Q4 2023 Gaia Inc Earnings Call
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Greetings and welcome to die of fourth quarter and full year 2023 earnings conference call. At this time, all participants on a listen only mode.
A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Mind you This conference is being recorded.
I would now like to turn the conference over to your host York got rate survey. Thank you you may begin.
Thanks.
Okay.
Hey, just real quick I, just want to make sure do we need any forward bookings this isn't that bad for the CFO.
Forward looking statements that we need to read as we head out here.
If not it's covered in our 8-K.
Our earnings release, but I will make sure at the end if I need to read that we will go ahead and do so with that I'll hand, it over to Erica.
Thanks, Dan and good afternoon, everyone.
So we continue to build and gaiam increasing momentum.
And Oh remember county.
And in a funny chemistry agreed over 800000 benchmark.
And we expect to finish.
First quarter and about 838000.
It's a good milestone towards our 15% revenue growth target for 2024.
The annualized gross profit per employee in the fourth quarter grew to over 650000 up from 535000 and last here.
Yeah.
That growth was the key driver to our $8 4 million or 10% of revenue cash flow improving.
Revenue for the quarter increased to 27, <unk> from $19 6 million in the year ago quarter.
Primarily because the growth of our member base.
Member growth was increasing increasing during the year.
Rose sequentially by additional 16000 in the fourth quarter, ending two 8000 800000 pigs.
<unk> thousand seven.
759000 on December one 2022.
The expected member growth to accelerate.
During 2024.
Gross profit for the quarter increased to $72 7 million from $17 over.
In the fourth quarter of 2022.
Gross margin at 85, 4% was kind of in line with the year.
And the net loss was $2 1 million or nine.
Compared to a net loss of one 4 million or seven since last year in the last quarter.
Because of higher marketing spend and increased amortization.
Operating cash flow increased by $2 1 million and our free cash flow increased spend $1 7 million.
Positive $1 million.
The cash balance as of December 31, two on the screen was seven 8 million they sent on.
In Houston or in line of credit, which is compared to net cash of $2 6 million.
Which was like 11 million, one 6 million of cash, but it's 9 million borrowing on our credit line.
And of the lost here.
Revenue for the full year was $80 4 million compared to 82 million in 2022 at the company was still recovering in front of the boat.
Subscriber from traction, which was experienced by the whole industry. During the second part is trying and trying to.
So why they lost for increased 40 year increased <unk> 2 million to $5 6 million, which because of increased marketing spend amortization, how free cash flow improved as I mentioned about $8 4 million to a positive one Cleveland marine for the year from the loss of seven.
Screaming.
And lost here.
Even with the increased marketing spend to 41% of revenue from 37, 2% of revenue.
The free cash flow was helped.
My elimination, that's about 5 million of annualized expense expenses.
Which was finalized in the beginning of a leader.
And included about 36 head counts God. So previously we had to bring in as a kind of a.
Viola and seeing their frequency board because the work from home lending.
But exist previously.
We expect our member growth to accelerate in 'twenty 'twenty, four as I said and being out or expect to about double our net member additions from 16000, we just reported in the fourth quarter to about 32000.
During the first quarter and now Ned will speak to more about the results.
Hello, Yeah. Thank you you have to have a.
Revenue for the fourth quarter, 2023 increased 6% to $27 million from $19 $6 million in the fourth quarter of 2022.
Primarily this was driven by a glass at the member base member growth during the year growing sequentially by up to an additional 16000 members during the fourth quarter with the member count ending the year at 806000 members up from 759000 on December 31, 2022, we expect member.
To further accelerate with continuing the faces of our food during 2024.
Gross profit for the fourth quarter increased to $17 $7 million down 17 point out $1 million in the fourth quarter of 2022 gross margin was 85, 4% in line with the year.
Net loss was $1 8 million or negative.
Eight cents per share as compared to net loss of.
$1 million.
Negative <unk> <unk> per share in the year ago quarter with higher amortization.
But operating cash flow improved by $2 1 million and free cash flow improved $1 7 million to $1 million.
From <unk>.
Seven negative seven doing safe.
Same quarter last year.
