Q1 2021 Curiositystream Inc. Earnings Call
Excuse me, ladies and gentlemen, this is the conference operator today's conference is scheduled to begin momentarily until.
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Ladies and gentlemen, thank you for standing by.
T D curiosity stream first quarter earnings call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone keypad.
Thank you I'll now turn the conference over to Denise Garcia with Investor Relations. Please go ahead.
Thank you welcome to curiosity strength discussion of its first quarter 2021 financial results, leading the discussion today are Clint Fitzco curiosity streams, Chief Executive Officer, and Jason Houston Curiosity strength, Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions, but first I'll review the safe Harbor statement.
During this call we may make statements related to our business that are forward looking statements under the federal Securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks uncertainties and assumptions our actual results could differ materially from expectations reflected in any forward looking statements. Please be aware that any forward looking.
Statements reflect management's current views only and the company undertakes no obligation to revise or update these statements nor to make additional forward looking statements in the future for.
For a discussion of material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's press release additional information will also be set forth in our quarterly report on form 10-Q for the.
Three months ended March 31, 2021 when filed in addition reference will be made to non-GAAP financial measures now I'll turn the call over to Clint.
Thank you Denise I'd like to thank everyone for joining our first quarter 2021 earnings call.
I am delighted to have with US today, our COO and General Counsel T Academy for <unk>.
CFO, Jason useless, and our chief product officer on AVP of content strategy Devin Emory.
After my comments I will turn the call over to our CFO, Jason uses to review the financials.
At the close of Jason's remarks, we will open up the call for questions.
Curiosity streams mission is to provide premium factual entertainment that informs and chance and inspires us.
As a pure play streaming service, we are capitalizing on current and emerging worldwide trends for.
They bring on demand content on.
Sturdy and robust business model with multiple avenues of content monetization and our differentiated content offering provides us with several key competitive advantages.
Our focus on factual content, which has longevity and engaging appeal across multiple demographics and geographies is key to our success.
Let me talk about the first quarter on.
I'm pleased to report robust growth in our direct subscription businesses, where we grew subscribers over 80% year over year during the quarter.
These are high value subscribers, and we are adding them at a rapid clip.
We'll continue to delight, our customers through high quality content additions and product innovations, which you will see from us for the coming quarters.
We're also pleased to announce that we have acquired one day University.
A founder led company, which shares our core value of providing inspiring engaging and informative content for people who want to know more.
One day University features over 500 unique talks and lectures from day best professors from over 150 colleges and universities in the United States. This milestone acquisition for our company that will fortify and enhance our long term direct to consumer digital proposition to a broader factual audience and also enable us to leverage that.
<unk> power and reach of their Chancing live events as the world opens up.
I'll provide more details later in the call.
Revenue in the first quarter grew 33% year over year to $9 9 million driven by continued strength in direct subscription revenue program sales and sponsorship also contributing to our success on the quarter.
As we've noted on previous earnings calls third party revenue growth can be lumpy and difficult to forecast precisely due to deal timing. We continue to expect a robust second half and now have 90% of our full year revenue goal of $71 million committed up from 80% at the end of last year.
With over $178 million of cash and investments on our balance sheet at the end of the quarter, where on an excellent position to invest in growth. We've always been opportunistic in our pursuit of profitable growth and we see a great deal of opportunity in the current environment, We will take advantage of our low customer acquisition costs.
<unk> two is that invest in marketing and according to our plan, we will continue to pursue strategic opportunities such as the one day University acquisition, we announced today.
One day use direct consumer services include livestream Q&A events five days per week premium multipart courses and access to a proprietary library of hundreds of entertaining and informative lectures on science history art politics and more.
Thank you for one day use of Master class for Academia, which appeals to an interested and curious customer base with.
The digital education and entertainment industries are growing at an accelerated rate following the pandemic, which expanded market awareness and engagement as an example of Coursera druids registered learner base by 65% in 2020.
From 24% growth in 2019.
One day University was founded as a location based entertainment company, which pre COVID-19 would hold 60 to 70 live events per year.
One day, you pivoted to streaming following the COVID-19 outbreak and launched its asphalt service in April of last year.
A year later the service has experienced the same tailwind from COVID-19 that many have and is growing well.
