Q4 2022 CuriosityStream Inc Earnings Call
Well good day, everyone and welcome to the curiosity stream Q4, and full year 2022 earnings call. If you have a question today. Please press star one on your telephone keypad.
I would now like to hand things over to MS. Denise Garcia. Please go ahead.
Thank you welcome to curiosity strange discussion of its fourth quarter and full year 2022 financial results.
The discussion today, our Clinton Zinczenko curiosity streams, Chief Executive Officer, and Peter Wesley Curiosity streams, Chief Financial Officer. Following management's prepared remarks, we'll 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 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 web.
And on our Investor Relations website as well as the risks and other important factors discussed in today's press release additional information.
Information will also be set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2022. When filed 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 Dr. Curiosity stream dot com.
Now I'll turn the call over to Clint.
Hello, everyone. I appreciate you all joining us today on the call are our CFO and general Counsel Teocalli.
Our CFO , Peter Wesley and our head of content Rob Berg.
Hard at work since our last call and I'm delighted to update you on our progress.
We made some strategic commercial decisions in our content licensing business in Q4 and more recently that.
While sacrificing immediate revenue and extensively better quarterly performance, we believe that put us firmly on the path to achieving positive adjusted free cash flow in the near term and even firmer sustainability in the long term.
Focused on driving operational efficiencies and leveraging opportunities made possible by our strong unique cash position.
We also continue to focus on improving the economics of all of our partnerships and vendor agreements.
We believe these decisions and actions and some others that Peter will address span.
And our overall opportunity and maximize profitability and sustainability.
Despite short term revenue impacts.
As part of our continued focus on building long term success I'm happy to share that we exceeded our year end target cash balance of $50 million by over $5 million ending the year with over $55 million in cash and short term investments zero debt zero debt we.
We believe our strong balance sheet and path to positive cash flow our major competitive advantages in the current environment.
Some industry players must raise capital, which is increasingly expensive and difficult to secure.
Believe we have the cash resources to turn cash flow positive without the need for outside capital.
Consistent with our focus on long term value creation over short term revenue opportunities. We also remain highly disciplined in third party licensing and distribution negotiations.
The value of our content, we won't enter into agreements that did not meet our valuation thresholds. We're in control of our own destiny and our future is bright.
Specifically, our direct consumer S wide revenues grew 12% in the fourth quarter and 25% for the full year on a year over year basis.
Looking ahead, we're optimistic about our ability to drive accelerated subscription revenue growth and profitability as we implement our new pricing structure as.
As we migrate to more efficient performance based marketing and as we execute on product innovation that will produce measurable return.
On the pricing front.
We recently completed an extensive three months pricing desk.
With over 3 million interactions.
We expect the changes we made to our standard tier subscription pricing on March 27th will create a tailwind to revenue growth later this year and beyond specifically.
Specifically, we increased the cost of our standard service to $39, 99% from 1999 per year for new annual subscribers.
499 from $2 99 per month for new monthly subscribers.
We've long maintained our $20 annual standard service price point, despite the significant investments we've made to expand our content library and improve the user experience.
We established our new price points following a rigorous process of testing and analysis that helped us to estimate the subscriber acquisition and retention impact of various pricing combinations spin.
Specifically, we analyzed over 3 million sessions during the course of many weeks using nine different combinations of pricing and messaging.
Thoroughly reviewing the data we confirmed a range of pricing flexibility and we believe we are striking the right balance between delivering value to our subscribers optimizing lifetime value and enhancing profitability.
Even at a higher price point, we continue to believe our service represents an extraordinary value compared to other offerings in the market.
We expect financial benefit of the price increase to build sustainably and gradually as new subscribers joined in his annual subscribers renew over time.
Our direct to consumer subscriber retention remained industry, leading during the fourth quarter as our incredibly talented content and marketing teams.
To leverage our critical mass content library of over 15000 programs to deliver new and engaging experiences.
Great example of this was a highly successful 100 days of curiosity campaign campaign.
Campaign kicked off September 23rd with our landmark original feature.
PE disaster Street and continued through the end of the year with a different existing series or special.
Re featured on our service each day and highlighted across all social channels with gratifying success.
Many of the titles re featured in 100 days campaign received more than 10 times the number of views they would normally receive on a typical day.
Performers included everything from secrets of the solar system, H engineering and Eternal Egypt.
Slanted insect amazing Dino World and radioactive for us.
Each of which saw their daily viewership increase from five X 25 X in a single day.
And nearly a week after we re featured each title they continued to deliver viewership levels much higher than they did previously.
During 100 days of curiosity campaign, social engagement jumped more than 200% from the previous three months. This was powered in large part by our strong video content, which drove a nearly 275% jump in video views. During the 100 days campaign as compared to the previous quarter and the social growth. We saw during that campaign continued into the first quarter with engaged.
It's up 400% from January one to today.
