Gaiam Inc. reported net revenue for the second quarter ended June 30, 2010 declined 6.7% to $56.4 million from $60.5 million recorded in the same quarter last year. A weakening in the consumer environment and the timing of some orders from retailers, combined with planned reductions in catalog circulation and the closure of unprofitable businesses during last twelve months, resulted in a decline in second quarter revenue. Profitability improved despite lower revenue and additional costs incurred to consolidate warehouses.
Gross profit decreased to $28.9 million, or 51.3% of net revenue, for the second quarter of 2010, from $31.4 million, or 52.0% of net revenue, during the comparable quarter last year. The change in gross margin resulted primarily from increased revenues in the lower margin solar segment. Excluding the solar segment, gross profit, as a percentage of net revenue, increased to 61.4% for the second quarter from 59.0% during the comparable quarter last year.
Expenses decreased $3.6 million, or 230 basis points as a percentage of net revenue, to $30.0 million, or 53.3% of net revenue, during the second quarter of 2010 from $33.6 million, or 55.6% of net revenue, during the same quarter last year. The improvement was the result of payroll and infrastructure cost reduction measures, as well as optimization of television advertising expenses and reduced catalog circulation.
Loss from operations for the second quarter of 2010 was $1.1 million, a 48.5% improvement on the $2.2 million loss during the same quarter last year. Net loss was $500,000, or 2 cents per share, during the quarter, compared to a net loss of $1.0 million, or 4 cents per share, during the same quarter last year.
For the six months ended June 30, 2010, Gaiam recorded net revenue of $118.6 million, a 1.9% increase from $116.4 million for the first half of last year. The Company recorded a net loss of $$800,000, or 3 cents per share, for the first half of 2010 compared to a net loss of $4.1 million, or 17 cents per share, for the six months ended June 30, 2009.
The Company ended the second quarter of 2010 with $43.0 million in cash and no debt. Cash reduction of $5.3 million from the end of last year was due to the payment of an annual cash dividend of $3.5 million, or 15 cents per share, and the acquisition of Discovery's catalog media library from its previous licensor to complement the Company's new licensing relationship with Discovery.
“In the second quarter, retailers reacted to the volatile consumer climate with conservative ordering patterns,” commented Lynn Powers, Gaiam's President & CEO. “Our continued focus on controlling costs enabled us to deliver a 49% improvement in operational income, even with lower revenue for the quarter. We continue to focus on growth we can control including growing our store within store presence to over 12,500 doors, up from 12,000 last quarter. With the completion of the warehouse consolidation at the end of June, which will give us an additional $1 million in annual savings going forward, we are now turning our attention to growth opportunities for the Gaiam brand. Our revenues will be positively impacted beginning in September by the addition of new content and products, such as Discovery and Reebok, which will contribute to revenue in the third quarter and then meaningfully grow our fourth quarter revenue.”
“We continue to focus on maintaining leadership in our respective markets. Our U.S. market share in the non-theatrical DVD segment (Nielsen Videoscan) is 10%, up from 5% at the end of last year, and our fitness market share improved to 42.7%,” said Jirka Rysavy, Chairman. “Challenging environments always bring opportunities to companies with a solid balance sheet and strong brand. We have returned our focus to searching for companies and content that fit into our business model and can leverage our broad distribution footprint.”
