Sequential Brands Group Inc. (NASDAQ: SQBG) recently boosted its 2016 topline target to a range of $172-$177 million up from the previously targeted annual revenue range of $150-$155 million. You can see that the company raised both its lower-end and high-end revenue estimates by $22 million. But where is the extra revenue amount coming from?
Acquisition of GAIAM Yoga
Sequential Brands Group Inc. (NASDAQ: SQBG) is in the process of closing the acquisition of GAIAM Yoga for $146 million. That comes at a time when recent studies have shown growing popularity of yoga among U.S. population. It is estimated that the number of people in the U.S. who practice yoga rose 76% in the past four years to 35 million. Other studies predict that more than 80 million people in the U.S. aspire to practice yoga in the coming years. As such, SQBG’s decision to acquire a leading yoga brand is seen as a strategic move that should generate long-term revenue growth.
SQBG is hoping that the acquisition of GAIAM Yoga will help it accelerate market share acquisition and global expansion in fitness, wellness and yoga provider space.
Impact on financial results
GAIAM Yoga is expected to immediately boost SQBG’s topline and bottom-line figures. The business is expected to generate $22 million in 2016 and add $20 million to the adjusted EBITDA. As such, 2016 revenue is seen coming in the band of $172-$177 million and adjusted EBITDA is guided in the range of $112-$115 million. The previous adjusted EBITDA guidance before the input expected from GAIAM Yoga was in the range of $92.5-$95.0 million.
Sequential Brands Group Inc (NASDAQ: SQBG) further said that it expected GAIAM Yoga to improve its adjusted EBITDA margin by more than 3% and pave way for more growth in the athletic market.
Nearing close of the deal – Sequential Brands Group Inc (NASDAQ: SQBG)
Sequential Brands Group Inc (NASDAQ: SQBG) is nearing closing the acquisition of GAIAM Yoga. It said it hoped to close the transaction within 60 days after its proposal to acquire the business was accepted. The company is funding the transaction through a combination of debt and existing cash balance.