They use content is highly complementary to our existing library and with our more advanced technology platform and marketing resources, we see a tremendous opportunity to accelerate subscriber growth.
We're really excited to work with the company's brilliance visionary founder Steven Shrugs.
After this acquisition to accelerate one day use growth and enhance the value proposition of our direct services.
We're always looking for creative ways to grow our business and enhance our service offerings. So when we identify a strategic growth opportunity like one day, you we will aggressively pursue it we have other opportunities in our pipeline, which would improve our value proposition.
Expand our distribution and accelerate subscriber growth, which we look forward to announcing in the coming months.
Continue to optimize our business to our Northstar metrics revenue and paying subscribers.
At the end of the first quarter, we increased total subscribers, 28% compared to the first quarter of 2020 to approximately $16 million with direct subscribers increasing 80%.
We continue to deliver unique relevant insightful perspectives on our world through groundbreaking new content.
During the quarter. We premiered the three part original series ancient Yellowstone, which reveals the stunning array of past and present life. That's been discovered beneath the hot Springs in Snowcapped Mountains of Yellowstone National Park.
The series was shot entirely during the pandemic in the first episode had more viewers on its first week than any other program to date.
In March we premiered nature through her eyes Butte.
Beautiful for part series about some of the world's greatest female natural history photographers and Cinematographers.
It opened on international Women's day during a special Jackson Wild film Festival event that highlighted the enormous challenges that female filmmakers phase for the.
On a perspective, they bring to capturing the natural world.
At the end of the quarter. We also premiered the first five episodes of our 10 Park Landmark original series Ancient engineering, which reveals how major advances in design gave rise to some of the greatest structures in history and how these century old building techniques continue to shape our world to this day.
Many more of the New landmark original series. We recently announced are also rapidly nearing completion, including rescue champions chimpanzees of the Congo with Jane Goodall the.
The Royals and color Doug to the rescue and faster Humanities quest to save time.
<unk> is also well underway on some of our most ambitious feature docs, including a biopic on ground breaking Black American aviator, Betsy Coleman and have all the gripping story of why Hollywood actor, Michael Enright gave up everything to fight alongside Kurdish forces in Syria during their long and brutal war against Isis.
We continue to invest in the distinct content that defines us.
<unk> history science travel and every category in the factual genre.
We will offer more new original this year than any time in our history.
We're exploring all options to expand our library that is already unrivalled in goes deeper than anyone into the topics our viewers already care about where have yet to discover.
We are extremely well capitalized at the end of the first quarter with over $178 million of cash and investments on our balance sheet.
Cash flow during the quarter benefited from our follow on offering which raised approximately $94 million on proceeds. We also received $55 million during the quarter from warrant exercises.
With our strong balance sheet robust direct subscriber growth and leading factual content library on streaming.
We are excited about our prospects for the remainder of the year and beyond and as we have 90% of our year end revenue target committed we are on track to achieve our year end revenue goal for 2021.
I'd like now to turn the presentation over to our CFO Jason uses.
Thanks, Clint I'm also excited about our increased visibility into our 2021 revenue goal and the exciting business development activities, we announced this quarter with over $178 million of cash and investments on our balance sheet at the end of the quarter. We are in the strongest position on our history to execute on on a multifaceted growth strategy.
Before reviewing the first quarter financials I'll give a brief update on the 10-K, we filed we refiled earlier this month.
SEC recently required companies that have completed a stock transaction to reclassify private placement warrants as liabilities as a result of the reclassification, we recognized incremental non operating expense of $10 million for the year ended December 31, 2020, there was no material impact on to our his.
Storage <unk> reported cash and cash equivalents or cash flows from operating investing or financing activities.
During the first quarter of 2021, we recognized an incremental $3 8 million in other expense related to the change in the fair value of our warrant liability now.
Now, let's review, our first quarter financials curiosity streams Q Q1, 'twenty, one revenues grew 33% to $9 9 million from seven 5 million in Q1 of 2020.
This was led by direct to consumer partner direct and higher program sales.
Cost of revenue was about $4 2 million or 42% of revenue compared to 36% of revenue in Q1 2020, primarily due to an increase in our content amortization as a result of timing and a number of titles released in Q1 2021 compared to the same quarter. Prior year as a result for Q1 gross margin was 58% compared to <unk>.
