Gaiam Reports Second Quarter Results

  Gaiam Reports Second Quarter Results

  - Net Revenue Increases 11% in Second Quarter and 23% in 1st Half of 2013,
                   Excluding the Company’s DRTV Business -

- EPS of $0.35 for the Second Quarter, Inclusive of Gain on Sale of RSOL Stock
                                      -

Business Wire

BOULDER, Colo. -- August 7, 2013

Gaiam, Inc. (NASDAQ: GAIA), a lifestyle media company, today reported
financial results for the second quarter ended June 30, 2013.

Conference Call: Gaiam is hosting a conference call today, August 7, 2013,
beginning at 2:30p.m.MT (4:30p.m.ET). The conference call dial-in numbers
are (212) 231-2901 or (415) 226-5355. Questions will be reserved for analysts
and investors.

2013 Second Quarter Financial Results Summary

  *Net revenue, excluding the Company’s direct response television marketing
    business (“DRTV”), increased $4.0 million, or 10.8%, for the quarter and
    $16.9 million, or 23.2%, for the first half of 2013.

       *Business segment net revenue grew $0.8 million or 2.6%.
       *Direct to consumer segment net revenue excluding DRTV increased by
         $3.3 million or 37.8%.
       *Net revenue including DRTV was $44.5 million for the quarter.

  *Operating expenses declined $2.5 million, or 8.2%, to 61.8% of net
    revenue.
  *Net income increased $9.9 million to $7.9 million, or $0.35 per diluted
    share, inclusive of a gain on the sale of Real Goods Solar, Inc. (“Real
    Goods Solar” or “RSOL”) common stock.
  *Working capital ratio improved on a quarterly sequential basis to 2.1
    times from 1.7 times at March 31, 2013.
  *The Company ended the quarter with a cash balance of $17.5 million.

Lynn Powers, Chief Executive Officer of Gaiam, commented, “Our recent results
highlight our continued progress in positioning Gaiam as a leader in fitness
and entertainment media. With our ongoing market share growth, Gaiam is now
the largest and second largest seller of fitness and non-theatrical
entertainment media, respectively. Part of our success is reflected in our
business segment’s sales performance as total revenue is up $12.3 million, or
22.6%, year to date. Another example of our strong market position is our
recently secured distribution rights for Scripps Networks’ high-profile,
lifestyle-oriented content.

“Excluding DRTV, which benefited last year from significant contributions
related to the release of the Jillian Michaels Body Revolution media fitness
program, the direct to consumer segment’s net sales increased year over year
by 37.8% and 24.9%, in the three and six month periods ended June 30, 2013,
respectively. With the launch of our new Firm branded infomercial in late
third quarter, we anticipate the direct to consumer segment to significantly
improve our fourth quarter performance, bringing our full year results in line
with our expectations.”

2013 Second Quarter Financial Review

In the quarter ended June 30, 2013, net revenue was $44.5 million, compared to
$45.5 million in the prior-year period. Excluding the Company’s DRTV business,
net revenue increased $4.0 million or 10.8%. Net revenue for the Company’s
business segment increased $0.8 million, or 2.6%, to $29.3 million for the
second quarter of 2013. Excluding the Company’s DRTV business, direct to
consumer segment revenue increased 37.8%. Inclusive of the DRTV business, net
revenue for the direct to consumer segment was $15.3 million in the 2013
second quarter, compared to $16.9 million for the prior year quarter. The
decrease in direct to consumer net revenue primarily reflects a $4.9 million
year over year decline in sales at the Company’s DRTV business, compared to
the second quarter of 2012, which benefited from strong sales of the Jillian
Michaels Body Revolution media fitness program following its introduction
early in 2012. (See Non-GAAP Financial Measures tables later in this press
release).

Gross profit for the 2013 second quarter was $23.6 million, or 53.1% of net
revenue, compared to gross profit of $28.0 million, or 61.6% of net revenue,
in the second quarter of 2012. The decrease in gross margin primarily reflects
the nearly 60% year-over-year decline in the higher margin DRTV net revenue,
as well as higher sales of lower margin fitness accessories.