Throughout the quarter. We also continued to premier more brand defining original series like oddly satisfying science second.
The second season of NYSE revealed new episodes of our award winning science and technology Strand breakthrough featuring flying cars reached of hope and voyage into the Sun.
As well as a one hour special the Lucy mission origins of the solar system.
And our ever popular year end wrap top science stories of 2020 to build.
Building on the success of 100 days curiosity has already created several more campaigns to enhance program discovery ability throughout 2023, and beyond including ancient Egypt week space week and Dino.
Turning to product innovation, we've been encouraged by the continued embrace of our smart bundle subscription plan. In fact December was an all time record months for smart bundle subscriber additions.
<unk> at 32% year over year smart bundle subscriber growth.
And while the smart bundle continues to increase as a percentage of our base. We believe there is excellent runway for growth considering that less than 10% of our DTC subscribers are on this plan.
We believe our smart bundle subscribers, many of whom have upgraded from our standard subscription depreciate plans curated content of value.
And at $70 per year are smart bundle represented 83% savings compared to subscribing to each service individually.
And we have broad global rights with the majority of our six content providers, including da Vinci kits, which we added to the bundle during the fourth quarter da.
De Vinci kids' significantly enhances our proposition for kids age five to 12 and is available on over 16 languages.
Controlling the broad scope of rights with the majority of our content providers enables us to provide smart model globally and expand our market opportunity. Additionally.
Based on our recent testing we found not surprisingly.
Our increased standard tier pricing generated a higher rate of smart bundle conversions.
As I mentioned earlier, we believe the macro environment with rising interest rates and diminished access to capital.
Its many challenges for most.
It is significantly though increased our volume of inquiries from potential strategic and commercial partners.
Besides strategic combination considerations were engaged with more scale partners around the world, who are seeking high quality cost effective alternatives from services like ours as compared to increasingly pricing content from legacy media companies.
In addition, we believe our strong cash position increases our flexibility with regards to how we can structure our partnership agreements both commercially and strategically.
We believe our strong cash position also enables us to lock up important tools and services at meaningful discounts as we can buy in bulk and over a longer term.
Nearly everything is on sale today.
And by that I mean, certain acquisition advertising inventory certain influencer marketing services technical products and services.
And even non core assets of other companies.
We're aggressively taking advantages of these discounts, which may result in more cash out over a short period of time, but which we would trade for improvement in our longer term performance.
Looking ahead, we are confident that we have the right assets and capabilities in place to execute on our innovation and growth strategies.
All of the macro noise. We are currently in the midst of.
More global opportunities are opening up is curiosity of one day University of rolling out with several new partners, who will deliver millions of paying subscribers in southeast Asia, Eastern Europe , Australia, and even North America.
While we barely dipped our toe in the water with regard to third party SaaS and Avon opportunities, we have considerable upside here through aligning with the right partners around the world with thousands of titles that haven't run any avon or SaaS platforms.
We recently hired a great leader execute or an industry that Tom spoke to head up our brand partnership efforts.
Well the turbulent macro environment has been a challenge in many respects. It is also presented new and compelling opportunities that didn't exist even a year ago.
With the decisive actions, we have taken to rationalize our annualized cost base they have.
Avi lifting of critical mass content creation in Languaging behind us.
It increased DTC pricing structure and optimized scale partnerships we.
We see many ways to win in this environment and come out stronger on the other side.
Turning the call over to Peter for more detailed discussion of our financials I'd like to thank our colleagues across the curiosity ecosystem.
Fulltime employees freelancers sales agents' producers editors.
Our deeply appreciated third party business partners.
Thank you for focusing on the signal through the noise and for your tireless commitment and your quality work.
Together, we will continue to help people around the world satisfy the curiosity through premium factual content.
And deliver <unk>.
<unk> profitable growth for our shareholders.
Over to you Pierre Thanks, Frank.
As Clint mentioned, we made further progress towards our positive adjusted free cash flow objective during the quarter and we remain intensely focused on expense discipline and operating efficiency.
We believe our Q4 results demonstrate the excellent progress we've made over the past year to improve profitability and cash flow.
Fourth quarter, adjusted EBITDA improved by $2 $6 million compared with the prior year quarter, while adjusted free cash flow improved $22 $7 million year over year.
Before I get into more details about the quarter I'd like to make a couple of comments first I would like to note that the metrics that we will refer to most frequently and this in future calls our revenue adjusted EBITDA and adjusted free cash flow.
We think those figures will give you the best sense for the overall economics of our business, we're particularly focused on adjusted free cash flow, which for the record is simply.
Calculated by taking cash flow from operations less capital expenditures and any adjustments that we think are appropriate as disclosed in further detail in our earnings release.
We have not taken any adjustments to free cash flow for any of the historical periods discussed in this call are presented in this quarter's earnings release.
