Q1 2022 Curiositystream Inc. Earnings Call
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Ladies and gentlemen, thank you for standing by my name is Brent and I will be your conference operator today.
At this time I would like to welcome everyone to the curiosity stream Q1, 'twenty to 'twenty two earnings conference call.
All lines have been placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session.
You would like to ask a question at that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one thank you.
It's now my pleasure to turn today's call over to MS. Denise Garcia Investor Relations. Please go ahead.
Thank you Brent and welcome to curiosity streams discussion of its first quarter of 2022 financial results, leading the discussion today are quintin stinchcomb curiosity streams, Chief Executive Officer, and Jason Eustace curiosity streams, Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions, but first I'll.
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 form.
We're 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 a discussion of the 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 it will also be set forth in our quarterly report on Form 10-Q for the quarter ended March 31, 2022. When files. In addition reference will be made to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures can be found on our website at investors <unk>.
<unk> stream Dot Com now I will turn the call over to Clint.
Thank you Denise I'd like to thank everyone for joining our first quarter earnings call.
Also joining us today is our CFO and general counsel Teocalli heat.
Our CFO Jason Eustis.
And our Chief strategy Officer, Devin Emory.
This quarter, Jason will begin with an overview of our first quarter financial results and a review of our key financial objectives. Following.
Following his remarks I'll sure.
Here, our plan to achieve those objectives Jason.
Thank you Clint.
I'm pleased to report first quarter 2022 revenue grew 77% year over year to $17 $6 million with continued strong DTC growth of 49%.
Both revenue and EBITDA were in line with our expectations, notably we reduced our cash burn by $19 3 million quarter over quarter to end with a burn of $13 9 million.
And we ended the cash we ended the first quarter with cash restricted cash and available for sale investment balance of 85 million, while weighted average shares outstanding were about $52 8 million.
We are increasing our guidance for the first half and we now expect revenue to range from $38 million to $40 million and our EBITDA to range 30 loss of $35 million to $33 million.
Last quarter, we discussed I'm, sorry last quarter, we discussed our increased focus on achievement of positive cash flow and said we would be provide we would provide updates to this objective in the future. Today, we are establishing two specific financial targets related to this objective first we intend to achieve pause.
Cash flow from operations by the first quarter of 2023.
Second we expect to maintain a minimum cash and investment balance of $50 million. This year and beyond these targets are crucially important to our board our management team and our shareholders as we work towards joining the ranks of enduring companies that operate on a positive cash flow basis now I'll.
Turn the call back over to Clint to discuss our strategy and our plans to meet these objectives.
Thank you Jason.
Be clear given the company's strong cash position and positive operating cash flow forecast management expects no requirement for future capital raises to support operations.
Since becoming a public company almost two years ago, we've significantly grown revenue and subscribers developed a multifaceted revenue stack and build the world's best factual content library.
As you know with curiosity company. We operate today is a much more robust business that it was less than two years ago.
Along the way we've created many assets built solid relationships and developed key learnings that we have yet to fully leverage to drive growth and operating efficiency.
As a streaming platform with flexible content rights, we can quickly pivot to take advantage of changes in market dynamics.
And do so in a cost effective manner.
I believe the work we have done has positioned us well to operate on a positive operating cash flow basis by the first quarter of 2023, while maintaining a $50 million cash cushion.
To get there, let me share how we view our business opportunity.
Our board and our management team view, our business as three primary building blocks. The first of these which we built early on in our development as a well engineered streaming platform that can scale globally.
Our territory adaptive easy to navigate and localized able streaming platform now serves curiosity subscribers in over 175 countries.
It enables us to launch with existing capital and engineering resources.
Regional subscription video on demand services, such as the service, we recently launched in Germany in partnership with Spiegel.
Our second building block is our content.
Through the end of 2022.
We will have invested over $188 million and original productions and acquired content.
We've invested a further $15 million to $20 million in acquisitions like one day University and learned 25 and partnerships like Spiegel and nebula, which brought additional content into our ecosystem that we have yet to fully cultivate.
