Q3 2023 Gaia Inc Earnings Call
[music].
Good afternoon, everyone and thank you for participating in today's conference call to discuss financial.
Financial results for the third quarter ended September 30th 2023.
Joining us today are Guy S. C O Erica for C. D C O James Calhoun, and CFO Ned Preston following some prepared remarks, we will open the call for your questions before we get started however, I would like to take a minute to read the safe Harbor language. The following constitutes the safe Harbor statement under private Securities Litigation Reform Act of nine.
195.
The matters discussed today include forward looking statements that involve numerous assumptions risks and uncertainties. These include but are not limited to our ability to attract new members.
Yeah.
Our ability to compete effectively including for our customer engagement with different modes of entertainment maintenance and expansion of device platforms for screening fluctuation in customer usage of our service fluctuations in quarterly operating results service disruptions production risks general economic conditions future losses loss of key personnel.
Price changes brand reputation accusations new initiative as we undertake security and information systems legal liability for website content failure of third parties to provide adequate service future Internet related taxes, our founders control of Us litigation consumer trends the effect of government.
Relation and programs the impact of public health threats, including the Corona virus, COVID-19, pandemic and our response to it and other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q.
There's no obligation to publicly update or revise any forward looking statements with that I would now like to turn the call over to Guy S. T O.
Please go ahead Sir.
Thank you and good afternoon, everyone.
Hi, I'm glad again, we can't continue to reporting positive results.
Revenue for third quarter increased to 22 million sequentially up from $19 8 million and from last year of $19 9 million.
During the quarter, our memory gross doubled sequentially too.
To vote 16000.
Ending with 798500 members I should say about 776000, we reported last year. So we more than recovered a 2022 lawsuits, which were caused by the industry wide post coffee subscriber contraction.
Virtually all of the growth in this quarter is coming from our Derek members.
Our ARPA.
And you're going to grow study has.
And you did over the last five years and shall be further supplemented by our recent launch of that marketplace.
We have rolled out marketplace in September to less than 5% of our members and generates over hundred thousand sales in the first 20 days without virtually any marketing cost.
Hello annualized gross profit per employee improved again during the third quarter to our new all time high of over 650000, Chris.
Chris lifting our to increase efficiencies.
Yeah.
However loss improved to 600000 or three cents per share down from $2 4 million or 11 cents per share and EBITDA increased to $3 9 million for one point and Milan and European glass.
Quarter lost here.
Yeah.
We continue to generate positive free cash flow is the cash on.
On September 30th growing to $11 2 million.
From $10 9 million.
Last quarter.
Now James will cover in the marketplace and some other new marketing initiative, and then that will speak more about financial results James Thank you okay.
So we rolled out a beta version of marketplace in September initially targeting less than 5% of our members and the results have been truly exciting.
Within the first 20 days, we were able to generate over $100000 in sales and all of this was achieved with zero paid marketing costs.
This achievement is testament to the strong connection we have with their members and the appeal of the market places offerings. It also demonstrates the significant potential for growth that lies ahead of us as we expand our offering into 2024.
The launch of Guy in market places a significant step forward for us it's not just the new feature represent strategic expansion of our platform and it allows us to diversify our offerings and support the conscious lifecycle of their members in a more meaningful way.
Whilst also improving obsolete, which is a key metric for us to focus on as we move forward.
Marketplace will include a carefully curated selection of experiences retreats courses and products that resonate with our audience, which will be offered to members at a discount to the market.
To help us create a thriving ecosystem that benefits, both our mendes and Gaia.
A key passion and focus for me is improving our marketing efficiency and I believe there to be a lot of untapped opportunities for us, especially with our direct to consumer marketing campaigns and digital events.
Marketplace will play a critical role in this as it will contribute to free cash flow, which we will use to accelerate outgrowth initiatives as we focus on scaling to 900000 subscribers as quickly as possible, while maintaining positive cash flow.
Now <unk> will talk more on our financial results.
Great. Thank you James.
Revenues for the third quarter were $20 2 million a sequential increase for the third consecutive quarter continuing the return to growth in our member base. During the first three quarters of 2023.
Compared to the year ago quarter revenues grew by 2% at the company recovered from the post Covid subscriber contraction experienced industry wide during 2022.
In the quarter, we continued to invest in and release new content, particularly to support our language expansion efforts.
As a result of these strategic growth investments gross margins were 85, 2% during the third quarter of 2023, and we expect them to remain at this level for the near term as we expand our language offerings and tactically support the growth of the business.
