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Gaiam Reports Second Quarter Revenue Increases 48% To $45.4 Million

2012 Second Quarter Financial Review (As Compared to 2011 with Real Goods Solar “RSOL” Deconsolidated)

On December 31, 2011, due to the conversion of the Company’s holdings of RSOL Class B common stock to Class A common stock, Gaiam changed the accounting for its 38% ownership in Real Goods Solar, Inc. (“Real Goods Solar”) from a consolidated basis to an equity method (“deconsolidated”). As a result, for 2012, Gaiam’s interest in Real Goods Solar’s net results are reflected as a single line in Gaiam’s financial statements, whereas for 2011 Real Goods Solar’s financial position and results of operations are consolidated into each line of Gaiam’s financial statements. The year-over-year financial comparisons below are stated as if Real Goods Solar was deconsolidated as of January 1, 2011.

Net revenue increased $14.7 million, or 47.8%, to $45.4 million in the second quarter ended June 30, 2012. Net revenue for the business segment increased $14.0 million, or 96.1%, to $28.5 million, and excluding the acquisition of Vivendi Entertainment, internal revenue growth was 52.8%. The internal growth of the direct to consumer segment was 3.4%, or $0.5 million, compared to the prior year quarter. The increase in sales in the business segment includes an over 30% aggregate increase in revenue from the Company’s top 25 retail accounts as well as a full quarter of contribution from the operations of Gaiam Vivendi Entertainment, which totaled $6.3 million. The increase in direct to consumer sales primarily reflects increases in the Company’s direct response marketing business.

Second quarter 2012 gross profit increased to $28.0 million, or 61.6% of net revenue, from $17.2 million, or 56.1% of net revenue, during the comparable quarter last year. The 550 basis points increase in gross margin primarily reflects a shift in the sales mix to the higher margin direct response television marketing business, as well as the higher margin Gaiam Vivendi Entertainment business. Gross profit margin in the first half of 2012 increased to 59.4% of net revenue compared to 55.9% in the comparable year-ago period.

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