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

Jirka Rysavy, Chairman of Gaiam, added, “Gaiam’s higher than expected internal revenue growth in the first half of 2012 and significant improvement to the bottom line in our seasonally weakest quarter, as well as new management at Real Goods Solar, position us well for the second part of the year.”

Following the completion of today’s conference call, a replay will be available until August 16, 2012 by dialing 800/633-8284 or 402/977-9140, passcode: 21600769.

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, over 15,000 store within stores, 5,600 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. 2011 RESULTS WITH REAL GOODS SOLAR DECONSOLIDATED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)
		Three Months Ended							Three Months Ended
		June 30, 2012							June 30, 2011
Net revenue		$	45,446			100.0	%		$	30,755			100.0	%
Cost of goods sold			17,435			38.4	%			13,513			43.9	%
Gross profit			28,011			61.6	%			17,242			56.1	%
Selling and operating			26,896			59.2	%			20,383			66.3	%
Corporate, general and administration			3,081			6.7	%			2,159			7.0	%
Loss from operations			(1,966	)		-4.3	%			(5,300	)		-17.2	%
Interest and other income (expense)			(123	)		-0.3	%			70			0.2	%
Loss from equity method investment			(944	)		-2.1	%			(591	)		-1.9	%
Loss before income taxes			(3,033	)		-6.7	%			(5,821	)		-18.9	%
Income tax benefit			(924	)		-2.1	%			(1,827	)		-5.9	%
Net loss			(2,109	)		-4.6	%			(3,994	)		-13.0	%
Net loss attributable to the noncontrolling interest			56			0.1	%			126			0.4	%
Net loss attributable to Gaiam, Inc. (a)		$	(2,053	)		-4.5	%		$	(3,868	)		-12.6	%
Weighted-average shares outstanding:
Basic			22,702							23,314
Diluted			22,702							23,314
Net loss per share attributable to Gaiam, Inc. common shareholders:
Basic		$	(0.09	)					$	(0.17	)
Diluted		$	(0.09	)					$	(0.17	)

(a)

Excluding the losses from our equity method in RSOL, the net loss attributable to Gaiam, Inc. was $1.2 million, or $0.05 per share, during the second quarter of 2012 and $3.3 million, or $0.14 per share, during the second quarter of 2011.

GAIAM, INC. 2011 RESULTS WITH REAL GOODS SOLAR DECONSOLIDATED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)
		Six Months Ended							Six Months Ended
		June 30, 2012							June 30, 2011
Net revenue		$	92,779			100.0	%		$	68,142			100.0	%
Cost of goods sold			37,662			40.6	%			30,069			44.1	%
Gross profit			55,117			59.4	%			38,073			55.9	%
Selling and operating			51,057			55.0	%			40,494			59.4	%
Corporate, general and administration			5,654			6.1	%			4,500			6.6	%
Acquisition-related costs			1,667			1.8	%			—			0.0	%
Loss from operations			(3,261	)		-3.5	%			(6,921	)		-10.1	%
Interest and other income (expense)			(67	)		-0.1	%			114			0.2	%
Loss from equity method investment			(1,640	)		-1.8	%			(577	)		-0.9	%
Loss before income taxes			(4,968	)		-5.4	%			(7,384	)		-10.8	%
Income tax benefit			(1,561	)		-1.7	%			(2,426	)		-3.5	%
Net loss			(3,407	)		-3.7	%			(4,958	)		-7.3	%
Net loss attributable to the noncontrolling interest			135			0.2	%			84			0.1	%
Net loss attributable to Gaiam, Inc. (a)		$	(3,272	)		-3.5	%		$	(4,874	)		-7.2	%
Weighted-average shares outstanding:
Basic			22,700							23,307
Diluted			22,700							23,307
Net loss per share attributable to Gaiam, Inc. common shareholders:
Basic		$	(0.14	)					$	(0.21	)
Diluted		$	(0.14	)					$	(0.21	)

(a)

Excluding costs related to our acquisition of Vivendi Entertainment and the losses from our equity method investment in RSOL, the net loss attributable to Gaiam, Inc. was $0.6 million, or $0.03 per share, for the first half of 2012 and $4.3 million, or $0.18 per share, for the first half of 2011.

GAIAM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
		June 30,			December 31,
		2012			2011
Assets
Current assets:
Cash		$	11,460		$	14,545
Accounts receivable, net			24,825			31,113
Inventory, less allowances			30,783			29,205
Deferred advertising costs			3,301			3,303
Deferred tax assets			6,471			6,686
Receivable from equity method investee			2,183			2,176
Advances			16,198			5,336
Other current assets			2,324			1,969
Total current assets			97,545			94,333
Property and equipment, net			23,930			23,664
Media library, net			14,335			14,576
Deferred tax assets			14,497			12,636
Goodwill			9,405			2,673
Other intangibles, net			8,249			569
Equity method investment			12,660			14,300
Other assets			592			539
Total assets		$	181,213		$	163,290
Liabilities and Equity
Current liabilities:
Line of credit		$	14,000		$	—
Accounts payable			18,446			21,069
Participations payable			16,676			7,851
Accrued liabilities			3,744			3,196
Total current liabilities			52,866			32,116
Total equity			128,347			131,174
Total liabilities and equity		$	181,213		$	163,290

Non-GAAP Financial Measures For Earnings Before Share-Based Compensation, Interest, Acquisition-Related Costs, Income Taxes, Depreciation and Amortization (Adjusted EBITDA)

The Company has utilized the non-GAAP information set forth below as an additional device to aid in understanding and analyzing its financial results for the three and six months ended June 30, 2012 and 2011, respectively. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the 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.

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