Total member acquisition costs during the quarter were $8 4 million or 41% of revenues aligned to our second quarter costs in the third quarter, we experienced growth in our direct member base, which is a continuation from the first and second quarters.
Selling and operating expenses, excluding marketing and member acquisition costs in the third quarter were $7 9 million or 39% of revenues, which was a <unk> 7 million or 8% improvement from the prior year period.
This decrease is.
Due to cost reductions completed earlier in the year and employee retention tax credits filed during the quarter corporate and G&A expenses in the third quarter were $1 4 million down 29% from the prior year period due to the cost improvements in the first half and the aforementioned payroll tax credit.
During the third quarter of 2023, we recorded a loss of <unk> 6 million or negative three cents per share compared to loss of $2 4 million in the year ago period.
The improvement was primarily driven by expense reductions and the increase in revenues between periods.
EBITDA was $3 9 million or 19% of revenues in the quarter and we generated free cash.
Our deferred revenues for the third quarter were $15 3 million, an increase of <unk> 8 million from the year ago period, we expect to continue to benefit from the inherent negative working capital cycle in our business model as we continue to grow our member base and revenues. In addition, we expect to be in a position to continue generating cash.
Flows from operations in excess of the cash flows we reinvest back into our content library and product enhancements going forward.
Due to our in house production capabilities in absence of contractual commitments tied to our content production, we have significant discretion and the amount and timing of our investments.
This flexibility allows us to adjust our investment levels as needed to withstand a downturn in the macroeconomic environment if necessary.
Through the company's focus on accelerating growth and a return to positive operating margins. We have made tremendous progress over the past few quarters on numerous key areas of improvement for the business with continued disciplined execution and the launch of the Guy and marketplace. We are well positioned to continue growing revenues and to remain cash flow positive.
Going forward.
With that I will hand, it back to you for some closing remarks.
Yeah, we expect that remember gross to further increase in 'twenty to 'twenty four.
This continuing growth of our pool.
For 'twenty 'twenty four we are targeting about 15% gross in revenues, it's about 10% growth in our members.
It was a strong growth of our pool. So it should be helped by our planned price increase for the new members into the second part of next year.
Okay.
We also expect to continue to increase our gross profit per employee benchmark.
And I personally believe that Guy is in the best place since we started that was trillium business.
Our goal is simple to grow fast to 900000 members, while continue to generate a positive free cash flow.
I encourage you to visit IR to God com and download the investor presentation to see our pro forma how come that you can look at 900000 members of annual average.
That means 900000 in the middle of the year.
We would update.
Dave this probably within an hour.
Okay.
Over the next few months I also plan to promote subject to our board approval.
Our C O and CMO James here.
Two C E O position.
And I know James for seven years. The marriage is S. Vod business F. M T V into Guy in 2019.
And S. M. T V had the same mission as Guy here and it grew to over 600000 subscribers without any outside funding solely dependent know James just marketing skills.
Jason would continue to report to me in my role as executive Chairman.
I would focus on creation of Gaia community, which we talked before and that's the main part being a part of our mission statement.
And ER should be the final differentiation from all the other video streaming businesses.
I hope to launch Guy community. After we reach our 900000 annual member average milestone.
So this concludes our remarks, so I would like to open to questions operator.
Yeah.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question comes from Mark Argento with Lake Street Advisors. Please proceed with your question.
Hey, Good afternoon, guys. Just a quick question it looks like your actual sub adds were a lot stronger than what we had been modeling can you just touch on kind of the environment out there from a subscriber acquisition perspective, the cost to acquire Saab.
Arnold's are seeing that success.
Well it.
The environment I think it's obviously better than it was last two year quite a bit it's not fundamentally different in second quarter I think the the doubling our gross is pure internal I think James helped a lot.
They didn't have really CMO, so he's kind of a function of a much more as a CMO C. L O right now.
And.
The cost of acquisition, it's kind of the similar as the second quarter.
Maybe a little cheaper on domestically.
And visa.
We saw a little.
Bombs in places like Latin America and.
Churn kind of bump a little bit because of all the internal mostly internal thinks was crazy Carson stuff, but pretty much for 90% of our business was more positive and I expect as I said that the member.
Additions to increase again in next year from where we are right now we still have definitely some.
Some room and I think that will be.
The main part of existing Humana sure Mark I would also add that you know, we're focusing a lot and my focus and especially with the growth and marketing team is on conversion rate optimization. So card conversion guest of member conversion. Our first 30 day 60 day 90 days. This is a really key focus a thousand now so with.