Cash balance as of December 31, 2023 was $7 $8 million with an unused 10 million lie.
Your line of credit compared to net cash of $2 $6 million or $11 6 million of cash with $9 million of borrowing against the line of credit a year ago.
Shifting to the 2023 full year financial results.
Revenue for the year was 84 million as compared to $82 million in 2022 as a company was recovering from the first of its subscriber contraction experienced industry wide. During the latter part of 2022 lots for the year was negative $5 6 million or negative 27 per share as compared to lots of.
$3 6 million or negative 19 cents per share for 2022 with increased marketing spend and amortization, however, operating cash flow improved by $4 $2 million.
For the year free cash flow improved by $8 4 million to $1 1 million.
A negative $7 $3 million, even as we increased marketing 41, 1% of revenue.
Around 30 752 in the prior year.
The free cash flow was helped by the elimination of $5 million in annualized spending finalize it in the beginning of the year, which included 36 head count added previously to offset reduced efficiency because of work from home mandates.
The company decided to restate the consolidated financial statements for 2022, and the first three quarters of 2023, making some presentation changes to be in line with the industry. None of these changes are the restatement impact our revenue or free cash flow and we are already reflecting that in our release.
We expect our member growth to accelerate during 2024 as we are now forecasted to double our net member additions from 16000 in the fourth quarter of 2023 to 32000 in the first quarter of 2020 for finishing the first quarter with about 300, I'm sorry 838000 members.
While continuing to generate positive free cash flow.
Speaker Change: With that I will hand, it over to James Cahill Gajewski deal.
Thank you Dan and thank you, Eric and Hello, everyone. As Jochen mentioned, we have continued our trend on executing.
Cash flow positive growth for the final three consecutive quarters of 2023.
We saw continued improvements in marketing efficiency with some of our lowest customer acquisition costs. Since the beginning of 2021 and continued our execution improving off to on an annualized basis.
Since moving into the role as CEO as of December I extended my initial focus on improving marketing efficiency and the return on cash from our marketing spend.
Key to this success has been the rollout of our direct to pay campaigns. In Q4, we just have to result in improving retention by incentivizing them to skip a trial period and move directly to a paid membership with a focus on our annual plan.
Additionally.
What type of spending.
He has been the continued rollout of our Gaiam marketplace initiative, where members can shop, a curated selection of experiences retreats courses and physical goods with access to exclusive member discounts.
This project is aimed at supporting the punches glad to talk a lot about members, whilst also improving cash flow and increasing the company's gross revenue as we booked to keep them sales at 100% gross margin.
In Q4 will be implemented further project leveraging AI would they be organization from improvements at a product level.
Speaker Change: Building efficiencies and cost savings on a team level Keith It is progressing and AI powered search engine trade now exclusive categorical metadata and transcripts unlocking the power of that fascinates real conscious media library, although the 10000 titles in English Spanish French and German.
Speaker Change: <unk> can now as I've said for years related to that first national interests and quickly uncovered and most relevant films series episodes yoga classes or documentaries.
Speaker Change: We continue to look at further ways, we can capitalize on that switching content library and data as we move forward.
These projects are aimed at continuing our focus on establishing gaiam as the worlds leading player in the consciousness that so many media space and leveraging our capacity to use AI to find more efficient ways to reach our target audience and grow our community.
2023 was also a landmark year for us on the content side, we released over 1500 titles across our four languages and produced five life events.
Speaker Change: Top tier brands in 2023 included our original series releases of handling a bridge to beyond Biohacking, Dave Asbury ancient civilizations season, five and then original documentary called healing vibrations.
Speaker Change: Moving forward for 2024 focus will be to continue to execute on improving our marketing efficiency the rollout of that marketplace initiative.
Speaker Change: <unk> focus on our premium membership tier growing improvements you know if they will always maintain a cash flow positive right.
And I know, it's been sometime since our last announcement and we're looking forward to updating you on our Q1 numbers shortly.
As a quick sneak peek, we've relaunched our premium membership tier with a new rebrand from events across the Gaiam bus and celebrated with its sold out immersion event at our Gaia sphere event center and a new record.
