Q2 2024 Gaia Inc Earnings Call
Speaker Change: Good afternoon and welcome to Gaia's second quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.
Operator: All At this time, all participants are in a listen. Joining us today from Gaia are Jirka, Rysavy, Thierry Wuilloud, Ned Preston, James Colquhoun, Vadim Merkulov, Ned Preston, James Colquhoun, Vadim Merkulov, Thierry Wuilloud, Ned Preston, Executive Chairman, James Colquhoun, CEO, and Ned Preston, CFO. After the speaker's presentation, there will be a question and answer session.
Speaker Change: Joining us today from Gaia are Jirka Rysavy,
Speaker Change: Executive Chairman, James Colquhoun, CEO , and Ned Preston, CFO . After the speaker's presentation, there will be a question and answer session.
Operator: Before we begin, Gaia's management team would like to remind everyone that management's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions, including, but not limited to, statements of expectations, future events, or future financial performance. These statements do not guarantee future performance, and, therefore, undue reliance should not be placed upon them. Although we believe these expectations are reasonable, Gaia management undertakes no obligation to revise any statements to reflect changes that occur after this call.
Operator: Actual events or results could differ materially. These statements are based on current expectations of the company's management and involve inherent risks and uncertainty. Including those identified in the risk factor section of Gaia's latest annual report on Form 10-K filed with the FBI. All non-GAAP financial measures referenced in today's call are reconciled in the company's earnings press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the time and date of this broadcast, August 5, 2024.
Speaker Change: Before we begin, Gaia's management team would like to remind everyone that management's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions, including, but not limited to, statements of expectations,
Speaker Change: Future Events, or Future Financial Performance.
Speaker Change: These statements do not guarantee future performance and therefore undue reliance should not be placed upon them.
Speaker Change: Although we believe these expectations are reasonable, Gaia Management undertakes no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially.
Speaker Change: These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factor section of Gaia's latest annual report on Form 10-K filed with the SEC.
Speaker Change: All non-GAAP financial measures referenced in today's call are reconciled in the company's earnings press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the time and date of this broadcast, August 5, 2024.
Operator: Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on Gaia's Investors Relations website at ir.gaia.com. I will now turn the call over to Gaia Executive Chairman, Jirka Rysavy. Please proceed.
Speaker Change: Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on Gaia Investors Relations website at ir.gaia.com. I will now turn the call over to Gaia Executive Chairman, Jirka Rysavy. Please proceed with your call.
Jirka Rysavy: Good afternoon, everyone. So for the quarter, we continue to build on our increasing momentum. During the second quarter, which is actually our slowest season, we grew revenue at the same rate as we did in the first and by 11% to $22.1 million. We expect revenue growth to be similar during the third quarter and then to increase to about 15% in the fourth quarter. The member count during the quarter grew by 10% to 850,000, up from 774,000 in the year-ago quarter.
Jirka Rysavy: Good afternoon, everyone.
Jirka Rysavy: So for the quarter we continue to build in our increasing momentum.
Speaker Change: During the second quarter, which is actually our seasonally slowest, we grew revenue at the same rate as we did in first and by 11% to $22.1 million.
Jirka Rysavy: We expect revenue growth to be similar during the third quarter and then to increase to about 15% in the fourth quarter.
Jirka Rysavy: The member count during the quarter grew by 10% to 850,000 members, up from 774,000 in the year-ago quarter.
Jirka Rysavy: Including some of the non-recurring expenses we have in a quarter, our loss was similar to last year in nine cents per share. Free cash flow was $700,000 for the quarter and $1.6 million for the last six months, which is a $2 million improvement on the top of the $8.4 million improvement we delivered during last year. In 2016, Gaia invested 10 million, and we recently raised 12 million from outside investors for our subsidiary Igniton, with Gaia still retaining 71% of equity.
Jirka Rysavy: including some of the non-recurring expenses we have in a quarter. Our loss was similar as the last year in nine cents per share.
Jirka Rysavy: Free cash flow was 700,000 for the quarter and 1.6 million for last six months which is 2 million improvement on the top of 8.4 million improvement we delivered during last year.
Speaker Change: In 2016, Gaia invested 10 million and we recently raised 12 million from outside investor for our subsidiary Igniton, with Gaia still retaining 71% of equity.
Jirka Rysavy: Igniton used 10 million of cash raised to acquire the exclusive worldwide license for Igniton Health Technology. Technology uses concentrated quasiparticles transmitted by the sun to improve cognition, memory, and longevity. Technology can be delivered by various means, from embedded food supplements to controller release from coded microchips, like, for example, from Gaia-connected TV devices. And James will now speak more about the business advantage.
Speaker Change: Igniton used 10 million of cash raised to acquire exclusive worldwide license for Igniton health technology.
Speaker Change: This technology uses concentrated quasi-particle transmitted by the sun to improve cognition, memory, and longevity.
Speaker Change: Technology can be delivered by various means, from embedded food supplements to controller release from coded microchips, like for example from Gaia connected TV device.