The improvements in efficiency that we're seeing in CPA costs, which have come down marginally up throughout the year, especially if we compare to the start of the year until till now there is improvements in CPA costs, whether that's because of the macro environment lessons are worse.
Competition or or otherwise, but it's still coming down for us and we're also working on an outside improving that with that conversion rate optimization. So I really seek to see more improvement in that in 2024 and in marketing efficiencies are very core focus of mine for the 24 year as well.
That's helpful. Thank you for that and just.
Pivoting to.
I think you said youre going to take pricing in Q2 of next year.
What do you where do you think you're in in terms of our pricing you know how big of an impact could that have in terms of the our true yeah.
A lot of parties out here.
Well, we're not going to do to Q2, it's going to be proud of the middle of Q3. So are you know closer to September rethinking about $2 40, new members.
And we probably will focus on our months lease to move more people to annual so we probably wouldnt.
Grace annual.
The annual takes right now about 25%.
And but that's kind of the strategy not.
It's also we kind of hope that will help loves her attention because people kind of come in Cleveland coming the same price.
But and also that's why not kind of and I kind of say to really grow revenue 15, I remember stand is because we expect that you know increase price for your members who are probably we took care of Hayden conversion. So we wouldnt grow revenue as fast I mean, the members as fastest revenue so but our goal is obviously to revenue.
As you know the grind to revenues.
I think second to about two years ago was saying, we would be grandfathering or grand mothering, either all how we say it or existing members. So there is a retention play there in that we can promise out existing members. They will stay on their existing monthly price point.
And then by not touching our annual price point, it will create a bigger.
Price difference between the monthly and annual membership, which we hope to skew more conversions upfront or or ongoing up to annual because we see the churn rates on customer cohorts that stay longer than one year in particular longer than two and three years much more beneficial for us as a brand and so we want to.
Skewed it.
Commit more membership term as much as possible.
And Mark this is Matt I think the last part of your question was around the ARPA and so of course all of this along with some of the other offerings that James will be spearheading or around our other offers plus the marketplace. The combination of all of that plus the increase we do anticipate would take our proves up obviously.
Which we can outline and in future meetings with you, but I think that was the last part of your question.
Yeah.
Yeah no that's.
That's super helpful. And then in terms of about the marketplace. There's also obviously a pretty good uptake.
No marketing dollars behind it you.
Thank you.
I'm more encouraged in terms of the opportunity and does that change your timing or aggressiveness at all from your guys perspective.
From outside we plan to be as aggressive as possible on executing on marketplace.
The main focus for us internally at the minute is curating and building out our SKU offering around the three core verticals of retreats or experiences than courses than.
<unk> physical product.
And once we have more of that in place will continue the rollout why that to our membership base and as we get testing data of what office performed best that will inform our marketing and we'll continue to keep expanding that and Eureka has a strong background in e-commerce and and retail products with the previous.
Our version of Gaiam, and and can see a huge potential for this given the community that we have at the moment.
Yeah, we want to be really selective as the products because we kind of it's basically most of that mostly only targets to our members, so which what I would say 90% of revenue will be from our existing members. It's you can buy it if you know the member obviously, but we won promoted outside at least not for now.
And remember so so get a 10% discount so a few common.
By $7000 trip, it's better to become a member.
I didn't get a 10% discount so it's kind of around that but we kind of are going to I'm going to look at it as kind of a beginning of a community. So we went out attract people.
Especially like all kind of items right now would really pushed to launch was we have to.
Seasons of show what is her most of your show correlation engine civilization, which Phil we really talk about crazy time.
And so we basically launched at detour is at Purdue in Egypt, and you know so really quick on pretty high prices those freight that typically a $10000 per trip.
So.
You know, it's very lucrative business overall, and but we would not be very selective so we don't disappoint our customers switched to offering.
I think one final thought there mark from a from an investment community perspective to summarize the marketplace offering it's like a conscious version of Costco and that it's a discount membership model, but also there is in a way of QVC component because we have content that speaks to the offerings as well. So I'd say, that's a quick way to summarize.
To the focus and.
Also a few modeling the way how we kind of look at it and the strips. So we take a you know.
30% of you provide 10% discount so effectively only the 20% is still revenue and the operating income the rest to be treated as outside vendors. So it's going to be a relatively high margin.
Yeah.
Alright very helpful. Good luck to Russell I guys. Thanks.
Thank you. Thank you.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Terry.
Water Tower research. Please proceed with your question.
Yes. Thank you good afternoon, and James' congratulation on the.
