Q4 2024 CuriosityStream Inc Earnings Call
Operator: Please wait, the conference will begin shortly.
Please wait the conference will begin shortly.
[music].
Krista: Good afternoon. My name is Krista and I will be your conference operator today I'd like to welcome everyone to the curiosity stream fourth quarter and full year 2024 earnings Conference call. Please note that today's call is being recorded all lines have been placed on mute to prevent any background noise. After.
Krista: Good afternoon, my name is Krista and I will be your conference operator today. I'd like to welcome everyone to the CuriosityStream fourth quarter and full year 2024 earnings conference call. Please note that this, that today's call is being recorded.
Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star, then the number one on your telephone keypad. To withdraw your question, please press star one again.
Krista: The speaker's remarks, there will be a question and answer session. If you would like to ask a question simply press Star then the number one on your telephone keypad.
Brett Maas: Draw. Your question. Please press Star one again I will now turn the call over to Brett Maas with curiosity streams Investor Relations you may begin your conference.
Brett Ma: I will now turn the call over to Brett Ma with CuriosityStream's investor relations. You may begin your conference. Thank you, and welcome to CuriosityStream's discussion of its fourth quarter and full year 2024 financial results.
Brett Maas: Thank you and welcome to curiosity streams discussion of its fourth quarter and full year 2020 financial results, leading the discussion today, our clinic Fitch column here, obviously streams, Chief Executive Officer, and Brady Hayden curiosity streams, Chief Financial Officer. Following management's prepared remarks, we'll be happy to take your questions, but first I'll review.
Unknown Executive: Leading the discussion today are Clint Stinchcomb, CuriosityStream's Chief Executive Officer, and Brady Hayden, CuriosityStream's Chief Financial Officer.
Brett Ma: Following the management's prepared remarks, we'll be happy to take your questions, but first I'll review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking statements under the federal securities laws. These statements are not guaranteed of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements.
Brett Maas: The Safe Harbor statement.
Brett Maas: During this call we may make statements related to our business. Therefore looking statements under the federal Securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks uncertainties and assumptions our actual results could differ materially from expectations reflected in any forward looking statements. Please be aware that any forward looking statements reflect management's current views only and the company undertakes no obligation to her.
Brett Ma: Please be aware that any forward-looking statements reflect management's current views only, and the company undertakes no obligation to revise or update these statements, nor to make additional forward-looking statements in the future. For discussion of the material risks and other important factors that could affect our actual results, please report to our SEC website and our investor relations website, as well as the risks and other important factors discussed in today's press release.
Brett Maas: Buys or update these statements nor to make additional forward looking statements in the future for a discussion of the material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC website, and our Investor Relations website as well as the risks and other important factors discussed in today's press release additional information will also be set forth in our annual report on Form 10-K for the fiscal.
Brett Ma: Additional information will also be set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2024, when filed. In addition, reference will be made to non-GAAP financial measures. Reconciliation of these non-GAAP financial measures, comparable GAAP measures, can be found on our website at investors.curiositystream.com. Unless otherwise stated, all comparisons will be against our results for the comparable 2023 period.
Brett Maas: Year ended December 31, 2024, when filed in addition reference will be made to non-GAAP financial measures reconciliation of these non-GAAP financial measures comparable GAAP measures can be found on our website at investors <unk>.
Brett Maas: Curiosity stream dot com.
Speaker Change: Unless otherwise stated all comparisons will be against our results for the comparable 2023 period now I'll turn the call over to the floor is yours.
Clint Stinchcomb: Now I'll turn the call over to Clint. Clint, the floor is yours. Thank you, Brett. took big steps forward in 2024. To speak plainly, we delivered a year over year cash flow increase of about $26 million in 2024. More specifically, we lost about $16 million in cash in 23, and we made about $10 million in 2024. We did this by executing on the cost rationalization we promised and by securing higher margin revenue across our subscription services, which represent recurring revenue, and also in our advertising and licensing initiatives, which represent largely variable revenue.
Brett Maas: Thank you Brett.
Brett Maas: Two big steps forward in 2024 to speak plainly, we delivered a year over year cash flow increase of about $26 million in 2024.
Brett Maas: More specifically, we lost about $16 million in cash and 23, and we made about $10 million in 2024.
Brett Maas: Did this by executing on the cost rationalization, we promised and by securing higher margin revenue across our subscription services, which represent recurring revenue.
Brett Maas: And also in our advertising and licensing initiatives, which represent largely variable revenue.
Clint Stinchcomb: I'm gratified to share that 2025 will be a return to top-line growth and continued bottom-line Q4 we delivered our 9th straight quarter of increased cash flow and as such our highest ever adjusted free cash flow at $3.3 million. Our top-line revenue also exceeded our guide. Our subscription revenue grew both sequentially and year-over-year. Our variable revenue grew sequentially and will down slightly from the prior year quarter. We believe it's important and helpful to understand that by increasing our overall roster and categories of partners. which enabled higher margin revenue, we laid additional and critical groundwork for heavy overall improvement in 2025.
Brett Maas: I'm gratified to share that 2025 will be a return to topline growth and continued bottom line growth.
Brett Maas: Q4, we delivered our ninth straight quarter of increased cash flow and as such our highest ever adjusted free cash flow at $3 $3 million.
Brett Maas: Our topline revenue also exceeded our guidance.
Brett Maas: Our subscription revenue grew both sequentially and year over year, our variable revenue grew sequentially and was down slightly from the prior year quarter.
Brett Maas: We believe it's important and helpful to understand that by increasing our overall roster and categories of partners.
Brett Maas: Which enabled higher margin revenue, we laid additional and critical groundwork for heavy overall improvement in 2025.
Brett Maas: Our confidence in 2025 is driven by five factors.