James Colquhoun: Hello everyone, and thank you, Jirka. Our Q2 results reflect our ongoing commitment to delivering transformative content and growing our community. During the second quarter, traditionally our slowest, we achieved an 11% increase in revenue and a 10% growth in membership year over year, whilst also marking our fifth consecutive quarter of positive free cash flow. We have also implemented a price increase for new members, starting in July, which we expect to positively impact our revenue by the end of the year.
Speaker Change: And James will now speak more about the business advance.
James Colquhoun: Hello everyone and thank you Jirka. Our Q2 results reflect our ongoing commitment to delivering transformative content and growing our community.
James Colquhoun: During the second quarter, traditionally our slowest, we achieved an 11% increase in revenue and a 10% growth in membership year-over-year, whilst also marking our fifth consecutive quarter of positive free cash flow.
James Colquhoun: We have also implemented a price increase for new members, starting in July , which we expect to positively impact our revenue by the end of the year.
James Colquhoun: The timing of this increase was moved from Q2 to Q3 to strategically align with our third-party partners, ensuring minimal disruption to our members. Traditionally, we have grandfathered existing members on old pricing, however, we are currently testing a price increase for all new members in Great British Power. Should this test be successful, we will roll out price increases for all members from Q4 onwards, which will be the first time we have done this in the history of the company.
James Colquhoun: The timing of this increase was moved from Q2 to Q3 to strategically align with our third party partners ensuring minimal disruption to our members.
James Colquhoun: Traditionally we have grandfathered existing members on old pricing, however we are currently testing a price increase for all new members in Great British Pounds.
James Colquhoun: Should this test be successful, we would roll out price increases for all members from Q4 onwards, which will be the first time we have done this in the history of the company.
James Colquhoun: Additionally, as of today, we are excited to officially announce the public launch of Gaia Marketplace to our entire member base and community. This initiative not only strengthens our community engagement but also introduces an alternative revenue stream to the Gaia business. Gaia Marketplace offers transformative tours and experiences for Gaia members to connect with like-minded communities from across the globe. From exploring ancient civilizations in Egypt, delving into transformative healing practices in Costa Rica, and awakening one's highest potential in curated retreats with leading teachers from Gaia's platform.
James Colquhoun: Additionally, as of today, we are excited to officially announce the public launch of Gaia Marketplace to our entire member base and community.
James Colquhoun: This initiative not only strengthens our community engagement, but also introduces an alternative revenue stream to the Gaia business.
James Colquhoun: Gaia Marketplace offers transformative tours and experiences for Gaia members to connect with like-minded community from across the globe.
James Colquhoun: From exploring ancient civilizations in Egypt, delving into transformative healing practices in Costa Rica and awakening one's highest potential and curated retreats with leading teachers from Gaia's platform.
James Colquhoun: Members will also have access to powerful courses, training programs, events, workshops, and conscious products chosen and backed by research for exceptional quality and impact. Gaia Marketplace underscores the company's continued commitment to creating a global conscious community, and you can find out more about this initiative at marketplace.gaia.com. Looking forward through the end of the year, we will continue to execute on increasing the number of members on our new higher pricing, expanding the rollout of our Marketplace Initiative. Scaling our member growth in our premium tier and overall making improvements on free cash flow generation and increases in annualized ARPU. Our CFO, Ned Preston, will now provide more detailed financial information.
James Colquhoun: Members will also have access to powerful courses, training programs, events, workshops and conscious products chosen and backed by research for exceptional quality and impact.
James Colquhoun: Gaia Marketplace underscores the company's continued commitment to creating a global conscious community and you can find out more about this initiative at marketplace.gaia.com
Speaker Change: Looking forward through the end of the year, we will continue to execute on increasing the number of members on our new higher pricing.
Speaker Change: expanding the rollout of our marketplace initiative, scaling our member growth in our premium tier and overall making improvements on free cash flow generation and increases in annualized ARPU.
Speaker Change: Our CFO , Ned Preston, will now provide more detailed financial insights.
Ned Preston: Thank you, James. Turning now to our financial results for the second quarter ended June 30th, 2024. Revenues for the second quarter grew $2.2 million, or 11%, to $22.1 million from $19.8 million in the prior year-ago period. This also marked our fourth sequential period of year-over-year top-line growth. Member Account; The member count increased 10% to 850,000 as of June 30, 2024, up from 774,000 members as of June 30, 2023.
Ned Preston: Thank you, James.
Ned Preston: Turning now to our financial results for the second quarter into June 30th, 2024.
Ned Preston: Gross profit in the second quarter increased to $18.7 million, up from $17 million in the year-ago quarter. Including non-recurring expenses, the net loss was negative 2.1 million, or negative 9 cents per share, which is the same as a year ago in the second quarter. Operating cash flows for the first six months finished at $3.9 million, representing a $2.6 million improvement from the first six months of 2023 and continuing the momentum we've delivered in the prior four quarters.
Ned Preston: Revenues for the second quarter grew 2.2 million or 11% to 22.1 million from 19.8 million in the prior year-ago period. This also marked our fourth sequential period of year-over-year top-line growth.
Speaker Change: Member count increased 10% to 850,000 as of June 30th, 2024, up from 774,000 members as of June 30th, 2023.
