Gaiam’s Q4 Revenues Slide 5%

Gaiam, Inc. reported net revenue for the fourth quarter decreased
4.9% to $83.3 million from $87.6 million recorded during the same
quarter last year. The net revenue decline was primarily attributable to
the company's decision to reduce direct response television advertising
and catalog circulation, partially offset by sales growth in the solar
segment.

Gross profit decreased to $41.5 million, or 49.8% of net revenue, during the fourth quarter of 2010, from $45.9 million, or 52.3% of net revenue, during the comparable quarter last year. The change in gross margin resulted primarily from decreased revenues from the high gross margin direct response marketing business and increased revenues from the lower gross margin solar segment. Excluding the solar segment, gross profit, as a percentage of net revenue, was 55.9% during the fourth quarter of 2010.

Expenses decreased dramatically during the quarter as a result of payroll and infrastructure cost reduction measures and direct response marketing and catalog circulation optimization. Expenses decreased $4.4 million, or 300 basis points as a percentage of net revenue, to $34.8 million, or 41.7% of net revenue, during the fourth quarter of 2010 from $39.2 million, or 44.7% of net revenue, during the same quarter last year.

Income from operations during the fourth quarter of 2010 set a record for the Company, improving to $6.8 million from $6.7 million during the same quarter last year. Net income was $4.2 million, or $0.18 per share, during the fourth quarter of 2010, compared to $4.0 million, or $0.17 per share, during the same quarter last year.

For the year, net revenue was $274.3 million, compared to $278.5 million last year. Income from operations increased $6.9 million to $6.1 million for 2010 from an operating loss of $0.8 million last year. Net income for 2010 increased $4.0 million to $4.3 million, or $0.18 per share, compared to $0.3 million, or $0.01 per share, during last year.

According to Nielson's Videoscan, in 2010, the Company grew its non-theatrical market share to 7% from 5% in 2009. The Company further invested in growing its non-theatrical market share through the acquisition of Discovery's catalog media library from its previous licensor to complement the Company's licensing relationship with Discovery. Gaiam increased its lead in the fitness category to 40% market share, recently launched a branded daily exercise show on the Oprah Winfrey Network, and released the first of a series of media titles from The Biggest Loser host Jillian Michaels.

The company ended 2010 with $28.8 million in cash and no debt. Cash declined primarily due to payments during 2010 of both the 2010 and 2011 annual $0.15 per share cash dividends which combined totaled $7.0 million, the acquisition of Discovery's catalog media library, and advances on new content deals.

“Our expenditure control and the growth of our store-within-store presentations from 11,000 to 14,700 during the year helped us to achieve record operating income this quarter and improve our operating income for the year by $6.9 million,” said Lynn Powers, CEO. “As we progress through 2011, we will continue to optimize our direct response television advertising spend and catalog circulation, and, most importantly, expand our brand, and thus our market share, through investments in new product offerings and the digital delivery of our vast media holdings.” 

“We are pleased with the $6.9 million improvement in our operating income, the 34% expansion of our store-within-store presentations during the year, and the continued improvement to our non-theatrical market share,” said Jirka Rysavy, Chairman. “Promising traction in our new digital sales unit and recent improvements in our catalog business are both positive indicators for our return to revenue growth in 2011.”