52000 unique we need lifesaving attendees from across the globe and with that I'll pass back to you for the tape out.
Yes, before I close out actually I'd like to let our.
Net.
I had to read the forward looking statements, which we neglected to reach for them in the statement.
Okay I'll go through this quickly it's as I said in the 8-K as well as the earnings release, but forward looking statements in the press release contains forward looking statements within the meaning of the federal Securities laws. All statements other than statements of historical fact are forward looking statements that involve risks and uncertainties and lifted.
Speaker Change: Session, we intend to use the words anticipate believe contemplate continue could estimate expect future hopes intends may might objective ongoing plan potential predict project.
Good strive target well or what.
Similar expressions as they relate to us to identify such forward looking statements forward looking statements include without limitation, the company's plans related to restatement of the financial state and that's our ability to attract new members and retaining existing members our ability to compete effectively including for customers with different modes of infotainment maintenance.
An expansion of device platforms for streaming fluctuation in customer usage of our service fluctuations in quarterly operating results service disruptions product risks general economic conditions future losses loss of key personnel.
Changes brand reputation acquisitions, new initiatives, we undertake security and information systems legal liability for website contact daily of third parties to provide adequate service future Internet related taxes, our founders control of US litigation consumer trends the effects of government regulation and programs the impact.
Public health threats increase, including the coronavirus, COVID-19, pandemic and our response to it and other risks and uncertainties, including in our filings with the U S Securities and Exchange Commission. These statements involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially from those implied.
<unk> by forward looking statements, including the outcome of the companies.
Completion of the qualification and evaluation of the specific impact of the errors identified in the company's financial results and previously issued financial statements, including the possibility of material adjustments there too.
The discovery of additional unanticipated information during the procedures required by completing before the company is able to file its annual report on Form 10-K for the year ended December 31, 2023, and the application of accounting or tax principles and then.
Dissipated manner also additional risk factors set forth in the company's periodic filings with SEC, including but not limited to those risks and uncertainties listed in the section entitled risk factors in the company's annual report and Form 10-K filed with the SEC. We caution you that no forward looking statement as a guarantee of future performance and you.
Should not place undue reliance on these forward looking statements, which reflect our views only as of the date of the press release, we undertake no obligation to update any forward looking information with that I'm going to pass it back to Gary.
Gary: Thank you.
Interesting thing so that you don't have a final thought.
So for the summary.
We started this year with $7 8 million in cash and cash.
$10 million of unused credit line.
And our current view on our full business indicators for 2024, we expect our revenue to grow about 15% as we said in the last call.
Gary: And that is continued growth of our food.
We are also planning to increase our gross profit per employee going forward and continue to deliver positive free cash flow.
And this concludes our remarks and I would like to open for questions. So operator please.
Thank you.
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Our first question comes from Mark Argento with Lake Street Capital markets. Please proceed with your question.
Hey, guys had gone right drew the short straw there.
Hmm.
They get a little bit.
The.
So 15% growth.
Kind of reference ARPA growth.
It's a nice sub growth.
The balance there between them.
Our progress and just walk us through kind of currently.
So.
None: To start we probably are looking you know in the right now we gave you the number for the first quarter.
It's about 10% and we probably going to be sitting on our revenue growth on a per SKU.
None: Our correspondent.
None: Calculate anybody kind of that way.
None: And.
For the pricing that's not yet thank you Barak Hello. Good afternoon. So it's James here with privacy, we plan on creating an increasing in a USD pricing later in the year.
We're also increasing our EU.
And GBP pricing.
By the end of this quarter Q1.
So this will increase the op two additionally will be.
Continuing to maintain a blend about third party second party and direct mandate to maintain a steady up.
None: And growth for the year.
And with the addition of marketplace as well as we continue to scale out of that initiative that will help us to increase cash flow throughout the year and also contribute like we mentioned to this oh. So good that we can keep the foot on the gas with subscriber growth.
Yes, and Mark this is net of class thing to add what 2024, it's going to get us on a more natural path, so as you've modeled and others at modest for US This past year, our member growth and revenue with not a lot right going forward that will be more of the case and then I think.
Your model for 2024 has us growing revenue.