For Q1 of 'twenty <unk>.
Advertising and marketing expenses for about little over $12 million, a 4% decrease year over year and a sequential decrease of about $1 1 million.
Curiosity streams overall operating expenses increased 22% to $20 8 million for up from $17. One in Q1 of 'twenty.
First quarter EBITDA loss of $15 5 million compared to an EBITDA loss of $12 three last year.
Due to higher G&A costs associated with being a public company and higher personnel costs related to key executive hires we announced last quarter as well as other great talent, we added from our team during the during the quarter Kerry.
Curiosity streams, ending cash and investment balances on March 31 totaled 2008, 2021 totaled a $178 1 million, which is up from $42 4 million at the end of last year as we successfully raised $94 million and our follow on offering and received $55 million from warrants exercised during the quarter.
We are on track with our plans for 2021 to deliver $71 million in revenue with over 90% of our 2021 revenue committed to date up from 80% at the end of last year.
We continue to expect an outsized second half of the year has been as our new lines of business such as program sales and sponsorships ramp up and we pursue additional business development opportunities such as one day University deal we announced today.
And now I'll turn it back over to Clint to open up the line for questions.
Yes.
And at this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad.
And your first question comes from Thomas Forte with D. A Davidson <unk> company.
Great. Thanks for taking my questions I had three questions in total so the first one I have Clinton previous calls you've talked about the opportunity.
For your sponsorship efforts when pandemic related restrictions ease and you get the opportunity to meet with companies. Once again, but can you give us an update on these efforts.
Yes.
Yes. Thank you for the question, Tom I'd say that things are still not quite as open as we'd like.
But we did a re.
Recently add from strong brands to our advertising roster and the consumer technology and financial services space.
Our team are like coiled springs, they are ready to meet with anyone in person virtually anywhere anytime in the world and so as things open up.
The roster of brand of brand partners will only increase.
Great and then my second question is I was wondering if curiosity stream gets a halo effect.
One of your content providers that showed another channel as David Attenborough debt on Earth day, with a show on Apple TV plus.
Yes, definitely we think its actually.
Additive to curiosity stream additive to the category.
<unk>.
Netflix will offer.
Our program for our series like that or Apple TV will offer a program or a series like debt and so for us.
As we've said in the past we want to be the most reliable destination for factual entertainment and provided we continue to Mark our territory in that way, we will benefit from the Halo effect of that type of content on other services.
Excellent Alright, and then my third question and thank you for taking my questions on the one day University acquisition.
It looks like a great acquisition on first blush.
In particular intrigued that the notion of lives I remind us a little on what clubhouse is doing well the clubhouse is only focus on audio.
Video element as well.
Should we think about your loss content strategy in general and for one day University in particular.
Okay.
Well what do you is actually built on live in person events started by great entrepreneur, Steven Schrag has more than 10 years ago. He wanted a place where curious people could spend a fun and engaging day or half day in community with other curious people listening to our countries.
Greatest minds, and so I think what attracted people is the <unk>.
<unk> built a roster of.
Elite Master instructional talent the best in the country from Katherine Sanderson, Amhurst, who is well known for.
Work on the science of happiness to the Great American historian loom Naser from Rutgers to Ana to Linzess from Georgetown Scott Galloway from NYU.
No.
Stevens created the best collection of professors that you can find debt I think anywhere in the world and so we believe that.
As the world opens back up.
We will.
We will work closely with Steven and his team.
Two even.
<unk> and increase the number of live events that are done every year and what we believe is important and we're not alone in this is that over time. The most successful digital media companies, Tom will have on online and offline presence and a passionate offline presence meeting.
Live in person presence over the long term will do.
<unk> deliver new direct subs on new brand partners and ultimately reduce our cash.
Great. Thanks for taking my questions.
Thank you Tom.
And your next question comes from Devin Briscoe with Bill for Global Research.
Thanks for the question I just had a follow up on the one day University acquisition could you talk about.
The financial profile.
And potential synergies from the acquisition and just how youre thinking about integration of that asset.
And how you could potentially I don't know if you potentially could bundle.
The services together dual utilized content or exactly how youre going to sort of integrate the two businesses together.
So.
Stephen and his head of operations Kevin Brennan.