Clint Stinchcomb: Our confidence in 2025 is driven by five factors. Number 1 We aggregated and amassed rights to hundreds of thousands of hours of monetizable video and audio, which we're putting to work on our own platforms and in licensing agreements. Our licensing agreements are with both traditional media partners and technology partners that are in need of content to train and fine-tune large language models to accelerate their AI product rollouts in an environment of increasing competition. Over the past handful of months, we've delivered and licensed over 8 million minutes of video and audio, and we're in the process of delivering much more.
Brett Maas: Number one.
Brett Maas: We aggregated and amassed rights to hundreds of thousands of hours of monetize the whole video and audio which we're putting to work on our own platforms and then licensing agreements are.
Brett Maas: Our licensing agreements are with both traditional media partners and technology partners that are in need of contents to train and fine tune large language models to accelerate their AI product rollouts and in an environment of increasing competition.
Brett Maas: Over the past handful of months, we've delivered a licensed over 8 million minutes of video and audio and we're in the process of delivering much more.
Clint Stinchcomb: We have much greater visibility today than three, six, and nine months ago in regard to what is possible here.
Brett Maas: We have much greater visibility today than three six or nine months ago in regard to what is possible here.
Brett Maas: Number two.
Clint Stinchcomb: Number two. Our overall annualized operational costs are significantly lower than our recurring revenue. This dynamic ensures a hard minimum of annual free cash flow and empowers us with the flexibility to take some calculated swings.
Brett Maas: Our overall annualized operational costs are significantly lower than our recurring revenue. This.
Brett Maas: This dynamic ensures a hard minimum of annual free cash flow and empowers us with the flexibility to take some calculated swings.
Clint Stinchcomb: Through enhanced simplification and optimization practices, made much easier by improving AI tools, we're continuing to reduce costs while not negatively impacting growth.
Brett Maas: Through enhanced simplification and optimization practices made much easier by improving AI tools, we're continuing to reduce costs, while not negatively impacting growth number.
Clint Stinchcomb: Number three. following translation costs driven by AI.
Brett Maas: Number three.
Brett Maas: Falling translation costs driven by AI.
Clint Stinchcomb: Well, we can't yet dub and subtitle all of our content through synthetic AI solution. We can for certain subsets, like natural history films with a Voice of God narration. We're beginning to translate more sub-genres of content within and beyond our current 12 languages. We believe increased localization will be particularly catalytic to factual programming like ours as it travels well, as evidenced by our subscribers in 176 different countries.
Brett Maas: While we can't yet dubbed and subtitled all of our content through synthetic AI solutions.
Brett Maas: Can for certain subsets like natural history films with voice of God narration.
Brett Maas: Are beginning to translate more sub genres of content within and beyond our current 12 languages.
Brett Maas: We believe increased localization will be particularly catalytic to factual programming like ours as it is.
Brett Maas: Travel as well as evidenced by our subscribers and 176 different countries.
Clint Stinchcomb: Number four.
Brett Maas: Number four.
Clint Stinchcomb: New Currency Rollouts. In light of our existing global subscriber base and worldwide appeal, we plan to add 20 to 30 new currency opportunities for our subscribers.
Brett Maas: New currency Rollouts in light of our existing global subscriber base and worldwide appeal, we plan to add 20 to 30, new currency opportunities for our subscribers this year.
Brett Maas: Number five.
Clint Stinchcomb: Number five.
Clint Stinchcomb: Enhanced, Talent, Density. Well, we always have ample room for improvement. are high concentration of skilled. Motivated and Enthusiastic Team Members. is generating increased productivity, innovation, faster decision making, faster execution, faster fixing of mistakes, and we believe a competitive advantage for Curiositystream by enabling us to achieve more with less. quickly adapt to evolving opportunities.
Brett Maas: Enhanced talent density.
Brett Maas: While we always have ample room for improvement are.
Brett Maas: Our high concentration of skilled.
Brett Maas: Motivated and enthusiastic team members is generating.
Getting increased productivity innovation faster decision, making faster execution faster fixing of mistakes and we believe a competitive advantage for curiosity stream by enabling us to achieve more with less.
Brett Maas: And to quickly adapt to evolving opportunities.
Clint Stinchcomb: Well, it's not a metric we obsess over. We believe our revenue per FTE is among the highest in our competitive set.
Brett Maas: While it's not a metric we obsess over we believe our revenue per FTE is among the highest in our competitive set.
Brett Maas: Following our annual dividend review meeting in January and in accordance with historical best practices of confident dividend paying companies.
Clint Stinchcomb: Following our annual dividend review meeting in January, and in accordance with historical best practices of confident dividend paying companies, we announced an increase from $0.10 to $0.12 for dividend holders in Q1 2025. Subsequently announced an upwardly revised increase to 16 cents for shareholders through 2025, which we plan to pay from operations in light of our enhanced visibility into certain third party agreements and our overall pipeline. We believe this dividend, beginning with four cents per share this quarter on March 28. a great way to reward our investors and our employees and to raise the broader global profile of Curiositystream.
Brett Maas: We announced an increase from 10 to 12 for dividend holders in Q1 2025.
Brett Maas: We subsequently announced an upwardly revised increased to 16.
Brett Maas: For shareholders through 2025, which we plan to pay from operations in light of our enhanced visibility into certain third party agreements and our overall pipeline.
Brett Maas: We believe this dividend beginning with the <unk> <unk> per share this quarter on March 28.
Brett Maas: It's a great way to reward our investors and our employees and to raise the broader global profile of curiosity stream today.
Clint Stinchcomb: Today, in addition to participating in the growth potential of a vibrant organization at the intersection of content and generative AI, shareholders can enjoy a return comparable to cash and other ultra-reliable investment instruments.
Brett Maas: In addition to participating in the growth potential of a vibrant organization at the intersection of content and generative AI.
Brett Maas: Shareholders can enjoy return comparable to cash and other ultra reliable investment instruments.
Clint Stinchcomb: This increase further underscores our confidence in our trajectory.
Brett Maas: This increase further underscores our confidence in our trajectory.
Brett Maas: While I've referenced our dramatic increase in content volume, we premiered some terrific original series and feature specials.