Speaker Change: Gross profit in the second quarter increased to $18.7 million, up from $17 million in the year-ago quarter. Including non-recurring expenses, net loss was $-2.1 million, or $0.09 per share, which is the same as the year-ago quarter.
Speaker Change: Operating cash flows for the first six months finished at $3.9 million, representing a $2.6 million improvement from the first six months of 2023 and continues the momentum we've been we've delivered in the prior four quarters.
Ned Preston: Free cash flow for the second quarter was $700,000, up from $200,000 in the year-ago period. The second quarter of 2024 was our fifth consecutive quarter of positive free cash flow. In the last six months, both revenue and member growth were stable at over 10%, with an improvement in free cash flow of $2 million on top of the $8.4 million improvement delivered during 2020-21. As of June 30, 2024, our cash balance was $5.5 million, with an unused $10 million line of credit.
Speaker Change: Free cash flow for the second quarter was $700,000, up from $200,000 in the year-ago period. The second quarter of 2024 was our fifth consecutive quarter of positive free cash flow.
Speaker Change: In the last six months, both revenue and member growth were stable at over 10%, with an improvement in free cash flow of $2 million on top of the $8.4 million improvement delivered during 2023.
Speaker Change: As of June 30, 2024, our cash balance was $5.5 million.
Jirka Rysavy: That completes my summary. I'd like now to turn the call back over to Jirka for his closing comments. Jirka?
Speaker Change: with an unused $10 million line of credit.
Speaker Change: That completes my summary. I'd like now to turn the call back over to Jirka for his closing comments.
Speaker Change: Jirka?
Jirka Rysavy: Yeah, so for the summary, we expect increasing annual revenue growth rate.
Jirka Rysavy: This continuing growth of ARPU and increasing gross profit per employee and continued generated of positive free cash flow. And this concludes our remarks and I would like to open the call for questions. Operator, please.
Jirka Rysavy: Yeah, so for the summary, we expect an increasing annual revenue growth rate, continuing growth of ARPU, and increasing gross profit per employee and continued generation of positive free cash flow. And this concludes our remarks, and I would like to open the call for questions. Operator, please.
Operator: We will now open the line for questions from the company's publishing analysts. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 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 key. One moment, please, while we pull for questions. Our first question comes from Mark Argento on Lake Street. Please proceed with your question.
Operator: Thank you.
Speaker Change: We'll now open the line for questions from the company's publishing analysts.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: The confirmation toll indicates that your line is in the question queue.
Speaker Change: You may press star 2 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.
Speaker Change: One moment, please, while we poll for questions.
Speaker Change: Our first question comes from Mark Argento with Lake Street. Please proceed with your question.
Mark Argento: Hey guys, a few different questions here. Maybe James will start off with... price increase? Could you just walk us through kind of what your plan was previously, and then the new plan sounds like you're shifting the taking price a little bit to align with the subscriber with some of your partners. Could you just walk us through that process, and then the actual price increases? I know you talked about something about Great Britain and the British pound being denominated, but just kind of walk us through that again, that would be helpful.
Mark Argento: Hey guys, a few different questions here. Maybe James will start off with...
Mark Argento: you know that process and then the actual price increases. I know you talked about something about you know the Great Britain, the British pound denominated but just kind of walk us through that again that would be helpful. Unknown Speaker
James Colquhoun: Sure Mark, so first of all, we increased our pricing in GBP and EUR in Q2, and we had intended to increase prices for new members, that is, and we had intended to increase prices for new members in USD and the rest of all currencies in Q2 also. However, that was pushed until the start of Q3 just in terms of lining up price increases with our third-party partners, some of them, like our biggest partner Amazon, were not able to With Great British pounds, we are testing for the first time ever increasing the price for all existing members.
James Colquhoun: Sure, Mark. So, first of all, we increased our pricing in GBP and EUR.
James Colquhoun: Q2 and we had intended to increase price for new members that is and we had intended to increase price for new members in USD and rest of all currencies in Q2 also however
Speaker Change: That was pushed until the start of Q3, just in terms of lining up price increases with our third party partners. You know, some of them, like our biggest partner, Amazon, was not able to increase until Q3.
Speaker Change: With Great British Pounds, we are testing for the first time ever increasing the price for all existing members. As a company, we have traditionally grandfathered members on existing legacy pricing, but we're currently testing an increase for all members in Great British Pounds.
James Colquhoun: As a company, we have traditionally grandfathered members on existing legacy pricing, but we're currently testing an increase for all members in Great British Pounds. We're anticipating that this increase will be successful and that we make a margin on the delta from the increase in relation to any losses. If that is the case, then we would anticipate considering increasing the amount for all members in the Q4 period.
Speaker Change: We're anticipating that this increase will be successful and that we make a margin on the delta from the increase in relation to any losses.
Speaker Change: If that is the case, then we would anticipate considering increasing for all members in the Q4 period, so hope for more information on that as the year goes on.
James Colquhoun: And do you anticipate a similar outcome?
Speaker Change: Do you anticipate a similar cadence in the U.S. or just focus right now in terms of the British pound?
James Colquhoun: So after we test the Great British Pound impact on member losses, then we'll anticipate rolling out to USD price increases and other rest of world currencies as well in remaining countries.
