UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
_____________________
(MARK ONE)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarter endedMarch 31, 2023
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period fromto
_________ to _________
Commission file
number: 001-39139
_____________________
CURIOSITYSTREAM INC.
(Exact Name of Registrant as Specified in Its Charter)
_____________________
| Delaware | 84-1797523 | |||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||
8484 Georgia Ave., Suite 700
Silver Spring,
Maryland 20910
(Address of principal executive offices)
(301)
755-2050
(Issuer’s telephone number)
_____________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||||
Common Stock, par value $0.0001 | CURI | NASDAQ | ||||||||||||||
Warrants, each exercisable for one share of Common Stock at an exercise price of $11.50 per share | CURIW | NASDAQ | ||||||||||||||
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐
oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒x No ☐o
S-T
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” inRule 12b-2
of the Exchange Act.| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||||||||||||
| Emerging growth company | ☒ | |||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☐ No ☒CURIOSITYSTREAM INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023
TABLE OF CONTENTS
Table of Contents
| Page | ||||||||
Item 1. Financial Statements (unaudited) | ||||||||
i
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 48,668 | $ | 40,007 | ||||
| Restricted cash | 500 | 500 | ||||||
| Short-term investments in debt securities | — | 14,986 | ||||||
| Accounts receivable, net | 9,699 | 10,899 | ||||||
| Other current assets | 2,189 | 3,118 | ||||||
| Total current assets | 61,056 | 69,510 | ||||||
| Investments in equity method investees | 10,547 | 10,766 | ||||||
| Property and equipment, net | 1,000 | 1,094 | ||||||
| Content assets, net | 66,373 | 68,502 | ||||||
Operating lease right-of-use | 3,633 | 3,702 | ||||||
| Other assets | 493 | 539 | ||||||
Total assets | $ | 143,102 | $ | 154,113 | ||||
Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Content liabilities | $ | 1,656 | $ | 2,862 | ||||
| Accounts payable | 7,500 | 6,065 | ||||||
| Accrued expenses and other liabilities | 3,380 | 7,752 | ||||||
| Deferred revenue | 13,863 | 14,281 | ||||||
| Total current liabilities | 26,399 | 30,960 | ||||||
| Warrant liability | 331 | 257 | ||||||
Non-current operating lease liabilities | 4,560 | 4,648 | ||||||
| Other liabilities | 655 | 622 | ||||||
Total liabilities | 31,945 | 36,487 | ||||||
Stockholders’ equity | ||||||||
Common stock, $0.0001 par value – 125,000 shares authorized as of March 31, 2023 and December 31, 2022; 52,961 shares issued and outstanding as of March 31, 2023; 52,853 shares issued and outstanding as of December 31, 2022 | 5 | 5 | ||||||
Additional paid-in capital | 360,002 | 358,760 | ||||||
| Accumulated other comprehensive loss | — | (40 | ) | |||||
| Accumulated deficit | (248,850 | ) | (241,099 | ) | ||||
| Total stockholders’ equity | 111,157 | 117,626 | ||||||
Total liabilities and stockholders’ equity | $ | 143,102 | $ | 154,113 | ||||
For the three months ended March 31, | ||||||||
2023 | 2022 | |||||||
Revenues | $ | 12,387 | $ | 17,627 | ||||
Operating expenses | ||||||||
| Cost of revenues | 9,001 | 11,850 | ||||||
| Advertising and marketing | 3,115 | 14,768 | ||||||
| General and administrative | 8,059 | 10,503 | ||||||
| 20,175 | 37,121 | |||||||
Operating loss | (7,788 | ) | (19,494 | ) | ||||
| Change in fair value of warrant liability | (74 | ) | 3,860 | |||||
| Interest and other income (expense) | 388 | (57 | ) | |||||
| Equity method investment loss | (219 | ) | (156 | ) | ||||
Loss before income taxes | (7,693 | ) | (15,847 | ) | ||||
| Provision for income taxes | 58 | 45 | ||||||
Net loss | $ | (7,751 | ) | $ | (15,892 | ) | ||
Net loss per share | ||||||||
| Basic | $ | (0.15 | ) | $ | (0.30 | ) | ||
| Diluted | $ | (0.15 | ) | $ | (0.30 | ) | ||
Weighted average number of common shares outstanding | ||||||||
| Basic | 52,950 | 52,750 | ||||||
| Diluted | 52,950 | 52,750 | ||||||
For the three months ended March 31, | ||||||||
2023 | 2022 | |||||||
Net loss | $ | (7,751 | ) | $ | (15,892 | ) | ||
| Other comprehensive income (loss) | ||||||||
| Unrealized gain (loss) on available for sale securities | 40 | (233 | ) | |||||
Total comprehensive loss | $ | (7,711 | ) | $ | (16,125 | ) | ||
Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Additional Paid-in | Other Comprehensive | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | ||||||||||||||||||||||||||
Balance as of December 31, 2021 | 52,677 | $ | 5 | — | $ | — | $ | 352,334 | $ | (222 | ) | $ | (190,182 | ) | $ | 161,935 | ||||||||||||||||
| Net loss | — | — | — | — | — | — | (15,892 | ) | (15,892 | ) | ||||||||||||||||||||||
| Stock-based compensation, net | 90 | — | — | — | 1,651 | — | — | 1,651 | ||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (233 | ) | — | (233 | ) | ||||||||||||||||||||||
Balance as of March 31, 2022 | 52,767 | $ | 5 | — | $ | — | $ | 353,985 | $ | (455 | ) | $ | (206,074 | ) | $ | 147,461 | ||||||||||||||||
Balance as of December 31, 2022 | 52,853 | $ | 5 | — | $ | — | $ | 358,760 | $ | (40 | ) | $ | (241,099 | ) | $ | 117,626 | ||||||||||||||||
| Net loss | — | — | — | — | — | — | (7,751 | ) | (7,751 | ) | ||||||||||||||||||||||
| Stock-based compensation, net | 108 | — | — | — | 1,242 | — | — | 1,242 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 40 | — | 40 | ||||||||||||||||||||||||
Balance as of March 31, 2023 | 52,961 | $ | 5 | — | $ | — | $ | 360,002 | $ | — | $ | (248,850 | ) | $ | 111,157 | |||||||||||||||||
| (In thousands, except par value) | March 31, 2024 | December 31, 2023 | |||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 38,750 | $ | 37,715 | |||||||
| Restricted cash | 125 | 500 | |||||||||
| Accounts receivable | 4,876 | 4,760 | |||||||||
| Other current assets | 1,831 | 2,315 | |||||||||
| Total current assets | 45,582 | 45,290 | |||||||||
| Investments in equity method investees | 4,598 | 6,354 | |||||||||
| Property and equipment, net | 639 | 727 | |||||||||
| Content assets, net | 40,154 | 44,943 | |||||||||
| Operating lease right-of-use assets | 3,279 | 3,350 | |||||||||
| Other assets | 311 | 358 | |||||||||
| Total assets | $ | 94,563 | $ | 101,022 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities | |||||||||||
| Content liabilities | $ | 74 | $ | 407 | |||||||
| Accounts payable | 3,288 | 4,765 | |||||||||
| Accrued expenses and other liabilities | 4,766 | 3,705 | |||||||||
| Deferred revenue | 14,651 | 14,521 | |||||||||
| Total current liabilities | 22,779 | 23,398 | |||||||||
| Warrant liability | 74 | 44 | |||||||||
| Non-current operating lease liabilities | 4,187 | 4,283 | |||||||||
| Other liabilities | 562 | 651 | |||||||||
| Total liabilities | 27,602 | 28,376 | |||||||||
| Stockholders’ equity | |||||||||||
| Common stock, $0.0001 par value – 125,000 shares authorized as of March 31, 2024, and December 31, 2023; 53,306 shares issued and outstanding as of March 31, 2024; 53,286 issued and outstanding as of December 31, 2023 | 5 | 5 | |||||||||
| Additional paid-in capital | 363,319 | 362,636 | |||||||||
| Accumulated other comprehensive loss | — | — | |||||||||
| Accumulated deficit | (296,363) | (289,995) | |||||||||
| Total stockholders’ equity | 66,961 | 72,646 | |||||||||
| Total liabilities and stockholders’ equity | $ | 94,563 | $ | 101,022 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
| Three Months Ended March 31, | |||||||||||||||||||||||
| (Unaudited and in thousands except per share amounts) | 2024 | 2023 | |||||||||||||||||||||
| Revenues | $ | 12,001 | $ | 12,387 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Cost of revenues | 6,748 | 9,001 | |||||||||||||||||||||
| Advertising and marketing | 3,105 | 3,115 | |||||||||||||||||||||
| General and administrative | 5,802 | 8,059 | |||||||||||||||||||||
| 15,655 | 20,175 | ||||||||||||||||||||||
| Operating loss | (3,654) | (7,788) | |||||||||||||||||||||
| Change in fair value of warrant liability | (30) | (74) | |||||||||||||||||||||
| Interest and other income (expense) | 439 | 388 | |||||||||||||||||||||
| Equity method investment loss | (1,756) | (219) | |||||||||||||||||||||
| Loss before income taxes | (5,001) | (7,693) | |||||||||||||||||||||
| Provision for income taxes | 34 | 58 | |||||||||||||||||||||
| Net loss | $ | (5,035) | $ | (7,751) | |||||||||||||||||||
| Net loss per share | |||||||||||||||||||||||
| Basic | $ | (0.09) | $ | (0.15) | |||||||||||||||||||
| Diluted | $ | (0.09) | $ | (0.15) | |||||||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 53,301 | 52,950 | |||||||||||||||||||||
| Diluted | 53,301 | 52,950 | |||||||||||||||||||||
For the three months ended March 31, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities | ||||||||
| Net loss | $ | (7,751 | ) | $ | (15,892 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Change in fair value of warrant liability | 74 | (3,860 | ) | |||||
| Additions to content assets | (3,723 | ) | (14,470 | ) | ||||
| Change in content liabilities | (1,206 | ) | (5,672 | ) | ||||
| Amortization of content assets | 5,852 | 9,038 | ||||||
| Depreciation and amortization expenses | 127 | 209 | ||||||
| Amortization of premiums and accretion of discounts associated with investments in debt securities, net | 26 | 411 | ||||||
| Stock-based compensation | 1,267 | 1,788 | ||||||
| Equity method investment loss | 219 | 156 | ||||||
Other non-cash items | 121 | 120 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 1,200 | 10,052 | ||||||
| Other assets | 944 | 2,227 | ||||||
| Accounts payable | 1,440 | 4,990 | ||||||
| Accrued expenses and other liabilities | (4,514 | ) | (3,677 | ) | ||||
| Deferred revenue | (384 | ) | 2,293 | |||||
| Net cash used in operating activities | (6,308 | ) | (12,287 | ) | ||||
Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (5 | ) | (22 | ) | ||||
| Investment in equity method investees | — | (813 | ) | |||||
| Sales of investments in debt securities | — | 2,502 | ||||||
| Maturities of investments in debt securities | 15,000 | 19,603 | ||||||
| Purchases of investments in debt securities | — | (1,497 | ) | |||||
| Net cash provided by investing activities | 14,995 | 19,773 | ||||||
Cash flows from financing activities | ||||||||
| Payments related to tax withholding | (26 | ) | (137 | ) | ||||
| Net cash used in financing activities | (26 | ) | (137 | ) | ||||
Net increase in cash, cash equivalents and restricted cash | 8,661 | 7,349 | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | 40,507 | 17,547 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 49,168 | $ | 24,896 | ||||
Supplemental disclosure: | ||||||||
| Cash paid for taxes | $ | — | $ | 177 | ||||
| Cash paid for operating leases | 134 | 131 | ||||||
Right-of-use | — | 3,965 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| Three Months Ended March 31, | |||||||||||||||||||||||
| (Unaudited and in thousands) | 2024 | 2023 | |||||||||||||||||||||
| Net loss | $ | (5,035) | $ | (7,751) | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Unrealized gain on available for sale securities | — | 40 | |||||||||||||||||||||
| Total comprehensive loss | $ | (5,035) | $ | (7,711) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| (Unaudited and in thousands) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 52,853 | $ | 5 | $ | 358,760 | $ | (40) | $ | (241,099) | $ | 117,626 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | (7,751) | (7,751) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | 108 | — | 1,242 | — | — | 1,242 | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 40 | — | 40 | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | 52,961 | $ | 5 | $ | 360,002 | $ | — | $ | (248,850) | $ | 111,157 | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 53,287 | $ | 5 | $ | 362,636 | $ | — | $ | (289,995) | $ | 72,646 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (5,035) | (5,035) | |||||||||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | — | — | (1,333) | (1,333) | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | 19 | — | 683 | — | — | 683 | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | 53,306 | $ | 5 | $ | 363,319 | $ | — | $ | (296,363) | $ | 66,961 | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CURIOSITYSTREAM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 31, | |||||||||||
| (Unaudited and in thousands) | 2024 | 2023 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | (5,035) | $ | (7,751) | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||||||
| Change in fair value of warrant liability | 30 | 74 | |||||||||
| Additions to content assets | (426) | (3,723) | |||||||||
| Change in content liabilities | (333) | (1,206) | |||||||||
| Amortization of content assets | 5,215 | 5,852 | |||||||||
| Depreciation and amortization expenses | 117 | 127 | |||||||||