Clint Stinchcomb: While I've referenced our dramatic increase in content volume, we've premiered some terrific original series and feature specials. Some favorites include a rather irreverent series, Science for Evil Geniuses, starring Game of Thrones actor Paul Kay. feature doc searching for Satoshi about the mysterious creator of Bitcoin. 4th season of our high school football series, 4th and Forever, featuring the DeSoto Eagles and their quest to recapture a Texas state title. Our delicious evolutionary biology special, Taste the Flavor of Life, and our epic five-part series, Fateful Planet, which brings to life the most violent chapters in Earth's geologic history.
Brett Maas: Some favorites include rather our reference series science for evil Geniuses, starting game of Thrones actor Paul K.
Brett Maas: The feature dark searching forced the doshi about the mysterious creator of bitcoin.
Brett Maas: The fourth season of our high School football series fourth and Forever, featuring the Desoto Eagles in their quest to recapture at Texas State title.
Brett Maas: Our delicious evolutionary biology special taste, the flavor of life and.
Brett Maas: And our epic five part series faithful planet, which brings to life. The most violent chapters and Earth geologic history.
Clint Stinchcomb: In closing, I'm proud that the well-directed hard work of our talent-dense team enabled us to achieve our ninth straight quarterly increase in cash flow, $3.3 million, and end the year with approximately $40 million in liquidity and no debt, zero. Looking forward, we're returning to top-line revenue growth in the double digits in 2025, and we likewise anticipate double-digit annual percentage growth in free cash flow. Additionally, we continue to believe that our extensive library of now hundreds of thousands of hours of audio and video, our global appeal, our direct subscriber base and direct platforms for multi-year third party agreements.
Speaker Change: In closing I am proud that the well directed hard work of our talent dense team enabled us to achieve our ninth straight quarterly increase in cash flow $3 $3 million.
And the year with approximately $40 million in liquidity and no debt zero looking forward, we're returning to top line revenue growth in the double digits in 2025.
Speaker Change: And we likewise anticipate double digit.
Speaker Change: Annual percentage growth in free cash flow.
Speaker Change: Additionally, we continue to believe that our extensive library of now hundreds of thousands of hours of audio and video <unk>.
Speaker Change: Our global appeal, our direct subscriber base and direct platforms.
Speaker Change: Our multi year third party agreements.
Clint Stinchcomb: Our public company currency and our rationalized cost structure are uniquely favorable attributes that provide us with sustainable, durable, long-term strength and exceptional Flexibility.
Speaker Change: Our public company currency and a rationalized cost structure are uniquely favorable attributes that provide us with sustainable durable long term strength and exceptional.
Speaker Change: Flexibility.
Brady Hayden: Over to my friend and colleague, Brady. Thank you, Clint, and good afternoon, everyone. Our full financial results are presented in the back of the press release that we just issued a few minutes ago, as well as the 10K that we'll file in the next few days. But let me quickly go through some of the results that we want to highlight for the fourth quarter, as well as full year 2025. We have remained intensely focused on expense, discipline, and operating efficiency, and we believe our 2024 results demonstrate the excellent progress we have made over the past several Clint said we achieved another milestone in the fourth quarter as adjusted free cash flow came in at $3.3 million, which exceeded guidance and was an improvement of $5.7 million from prior year.
Brady Hayden: Over to my friend and colleague Brady.
Speaker Change: Thank you Glenn and good afternoon, everyone are.
Speaker Change: Our full financial results are presented in the back of the press release that we just issued a few minutes ago as well as the 10-K that we'll file in the next few days, but let me quickly go through some of the results that we want to highlight for the fourth quarter as well as full year 2024.
Speaker Change: We have remained intensely focused on expense discipline and operating efficiency and we believe our 2024 results demonstrate the excellent progress we have made over the past several quarters.
Speaker Change: Clint said, we achieved another milestone in the fourth quarter as adjusted free cash flow came in at $3 3 million, which exceeded guidance and was an improvement of $5 $7 million from prior year.
Brady Hayden: This also represented the highest quarterly adjusted free cash flow in the company's history and nine quarters of sequential improvement in this For the full year adjusted free cash flow with $9.5 million and improvement of $25.5 million from 2020. Put that number in context, we improved our 2024 cash flow by an amount equal to half of our annual revenue. Looking more at Revenu Fourth quarter revenue was above our guidance range, coming in at $14.1 million, compared to $12.6 million in Q3 and $14.8 million in the prior year. Our direct business remained our largest revenue category, generating $9.4 million in Q4 and $38.6 million for the full year.
Speaker Change: Also represented the highest quarterly adjusted free cash flow in the company's history and nine quarters of sequential improvement in this metric.
For the full year adjusted free cash flow was $9 5 million, an improvement of $25 $5 million from 2023.
Speaker Change: That number in context, we improved our 2020 for cash flow by an amount equal to half of our annual revenue.
Speaker Change: Looking more at revenue.
Speaker Change: Fourth quarter revenue was above our guidance range coming in at $14 1 million compared to $12 6 million in Q3.
Speaker Change: $14 8 million in the prior year quarter.
Speaker Change: Our direct business remained our largest revenue category generating $9 4 million in Q4, and $38 $6 million for the full year continuing to demonstrate a predictable recurring revenue stream.
Brady Hayden: Continuing to demonstrate a predictable recurring revenue Total revenue of $51.1 million was lower for the full year, although this was mostly the result of entering fewer non-cash transactions in 2024 than in 2023. If you take out these non-cash deals, our 2024 revenue was essentially flat year over year. Fourth quarter gross margin, a 52% increase from 45% a year ago, driven by our cost control efforts and continued reductions in content amortization. Our gross margin excluding content amortization, which focuses on the cash cost of delivering our services, was 85% in the fourth quarter compared to 80% a year ago.
Speaker Change: Total revenue of $51 $1 million was lower for the full year. Although this was mostly the result of entering fewer noncash transactions in 2024 and in 2023.