Speaker Change: So after we test the Great British Pound impact on member losses, then we'll anticipate rolling out to USD price increases and other rest of world currencies as well in remaining countries.
James Colquhoun: I was kind of targeting about $2 in the US. We actually did it more in the UK, probably three plus right because of the difference in currency, so we try to catch it up to the dollar, so it's a higher increase in the UK than we would do in the US, but so we were targeting about $2 in the US.
Speaker Change: I was kind of targeting about $2 in the US. We actually, it was more in the UK, probably
Speaker Change: 3 plus right because the difference in currency so we try to catch it up to the dollar So it's higher increase in the UK than we would do in the US, but so we targeting about $2 in the US
James Colquhoun: So is that roughly kind of a 20% blended average, or how do you guys think about that? Yeah, I mean the...
Speaker Change: So is that roughly at kind of a 20% you know blended average or how do you guys think about that?
James Colquhoun: Yeah, I mean, the $2 is about 17 and a half. But you know, if you kind of take this, some third parties depend on the currency that
James Colquhoun: Great. And then just pivoting quickly to the marketplace. I know it's early, and you just got to kind of get up and run it. But you know, what, you know, what are your expectations in terms of what that business is? Does it incrementally generate meaningful revenue this year? Is this your more testing year? Think about adding, you know, incremental revenues meaningfully next year.
Speaker Change: Great, and then just pivoting quickly to marketplace, I know it's early and you just got it kind of up and running, but you know what, you know, what are your expectations in terms of
Speaker Change: And what is that business? Does it incrementally generate meaningful revenue this year? Is this year more testing year? Think about adding, you know, incremental revenues meaningfully next year? What should we kind of expect to see in terms of...
James Colquhoun: Sure. So we've been primarily testing Marketplace and beta up until today. So today there was a release that went out prior to our earnings release announcing the rollout of Marketplace to our entire member base. Based on our testing with our beta groups, we're optimistic about the revenue opportunity contributed by Marketplace. We do see that growing sequentially over time, typically because of how the revenue is attributed. So we anticipate most of the revenue to come from retreats and experiences.
Speaker Change: Sure, so we've been primarily testing Marketplace and beta up until today. So today there was a release that went out prior to our earnings release announcing the rollout of Marketplace to our entire member base.
Speaker Change: Based on our testing to our beta groups, we're optimistic about, you know, the revenue opportunity contributed from marketplace.
Speaker Change: We do see that growing sequentially over time, typically because of how the revenue is attributed. So we anticipate most of the revenue to come from, you know, retreats and experiences. And so, you know, if we take sales for a retreat now in Q1, we'll be building up that deferred revenue in marketplace.
James Colquhoun: And so if we take sales for a retreat now in Q1, we'll be building up that deferred revenue in Marketplace. So much of the quote-unquote sales that we take now, for instance, in Q3 and Q4, a majority of that would also be deferred revenue, which would hit in Q1, Q2. So we see a stacking effect of that throughout the year, and alongside price increases, which like Jirka had hinted at in his script, we see our growth rate increasing from double digits currently to sort of mid-teens in Q4. And we anticipate that Marketplace will contribute to that mid-teens growth as we go into 2025 alongside price increase attribution as well.
Speaker Change: So much of the quote-unquote sales that we take now, for instance in Q3 and Q4, a majority of that would also be deferred revenue, which would hit in Q1, Q2. So we see a stacking effect.
Speaker Change: of that throughout the year.
Speaker Change: and alongside price increase, you know, where like Jirka had hinted at in his script.
Speaker Change: We see our growth rate increasing from double digits currently to sort of mid-teens in Q4, and we anticipate that Marketplace will contribute to that mid-teens growth as we go into 2025, alongside the price increase attribution as well.
Jirka Rysavy: You should look at the marketplace as a part of the community. Our goal with Gaia is to ultimately be a conscious community worldwide. And we plan to launch the actual community by the end of the next year, and so the marketplace is kind of part of that. We spend no marketing, no basically separate marketing expenses. It's basically only for our members. So there's, you know, kind of email and being on the side.
Speaker Change: You should look at the marketplace as a part of the community. Our goal with Gaia is to ultimately be a conscious community worldwide.
Speaker Change: and we would plan to launch actually the actual community kind of by end of the next year.
Speaker Change: And so Marketplace is kind of part of that. We spend no marketing, no basically separate marketing expenses. It's basically only to our members. So there's, you know, kind of email and being on site.
Jirka Rysavy: So it's a pure increase to ARPU. It should break even pretty quickly. It's not breaking even now, so it contributed to some of the losses this quarter will probably be in a third because we have already staffed and we don't have the revenue yet. But that will grow pretty quickly because we just use about four people. So when I kind of look at it, I look at it as the beginning of the community, so a global community of like-minded people, that's how we look at it.
Speaker Change: So, it's pure increase to ARPU, it should break even pretty quickly, it's not breaking even now, so contributed to some of the losses this quarter, probably be in the third because we already staffed and we don't have the revenue yet.
Speaker Change: But that will get pretty quickly because we just used about four people.