We believe the original production cost or onscreen value of our content.
He has over five times greater than what we actually paid for it.
And with over 10000 titles, we believe we have built the world's best factual content library in all genres.
As we gain knowledge about the kinds of factual content audiences are most interested in and which resonate best with consumers.
We believe much of the heavy lifting is behind US we have identified a path forward, which will allow us to continue to delight, our subscribers by refreshing and replenishing the curiosity library, while reducing our content spending to a level that can easily be accommodated within positive cash flow from operations in 2023 and beyond.
As a reminder, curiosity as distinguished from other streaming companies and that we are not competing to win the content spending more.
Monetize our content in multiple ways, we're playing on an entirely different field.
Not for example, bidding on ever escalating sports rights or scripted series.
Contrast, curiosity operates within a more predictable less competitive content acquisition and production environment.
Especially now that traditional factual linear networks have transitioned largely to the exhibition of reality television repeats.
And the major streaming platforms are focused largely on the production of movies and scripted series.
While the competitive battles rage.
In regard to scripted Scott content streamers curiosity now stands alone as the reliable destination for on demand premium factual content history science nature technology human adventure space.
Listen and exploration.
This is a good place to be.
We expect our cash flow profile to improve next year as we continue to monetize our content through <unk>.
Descriptions to our direct tiers bundled partnerships content licensing and sponsorship.
And then the service of these objectives, meaning promotion to our subscription tiers in advertising and sponsorship monetization. We're increasingly focused on building audience engagement in front of the paywall.
We're doing this through expanded rollouts of our fast and pay TV channels that focused on genres, ranging from science to history to nature to kit.
And also through enhanced engagement NEVA audio.
In light of the flexible rights, we control across our thousands of hours of content, we can be swiftly responsive to the needs of subscription resistant consumers directly and through distribution partners.
As these free AD supported developments illustrated key strategy for US this year is to reduce expenditures on direct paid marketing.
As revenue builds in 2023 and beyond from our AD supported services.
Our <unk> sales are boosted from the enhanced promotion, we expect that our revenues and profits will continue to increase.
We also intend to continue to explore alliances and combinations that would result in exposure of our content on a global scale promotional platforms.
Curiosity, we believe that our promotional funnels, which effectively and efficiently market. Our core premium subscription service constitute the third critical building block of our enterprise or.
Our game plan is to focus on maximizing the performance of our global streaming platform, our best in class content and our promotional outreach.
In summary, we've created an enduring media brand that we expect to soon generate positive cash flow from operations with an upward revenue growth trajectory that is fully reflective of the worldwide demand for quality entertainment.
That informs and chance and inspires.
With that operator, let's open the call to questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad will pause for a moment to compile our Q&A roster.
Your first question is from the line of Peter Henderson with Bank of America. Your line is open yes.
Yes, hi, Thank you for taking the question.
Quickly I'm curious how do you differentiate between the value of the library content asset scripts subscription acquisition tool versus new content subscription acquisition tool and it sounds like you guys are planning on sort of.
Slowing down the production of new content I'm, just kind of curious as to how much that will impact <unk>.
Subscriber growth moving forward.
Thank you for the question Peter that's a good one and I'm going to take the first part of this and then.
My colleague Devin Emory will take the second part.
I mentioned in our last call that we.
We believe we built a.
Critical mass library.
We've built this library much faster than we anticipated because.
We acquired more content that we than we had originally anticipated and through some tuck in acquisitions, we were able to.
Bring more content into curiosity as well so well over 10000 titles, we feel like.
We have a we have a strong critical mass.
And there's a lot of it as I mentioned as well that we've not yet we've not yet deployed so.
Let me start with that piece and then.
As it relates to the execution of that Devin will talk a little bit about that and I think importantly through the end of this year and continuing we have a lot of original content is rolling out the way that we view, how we are producing in acquiring and distributing is.
I've mentioned this in the past and we want to be the App that everyone goes to when they want or genre of programming and so we have seven internal categories of content that we're looking at.