On the new position.
Jeff How you explained a little bit about revenue and for the market place.
I was going to ask you, but I think I kind of got it. So is that the 100000 dollar of revenue that you see that's your <unk>.
Yeah, That's a commission on the gross.
Number that mark.
Okay.
No.
No it's a.
John I'll do one it would be basically one tour worse to sale. It was 100000 from that we've reported revenue of about 20.
Oh, Okay, Okay I got it.
Okay.
Great.
You haven't talked about third party channels in Hawaii can you give us that'd be the Colorado He's there.
We're putting some emphasis on the specific one or what's your thought around.
Obviously, the stomach member acquisition seems to be doing really well, but.
Any color on third party channels.
Terry Hi, Thank you for your congratulations pending board approval of course.
I will speak to third party that reports directly to me it has been a flatter compared to our direct membership growth. However, I see.
Seeking to be more aggressive in our expansion with third party keeping it in alignment with our current balance of direct to third party revenue contribution, making sure that it doesn't get too.
Hi that we plan to be growing third party in particular by rolling out new territories in 2024.
In particular without largest third party distributor, which is our partner, which is Amazon Prime. So we have a prime video channel within the Amazon infrastructure.
And we are in the process of renewing our agreement with them to expand the term for a longer period of time.
Or am I, just met with one of the M&A Amazon executives over the weekend to confirm this and where we have already plans for Q2 Slash Q3, sorry Q2 correct.
For Australia, and New Zealand and I'll be meeting with the Australia, New Zealand Rep as well. So this is very much in my court and I'm I'm seeking to expand our international expansion with a third party.
You have is the Amazon, we actually trigger to initiation or are you going to renegotiation because our price increases we plan to do so.
You have to kind of give them notice since signing a new agreement with us to higher price. So that was caused this negotiation was actually initiated by us.
And also when you asked the question about 800000 and sale so.
It was the first 20 days, so we get 100000.
Tourists are actually sold so it creates about 100000 revenues from the first trip from the single tour.
But it took like a month and half to sell it.
Okay.
Great.
We've talked about a pool and we've also talked in previous conversation about the focus on international.
Gross you see a big difference in our pool from your international members versus the U S members.
No there's not I mean short of some Latin America, which we scaling actually down.
Which we kind of play with lowered prices, but didn't really work for us. So it's basically the prices we would charge really much in Europe.
Europe very similar as we would.
Unknown Executive: [inaudible] . .
Charge here so.
It's very it's the DARPA, saying pretty much for right now and I would add that there is there are three drivers for increasing off through next year. One York already mentioned, which is about the planned price increase circa middle of the year. In addition to that what we spoken about as market place with the revenue attribution.
And then third would be an increased focus on our premium Gaia events plus here at $2 99, a year. That's also something that I have my sights set on for expanding in in 2024. So each of those three leavers will be improving author throughout the next year.
The increase or who it was always as a part of our mission and now we actually want to accelerate that because now we kind of get to the place where we can generate positive cash flow.
The newest Lee so the RP will become much bigger focus right now so the revenue would be definitely a focus more than the numbers of members. So is it going forward, it's going to be a focus that's why to harpoon ER. This initiative like increasing new price Gaia sphere, sorry, guys.
Jirka Rysavy: Virtually all the growth in this quarter is coming from our direct members. Our ARPU continued to grow steady as it did over the last five years and it shall be further supplemented by our recent launch of Gaia Marketplace.
Your premium pricing is seven plus.
Jirka Rysavy: We have rolled our Marketplace in September to less than 5% our members and generate over 1,000 sales in first 20 days with a virtual any marketing cost.
Or are the marketplace. So they all you know effectively what do we say that we're going to grow members, 10% of revenue, 15% Youll see that'd be increasing.
<unk> dramatically and we would want to keep doing it.
Great maybe a last question New York are you you mentioned that you would be focused on community can you.
Can you tell me.
What does it mean is it is it focused on the marketplace.
Someone like events or what did you mean, when you said you will focus on guy out community.
If you go to the bottom of our you know guided com, you'll see the automation is so that's pretty much that's community what I'm talking about.
We kind of look at launching it Vod build something about a year ago, but that time, we decided the way I was designed at the.
The communities right now too much split between that might have different events in the world. So it's not a time to launch it severely traction a little bit.
So it's basically we have now you know.
Two thirds of our people are with us more than a year and one third over three years and that's increasing the three year number obviously, increasing every month as a percentage and so we know a lot of what people are watching what are they interested in one of the things what you hear is they would like.