Speaker Change: So, when I kind of look at it, look at it as beginning of the community, so global community of like-minded people, that's how we look at it.
Mark Argento: Well, that's one for me. You mentioned this ignition. I think I'm pronouncing that right, that you guys have invested some money and raised some additional capital. You know, is this a product at this point? Is it that you, you know, are going to be able to commercialize this? Maybe talk through a little bit of your code the concept here, what it is, and how over time you think you can monetize it
Speaker Change: Well, that's one for me. You've mentioned this igniton, I think I'm pronouncing that right.
Speaker Change: that you, uh, you guys have invested some money in, raised some additional capital. Um, you know, is this a product at this point? Is it that you, you know,
Speaker Change: I'm going to be able to commercialize this, maybe talk through a little bit of the concept here, what it is.
Jirka Rysavy: We would assume that we'll get started monetizing next year. It's a technology, as I mentioned, kind of, concentrate and stabilize this subatomic particle from the sun, which was known to ancients, but it was never used that way. So we right now embedded in food supplements, which have been tested over the last two years. And typically, you know, the results of the studies have been actually published in peer-reviewed medical journals, and thus improve memory 80 to 100% within 30 days.
Speaker Change: You know how over time you think you can monetize it
Speaker Change: We would assume that we'll get started monetizing next year.
Speaker Change: It's a...
Speaker Change: It's a technology, as I mentioned, kind of
Speaker Change: concentrate and stabilize it this subatomic particle from the Sun which has known to ancients but it was never used that way so we right now embed it in this food supplements which was tested over last two years
Speaker Change: And typically, you know, the results of the studies, they were actually published in peer-reviewed medical journals.
Speaker Change: and thus improve the memory 80 to 100% within 30 days. So it's very significant, a lot of interest. We're not monetizing it yet. But ultimately, the idea with Gaia that we can release.
Jirka Rysavy: So it's very significant, and there is a lot of interest. We're not monetizing it yet. But ultimately, the idea with Gaia that we can release some kind of device, connected TV device, and we can deliver it through the increase in a coded microchip using Gaia Broadcast, and so it's we, you know, it's obviously a few years off for that part, but it was always very promising; the results are stunning for people who get a sample, as we did with our employees, and so also improving, you know
Speaker Change: Some kind of device, connected TV device, and we can deliver it through the increase on coded microchips.
Speaker Change: using Gaia Broadcast.
Speaker Change: And so it's, you know, it's obviously a few years off for that part but it was always very promising. The results are stunning. People who get a sample as we did with our employees.
Speaker Change: and so also improve, you know, brain capacity, cognition. So it's very promising, but it's early, but that's why we kind of decided to raise some outside money, so.
Jirka Rysavy: So it's very promising, but it's early. But that's why we kind of decided to raise some outside money so it doesn't chew on Gaia's additional free cash flow because we pretty much committed to this free cash flow with Gaia.
Speaker Change: doesn't churn Gaia additional free cash flow.
James Colquhoun: I would also just add to that, Jirka and Mark, that these two use cases that Jirka suggested for the embedded food supplements and the microchip are just two potentials for the technology. So it's very exciting that we have this announcement for this quarter.
Speaker Change: Because we pretty much committed to this free cash flow at Gaia.
Speaker Change: I would also just add to that, Jirka and Mark, that these two use cases that Jirka suggested on the embedded food supplement and the microchip are just two potentials for the technology. So it's very exciting that we have this announcement for this quarter.
Speaker Change: We probably also, as this product will launch in the form of supplements, it will be, you know, launched, one of the channels will be in Gaia Marketplace.
Jirka Rysavy: We will probably also, as this product will launch in the form of supplements, it will be, you know, launched; one of the channels will be Gaia Market.
Mark Argento: Right. Appreciate the color, guys. I'll hop back into you.
Speaker Change: Right, appreciate the color guys. I'll hop back in to you.
Thierry Wuilloud: Our next question comes from Thierry Wuilloud with Water Tower Research. Please proceed with your question.
Speaker Change: Our next question comes from Thierry Wuilloud with Water Tower Research. Please proceed with your question.
Thierry Wuilloud: Yes, good afternoon. Mark covered quite a few spots there. But maybe on the marketplace, is it going to be a challenge to scale it up? Or how do you see that? How do you see that working? I mean, I'm looking at maybe trips to Egypt or offering of that kind. Can you really offer that to the whole membership base, which is obviously very large at this point?
Speaker Change: Yes, good afternoon. Mark covered quite a few spots there, but maybe on Marketplace.
Kerry Ulab: Is it going to be a challenge to scale it up, or how do you see that working? I mean, I'm looking at maybe trips to Egypt or offering of that kind.
Speaker Change: Can you can you really offer that to the whole membership base, which is?
James Colquhoun: Hello Thierry, good afternoon. Thank you for your question. So with marketplace, you know, we anticipate building revenue slowly over time. And like I'd mentioned in my previous answer, a lot of the sales, quote unquote, that we might be taking now would be deferred into future quarters as the way we book it when the retreat happens or this tour happens. So this is something we'll be growing over time and testing into. And now our beta tests with small segments of our member base were very promising. And we're excited about the opportunity of this, in particular, in terms of how it's going to help us move towards this sort of mid-teen growth in 2025.