Higher than our actual member growth and we are excited to get back on this more predictive.
Where we will talk about member growth at along with other items like our food and as well as churn and other items.
But but we were upside here for 2020 for the numbers, we provided already out of the gate here for Q1, and we look forward to talking about that in a lot more detail in about five weeks would actually work.
Yes, you're going to have prevalent second part of the year, you're going to have revenue room faster than members because as we mentioned we plan to increase prices somewhere.
Now the second part.
Oh I'm learning here.
With that I expect those kind of decouple Nancy.
Third because we probably we expect problem conversion, but they ran and we only did it once before.
Statistics.
We also kind of back to a regular seasonality, which was kind of messed up Brian can cause it then.
Then so.
Do you see the Hum.
Kind of Fortune first good water.
Probably we don't know obviously.
Second quarter look like it would be definitely.
Did you know increase to the first corner from Florida, and let's see how the price increases.
None: So far Hum.
And the industry a lot of people who raised their pricing. So it's kind of it's there. So you don't expect much.
We also.
Right its only for new people not not for existing owners.
And then.
None: Marketplace.
A little in Q.
None: Yes.
None: Saturday.
Rob.
None: Thoughts on them.
That would be a material.
That small revenue contributor.
24.
Yeah. Thanks, Bob Yeah, we've continued to roll out its still in the beta phase at this stage, we had a fell about Egypt.
Zander with one of our top talent from outside culture and civilization.
As we move into Q2, three and beyond is where we will anticipate a rolling this out in a more serious fashion and we'll have more to report to you on that later in the year.
Juxtapose them out.
But gaiam swaps.
There.
It requires a dollar.
Hmm.
Relaunch with Gaiam Clos.
Yes that will be discussing in more detail on our Q1 call. It just happened in the end.
In the week, we can off ago, essentially it's a rebrand of our advanced crossed here, which is that premium memberships here and it seems to initiatives.
Our premium membership here, along with marketplace and in addition to that our price increase and which will as you said Scott.
Start to see the subscriber growth and <unk> growth consistently as we go throughout the year. So.
Really happy to have these initiatives in place now so that we can keep.
Subscriber growth and off topic was moving upwards.
None: In conjunction with each other.
One last one.
None: Sure.
The cost of acquiring new subscribers.
Locked down.
Basically the court with respect to the buying keywords.
Uh huh.
What's really kind of drive your bill.
We've acquired.
Did you see things firm up.
In the first quarter, we saw our customer acquisition costs on the average for that quarter at one of the lowest levels since the beginning of Q1 of 2021.
A lot of these improvements.
Driven through a number of factors.
Most of it's finding new conversion improvements.
Landing pages and checkout conversion in addition, some of the.
These online events, where we bring select content in front of the paywall and provide our leads our prospects with an experience of gaiam before inviting them into a membership which is the acquisition cost.
Additionally, and as.
As we implemented some of these campaigns, it's helped with retention as well because we've invited mandates into.
Paying for a membership upfront either monthly or incentivize the annual plan.
And this has been really positive for us as a company and we're seeing these improvements continue to roll through into Q1, which will be a.
We reported on in more detail shortly.
None: Great appreciate the color thanks, guys.
Thank you thanks Mark.
Our next question comes from theory Butler with water Tower Research. Please proceed with your question.
Yes.
<unk>, Yeah, I think you've covered most of the Mr protection, but.
Yeah.
38000.
The improvement in memberships tool.
This quarter.
Is there something new.
And then I know you talked about acquisitions have been a little more.
None: Wondering if you can give us a bit more color maybe on what you're talking about.
I'll start and see if there's further answers on this side I would say first and foremost continuing improvements in marketing efficiency.
It seems to have moved from the board to CLO and then CFO.
C C.
None: In December you know one of my key focuses has been on how can we improve on the efficiency of acquisition populated about thoughtfulness.
Just by really dialing in on understanding our market segment in a deeper way and targeting our message to our sort of core avatars plus some fine tuning some of the work that you work with your previous to my.
Mike coming on board, where he was focusing on how we are.
Yeah.
Focusing our marketing acquisition on our highest retention segments as well, which is try to stabilize the business.