And half of them are original half of them are acquisition and they all serve different purposes and they are all very important so keeping things fresh isn't.
It's incredibly important to us and we know that it is going to drive engagement and retention as well as acquisition and so none of the types of content that we are producing our programming are going away, but we also know.
But there are plenty of investments we can make that continue to make our home screen and are at very fresh gift.
People are a lot of content and continue to make us the app that people will open up when they want to watch anything from the Tentpole original film that we're releasing.
Or something might crash course, or along those lines, we want everything and we will continue to have everything sorry.
Just one quick follow up do you do your distribution.
Your bundled distribution agreements have any sort of requirements on.
Do content creation at all.
Yes, some have minimum hourly requirements.
Minimum of distributors that do.
We have.
Zero concerns about meeting any of those.
And I want to be careful about what I say about distribution agreements as I learned early on in terms of distribution partners don't really like that.
Hopefully that answers question Peter Yes, it does great. Thank you.
Your next question comes from the line of Laura Martin with Needham Your line is open.
Hey, guys.
Free cash flow first that is fabulous and stock today.
Let's go with but can you give us an update on what's going on with day one University. Please.
When the University. So we continue to yes. Thank you Laura I appreciate those comments so as it relates to one day you.
We continue to build the library there we have a <unk>.
Creative head of one day University.
And Stephen <unk>, who was the original founder.
And we've also recently added it to our premium tier and so we're seeing growth there that we're excited about we think there's a lot of we think theres a lot of value to unlock.
It was originally started as a.
As a live event company.
Obviously, that's not exactly what it is today and what.
We've chosen to do is take the content continue to build on the content and rapid into our.
Subscription service operations and at the same time.
We have we have been doing some.
Premium of course events.
Debt.
We're certainly encouraged by the initial results. So we like one day University things provides.
<unk> provides a lot of value to.
To the company and we see a lot of opportunities to unlock value there.
Great. My second one is I know it's early could you guys. Just started doing the boss channel. So can you talk about what surprised you guys had been a subscription really since you were in your session. But this is really your first by the way everybody is following you write Netflix is going to end up and Disney is going to follow you. So what is surprising you as you enter.
The AD driven portion of the streaming business.
I don't think anything has surprised us significantly I think what we're working on right. Now is because we are a very in the genre that we program a very broad brush.
Rand.
We know that people who are using fast channels are doing like different types of content. So we're still in the experimentation mode and.
What parts of our library and what types of genres that we're going to program. Yes. We've seen good initial results. We're definitely planning on expanding the number of partners that we're working with and I think what Youll see over time is that we'll also be looking at how do we program in terms of the genres and are we looking at one brand that goes across everything.
Looking at genre specific brands and that's something that we'll be figuring out as we go.
One thing that maybe surprised me a little bit as we have been asked by distribution partners in other large platforms to create very descriptive servings science.
Science service and Engineering service.
We're considering all of that.
Probably so interesting to me unless you guys.
It sounds fascinating. Okay. My last question is on so one of the things I think Jason just said was that 50% of titles are original 50% where acquisitions and say you really feel like 10000 titles are now my question is when you look at viewing.
Is viewing overweighted towards your O&M titles or is the lean over weighted towards your purchase titles I am interested in the relationship between investment versus viewing so kind of return on investment dollar is what I'm trying to get at.
Yes, we don't have exact numbers to share on that but I will say that we are yes, we love original content, we love the acquisition content one of the nice things about original content that we can create exactly what we know is going to engage with our audience. So you do see that when we're creating original content.
It is it is resonating very strongly that said we have a lot of as Clinton was talked about earlier, we have a lot of ability to go pick up titles that we know are going to resonate very well with our subscribers and.
Anecdotally one of the.
One of our top shows that we premiered a quarter or two ago is a show that's available on a lot of other platforms.
But as I was saying earlier, because we want to be the place that people go to watch this type of content that had a stronger life we think.
On the curiosity stream platform than it might on on other services. So I would say that it weights towards original because we have full control over that we know exactly.
