Gaiam Reports Third Quarter Fiscal 2007 Results

- Third quarter revenues increased 36% to $70.3 million

- Operating income increased 315% to $4.2 million

- Earnings per share doubled to $0.12

BROOMFIELD, Colo., Nov. 7 /PRNewswire-FirstCall/ -- Gaiam, Inc. (Nasdaq: GAIA), a lifestyle media company providing a broad selection of information, media, products and services to customers who value personal development, wellness, ecological lifestyles, responsible media and conscious community, announced today results for its third quarter ended September 30, 2007.

Gaiam also announced that it will host a conference call today, November 7, 2007, at 2:30 p.m. MST (4:30 p.m. EST) to review the third quarter 2007 results.


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For the third quarter, Gaiam generated revenue of $70.3 million, an increase of 36% over the $51.8 million recorded in the same period last year. The internal growth rate was 34%.

Gross margin expanded 260 basis points to 65.6% of revenue in the third quarter of 2007, from 63.0% in the same period last year, which in turn represented a 750 basis point increase from 55.5% in the third quarter of 2005. The increase over 2006 was primarily due to higher margin international sales and subscriptions.

Operating expenses as a percentage of revenue decreased to 59.7% in the third quarter of 2007, from 61.0% in the comparable period last year even after increased expenses related to Gaiam's expanding community business.

Operating income for the third quarter of 2007 increased 315% to $4.2 million, or 6% of revenue, compared to operating income of $1.0 million, or 2% of revenue, a year ago.

Gaiam reported a net income for the third quarter of $2.9 million, or $0.12 per share, as compared to net income of $1.7 million, or $0.06 per share, for the third quarter of 2006. Gaiam repurchased 2.5 million shares of its stock in February 2007. Depreciation and amortization for the third quarter of 2007 was $3.3 million.

For the nine months ended September 30, 2007, Gaiam recorded net revenues of $181.1 million, a 24% increase from $146.7 million in the comparable period a year ago. Net income tripled to $4.3 million, or $0.17 per share, compared to net income of $1.4 million, or $0.06 per share, for the nine months ended September 30, 2006.

According to Nielsen's VideoScan, Gaiam's market share in the fitness/wellness DVD category increased to 49% for the nine months ended September 2007, up from 45% in the same nine months last year, and for the quarter ended September 2007, increased to 53% compared to 46% for the third quarter of 2006.

Lynn Powers, Gaiam's President, commented, "We are extremely pleased with our third quarter results as we achieved a 34% internal growth in sales and improved gross and operating margins. During the quarter we continued to successfully leverage our leading media content growing our DVD market share in fitness / wellness to 53%."

Although Gaiam's third quarter is typically a very demanding cash flow period, Gaiam generated $4.1 million in cash from its operations, bringing year to date cash generated from operations to $20.6 million compared to cash provided by operations of $0.6 million in the same nine months of last year.

During the third quarter, Gaiam strengthened its community by acquiring Zaadz, a leading social networking site, LIME Media, a multimedia lifestyle company, and a majority ownership of Conscious Enlightenment, an online and offline community.

Gaiam is entering into a strategic relationship with Care2, a social networking site with 7.5 million members that circulates 40 million newsletters per month. Among other things, Gaiam will become an exclusive provider of paid subscription services and e-commerce for Care2.

"We are very pleased with our results, which allowed us to accelerate development of our community and subscription programs. The recent acquisitions strengthen our leading position in the field, creating a unified online solution for LOHAS," said Jirka Rysavy, Chairman and Chief Executive Officer.

Gaiam's board of directors also authorized a share repurchase program of up to 5 million shares of Gaiam's Class A common stock as well as the filing of a shelf registration statement for the same amount of shares. In some instances shareholders of potential acquisition targets request Gaiam shares as consideration, although Gaiam generally expects to use its growing cash on hand.

A replay of the call will begin approximately one hour after the end of the call and will continue until 11:59 p.m. EST on November 14, 2007.

Replay number: 866-347-5809

For more information about Gaiam, please visit http://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," "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.

