Q4 2024 Gaia Inc Earnings Call
Jirka Rysavy, Ned Preston, Ned Preston
Jirka Rysavy, Thierry Wuilloud, Jirka Rysavy, Thierry Wuilloud, Jirka Rysavy, Thierry Wuilloud,
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Good afternoon, and welcome to Gaia's fourth quarter, 2024 Earnings Conference call. At this time, all participants are in a listen-only mode. Joining us today from Gaia are Jirka Rysavy, Executive Chairman, James Colquhoun, CEO , and Ned Preston, CFO . After the speaker's presentation, there will be a question and answer session.
Before we begin, management team would like to remind everyone that management's prepare remarks contained 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's management undertakes no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially.
These statements are based on current expectations of the company's management and involve inherent risk and uncertainties, including those identified in the Risk Factor section of Gaia's latest annual report on Form 10K filed with the SEC.
I'm sensitive information that is accurate only as of the time and date of this broadcast March 10th 2025.
Finally, I would like to remind everyone that this conference call.
It is being webcast and a recording will be available for replay all guys Investor relations website at IR Dot dot.
Guy: Dot Com I will now turn the call over to Guy as executive Chairman Yoga recently.
Guy: Good afternoon, everyone.
Guy: During the first quarter, our revenue grew 18% to 24.4 million.
Guy: This girl with gross margin improving to 88, 3% from 85.3.
Guy: And the year ago quarter.
Guy: Yeah.
Guy: Over the last months.
Guy: Erased for the first time in our history, our subscription prices for most of our existing members by at least $2.
Guy: Even with some member losses caused by the price increase our member count grew by 6%.
Guy: Revenue for the year grew 12% to $90 2 million.
Guy: Our gross profit per employee 40 year improved to 730000 from 660000.
Guy: Our ratio of the member lifetime value to our close through acquisition climbed to over six X.
Guy: Yeah.
Guy: And we had a positive free cash flow for both quarter and full year.
Guy: This is the free cash flow improving for about 4 million 40 year.
Guy: And James James who are and I'll speak more about advances in the business.
Guy: Thank you Erika and Hello, everyone 2024 was a year of strengthening our member base enhanced retention and delivering strong financial performance as we continued to scale guys impact and Gras conscious community.
Guy: As you can mentioned, we successfully executed on positive free cash flow generation for Q4, and the full year and in addition, we achieved tough topline revenue growth acceleration of 12% and we aim to accelerate revenue growth further in 2025, while sustaining free cash flow and delivering year on year improvements in earnings per share.
Guy: Despite the anticipated impact from that pricing increase in members grew at 6% demonstrating the strength of our engaged member base.
Guy: Two notable facts and the strengthening of our member base that we saw 11% growth in our direct members across high L. T V regions, including the U S, Canada and us markets reinforcing strong demand for guys premium content and our commitment to long term member retention paid off with 12% growth in our annual.
Direct member count supporting both cashless stability and sustained revenue growth.
Guy: The Guy plus premium membership tier grew by over 25% highlighting the increasing demand for our exclusive content live events and deeper engagement opportunities.
Guy: Okay.
Guy: As we drove increases in our annual member base and enhanced retention deferred revenue on the balance sheet grew by $3 4 million for the year.
Guy: Switching to pricing as Juergen mentioned for the first time in our history, we successfully transitioned legacy members to the new pricing model in Q4, following a successful test in Q3 in the United Kingdom.
Guy: This resulted in a limited 6.3% churn impact within that specific mandate cohort by year's end.
Guy: The 18% price increase establishing a strong foundation for higher ought to in future periods.
Guy: Obviously continued its upward trend year over year and create a $107 on an annualized basis driven by our pricing strategy. The full launch of Guy marketplace. In Q3 and continued expansion of Guy plus subscriptions, we anticipate further auto increases on an annualized basis, which we will report annually.
Guy: Our ongoing financial discipline also led to a 19% year over year improvement in EPS, demonstrating our ability to drive efficiency and profitability, while growing top line revenue.
Guy: We aim to continue accelerating margin expansion with further improvements in earnings for 2025 and beyond.
Guy: In Q1 of 2025, we raised $8 million to accelerate our artificial intelligence and Guy community initiatives, which we are confident we will add substantial long term value for our members and shareholders through driving improvements in retention and growth.
Guy: Regarding AI, we are on a mission to build the world's first conscious generally they I, while traditional generative AI models have focused on knowledge accumulation and reasoning alcohol is to provide wisdom training on model on a proprietary dataset of conscious content for which we have 98% worldwide rights, making this truly and.
Guy: International initiative.
Guy: This AI will be integrated into the guy a platform to enhance the member experience with intelligent deeply meaningful interactions further solidifying our leadership in the conscious media space.