What we need to make to make that do well with our audience, but again the acquisitions are incredibly important too.
Without a doubt I mean as example, we premiered engineering future season, two this week and so obviously.
That's generating more consumption than any other title, but if you look so right underneath that we have great evergreen programming like the story of Europe as an example for us and so that's the top 20 performer this week.
I think a lot of that.
While the original programming will tend to bring people in something Thats press for LIFO write about it but certainly the breadth and depth.
And quality of the content is what keeps people, who then curiosity stream, we believe keeps our.
Our retention rates among the best in the industry.
Okay. Thank you.
Your next question is from the line of Victoria, James with D. A Davidson your line is open.
Thank you for taking my question I've got two but I'll ask them one at a time. So firstly last quarter you were still in considerations around sort of the timing and the potential of a price increase for your service can you frame up how you think about user retention and engagement impact in advance of those prospective changes.
So I'll take the first part and I would say that.
As I mentioned in our last call I think we have a lot of a lot of room to better align our.
<unk>.
Offering.
As it relates to price the consumers pay.
No.
Okay.
As we've mentioned before that represents significant opportunity for US same time anytime you do a rate increase or anything like that.
You want to do it very thoughtfully and deliberately so.
Devin and team are working through that.
We are not going to announce for competitive reasons and a variety of other reasons exactly when we're planning to do that but.
We're certainly continue to work on it and.
Work to ensure that when we do initiate price increase we do it.
Most thoughtful and effective manner possible.
Yes.
Does that answer your questions Victoria.
Well, sorry, I muted myself, yes. Thank you.
And my second question is we recently wrote a white paper on inflation and has since been sort of been looking at rising labor costs and hiring can you talk to us about how you think about your ability to attract and retain top labor kiosk mission.
It's a great question and I would say that yes.
We're obviously in a free agent Academy today, I think that's that's undeniable.
I think there are a lot of.
A lot of tech.
Technical people a lot of engineers a lot of product to.
Marketing people, who are purpose driven.
Think that is something unique about curiosity, we are purpose driven company and that's that's attractive to.
Thats attractive to large subset.
I think.
We also.
Not unlike many other companies offer pretty flexible working environments.
Largely remote with our engineering staff as an example, and so as we continue to continue to offer those things.
To provide people.
With an opportunity and.
And really level of responsibility to do new and interesting things.
What we found is the teams find that attractive.
Thank you.
Yes.
Your next question is from the line of Julien Hustling with Roth Capital Partners. Your line is open.
Hey, Thanks for taking my question I'll start with one on the DTC side in terms of the conversion.
I think you guys mentioned potentially lowering your marketing outlook a little bit.
How much of that is due to just better conversion from some of those marketing efforts being more efficient and then <unk>.
Does the SaaS strategy, playing to that in terms of potentially filing notes into.
I'm, sorry S slides subs over time.
That's a great question.
You pretty much nailed the strategy in that question and that our marketing approach is different than a traditional marketing approach, where you have a funnel yugo awareness consideration et cetera, but we're looking to do and what we've done successfully is.
Get kind of inside the communities that have the highest proclivity to subscribe and engage to our product within the context that they commute.
So what.
What we have found and refined and gotten very good at is we are able to invest into these communities and then over time increase the engagement around our brand in those communities and pull back on some of the paid marketing that we're doing there. So a good example of this is homeschooling community of parents, who are home schooling their children.
Years ago, we invested into a fair amount of paid marketing to reach them within the context outs podcast of resources and we did a very good job of increasing our awareness.
As well as creating that community evangelist effect. So now we're not spending a ton of money in that specific community, but we are still very strong that we are still engaged there as a brand.
We're still you know constantly recommended by other homeschoolers setup procure <unk> as their streaming service of choice and so we replicate that approach and what that means is that as we are able to call. It launching fast call. What we're doing on our Youtube channel or in front of the paywall, where were creating content and we're engaging with those communities, we can create and foster these.
Evangelists of our brand, where it's not a traditional one to one pay for the impression trying to get the conversion type.