    Contact: John Mills
             Integrated Corporate Relations, Inc.
             310-954-1105
             jmills@icrinc.com



                                 GAIAM, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
                    (In thousands, except per share data)

                            Three months ended       Three months ended
                            September 30, 2007       September 30, 2006

    Net revenue            $70,318       100.0%      $51,786       100.0%

    Cost of goods sold      24,174        34.4%       19,157        37.0%

    Gross profit            46,144        65.6%       32,629        63.0%

    Operating expenses      41,948        59.7%       31,619        61.0%

    Earnings from operations 4,196         5.9%        1,010         2.0%

    Other income             1,028         1.5%        1,512         2.9%

    Earnings before
     income taxes            5,224         7.4%        2,522         4.9%

    Income tax expense       2,060         2.9%          977         1.9%

    Minority interest in
     net (income) loss
     of consolidated
     subsidiaries            (246)        -0.4%          108         0.2%

    Net income              $2,918         4.1%       $1,653         3.2%

    Shares outstanding:
      Basic                 24,705                    26,705
      Diluted               24,970                    26,864

    Income per share:
      Basic                  $0.12                     $0.06
      Diluted                $0.12                     $0.06



                                 GAIAM, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
                    (In thousands, except per share data)

                           Nine months ended          Nine months ended
                           September 30, 2007         September 30, 2006


    Net revenue           $181,137       100.0%     $146,699       100.0%

    Cost of goods sold      63,886        35.3%       54,017        36.8%

    Gross profit           117,251        64.7%       92,682        63.2%

    Operating expenses     113,357        62.6%       93,337        63.6%

    Earnings (loss)
     from operations         3,894         2.1%        (655)        -0.4%

    Other income             3,375         1.9%        2,639         1.7%

    Earnings before
     income taxes            7,269         4.0%        1,984         1.3%

    Income tax expense       2,868         1.6%          784         0.5%

    Minority interest in
     net (income) loss
     of consolidated
     subsidiaries             (77)        -0.0%          178         0.1%

    Net income              $4,324         2.4%       $1,378         0.9%

    Shares outstanding:
      Basic                 25,000                    23,450
      Diluted               25,222                    23,697

    Income per share:
      Basic                  $0.17                     $0.06
      Diluted                $0.17                     $0.06



                                 GAIAM, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In thousands, except share information)

                                              September 30,       December 31,
                                                  2007                2006
                                              (Unaudited)
    Assets
    Current assets:
        Cash and cash equivalents (1)            $81,565            $104,876
        Accounts receivable, net                  12,879              25,324
        Inventory, net                            27,421              24,313
        Deferred advertising costs                 4,789               3,965
        Deferred tax assets                        4,700               3,404
        Other current assets                       6,449               4,965
    Total current assets                         137,803             166,847

    Property and equipment, net                    8,673               7,784
    Media library, net                            35,673              37,201
    Goodwill and other intangibles, net           39,862              28,879
    Deferred tax assets, net                       4,111               5,958
    Notes receivable and other assets                987               4,299
    Total assets                                $227,109            $250,968

    Liabilities and stockholders' equity
    Current liabilities:
        Accounts payable                         $17,060             $18,848
        Accrued liabilities                       10,531               7,437
        Income taxes payable                         888                 415
    Total current liabilities                     28,479              26,700

    Minority interest                              5,961               5,662

    Commitments and contingencies

    Stockholders' equity:
        Class A common stock, $.0001 par
         value, 150,000,000 shares
         authorized, 19,361,373 and
         21,749,936 shares issued and
         outstanding at September 30, 2007
         and December 31, 2006, respectively
         (1)                                           2                   2
        Class B common stock, $.0001 par
         value, 50,000,000 shares authorized,
         5,400,000 issued and outstanding at
         September 30, 2007 and December 31,
         2006                                          1                   1
        Additional paid-in capital (1)           170,387             200,906
        Accumulated other comprehensive income     1,131                 873
        Retained earnings                         21,148              16,824
    Total stockholders' equity                   192,669             218,606
    Total liabilities and stockholders' equity  $227,109            $250,968

    (1)  On February 6, 2007, Gaiam repurchased 2.5 million shares of its
         Class A common stock for $32.9 million in cash including acquisition
         costs. The repurchased stock resulted in a $32.9 million reduction to
         Additional paid-in capital.

SOURCE Gaiam, Inc.