To find.
People like them, you know watching guy in the community. So that's one thing.
It's going to be focused we're going to use all of our venues. What you mentioned is it part of that.
Okay that sounds very interesting great. Okay.
That will be to find out for different differentiation for us if you look in our slides.
In three years you know.
We have something that nobody else and that's what has this world.
It's a niche business and we want to keep it that way in this community will be based on that and in theory, if I had to say one part of that that youre alluding to amongst many things would be some form of a a decentralized town hall in a way where members can get together and forums and like your can mentioned organize a watch parties and me.
Yes.
That sounds very interesting great. Thank you guys.
Thank you. Thank you.
Yes.
We have reached the end of our question and answer session I would now like to turn the floor back over.
Q Mr. It receded for closing comments.
Well. Thank you everyone for joining and we look forward to speaking with you in a very poor to fourth quarter results in March. Thank.
Thank you very much.
Yes.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
[music].
Jirka Rysavy: I know annualized growth profit per employee improved again during the third quarter to our new all-time high of over 650,000 reflecting out the increased efficiencies. Our loss improved to 600,000 or three cents per share down from 2.4 million or 11 cents per share and EBITDA increased to 3.9 million from 1.8 million during the quarter last year. We continue to generate positive free cash flow with the cash on September 30th growing to 11.2 million from 10.9 million and end of the last quarter.
Hum.
[music].
Hum.
[music].
Hum.
Mhm.
Hum.
Hum.
James Colquhoun: Now James will cover the Marketplace and some other new marketing initiative and then that will speak more about financial results. Thank you, Yerka. So we rolled out a beta version of Marketplace in September, initially targeting less than 5% of our members and the results have been truly exciting. Within the first 20 days we were able to generate over $100,000 in sales and all of this was achieved with zero paid marketing costs.
[music] mhm.
James Colquhoun: This achievement is testament to the strong connection we have with our members and the appeal of the Marketplace's offerings. It also demonstrates the significant potential for growth that lies ahead of us as we expand our offering into 2024. The launch of Gaya Marketplace is a significant step forward for us.
James Colquhoun: It's not just the new feature represents strategic expansion of our platform and it allows us to diversify our offerings and support the conscious life cycle of our members in a more meaningful way, while also improving our proof, which is a key metric for us to focus on as we move forward. Marketplace will include a carefully curated selection of experiences, retreats, courses and products that resonate with our audience, which will be offered to members at a discount to the market to help us create a thriving ecosystem that benefits both our members and Gaya.
Mhm.
Yeah.
Hmm.
Hum.
Oh.
[music].
Hum.
James Colquhoun: A key passion and focus for me is improving our marketing efficiency and I believe there to be a lot of untapped opportunities for us, especially with our direct-to-consumer marketing campaigns and digital events. Marketplace will play a critical role in this as it will contribute to free cash flow, which we will use to accelerate our growth initiatives as we focus on scaling to 900,000 subscribers as quickly as possible while maintaining positive cash flow.
Hum.
Yeah.
Yeah.
Ned Preston: Now, Ned will talk more on our financial results. Great. Thank you, James. Revenues for the third quarter were 20.2 million, a sequential increase for the third consecutive quarter, continuing the return to growth and our member base during the first three quarters of 2023. Compared to the year ago quarter, revenues grew by 2%, as the company recovered from the industry wide during 2022. In the quarter, we continue to invest in and release new content, particularly to support our language expansion F, as a result of these strategic growth investments, growth margins were 85.2% during the third quarter of 2023 and we expect them to remain at this level for the near term as we expand our language offerings and tactically support the growth of the business.
Yeah.
Hmm.
Yeah.
Okay.
Ned Preston: Total member acquisition costs during the quarter were 8.4 million or 41% of revenues aligned to our second quarter costs. In the third quarter we experienced growth in our direct member base, which is a continuation from the first and second quarters. Selling and operating expenses, excluding marketing and member acquisitions costs in the third quarter were 7.9 million or 39% of revenues, which was a 0.7 million or 8% improvement from the prior year period.
Hum.
Ned Preston: This decreases due to cost reductions completed earlier in the year and employee retention tax credits filed during the quarter. Corporate and GNA expenses in the third quarter were 1.4 million, down 2.9 million from the prior year period due to the cost improvements in the first half and the aforementioned payroll tax credit. During the third quarter of 2023 we recorded a loss of 0.6 million or negative 3 cents per share compared to loss of 2.4 million in the year ago period.
Yeah.