Operating expenses declined $2.5 million, or 8.2%, to $27.5 million, or 61.8%
of net revenue, in the 2013 second quarter, compared to $30.0 million, or
65.9% of net revenue, in the second quarter of 2012.

Operating loss for the three months ended June 30, 2013 increased $1.9 million
to $3.9 million from $2.0 million in the second quarter of 2012. The increased
operating loss is primarily attributable to a negative earnings comparison for
the Company’s DRTV business and investments in GaiamTV, as well as other
unusual expenses like the branding study with IDEO. These businesses are
expected to improve, as explained below, in the fourth quarter of 2013.

During the quarter, the Company recorded a gain on the sale of 6,012,500
shares of Real Goods Solar common stock of $16.4 million. Gaiam used a portion
of its net operating loss carry-forwards to offset all the resulting taxable
gain. After the sale, Gaiam continues to own approximately 4.1 million shares
of Real Goods Solar common stock. Gaiam founded Real Goods Solar (previously
Gaiam Energy Tech, Inc.) as its solar subsidiary in 1999. Following the sale,
Gaiam’s Chairman, Jirka Rysavy, resigned as Chairman of Real Goods Solar, a
position he had held from its inception.

Net income for the 2013 second quarter was $7.9 million, or $0.35 per diluted
share, compared to a net loss of $2.1 million, or $0.09 per share, for the
second quarter of 2012.

2013 First Half Financial Review

Revenue for the first six months of 2013 increased $8.4 million, or 9.1%, to
$101.2 million, inclusive of internal net revenue growth of $2.1 million or
2.3%. Excluding the DRTV business in the first six months of 2013 and 2012,
net revenue increased $16.9 million, or 23.2%, inclusive of $10.6 million or
14.7% of internal revenue growth. (See Non-GAAP Financial Measures tables
later in this press release.)

Gross profit margin for the six months ended June 30, 2013 was 55.2% of net
revenue, compared to 59.4% in the comparable year-ago period, primarily due to
the approximately 43% year-over-year decline in higher margin DRTV net
revenue.

Operating loss for the six-month period ended June 30, 2013 increased $0.5
million to $3.7 million from $3.3 million for the same period last year. The
increase in operating loss is primarily due to negative earnings comparisons
in the Company’s DRTV and GaiamTV businesses of $3.7 million and $1.4 million,
respectively, and unusual expenses like a brand research and positioning
study, partially offset by the improvements in the Company’s other core
businesses. The Company’s direct to consumer segment’s operating results are
expected to improve in the 2013 fourth quarter when its DRTV business launches
its new Firm branded infomercial, which should bring total year results in
line with the Company’s expectations.

Net income for the first six months of 2013 was $7.6 million, or $0.33 per
diluted share, inclusive of a gain on the sale of Real Goods Solar common
stock. Net loss for the first six months of 2012 was $3.3 million, or $0.14
per share.

As of June 30, 2013, Gaiam had total cash of $17.5 million compared to cash of
$9.9 million at December 31, 2012, with the draw on the Company’s $35 million
line of credit decreasing $4.3 million to $12.0 million. The Company’s current
ratio improved to 2.1 times.

Jirka Rysavy, Chairman of Gaiam, commented, “With the sale of a portion of our
Real Goods Solar stock holdings, we are beginning to unlock gains in some of
our assets that should significantly improve both our income statement and
balance sheet in coming quarters.”

Following the completion of today’s conference call, a replay will be
available until August 14, 2013 by dialing (800) 633-8284 or (402) 977-9140,
passcode: 21668564.