Speaker Change: Take out these noncash deals are 2024 revenue was essentially flat year over year.
Speaker Change: Fourth quarter gross margin of 52% increase from 45% a year ago, driven by our cost control efforts and continued reductions in content amortization.
Speaker Change: Our gross margin excluding content amortization, which focuses on the cash cost of delivering our services was 85% in the fourth quarter compared to 80% a year ago.
Speaker Change: Turning to operating expenses for the year, our combined expenses for advertising and marketing plus G&A were down $7 7 million or 17% compared to 2023 as we realize the ongoing benefits of our planned spending reductions and excluding stock based compensation G&A decline.
Brady Hayden: Turning to operating expenses, for the year our combined expenses for advertising and marketing plus G&A were down $7.7 million, or 17% compared to 2023, as we realized the ongoing benefits of our planned spending reductions. and excluding stock based compensation, G&A declined 7.3 million or 29% in 2020. Fourth quarter adjusted EBITDA improved by $1.5 million or 43% compared with the prior year, and for the full year adjusted EBITDA improved by $14.1 million or 70%. As we've discussed before, our earnings are negatively impacted by content amortization, which is, of course, a non-cash expense. We are required to record each course.
Speaker Change: $7 3 million or 29% in 2024.
Speaker Change: Fourth quarter, adjusted EBITDA improved by $1 5 million or 43% compared with the prior year and for the full year adjusted EBITDA improved by $14 1 million or 70%.
Speaker Change: As we've discussed before our earnings are negatively impacted by content amortization, which is of course, a noncash expense we are required to record each quarter.
Brady Hayden: While we don't provide guidance with regard to adjusted EBITDA, we expect that as revenue grows and margins continue to improve, break-even adjusted EBITDA is within our reach. And as we mentioned earlier, adjusted free cash flow was $9.5 million for the year, compared with negative $16 million in 2023, an improvement of $25.5 million.
Speaker Change: While we don't provide guidance with regard to adjusted EBITDA, We expect that as revenue grows and margins continue to improve breakeven adjusted EBITDA is within our reach.
Speaker Change: And as we mentioned earlier adjusted free cash flow was $9 5 million for the year compared with negative $16 million in 2023, an improvement of $25 $5 million.
Speaker Change: Turning to return of capital in March 2024, we announced our dividend program and during the year, we paid three dividends, including our September dividend of $1 $4 million, bringing total dividends paid for the year to $4 1 million.
Brady Hayden: Turning to return of capital. In March 2024, we announced our dividend program. And during the year, we paid three dividends, including our September dividend of $1.4 million, bringing total dividends paid for the year to $4.1 million.
Speaker Change: We also announced in 2024, our share repurchase plan and during the year, we bought back 216000 shares of our common stock.
Brady Hayden: We also announced in 2024 our share repurchase plan. And during the year we bought back 216,000 shares of our common Looking forward, increasing the dividend program to $0.16 per share in 2025 would imply about a 7.5% yield based on yesterday's closing price of our share. We ended the year with total cash insecurities of $39.7 million and no outstanding debt. Put that into context, our cash and securities balance represents about one third of our market cap at our current share price. This, along with our confidence to continue generating strong free cash flow, further supports our dividend income.
Speaker Change: Going forward, increasing the dividend program to <unk> 16 per share in 2025 would imply about a seven 5% yield based on yesterday's closing price of our shares.
Speaker Change: We ended the year with total cash and securities of $39 $7 million and no outstanding debt.
Speaker Change: That into context, our cash and securities balance represents about one third of our market cap at our current share price.
Speaker Change: This along with our confidence to continue generating strong free cash flow further supports our dividend increase.
Speaker Change: Moving to first quarter 2025 guidance, we expect revenue in the range of 14, five to $15 $5 million and adjusted free cash flow in the range of $1 million to $2 million.
Brady Hayden: Moving to first quarter 2025 guidance, we expect revenue in the range of $14.5 to $15.5 million and adjusted pre-cash flow in the range of $1 to $2 million.
Brady Hayden: While we don't provide full-year guidance, we believe we'll achieve double-digit growth in both revenue and cash flow for 2024.
Speaker Change: While we don't provide full year guidance, we believe we'll achieve double digit growth in both revenue and cash flow for 2025.
Operator: With that, we can hand the call back to the operator and open it to questions. Thank you.
Speaker Change: With that we can hand, the call back to the operator and open it to questions.
Speaker Change: Thank you.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star 1.
Speaker Change: I will begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue and if you'd like to withdraw that question again press Star. One. We also ask that you limit yourself to one question and one follow up for any additional questions. Please re queue.
Operator: We also ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue.
Patrick Scholl: And your first question comes from Patrick Scholl with Barrington Research. Please go ahead. Hi, thank you. I was just wondering if you could talk a little bit more about the revenue expectations for Q1 in the full year. So you had mentioned earlier about like separating out subscription and the advertising and content licensing as kind of recurring versus variable growth. I was kind of wondering how you're seeing the contribution of those kind of two different types of revenue into the 2025 expectations.
Speaker Change: Your first question comes from Patrick Sholl with Barrington Research. Please go ahead.
Patrick Sholl: Hi, Thank you I was just wondering if you could.
Speaker Change: Talk a little bit more about the revenue expectations for Q1 and full year that you had mentioned earlier about.
Patrick Sholl: Separating out subscription.
Patrick Sholl: The advertising and content licensing is kind of recurring versus variable growth I was just kind of wondering how youre seeing the contribution of those two different types of revenue into the 2025 expectations.
Patrick Sholl: Yes.
Clint Stinchcomb: Thank you for the question, Pat. It's a really good one, and I'm glad that you asked it.
Pat: Thank you for the question Pat that's a really good one.
Pat: I am glad that you asked it.