Guy: AI will also power expanded search and discovery tools enhancing content discovery ability accessibility and engagement.
Guy: Additionally, we are leveraging AI to drive efficiency in language translation without 11 labs partnership, making guys content more accessible worldwide.
Guy: Plus utilizing AI driven enhancements to drive operational efficiency, expanding our gross profit per employee.
Guy: On the community front Gaia has always been dedicated to fostering a global conscious community. It is at the heart of our mission. This next step in our strategic plan will be the key differentiator between Guyana and other major streamers.
Guy: Our capital investment will focus on building technology and worldwide network that will grow community engagement create meaningful connections and expand the network effect of our business imagine the best at Rabbit Meetup, Whatsapp and Facebook, that's what we're building with Guy community.
Guy: The level of engagement with personalized connections to guy driving retention and reinforcing the network effect of that business.
Guy: The AI and community initiatives are planned to rollout with our scheduled 2026 price increase at the end of Q1 next year, which we anticipate will further accelerate topline growth and drive improvements in earnings and a long time.
Guy: As we continue into 2025, our strategy remains focused on growing our community enhancing engagement and leveraging technology to further personalize and optimize the member experience we.
Guy: We remain committed to expanding the value of Guy a plus.
Guy: And scaling guy marketplace, ensuring that our premium subscribers receive even more exclusive content live experiences and unique offerings.
Guy: These efforts will contribute to incremental off to great wall screen, forcing guy at the world's leading conscious media and community platform.
Speaker Change: With these initiatives in place we are well positioned for another year of accelerated growth strong cash flow generation and year on year improvements in earnings and with that our CFO Ned Preston will now provide deeper insights into our financial performance.
Ned Preston: Thank you James revenues for the fourth quarter, 2024 increased 18% to $24 $4 million from $20 7 million in the fourth quarter of 2023, primarily driven by growth of our member base and increasing our pool.
Ned Preston: Member growth increase during the year growing sequentially during the fourth quarter as James mentioned, despite some member losses due to the price increase we ended 2024 with a member count of 856000 up from 806000 at the end of 2023.
Ned Preston: Gross profit in the fourth quarter increased to $21 6 million from $17 seven.
Ned Preston: In the fourth quarter of 2023 gross margin was 88, 3% for the fourth quarter up from 85, three in the fourth quarter of last year.
Ned Preston: Net loss was negative <unk> 8 million or negative <unk> <unk> per share as compared to a net loss of $1 8 million or negative eight cents per share in the year ago quarter.
Ned Preston: With free cash flow improving by $2 2 million, two 6 million up from <unk>.
Ned Preston: $1 6 million year over year.
Ned Preston: Shifting to the 'twenty 'twenty four full year financial results revenue for the year was $90 4 million as compared to $84 million in 2023, representing 12% growth on a year over year basis.
Ned Preston: Gross profit increased to $77 8 million from $68 8 million in 2023 gross margin increased to 86, 1% from 85, 5%, we expect gross margins to be around 86% for fiscal year 2025.
Ned Preston: Loss for the year was negative $5 4 million or negative <unk> 22 per share as compared to a loss of $5 6 million or negative <unk> 27 per share for 2023 with increased marketing spend and amortization and operating cash flow improvement of $1 million.
Ned Preston: For the year free cash flow improved by 4 million to $2 7 million up from negative $1 3 million in the prior year.
Ned Preston: The cash balance as of December 31st 2024 was $5 9 million with an unused $10 million line of credit.
Speaker Change: That completes my summary, I'd like to now turn the call back over to Europe for his closing comments.
Ned Preston: Yeah, [laughter] Fotis summary, they expect.
Ned Preston: For this year to increasing annual gross rate.
Ned Preston: <unk> continuing growth of our pool.
Our increase in gross profit per employee of course continued generation of positive free cash flow.
Ned Preston: The price increase we executed last year combined with some new investment in.
Ned Preston: The content increase.
Ned Preston: Investment in content artificial intelligence and community should further improve our position.
Ned Preston: So and this includes our remarks I would like to open the call for questions.
Ned Preston: Operator.
Thank you at this time, we'll open the line for questions from the company's publishing analysts company request that each participant limit their comments to one question and one follow up if you would like to ask a question. Please press star one or your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star to remove yourself from the queue.
Ned Preston: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
Ned Preston: Moment, while we poll for questions.
Okay.
Speaker Change: And our first question comes from Mark Argento from Lake Street Lake Street Capital. Please proceed with your question.
Mark Argento: Hey, good afternoon guys.
Speaker Change: Wanted to drill down a little bit on the call.
Mark Argento: <unk> expectations of.
