Gaiam’s Q3 Revenues Slide 2.8%

Gross profit decreased to $33.2 million, or 45.9% of net revenue, during the third quarter of 2010, from $35.8 million, or 48.1% 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 and a higher mix of fitness products and accessories, driven by the launch of Reebok accessories at Target stores. Excluding the solar segment, gross profit, as a percentage of net revenue, was 56.5% during the third quarter of 2010.

Expenses improved during the quarter, the result of payroll and infrastructure cost reduction measures, as well as television advertising and catalog circulation optimization.   Expenses decreased $2.8 million, or 240 basis points as a percentage of net revenue, to $32.1 million, or 44.4% of net revenue, during the third quarter of 2010 from $34.9 million, or 46.8% of net revenue, during the same quarter last year. 

Income from operations during the third quarter of 2010 improved 13.5% to $1.1 million from $1.0 million during the same quarter last year.  Interest and other income during the third quarter of 2010 included a gain on an equity investment of $1.0 million. Net income was $0.9 million, or $0.04 per share, during the third quarter of 2010, compared to $0.4 million, or $0.02 per share, during the same quarter last year. 

For the first nine months of 2010, revenue was $190.9 million, compared to $190.8 million in same period of last year. Net income for the first nine months of 2010 improved $3.8 million to $59,000, or $0.00 per share, compared to a net loss of $3.7 million, or $0.16 per share, during the same period last year. 

The company ended the third quarter of 2010 with $40.8 million in cash and no debt.  Cash declined $7.5 million from the end of last year primarily due to the payment of an annual cash dividend of $3.5 million, or $0.15 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.

“We continue to execute our strategies to control costs, increase our branded store presence, optimize our marketing expenditures and invest in new products and digital delivery,” said Lynn Powers, CEO.  “As a result, this quarter our store-within-store presence grew to 14,500 doors compared to 12,500 doors last quarter and our warehouse consolidation is complete, furthering our cost savings. We continue to look forward to the opportunities that these strategies will create for us in the fourth quarter and beyond.”

“We are pleased with our $6.8 million improvement in operating income through September, as well as encouraged by a positive earnings outlook for our fourth quarter,” said Jirka Rysavy, chairman. “The 32% expansion of our store-within-store presentations during the last 12 months, the addition of our digital sales unit and improvements in our catalog business are good signs for revenue growth in 2011.”