Clint Stinchcomb: minutes, that's where we're going to and we'll be having medical And we're in the first week, excuse me this morning, we're going to have medical appointment. but this is a half a year into accesses to One thing that I said in my opening remarks is that You know, in light of Our current, you know, overall annualized operational costs. These are significantly lower than our recurring revenue, which we consider to be our subscription revenue. So this dynamic ensures a really hard minimum of annual free cash flow and, you know, gives us the flexibility to take some calculated swings, you know, potentially some, some large swings.
Pat: Sure.
Pat: One thing that I said in my opening remarks is that.
Pat: In light of.
Pat: Our current overall annualized operational cost these are significantly lower than our recurring revenue, which we consider to be our subscription revenue. So this dynamic insurers really hard minimum of annual free cash flow in <unk>.
Pat: Gives us the flexibility to take some calculated swings potentially some some large swings so when we're talking about subscription.
Clint Stinchcomb: So when we're talking about, you know, subscription and, and And when we're talking about recurring revenue, typically talking about anything that is subscription oriented. And so then you go to variable. So variable historically is licensing, and advertising. So When we're thinking of the question I've been asked many times is, okay, are some of these, you know, big licensing deals that you anticipate doing this year? Are those recurring? And so I think it's critical to understand this, you know, I've done directly or, you know, been parts of hundreds and hundreds of content licensing agreements, most of them are not recurring.
Pat: <unk>.
Pat: So when we're talking about recurring revenue, we're typically talking about anything that is subscription oriented and so.
Pat: Then you go to variable so variable historically is.
Pat: Licensing and advertising so.
Pat: When we when we're thinking question I've been asked many times is okay or some of these big licensing deals that you anticipate doing this year.
Pat: Are those recurring and so I think it's critical to understand.
Pat: Yes.
Pat: I've done directly or been parts of hundreds and hundreds of content licensing agreements most of them are not recurring so typically a company like ours.
Clint Stinchcomb: So typically a company like ours, Delivering content to a partner, the partner accepts the content, and then we then recognize the revenue at the start of the term. It used to be upon acceptance of the content, you know, it's now at the start of the term. So it's not recurring in the traditional sense, but it can become de facto recurring if we build a strong relationship with a content partner by delivering high quality, diverse content on time, you know, and at the scope and scale they're looking for. As early as we are in this practice of, you know, licensing video to non-traditional partners, you know, for AI training purposes.
Pat: As to delivering content to a partner the partner accepts the content and then we then recognize the revenue at the start of the term they used to be upon acceptance of the content.
Now at the start of the term so.
Pat: So it is not recurring in the traditional sense, but it can become de facto recurring.
Pat: We build a strong relationship with a content partner by delivering high quality diverse content on time scope and scale, they're looking for.
Pat: As early as we are in this practice of licensing video to non traditional partners for AI training purposes.
Clint Stinchcomb: We've already had clients ask for a second and third order after we fulfilled the first. So, you know, strong relationship with a customer, you know, with whom we've demonstrated a track record of great performance. is many times better than a contractual relationship that locks you into volume and to pricing. And so what I have said publicly, Pat, is that, you know, we anticipate that, you know, the licensing revenue that we generate this year, you know, will be will likely exceed Our direct revenue. So we're not guiding to year end. But hopefully that gives you some sense of, of what's possible.
Pat: We've already had clients ask for a second and third order. After we fulfilled the first so strong relationship with the customer with whom we've demonstrated a track record of great performance.
Pat: As many times better than the contractual relationship that locks you into volume and pricing and so what I have said publicly Pat is that we anticipate that the licensing revenue that we generate this year.
Pat: We will be.
Pat: We'll likely exceed.
Pat: Our direct revenue so we're not guiding to yearend.
Pat: But hopefully that gives you some sense of.
Pat: What's possible will.
Clint Stinchcomb: We'll, you know, continue to share each quarter the process that we're making in these areas. But, you know, we feel very good about this year and feel very good about our growth potential. And, you know, I feel like we have better visibility, you know, even though we're doing, you know, some larger individual deals than we've had in the past is better visibility to, you know, a high minimum threshold. So hopefully that's helpful, Pat, but in terms of like how I think of it going forward, you know, will this be a, you know, robust business for us?
Pat: Continue to share each quarter the process that we're making in these areas but.
Pat: We feel very good about this year and feel very good about our growth potential and.
Pat: I feel like we have.
Pat: Better visibility, even though we're doing some larger individual deals.
Pat: Than we've had in the past is better visibility too.
Hi minimum threshold.
Pat: So hopefully that's helpful Pat.
Pat: But in terms of like how I think of it going forward.
Pat: Will this be a re.
Pat: Robust business for us three years from now.
Clint Stinchcomb: Three years from now, you know, as it relates to like AI training licensing, you know, I think I would say that, you know, if we're talking about, you know, specifically and only granting an AI video training, right. Probably will be, but we don't know for sure. But what we do know for sure, based on decades of content and data licensing practices, is that if we control rights, as we do now, to hundreds of thousands of hours of quality, monetizable audio and video, there'll be considerable demand for our corpus. Is that helpful, Pat? Can I expand any further?
Pat: As it relates to like AI training licensing.
Pat: I think I would say that.
If we're talking about specifically and only granting an AI video training right.
Pat: Probably will be but we don't know for sure, but what we do know for sure based on decades of content and data licensing practices is that if we control rights as we do now to hundreds of thousands of hours of quality monetize audio and video there'll be considerable demand for our corpus.
Patrick Sholl: Is that helpful. Pat can I expand any further okay.
Clint Stinchcomb: Okay.
Patrick Scholl: That was very helpful.
Pat: Yes.
Pat: Very helpful.
Clint Stinchcomb: And then I'll just, on just the overall subscriber activity, I guess, can you just talk about how you kind of approach, you know, managing the service and kind of in light of, you know, just general increased macro uncertainty and you know, what what earnings you have from, I guess, 2022 and the uncertainty in that period. Yeah. Thanks for asking.
Pat: Yeah.
Pat: On just the overall subscriber activity.
Pat: Can you just talk about how you kind of approach.
Pat: Managing the service and kind of in light of.
Pat: General increased macro uncertainty in la.