The other thing I'd like to point out is that we made some important revisions to our Spiegel television joint venture during the first quarter of 2023.
These changes, which included allowing the JV to directly off our subscription video on demand and fast services.
Our intended to help drive the success of the business.
These changes also resulted in a reduction to revenue of $2 $2 million during the fourth quarter and the full year.
Fourth quarter revenue was $14 5 million compared to $27 $3 million in the prior year quarter.
The year over year change was primarily driven by a $9 $5 million reduction in content licensing revenues.
A $2 $2 million reduction in bundled distribution revenues.
And a $2 $1 million reduction in other revenues, partially offset by continued revenue growth in our direct and enterprise categories.
Our largest revenue category. This quarter was our direct business, which includes our direct to consumer and partner direct revenue streams direct.
Direct revenue came in at a combined $8 $6 million, an increase of 10% compared with the fourth quarter of 2021 as.
As Clint mentioned, we're implementing a price increase for our new standard plan subscribers and transition to a performance based customer acquisition marketing model as we entered 2023 with less than $1 million of marketing commitment for the year.
We continue to be excited about our high value smart bundle offering while we achieved 32% subscriber growth this year.
With the increase in our standard pricing, we expect an even higher percentage of new subscribers to opt to the smart bundle in 2023.
Turning to content licensing, which was our second largest category. This quarter, we generated $3 million of revenue compared to $12 5 million in the prior year quarter are.
Our fourth quarter revenue in this category was negatively impacted by the Spiegel TV related charges discussed previously.
Content licensing is an inherently lumpy business, while we expect this characteristic to continue we are encouraged by the level of interest in our library.
Our next largest category this quarter was bundled distribution, which saw $1 $5 million of revenue in the quarter.
Q4 was the first quarter, which included the full impact of the contract discussed last quarter that we did not renew.
Excluding the $2 6 million of revenue we generated from this contract in the fourth quarter of 2021 under distribution revenue grew 29% year over year on an adjusted basis.
We remain actively engaged in discussions with distributors around the world and are focused on signing new contracts to drive both top in line top and Bottomline growth.
Our next largest category was enterprise, which grew 18% year over year to $1 $4 million in the fourth quarter.
Fourth quarter gross margin of nine 4% was negatively impacted by lower revenues in our elevated content amortization expense relative to our run rate investment in new content additions.
Content amortization in the fourth quarter was $9 8 million nearly double our $5 $2 million of cash content spend in the quarter.
We expect content amortization expense the largest component of our cost of revenues to decrease going forward and ultimately converge with a lower level of new content investment that we require now that we've achieved critical mass in our content library.
As we discussed on our last earnings call, our Q4 advertising and marketing expense of $9 $1 million continued to reflect sizable legacy advertising commitments moving forward, we expect significant improvement on the advertising and marketing line as we entered 2023 with less than $1 million of marketing commitments for the year.
Turning to G&A, we continue to make progress and reduced reducing our overhead costs, including a 29% workforce reduction between the end of 2021 and the end of 2022.
G&A expenses were $7 $6 million during the quarter down 15% year over year and 13% sequentially.
Moving to profitability.
Despite lower revenues and ongoing legacy content amortization and advertising expenses.
Adjusted EBITDA loss of $13 6 million improved year over year from a loss of $16 3 million in the prior year.
Moving forward, we expect adjusted EBITDA to benefit from lower levels of content amortization in advertising and marketing spend.
We also reduced our fourth quarter cash spend on content by more than $2 million on a sequential basis and by greater than 75% compared to the prior year quarter.
Adjusted free cash flow improved year over year during the quarter by $22 7 million from negative $31 5 million to negative $8 $8 million.
At the end of the fourth quarter cash restricted cash and available for sale investments totaled $55 $5 million ahead of our $50 million at year end target.
Our overall balance sheet was in great shape at the end of the year with $154 million of assets and $36 million of liabilities translating into book value of $118 million or approximately $2 23 per share.
Moving to our first quarter guidance, we expect revenue in the range of $11 million to $13 million and adjusted free cash flow in the range of negative eight to negative $6 million included.
Included in this amount is approximately $4 million of payments related to marketing activity in the fourth quarter.
Our adjusted free cash flow guidance reflects our continuing focus on bringing down our cash burn which is a top priority for us.
I'd also like to provide some further guideposts for 2023 that I will hope will be helpful to you as you think about our business.
First we expect our content amortization the largest component of our cost of revenue to decline from approximately $39 million in 2022% to 25% to $30 million in 2023.
Second we expect our advertising and marketing expense to decline from approximately $41 million in 2022 to $20 million to $25 million in 2023, as we move to a performance based marketing model.
Finally, turning to our cash flow statement, we expect our cash spend on content the decline from approximately $42 million in 2022 to $10 million to $15 million in 2023.