| Amortization of premiums and accretion of discounts associated with investments in debt securities, net | — | 26 | |||||||||
| Stock-based compensation | 689 | 1,267 | |||||||||
| Equity method investment loss | 1,756 | 219 | |||||||||
| Other non-cash items | 122 | 121 | |||||||||
| Changes in operating assets and liabilities | |||||||||||
| Accounts receivable | (116) | 1,200 | |||||||||
| Other assets | 502 | 944 | |||||||||
| Accounts payable | (1,477) | 1,440 | |||||||||
| Accrued expenses and other liabilities | (419) | (4,514) | |||||||||
| Deferred revenue | 41 | (384) | |||||||||
| Net cash provided by (used in) operating activities | 666 | (6,308) | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property and equipment | — | (5) | |||||||||
| Maturities of investments in debt securities | — | 15,000 | |||||||||
| Net cash provided by investing activities | — | 14,995 | |||||||||
| Cash flows from financing activities | |||||||||||
| Payments related to tax withholding | (6) | (26) | |||||||||
| Net cash used in financing activities | (6) | (26) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | 660 | 8,661 | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 38,215 | 40,507 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 38,875 | $ | 49,168 | |||||||
| Supplemental disclosure: | |||||||||||
| Cash refund for taxes | $ | (2) | $ | — | |||||||
| Cash paid for operating leases | $ | 138 | $ | 134 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
CURIOSITYSTREAM INC.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
On October 14, 2020, Software Acquisition Group Inc., a special purpose acquisition company and a Delaware corporation (“SAQN”), consummated a reverse merger pursuant to that certain Agreement and Plan of Merger, dated August 10, 2020 (the “Business Combination”). Upon the consummation of the Business Combination, CuriosityStream Operating Inc.
The principal business of CuriosityStream Inc. (the “Company”"Company" or “CuriosityStream”"CuriosityStream") is to provideproviding customers with access to high quality factual content via a direct subscription videomore than six thousandthousands of accessible on-demand and ad-free productions and includes shows and series from leading non-fictionnonfiction producers.
on-demand
(SVOD) platform accessible by internet connected devices, or indirectly via distribution partners who deliver CuriosityStream content via the distributor’s platform or system. The Company's online library available for streaming spans the entire category of factual entertainment including science, history, society, nature, lifestyle, and technology. The library is composed of The Company’s content assets are available for consuming directly through its owned and operated website (“O&O Consumer Service”), mobile applications developed for iOS and Android operating systems (“App Services”), and via the platforms and systems of third-party partners in exchange for license fees. The Company offers subscribers a monthly or annual subscription. The price for a subscription varies depending on the location of the subscriber, the content included (e.g., Direct Service or Smart Bundle service) and the length of the subscription (e.g., monthly or annual) selected by the customer. As an additional part of the Company’s App Services, it has built applications to make its service accessible on almost every major customer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles. In addition, CuriosityStream has affiliate agreement relationships with, and its content assets are available through, certain multichannel video programming distributors (“MVPDs”) and virtual MVPDs (“vMVPDs”). The Company also has distribution agreements which grant other media companies certain distribution rights to the Company’s programs, referred to as content licensing deals.arrangements. The Company also sells selected rights to content it createscreated before production begins.
The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistent in all material respects with those applied in the Company’s consolidated financial statements as of and for the year ended December 31, 2022.2023.
In the opinion of management, the unaudited consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes andincluded in the Annual Report on Form2022.2023. The results of operations for the three months ended March 31, 20232024, are not necessarily indicative of the results to be expected for the year ending December 31, 2023.2024.
Management’s Discussion and Analysis of Financial Condition, and Results of Operations
10-K
for the year ended December 31, The preparation of consolidated financial statements in conformity with U.S. GAAP and the rules and regulations of the U.S.U.S Securities and Exchange Commission (the “SEC”) requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results couldcould differ from those estimates. Significant items subject to such estimates include the content asset amortization, policy, the assessment of the recoverability of content assets and equity method investments, and the determination of fair value ofestimates related to non-monetary transactions, share-based awards and liability classified warrants and measurement of income tax assets and
Concentration of risk
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, investments, and accounts receivable. The Company maintains its cash, cash equivalents, and investments with high credit quality financial institutions; at times, such balances with the financial institutions may exceed the applicable FDIC-insured limits.
Accounts receivable, net are typically unsecured and are derived from revenues earned from customers primarily located in the United States.States.
Fair value measurementValue Measurement of financial instruments
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The applicable accounting guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputsthose that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The accounting guidance establishes three levels of inputs that may be used to measure fair value:
•Level 1 —: Quoted prices in active markets for identical assets or liabilities.
•Level 2 —: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 — : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification at each reporting period. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
The Company’s assets measured at fair value on a recurring basis includehave included its investments in money market funds and corporate debt securities.securities (at December 31, 2022). Level 1 inputs were derived by using unadjusted quoted prices for identical assets in active markets and were used to value the Company’s investments in money market funds and U.S. government debt securities. Level 2 inputs were derived using prices for similar investments and were used to value the Company’s investments in corporate and municipal debt securities.
The Company’s liabilities measured at fair value on a recurring basis include its private placement warrants issued to Software Acquisition Holdings LLC, the Company’s former Sponsor, in a private placement offering (the “Private Placement Warrants”). The fair value of the Private Placement Warrants is considered a Level 3 valuation and is determined using the Black-ScholesBlack-Scholes valuation model. Refer to Note 6 - Stockholders' Equity for significant assumptions which the Company used in the fair value model for the Private Placement Warrants.
Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments only in certain circumstances, e.g., when there is evidence of impairment indicators.
The Company’s remaining financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other liabilities are carried at cost, which approximates fair value because of the short-term maturity of these instruments.
7
such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC.
In June 2016,November 2023, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)“Financial Instruments—Credit Losses2023-07 ("ASU 2023-07"), Segment Reporting (Topic 326)280): Measurement of Credit LossesImprovements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on Financial Instruments (“ASU2016-13”).”The amendments in this update introduce a new standard to replace the incurred loss impairment methodology underpriorU.S. GAAPan interim and annual basis. Public entities with a methodology that reflects expected credit lossessingle reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.
ASU No. 2016-13,
In December 2023, the FASB issued ASU No. 2023-09 ("ASU 2023-09"), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires considerationpublic entities, on an annual basis, to provide disclosure of a broader rangespecific categories in the rate reconciliation, as well as disclosure of reasonable and supportable information to inform credit loss estimates.income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.
NOTE 3 - EQUITY INVESTMENTS
The Company determines its allowance for doubtful accounts based on historical loss experience, customer financial condition, and current economic conditions.
holds equity investments in Spiegel TV Geschichte und Wissen GmbH & Co. KG (the “Spiegel Venture”) and Watch Nebula LLC (“Nebula”). The Company accounts for these investments under the equity method of accounting. The Company’s carrying values for its equity method investments as of March 31, 2024, and December 31, 2023, were as follows:
| (In thousands) | Spiegel Venture | Nebula | Total | ||||||||||||||
| Balance at December 31, 2023 | $ | 1,736 | $ | 4,618 | $ | 6,354 | |||||||||||
| Equity method investment loss | (1,519) | (237) | (1,756) | ||||||||||||||
| Balance at March 31, 2024 | $ | 217 | $ | 4,381 | $ | 4,598 | |||||||||||
SPIEGEL VENTURE
In July 2021, the Company acquired a 32% ownership in the Spiegel Venture for an initial investment of $3.3 million. The
Spiegel Venture, which prior to the Company’s equity purchase, was jointly owned and operated by Spiegel TV GmbH (“Spiegel TV”) and Autentic GmbH (“Autentic”), operates two documentary channels, together with an SVOD service as well as a free advertising-supported streaming television (FAST) channel, which provide factual content to pay television audiences in Germany.Germany and certain German-speaking regions of other countries. The Company has not received any dividends from the Spiegel Venture as of March 31, 2024.
Per the Share Purchase Agreement (as amended in early 2023, the “SPA”), in the event the Spiegel Venture achieved certain financial targets during its 2022 fiscal period, the Company is required to make an additional payment related to its 32% equity ownership to both Spiegel TV and Autentic (the “Holdback Payment”). During the three months ended June 30, 2023, the Company determined the Spiegel Venture had achieved such financial targets, resulting in the Company paying a Holdback Payment in the amount of $0.9 million to the Spiegel Venture during July 2023.
The Company has a call option that permits it to require Spiegel TV and Autentic to sell their respective ownership interests in the Spiegel Venture (“Call Option”) to the Company. The Call Option, exercisable at a value based on a determinable calculation in the Share Purchase Agreement, which was amended during the three months ended March 31, 2023 (as amended, the “SPA”),SPA, is initially exercisable only during the period that is the later of (i) the30-dayperiod30 business days following the adoption of the Spiegel Venture’s audited financial statements for the fiscal year 2025, and (ii) the period between March 1, 2026, and March 30,31, 2026.
Together with the Call Option, each of Spiegel TV and Autentic has a put option that permits it to require the Company to purchase their interest (“Put Option”) at a value based on a determinable calculation outlined in the SPA. The Put Option is only exercisable upon the achievement of certain defined conditions, as outlined in the SPA, and is initially exercisable only during the period that is the later of (i) the
8
In the event the Call Option or Put Option is not exercised, both options
will
continue to be available to each respective party in the following year through perpetuity, with its exercise limited to the same date range as outlined above. The Put Option is not currently considered to be probable of becoming exercisable based on the defined conditions in the SPA.Since the time of its original investment, the Company has been obligated to purchase additional incremental ownership interests, each for a payment of $0.8 million and representing 1.625% of equity ownership, if Nebula meets certain quarterly targets. The Company has made three subsequent incremental purchases, bringing its total ownership interest in Nebula to 16.875% as of March 31, 2024. The Company did not make further investments in Nebula during the three months ended March 31, 2024, and the obligation to make additional purchases ended as of September 30, 2023. The Company has not received dividends from Nebula as of March 31, 2023.2024.
