Ladies and gentlemen, thank you for standing and welcome to Gaiam's 2014 second quarter results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded today Wednesday, August 6, 2014. I would now like to turn the conference over to Norberto Aja, Investor Relations. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Thank you for participating in Gaiam's 2014 second quarter conference call. Joining me today on the call are Gaiam's Chairman, Jirka Rysavy, Gaiam's CEO, Lynn Powers and Steve Thomas, Gaiam's CFO. Following some prepared remarks, we will open the call for your questions. Before we get started however, I would like to take a minute to read the Safe Harbor language. The following constitutes a Safe Harbor statement of the Private Securities Litigation Reform Act of 1995. Except for historic information contained herein, the matters discussed in this call today are forward-looking statements and involve risks and uncertainties including but not limited to general business conditions, integration of acquisitions, timely development of new businesses, impact of competition and other risk details from time to time as described in the SEC reports. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission including the company's reports on Form 10K and 10-Q. Gaiam assumes no obligation to publicly update or revise any forward-looking statements. Today's call includes non-GAAP financial measures within the meaning of the SEC Regulation G. When required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as the company's website. 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. So revenue for the second quarter of this year grew $0.6 million to $32.5 million. It's just a 2% growth. However, the normalized growth for the quarter was about 9%, if adjusted for change in our fitness and media category management reporting which we talked about in last call and impact of Target which is still experiencing challenges from its data breach and shift about $1.1 million in our eco-travel business to third quarter. Gross margin improved by 600 basis points. Operating loss decreased 22% year-over-year to $3.2 million but that $3.2 million includes $2 million operating loss from our Gaiam TV subscription unit and also about $0.6 million one-time legal and audit costs for the unit's planned separation. The business segment secured 1,100 new store-within-store placement at cost, starting in September. Gaiam Sport now have approved the separation of the subscription unit from the Gaiam branded business and we currently expect that they will occur after we file 10-K for 2014. In this quarter, Gaiam TV plans to add an unlimited download feature as a major step to differentiate itself from other streaming video players. This feature will allow members to download and watch video offline as long as their subscription remains active. The content is encrypted and this become disabled when subscription lapses. Gaiam TV has 600,000 video available for exclusive streaming through Gaiam TV platforms, which now has subscribers in more than 100 countries. Because of its wide international acceptance, Gaiam TV will accelerate its support for languages. The conversion rate from the free trial to subscription has held pretty much steady from last call at well over 70% level. During the second quarter at Gaiam, cash grew to $30.9 million and current ratio to about 3.0. And now I would like to turn over to Steve who will give you more detail about quarter.

Thank you, Jirka. I will spend a few minutes reviewing the financial results in greater detail and offering additional perspective on the performance for the quarter. Let me begin by reminding everyone that the results we reported earlier today and that we will discuss on this call do not include any contributions from Gaiam Vivendi Entertainment or GVE, our former non-Gaiam branded entertainment media business, nor do they include contributions from our direct response television marketing operations as we made a strategic decision to discontinue that business in the fourth quarter of 2013. As a result, we now report both of these businesses as discontinued operations in all figures reflected only are continuing operations. Beginning with the income statement. Net revenue for the second quarter of 2014 was $32.5 million, an increase of approximately 2% or $0.6 million compared to $31.9 million in the prior year period. Net revenue for the business segment increased by 1.2% or $0.2 million to $20 million while the direct to consumer segment net revenue increased 7% or $0.8 million to $12.4 million, compared to the second quarter of fiscal 2013. As a reminder, our business segment is comprised of our sales to domestic and international retailers including store-within-store and our direct-to-consumer segment is comprised of our branded e-commerce catalog and travel businesses, as well as our Gaiam TV subscription service. The business segment continues to be affected by the sales decline at our largest retailer and our conversion on third-party media to distribution arrangement. These events combined with the timing of certain trips between quarters at our travel business affected revenues by approximately $2.3 million in the quarter. Gross profit for the 2014 second quarter grew to $15.5 million or 48% of net revenue compared to gross profit of $13.3 million or 42% of…

Thanks, Steve. Overall second quarter results were in line with our expectations as we continue our strategic repositioning. Our topline growth in the quarter was muted by continued challenges at our largest retail partner and a difference in the booking of trips between quarters at our eco-travel division. Together, these issues impacted revenue by about $2.3 million. At the same time, reflecting our brand strength and the progress we are making in the retail market, our largest 25 customers grew 7% during the quarter and excluding our largest customer grew over 30%. Today, I would like to review our key initiatives for the year and how we are executing against them as we continue to reposition our company around the strategy of being a leading provider of yoga fitness and well-being products and solutions. As of the end of 2013, we divested our entertainment business and shut down our direct response television business. These actions allowed us to focus our attention and resources on our core strength and to set a 2014 operating plan that calls for one, expanding our store-within-store placements for our Gaiam and Gaiam Restore brands, two, expanding placement for our SPRI brand, three, accelerating our product innovation and four, improving our e-commerce branding and performance. Regarding store-within-store growth, we are pleased to confirm that Kohl's, a major US retailer will place a Gaiam branded eight foot store-within-store set in 1,100 of its doors beginning in Q3 this year. The set will include Gaiam Yoga and Gaiam Restore products and media, and will be an example of the kind of impactful and sustainable growth we are seeking. On the SPRI distribution during the third quarter, we will be replacing fitness products that we currently manufacture under a third-party brand with SPRI branded products across over 1,700 doors.…

(Operator Instructions). Our first question is from the line of Mark Argento from Lake Street Capital Markets. Please go ahead.