Pat: Learnings you had from I guess 2022 and the.
Pat: Okay, there's uncertainty in that period.
Pat: Thanks for asking so.
Clint Stinchcomb: So, look, if you look at the direct subscription business today, you've got Netflix, and you have Amazon, who have Escape Velocity. Those are completely different animals. I think there's been some good news in the press recently for Some existing legacy services like Max in regard to their subscriber numbers for a couple of reasons. One is They've you know embraced bundling from you know, kind of a partner level and also, you know from a from a wholesale level. And so I think you are seeing a certain return to, you know, almost a traditional. Cable Pay TV business, you know, not exactly, but in part.
Speaker Change: If you look at the direct subscription business today, you've got Netflix and you have Amazon who have escaped.
Pat: Escape velocity those are completely different animals.
Speaker Change: There's been some good news in the press recently for.
Speaker Change: Some existing like legacy services like Max in regard to their subscriber numbers for a couple of reasons one is <unk>.
Speaker Change: They've.
Speaker Change: Embraced bundling from kind of a partner level and also from a from a wholesale level and so I think you are seeing a certain a certain return to it.
Speaker Change: Almost a traditional.
Speaker Change: Cable pay TV business, not exactly but in part and.
Clint Stinchcomb: And so that's happening. However, you know, those are exceptions. Like if you look at, you know, most of the hundreds of streaming services in business today, you know, to the extent that they're growing, they're doing a price increase for the most part, like you just look at the big ones and you can see, okay, you know, they're doing the price increases are really, really frequent. And then it's also and then also their, you know, Embracing, you know, bundling and, you know, and other approaches. I think that, you know, for the, for the larger services, you know, what tends to get people to subscribe to those are big specials.
Speaker Change: And so that's happening however, those are exceptions like if you look at most of the hundreds of streaming services and business today to the extent that theyre growing theyre doing a price increase for the most part like you just look at the big ones and you can see okay.
Speaker Change: The price increases are really really.
Speaker Change: Frequent and then it's also and then also there.
Speaker Change: Embracing bundling and.
Speaker Change: And other approaches I think that.
Speaker Change: For the for the larger services.
Speaker Change: It tends to get people to subscribe to those.
Speaker Change: Our big specials well.
Clint Stinchcomb: Well, whereas most of the consumption comes from This is a series with lots and lots of episodes, you know, 300, 400, typically targeted to, you know, kids or, you know, adults for sure, but, you know, what we've learned, like, over the last, even just, like, over the last six weeks is, most streams, the most streamed content series last year was Bluey. I don't know if you have young kids, Pat, but if you do, you've heard of that, 55 billion minutes over the course of the year, so that's a lot. I think, you know, number two was Grey's Anatomy.
Speaker Change: Whereas most of the consumption comes from.
Speaker Change: Series with lots and lots of episodes 300, 400, typically targeted to kids or adults for sure but.
Speaker Change: What we've learned over the last even just like over the last six weeks as most.
Speaker Change: <unk> the most dreams.
Speaker Change: Content series last year was Blooey I know if you have young kids back, but if you do you've heard of that 55 billion minutes over the course of the year. So that's a lot.
Speaker Change: I think number two was Grey's anatomy.
Clint Stinchcomb: That's a, you know, it's a good series, you know, there's hundreds of episodes, and, you know, that makes up a significant portion of Netflix's consumption as they've shared. So I think that, you know, what we're seeing is Cost Rationalization, you know, a reliance on, you know, some key specials to get people to come to the service, and then a robust library. keep people engaged and subscribed. And by the way, that's our strategy as well, you know, on a slightly different level than some of these, you know, multi billion dollar companies. But that that's the approach.
Speaker Change: Yes, it's a good series, there's hundreds of episodes.
Speaker Change: And that makes up a significant portion of.
Speaker Change: I have netflix as consumption as they've shared so.
Speaker Change: Think that what we're seeing is cost rationalization.
Speaker Change: Our reliance on some key specials to get people to come to the service and then a robust library.
Speaker Change: To keep people engaged.
Speaker Change: Subscribed and by the way, that's our strategy as well on a slightly different levels in some of these multibillion dollar companies, but that's the approach and so.
Clint Stinchcomb: And so You know, with our subscription services, you know, we push hard with our partners and because of our global appeal, you know, we have, we have a number of new launches in our pipeline. But then at the same time, we want to make sure that we have a certain number of.
Speaker Change: With our subscription services, we push hard.
Speaker Change: With our partners and because of our global appeal.
Speaker Change: We have a number of new launches in our pipeline.
Speaker Change: But then at the same time, we want to make sure that we have.
Speaker Change: Certain number of <unk>.
Clint Stinchcomb: Great. Exciting Specials that will generate some press to help get people into the service. And then we want to make sure that we have, you know, a really robust library. And so as part of, you know, one benefit to all of this content that we've amassed, you know, in large part for licensing to the hyperscalers, we're also getting additional rights as we as we aggregate that content that we can put to work in AVOT, in FAST, in Pay TV, and then, you know, across our subscription.
Speaker Change: Great.
Speaker Change: Exciting specials that will generate some press to help get people into the service and then we want to make sure that we have a really robust library and so as part of one benefit to all of this content that we've amassed in large part for licensing to the Hyperscale.
Speaker Change: We're also getting additional rights as we as we aggregate that content that we can put to work.
Speaker Change: <unk> and SaaS and pay TV, and then across our subscription services.
Speaker Change: Okay. Thank you.
Laura Martin: Your next question comes from the line of Laura Martin with Needham. Please go ahead.
Laura Martin: Your next question comes from the line of Laura Martin with Needham. Please go ahead. Hi there.
Laura Martin: Hi, there.
Clint Stinchcomb: Could you update us on what's going on with your fast channels and your ad driven businesses? Sure. I think that as it relates to our fast channels and our ad driven businesses, again, One thing we're really enthusiastic about is just in light of the High, high level of volume of content that we've been, you know, acquiring aggregating over the last nine to ten months, you know, in addition to being able to license that out, we're able to start putting that to work. There's a lag between obviously when we have it. And when we provide it to one of the large platform partners and then when they publish it and then when we get paid.