Since August 2021, the Company has included access to Nebula’s SVOD service as a part of a combined CuriosityStream / Watch Nebula subscription offer and as part of the Company’s Smart Bundle subscription package. As part of this arrangement, the Company has shared revenue with Nebula, based on certain metrics, and paid monthly. On September 26, 2023, Nebula provided the Company with a notice of non-renewal (the “Nebula Non-Renewal”), which resulted in the expiration of the revenue share at the end of 2023. Nebula is still required to make its service available to subscribers to either of these offerings through the end of the term of any such subscription that exists as of December 31, 2023.
9
Spiegel Venture | Nebula | Total | ||||||||||
(in thousands) | ||||||||||||
| Balance, December 31, 2022 | $ | 2,899 | $ | 7,867 | $ | 10,766 | ||||||
| Equity method investment income (loss) | 28 | (247 | ) | (219 | ) | |||||||
| Balance, March 31, 2023 | $ | 2,927 | $ | 7,620 | $ | 10,547 | ||||||
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
A reconciliation of the Company’s cash and cash equivalents in the consolidated balance sheets to cash, cash equivalents and restricted cash in the consolidated statements of cash flows is as follows:
| (In thousands) | March 31, 2024 | December 31, 2023 | |||||||||
| Cash and cash equivalents | $ | 38,750 | $ | 37,715 | |||||||
Restricted cash1 | 125 | 500 | |||||||||
| Cash and cash equivalents and restricted cash | $ | 38,875 | $ | 38,215 | |||||||
1 Restricted cash included cash deposits required by a bank as collateral related to corporate credit card agreements. | |||||||||||
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Cash and cash equivalents | $ | 48,668 | $ | 40,007 | ||||
| Restricted cash | 500 | 500 | ||||||
| Cash, cash equivalents and restricted cash | $ | 49,168 | $ | 40,507 | ||||
As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||
Cash and Cash Equivalents | Short-term Investments | Investments (non-current) | Total | Cash and Cash Equivalents | Short-term Investments | Investments (non-current) | Total | |||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
| Level 1 Securities | ||||||||||||||||||||||||||||||||
| Money market funds | $ | 47,272 | $ | — | — | $ | 47,272 | $ | 17,724 | $ | — | — | $ | 17,724 | ||||||||||||||||||
| Total Level 1 Securities | $ | 47,272 | — | — | $ | 47,272 | $ | 17,724 | — | — | $ | 17,724 | ||||||||||||||||||||
| Level 2 Securities | ||||||||||||||||||||||||||||||||
| Corporate debt securities | — | — | — | — | — | $ | 14,986 | — | $ | 14,986 | ||||||||||||||||||||||
| Total Level 2 Securities | — | — | — | — | — | $ | 14,986 | — | $ | 14,986 | ||||||||||||||||||||||
| Total | $ | 47,272 | — | — | $ | 47,272 | $ | 17,724 | $ | 14,986 | — | $ | 32,710 | |||||||||||||||||||
| (In thousands) | Cash and Cash Equivalents | ||||||||||||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Level 1 securities: | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | 36,544 | $ | 36,072 | |||||||||||||||||||||||||||||||
| Total Level 1 securities | $ | 36,544 | $ | 36,072 | |||||||||||||||||||||||||||||||
As of December 31, 2022 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
| Debt Securities: | ||||||||||||||||
| Corporate | $ | 15,026 | — | $ | (40 | ) | $ | 14,986 | ||||||||
| Total | $ | 15,026 | — | $ | (40 | ) | $ | 14,986 | ||||||||
Content assets consisted of the following:
As of | ||||||||
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Licensed content, net | ||||||||
| Released, less amortization | $ | 11,790 | $ | 11,154 | ||||
| Prepaid and unreleased | 3,086 | 4,014 | ||||||
| 14,876 | 15,168 | |||||||
| Produced content, net | ||||||||
| Released, less amortization | 32,332 | 33,094 | ||||||
| In production | 19,165 | 20,240 | ||||||
| 51,497 | 53,334 | |||||||
| Total | $ | 66,373 | $ | 68,502 | ||||
| (in thousands) | March 31, 2024 | December 31, 2023 | |||||||||
| Licensed content, net: | |||||||||||
Released, less amortization and impairment1 | $ | 10,221 | $ | 8,271 | |||||||
| Prepaid and unreleased | 4,966 | 8,357 | |||||||||
| Total Licensed content, net | 15,187 | 16,628 | |||||||||
| Produced content, net: | |||||||||||
Released, less amortization and impairment2 | 23,425 | 22,880 | |||||||||
| In production | 1,542 | 5,435 | |||||||||
| Total produced content, net | 24,967 | 28,315 | |||||||||
| Total content assets | $ | 40,154 | $ | 44,943 | |||||||
Of the $10.2 million unamortized cost of the licensed content that hashad been released is expected toas of March 31, 2024, the Company expects that $4.7 million, $3.1 million and $1.4 million will be amortized in each of the next three years, respectively. As of March 31, 2023,
10
Impairment Assessment
The Company’s primary business model is subscription-based as opposed to a model based on generating revenues at a specific title level. Content assets are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content library will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs are written off for content assets that have been, or are expected to be abandoned.
Amortization
In accordance with its accounting policy for content assets, the Company amortizedamortizes licensed content costs and produced content costs,, which is included inwithin cost of revenues onin the Company’s
Warrant liabilityWARRANT LIABILITY
NoteNOTE 5 — Revenue- REVENUE
unaudited consolidated statements of operations,operations. For the three months ended March 31, 2024, and 2023, content amortization was as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | |||||||||||||||||||||
| Licensed content | $ | 1,698 | $ | 1,945 | |||||||||||||||||||
| Produced content | 3,517 | 3,907 | |||||||||||||||||||||
| Total | $ | 5,215 | $ | 5,852 | |||||||||||||||||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Licensed content | $ | 1,945 | $ | 2,999 | ||||
| Produced content | 3,907 | 6,039 | ||||||
| Total | $ | 5,852 | $ | 9,038 | ||||
As described in Note 6 - Stockholders' Equity, the Private Placement Warrants are classified as aTheAs of March 31, 2024, and December 31, 2023, the fair value of the Private Placement Warrants, as determined using Level 3 inputs, was as follows:
non-current
liability and reported at fair value at each reporting period. | (in thousands) | March 31, 2024 | December 31, 2023 | |||||||||
| Private Placement Warrants | $ | 74 | $ | 44 | |||||||
As of March 31, 2023 | As of December 31, 2022 | |||||||
(in thousands) | ||||||||
| Level 3 | ||||||||
| Private Placement Warrants | $ | 331 | $ | 257 | ||||
| Total Level 3 | $ | 331 | $ | 257 | ||||
The following table sets forth the Company’s revenues disaggregated by typerevenues for the three months ended March 31, 20232024, and 2022,2023, as well as the relative percentage of each revenue type to total revenue.revenue:
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct Business: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct-to-Consumer | 8,068 | 67 | % | 7,480 | 60 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Partner Direct Business | 1,462 | 12 | % | 1,102 | 9 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Direct Business | 9,530 | 79 | % | 8,582 | 69 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Licensing: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Library sales | 868 | 7 | % | 817 | 7 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Presales | 296 | 2 | % | 1,201 | 10 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Content Licensing | 1,164 | 10 | % | 2,018 | 16 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bundled Distribution | 1,142 | 10 | % | 1,416 | 11 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Enterprise | 68 | 1 | % | 97 | 1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 97 | 1 | % | 274 | 2 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 12,001 | $ | 12,387 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
| Subscriptions – O&O Service | $ | 6,642 | 54 | % | $ | 7,307 | 41 | % | ||||||||
| Subscriptions – App Services | 878 | 7 | % | 1,048 | 6 | % | ||||||||||
| Subscriptions – Total | 7,520 | 61 | % | 8,355 | 47 | % | ||||||||||
| License Fees – Partner Direct | 1,102 | 9 | % | 1,143 | 7 | % | ||||||||||
| License Fees – Bundled Distribution | 1,473 | 12 | % | 3,767 | 21 | % | ||||||||||
| License Fees – Content Licensing | 2,018 | 16 | % | 4,248 | 24 | % | ||||||||||
| License Fees – Total | 4,593 | 37 | % | 9,158 | 52 | % | ||||||||||
Other – Total (1) | 274 | 2 | % | 114 | 1 | % | ||||||||||
| Total Revenues | $ | 12,387 | $ | 17,627 | ||||||||||||
11
As of March 31, 2024, the Company expects to be recognizedrecognize revenues in the future related to performance obligations that as of March 31, 2023 are as follows:
were
unsatisfied| Remainder of Year Ending December 31, 2024 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2026 | 2027 | Thereafter | Total | ||||||||||||||||||||||||||||||
| Remaining performance obligations | $ | 1,192 | $ | 613 | $ | 92 | $ | 46 | $ | 20 | $ | 1,963 | |||||||||||||||||||||||
Remainder of year ending December 31, | For the years ending December 31, | |||||||||||||||||||||||||||
2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
| Remaining Performance Obligations | $ | 5,695 | $ | 4,156 | $ | 2,096 | $ | 193 | $ | 31 | $ | 195 | $ | 12,366 | ||||||||||||||
These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i)(a) contracts with an original expected term of one year or less or (ii)(b) licenses of content that are solely based on sales or usage-based royalties.
DEFERRED REVENUE
Contract liabilities (i.e., deferred revenue)certificatescards and other prepaid subscriptions that have not been redeemed. Total deferred revenues,were $14.5$15.2 million and $14.9 millionatas of March 31, 20232024, and December 31, 2022, respectively. Revenues2023, with the non-current portions of $0.6 million as of March 31, 2024, and December 31, 2023, included in other liabilities on the consolidated balance sheets.of $6.5 millionwere recognized duringFor the three months ended March 31, 2023,2024, the Company recognized revenues of $6.3 million related to the balanceamounts deferred as of deferred revenue at December 31, 2022, primarily related to the recognition from annual2023.plan amounts.
consist
of subscriber and affiliate license fees billed that have not been recognized, amounts contractually billed or collected for content licensing sales in advance of the related content being made available to the customer, and unredeemed gift As of March 31, 20232024, and December 31, 2022,2023, the Company
had
authorized the issuance of 126,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a) 125,000,000 shares of common stock, and (b) 1,000,000 shares of preferred stock.As of March 31, 2023,2024, the Company had 3,054,203 publicly traded warrants outstanding that were sold as part of the units of Software Acquisition Group Inc. in its initial public offering on November 22, 2019, and that were issued to the PIPE Investors in connection withbusiness combination that closed Business Combination on October 14, 2020 (the “Public Warrants” and,,together with the Private Placement Warrants, the “Warrants”"Warrants") and 3,676,000 Private Placement Warrants outstanding.
the
The
Private Placement Warrants are liability-classified, and the Public Warrants are equity-classified.Each whole warrant entitles the registered holder to purchase one share of the Company’s common stockCommon Stock at an exercise price of $11.50 per share. All Warrants expire on October 14, 2025.