Yes, hi. Good afternoon.

Hi, Mark.

Just lots going on in the second half of this year. Maybe we could touch on the Kohl's relationship. It looks like eight feet. Will this be a standalone fixture? Or will this be in line with some of their other fixed terrain? Maybe if you could talk a little bit about the opportunity at Kohl's?

Yes. The relationship with Kohl's is going to be another really positive retail partnership. They are going after the healthy living space, as they can see tremendous growth potential there. Gaiam will be positioned on a standalone fixture with great branding and it will incorporate both Gaiam Yoga and Gaiam Restore products. We are also in discussions on additional product line expansions for 2015 as well as an expanded assortment on kohls.com.

Great, and that product, you said, for Q3 that will be in place and ready to go for the holiday season?

Absolutely.

And have you started shipping yet? Or when will we see the impact in terms of the P&L? Did you catch any of that shipping this quarter? Will that mostly all be in Q3?

Q3 and going into Q4.

Okay. Great.

Mid-September, for the majority of it.

Okay. Great. That's helpful. And then I believe in your prepared remarks, you had mentioned that and I just want to make sure I got the numbers right here but of your top 25 customers, growth was 7% on a year-over-year basis? And excluding your largest customer, sales were up 30%? Did I hear that right?

That's correct. Very strong growth at Amazon and Sports Authority are driving that.

Okay. Last question, and then I will let somebody else chime in. But on the apparel opportunity, in terms of specific number, the $10 million to 15 million for next year, to get to that kind of level of sales, can you talk about, you look to do an exclusive with the retailer? Or how do you see potentially rolling this out in your go-to-market strategy with apparel?

Right now, our go-to-market strategy is twofold. First and foremost is that we are working with several of our current retail partners on the high-end Gaiam Sol line as well as several of the yoga studios. And then secondarily, we are also looking at some segmentation in apparel for some of our mid tier retail partnerships.

So when you launch, when you are targeting this $10 million to $15 million, I assume that would incorporate some of the middle market? It's not just boutique or the higher end stuff?

That's correct. We are just going to fill a huge white space in the market.

Fantastic. Thanks.

Thanks, Mark.

Our next question is from the line of George Kelly from Craig-Hallum Capital Group. Please go ahead.

Hi guys. First just a follow-up on one of Mark's questions. You just mentioned that Amazon and Sports Authority did very well in the quarter. I am wondering if you could be more specific if there were any product lines or brands, what was driving that growth?

The Amazon growth is across all of our product categories. As you know, Amazon, since there is virtual shelf space, they take a lot of our products and they are doing well with everything from active sitting to yoga to SPRI. And on Sports Authority, a lot of it is coming from them creating a destination for yoga as well as the SPRI Cross Train products that we shipped in third quarter last year.

Okay, and then with Target, how does it look after the quarter, just through July? Any improvement there?

Yes, we are seeing a little bit of comping in July. But they continue to struggle as you saw from the article and Wall Street today.

Okay, and then, Jirka, on the TV side, have you started to step on marketing there at all? Or what kind of marketing have you guys been doing recently?

We just hired a new head of marketing, started like two weeks ago. Earlier she has same position in Microsoft. She was in charge of launch and supporting the Xbox. And so she is here about two weeks. So we will do a step. We kind of have the second quarter pretty much, we right now -- as we plan to separate, we look at it much more closely our Netflix number. We also try to change how we report to the way how Netflix reports, so people can compare it. And second quarters were slow for them, and so we too a little down, the marketing for second Q. The best way to get customers is in between October and January. It is kind of pretty much of fourth and first quarter, where Netflix gets 80% of their subscribers. So we plan to step it up about mid-September for those months, if that's what you are really asking.

Okay, and then the expected loss on the TV business for the full year? Has that changed?

Well it did not since yet per se, but because as I mentioned, we are getting so much international acceptance, we probably going to do some more, actually a little bit of language support. So we want to do some Spanish and probably another European language. Fortunately how this is accounted, when you translate an existing title, it will hit upfront before you get any revenue. But it's growing really well there. And as we talk internally, especially with Kohl's and stuff, we have a great opportunity to have next year very exciting year, earnings wise. So I think you want to get as much into this year with all these changes. So that would be probably what we can do a little margin in the second part but for the first half, it's right on the budget.

Okay. All right. Thank you.

Thank you. This is the operator. Speakers, I will return the call back to you. You may continue with your presentation or closing remarks.

Thank you very much. And our next call will be probably somewhere early November. Thank you very much.