About GAIAM

Gaiam, Inc. (NASDAQ: GAIA) is a leading producer and marketer of lifestyle
media and fitness accessories. With a wide distribution network that consists
of over 60,000 retail doors, 15,000 store within stores, and 6,000 media
category management locations, and a digital distribution platform, Gaiam is
dedicated to providing solutions for healthy and eco-conscious living. The
Company dominates the health and wellness category and releases non-theatrical
programming focused on family entertainment and conscious media. In addition,
Gaiam has exclusive licensing agreements with Discovery Communications and
other licensing partners. For more information about Gaiam, please visit
www.gaiam.com or call 1.800.869.3603.

This press release includes forward-looking statements relating to matters
that are not historical facts. Forward-looking statements may be identified by
the use of words such as “expect,” “intend,” “believe,” “will,” “should” or
comparable terminology or by discussions of strategy. While Gaiam believes its
assumptions and expectations underlying forward-looking statements are
reasonable, there can be no assurance that actual results will not be
materially different. Risks and uncertainties that could cause materially
different results include, among others, introduction of new products and
services, completion and integration of acquisitions, the possibility of
negative economic conditions, and other risks and uncertainties included in
Gaiam’s filings with the Securities and Exchange Commission. Gaiam assumes no
duty to update any forward-looking statements.

                                                               
GAIAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
                                                                       
                                 Three Months Ended       Three Months Ended
                                 June 30, 2013            June 30, 2012
Net revenue                      $ 44,544     100.0 %     $ 45,446     100.0 %
Cost of goods sold                20,909    46.9  %      17,435    38.4  %
                                                                       
Gross profit                       23,635     53.1  %       28,011     61.6  %
Selling and operating              24,294     54.5  %       26,896     59.2  %
Corporate, general and            3,227     7.3   %      3,081     6.7   %
administration
                                                                       
Loss from operations               (3,886 )   -8.7  %       (1,966 )   -4.3  %
Interest and other                 (52    )   -0.1  %       (123   )   -0.3  %
expense, net
Gain on sale of investment         16,429     36.8  %       —          —     %
Loss from equity method           —         —     %      (944   )   -2.1  %
investment
                                                                       
Income (loss) before               12,491     28.0  %       (3,033 )   -6.7  %
income taxes
Income tax expense                4,508     10.1  %      (924   )   -2.1  %
(benefit)
                                                                       
Net income (loss)                  7,983      17.9  %       (2,109 )   -4.6  %
Net (income) loss
attributable to the               (135   )   -0.3  %      56        0.1   %
noncontrolling interest
                                                                       
Net income (loss)
attributable to Gaiam,           $ 7,848     17.6  %     $ (2,053 )   -4.5  %
Inc.
                                                                       
Weighted-average shares
outstanding:
Basic                              22,741                   22,702
Diluted                            22,741                   22,702
Net income (loss) per
share attributable to
Gaiam, Inc. common
shareholders:
Basic                            $ 0.35                   $ (0.09  )
Diluted                          $ 0.35                   $ (0.09  )
                                                                       

                                                               
GAIAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
                                                                       
                                Six Months Ended          Six Months Ended
                                June 30, 2013             June 30, 2012
Net revenue                     $ 101,177     100.0 %     $ 92,779     100.0 %
Cost of goods sold               45,337     44.8  %      37,662    40.6  %
                                                                       
Gross profit                      55,840      55.2  %       55,117     59.4  %
Selling and operating             52,523      51.9  %       51,057     55.0  %
Corporate, general and            7,052       7.0   %       5,654      6.1   %
administration
Acquisition-related costs        —          —     %      1,667     1.8   %
                                                                       
Loss from operations              (3,735  )   -3.7  %       (3,261 )   -3.5  %
Interest and other                (281    )   -0.2  %       (67    )   -0.1  %
expense, net
Gain on sale of                   16,429      16.2  %       —          —     %
investment
Loss from equity method          —          —     %      (1,640 )   -1.8  %
investment
                                                                       
Income (loss) before              12,413      12.3  %       (4,968 )   -5.4  %
income taxes
Income tax expense               4,652      4.6   %      (1,561 )   -1.7  %
(benefit)
                                                                       