The Company has the right to redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stockCommon Stock matched or exceeded $18.00 per share for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the warrant holders.The Private Placement Warrants are identical to the Public Warrants except that, so long as they are held by Software Acquisition Holdings LLC (the Company’s former sponsor) or its permitted transferees: (i) they will not be redeemable by the Company; (ii) they may be exercised by the holders on a cashless basis; and (iii) they are subject to registration rights.
There were no exercises of warrants during the three months ended March 31, 2023.2024.
12
The warrant liability related to the Private Placement Warrants is recorded at fair value as of each reporting date with the change in fair value reported within other income (expense) in the accompanying unaudited consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity.equity (deficit). The fair value of the warrant liability for the Private Placement Warrants was estimated using a Black-Scholes pricing model using Level 3 inputs. The significant assumptions used in preparing the Black-Scholes option pricing model areto determine fair value as of March 31, 2024, and December 31, 2023, were as follows:
| March 31, 2024 | December 31, 2023 | ||||||||||
| Exercise price | $ | 11.50 | $ | 11.50 | |||||||
| Stock price (CURI) | $ | 1.07 | $ | 0.54 | |||||||
| Expected volatility | 90.00 | % | 100.00 | % | |||||||
| Expected warrant term (years) | 1.5 | 1.8 | |||||||||
| Risk-free interest rate | 4.81 | % | 4.23 | % | |||||||
| Dividend yield | 2.3 | % | 0 | % | |||||||
| Fair Value per Private Placement Warrant | $ | 0.02 | $ | 0.01 | |||||||
As of March 31, 2023 | As of December 31, 2022 | |||||||
| Exercise price | $ | 11.50 | $ | 11.50 | ||||
| Stock price (CURI) | $ | 1.35 | $ | 1.14 | ||||
| Expected volatility | 79.00 | % | 77.00 | % | ||||
| Expected warrant term (years) | 2.5 | 2.8 | ||||||
| Risk-free interest rate | 3.94 | % | 4.22 | % | ||||
| Dividend yield | 0 | % | 0 | % | ||||
| Fair Value per Private Placement Warrant | $ | 0.09 | $ | 0.07 | ||||
The change in fair value of thePrivate Placement Warrant private placement warrant liability resulted ina lossof $0.1 million and a gain of$3.9 million
was negligible for the three months ended March 31, 20232024 and 2022, respectively.
$0.1 million for the three months ended March 31, 2023.Basic and diluted earnings (loss) per share calculations are calculated on the basis of the weighted average number of shares of the Company’s common stockCommon Stock outstanding during the respective periods. Diluted earnings (loss) per share give effect to all dilutive potential common shares outstanding during the period using the treasury stock method for stock options and other potentially dilutive securities. In computing diluted earnings (loss) per share, the average fair value of the Company’s common stockCommon Stock for the period is used to determine the number of shares assumed to be purchased from the exercise price of the options. Purchases of treasury stock reduce the outstanding shares commencing on the date that the stock is purchased. Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would be anti-dilutive.
Three months ended March 31, | ||||||||
2023 | 2022 | |||||||
(in thousands, except per share data) | ||||||||
| Numerator - Basic and Diluted EPS: | ||||||||
| Net loss | $ | (7,751 | ) | $ | (15,892 | ) | ||
| Denominator - Basic and Diluted EPS: | ||||||||
| Weighted–average shares | 52,950 | 52,750 | ||||||
| Net loss per share - Basic and Diluted | $ | (0.15 | ) | $ | (0.30 | ) | ||
For the three months ended March 31, 2024, and 2023, and 2022, the following share equivalents were excluded from the computationcomponents of basic and diluted net loss per share were as the inclusionfollows:
| (In thousands except per share amounts) | Three Months Ended March 31, | ||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Numerator — Basic and Diluted EPS: | |||||||||||||||||||||||
| Net loss | $ | (5,035) | $ | (7,751) | |||||||||||||||||||
| Denominator — Basic and Diluted EPS: | |||||||||||||||||||||||
| Weighted–average shares | 53,301 | 52,950 | |||||||||||||||||||||
| Net loss per share — Basic and Diluted | $ | (0.09) | $ | (0.15) | |||||||||||||||||||
13
Common shares issuable for warrants, options, and restricted stock units (“RSU”) represent the total amount of outstanding warrants, stock options, and restricted stock units at March 31, 2024, and 2023. For the three months ended March 31, 2024, and 2023, and 2022.the following share equivalents were excluded from the calculation of diluted net loss per share as the inclusion of such shares would have been anti-dilutive.
| Antidilutive shares excluded: | March 31, | |||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Options | 4,630 | 5,293 | ||||||
| Restricted Stock Units | 1,030 | 1,020 | ||||||
| Warrants | 6,730 | 6,730 | ||||||
| Total | 12,390 | 13,043 | ||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | |||||||||||||||||||||
| Options | 31 | 4,630 | |||||||||||||||||||||
| Restricted stock units | 2,478 | 1,030 | |||||||||||||||||||||
| Warrants | 6,730 | 6,730 | |||||||||||||||||||||
| Total | 9,239 | 12,390 | |||||||||||||||||||||
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value is recognized in earnings over the period during which an employee is required to provide the service. The Company accounts for forfeitures as they occur.
In October 2020, the Company’s Board of Directors of the Company adopted the CuriosityStream 2020 Omnibus Plan (the “2020 Plan”). The 2020 Plan became effective upon consummation of the Business Combination and succeeds the Legacy CuriosityStream Stock Option Plan. Upon adoption of the 2020 Plan, a total of 7,725,000 shares were approved to be issued as stock options, share appreciation rights, restricted stock units and restricted stock.
The following table summarizes stock option and restricted stock unit (“RSU”)RSU activity, prices, and values for the three months ended March 31, 2023:2024:
Number of Shares Available for Issuance Under the Plan | Stock Options | Restricted Stock Units | |||||||||||||||||||||||||||
| (in thousands except share price and fair value amounts) | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Grant Date Fair Value | |||||||||||||||||||||||||
| Balance at December 31, 2023 | 4,762 | 32 | $ | 5.79 | 2,058 | $ | 2.57 | ||||||||||||||||||||||
| Granted | (469) | — | — | 469 | 0.54 | ||||||||||||||||||||||||
| RSUs vested | 12 | — | — | (31) | 12.98 | ||||||||||||||||||||||||
| Forfeited or expired | 20 | (2) | 5.88 | (18) | 10.61 | ||||||||||||||||||||||||
| Balance at March 31, 2024 | 4,325 | 31 | $ | 5.30 | 2,478 | $ | 1.95 | ||||||||||||||||||||||
Stock Options | Restricted Stock Units | |||||||||||||||||||
Number of Shares Available for Issuance Under the Plan | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
| Balance at December 31, 2022 | 1,815 | 4,632 | $ | 7.13 | 759 | $ | 7.14 | |||||||||||||
| Granted | (342 | ) | — | — | 342 | 1.41 | ||||||||||||||
| Options exercised and RSUs vested | 18 | — | — | (49 | ) | 10.27 | ||||||||||||||
| Forfeited or expired | 23 | (2 | ) | 5.88 | (21 | ) | 9.85 | |||||||||||||
| Balance at March 31, 2023 | 1,514 | 4,630 | $ | 7.13 | 1,030 | $ | 4.89 | |||||||||||||
There were no options exercised during the three months ended March 31 20232024, and 2022.2023.
Stock options and RSU awards generally vest on a monthly, quarterly, or annual basis over a period of one to four years from the grant date. When options are exercised, the Company’s policy is to issueCompany issues previously unissued shares of Common Stock to satisfy share option exercises. Upon vesting and distribution of RSUs, the Company’s policy is to issueCompany issues previously unissued shares of Common Stock to satisfy restricted stock units vested, net of shares withheld for taxes if elected by the RSU holder.
The fair value of stock option awards is estimated using the Black-Scholes option pricing model, which includes a number of assumptions including Company’s estimates of stock price volatility, employee stock option exercise behaviors, future dividend payments, and risk-free interest rates.
The expected term of options granted is the estimated period of time from the beginning of the vesting period to the date of expected exercise or other settlement, based on historical exercises and post-vesting terminations. The Company generally estimates expected term based on the midpoint between the vesting date and the end of the contractual term, also known as the simplified method, given the lack of historical exercise behavior.
14
On April 28, 2023, the Company’s Board of Directors authorized, and on June 14, 2023, the Company’s shareholders approved, a stock option exchange program (the “Exchange”) that permitted certain current employees and executive officers to exchange certain outstanding stock options with exercise prices substantially above the current market price of the Company’s Common Stock for RSUs of an equivalent fair value. The Exchange was completed in July 2023. For options that had already vested at the time of the Exchange, the resulting RSUs will vest in July 2024. Otherwise, the vesting schedules for unvested options at the time of the Exchange will remain the same for the resulting RSUs. As a result of the Exchange, 4.6 million of outstanding eligible stock options were exchanged for 1.6 million new RSUs, with a fair value of $0.99 per share on the date of the Exchange. There was no incremental compensation expense recorded by the Company as a result of the Exchange.
The Company uses its own historical volatility as well as the historical volatility of similar public companies for estimating volatility. The risk-free interest rate is estimated using the rate of return on U.S. Treasury securities with maturities that approximate to the expected term of the option. The Company does not currently anticipate declaring any dividends.option..
| Three months ended March 31, | ||||||
| 2023 | 2022 | |||||
| Dividend yield | N/A | 0 | % | |||
| Expected volatility | N/A | 60% - 65 | % | |||
| Expected term (years) | N/A | 6.00 - 6.50 | ||||
| Risk-free interest rate | N/A | 1.40% - 2.44 | % | |||
| Weighted average grant date fair value | N/A | $2.30 | ||||
| (in thousands) | ||||||
| Stock-based compensation - Options | $777 | $967 | ||||
| Stock-based compensation - RSUs | $490 | $821 | ||||
| (stock-based compensation in thousands) | Three Months Ended March 31, | ||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Stock-based compensation — Options | $ | 5 | $ | 777 | |||||||||||||||||||
| Stock-based compensation — RSUs | $ | 684 | $ | 490 | |||||||||||||||||||
| Total stock-based compensation | $ | 689 | $ | 1,267 | |||||||||||||||||||
Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized on a straight-line basis over the requisite service period.
The Company operates as one reporting segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on an entity-wide basis for purposes of making operating decisions, assessing financial performance and allocating resources.
All long-lived tangible assets are located in the United States. RevenueFor the three months ended March 31, 2024, and 2023, revenue by geographic location based on thecustomer location of the customers, withwas as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 7,425 | 62 | % | $ | 6,686 | 54 | % | |||||||||||||||||||||||||||||||||||||||
| International: | |||||||||||||||||||||||||||||||||||||||||||||||
| Netherlands | 208 | 2 | % | 1,246 | 10 | % | |||||||||||||||||||||||||||||||||||||||||
| Other | 4,368 | 36 | % | 4,455 | 36 | % | |||||||||||||||||||||||||||||||||||||||||
| Total International | 4,576 | 38 | % | 5,701 | 46 | % | |||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 12,001 | 100 | % | $ | 12,387 | 100 | % | |||||||||||||||||||||||||||||||||||||||
Revenue from one foreign country, individually comprisingNetherlands, comprised 10% or greater than 10% of total revenue is as follows:for one or more of the periods presented.