Great.
You were on a great company right now it's small it's 910 people.
And so we will need some time to properly integrate <unk> into our tech stack and marketing operations and to identify and pursue optimal pricing and packaging scenarios.
But they will unit continued.
Continue to operate the ODU as a standalone business and over the next few months, we will work closely with.
Steven and the rest of the team too.
Leverage as many synergies as possible so there'll be a lot more to come.
There in regard to specifics, but we're really excited about what we'll be able to do together and.
What we'll be able to.
How we'll be able to help grow.
On one day University.
Two on anything because I was just going to say I think the point that we want to make is that we're going to hopefully with the with the acquisition, we hope to amplify their their presence in the marketplace specific and AD spots as well as the other lines for their business to really.
Propel their growth going forward.
And you talked about some lumpiness in revenue for the year, particularly related to third parties.
Could you provide a little bit more color on your expectations for growth for the year do you expect revenue trends to accelerate on.
So each quarter throughout the year and do you think you were impacted at all just on the subscription side.
Due to tough COVID-19 comps in the first half.
Or is that not that much of a factor.
It has not been much of a factor I mean churn might might tick up a little bit as we kind of go into Q2, but we're not expecting a major increase there as.
As those COVID-19 subscriptions kind of anniversary so that that could go up a little bit but overall, we're expecting the next three quarters, obviously be bigger than the one we just had because we haven't hit that 71. So they will be much bigger in order to hit that 71 for the full year.
Okay. Thank you.
Yeah.
And your next question comes from Dan Corners, with the benchmark company LLC.
And Dan Your line is open.
Hi, Thanks, good evening.
Jason just to be clear you're on it.
The 71 is exclusive of the acquisition correct.
Inclusive.
Okay.
And then.
Just also just.
Some color.
I know you've talked about off on an online presence I'm just curious if you are.
Kind of viewing. This this is not really a pivot this is ancillary synergistic.
And potential for you to take some of your own talent and some of the pipeline and potentially.
Drive it offline as well as getting more of their talent on line is not the range.
For us.
Yes.
Okay, and then maybe if you can just give us kind of an update on sort of the international.
Push.
Obviously, there's been a lot of noise and.
Asia, Unfortunately, due to COVID-19, but just in general on the international NV PD expansion strategy, where we are there.
Yes, we.
We continue to.
<unk>.
With international distribution partners, obviously not in not in person.
Think that Youll see youll see.
The fruits of our labor in the second third and fourth quarter. This year as it relates to those conversations we have a great team moving up the varsity team that's out there.
In lots of conversations and I think as things open up more.
That's only a tailwind for us and we're excited about the opportunity to meet more in person with people but.
Conversations are good and strong some of these third party deals takes a while to actually get across the finish line and then there's a lot of deals that are available to us, but we're trying to do the right.
Strike the right long term partnerships with the right distributors for scale.
Got it and just last one just on pricing, obviously, that's probably not now youre still building out the library I know historically, you've talked about your ability to take pricing just wonder.
As you layer this acquisition in and where the library is when you start to have those conversations.
Debt, you're referring to price elasticity with distributors or in the direct side I know on the DTC side, yes on.
On the DTC side. So yes, we do believe that we have considerable price elasticity, providing great value at $3, a month or $20 per year.
We are testing some.
Premium tier options, where we're providing people.
Additional features and benefits and even additional content for them.
People that subscribe to our premium tier, which we previously referred to as our for K tier. So I think over the next over the next few months Youll see us do some interesting things there.
Perfect. Thanks for all the color guys I appreciate it.
Thanks.
Your next question comes from Gary.
With Roth capital partners.
Hey, guys. Good afternoon, thanks for taking my questions.
On the $1 million incremental subs sequentially, what was kind of a mix of direct versus bundle.
Yes. It followed the same mixture that we've typically sent weighted so its outsized to the bundled side of the house, but definitely we're seeing greater growth or greater pickup on the stronger ARPA sat on the direct side.
Got it and then.
The improvement in visibility is directly related to what from last quarter's call.
Third party distribution agreements yes.
Got it and then just.
This is my last one following up on the on the Lumpiness.
Yes.
Advertising revenue typically being down on the first quarter is that kind of what was contributory or program sales as.