Net income (loss)                 7,761       7.7   %       (3,407 )   -3.7  %
Net (income) loss
attributable to the              (189    )   -0.2  %      135       0.2   %
noncontrolling interest
                                                                       
Net income (loss)
attributable to Gaiam,          $ 7,572      7.5   %     $ (3,272 )   -3.5  %
Inc.
                                                                       
Weighted-average shares
outstanding:
Basic                             22,736                    22,700
Diluted                           22,736                    22,700
Net income (loss) per
share attributable to
Gaiam, Inc. common
shareholders:
Basic                           $ 0.33                    $ (0.14  )
Diluted                         $ 0.33                    $ (0.14  )
                                                                       

                                            
GAIAM,INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
                                                  
                                    June 30,      December 31,
                                    2013          2012
Assets
Current assets:
Cash                                $ 17,482      $   9,858
Accounts receivable, net              38,889          57,533
Inventory, less allowances            31,881          29,840
Deferred advertising costs            4,343           4,324
Deferred tax assets                   8,002           9,129
Receivable from related party         2               64
Advances                              15,816          13,197
Other current assets                 3,329          2,463
                                                  
Total current assets                  119,744         126,408
Property and equipment, net           24,095          23,998
Media library, net                    12,972          13,090
Deferred tax assets                   11,530          14,692
Goodwill                              10,011          9,405
Other intangibles, net                4,740           5,608
Other assets                         741            661
                                                  
Total assets                        $ 183,833     $   193,862
                                                  
Liabilities and Equity
Current liabilities:
Line of credit                      $ 11,972      $   16,231
Accounts payable                      22,600          26,738
Participations payable                17,768          28,046
Accrued liabilities                  4,226          3,975
                                                  
Total current liabilities             56,566          74,990
Total equity                         127,267        118,872
                                                  
Total liabilities and equity        $ 183,833     $   193,862
                                                      

Non-GAAP Financial Measures For Net Revenue

The Company has utilized the non-GAAP information set forth below as
additional devices to aid in understanding and analyzing its financial results
for the three and six months ended June 30, 2013 and 2012. The Company
believes that these non-GAAP measures will allow for a better evaluation of
the operating performance of its business and facilitate meaningful comparison
of the results in the current period to those in the prior period and future
periods. Reference to these non-GAAP measures should not be considered a
substitute for results that are presented in a manner consistent with GAAP.

A reconciliation of the GAAP net revenue to the non-GAAP net revenue is set
forth below (unaudited, in millions):

                                                                                                              
                                                                                  For the Three           For the Six Months
                                                                                  Months Ended            Ended
                                                                                  June 30,                June 30,
(in                                                                              2013     2012       2013      2012  
millions)
                                                                                  (unaudited)             (unaudited)
Net revenue                                                                       $ 44.5     $ 45.5       $ 101.2     $ 92.8
Less: DRTV net revenue                                                             (3.3 )    (8.3 )      (11.4 )    (19.9 )
                                                                                                                      
Non-GAAP net revenue                                                              $ 41.2    $ 37.2      $ 89.8     $ 72.9  
                                                                                                                              

A reconciliation of the GAAP net revenue to the non-GAAP net revenue for our
direct to consumer segment is set forth below (unaudited, in millions):

                                                             
                       For the Three Months Ended     For the Six Months Ended
                       June 30,                       June 30,
(in millions)          2013         2012          2013        2012  
                       (unaudited)                    (unaudited)
Net revenue of
our direct to          $  15.2        $  16.9         $  34.6        $ 38.5
consumer segment
Less: DRTV net           (3.3  )       (8.3  )        (11.4  )     (19.9 )
revenue
                                                                     
Non-GAAP net
revenue of our         $  11.9       $  8.6         $  23.2       $ 18.6  
direct to
consumer segment

Contact:

Gaiam, Inc.
Steve Thomas, 303-222-3782
Chief Financial Officer
steve.thomas@gaiam.com
or
JCIR
Joseph N. Jaffoni, Norberto Aja, Richard Land
212-835-8500
gaia@jcir.com
 
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