Three months ended March 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
(in thousands) | ||||||||||||||||
| United States | $ | 6,686 | 54 | % | $ | 11,799 | 67 | % | ||||||||
| International: | ||||||||||||||||
| Netherlands | 1,246 | 10 | % | 65 | 0 | % | ||||||||||
| United Kingdom | 562 | 5 | % | 1,901 | 11 | % | ||||||||||
| Other | 3,893 | 31 | % | 3,862 | 22 | % | ||||||||||
| Total International | 5,701 | 46 | % | 5,828 | 33 | % | ||||||||||
| $ | 12,387 | 100 | % | $ | 17,627 | 100 | % | |||||||||
15
As of March 31, 2023.
| (In thousands) | March 31, 2024 | December 31, 2023 | |||||||||
| Accounts receivable | $ | 479 | $ | 811 | |||||||
| Accounts payable | $ | 3 | $ | 374 | |||||||
For the three months ended March 31, 2024, and statement2023, the impacts of arrangements with the Spiegel Venture and Nebula on the Company’s consolidated statements of operations iswere as follows:
Balance sheets: | March 31, | December 31, | ||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Accounts receivable | $ | 2,804 | $ | 3,358 | ||||
| Accounts payable | 788 | 404 | ||||||
| Accrued expenses and other liabilities | 14 | — | ||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | |||||||||||||||||||||
| Revenues | $ | 111 | $ | 794 | |||||||||||||||||||
| Cost of revenues | $ | 15 | $ | 1,202 | |||||||||||||||||||
Statement of operations: | Three months ended March 31, | |||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Revenues | $ | 794 | $ | — | ||||
| Cost of revenues | 1,202 | 990 | ||||||
OPERATING LEASE
The Company sublets a portion of its office space to Hendricks Investment Holdings, LLC, (“HIH”), which is considered a related party as it is managed by various members of the Company’s Board of Directors. The Company accounts for the arrangement as an operating lease. Refer to Note 11 - Leases for furtheradditional information.
The Company is a party to a Fixedleasepayments were included in the calculation ofright of use (“ROU”)asset and leases liabilities with variable lease payments being recognized as lease expense as incurred. The Company has determined that no renewal clauses are reasonably certain of being exercised and therefore has not included any renewal periods within the lease term for this lease.
non-cancellable
operating lease agreement for office space, which expires in 2033. The Company’s operating lease for this office space includes fixed rent payments and variable lease payments, which are primarily related to common area maintenance and utility charges. The Company elected not to separate lease andnon-lease
components, and as such, all amounts paid under the lease are classified as either fixed or variable lease payments.As of
March 31, other liabilities on the consolidated balance sheets, and non-current
lease liabilities of as of
March 31, Components of Lease Cost
| Three Months Ended March 31, | |||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | |||||||||||||||||||||
| Operating lease cost | $ | 119 | $ | 121 | |||||||||||||||||||
| Variable lease cost | 12 | 13 | |||||||||||||||||||||
| Total lease cost | $ | 131 | $ | 134 | |||||||||||||||||||
16
Three months ended March 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
| Operating lease cost | 121 | 121 | ||||||
| Short-term lease cost | — | 18 | ||||||
| Variable lease cost | 13 | 11 | ||||||
| Total lease cost | 134 | 150 | ||||||
As of March 31, 2023,2024, maturities of ourthe Company’s operating lease liabilities, which do not include short-term leases and variable lease payments,follows (in thousands):follows:
were
as | Remaining nine months of 2023 | $ | 409 | ||
| 2024 | 557 | |||
| 2025 | 571 | |||
| 2026 | 585 | |||
| 2027 | 600 | |||
| Thereafter | 3,346 | |||
| Total Lease Payments | $ | 6,068 | ||
| Less: imputed interest | (1,165 | ) | ||
| Present value of total lease liabilities | $ | 4,903 | ||
| (In thousands) | |||||
| Nine remaining months of 2024 | $ | 419 | |||
| 2025 | 571 | ||||
| 2026 | 585 | ||||
| 2027 | 600 | ||||
| 2028 | 615 | ||||
| Thereafter | 2,731 | ||||
| Total lease payments | $ | 5,521 | |||
| Less: imputed interest | (961) | ||||
| Present value of total lease liabilities | $ | 4,560 | |||
COMPANY AS LESSOR
The Company subletssubleases a portion of its office space to a related party and accounts for the arrangement as an operating lease. Related party sublease rental income is recognized on a straight-line basis and is included in Interest and other incomeincome (expense) in the accompanying consolidated statements of operations. For the three months ended March 31, 2023,2024, operating lease income from the Company’s sublet was less than $0.1 million. As of March 31, 2023,2024, total remaining future minimum lease payments receivable on the Company’s operating lease$0.6 $0.2 million.
were
As of March 31, 2023,2024, the Company had $7.5 million ofCompany’s content obligations comprised of $1.6amounted to $0.6 million, includedincluding $0.1 million recorded within in content liabilities in the accompanying unaudited consolidated balance sheet,sheets, and $5.9$0.5 million of obligations that are not reflected in the accompanying consolidated balance sheetsyet recorded as they did not yet meet the asset recognition criteria for content assets.All content These obligations are expected to be paid2023.2024.
by
December 31, As of December 31, 2022,2023, the Company had $11.5 million ofCompany’s content obligations comprised of $2.9amounted to $1.1 million, included inincluding $0.4 million recorded within current content liabilities in the accompanying unaudited consolidated balance sheets and $8.6$0.7 million of obligations that are not reflected in the accompanying unaudited consolidated balance sheetsyet recorded as they did not yet meet the asset recognition criteria for content assets.
Content obligations include amounts related to licensed, commissioned and internally produced streaming content. An obligation for the production of content includes
non-cancelable
commitments under creative talent and employment agreements. An obligation for the licensed and commissioned content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date.The Company has certain commitments with regardsperiodically enters into agreements to receive future advertising and marketing expensesservices as stated in thepart of various licensee agreements. Certain ofarrangements, and the Company reports commitments when the applicable agreements do not specify the amount of advertising and marketing commitment; however, the total commitmentsprovide for agreements which do specify the amount are $1.1 million asspecific committed amounts. As of March 31, 2023,2024, the Company’s future advertising commitments totaled $1.4 million, of which $0.6the Company expects to pay $0.8 million and $0.5 million are expected to be paid during the nine months ending December 31, 2023, and year ending December 31, 2024, respectively.2024.
17
NOTE 14 - SUBSEQUENT EVENTS
On May 6, 2024, the Board declared a regular quarterly cash dividend of $0.025 per share of Common Stock, equivalent to $0.10 per share of Common Stock on an annual basis. The cash dividend will be paid on July 31, 2024, to all holders of record of Common Stock at the close of business on July 12, 2024. This cash dividend of approximately $1.3 million is expected to be paid from available cash on hand.
18
Item
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of CuriosityStream Inc.
Cautionary Note Regarding Forward-looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain statements that are, or may deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the Company’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, such as subscription plan price increases, the development of integrated digital brand partnerships with advertisers and our dividend plans, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “attribute,” “believe,” “continue,” “hope,” “estimate,” “expect,” “intend,” “may,” “might,” “potential,” “seek,” “should,” “will” and “would,” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, filed with the SEC on March 31, 2023.25, 2024 (the “Annual Report”) and any other subsequent periodic reports and future periodic reports. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, 10-Q,unless required by law.
Overview
Created
OVERVIEW
Founded by John Hendricks, founder of the Discovery Channel and former Chairman of Discovery Communications, CuriosityStream is a media and entertainment company that offers premium video and audio programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and technology. Our mission is to provide premium factual entertainment that informs, enchants and inspires.
We are seekingseek to meet demand for high-quality factual entertainment via SVODsubscription video on-demand (“SVOD”) platforms, as well as viacontent licensing, bundled content licenses for SVOD and linear offerings, content licensing, brand sponsorship and advertising, talks and courses and partner bulk sales.
The main sources of our revenue are:
1.Subscription and license fees earned from our Direct-to-Consumer business and Partner Direct subscribers ("Direct Business"),
2.License fees from content licensing arrangements ("Content Licensing"),
3.Bundled license fees from distribution affiliates (“Bundled Distribution”),
4.Subscriber fees from our Enterprise business ("Enterprise"), and
5.Other revenue, including advertising and sponsorships ("Other").
19
We operate our business as a single operating segment that provides premium streaming content through multiple channels, including the use of various applications, partnerships and affiliate relationships. We generate our revenue through five products and services: Direct Business, Bundled Distribution, Content Licensing, Enterprise and Other. The table below shows our revenue generated through each of the foregoing products and services for the three months ended March 31, 2023 and 2022:
| Three Months Ended March 31, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| (in thousands) | ||||||||||||||||
Direct Business | $ | 8,582 | 70 | % | $ | 8,334 | 47 | % | ||||||||
Bundled Distribution | 1,473 | 12 | % | 3,767 | 21 | % | ||||||||||
Content Licensing | 2,018 | 16 | % | 4,248 | 24 | % | ||||||||||
Enterprise | 40 | 0 | % | 1,163 | 7 | % | ||||||||||
Other | 274 | 2 | % | 114 | 1 | % | ||||||||||
|
|
|
| |||||||||||||
Total Revenues | $ | 12,387 | $ | 17,627 | ||||||||||||
|
|
|
| |||||||||||||
CuriosityStream’s award-winning content library features more than 15,00016,000 programs that explore topics ranging from space engineering to ancient history to the rise of Wall Street.Street and includes shows and series from leading nonfiction producers. Our library includes:
•An extensive catalog of originally produced and owned content includes more than 9,500of approximately 10,000 short-, mid- and long-form video and audio titles, including One DayCuriosity University and Learn 25 recorded lectures that are led by some of the most acclaimed college and university professors in the world. Our library also features a
•A rotating catalog of more than 5,500nearly 6,000 internationally licensed videos and audio programs. Every month,
•More than 6,000 on-demand and ad-free productions available on-demand through our SVOD offerings.
Each week we launch dozens of new video titles, which are available on-demand in high- or ultra-high definition. Through new and long-standing international partnerships, we have localized a large portion of our video library infrom English to ten different languages.
20
RESULTS OF OPERATIONS
The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statements for three months ended March 31, 2024, and 2023, and includes our results of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited and in thousands) | 2024 | 2023 | Total | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct Business | $ | 9,530 | $ | 8,582 | $ | 948 | 11 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Licensing | 1,164 | 2,018 | (854) | (42 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bundled Distribution | 1,142 | 1,416 | (274) | (19 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Enterprise | 68 | 97 | (29) | n/m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 97 | 274 | (177) | (65 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | 12,001 | 12,387 | (386) | (3 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenues | 6,748 | 9,001 | (2,253) | (25 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising and marketing | 3,105 | 3,115 | (10) | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 5,802 | 8,059 | (2,257) | (28 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 15,655 | 20,175 | (4,520) | (22 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating loss | (3,654) | (7,788) | 4,134 | (53 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of warrant liability | (30) | (74) | 44 | n/m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest and other income (expense) | 439 | 388 | 51 | n/m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity method investment loss | (1,756) | (219) | (1,537) | 702 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss before income taxes | $ | (5,001) | $ | (7,693) | $ | 2,692 | (35 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 34 | 58 | (24) | n/m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | $ | (5,035) | $ | (7,751) | $ | 2,716 | (35 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| * n/m = percentage not meaningful | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the three months ended March 31, 2024, and 2023, operating loss was $3.7 million and $7.8 million, respectively. The decline in operating loss of $4.1 million, or 53%, primarily resulted from the decreases to our operating expenses of $4.5 million, or 22%, which more than offset the decline in revenues of $0.4 million, or 3%, compared to the three months ended March 31, 2023.