None: Over time, Gary we're seeing PS.
None: It's come together, we're getting more and more data as we go ahead Sir.
It really started to take though and I'm happy to see that flip back to growth in a meaningful way.
Okay.
It's definitely the lowering the cost but it was actually my first time big expectation.
Good morning, James to come to this position because marketing.
As we emerge as a company and as you kind of size.
He didn't motivated we announced capital and that kind of like that so you see some of the first impact you know I think the games this impact on marketing right.
It's a lot of the work on accounting marketing and learn from them.
Our printing and over the last you know second part of the year to prep things. So it can be more like a fine tune so you're already on recycling.
Fourth quarter third quarter, we started to grow again.
But we like the idea of keep accelerating and getting it out because I think we have.
Such a so so much potential so I'm glad.
You know it seems doing your job.
Did you say that you are using live event two to attract new members.
How does that work do you invite them to attend and then and then that would lead them.
You signed them up.
Okay.
So one of the strategies carried that.
We implemented last year. It was like I mentioned, putting some content in front of the paywall. So that people are leads and prospects can experience some of the content inside of Gaiam before inviting them into a membership and this has been very effective for us in terms of reducing acquisition costs.
Encouraging people directly into an annual membership, which boosts our retention because clearly for most businesses in this space and the subscription industry zero to 90 days. If it is you typically your largest churn events. So to leapfrog that if there is a huge incentive.
You are referring to the recent if anybody had any merit that sold out we did open that up for a limited time livestream attendees.
And as I mentioned, we had.
None: 2000 unique attendees and it's great to see an initiative that was launched by Europe in 2019 with the guys here events center that we're able to start really leveraging that technology to reach more people and open up that top of funnel and ultimately we'll be able to really target. These people and that's a high tech will further.
It drives our acquisition costs down and scale our membership as we continue to move forward.
I mean 2000 unique attendees for one event.
A life event.
Pretty amazing.
Yeah, we're very happy with the result.
Yeah.
So you said you would give us some more insights on Gaiam plus when you report the first quarter.
You bet.
Did I understand that Paul because I had a bunch of questions about that.
That would be when we do Q1, and just to let you know where they suddenly happened within the last few weeks of the first quarter. So it will be the earnings.
About of a looming into that premium tier.
And to continue scaling that throughout the year, a low side, our marketplace initiatives. So I'm grateful that a lot of the groundwork is done we can focus on execution as we move throughout the year.
Are there any metrics about gaiam marketplace that you can share with us maybe the number number of offering.
Platform.
You're open to every single one of your members are not quite yet.
Can you give us some color there.
So we're still in a beta on the marketplace I'll be providing some more data that on our Q1 call and.
None: Satisfy the testing we've been doing continues to create great result, sandwiches staking out rollout to Apple membership as we continue to solidify the offering so I'll, let you know more than that on the coupons.
Okay, and then maybe a quick last question for Ned.
Presentation changes is there can you can quickly give us.
None: Hum.
As to what those changes have been.
None: <unk>.
Yeah, No I mean, as you know I've been onboard now for since the end of June and that's about two.
Well over 100 investors and a lot of people have asked me the same thing as I have said it.
It's hard to track Gaiam against <unk>.
So more people in your industry, and so really and.
Closing out my first fiscal year as well as the fact that we brought on new auditors, who transitioned to new hires in Q4.
Previous address leaving the public space.
None: We went through and looked at all of our financial statements and it was really an opportunity to align with industry standards.
And so really what we.
None: Shared in the 8-K.
As I said earlier, none of the changes.
Restatements impact our revenue or free cash flow and we are already reflecting that in this release, but what I'm really happy with is now as I talk to.
None: Existing and potential investors will be speaking the same language.
None: Around common factors update there.
Great. Thank you for answering my questions.
None: Thank you.
We have reached the end of the question I answered Stephen I'd now like to turn the call back over to management for closing comments.
Well. Thank you everyone for joining and we look forward to speaking with you. Many of you reported a first quarter results and having me. Thank you very much.
This concludes today's conference you may disconnect. Your lines at this time every thank you for your participation.