Along with our planned reduction in cash content spend we expect our zero margin pre sales content licensing revenue.
Which amounted to approximately $19 million in 2022.
To be in the low to mid single digit million dollar range in 2023.
And with that operator, let's open the call to questions.
Thank you Sir and just a reminder, everyone. It is star one if you have a question today.
Our first question from Dan Carnose benchmark.
Great. Thanks, good afternoon.
Maybe a couple of things.
And obviously, thanks for all the help on kind of walking through the pieces.
Yes.
Help us think through first just on the parts of the business that you strategically decided to exit.
I know you have kind of the core DTC, but if there is any way that you can kind of parse out impact on advertising.
Or on the corporate or any kind of segment that you used to disclose podcast ODU just anything that helps us understand.
Sort of what we're what we're left with here given the guide and then secondarily you talked about tailwind as we go into the back half of the year from pricing can you just talk to how the pricing increases are going to play out when do consumers see them as on their renewal date, the phase <unk>, just help us kind of understood.
The timing of how that unfolds.
Happy to let.
Let me try to tick those off.
Kind of one by one.
So I appreciate the questions and let me say first of all.
We have a really competitive team.
We like to win I like to win.
I, probably hate losing more than I like winning.
We'd like to win every quarter, but at the same time, that's a that.
That can be a fleeting victory thats less important than winning the race.
We'll run the whirlwind I can assure you.
By focusing on what is essential so.
I don't know that we've given up anything I would say that you know.
We passed on some licensing opportunities that were really meaningful because we.
We balance.
That revenue against what we believe to be possible through.
Retaining certain rights and through broader licensing rights and frankly through <unk>.
Combination considerations so.
Those decisions are not made lightly but what I will say is as we.
Look out over this year.
Where we plan to grow.
And where we plan, where we've grown in the past is one international Rollouts with large channel stores like Amazon like Youtube and the usual suspects there. These international environments are great because the number of <unk> services offered is.
As a fraction of what it is in the U S.
In some cases, maybe 10% to 15 services as compared to hundreds it's not just curiosity stream, but also one day view this is kind of low hanging fruit.
And then in the U S. ODU will continue to rollout there and we're able to do this because we control.
Rod Global rights to our content that we have not we didn't historically, we haven't leaned in at all too.
International Rollouts with channel stores, we focus largely on bringing people directly to our service.
That business is rolling and we anticipate increasing bundled rollouts. We have four launches just this month eastern Europe , Northwestern Europe , Australasia millions of paying subscribers solid strong margin recurring revenue with no marketing cost in areas, where the direct consumer.
Opportunities not necessarily as good as it is in other places.
<unk>.
Avon and fast.
<unk> SaaS, Brent our brand partnership business has been.
A little bit less.
<unk> in the past because oftentimes it's.
We might be we might do a million dollar deal that happens in a quarter.
This will get a little more predictable as we do two things one is return on traditional advertising with the millions of linear subscribers that we have around the world, where we haven't turned it on.
In addition to that we have thousands of hours with thousands of titles that haven't run on large fast enabled platforms, we dipped our toe in the water for the last year.
As it relates to fast.
But.
To maximize the money here you need to be on the top six platforms with good positioning and some promotion.
That's really important I mean, there is you know like thousands of SaaS channel some of which make no money you don't want to be yelling into the wind you want to have the right alliances and so.
I think if you look at how.
Companies.
That are looking to expand and fast that have this kind of positioning.
Typically look at it is like okay with fast channel can generate $3 million to $4 million per year and that assumes you have 250 hours of good content to roll through so.
We have probably better content available than anybody that I can think of broadly in the media space. It's also operating so.
We kind of know what the value is is there an avon SaaS space, there's a lot to exploit and we just want to do it the right way, we don't want to just.
Throw up content.
And.
Even though it might mean, a short term hit.
We want to make sure that when we're doing this we're doing it in the right way and we're maximizing the opportunity around it.
The opportunity certainly clearer and more predictable today than even was.
Six nine months ago, you could argue we should have moved into this area earlier and.
And I think Thats, a fair argument, but our focus has really been on building our subscription businesses.
On the content licensing side, you can see the value that exists there enable SaaS base, if you're just license to your content as compared to licensing and then continuing to operate channel as it relates to the kind of traditional content licensing and we licensed over $45 million content outside the U S and territories, representing about 30% to 40% of the.
World.
We have not sold the U S. Our core North American package.
So theres a lot of value here at left to exploit but we're not going to do a deal that we don't think is in our long term best interest development, even if it meant.
Exceeding the analyst expectations by 1 million or $2 million in the quarter that is not that.
Thats not the rates that were trying to win.
And then getting back to the and then I think the last question was around the price increase.
We did a lot of testing around the price increase.
Tested over nine different combinations over 3 million sessions, new customers are now seeing that pricing.
As of Monday.