Speaker Change: which is obviously very large at this point.
Speaker Change: Hello Thierry, good afternoon, thank you for your question. So with Marketplace, you know, we anticipate building revenue slowly over time and like I'd mentioned in my previous answer a lot of the sales quote-unquote that we might be taking now would be deferred into future quarters as the way we book it when the retreat happens or this tour happens.
Speaker Change: So,
Speaker Change: Jirka Rysavy, Jirka Rysavy, James Colquhoun
Speaker Change: and we're excited about the, you know, the opportunity of this in particular in terms of how it's going to help us, you know, move towards these sort of mid-teen growth in 2025.
James Colquhoun: With regard to the tours you mentioned Egypt, this applies to a segment of our audience in particular that is interested in one of our tentpole series, Ancient Civilizations. We have also now on the Marketplace site a varied array of retreats, tours, experiences, courses, training programs, and live events that now cater to many different segments of our member base and different content and shows that our members have grown to love. So you'll see that we have different experiences and offerings to cater to all these member subsets.
Speaker Change: With regards to the tours you mentioned Egypt this applies to us You know a segment of our audience in particular that is interested in one of our tentpole series ancient civilizations
Speaker Change: But we have also now, you know, on the marketplace side, a varied array of, you know, retreats, tours, experiences, courses, training programs, live events.
Speaker Change: that now cater to many different segments of our member base and different content and shows that our members have grown to love. So you'll see that we have different experiences and offerings to cater to all these member subsets. And, you know, we anticipate that given our
James Colquhoun: We anticipate that given our Capacity to be able to target these members through on-site and in-app contextual promotion, email promotion, and notification promotion, we will be able to reach these members with these exclusive offers and discounts and build that momentum in revenue attribution over time.
Speaker Change: Capacity to be able to target these members through on-site and in-app contextual promotion and email promotion and notification promotion will be able to reach these members with these exclusive offers and discounts and build that momentum.
Thierry Wuilloud: Okay, great. On the price increase, I was wondering, do you have expectations in terms of, you know, you increase the price by $2 or by £3. Do you have any expectations as to what kind of attrition could be caused by that, and how do you balance the tradeoff?
Speaker Change: and revenue attribution over time.
Speaker Change: Okay, great. On the price increase, I was wondering, do you have expectations in terms of...
Speaker Change: You know you increase the price by by two dollars or by three pounds. Do you have a expectation as to what kind of attrition could be could be caused by that and how do you balance the trade-off?
James Colquhoun: Well, we don't really have any benchmarks, so there are certainly no other companies that publicly publish benchmarks that relate to price increases. However, when we've done this in the past in terms of acquisition, we do see that we make the delta on the increase. And we anticipate that we would be doing the same as we roll out these tests into Great British Pounds and further. And so that's what we're currently aiming for.
Speaker Change: Well, we don't really have any benchmarks, so there's certainly no other companies that publicly publish benchmarks that relate to price increases. However, you know, when we've done this in the past in terms of acquisition, we do see that we make the delta.
Speaker Change: on the increase. And we anticipate that we would be doing the same as we roll out these tests into Great British Pounds and further. And so, you know, that's what we're currently aiming for.
James Colquhoun: Yeah, we have. We never raised money before for existing members. For new members, we did raise the price by about $2 in 2019. And so that time, there was about a 20% price increase and the kind of increase in conversion, and basically losses, but it was more of an increase. I mean, decreases in conversion took about 8% out. So the gain was about 12%, 11.5%, 12% at that time for the new members. We have not, we have no existing members. We have this test going in Britain, and we probably wouldn't know for another 30 days.
Speaker Change: We have never raised money before for existing members.
Speaker Change: For new members, we did raise the price for about $2 in 2019.
Speaker Change: And so that time was about 20% price increase and the kind of increase in conversion and basically losses.
Speaker Change: But it was more kind of increases, I mean decreases in conversion, took about 8% out.
Speaker Change: So the gain was about 12%, 11.5-12% that time for the new members. We have no existing members, we have this test going in Britain, and we probably wouldn't know for another 30 days.
Thierry Wuilloud: And finally, about Igniton. You talked about food supplements. You talked about microchips. It seems the food supplements would be a, maybe a more straight forward way to deliver the product or the substance. How closely are you to maybe some revenue from that or from launching that?
Speaker Change: Okay.
Speaker Change: Finally, about Igniton.
Speaker Change: You talked about food supplements, you talked about microchips, it seems the food supplements would be a...
Speaker Change: maybe a more straightforward way to deliver the product or the substance. How close are you to maybe some revenue from that or from launching that?
Jirka Rysavy: Well, I just answered that question. We expect to do that early next
Jirka Rysavy: We already have it, you know, it's a we can do it effectively now. We're just finishing some more studies, but all the technologies and equipment are in place, so we can technically do it even in the fourth quarter, but our plan is to do it. And we might be able to do it before Christmas, but our target is next year.
Speaker Change: Well, I just answered that question. We expect to do that early next year. We already have it, you know, we can do it effectively now. We're just finishing some more studies.