Ned Preston: The improvement was primarily driven by expense reductions and increase in revenues between periods. Evida was 3.9 million or 19% of revenues in the quarter and we generated free cash. Our deferred revenues for the third quarter were 15.3 million and increase a 0.8 million from the year ago period. We expect to continue to benefit from the inherent negative working capital cycle in our business model as we continue to grow our member base and revenues.
Hum.
Yeah.
Okay.
Ned Preston: In addition, we expect to be in a position to continue generating cash flows from operations and excess of the cash flows we were invest back into our content library and product enhancements going forward. Due to our in-house production capabilities and absence of contractual commitments tied to our content production, we have significant discretion in the amount and timing of our investments. This flexibility allows us to adjust our investment levels as needed to withstand a downturn in the macroeconomic environment if necessary. Through the company's focus on accelerating growth and a return to positive operating margins, we have made tremendous progress over the past few quarters on numerous key areas of improvement for the business.
Okay.
Okay.
Hum.
Hum.
Ned Preston: With continued discipline and execution and the launch of the guy marketplace, we are well positioned to continue growing revenues and to remain cash flow positive going forward.
Yeah.
Hum.
[music] mhm.
Yeah.
Oh, Oh Oh.
[music].
Jirka Rysavy: With that, I will hand it back to Yerka for some closing remarks. We expect our member growth to further increase in 2024 with continuing growth of ARPU. For 2024, we are targeting about 15% growth in revenues. It's about 10% growth in our members. With the strong growth of ARPU, which should be helped by our planned price increase for the new members in the second part of the next year. We also expect to continue to increase our growth profit per employee benchmark. And I personally believe that Gaia is in the best place since we started our streaming business.
Jirka Rysavy: Our goal is now simple, to grow fast to 900,000 members while continuing to generate a positive free cash flow. I encourage you to visit IR.Gaya.com and download investor presentation to see our performer how a company can look at 900,000 members of annual average. That means 900,000 in the middle of the year.
Hum.
[music].
Unknown Executive: We would update this, probably within an hour.
Jirka Rysavy: Over the next few months, I also plan to promote subject to our board approval, our CO and CMO James here, to see EO position. And I know James for seven years, we merged his SVOD business FMTV into Gaia in 2019. And FMTV had the same mission as Gaia and grew to over 600,000 subscribers without any outside funding, solely dependent on James' marketing skills. Jason would continue to report to me in my role as executive chairman.
Jirka Rysavy: I would focus on creation of Gaia community, which we talked before and it's the main part of our mission statement. And should be the final differentiation from all other video streaming businesses. I hope to launch Gaia community after we reach our 900,000 annual member average milestone.
Unknown Executive: So this concludes our remarks.
Unknown Executive: So I would like to open the questions operator. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions.
Mark Argento: Our first question comes from Mark Argento with Lake Street advisors. Please proceed with your question. Good afternoon guys. I just had a quick question. It looks like your actual sub ads were a lot stronger than what we had been modeling. Can you just touch on kind of the environment out there from a subscriber acquisition perspective, the cost of course. And what channels you're seeing that success in. Well, it's the environment. I think it's obviously better than it was last year, quite a bit.
Mark Argento: It's not fundamentally different than second quarter. I think the doubling our gross is pure internal. I think the James up a lot. We didn't have really CMO. So he's kind of functioning much more the CMO than COO right now. And the cost of acquisition. It's kind of the stimulus, the second quarter. Maybe a little cheaper on domestically. And we saw little bombs and places like Latin America and.
James Colquhoun: Turn kind of bump a little bit because of all the internal, mostly internal things with great cars and stuff, but pretty much for 90% of our business was more positive and I expect, as I said, that the member, the additions to increase again in next year from where we are right now, we still have definitely some room and I think there will be the main part of the group, just think you want to. Sure, Mark, I would also add that, you know, we're focusing a lot, my focus and especially with the growth and marketing team is on conversion rate optimization, so card conversion, guest and member conversion, first 30 days, 60 days, 90 days, this is a really key focus of ours now, so with the improvements in efficiency that we're seeing in CPA costs, which have come down marginally throughout the year, especially if we compare to the start of the year until now there is improvements in CPA costs, whether that's because of the macro environment, less competition or otherwise, but it's still coming down for us and we're also working on our side improving that with the conversion rate optimization, so I really seek to see more improvement in that in 2024 and marketing efficiency, a very core focus of mine for the 24 years as well.