So it's a blended on a blended basis, it's about 83% price increase so new customers coming on will pay that.
Over the next few months will.
Transition our current <unk>.
Monthly customers to that pricing and then.
Over the next one.
Over the next 11 or 12 months, our annual customers will transition to the.
To the annual price so.
Our technology team.
Did a lot of work there.
We're really excited about.
The opportunity there.
That will flow through.
Later this year in earnest and then more over the next few years frankly, we should have done this earlier.
But.
And now it's certainly extraordinary value as it relates to what's available in the marketplace with a long answered Dan.
Dan hopefully I'll hit everything, but if I didn't.
Please let me know what I missed.
No that was very comprehensive thanks, very much I appreciate it.
You bet. Thanks.
We'll take the next question from Laura Martin Needham.
Okay. Clint so the first one for you.
So my revenue fell by $13 million year over year 14.
And I thought what I heard you say is it in about $9 million of that was from lower content licensing and then two six spread this client that didn't renew did I get that right.
The $13 million decline in Manhattan.
Peter Correct me here, but it's a combination of.
<unk>.
Yes.
An accounting correction that we took.
Okay and also so.
So that was over $2 million.
Then okay.
Yes.
A.
The deal that we did not renew that we didn't like the overall economics on as it related to a bundle distribution and then.
The other difference was in pre sales content licensing, which we pulled back on as we're trying to build a different approach there that the accounting treatment around our pre sales content licensing.
As it has existed for the last 18 to 24 months has been.
Zero margin and so there are some changes that we need to make to <unk>.
How that works in order to.
Generate higher content licensing revenue. So it's really those three things Peter do you want to clarify here I will clarify slightly.
So.
The if I were to put it in the categories that I typically talk about overall the content licensing was down year over year by $9 $5 million.
That includes the $2 $2 million.
Charge taken in Q4.
The bundled distribution revenues was down by $2 $2 million.
But.
In the comparable quarter a year earlier, there was $2 6 million of revenue in that category. There was associated with the distribution agreement that we did not renew in the middle of 2022.
And then $2 1 million was a reduction in other revenues, but those were those were somewhat offset by revenue growth in our direct and enterprise categories.
Okay Super helpful. Okay. So now when I look at the next quarter.
Still have this company like half the size right. So I still have the top end of your guidance is 13 million next quarter. After doing 14 in half this quarter. So that is my question.
Is this company now half the size. It was 90 days ago or are we holding back that $9 million of licensing rights. What I heard you say in answer to the prior question was youre holding back some of that licensing income in the near term because you think you can do global distribution rights on these big platforms.
Is that what youre, saying.
In part.
Think that.
As Peter guided to and that in the first quarter, we pulled back a little bit.
And more than a little bit in some areas and so.
Okay.
We will have <unk>.
Certainly.
Greater growth as we as we go through the year, but.
We did a little bit of a bit of a bit of a reset here.
And the last.
I'd say four or five months as we looked at.
As we looked at.
Opportunities that we could take advantage of an and.
Opportunities that.
We might want to consider later on in the year as industry put it if I could add I would say.
Our key focus is improving our overall economics and cash flow even if it means sacrificing some revenues it's really the bottom line that we're focused on.
No.
Theres a couple of things that are that are happening here, they're with us with a lower.
Overall content spend or <unk>.
Content licensing is coming down because we're going to have and particularly going into 2023, as we talked about in the kind of forward guideposts.
We had a lot of roughly $19 million of content licensing revenue in 2022, there was effectively zero margin revenue was pre sales revenue and something that we don't.
Make a margin on so that is going to add that number is coming down substantially.
And the second big element as we had certain agreements with large enterprises.
Where the overall economics are not terribly compelling and we're not going to do those deals again and so the most obvious example of that is the bundled distribution deal that we elected not to renew in mid 2022.
We're even if it had.
Revenue and gross margin associated with it when you took the whole package into consideration, particularly very substantial marketing commitments that went alongside it.
Marketing commitments that we needed to make.
To that partner overall, those deals just didn't make sense and so.
Obviously, when you look at the Q1 guidance you are seeing a lower number but improvement and ultimately it's going to be improvements on the bottom line improvements on the on the cash in the adjusted cash flow and position us to as <unk>.
<unk> suggests grow from there.
That makes a ton of sense and then I want to stay on this marketing point, because I think it's super interesting.
So you did $9 1 million in the quarter of advertising and marketing. It sounds like you had this massive commitment maybe $40 million of its way to 20, if we're going to go into the SaaS business. The issue with those platforms as they are cluttered and you do have to spend a bunch of marketing dollars and AD dollars to drive discovery that.
You wouldn't have had in the past. So can you speak to why you think youre going to be able to save so much money on that line for starting a whole new revenue stream that you've never that curiosity stream is never done in the past.
It's a great question, Laura so so as it relates to <unk>.
You hit it on the head.
