Gaiam Reports 2006 Results

* Revenues increased 54% to $219.5 million

* Gross margin improved 740 basis points to 63.9%

* Earnings per share $0.23 up from $0.08 per share

BROOMFIELD, Colo., March 12 /PRNewswire-FirstCall/ -- Gaiam, Inc. (Nasdaq: GAIA), a lifestyle-media company catering to people who value personal development, natural health and inspirational media, announced today results for its fourth quarter and year ended December 31, 2006.

Gaiam also announced that it will host a conference call today, March 12, 2007, at 2:30 p.m. MST (4:30 p.m. EST) to review the fourth quarter and full year 2006 results.

Dial-in No.: 888-323-7915

Passcode: GAIAM

Revenue for the year ended December 31, 2006 increased 54% to $219.5 million from $142.5 million recorded in 2005. Revenues for Gaiam's direct to consumer segment increased 73.8% to $125.7 million. Revenues for Gaiam's business segment increased 33.7% to $93.8 million.

Gross profit margin for the year increased 740 basis points to 63.9% from 56.5% in 2005 surpassing the 680 basis point improvement made in 2005 over 2004 margin of 49.7%. The increase was primarily due to higher media sales, lower cost of goods sold associated with higher DVD sales volume and the elimination of fees previously paid for third party distribution.

Net income improved to $5.6 million or $0.23 per share, as compared to $1.3 million or $0.08 per share in 2005. Depreciation and amortization was $7.8 million for the year.

The number of paying members in Gaiam's community and subscription clubs exceeded the 100,000 level.

According to Nielsen's VideoScan, Gaiam's market share in the fitness/wellness DVD category grew to 44.7% in 2006 from 41.5% in 2005.

For the fourth quarter, Gaiam revenue increased to $72.8 million from $64.3 million recorded in the same period last year. Gross margin increased 410 basis points to 65.5% from 61.4% in the fourth quarter of 2005, and pretax margin increased to 10.4% from 4.2% during the fourth quarter. Net income for the fourth quarter increased to $4.3 million, or $0.16 per share, compared to $1.5 million, or $0.07 per share, for the fourth quarter of 2005. Depreciation and amortization for the quarter was $2.3 million.

During the fourth quarter, Gaiam continued to expand its media distribution network, to over 68,000 retail doors from 65,000 at the end of the third quarter and 50,000 at the end of 2005. In the fourth quarter Gaiam also increased its branded store-within-store presentations to over 6,000 retail doors from 5,500 at the end of the third quarter and 4,500 at the end of 2005.

In the fourth quarter, Gaiam acquired the remaining shareholder interest of Conscious Media increasing its interest to effectively 100% from the 86% held previously. Conscious Media operates a visual media post production facility which will enable Gaiam to substantially increase video production. With control of the production schedules, Gaiam intends to double the number of programs produced in 2007 to 90, from the 45 released in 2006.

Gaiam also acquired the remaining 47% minority interest of media distributor Newmark Media during the quarter. Newmark Media operates primarily in the natural grocery and drugstore channels, which present a significant future growth opportunity for Gaiam's distribution network.

During the fourth quarter, Gaiam maintained its cash position despite cash outlays for the acquisitions noted above, and as of December 31, 2006 ended with $105 million. On a proforma basis giving effect to the repurchase of 2.5 million shares of common stock and two content licensing agreements during first quarter 2007, Gaiam's cash position at December 31, 2006 would have been approximately $75 million with no debt.

"We are very pleased with our performance for both the fourth quarter and full year 2006," said Jirka Rysavy, Chairman and Chief Executive Officer. "Our media-focused strategy, continued development of community assets, increasing gross margin and additional volume in our centralized distribution center should continue to improve our pretax margin, which during the fourth quarter increased to above 10%, from 4.2% a year ago."

"Our strong earnings growth validates Gaiam's business strategy," said Lynn Powers, President. "We are committed to improving the quality of peoples' lives through our premier products and services. With our extensive media library, distribution network and expanding subscription business, we are well positioned for continued growth. We currently expect gross margin for 2007 to be approximately 62- 63%."