For the three months ended March 31, 2024, and 2023, net loss was $5.0 million and $7.8 million, respectively, a decrease in net loss of $2.7 million, or 35%.
Our future operating results and cash flows are dependent upon a number of opportunities, challenges, and other factors, including our ability to efficiently grow our subscriber base, increase our prices and expand our service offerings to maximize subscriber lifetime value.
Revenue
Since the Company was founded in 2015, we have generated the majority of our revenues from consumers directly accessing our content in the form of monthly or annual subscription plans.
For the three months ended March 31, 2024, and 2023, revenues totaled $12.0 million and $12.4 million, respectively, a decrease of $0.4 million, or 3%. This decline was primarily driven by declines in Content Licensing and Bundled Distribution of $0.9 million and $0.3 million, respectively, while our Direct Business revenue increased by $0.9 million.
21
Direct Business
Our Direct Business revenue is derived from consumers subscribing directly through our O&O Consumer Service and App Services and through Partner Direct relationships. Our O&O Direct-to-Consumer serviceConsumer Service is available in more than 175 countries to any household with a broadband connection. Currently, mostOur App Services enable access to CuriosityStream on almost every major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g., LG, Vizio, Samsung) and gaming consoles.
We are currently in the process of raising the prices for our legacy subscribers payin our U.S. dollar-based markets, which represent the vast majority of our Direct Business revenue. These legacy subscribers previously paid $2.99 per month or $19.99 per year for our standard CuriosityStream service.year. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We also provide a Smart Bundle service for $9.99 per month or $69.99 per year. Our Smart Bundle membership currently includes everything in our standard service, plus subscriptions to third-party platforms Tastemade Topic, , Kidstream (added in January 2024), SommTV DaVinci, Da Vinci Kids our equity investee Nebula,, and our One DayCuriosity University stand-alone service.
18
Our App Services enable access to CuriosityStreamSmart Bundle pricing remains unchanged. However, we may in the future increase the price of these existing subscription plans, which may have a positive effect on almost every major consumer device, including streaming media players like Roku, Apple TV and Amazon Fire TV, major smart TV brands (e.g.our revenue from this line of our business.
The multichannel video programming distributors (“MVPDs”), LG, Vizio, Samsung) and gaming consoles. The MVPD, vMVPDvirtual MVPDs (“vMVPDs”) and digital distributor partners making up our Partner Direct Business pay us a license fee for sales to individuals who subscribe to CuriosityStream via the partners’ respective platforms. We have affiliate agreement relationships with, and our service is available directly from, major MVPDs that include Comcast, Cox, Dish and vMVPDs and digital distributors that include Amazon Prime Video Channels, Apple Channel, Roku Channel, Sling TV and YouTube TV.
In addition to
The following table details our Direct Business described above,for the three months ended March 31, 2024, and 2023:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | Total | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct-to-Consumer | 8,068 | 7,480 | 588 | 8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Partner Direct Business | $ | 1,462 | $ | 1,102 | 360 | 33 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Direct Business | $ | 9,530 | $ | 8,582 | $ | 948 | 41 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
For the three months ended March 31, 2024, our Direct-to-Consumer revenue increased by $0.6 million, or 8%, compared to 2023. While our overall DTC subscriber count declined, the effects of this were more than offset by the higher pricing that we began to roll out in 2023. Our Partner Direct Business benefited primarily from the adoption of the price increase and continued subscriber growth.
Content Licensing
Through our Content Licensing business, we license to certain media companies a collection of existing titles from our content library in a traditional content licensing deal. We also pre-sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and creates content licensing revenue.
The following table details our Content Licensing results for the three months ended March 31, 2024, and 2023:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | Total | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Library sales1 | $ | 868 | $ | 817 | $ | 51 | 6 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Presales | 296 | 1,201 | (905) | (75 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Content Licensing | 1,164 | 2,018 | (854) | (42 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 The 2024 amount included $0.2 million from trade and barter transactions. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
22
For the three months ended March 31, 2024, compared to 2023, Library sales increased by 6%, while presales declined by 75%. Within our content licensing business, our primary focus is on our positive gross margin library-related transactions, although we may continue to enter into presale arrangements with certain partners for strategic purposes.
Bundled Distribution
Our Bundled Distribution business includes affiliate relationships with our Bundled MVPD Partners and vMVPDs, which are broadband and wireless companies in the U.S. and international territories to whom we can offer a broad scope of rights, including 24/7 “linear” channels, our on-demandvideo-on-demand content library, mobile rights and pricing and packaging flexibility, in exchange for an annual fixed fee or fee per subscriber.
In
For the three months ended March 31, 2024, and 2023, our Content LicensingBundled Distribution revenue was $1.1 million and $1.4 million, respectively. This 19% decline was primarily the result of revised affiliate agreements and the non-renewal of certain partnerships. Bundled Distribution is a challenging revenue stream given the pressures being felt in the linear pay television business we license to certain media companies a collection of our existing titles in a traditional content licensing deal. We also sell selected rights (such as in territories or on platforms that are lower priority for us) to content we create before we even begin production. This latter model reduces risk in our content development decisions and creates content licensing revenue.
worldwide.
Enterprise
Our Enterprise business is comprised primarily of sellingproviding subscriptions in bulk to companies and organizations that in turn offer these subscriptions to their employees and members as an employment benefit or “gift of curiosity.” Revenues from our Enterprise business are included within Subscriptions – O&O Services in Note 5 to the accompanying unaudited consolidated financial statements.
Our
Other business is primarily comprised of
We provide advertising and sponsorship revenue. Wesponsorships services through developing integrated digital brand partnerships designed to offer companies the opportunitychance to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration,integration; branded social media promotional videos,videos; broadcast advertising spots in our video and audio programs that are made available on our linear programming channels or in front of the paywall,paywall; and our increasing focus on digital display ads.
ads while delivering our content through advertising-based video-on-demand (AVOD), transactional video-on-demand (TVOD), free advertising-supported streaming television (FAST), YouTube and other similar distribution channels.
In the future, we hope to continue developing integrated digital brand partnerships with advertisers. These sponsorship campaigns offer companies the chance to be associated with CuriosityStream content in the forms described above. We believe the impressions accumulated in these multi-faceted campaigns would roll up toresult in verifiable metrics for the clients.
Key Factors Affecting Results
For the three months ended March 31, 2024, Other revenue was $0.1 million, a decline of Operations
$0.2 million, or 65%, from the same period in 2023. This decline was largely due to certain short-term marketing partnerships that we entered into during the early part of 2023, including a $0.2 million campaign that we provided through a trade and barter arrangement, which were not renewed in 2024.
Operating Expenses
Our futureprimary operating resultscosts relate to the cost of producing and cash flows are dependent upon a numberacquiring our content, the costs of opportunities, challenges,advertising and other factors, including our ability to efficiently grow our subscriber base, increase our prices, and expandmarketing our service, offerings to maximize subscriber lifetime value. In particular, we believe thatpersonnel costs, and distribution fees.
For the following factors significantly affectedthree months ended March 31, 2024, and 2023, our resultsoperating expenses were $15.7 million and $20.2 million, respectively, a decrease of operations over the last fiscal quarter$4.5 million, or 22%.
Cost of Revenues
Cost of revenues encompasses content amortization, distribution fees, revenue sharing arrangements, hosting and are expected to continue to have such significant effects:
streaming delivery costs, payment processing costs, commission costs, and subtitling and broadcast costs. Producing and co-producing content and commissioned content is generally more costly than content acquired through licenses.
23
Currently, the main sourcesTable of ourContents
Distribution fees include payment processing fees and revenue are (i) subscriber and license fees earned from our Direct Business (“Direct Business”), (ii) bundled license fees from distribution affiliates (“Bundled Distribution”), (iii) license fees from content licensingshare arrangements (“Content Licensing”), (iv) subscriber fees from our Enterprise business (“Enterprise”), and (v) Other revenue, including advertising and sponsorships (“Other”).
Since the Company was founded in 2015, we have generated the majority of our revenues from consumers directly accessing our content in the form of monthly or annual subscription plans. Currently, most legacy subscribers pay $2.99 per month or $19.99 per year for our standard CuriosityStream service. As of March 27, 2023, we increased our standard pricing for new subscribers to this service to $4.99 per month or $39.99 per year. We also provide awith Smart Bundle service for $9.99 per month or $69.99 per year. Currently,and digital distributor partners, as well as fees owed to the Spiegel Venture related to our Smart Bundle pricing and pricing for most legacy subscribers remain unchanged. However, we may in the future increase the price of these existing subscription plans, which may have a positive effect on our revenue from this line of our business.German SVOD service. We pay a fixed percentage distribution fee to our partners for subscribers accessing our platform via App Services to compensate these partners for access to their customer and subscriber bases. The MVPD, vMVPD and digital distributor partners making up our Partner Direct Businessbusiness pay us a license fee, and host and stream our content to their customers via their own platforms, such as set top boxes in the case of most MVPDs. We do not incur billing, streaming or backend costs associated with content distribution through our MVPD, vMVPD and digital distributor partners.
Operating Costs
Our primary operating costs relate to the
The following table details cost of producingrevenues for the three months ended March 31, 2024, and acquiring our2023:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | Total | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content amortization | $ | 5,215 | $ | 5,852 | $ | (637) | (11 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other1 | 1,533 | 3,149 | (1,616) | (51 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total cost of revenues | $ | 6,748 | $ | 9,001 | $ | (2,253) | (62 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
1 Includes commissions, distribution fees, production and broadcast, promotions and sponsorships, and other expenses. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the three months ended March 31, 2024, cost of revenues decreased to $6.7 million from $9.0 million, a 62% reduction. This decrease was mostly driven by an 11% decline in content amortization due to fewer presale agreements, as discussed above, a reduction in content acquisitions and releases during the costsyear and the content impairment that we recorded in the third quarter of advertising and marketing our service, personnel costs, and distribution fees. Producing and co-producing content and commissioned content is generally more costly than acquiring content through licenses.
The Company’s primary business model is subscription based as opposed2023. Other cost of revenues also declined due to a model generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewedreduction in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content orrevenue share arrangements, including specifically our arrangement with Nebula that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content library will be statedexpired at the lowerend of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. For a discussion of the accounting policies for content impairment write-down2023.
Advertising and management estimates involved therein, see “— Critical Accounting Policies and Estimates” below.
Further, ourMarketing
Our advertising and marketing expenditures and personnel costs constituteare a primary operating costscost for our business. TheseWhile these costs may fluctuate based on advertising and marketing objectives, and personnel needs. In general, we intend togenerally focus marketing dollars on efficient customer acquisition. With respectacquisition methods. For the three months ended March 31, 2024, advertising and marketing expenses remained flat when compared to the same period in 2023.
General and Administrative
Our general and administrative costs are associated with certain administrative functions, including corporate governance, executive management, information technology, finance and human resources. These costs consist largely of compensation expense, subscriptions that support our business, professional services, licenses and rent. While personnel costs,levels may fluctuate based on our needs, we tend to focus on hiring and retaining revenue-generating personnel, such as sales staff and roles that support the improvement, maintenance and marketing of our Direct Service.