We've run off.
Okay.
Most all of our obligated marketing expenses as of.
As Peter said in his comments.
Pay for some of those in January .
Well for fourth quarter so.
Going forward.
We're growing virtually.
100% not quite there, yet, but getting close to that.
On performance based marketing.
And so yes.
Yes.
Thats with certain that's where our direct business thats with certain key partners in the direct space, but to your point like Okay. How are you going to maximize your Avon and fast initiatives.
What became real cleared may and looking at this over the last handful of months.
You have to have the right partners you just.
What's your as you said Lincoln unless youre positioned well with the uptick.
<expletive> <unk>.
Providers.
And unless you're committing some level of promotion.
Youre not going to you risk.
Yelling into the wind.
Just making a fraction of what's possible and so it takes it takes longer to create these types of alliances, but that's what we're that's what we're focused on we don't want to just I mean, we.
We dipped our toe in the water with some of the kind of secondary.
And size fast platforms, and we learned a fair bit from that end.
Obviously, we've done we've done some work with our own it own platforms in front of the paywall, but.
What I will say is that.
As it relates to the amount of money that needs to be spent to grow those services.
It's all a consideration in the <unk>.
That we create our alliances.
Go to market strategy with the larger platforms does that makes sense.
Yeah Super helpful. Thank you guys. Thank you very much.
And next we'll hear from Darren Afterheat Ross.
Hi, This is Dylan on for Darren Thanks for taking my questions.
So I wanted to follow up on the SaaS side.
Could you sort of share what percentage of revenue is coming from that the SaaS the SaaS channels themselves.
It's minimal it was minimal in 'twenty two.
Yes.
Let's say, we dipped our toe in the water with gist.
In an effort to learn what we could to understand.
The real differences in the positioning of the service and also to just operationally make sure that we're doing all the things right.
So.
Minimal revenue from SaaS last year going forward.
Will be it will be a component of it.
Our broader advertising and brand partnership business. So.
It's meaningful but.
Avon is meaningful and then.
The comprehensive approach that we take to these brand Mark within brand partnerships, where we are.
Including our partners on our <unk> platforms, including social.
Spreads out across a number of different.
Assets so.
I think in 2023, SaaS will be a component, but probably less of a component that will be in 'twenty four and beyond when we are.
When we've got a full year behind us and we're really rolling and the other benefit that we see the SaaS is.
It's not just monetization for our brand partners. It's also.
Platform to promote to our direct services and this becomes even more valuable as we move to virtually 100% performance based marketing and as we have frankly higher margin.
More profitable subscription tiers to promote too.
And it's.
So we just want to make sure that we.
We leverage it as strongly as we can make sense.
Yes, that's helpful.
And then in terms of.
The Spiegel changes and then some of the deals that have gone away like when when do you expect to see the impact one of the Spiegel changes and then are there any sort of.
Other partnerships or bundled agreements that are essentially.
Less favorable and economics that you can either try to restructure or possibly do similar things to what you've done the last six months.
Well.
Well I would say I would say as it relates to Spiegel.
We like that relationship.
The fact that we have.
Two linear channels and German speaking Europe , reaching close to 5 million customers.
And seeing the curiosity brand.
That's been really good and what Peter is talking about is it.
As an accounting treatment that we are we think actually.
Physicians that that JV for even greater success.
As it relates to our other bundled deals.
You'll you'll read about number of them over the next months.
The economics that we have with our other partners are good they're all.
Nice margin.
Recurring revenue multiple years and in the cases, where it requires the language content.
Much of that is is behind US now as is like having built this critical mass library. So.
The deals that we'll do are.
We are going to all fit that criteria.
Really excited about the ones that are coming.
Come on over the past month over the next months.
I'd just add that one distribution deal we walked away from that was a that was a real outlier in terms of the overall economics of that package.
And we've instilled real discipline in some of our larger kind of enterprise type types of deals.
We're not doing that some of the types of deals that we had done in the past, but they're there those deals are effectively all behind us as of the end of 2022.
Got it appreciate it that's helpful actually one more if I may maybe I missed it but did you guys share the subscription.
The traveler number at all for any end of the year.
We didn't know.
But I mean, our direct with our direct our direct to customers grew.
And as a group of 25% year over year and on the bundled side.
It grew.
<unk> grew a little bit.
And that was a combination of.
In certain cases, we're paid.
Basically a fixed fee.
Just on the numbers.
It's not a fee per subscriber, it's a fixed fee and the distributor customers subscribers can go up and down a little bit and so that's why it was kind of <unk>.
Margin growth over the quarter there.
Okay I appreciate it thank you.
Yeah.
The next question comes from Jim Goss Barrington.
Alright, thank you.
As you've gone through these consumer tests I'm wondering.
If you could talk about the pricing philosophy developed that or does it cause you to arrive at the.
The 490 939 99.