James Colquhoun: That's a helpful thank you for that and just pivoting to, I think you said you're going to take pricing in Q2 next year, what do you think in terms of pricing, how big of an impact could that have in terms of the ARP from a lot of part of that year? Well, we're not going to do the Q2, it's going to be probably middle of Q3 somewhere closer to September, we're thinking about $2 for the new members and we probably will focus on a monthly to move more people to annuals, so we probably won't raise annual, annual takes right now about 25% but that's kind of a strategy, it's also we kind of hope that we'll help with our attention because people can't leave and come on the same price, but also that's why when I kind of said we'll grow revenue 15 and member 10 is because we expect that increase price for new members, we'll probably take a hidden conversion so we wouldn't grow revenue as fast, I mean members as fast as revenue so, but our goal is obviously to revenues, you know, to growing to revenues.
James Colquhoun: I think seconds of what you're saying, we would be grandfathering or grandmothering either all how we say it, our existing members, so there is a retention play there in that we can promise our existing members they will stay on their existing monthly price point and then by not touching our annual price point it will create a bigger price difference between the monthly and annual membership which we hope to skew more conversions up front or ongoing up to annual because we see the churn rates on customer cohorts that stay longer than one year in particular longer than two and three years, much more beneficial for us as a brand and so we want to skew it up, to commit more membership term as much as possible. And Mark, this is Ned.
James Colquhoun: I think the last part of your question was around the ARPU. And so, of course, all of this along with some of the other offerings that James will be spearheading around our other offers plus the marketplace. The combination of all of that plus the increase we do anticipate would take our ARPUs up obviously, which we can outline in future meetings with you. But I think that was the last part of your question. Yep, no, that's super helpful.
James Colquhoun: And then in terms of the marketplace business, obviously, pretty good uptake with no marketing dollars behind it. You know, making it more encouraged in terms of the opportunity and does that change, you know, timing or aggressive business at all. From our side, we plan to be as aggressive as possible on executing on marketplace. The main focus for us internally at the minute is curating and building out our FKU offering around the three core verticals of retreats or experiences, then courses, then physical product.
James Colquhoun: And once we have more of that in place, we'll continue the rollout wider to our membership base. And as we get testing data of what offers perform best, that will inform our marketing and we'll continue to keep expanding that. And Yerica has a strong background in e-commerce and retail products with the previous version of Gaiaam and can see a huge potential for this given the community that we have at the moment.
James Colquhoun: Yeah, we want to be really selective as the products because we kind of, it's basically the mostly, mostly only target to our members. So which what I would say 90% of rain will be from our existing members, you can buy, if you know the member, obviously, but we won't promote it outside, at least not for now. And members also get a 10% discount. So if you come and, you know, buy $7,000 trip, it's better to become a member and get a 10% discount.
James Colquhoun: So it's kind of around that, but we kind of going to, I'm going to look at it as kind of beginning of the Gaia community. So we want to attract people especially like our kind of items right now, what we really pushed through launch was we have two seasons of show, what's our most of you show called ancient civilization, which we'll really talk about pretty little of the time. And so we basically launched it, the tour is a pretty little Egypt and, you know, so really quick. On pretty high prices, those right, that typically $8,000 per trip. So, you know, it's very lucrative business overall, but we want to be very selective so we don't disappoint our customers with the offering.
James Colquhoun: And I think one final thought there, Mark, from an investment community perspective, to summarize the marketplace offering. It's like a conscious version of Costco in that it's a discount membership model, but also there is in a way a QVC component, because we have content that speaks to the offerings as well. So it's that's a quick way to summarize the focus. And also if you model it the way how we can look at it and these trips so we take you know 30% we provide 10% discount so effectively only the 20% hits the revenue and the operating income the rest we treat is outside vendors so it's going to be relatively high margin.
Unknown Executive: Very helpful. Good luck to Russell, guys. Thanks. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone.
Terry Fuller: Our next question comes from Terry Fuller, this water tower research. Please proceed with your question. Yes, thank you.
Terry Fuller: Good afternoon and James, congratulations on the on the new position. Jirka, you explained a little bit about revenue and for the marketplace and I was going to ask you but I think I kind of got it so that the $100,000 of revenue that you say that's your share of commission on the gross sale number. Can you get a marketplace tips? No, no, it's the original one of what we'd both basically want to or worse the sale was $100,000 from that we would report revenue about 20.
Terry Fuller: Okay, I got it. Okay, great. I was you haven't talked about third party channels in a while. Can you give us a bit of color? Is there are you putting some emphasis on a specific one or what's your thought around that I obviously the direct member acquisition seems to be doing really well but any color on third party channels.