Mark Argento: Growth in 2025, I think you said.
Mark Argento: Growth will accelerate maybe you could just.
Mark Argento: Just to expand on that are we looking on a year over year basis are we look at sequentially off of Q4, maybe if you could drill down on that a little bit that would be helpful.
Mark Argento: Yeah, Hey, Mark its Ned Preston.
Mark Argento: Yes, really our statement there is really on an annual basis, you just heard us say that we grew.
Mark Argento: 12% and 24 on an annual basis, so we look to accelerate their north of 12%.
Mark Argento: We did make a significant sequential move.
Mark Argento: Move back in Q4 of last year with our quarterly revenue moving up from around 22 to over $24 million. So we do look to sequentially grow in and a start you know starting here in Q1 as well, but really the suggestions earlier, where were really north of 12% on an annual basis.
Mark Argento: Okay.
Mark Argento: That's helpful.
Mark Argento: And then just quickly on on AI, maybe you could just talk a little bit about what you do.
Mark Argento: Kind of what you're intending to do there.
Mark Argento: And your own.
Mark Argento: Language model or are you going to leverage some existing AI Tac.
Mark Argento: What could we expect to see from you guys in and around AI.
Mark Argento: Yeah, Thanks, Bob regarding AI, where essentially a rapid play we're building the infrastructure now we will be piped into multiple L. L. M. So we can switch between them.
Mark Argento: Essentially we are building an integrated version of search a generative AI model, where people can have conversations essentially without content library and also with experts on our platform that have large amounts of content and it will be fully integrated into the product experience just like other made.
Mark Argento: <unk> <unk>.
Mark Argento: Tech companies are integrated AI into their product experience and this is something we will be rolling out in Q1 of next year alongside a price increase and we see it as a really positive way for our members to interact in a more deep way without content.
Mark Argento: And in a modern way that they are used to with these AI models, becoming more and more mainstream.
Speaker Change: Great. Thanks, I'll hop back in the queue.
Mark Argento: Yeah just.
Mark Argento: So as James mentioned price increase we planning to do another $2.
Mark Argento: Hum.
Mark Argento: Thank you.
Speaker Change: Our next question comes from George Kelly with Roth Capital Partners. Please proceed with your question.
George Kelly: Hey, everybody thanks for taking the questions.
George Kelly: First curious with respect to the pricing increase that you took.
George Kelly: In late 'twenty four how much is filtered through your member base at this point and are are you still.
George Kelly: In early 'twenty, five seeing kind of stable retention and all the member metrics is it.
George Kelly: Consistent with with your expectations.
George Kelly: Hi, George It's James here, Yes, it correct, we increased it in Q4 of last year, and we had the U K cohort start in Q3.
George Kelly: We have a blend of monthly and annual members and so all of the annual mandates will have transitioned to new pricing by the end of Q4 and yet we still have the annual members that'll be upgrading throughout the rest of the year.
George Kelly: So we're seeing that continue through till October which was when we first announced the price increase on the on the the majority of that.
George Kelly: Member base that direct member base so.
George Kelly: I would say we had more than half of the price increase go through by the end of the year and we have a little bit less than 50% that will be flowing through from January until October of 2025 in terms of the churn impact the second part of your question.
George Kelly: As we've gone through the member base in Q1 of this year, it's gone up slightly from six 3% that we had at the end of last year that were still more than making the delta on the price increase so price increase was roughly 18%.
George Kelly: Half of that is seven 5% and were still sitting under that from a churn impact perspective, making more than the delta on that increase.
Speaker Change: Okay understood. Thank you and then second question on <unk>.
George Kelly:
George Kelly: I was curious if you're still planning to launch sometime this spring and if you could give any detail around your price point like.
George Kelly: Patients.
Mark Argento: You mentioned the Mark's question just about your.
Mark Argento: Revenue guidance, you're expecting an acceleration this year like how are you baking in at that time, and just anything about that launch would be helpful.
Mark Argento: Yeah.
Mark Argento: Okay.
Mark Argento: So the plan to actually launch plan to introduce the brand somewhere.
Mark Argento: May June time frame and start to kind of sell.
Mark Argento: In July.
Mark Argento: Would it be sick and part of the year.
Mark Argento: We made recently like last week on a more just decision to discontinue our direct.
Mark Argento: Like self standing.
Mark Argento: Of course is <unk>.
Mark Argento: And so which was for last year about $1 1 million.
Mark Argento: And we expect <unk> will bring more than that and second part of the day here.
Speaker Change: Okay understood. Thank you.
Andy: Andy do you want to talk more about that.
Andy: Are you asking me a year ago.
Andy: Yeah.
Andy: Yeah.
Andy: Four okay sure Yeah, Yeah, no I'm happy to I appreciate it.