Speaker Change: but all the technologies and equipments in a place so we can technically do it even fourth quarter but our plan is to do it. We might be able to do it before for Christmas but our target is for next year.
Thierry Wuilloud: And do you have a sense of what channels you're going to use to market that?
Speaker Change: And do you have a sense of what channels you're going to use to market that?
Jirka Rysavy: Well, there are several different channels, which I mentioned one of them would be on our marketplace. Second, Igniton already has a network of distributors in 50 countries, targeted mostly practitioners, hospitals, and research labs, and so we would use our existing channels in IGNITON, and there would be a few other channels which will be finalized over the next 90 days.
Speaker Change: Well, there are several different channels, which I mentioned one of them would be on our marketplace. Second, the Igniton already has a network of distributors in 50 countries.
Speaker Change: targeted mostly practitioners, hospitals and research labs and so we would use our existing channels in IGNITON and there would be few other channels which will be finalized over the next 90 days.
Thierry Wuilloud: Okay, great. Thank you. I appreciate your time and your answers. Thanks, Thierry.
Operator: Our next question comes from Sahim Izmailo with Freedom Broker. Please proceed with your question.
Terry: Thanks, Thierry.
Sahim Izmailo: Yeah. Thank you. Good afternoon, everyone. This question is about... Your media library. Can you share your plans for expanding your media library and what level of investments are you targeting this year and possibly next year as a percentage of your revenue? Thanks.
Speaker Change: Thank you. Good afternoon, everyone.
Speaker Change: My question is about your media library. Can you share your plans for expanding your media library? And what level of investments are you targeting this year and possibly next year as a percentage of your revenue?
James Colquhoun: Okay, sorry, I didn't quite catch your name there. It's James here, the CEO, and I'll also pass this on to Ned for some sort of more specifics on this or to confirm. With regard to investment in our media library, you know, one of the unique points of difference we have as a streamer is that we own over 85% of our content library. We also have over 98% worldwide rights for all of our own content and any licensed third-party content. Currently, we're spending circa 11, 11.5% of our revenue on content production.
Speaker Change: Thanks.
Speaker Change: Okay, sorry I didn't quite catch your name there. It's James here, the CEO and I'll also pass to Ned for some sort of more specifics on this or to confirm.
Ned Preston: I would kind of say that's on direct because we also do licensing, right? So it's probably total about 14%.
Ned Preston: With regards to investment in our media library, you know, one of the unique points of difference we have as a streamer is that we own over 85% of our content library. We also have over 98% worldwide rights.
Ned Preston: for all of our own content and any licensed third-party content.
Ned Preston: Currently, we're spending circa 11, 11 and a half percent of our revenue on content production. I would kind of say that's on direct, because we also do licensing, right, so it's probably total about 14 percent.
James Colquhoun: On, you know, like Jirka said, about 11, 11.5% on produced content, 14% total, including, you know, third-party acquired content. We'd anticipate in 2025 potentially increasing the produced content percentage over time and adding to that media library asset. We've also spoken, Ned, Jirka, and myself, on potentially having our media library revalued. We did have it valued a number of years ago, and we see it as a huge strength to the business, earning that much content on our balance sheet and being able to leverage it into new languages and new markets as we grow and expand.
Speaker Change: on, you know, like Jirka said, about 11, 11.5% on produced content, 14% total, including, you know, third party acquired content.
Speaker Change: We'd anticipate in 2025 potentially increasing the produced content percentage over time and adding to that media library asset.
Speaker Change: We've also spoken, Ned and Jirka and I, on potentially having our media library revalued. We did have it valued a number of years ago and we see it as a huge strength to the business owning that much content on our balance sheet and being able to leverage it into
Ned Preston: Ned Preston, Jirka Rysavy, Thierry Wuilloud, James Colquhoun, Vadim Merkulov, Gaia Inc. We have gone out and looked at doing a formal revaluation here in the middle part of the year. We feel comfortable that that $150 million will stand or could even be slightly higher. But back to James' earlier point, we use a lot of data to evaluate what content to add to our media library. And also, in that presentation, Jack, you can see that, over time, a lot of our content is timeless.
Speaker Change: New Languages and New Markets as we grow and expand.
Speaker Change: It's Ned Preston. Thanks for the question. You've probably seen some language in our investor relations deck.
Speaker Change: or presentation on on our IR website. On the balance sheet we make some notes and anyone who's met with us in person.
Speaker Change: that we're quite proud of our media library. We value it at at least 150 million dollars and I know
Speaker Change: from transitioning from auditors this past Q4, that that's a solid number. We have gone out and looked at...
Speaker Change: doing a formal revaluation.
James Colquhoun: Here in the middle part of the year, we feel comfortable that that $150 million will stand or could even be slightly higher. But back to James' earlier point is that we use a lot of data to evaluate what content, what to add to our media library. And also in that presentation, you can see that over time, a lot of our content is timeless. A lot of it really retains its value over long periods of time and thus.
Ned Preston: A lot of it really retains its value over long periods of time. And thus, the fact that our library value doesn't shrink, if anything, it will grow as we add new content. I'd love to talk about it with you in more detail as we get to know you and the Freedom Broker team further. And I would generally say, you know,
Jack: The fact that our library value doesn't shrink, if anything it will grow as we add new content.