Type of relationship so as we continue to do that and continue to refine it we believe and we've seen that our marketing efficiency continues to get stronger and stronger and the organic impact of those relationships and those communities continues to compound. So that we can spend fewer dollars and drive higher conversions.
Yes.
Okay and then thank you and then sort of as a follow up.
Could you talk about.
Potential advertising like Kevin any better visibility there into until what the AD sales might be.
And then.
Any comment on sort of the percentage of subscribers that have taken up the tiered plans. So I think I saw somewhere that mobile has a half a million subscribers Brian . Thank.
Thank you.
Yes.
That's accurate based on what they've shared publicly.
As.
<unk>.
As an investment in Nebula, and the acquisition partnership with Nebula, we'd love seeing that.
What we like about nebulous obviously.
They have.
The group of more than a group well over 100 creators with.
200 million.
Accumulative followers in science history Tech travel.
The literature space. So it is an excellent match up for us.
We think that.
Sure.
They provide us a great marketing vehicle and too young.
<unk> demographic.
Provide.
Efficient.
Form of marketing for us.
So we like.
We really like what they're doing.
As it relates to our premium tier continues to grow but we're not going to release specific figures there but.
I think marketing team has done an excellent job with that smartest bundle.
That you can find in the world.
And so I think we'll continue to continue to build there.
Did I Miss.
And the other part of the question.
Yes, yes.
Sponsorship, what I'll say on advertising and sponsorship.
We're not going to release specific numbers, but we're on track to.
By far our best year ever as it relates to that revenue line.
Okay. Thank you.
Your next question is from the line of James Goss with Barrington Research. Your line is open.
Okay. Thank you.
With regard to the mass.
Channel.
Are you thinking of developing than either either at least one or a group of shower specific challenges channels rather to put on.
So that sort of.
Yes.
In addition to the.
The comprehensive.
Angela package.
That someone can that you can subscribe to enlist.
And with regard to more comprehensive traditional package.
A number of the providers are looking at AD free versus AD like type curve.
Programs and found that the Adelaide versions event actually developed higher ARPA.
Then the.
Fully paid one.
And is that sort of in Europe .
Concept as well.
Okay.
Yes, I would say that we.
Certainly been asked to create multiple channels into the SaaS space and Thats I think in light of the quality of content that we have and in light of the variety of factual content that we have so we'll obviously.
Be evaluating that and evaluating that constantly we are well positioned to do that.
To the extent that we can do that in a way that is additive and by additive.
Additive to promotion to our <unk>.
Two our subscription services and added as a as an extension for brand partnership monetization.
We think there's certainly some opportunities there as it relates to putting us in I think if I'm understanding. Your question correctly you asked if we would consider putting a fast change we're making a fast channel available on our subscription service, maybe if I understood that correctly, what I would say is that it wasn't it wasn't exactly that I was thinking with your subscription.
Channel can you do it either through a fully paid or in Adelaide version, where you do see a pre roll not interrupt the content.
Create advertising in front of it.
And in that way it created some premiums thoughts that might be a way to develop in our Peru, even if it's at a discount to whatever you charge for the fully paper on that.
Actually wind up giving you a better <unk>.
For those willing to.
Listen to enhance.
We don't currently have any plans to be doing that but what I will say is that we have the ability to run messages in front of videos, obviously right now we're using that for premium upselling into a premium tier which is.
One of our main path to increased <unk> as well as.
So other promotional messages that we have so as we continue to do that we will have more information and we'll be able to build out the add certain capabilities that certainly something that technically we could do but it's not something that's on the roadmap right now.
Okay, and one last one how many relationships do you have right now or do you plan to have with either C. T V. R V and V P D providers.
Providers.
We have many today cross across those ecosystems.
I would say that.
We expect we expect those partnerships to only grow.
Okay.
Alright, thank you.
Well thank you Jim.
There are no further questions at this time, ladies and gentlemen, thank you for your participation. This concludes today's conference call you may now disconnect.
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