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Results of Operations
The Company operates as one reporting segment. The financial data in the following table sets forth selected financial information derived from our unaudited consolidated financial statementsdetails general and administrative costs for the three months ended March 31, 20232024, and March 31, 2022 and shows our results2023:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | Total | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payroll and related | $ | 2,652 | $ | 3,589 | $ | (937) | (26 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional services | 1,051 | $ | 1,927 | (876) | (45 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 689 | 1,267 | (578) | (46 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Technology and subscriptions | 374 | 423 | (49) | (12 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other1 | 1,036 | 853 | 183 | 21 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total general and administrative | $ | 5,802 | $ | 8,059 | $ | (2,257) | (28 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
1 Includes facilities costs, depreciation and amortization, insurance, technology and subscriptions, travel and other expenses. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Table of operations as a percentage of revenue or as a percentage of costs, as applicable, for the periods indicated.
| Three months ended March 31, | ||||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||||||||||
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Revenues | ||||||||||||||||||||||||
Subscriptions | $ | 7,520 | 61 | % | $ | 8,355 | 47 | % | $ | (835 | ) | (10 | %) | |||||||||||
License fees | 4,593 | 37 | % | 9,158 | 52 | % | (4,565 | ) | (50 | %) | ||||||||||||||
Other | 274 | 2 | % | 114 | 1 | % | 160 | 140 | % | |||||||||||||||
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Total Revenues | $ | 12,387 | 100 | % | $ | 17,627 | 100 | % | $ | (5,240 | ) | (30 | %) | |||||||||||
Operating expenses | ||||||||||||||||||||||||
Cost of revenues | 9,001 | 45 | % | 11,850 | 32 | % | (2,849 | ) | (24 | %) | ||||||||||||||
Advertising and marketing | 3,115 | 15 | % | 14,768 | 40 | % | (11,653 | ) | (79 | %) | ||||||||||||||
General and administrative | 8,059 | 40 | % | 10,503 | 28 | % | (2,444 | ) | (23 | %) | ||||||||||||||
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Total operating expenses | $ | 20,175 | 100 | % | $ | 37,121 | 100 | % | $ | (16,946 | ) | (46 | %) | |||||||||||
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Operating loss | (7,788 | ) | (19,494 | ) | 11,706 | (60 | %) | |||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Change in fair value of warrant liability | (74 | ) | 3,860 | (3,934 | ) | n/m | ||||||||||||||||||
Interest and other income (expense) | 388 | (57 | ) | 445 | n/m | |||||||||||||||||||
Equity method investment loss | (219 | ) | (156 | ) | (63 | ) | 40 | % | ||||||||||||||||
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Loss before income taxes | $ | (7,693 | ) | $ | (15,847 | ) | $ | 8,154 | (51 | %) | ||||||||||||||
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Provision for income taxes | 58 | 45 | 13 | 29 | % | |||||||||||||||||||
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Net loss | $ | (7,751 | ) | $ | (15,892 | ) | $ | 8,141 | (51 | %) | ||||||||||||||
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n/m - percentage not meaningful
Revenue
Revenue for the three months ended March 31, 2023, and 2022 was $12.4 million and $17.6 million, respectively. The decrease of $5.2 million, or 30%, is primarily due to decreases of $4.6 million in License Fees revenue and $0.8 million in Subscriptions revenue.
The decrease in Subscriptions revenue resulted primarily from corporate subscriptions related to certain bulk agreements that ended in the third quarter of 2022.
The decrease in License Fees revenue of $4.5 million resulted primarily from a $2.2 million decrease in content licensing arrangements and a decrease of $2.3 million in bundled distribution agreements, compared to the three months ended March 31, 2022.
Operating Expenses
Operating expenses for the three months ended March 31, 2023, and 2022 were $20.2 million and $37.1 million, respectively. The decrease of $17.0 million, or 46%, primarily resulted from the following:
Cost of Revenues: Cost of revenues for the three months ended March 31, 2023, decreased to $9.0 million from $11.8 million for the three months ended March 31, 2022. Cost of revenues primarily includes content amortization, hosting and streaming delivery costs, payment processing costs and distribution fees, commission costs and subtitling and broadcast costs. The decrease of $2.8 million, or 24%, is primarily due to the decrease in content amortization of $3.2 million, which is primarily driven by the decrease in accelerated amortization on certain content licensing arrangements, partially offset by an increase of $0.4 million in foreign language translation and broadcasting fees.
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Advertising & Marketing: Advertising and marketing expenses for the three months ended March 31, 2023, decreased to $3.1 million from $14.8 million for the three months ended March 31, 2022. This decrease of $11.7 million, or 79%, is primarily due to reduced digital marketing spending of $4.2 million, radio advertising spending of $4.1 million and television and social media advertising spending of $3.1 million.
General and Administrative: General and administrative expenses for the three months ended March 31, 2023 decreased to $8.1 million from $10.5 million for the three months ended March 31, 2022. This decrease of $2.4 million, or 23%, is primarily attributable to a decrease of $1.1 million in salaries and benefits expense, a decrease of $0.5 million in stock based compensation, and a decrease of $0.8 million in various other categories.
Operating Loss
Operating loss for the three months ended March 31, 2023 and 2022 was $7.8 million and $19.5 million, respectively. The decrease in our operating loss of $11.7 million, or 60%, resulted from the decrease in operating expenses of $16.9 million, or 46%, partially offset by the decrease in revenue of $5.2 million, or 30%,in each case during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, as described above.
Change in Fair Value of Warrant Liability
For the three months ended March 31, 2023,2024, general and administrative expenses decreased to $5.8 million from $8.1 million for the Company recognized a $0.1same period in 2023. This decrease of $2.3 million, lossor 28%, was primarily the result of lower payroll and related tocosts and stock-based compensation of $0.9 million and 0.6 million, respectively, primarily driven by our smaller average workforce size as well as reduced incentive compensation. Professional services costs also declined by 45% as we streamlined various outside services during the changeyear and brought certain finance and operations functions internal.
Other Income (Expense)
Change in Fair Value of Warrant Liability
The fair value of theour warrant liability dueis estimated using the Black-Scholes valuation model that takes into account a number of economic assumptions, including the market price of our Common Stock and its expected volatility. Changes in these inputs from period to an increaseperiod may significantly affect changes in the fair value of the Private Placement Warrants, compared to a gain of $3.9 million recognized during the three months ended March 31, 2022 due to a decrease in the fair value of the Private Placement Warrants.
Interest and Other Income (Expense)
Interest and other income (expense) for the three months ended March 31, 2023 was $0.4 million income compared to $0.1 million expense for the three months ended March 31, 2022. The increase is primarily related to an increase in interest income during the current period.
values.
Equity Method Investment Loss
For the three months ended March 31, 2023 and 2022,2024, the Company recorded a loss of $1.8 million compared to a loss of $0.2 million equity method investment lossfor the same period in 2023, related to its investments in the Spiegel Venture and Nebula.
Provision for This increase in losses is primarily attributable to write-downs recorded by the Spiegel Venture.
Income Taxes
We had a provision for income taxes of $0.1 million in each of
For the three months ended March 31, 2024, Income tax expense was immaterial. For the comparative period in 2023, and 2022. The Company’sthe provision for income taxes was $0.1 million, primarily due to losses generated before income taxes. Our provision for income taxes differs from the federal statutory rate primarily due to the Company being in a full valuation allowance position and not recognizing a tax benefit attributable to generated losses for either federal or state income tax purposes.
21
LIQUIDITY AND CAPITAL RESOURCES
Net Loss
Net loss for the three months ended March 31, 2023 and 2022 was $7.7 million and $15.9 million, respectively. The decrease in our net loss of $8.2 million, or 51%, is primarily due to the decrease in operating expenses of $16.9 million and an increase in interest and other income (expense) of $0.4 million, partially offset by a decrease in revenue of $5.2 million and change in the fair value of warrant liability of $3.9 million.
Liquidity and Capital Resources
As of March 31, 2023, we had2024, the Company’s cash and cash equivalents, including restricted cash, of $49.2totaled $38.9 million. For the three months ended March 31, 2023, we2024, the Company incurred a net loss of $7.7$5.0 million and used $6.3generated $0.7 million of net cash in operating activities, used $0.1 million of netactivities. There were no significant cash inflows from financing activities whileor investing activities provided $15.0 millionduring the three months ended March 31,.
Our cash and cash equivalents mainly consist of net cash.
investments in institutional money market funds and short-term deposits held at major global financial institutions. We regularly monitor the creditworthiness of the financial institutions and money market fund asset managers with whom we invest our funds, and we maintain a level of liquidity sufficient to allow us to meet our cash needs in both the short term and long term.
We believe that our current cash levels, including investments in money market funds that are readily convertible to cash, will be adequate to support our ongoing operations, contentcapital expenditures and working capital requirements and, if required, additional capital contributions to equity method investees, for at least the next twelve months. We believe that we have access to additional funds in the short-termshort term and the long-term,long term, if needed, through the capital markets to obtain further financing.
Our principal uses of
We use cash areprincipally to acquire content, promote our service through advertising and marketing, and provide for working capital to operate our business. We have experienced significant net losses since our inception, and, given the significant operating and capital expenditures associated with our business plan, we anticipate that we will continue to incur net losses.
As previously discussed, we began entering into trade and barter transactions in the second quarter of 2023 primarily for the purpose of exchanging content assets through licensing agreements with media counterparties. Our use of these transactions has enabled us to acquire quality content that we can monetize through various distribution channels while preserving our liquidity.
Our Board of Directors declared a quarterly cash dividend of $0.025 per share, with the first dividend paid on April 30, 2024, for an aggregate amount paid of $1.3 million. Our Board of Directors declared the next quarterly cash dividend of $0.025 per share to be paid on July 31, 2024, for an aggregate amount paid of $1.3 million. We intend to pay regular quarterly dividends.
25
Cash Flows
Flow Analysis
The following table presents our cash flows from operating, investing and financing activities for the three months ended March 31, 20232024, and 2022:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (in thousands) | ||||||||
Net cash used in operating activities | $ | (6,308 | ) | $ | (12,287 | ) | ||
Net cash provided by investing activities | 14,995 | 19,773 | ||||||
Net cash used in financing activities | (26 | ) | (137 | ) | ||||
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Net increase in cash, cash equivalents and restricted cash | $ | 8,661 | $ | 7,349 | ||||
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Cash Flows from 2023:
| Three Months Ended March 31, | |||||||||||
| (Unaudited and in thousands) | 2024 | 2023 | |||||||||
| Net cash used in operating activities | $ | 666 | $ | (6,308) | |||||||
| Net cash provided by investing activities | — | 14,995 | |||||||||
| Net cash used in financing activities | (6) | (26) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 660 | $ | 8,661 | |||||||
Operating Activities
Cash flows from operating activities primarily consistsconsist of net losses, changes to our content assets (including additions and amortization), and other working capital items.
During
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2024 | 2023 | |||||||||
| Net loss | $ | (5,035) | $ | (7,751) | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||||||
| Change in fair value of warrant liability | 30 | 74 | |||||||||
| Additions to content assets | (426) | (3,723) | |||||||||
| Change in content liabilities | (333) | (1,206) | |||||||||
| Amortization of content assets | 5,215 | 5,852 | |||||||||
| Stock-based compensation | 689 | 1,267 | |||||||||
| Equity interests loss | 1,756 | 219 | |||||||||
| Other depreciation, amortization and non-cash items | 239 | 274 | |||||||||
| Changes in operating assets and liabilities | (1,469) | (1,314) | |||||||||
| Net cash provided by (used in) operating activities | $ | 666 | $ | (6,308) | |||||||
For the three months ended March 31, 2023, and 2022, we recorded a2024, our net cash outflowinflow from operating activities was $0.7 million compared to net cash used in operating activities of $6.3 million and $12.3 million, respectively, or a decreased outflow of $6.0 million, or 49%.