Jirka Rysavy: And I would generally say, you know, because we produce our content very differently than pretty much anybody else, streamers, they mostly hire independent producers. And the producers then hire what's called spot labor. So the overall margins, what they have to book in the content, what gets on the balance sheet, are more than twice what we do. We also know when we produce content for like PBS or Discovery, that roughly if you get a budget from them, it would cost us about half what the budget would be because we use pretty much only full-time employees who move to our studios in Colorado.
Speaker Change: And I would generally say, you know, because we produce our content very differently than pretty much anybody, you know, any streamers, they mostly hire independent producers.
Speaker Change: and the producers then hire what's called support labor.
Speaker Change: So, the overall margins, what they have to book in the content, what gets on the balance sheet is more than twice.
Speaker Change: What do we do? We also know when we produce content for like PBS or Discovery that roughly if you get a budget from them We would cost us about half
Speaker Change: would
Speaker Change: The budget would be because we use pretty much only as a full-time employees.
Jirka Rysavy: So you can also, in other ways, you can see that if you kind of see the number of content we have on our balance sheet compared to other streamers, you would see that we would have maybe two, two and a half, up to three times higher GP contribution than they would have because our cost on the balance sheet is probably half what they would, or what somebody else would put it. So that's our big advantage compared to the future.
Speaker Change: who moved to our studios to Colorado.
Speaker Change: So, you can also, other ways you can see that, if you kind of see the number of content what we have in a balance sheet.
Speaker Change: compared other streamers, you would see that we would have maybe two and a half up to three times higher GP contribution than they would have because our cost and balance sheet is probably half what somebody else would put it. So that's our big advantage compared to future.
Operator: Okay, thanks for your question. And I have another question. Of course, go ahead, Zane.
Speaker Change: Okay, thanks for your question. And I have another question.
Operator: Maria, did we drop or lose Saeen?
Speaker Change: Maria, did we drop or did we lose Saeen?
Operator: I think, Saheen, are you muted? Can't you hear me?
Speaker Change: I think, Fayeen, are you muted? Can you...
Operator: Can you hear me now? Yes, yes. Yes, as I said, I can see that your net cash flow from operating activities is negative and is quite a large negative. Can you explain it for me, please?
Zain: Can you hear me now?
Maria: Yes, yes.
Speaker Change: Yes, as I said, I can see that your net cash flow from operating activities is negative and is quite large negative. Can you explain it for me, please?
Ned Preston: Yeah, yeah. So through the first six months, our operating cash flows are positive. And as you can see, free cash flows in the quarter were positive. In the second quarter, we had a number of non-recurring expenses hit us left over from a restatement that we announced at the end of Q1, as well as some of the work that went into launching Igniton. So that's really at the core of why operating cash flows were negative for the quarter. We expect to get that back on track in the third quarter. Yeah, we as a nation
Speaker Change: for Q2.
Sian: Yeah, yeah, so through the first six months our operating cash flows are positive and as you can see free cash flows in the quarter were positive. In the second quarter we had a number of non-recurring
Speaker Change: expenses hit us left over from
Sian: A restatement that we announced at the end of Q1.
Sian: as well as some of the
Sian: work that went into launching Igniton. So that's really at the core of why operating cash flows were negative for the quarter. We expect to get that back on track in in the third quarter.
Jirka Rysavy: Yeah, we as a company, and we kind of said that at the beginning of the year, we experimented based on free cash flow, which was positive, and we expected it to be, you know, positive. So we generated cash every quarter for the last five quarters.
Sian: Yeah, we as a company, and we kind of said that at the beginning of the year, we experiment based on a free cash flow, which was positive. And we expect to be, you know, positive. So we generate cash every quarter for the last five quarters.
Speaker Change: Okay, thank you.
Speaker Change: Thank you.
Speaker Change: At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Rysavy for his closing remarks.
Mr. Rysavy: Thank you, everyone, for joining, and we look forward to speaking with you when we will report our third quarter, which will be at the end of October . Thank you very much.
Operator: Yeah, okay, thank you.
Operator: At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Rysavy for his closing remarks.
Jirka Rysavy: Thank you everyone for joining us, and we look forward to speaking with you when we report our third quarter, which will be by the end of October. Thank you very much.
Operator: Thank you for joining us today for Gaia's second quarter 2024 earnings conference call. You may now disconnect.
Speaker Change: Thank you for joining us today for Gaia's second quarter 2024 earnings conference call. You may now disconnect.
unknown: Jirka Rysavy, Thierry Wuilloud, Unknown Executive, Ned Preston, James Colquhoun, Vadim Merkulov, Gaia Inc [inaudible] Jirka Rysavy, Thierry Wuilloud, Unknown Executive, Ned Preston, James Colquhoun, Vadim Merkulov, Gaia Inc Jirka Rysavy, Thierry Wuilloud, Unknown Executive, Ned Preston, James Colquhoun, Vadim Merkulov, Gaia Inc
Speaker Change: [inaudible]
Speaker Change: [inaudible]