Jirka Rysavy: Terry, hi, thank you for your congratulations pending board approval. Of course, I will speak to third party that reports directly into me. It has been flatter compared to our direct membership growth. However, I'm seeking to be more aggressive in our expansion with third party, keeping it in alignment with our current balance of direct to third party revenue. Contributions making sure that it doesn't get too high, but we plan to be growing third party in particular by rolling out new territories in 2024.
Jirka Rysavy: In particular, without largest third party distributor, which is or partner, which is Amazon Prime, so we have a prime video channel within the Amazon infrastructure. And we are in the process of renewing our agreement with them to expand the term for a longer period of time. I just met with one of the Amazon executives over the weekend to confirm this and where we have already plans for Q2 flash Q3 sorry Q2 correct for Australia and New Zealand.
Jirka Rysavy: And I'll be meeting with the Australian New Zealand rep as well, so this is very much in my court and I'm seeking to expand our international expansion with third party. Yeah, is the Amazon we actually triggered initiation or regular renegotiations because our price increases. We plan to do so we have to kind of give him notice and signing new agreement with the higher price, so that was caused this negotiation was actually initiated by us.
Jirka Rysavy: And also, you know, when you asked the question about the 100,000 sales, so it was the first 20 days we get 100,000. The tour is actually sold, so it creates about 100,000 revenues from the first trip from the single tour, but it took like months and a half to sell it. Great.
James Colquhoun: We talked about ARPU and we've also talked in previous conversation about the focus on international growth. Is there a big difference in ARPU from your international members versus the U.S, members? No, there's no, I mean short of some lots in America which we scaling actually down, which we kind of play with lower the prices but didn't really work for us. So it's basically the prices we would charge pretty much in Euroverse similar as we would charge here.
James Colquhoun: There are three drivers for increasing ARPU next year. One, Jirka already mentioned which is about the planned price increase, circa middle of the year. In addition to that, what we've spoken about is marketplace with the revenue attribution. And then third would be an increased focus on our premium Gaia events plus tier at 2.99 a year. That's also something that I have my site set on for expanding in 2024. So each of those three levers will be improving ARPU throughout the next year.
James Colquhoun: Yeah, the increase ARPU it was always as a part of our mission and now we actually want to accelerate that because now we kind of get to the place where we can generate positive cash flow continuously. So the ARPU become much bigger focus right now. So the revenue would be definitely our focus more than the numbers of members. So at the going forward, it's going to be our focus. That's why the ARPU and this initiative like increasing the price Gaia sphere.
James Colquhoun: That's our Gaia sphere premium pricing is 7 plus or the marketplace. So they all effectively what we say that we go to grow members 10% or revenue 15% you'll see that we increasing the ARPU dramatically and we would want to keep doing it.
Jirka Rysavy: Great, maybe a last question York try you you mentioned that you will be focused on Gaia community. Can you. Can you tell me what does it mean is it is it focused on the marketplace is it focused on live events or what what did you mean when you said you focus on Gaia community. If you go to the bottom of our you know guided com you'll see the what the mission is so that's pretty much that community what I'm talking about.
Jirka Rysavy: We kind of look at launching it we already built something about a year ago by the time we decided the way I was designed that the community is right now too much split between by the different events in the world. So it's not a time to launch it. So we are in structure a little bit. So it's basically we have now. You know two thirds of our people are with us more than year and one third over three years and that's increasing that the three are number obviously increasing every month is a percentage.
Jirka Rysavy: And so we know a lot with people watching what they interested and one of the things what we hear is they would like to find. People like them, you know, watching Gaia in the community. So it's going to be focused. We're going to use all our venues, what you mentioned as a part of that. Okay, that sounds very interesting. Great. Okay. I think that will be the final for differentiation for us, if you look in other as well, it will become in three years, you know.
Jirka Rysavy: We have something with nobody else, and that's what has this. Well, they're going and it's a niche business and we want to keep it that way, and that's community will be based on that. And, and Siri, if I had to say one part of that that you're considering to amongst many things would be some form of a decentralized town hall in a way where members can get together on forums and like you're convention organized watch parties and meetups. That sounds very interesting. Great.
Unknown Executive: Thank you guys. Thank you.
Unknown Executive: We have reached the end of our question and answer session. I would now like to turn the floor back over to Mr. receiving for closing comments. Thank you everyone for joining and we look forward to speaking with you in a very important court results in March. Thank you very much. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Thank you very much. .