The net cash outflow used by operating activities for the three months ended March 31, 2023, was primarily due to our $7.7 million net loss and $1.4 million of net cash used in changes in operating assets and liabilities, partially offset by $2.8 million addback of non-cash expenses net of content additions. The most significant components of non-cash expenses include amortization of content assets of $5.9 million and stock-based compensation expense of $1.3 million, substantially offset by additions to content assets of $3.7 million and the change in content liabilities of $1.2 million. The components of changes in operating assets and liabilities were primarily attributed to a decrease in accrued expenses and other liabilities of $4.5 million and in deferred revenue of $0.4 million, partially offset by an increase in accounts payable of $1.4 million, a decrease in accounts receivable of $1.1 million and a decrease in other assets of $0.9 million.
The netoperating cash outflow used by operating activitiesof $7.0 million.
Although we reported a net loss of $5.0 million for the three months ended March 31, 2022, was primarily due to our $15.9 million net loss, and $12.3 million of non-cash expenses net2024, this amount reflected noncash items such as amortization of content additions, partially offset by $15.9assets, stock-based compensation and equity method investment loss of $5.2 million, in cash provided by changes$1.8 million, and $0.7 million, respectively. Cash used during the quarter included a $1.5 million change in operating assets and liabilities. The most significant componentsliabilities and additions to content assets and change of non-cash expenses include content liabilities of $0.4 million and $0.3 million, respectively.
For the three months ended March 31, 2023, we reported a net loss of $7.8 million. This amount reflected noncash items such as amortization of content assets, stock-based compensation and equity method investment loss of $5.9 million, $1.3 million and $0.2 million, respectively. Cash used during the quarter included additions of $14.5 million,to content assets and changes in content liabilities of $5.7$3.7 million and changes in the fair value of the warrant liability of $3.9$1.2 million, partially offset by amortization of content assets of $9.0 millionrespectively, and stock-based compensation expense of $1.8 million. The components of changes in operating assets and liabilities were primarily attributed to a decrease in accounts receivable of $10.1 million, a decrease in other assets of $2.2 million, an increase in accounts payable of $5.0 million and an increase in deferred revenue of $2.3 million, which were partially offset by a decrease in accrued expenses and other liabilities of $3.7$1.3 million.
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Cash Flows from Investing Activities
Cash flow from investing activities consists of purchases, sales and maturities of investments, business acquisitions and equity investments and purchases of property and equipment.
During
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For the three months ended March 31, 2023, and 2022, we recorded a net cash inflow from2024, there were no investing activities of $15.0 million and $19.8 million, respectively,that resulted in cash inflows or a decrease of cash inflow of $4.8 million, or 24%.
The net cash inflow provided by investing activitiesoutflows. In contrast, for the three months ended March 31,same period in 2023, wasour cash inflows were primarily due to maturities of investments in debt securities of $15.0 million.
The net cash inflow provided by investing activities for the three months ended March 31, 2022, was primarily due to the sale and maturities of investments in debt securities of $22.1 million, partially offset by purchases of investments in debt securities of $1.5 million and investments in Nebula of $0.8 million.
securities.
During the three months ended March 31, 2023 and 2022, we recorded net cash outflow from financing activities of $0.1 million, which is attributable to payments of withholding taxes during the respective periods.
Capital Expenditures
Going forward, we expect to continue making expenditures for additions to our content assets and purchases of property and equipment, although at a slower rate than in previous periods. The amount, timing and allocation of capital expenditures are largely discretionary and within management’s control. Depending on market conditions, we may choose to defer a portion of our budgeted expenditures until later periods to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate cash flow. Subject to financing alternatives, we may also increase our capital expenditures significantly to take advantage of opportunities we consider to be attractive.
Off Balance Sheet Arrangements
OFF BALANCE SHEET ARRANGEMENTS
As of March 31, 2023,2024, we had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operation is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Certain amounts included in or affecting the financial statements presented in this Quarterly Report on Form 10-Q and related disclosures must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A critical accounting policy is one which is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.
Content Assets
The Company acquires, licenses and produces content,
For more detailed information on our critical accounting policies, including original programming, in order to offer customers unlimited viewing of factual entertainment content. The content licenses are for a fixed fee and specific windows of availability. Payments for content, including additionsthose related to content assets, revenue recognition and trade and barter transactions, refer to the changes"Summary of Significant Accounting Policies" section in related liabilities, are classified within “Net cash used in operating activities”the Annual Report on Form 10-K filed with the unaudited consolidated statements of cash flows.
The Company recognizes its content assets (licensedSecurities and produced) as “Content assets, net”Exchange Commission on the unaudited consolidated balance sheets. For licenses, the Company capitalizes the fee per title and recordsMarch 25, 2024. This comprehensive discussion helps to ensure that stakeholders have a corresponding liability at the gross amountcomplete understanding of the liability whenaccounting methodologies and principles that influence the license period begins, the cost of the title is known, and the title is accepted and available for streaming. For productions, the Company capitalizes costs associated with the production, including development costs, direct costs, and production overhead.
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Based on factors including historical and estimated viewing patterns, the Company previously amortized the content assets (licensed and produced) in “Cost of revenues” on the unaudited consolidatedfinancial statements of operations on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. Starting July 1, 2021, the Company amortizes content assets on an accelerated basis in the initial two months after a title is published on the Company’s platform, as the Company has observed and expects more upfront viewing of content, generally as a result of additional marketing efforts. Furthermore, the amortization of original content is more accelerated than that of licensed content. We review factors that impact the amortization of the content assets on a regular basis and the estimates related to these factors require considerable management judgment. The Company continues to review factors impacting the amortization of content assets on an ongoing basis and will also record amortization on an accelerated basis when there is more upfront use of a title, for instance due to significant content licensing.
The Company’s business model is generally subscription based as opposed to a model generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. If such changes are identified, the aggregated content assets will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off.
Revenue recognition
Subscriptions — O&O Service
The Company generates revenue from monthly subscription fees from its O&O Service. CuriosityStream subscribers enter into month-to-month or annual subscriptions with the Company. The Company bills the monthly subscriber on each subscriber’s monthly anniversary date and recognizes the revenue ratably over each monthly membership period. The annual subscription fees are collected by the Company at the start of the annual subscription period and are recognized ratably over the subsequent twelve-month period. Revenues are presented net of the taxes that are collected from subscribers and remitted to governmental authorities.
herein.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company also earns subscription revenues through its App Services. These subscriptions are similar to the O&O Service subscriptions, but are generated based on agreements with certain streaming media players as well as with Smart TV brands and gaming consoles. Under these agreements, the streaming media player typically bills the subscriber directly and then remits the collected subscriptions to the Company, net of a distribution fee. The Company recognizes the gross subscription revenues when earned and simultaneously recognizes the corresponding distribution fees as an expense. The Company is the principal in these relationships as the Company retains control over service delivery to its subscribers.
License Fees — Partner Direct and Bundled Distribution
The Company generates license fee revenues from MVPDs such as Comcast and Cox as well as from vMVPDs such as Amazon and Sling TV (MVPDs and vMVPDs are also referred to as affiliates). Under the terms of the agreements with these affiliates, the Company receives license fees based upon contracted programming rates and subscriber levels reported by the affiliates. In exchange, the Company licenses its content to the affiliates for distribution to their subscribers. The Company earns revenue under these agreements either based on the total number of subscribers multiplied by rates specified in the agreements or based on fixed fee arrangements. These revenues are recognized over the term of each agreement when earned.
License Fees — Content Licensing
The Company has distribution agreements which grant a licensee limited distribution rights to the Company’s programs for varying terms, generally in exchange for a fixed license fee. Revenue is recognized once the content is made available for the licensee to use.
The Company’s performance obligations include (1) access to its SVOD platform via the Company’s O&O Service and App Services, (2) access to the Company’s content assets, and (3) licenses of specific program titles. In contracts containing the right to access the Company SVOD platform, the performance obligation is satisfied as access to the SVOD platform is provided post any free trial period. In contracts which contain access to the Company’s content assets, the performance obligation is satisfied as access to the content is provided. For contracts with licenses of specific program titles, the performance obligation is satisfied as that content is made available for the customer to use.
Recently Adopted Financial Accounting Standards
The information set forth under in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies in the Unaudited Notes to the unaudited consolidated financial statements under the caption “Basis of presentation and summary of significant accounting policies”Interim Consolidated Financial Statements is incorporated herein by reference.
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ItemITEM 3. Quantitative and Qualitative Disclosures About Market Risk
QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
Not applicable.
Item
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the specified time periods in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
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Our management, with the participation of the CEO and the CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of March 31, 2023.2024. Based on these evaluations, our CEO and the CFO concluded that our disclosure controls and procedures were effective as of March 31, 2023.
Changes in Internal Control Over Financial Reporting
2024.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is required to evaluate, with the participation of our CEO and our CFO, any changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during each fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended March 31, 20232024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II -— OTHER INFORMATION
Item
ITEM 1. Legal Proceedings.
LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, we believe would individually or in the aggregate have a material adverse effect on our business, results of operations, financial condition or cash flows.
Item
ITEM 1A. Risk Factors.
RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 31, 2023.25, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 31, 2023.25, 2024.
Item
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item
ITEM 3. Defaults Upon Senior Securities.
DEFAULTS UPON SENIOR SECURITIES
None.
Item
ITEM 4. Mine Safety Disclosures.
MINE SAFETY DISCLOSURES
Not Applicable.
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ITEM 5. OTHER INFORMATION
RULE 10b5-1 TRADING PLANS
None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended March 31, 2024, as such terms are defined under Item 5. Other Information.
None.
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Item
ITEM 6. Exhibits
EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Incorporated By Reference | |||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Description | Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith | |||||||||||||||||||||||||||||||||
| 3.2 |
| ||||||||||||||||||||||||||||||||||||||
| 31.1 | |||||||||||||||||||||||||||||||||||||||
| X | ||||||||||||||||||||||||||||||||||||||
31.2 | X | ||||||||||||||||||||||||||||||||||||||
32.1* | X | ||||||||||||||||||||||||||||||||||||||
101. INS** | Inline XBRL Instance Document | X | |||||||||||||||||||||||||||||||||||||
101. SCH | Inline XBRL Taxonomy Extension Schema Document | X | |||||||||||||||||||||||||||||||||||||
101. CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
101. LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
101. PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
101. DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||||||||||||||||||||||||||||||||
104 | Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101) | X | |||||||||||||||||||||||||||||||||||||
|
|
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*This document is being furnished with this Form 10-Q. This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act.
**The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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PART III. SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
| CURIOSITYSTREAM INC. | ||||||||||||
| Date: May | By: | /s/ Clint Stinchcomb | ||||||||||
| Name: | Clint Stinchcomb | |||||||||||
| Title: | President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) | ||||||||||||
| Date: May | By: | /s/ Peter Westley | ||||||||||
| Name: | Peter Westley | |||||||||||
| Title: | Chief Financial Officer and Treasurer | |||||||||||
(Principal Financial and Accounting Officer) | ||||||||||||
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