that does similar things you can leverage off while you built to or at that stage you wouldn’t because you don't see the stock reflects that, it’s the breadth of my question.

From simply, the subscription assets it makes sense to look at that. I think it's also a question how we manage all the assets and because also obviously where the stock is right now, it depends on how you look at the pieces but it's definitely something worth get several people here very excited. We recently talked to a lot of people; we launched right now Gaiam TV and its launch in July and FiOS which is digital business for Verizon. FiOS, its competed with the cable company pretty much. And same when we had discussion with Microsoft and Sony, so it's definitely a lot of interest when they see the technology and how far we are on the process and how we're actually doing if compared to existing model, so what's out there. So, we'll definitely have some of these discussions.

And on another note, in terms of what you're doing and obviously you have a direct response television, but it seems a lot of your products would sit better on a home shopping network. Have you have any discussions with HSN or QVC or Value Vision or have you thought about that, having all the Gaiam health and wellness hour once a week, something like that to really build the brand even more and drive revenues or do you think a relationship like that might not make sense?

No, I think a relationship like that absolutely does and we're actually talking to a consultant about that right now. So that's something we've got in the works to at least make a pitch on that.

And then 2 questions, and if you answered this one prior to me getting on I apologize. I know in the last call you mentioned the idea of annuity which market you serve, is that something that we can see near term, and designer skin care is what you talked about before. But there are obviously a plethora of different things you could do. I am just curious if that's how aggressively you want to get into at the annuity type non consumable business and how fast we could see that.

We're looking at that for 2013 and we would think probably second, third quarter of 2013, we'd have something ready to go on that.

Fair enough and another one you're not going to like but I have to ask you, given where your stock is, and the lack of liquidity and what the intrinsic value of the company probably is, which is materially higher, why don't you go private or consider it? Because right here your return on equity, that's probably the best use of your cash given where the stock is and sending a message to investors along those lines could make a lot of sense. Just curious as to your thoughts.

It's something that we obviously talked over several times. We have board meeting coming up in a month, so we probably, it's always on the discussion table, actually it's not a new topic, we look at it from different way, what's the right way and we have definitely for in the game. So and I am sure we'll keep discussing it.

And along similar lines, if you weren't to do that which obviously would probably make sense for you as the larger shareholders and controlling shareholders and others, the value of the business eventually will be realized, if it’s a liquidity issue. If you chose instead to address that, have you ever considered doing a non-detachable rights issuance continue simultaneously with a tender of stock so people who want to sell their stock, you buy it at 4.50 but otherwise they get the right to buy on a 1 for 1 or 2 for 1 basis of incremental share at discount to market. So you're rewarding loyal holders forever and increasing liquidity to take in by the discount, and can't strip it out. Seems like something like that can't hurt given how well you’ve done and yet the stock seems to not react.

From technical answer is yes, so anything is something like that, like my mind is always interested in it, but yes to say for the size of the company and where we are currently kind of creating any complex structure I think will be more problem than help. We might look at something, it does not we have lot of things going so there are several ways to approach it and I would become hesitant to create really complex structure but we committed to do something right now to really enhance the shareholder value.

I totally understand and obviously doing a secondary at this price would be ridiculous because it’s a very expensive currency but rewarding existing holders of the stock that have been patient by giving the opportunity to buy another share, it gives a non-detachable or could be hedged, might make sense, bring a lot of cash into the company and bring the average down as well as control some get some more liquidity and get higher multiple. It's just a thought, I don't think it hurt and if it could possibly help reward people that have been loyal and are losing money but they don't want to sell but they can't buy more because of the lack of liquidity, it's an idea.

It's definitely an idea, you know what, I'll bring it in the board as an option and it it's okay I'll quote you.

And Ms. Powers, there are no more questions on the phone lines at the moment. I will now turn the call back to you. Please continue with your presentation or closing remarks.

I would like to thank everybody for being with and thank you very much. Hopefully you'll be with us next quarter and hopefully we have right now things going in the company in the right direction and so we can reverse what happened in the market over the last couple of years and I was really pleased to see that report for the content because it's much easier to do something with once in a bag than opposite, how was it over the last 3 years. Thank you very much.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect you lines. Have a great evening everyone.