Was there an element if you get what you pay for it. So it was perceived that you're underpricing your.
Service.
And that might have been part of it and the 39 95.
Themes.
Conservatively and compelling this for 99 months gets you into more direct competition with some of the other services and I Wonder if you might.
About.
That variation.
And the impact.
Maybe the mix of monthly versus.
Annual.
I will take it to start and then ill.
Deferred to my good friend and colleague Peter Jim Thanks for that question. So.
Yeah as it relates to the $4 99 price if you look out over the okay.
Got it over the landscape.
Subscription services today 499 with.
Without breaking up the programs with ads is still really compelling.
The other value too.
To 499.
39 $99.
The.
We think that.
Because that because it's not it's not as steep a discount as we had in the past as it relates to the annual plan, we believe our mix will change probably by.
10 to 20 points theaters.
Accurate as to monthly versus annual.
Something along those lines is definitely it's definitely going to skew skew more monthly I think one of the things that was really interesting for us to test and we tested a variety of different <unk>.
Price points.
The monthly price point constant and try to drive a few different annual price points, then change the annual price point.
Comparing against the control group that we're seeing kind of our historical pricing and one of the things I was really interested to look at as we have gone through it is.
Historically, the $2 99.
1999 historical pricing that we've had.
Is it is a real outlier in that.
The annual price was basically less than seven months worth of monthly subscription payments. If you would wanted to equate the two.
There are many many services out there, whether it's consumer or enterprise, where typically the more typical.
The combination is that a.
Annual price would equal about 10 months, so we weren't really interested to see kind of what the what the right mix was and ultimately ended up with.
What effectively is our new pricing, which is about.
Eight months.
An equivalent of eight months in the annual pricing point and that was that was certainly one of the things. We thought was really interesting in that we were testing around to figure out.
Where the ultimate kind of.
Maximum optimized lift would be for for revenue and value per session and lifetime value and all the other metrics, we were trying to optimize for.
Okay and is it fair to think that you would need to get to.
Significantly higher critical mass to consider in Adelaide option.
<unk> been successful in leather streamers.
I think thats, a great question and so here's my response to that Jim versus.
I think Disney's recent price hike constructive rebate.
They went out with a $3 price hike and if you wanted to pay $3 more you could continue to watch without ads. If you want to save $3 you could watch some ads I think 6% of the people took the adoption.
And so that.
But to your broader question.
How do you.
How to use this service and how do you build a compelling advertising business I think we have that we have.
Our strategy to build our presence in front of the paywall.
Which will enhance our overall advertising revenue, which will enable us to promote to our direct service.
<unk> does not involve having a.
At this stage, having a curiosity light if you will pay for it when we look at.
As we've looked at it and when you look at the efficiency of your marketing spend it's going to be much greater if you're promoting to E Bay specific subscription offering as compared to spreading that out over.
Multiple multiple options, we like the options that we have right now because even though.
It's not curiosity light we have the smart bundle that sits on top of.
Our standard service and that's 90 99 months was $69 99, a year and if you. If you were to add up the cost of those seven services that occupy that smart models at $410 year, we're offering at 69 99, a year ago.
83% discount and.
What we found with this new pricing is because our annual pricing.
Our monthly pricing is now closer to that smart bundle, we're seeing more smart bundle conversions. So that's.
A lot that goes into that is a very good question.
We are really confident in this strategy going forward.
Okay, and one final thought to bring up.
You mentioned incorporating.
Farmers based marketing.
In New York.
Your approach of creating visibility for the service I Wonder if you could talk about the cross failure relationship and how many of those sort of services, you're trying to use and exactly how youre trying to create that visibility through those services.
Sure Scott.
We talk about performance based marketing, what we're saying is that.
Our marketing messages are.
Going to include a coupon or a call to action.
Not dissimilar to a traditional direct response in them.
Like CTV business as an example, and so how we do that is through.
Traditional.
Digital acquisition marketing means Facebook, Google Youtube, but also through working with.
Certain Youtube Influencers, who operate in the factual space, who have passionate followings and whose.
Yes.
Whose subscribers and followers will be more likely to subscribe a curiosity stream. So those are the areas.
Yeah, and we're really driving to.
Very focused on our cost of customer acquisition and the model around that and where we can price marketing kind of on that basis. It's great.
We love to do that we've obviously just significantly increase the lifetime value of our subscribers so for new subscribers and so that creates some.
New possibilities for us on the marketing side because of that uplift.
We will now take a follow up from Peter Henderson.
Hi, how are you doing thanks for taking my question.
Thanks, I just wanted to circle back to something that you stated earlier, which was.
I believe you said everything is for sale I'm, just wondering have you approached anyone.
Regarding a potential sale of the company itself.
Just trying to sort of clarify that comment fair question. So what I am saying everything is for sale I'm talking largely about.
Products and services so okay.