Speaker Change: Well I mean, it representing more than $1.1 million is a little broad.
Andy: So it's just such a.
Andy: An open ended thing and maybe it is to a certain degree for you to see Youre, just not wanting to give too much data, but like what exactly we have no idea until we sell the first few months how is it going to be received.
Andy: Okay.
Okay Fair enough, we'll just leave it there for now okay.
Andy: Thanks.
Andy: Okay.
Speaker Change: Thank you and as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Andy: Star one.
Speaker Change: And our next question comes from James Sidoti with Sidoti <unk> Company. Please proceed with your question.
Speaker Change: Hi, good afternoon. Thanks for taking the questions. So I think I heard you say that you put another $2 price increase what.
Speaker Change: When does that go into effect.
Speaker Change: Hi, Jim It's James here. So yeah. Your convention there would be a $2 increase so last year. We increased from 11 99, you asked to $13 99 U S. On a monthly membership and we plan to increase that $250 99 U S. By the end of Q1 in 2026.
Speaker Change: And we would then parlay that U S dollar amount into overseas currencies generally on a one for one basis.
Speaker Change: Some territories, we are more localized and we might be a little lower for instance, Latam, we have slightly lower pricing compared to U S. USD, but most other territories, where on parity or even slightly above.
Speaker Change: Alright, so I take it. The fact that you were putting this another round of price increases you are you're pretty happy with the results of the first round and nutrition weight from the first round.
Speaker Change: That's correct, Jim I think we're very impressed with the results from the first round of price increases it was something sensitive for us as an organization is typically we grandfathered members on legacy pricing. So like are kind of I mentioned. This was the first time in the company's history, where we increased prices for legacy members on an old pricing.
Speaker Change: And the results were excellent I also feel that the market in the streaming space is much more familiar and comfortable with price increases.
Speaker Change: That rollout to existing members. So it's more of that which is coming to the to the standard in the market now and.
Speaker Change: And still trailing generally in terms of Netflix the standard pricing in most territories, but accelerating further to stay in lockstep with them.
Speaker Change: Yes.
Speaker Change: For James said before our net gain was roughly 10%.
Speaker Change: All right.
Speaker Change: Got it got it.
Speaker Change: And one other point on AGM, it's net one other point on that price increase just to connect a couple of dots. We've talked about today is a lot of the investment that we went into on the AI and community front a lot of those improvements will be coming out are in the same time, if next year. So as we're increasing the prices and for all of the.
Speaker Change: Reason is that James in Utica just.
Speaker Change: Shared with you, we'll also be having some enhancements from AI and community standpoint that our members existing and new would benefit from.
Speaker Change: Okay and when.
Speaker Change: When you launch the ignorant on products I assume that's gonna be wants to your existing customer base, so should that minimize the.
Speaker Change: Net of increased sales and marketing costs since you're.
Speaker Change: You're basically going to be selling to to your own your own customers now or do you expect to invest an additional sales and marketing.
Speaker Change: I would say the sales and marketing cost will be roughly same as other around 40% because yes, we selling through guy marketplace, but also we will sell it and we'll sell them independently and obviously would have a law so that you're going to be.
Speaker Change: The launch of new products, which will be distributed through taken it already has a distribution.
Speaker Change: About $50.
Speaker Change: Seven the distributors about 50 countries today. So it will go through that network as well to start.
Speaker Change: Alright, and then last one is a balance sheet question you have about 6 million of debt, it's moved into its short term debt.
Speaker Change: We will finance that with another load or used a lot of credit right, yes. So.
Speaker Change: Yeah. Good catch there Jim Yes that just is a change from an accounting standpoint based on our current loan we plan to re up and do a very similar arrangement going forward later this year.
Speaker Change: And then just flipped into a new category, but our expectation is.
Speaker Change: Is to continue on with the same approach. This is a mortgage on our campus it's not really.
Speaker Change: We don't draw anything out $10 million credit lines. So this is about $5 9 million I think we have a mortgage.
Speaker Change: And our real estate it was probably three to four times the value correct, but if you're going to definitely payload more interest than we had before on the mortgage.
Speaker Change: We also grow our catch voluntarily start to gain some interest correct. Thanks for clarifying.
Speaker Change: Okay alright, thank you.
Speaker Change: Thank you at this time. This does conclude our question and answer session I'd now like to turn the call back to Mr. Rysavy for closing remarks.
Speaker Change: Yeah.
Rysavy: Well. Thank you everyone for joining and we look forward to speak with you when we reported our Q1 results in May 12.
Speaker Change: Thank you very much.
Speaker Change: Thank you for joining us today for guys fourth quarter and full year Conference call. You may now disconnect at this time.
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