Laura Martin: Great.
Speaker Change: Can you update us on what's going on with your best channels and your AD driven businesses.
Laura Martin: Sure.
Laura Martin: Yes.
Laura Martin: I think that.
Laura Martin: As it relates to our SaaS channels in our AD driven businesses again.
Laura Martin: One thing we're really enthusiastic about is just in light of the.
Laura Martin: Yes.
Laura Martin: High high level of volume of content that we've been acquiring aggregating over the last nine to 10 months. In addition to being able to license that out we're able to start putting that to work there's a lag between.
Laura Martin: Obviously, when we have it.
Laura Martin: And when we provide it to.
Laura Martin: One of the large platform partners and then when they publish it and then when we get paid but yes that lag will that lag will work itself out but were excited about fast for a number of reasons. One is we're getting a number of new launches for our flagship service and then are our three U S. Hispanic services.
Clint Stinchcomb: But that lag will work itself out. But we're excited about FAST for a number of reasons. One is we're getting a number of new launches for our flagship service. And then our three U.S. Hispanic services that are being distributed by Astraea, we believe are outperforming others in that category. And based on what we've seen to date and with the number of new partner launches coming up, we're really excited about what that will yield. At the same time, while we're focused on our owned and operated FAST channels, AVOD channels and incorporating advertising into more of our pay TV channels, there is in certain cases, if we think the economics make sense, we will just do some straight licensing deals with those partners as well.
That are being distributed by <unk>.
Laura Martin: Australia, we believe are.
Laura Martin: Outperforming.
Laura Martin: Others in that category and.
Laura Martin: Based on what we've seen to date and.
Laura Martin: With a number of new partner launches coming up we're really excited about what that will yield at the same time.
Laura Martin: And while we are.
Laura Martin: Focused on our owned and operated fast channels Ava channels and.
Laura Martin: Incorporating advertising into more of our pay TV channels. There is in certain cases, if we think the economics makes sense. We will just do some straight licensing deals with those partners as well so that revenue over the course of <unk>.
Clint Stinchcomb: So that revenue over the course of 2025 will show up as licensing revenue as compared to advertising revenue. But that continues to be a good, strong, durable area that will only add to our variable revenue over the course of the year. Thank you for asking.
Laura Martin: 2025 will show up as licensing revenue as compared to the advertising revenue but.
Laura Martin: We continue to that continues to be a good strong.
Laura Martin: Durable area that will only add to our variable revenue over the course of the year. Thank you for asking Laura.
Speaker Change: And then my follow up is back on data licensing can you sort of talked about a little bit, but I'm really interested in how the contracts for that.
Laura Martin: And then my follow up is back on the data licensing. You sort of talked about a little bit, but I'm really interested in how the contracts for the tech company, so your non traditional endemic, are different from like your normal media licensing. It sounds like maybe they're shorter, and then you do it, and it's almost like a project by project, then they come back and ask for more.
Speaker Change: Anthony you are non traditional endemic are different.
Speaker Change: Like your normal media license Zane it sounds like maybe they are shorter and then you do it and it's almost like a perfect.
Speaker Change: Then they come back and ask for more whereas over read it does deals are like three to five year deal. So yeah, so I'm a little bit.
Laura Martin: Whereas over at Reddit, those deals are like three to five year deal. So yeah, so I'm a little.
Laura Martin: So can you describe how the contract works?
Speaker Change: Can you describe how that Europe.
Speaker Change: Yes from your traditional media.
Clint Stinchcomb: I'm really glad that I'm really, you know, glad that you asked that. And so, you know, we don't know this for a fact, but we believe that we've probably done More in this space on from a licensing standpoint than any other media company doesn't mean that, you know, all of the agreements that we've done. you know, have started yet, you know, because, you know, the REV REC is started, you know, based on the term, but, you know, similar to traditional content licensing. We're delivering an agreed-upon amount of content to the partner, so just like we would deliver.
Speaker Change: I'm really glad that.
Speaker Change: And really the <unk>.
Speaker Change: Glad that you asked that and so.
Speaker Change: We don't know this for a fact, but.
Speaker Change: We believe that we've probably done.
Speaker Change: More on this space from a licensing standpoint than any other media company it doesn't mean that.
Speaker Change: All of the agreements that we've done.
Speaker Change: We have started yet because the Rev. Rec is started based on the term.
Speaker Change: But.
Speaker Change: Similar to traditional content licensing.
Speaker Change: We're delivering an agreed upon amount of content to the partner so just like we would deliver.
Clint Stinchcomb: 50 hours or you know 10 feature films to HBO. We're going to, you know, deliver a big batch big ranging batch of content to a technology partner. And I think the first difference, Laura, is in is in volume. I mean, they're just the volume is just you know, by orders of magnitude greater. And obviously, the price that they'll pay on a per hour basis is lower than, you know, pay for a feature film, obviously, but, you know, provided you have the volume, you can be in, you know, be really good shape. And so We deliver the content, they accept it, the revenue is recognized when the when the term starts.
50 hours or 10 feature films to HBO.
Speaker Change: We're going to deliver.
Laura Martin: Deliver a big batch big ranging batch of content to a technology partner and I think the first difference Laura is in is in volume I mean, they're just the volume is just.
Laura Martin: By orders of magnitude greater and obviously the price that they'll pay on a per hour basis is lower than <unk> for feature film, obviously, but provided you have the volume.
Laura Martin: You can be and be really good shape and so.
Laura Martin: We deliver the content.
Laura Martin: They accept it.
Laura Martin: Who is recognized when the when the term starts.