But at the same time.
Yes, I think there are.
There are non core strategic non core assets the company's own that are for sale and yes, we've had.
We've had inquiries.
We've had.
Real.
Meaningful inquiries as it relates to.
Curiosity stream being in combination with <unk>.
With other companies, but what im but what I.
What I like about the fact that.
Things are on sale today is there are opportunities for us too.
To purchase as an example acquisition inventory at a discount and because we have the cash to do that we can essentially buy in bulk and buy in advance and put that to work over a long period of time in a way that really drives profitability and.
Sustainability and so.
As Peter said, we are supremely I think disciplined in way that we're operating business. We've rationalized the cost basis in a way that gives us a lot of flexibility a lot of optionality.
Going forward, but as it relates to.
But we have the ability to be opportunistic and so we're going to do that wherever it makes sense.
Notwithstanding the challenging times that we're in I mean, I think I said in the script, we've never had more incoming as it relates to.
Strategic and commercial opportunities, it's just a function of the time, it's a function of the fact.
The fact that we.
Our on this March to positive cash flow, we don't need to raise any additional money and we have cash in the bank and so those are typically in my career Peter have been like the smaller under leveraged Guy it's nice to be in this in this position now.
And running a business that generates cash.
Just give you a lot more flexibility and opportunity.
Thank you.
Thank you.
Yes.
Next step is sharing J D.
D a davidson.
Hello, and thank you for taking my question.
I have one question I was wondering can you compare and contrast, your distribution efforts with Amazon Apple Roku and other cable providers and discuss how that has changed over time.
Compare and contrast, our relationship with them.
Alright.
Yeah.
Sure so.
As it relates to Amazon.
Apple Roku.
And their channel stores.
We launched with <unk>.
All of them.
To use the.
Ala carte vernacular so they offer us they offer essentially our subscription service.
Through there.
Through their system and through their offering.
And.
They pay us a fee based on.
Subscriptions that come in.
We have that same construct with.
Comcast in the U S.
And a few other.
Traditional mvpds in the U S. So that's one relationship and then as it relates to <unk>.
Other mvpds.
Many of which are outside the U S. We have a we have a relationship with those providers, where it's more of a fixed fee approach. So they are paying us some kind of fixed fee that.
Includes us conveying to them, perhaps a linear channel Vod content and a set of rights, where theyre going to pay us a fixed fee for that we like that because thats multi year revenue it's recurring.
It doesn't require any additional expects from us in most cases and that's that's.
Those are the deals that we have today.
Where we have not leaned in and.
Where we are over the next few years here is.
And rolling out with.
First <unk>.
Subset of companies that you mentioned, the large channel stores like Amazon and now like Youtube TV with Primetime Entertainment those are there real opportunities there and again, what we're really like about that is as you rollout in those international markets.
The number of services that are being offered is just a fraction of what it is in the U S. I think Amazon's fantastic marketing.
The subscription video on demand services, but theres a lot of them today.
Just a lot and the same with brochu and same with.
Apple but.
I think youll see us continue to enhance those relationships because.
Not only are those are they helpful for our subscription video on demand products.
We have three of those now there also.
They are also typically occupy.
Occupancy at.
Now that top six to seven category of.
SaaS enabled platforms, so that youll see us enhance the relationships create broader.
Global product relationships with that set of companies that you mentioned and thank you for the questions. Good luck.
Great. Thank you.
At this time I would like to hand, the conference back to Mr. <unk>.
For any additional or closing remarks.
I just wanted to thank everyone for the questions I thought they were really good and helpful.
Thank you for the interest and curiosity stream, we have a lot of day to day work to do.
With our shoulders to the wheel and I'm really excited about the actions that we've already taken.
And the direction that we're headed in this Peter shared we've taken the necessary ongoing steps to significantly reduce our annualized expenses to focus on the essentials and to move toward positive cash flow. This reset in combination with our strong cash position provides us with maximum control and maximum optionality again, we generated double digit direct sale.
Growth in Q4, and recently implemented a price increase which we expect to drive significantly higher lifetime value, while accelerating our path to positive adjusted free cash flow or.
Our critical mass content library of over 15000 programs combined with additional content.
That's flowing in daily and weekly basis that enables us to continually refresh our service, while remaining highly efficient and our content spend.
We're off to a great start this year in regards to global partner Rollouts of our services and these alliances they build.
Our more predictable long term recurring subscription revenues at zero to minimal marketing costs and complement our lump ore are lumpier areas of content monetization.
With a strong balance sheet zero debt, which we believe cements our excellent strategic position in the current market environment.
<unk>.
Peter and I look forward to updating you on our progress this year as we execute on our plan.
Thanks again.
Okay.
Ladies and gentlemen that does conclude today's conference we would like to thank you all for your participation today you may now disconnect.
Yes.
Yes.
Okay.
[music].