Additional guidance may be given on the conference call. A replay of the call will begin approximately one hour after the end of the call and will continue until midnight EST on March 18, 2007.

Replay number: 866-505-6452

For more information about Gaiam, please visit www.gaiam.com

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
                                  December 31, 2006         December 31, 2005


    Net revenue                   $72,781    100.0%        $64,322    100.0%

    Cost of goods sold             25,133     34.5%         24,826     38.6%

    Gross profit                   47,648     65.5%         39,496     61.4%

    Operating expenses             41,351     56.8%         36,303     56.4%

    Income from operations          6,297      8.7%           3,19      5.0%

    Other income (expense)          1,264      1.7%           (485)    -0.8%

    Income before income taxes      7,561     10.4%          2,708      4.2%

    Income tax expense              2,988      4.1%            970      1.5%

    Minority interest in net
     (income) loss of
     consolidated subsidiaries        306      0.4%           (257)    -0.4%

    Net income                     $4,267      5.9%         $1,481      2.3%

    Shares outstanding:
      Basic                        27,026                   20,254
      Diluted                      27,211                   20,595

    Income per share:
      Basic                         $0.16                    $0.07
      Diluted                       $0.16                    $0.07




                                 Gaiam, Inc.
               Condensed Consolidated Statements of Operations
                                 (Unaudited)
                    (In thousands, except per share data)


                           Twelve months ended       Twelve months ended
                            December 31, 2006         December 31, 2005

    Net revenue           $219,480       100.0%     $142,492       100.0%

    Cost of goods sold      79,150        36.1%       61,977        43.5%

    Gross profit           140,330        63.9%       80,515        56.5%

    Operating expenses     134,689        61.4%       77,429        54.3%

    Income from operations   5,641         2.5%        3,086         2.2%

    Other income             3,905         1.8%        (175)        -0.1%

    Income before income
     taxes                   9,546         4.3%        2,911         2.0%

    Income tax expense       3,774         1.7%          974         0.7%

    Minority interest in
     net (income) loss of
     consolidated
     subsidiaries             (128)         --          (601)       -0.4%

    Net income (loss)       $5,644         2.6%       $1,336         0.9%

    Shares outstanding:
      Basic                 24,349                    17,140
      Diluted               24,617                    17,354

    Income (loss) per share:
      Basic                  $0.23                     $0.08
      Diluted                $0.23                     $0.08



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




                                                  December 31,    December 31,
    Assets                                             2006           2005

    Current assets:
      Cash and cash equivalents                     $104,876        $15,028
      Accounts receivable, net                        25,324         28,067
      Inventory, less allowances                      24,313         20,792
      Deferred advertising costs                       3,965          3,917
      Deferred tax assets                              3,404          3,627
      Other current assets                             4,965          4,838
    Total current assets                             166,847         76,269

    Property and equipment, net                        7,784          9,428
    Media library, net                                37,201         38,339
    Non-current deferred tax assets                    5,958          7,282
    Goodwill and other intangibles                    28,879         17,541
    Notes receivable and other assets                  4,299          7,242
    Total assets                                    $250,968       $156,101

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable                               $18,848        $25,843
      Accrued liabilities                              7,437         13,045
      Income taxes payable                               415            165
    Total current liabilities                         26,700         39,053

    Long-term liabilities                                 --          1,663
    Total liabilities                                 26,700         40,716

    Minority interest                                  5,662          8,099

    Commitments and contingencies                         --

    Stockholders' equity:
      Class A common stock, $.0001 par value,
       150,000,000 shares authorized, 21,749,936
       and 15,010,736 shares issued and
       outstanding at December 31, 2006 and
       2005, respectively                                  2              1
      Class B common stock, $.0001 par value,
       50,000,000 shares authorized, 5,400,000
       issued and outstanding at December 31,
       2006 and 2005, respectively                         1              1
      Additional paid-in capital                     200,906         95,840
      Accumulated other comprehensive income             873            264
      Retained earnings                               16,824         11,180
    Total stockholders' equity                       218,606        107,286
    Total liabilities and stockholders' equity      $250,968       $156,101

SOURCE Gaiam, Inc.