I know you guys have kind of emphasize the second half of the year in terms of that being much faster growth, but like how do we think about sponsorship and program sales as it kind of moves quarter to quarter.
It's a really hard thing to predict on quite honestly because with program sales, it's going to be dependent on when that production is actually finished so if the production we anticipate it to be ready at the end of June and it's quite it's still aid in production that could net flip into into July or August. So we're going to wait to figure out what's the best time to <unk>.
Delivery of the product. So we can recognize the revenues, but that sometimes is what's going to cause some of that that lumpiness in our in our quarter to quarter on the program sales side and similarly on the on the sponsorship side. It takes a while to get those deals going and so while we have every expectation for them to fall within certain quarters. There were much more focused on what the full year.
Number is going to be and we have high probability high probability we know we're going to hit that $71 million. So.
It's just we don't we're not it's not fine tuned down two weeks each an exact every quarter as far as when it's going to fall.
That's fair I guess, because he is one lesson for you Jason Whats the right share count to be using on a go forward basis. So that's 52 on a on a fully diluted sorry basic and then 66 on a fully diluted.
Great. Thank you.
Your final question comes from Logan Thomas with stifle.
Hi, there. Thanks for taking the question I think this has been asked a couple of different times, but I'll go ahead and just.
Asking maybe a slightly different way on the guide for the year I was wondering if you can just talk to directionally, how much of the incremental growth from here implied in the guidance from the program sales versus the other buckets subscription affiliate licensing and then.
Trying to extrapolate that up to a higher level question.
How are you thinking about the scalability of the program sales revenue streams.
Maybe either as a source of pain for content subsidizing content costs and just more of the mid to longer term picture on program sales in general would be helpful.
No I mean program sales to still go on to continue to be a.
Key part of our revenue stack and our program strategy allows us access to high quality content, where we get to subsidize it with a third party distributor where we're currently not in those territories. So it's a great business model for us and to the degree that the content is still there and as we are growing it's still going to be a big part of our revenue stack going forward. So.
And as it relates to the Lumpiness for the quarters.
It's just I mean, we're much more focused on the long term, it's a $71 million marathon, it's not quarter to quarter.
That's I think that's the way we look at it and we continue to have strong growth in our strongest <unk> section of the business on the partner direct on the direct and we continue to sign up long term distribution third party bundled distribution partners. So I think.
Those are those are the way that's the way I look at the business to look at it as a positive impact and I'll say a high probability that we're going to hit that $71 million for next year.
As Jason said, it's sometimes hard to predict quarter to quarter on when content will deliver but what we'd like to book program sales businesses. It de risks our overall business and it is.
Annual and multi annual obligated contractual revenue.
Got it thanks for the detail.
And then a final one.
Apologies if I missed this but the 80% year over year on the direct.
Subscribers.
Is there an update on the size of the direct subscriber base and then.
With that just anything to call out on new content or the marketing strategy fronts there.
The needle or worth calling out on on acquisition and retention.
<unk>.
Yes, I mean on the direct side, we're still on that between $1 million to $2 million direct DTC subs is where we currently are as of first quarter. So I know, it's a little bit of a broader range, but it's still where we see I'll say continued rapid growth.
If there's anything Devin do you want to add on the customer acquisition, if there's certain channels are working better.
All of our channels are continuing to work well as they have.
A very strong second half of the year in terms of content, that's going to be going on on a subscription service. So we're excited for the word of mouth, that's going to generate and help catalyze our marketing activities.
As we were talking about earlier in the call. We are now at the anniversary date on when we brought on a lot of people from last year with warranty was starting and the renewal rates are in line with what we typically see which are yes.
Based on information.
Couple of weeks ago Theyre industry best So these people who signed up at discounted rates.
When we were doing the discounting and quarantine are now renewing at the standard and high levels that we typically see and their renewal prices were 70% higher than they were obviously, that's not reflected in Q1, but as they as they are renewing theyre going to standard pricing, 70% higher than they paid initially and they're renewing very very nicely for us so a lot of good stuff.
That we're seeing right now on the direct business and we are going to be able to continue to use that strong renewal on strong engagement tool to catalyze and continue our strong growth on the DTC side.
Great. Thanks, guys.
Thank you ladies and.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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