Clint Stinchcomb: We have, you know, in a few cases, you know, we have What might be referred to as sort of de facto, you know, additional content delivery, you know, based on some of the terms and conditions. But, you know, what you what you see in that space, because there's like big tranches of needs is it's typically, you know, one agreement. A tranche of content and then you know you get paid on that so that's That's the sort of industry standard market there. But again, I cannot emphasize this enough. I've been involved in so many content licensing agreements over the years that I've had four year agreements where they're contractually obligated to purchase a certain amount of content from us and then they don't because there's just lots and lots of ways to get out of that.
Laura Martin: We have.
Speaker Change: In a few cases, we have.
Laura Martin: What might be referred to as sort of.
Laura Martin: The facto additional content delivery based on some of the terms and conditions, but.
Laura Martin: What you see in that space, because there is like a big tranches of needs as it typically.
Laura Martin: No.
Laura Martin: One agreement.
Laura Martin: A tranche of content and then.
Laura Martin: You get paid on that so that's.
Laura Martin: That's the sort of industry standard market, there, but again I cannot emphasize this enough.
Laura Martin: The key and it's the key to any kind of like look I've been I've been involved in so many content licensing agreements over the years that I've had four year agreements, where we are.
Laura Martin: They are contractually obligated to purchase a certain amount of content from us and then they don't you know because there's just lots and lots of ways to get out of that so my feeling is always yes, you won't have as much contracted as possible. However.
Clint Stinchcomb: So my feeling is always yes, you want to have as much contracted as possible. However, huge key, I cannot emphasize this enough, is really building a strong relationship with a partner and delivering high quality. Diverse content on time, and when I say diverse I mean like diversity of imagery and what's on the screen and movement and this type of stuff. If you do that and you do it well, you're going to do more business with them. That is an absolute, I just think, an undeniable fact.
Laura Martin: Huge key I cannot emphasize this enough is really building a strong relationship with a partner.
Laura Martin: Delivering high quality.
Laura Martin: Diverse content on and when I say diverse I mean like diverse diversity of imagery and what's on the screen and movement in this type of stuff.
Laura Martin: You do that.
Laura Martin: And you do it well like Youre going to do more business with them that that is an absolute I just think an undeniable fact, but a couple of other things I would add to that so.
Clint Stinchcomb: But a couple other things I would add to that. So I talked a little bit about like, okay, what does this look like three years from now? You know, I think, Laura, you and I were together at a conference maybe a year ago, I think out in Denver, and we were talking a little bit about what we were looking to do here. But you know, so if you step back and say, okay, if you control a lot of content, a lot of rights, like that's always going to be great. But what we also know, what we've also learned is, you know, because we're in this business early, the hyperscalers don't want to work with hundreds of licensors.
Laura Martin: I talked a little bit about like okay. What does this look like.
Laura Martin: Three years from now I think.
Brady Hayden: Laura you and I were together at a conference maybe a year ago I think out in Denver, and we were talking a little bit about what we were looking to do here, but.
Brady Hayden: So if you step back and say, Okay. If you control a lot of content a lot of Reits like Thats always going to be great, but what we also know what we've also learned is because we're in this business early in the Hyperscale is don't want to work with hundreds of licenses they arent today and they won't.
Clint Stinchcomb: They aren't today and they won't. You know, and so they want to work with it at scale, at scale, you know, with a very finite number.
Brady Hayden: And so they want to work with us at scale at scale with a very finite number.
Brady Hayden: And then.
Clint Stinchcomb: And then, you know, I think lastly, something really interesting is, I think I bet my life that there will be new grants of rights 12 months from now that don't exist today in the AI space or have not been negotiated. I mean, I think if you'd listen to a call. Maybe, you know, call it 18 months ago, you know, before, you know, Reddit announced their agreement, which, you know, again, that's all that's publishing, that's text. And that's, you know, that is volume at a completely different scale than anybody has, you know, on a video basis.
Brady Hayden: I think lastly, something really interesting is I think.
Brady Hayden: I'll bet my life that there will be new grants of rights 12 months from now that don't exist today in the AI space or have not been negotiated.
Brady Hayden: If you listened to our call.
Brady Hayden: Yeah, maybe call it 18 months ago before.
Brady Hayden: Read it announced their agreement, which.
Brady Hayden: Again, that's all that's publishing that's taxed and that's.
Brady Hayden: That is volume at a completely different scale than anybody has on a video basis, but.
Clint Stinchcomb: But, you know, I don't believe that, that a lot of people would have even known what a, an AI video training right grant was. And so, you know, when I talk about training, like that's different than, you know, display or, you know, what I think will be many other additional rights and ways to participate in a long term process here that will become available.
Brady Hayden:
Brady Hayden: I don't believe that that a lot of people would have even known what a.
Speaker Change: And AI video training right Grant was and so.
Brady Hayden: When I talk about training like thats different than.
Speaker Change: Display or.
Speaker Change: What I think will be many other additional rights and ways to participate in a long term process here that will become available. So I'll just kind of leave it at that for now is that helpful.
Laura Martin: So I'll just kind of leave it at that for now. Is that helpful? Oh my God, so helpful. So interesting and so helpful. And I totally agree that these rights are going to change names and they're going to have to relicense everything they're doing today in two years. There's going to be whole new things they want to do with them. I've never seen our IP lawyer so excited, Laura. It's fantastic. on their full employment act. Yeah, that's right.
Speaker Change: Oh My God. So helpful. So interesting that's all helpful and I totally agree that right, they're going to change lanes and theyre going after re licensed everything we're doing today is going to be a whole new things they want to deal with them.
Speaker Change: I've never seen our IP lawyer, so excited look fantastic.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: All employment Act.
Speaker Change: Yes, that's right.
Laura Martin: You know, it Thanks, you guys.
Speaker Change: Okay.
Speaker Change: Thanks, guys. Thank you Laura.
Operator: Thank you, Laura. We have no further questions in our queue at this time.
Speaker Change: And we have no further questions in our queue at this time and ladies and gentlemen that does conclude today's conference call. Thank you for your participation and you may now disconnect.
Operator: And ladies and gentlemen, that does conclude today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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